House of Commons

Wednesday 27th November 2013 Commons Chamber

Wednesday 27 November 2013

The House met at half-past Eleven o’clock

Prayers

Wednesday 27th November 2013 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Wednesday 27th November 2013 Commons Chamber

The Secretary of State was asked—

[Naomi Long (Belfast East) (Alliance)]

1. What assessment she has made of the Amnesty International report entitled “Northern Ireland: Time to deal with the past”, published in September 2013; and if she will make a statement.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

Let me first express my sadness at the passing of Alec Reid and Eddie McGrady, who will be sadly missed as strong supporters of peace in Northern Ireland.

I have considered the proposals in the recent report by Amnesty, which covers devolved responsibilities in the main, but also covers some reserved matters relating to Northern Ireland’s past. I expect the all-party group chaired by Richard Haass also to take account of Amnesty’s contribution to the debate on these important matters.

[Naomi Long]

This morning I hosted the parliamentary launch of the report, which reinforces the need for a comprehensive mechanism to deal with the past, addressing justice, truth, recognition and support for the bereaved and the injured, and also reconciliation. What assurances can the Secretary of State give that the Government will support, co-operate with and properly resource any such comprehensive process emerging from the Haass talks, allowing the Police Service of Northern Ireland to focus its finite resources on policing the present, and, in particular, protecting our community from those—from both loyalist and republican sources—who wish to drag us back to the past?

[Mrs Villiers]

Let me take this opportunity to reiterate the calls made in Northern Ireland in the wake of recent attacks. There is determination that Northern Ireland will not be dragged back to its past, and there is universal condemnation of the disgraceful attacks that we have seen in recent days.

The Government strongly support the Haass process. We welcomed its establishment, and we urged the Executive to examine the very divisive issues involved. We will, of course, consider the outcome of the process very seriously, and will give thought to what resources we can deploy to support it within the constraints of the budgets available to us.

[Mr Philip Hollobone (Kettering) (Con)]

The report states that

“there are longstanding allegations that Irish authorities turned a blind eye to arms smuggling across the border and to members of republican groups fleeing—after attacks had been carried out—back to the Republic of Ireland”.

Will my right hon. Friend raise that aspect of the report with the Irish authorities to ensure their full co-operation?

[Mrs Villiers]

I shall be happy to do so. Let me add, however, that the security co-operation between the police services north and south of the border has never been stronger. It is hugely important in combating the threat not just from dissident republicans, but from other criminals who seek to use the border to enhance their criminal activities. We continue to work with the authorities in the Republic of Ireland to establish how we can enhance our security co-operation with them.

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

The Amnesty report contains a section on inquests. Has the Secretary of State been offered any explanation of why the Attorney-General in Northern Ireland, who has ordered the reopening of more than 40 historic inquests, now seems to believe that they should be abandoned?

[Mrs Villiers]

The Attorney-General’s remarks were patently made on his own behalf rather than that of the Northern Ireland Executive or the Government, and they received almost universal criticism. The Prime Minister has made it clear that we have no plans to introduce an amnesty along the lines suggested by the Attorney-General—and yes, I acknowledge that there is a degree of contradiction between his actions and his comments in relation to inquests.

[Ian Paisley (North Antrim) (DUP)]

Will the Secretary of State go a bit further and tell the House what action she is prepared to take to ensure that justice is done and seen to be done, rather than justice and the process of law being abandoned, which is what a senior law officer in Northern Ireland wants to happen?

[Mrs Villiers]

The Government are entirely committed to the integrity of the rule of law, and we will maintain our position. I think it important for the outcome of the Haass discussions also to abide by that principle, and to be consistent with maintaining the integrity of the rule of law.

[Dr Alasdair McDonnell (Belfast South) (SDLP)]

Does the Secretary of State agree that all the victims out there still need truth and justice, and, indeed, are entitled to truth and justice? What assessment has she made of last week’s “Panorama” programme about the military reaction force and the murders committed by its members?

[Mrs Villiers]

Let me take this opportunity to emphasise how important it is for victims to be at the centre of any proposals on dealing with the past. That was also emphasised during the Democratic Unionist party’s Opposition day debate. The allegations made in the “Panorama” programme have been referred to the police, and it is for the police to investigate them. I should stress that when the troops were operational in Northern Ireland they operated according to strict rules, and that the vast majority of the police and the Army officers who served there during the troubles were entirely courageous, supportive, and compliant with the rule of law.

[Mr Ivan Lewis (Bury South) (Lab)]

May I begin by associating myself with the Secretary of State’s comments about Father Alec Reid?

On the Amnesty report, will the right hon. Lady go further in agreeing with me that the problem with last week’s proposals from Northern Ireland’s Attorney-General is that they would deliver neither truth nor justice, and that instead of healing the wounds of the past, they would cause them to fester even further?

[Mrs Villiers]

The death of Father Alec Reid is a very sad loss. He played a key part in establishing the peace process, particularly in its early stages. As I have said, the Government have no plans to follow the advice of the Northern Ireland Attorney-General. I do not believe that it represents a viable solution to the past, and it received almost universal condemnation. As the hon. Gentleman suggests, it would result in significant problems, and many victims would feel real concern if people advocated that we follow that route.

[Mr Lewis]

Will the Secretary of State assure us that she is working with the Irish Government to engage with all parties involved in the Haass talks to seek a comprehensive framework to address the past? Such a framework needs to deal with truth, justice and reconciliation in a meaningful and substantive way. Tinkering at the edges will be seen as a missed opportunity with potentially lasting consequences, and it is essential that the Secretary of State shows leadership at this crucial time.

[Mrs Villiers]

I can assure the hon. Gentleman that I am very supportive of the Haass process and very engaged with the Irish Government. I have had discussions with all the political parties on these crucial matters. I have also had a number of helpful discussions in the United States about how our American friends can continue their role of supporting Northern Ireland’s political leadership in the difficult decisions that it needs to make on the issues that are the subject of the Haass process.

[Bob Blackman (Harrow East) (Con)]

2. What recent discussions she has had with the Northern Ireland Executive on building a shared future in Northern Ireland.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

I have discussed the importance of tackling sectarian divisions and building a shared society with the Northern Ireland Executive on many occasions, most recently with the First Minister and Deputy First Minister on 11 November. They both agree on the importance of delivering the commitments set out in their strategy document “Together: Building a United Community”.

[Bob Blackman]

The disturbances over the summer confirmed that there is much work to be done on building a just and fair society in Ulster. What will my right hon. Friend do to ensure that the community relations strategy announced by the Northern Ireland Executive is brought to fruition?

[Mrs Villiers]

We very much welcome the publication of the strategy. It was something that the UK Government had encouraged, and we worked with the First Minister and Deputy First Minister on it. When it is delivered, it will make a real difference to starting to heal the sectarian divisions that have been so divisive and corrosive and that can feed the scenes of disgraceful violence in Northern Ireland. The important challenge now is to ensure that the commitments in that strategy are delivered, and the Government will continue to encourage the Northern Ireland Executive to do that.

[Jim Shannon (Strangford) (DUP)]

If we are to achieve a shared future for Northern Ireland, it is important that the threat of terrorism should be addressed. Is the Secretary of State aware that the dissident republicans’ failed mortar attack at Cullyhanna in south Armagh showed a level of sophistication and technological detail that had never been seen before in Northern Ireland but that has been recorded in Afghanistan and Pakistan? Perhaps that shows international terrorism links. Will she tell us what steps she is taking to eradicate the dissident republican threat in Northern Ireland?

[Mrs Villiers]

I have been briefed on that attack. It and all the others we have seen in recent weeks are a matter of grave concern. The sad fact is that the threat of terrorism from dissident republicans continues to be severe; it has been set at that level since 2009. That is why the Government remain absolutely vigilant and completely supportive of the PSNI and the extra visibility mechanisms that it is deploying in Belfast. We have deployed an extra £200 million in funding to assist the PSNI and its partners in tackling this threat, and we will continue to give them every support.

[Stephen Lloyd (Eastbourne) (LD)]

On the economic shared future, will the Secretary of State tell me what work is being done on the legacy of this year’s Derry-Londonderry UK city of culture to ensure that the benefits continue to come to the city and to the whole of Northern Ireland?

[Mrs Villiers]

I am confident that there will be a very positive legacy. Interestingly, I am sure that the legacy will be felt on both sides of the border, because this is having a significant impact on areas in the south, too. We are determined that there will be a legacy from successful events such as the city of culture and the G8 meeting. That is one reason why the Prime Minister attended an investment conference a couple of months ago to promote Northern Ireland as a great place to do business, following on from the success of the G8 meeting.

[Lady Hermon (North Down) (Ind)]

Will the Secretary of State be so kind as to agree to come to my constituency to meet various loyalist communities to discuss their positive contribution to a shared future that we all want to enjoy?

[Mrs Villiers]

I am happy to do that, and I believe that our respective offices are in discussions about a date. It is very important to distinguish between the small minority of extremists within the loyalist community, who might have been responsible for the disgraceful scenes of rioting, and the vast majority, who are committed to peace and want to help to build a shared future for Northern Ireland. The hon. Lady makes the point well.

[Karl MᶜCartney (Lincoln) (Con)]

3. What recent discussions she has had with the Chief Constable of the Police Service of Northern Ireland on policing and security issues.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

I hold regular meetings with the Chief Constable of the PSNI, and we speak frequently by phone. We discuss a range of subjects, including police resourcing and the security situation in Northern Ireland.

[Karl MᶜCartney]

My right hon. Friend will be aware that so-called punishment attacks continue to be carried out in Northern Ireland by both loyalist and republican groups. Will she condemn these acts of barbarism and give the House an indication of what the PSNI is doing to counter those criminals who prey on communities across parts of Northern Ireland?

[Mrs Villiers]

I completely agree with my hon. Friend’s condemnation of these brutal attacks. We have seen a number of horrific attacks along these lines: the murder of Kevin Kearney, the attack on Jemma McGrath and, distressingly, an attack on a 15-year-old boy in recent weeks. These vigilante attacks are cowardly, ruthless and callous, and they are utterly unacceptable. I know that the PSNI is doing all it can to bring those responsible to justice.

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

Does the Secretary of State agree that the despicable terrorist attack on Belfast city centre at the weekend and other recent attacks represent a grave escalation in dissident terrorist activity, in an attempt to undermine investment, jobs and tourists coming to Northern Ireland? Can she give an assurance that she will stand with the people of Northern Ireland and the Executive in their determination to move ahead and not let these people drag us backwards?

[Mrs Villiers]

I can. I will stand shoulder to shoulder with Northern Ireland’s political leadership and the whole community in condemning these attacks and in supporting the determination to continue to make progress in Northern Ireland. These attacks are disgraceful; they could have put many lives at risk, and they are deliberately aimed at disrupting the economy in Northern Ireland and sowing the seeds of community division. I am sure that the people of Northern Ireland will not let the dissidents succeed in their objective of dividing our community.

[Mr Dodds]

I thank the Secretary of State for that assurance. Will she go further and say that she will commit herself to working closely with the Executive, the police and the security forces in Northern Ireland to look at what extra measures can be put in place to increase the operational capacity of the police, and to examine legislative changes that will enhance intelligence gathering for the security forces?

[Mrs Villiers]

I am happy to give the right hon. Gentleman an assurance on both those points. We always look at ways in which the effectiveness of the police can be enhanced. Of course, there is a debate to be had on the Executive’s resourcing of the police in the next spending review. We are working with the police on that, and it is very important.

[Mr Laurence Robertson (Tewkesbury) (Con)]

What assessment has the Secretary of State made of whether all paramilitary organisations are observing ceasefires? Does she agree that if any are not doing so, they are betraying rather than serving the people they purport to represent?

[Mrs Villiers]

I completely agree, and I think that my hon. Friend puts it very well when he says that paramilitary groups that come off their ceasefire are betraying the communities they purport to represent. My understanding is that, at the moment, no paramilitary organisations have come off their ceasefire, although I am, of course, well aware of the concerns felt about individual members of the Ulster Volunteer Force who are involved in criminality in east Belfast. The police are taking action to counter that.

[Stephen Pound (Ealing North) (Lab)]

Small business Saturday is important throughout the whole of the United Kingdom, but it is especially important in Northern Ireland. Last Friday, business people in Belfast and in Comber told me of their concerns and fears that the planned protests this Saturday will overshadow all the good work of small business Saturday. Will the Secretary of State assure the House that the PSNI will receive the resources and assistance it needs to ensure that positive images are not drowned out by chaotic cacophony from the streets?

[Mrs Villiers]

The hon. Gentleman puts his point well. We are entirely supportive of the efforts that the police will make to police the protest. I urge everyone involved to ensure that their protest is not only peaceful but entirely lawful and complies with the decision of the Parades Commission. I also call on them to think again about whether this is a wise thing to do. Although it will be disruptive, Belfast will be open for business. Many people will be out in the city centre doing their Christmas shopping despite the protest disruption.

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

4. What steps she is taking to reduce worklessness in Northern Ireland.

[Nic Dakin (Scunthorpe) (Lab)]

6. What steps she is taking to reduce worklessness in Northern Ireland.

[The Minister of State, Northern Ireland Office (Mr Andrew Robathan)]

I am answering these questions together as they use exactly the same wording, which is a rather strange coincidence.

[Karl Turner]

Northern Ireland has a higher population of young people than any other region in the UK. Nearly one in four of them is without a job. Does the Secretary of State have a plan to get them back to work?

[Mr Robathan]

Specific measures on this issue are for the Northern Ireland Executive. However, the economic pact we concluded with them in June will help to rebalance the economy and improve employment prospects. As the hon. Gentleman will know, the number of those who are unemployed in Northern Ireland has fallen dramatically over the past year, and the number of employee jobs has increased by more than 5,000.

[Nic Dakin]

Worklessness contributes to one in four children in Northern Ireland being in severe poverty, which is double the UK average. What are the Government doing about that?

[Mr Robathan]

Worklessness, as the hon. Gentleman will understand, is the responsibility of the Northern Ireland Executive, but we support them in their stand to increase employment and reduce the number of people on unemployment benefit. The best route out of poverty is through work. As he will know, we are turning the corner on the economy, which is increasing employment both in the United Kingdom as a whole and in Northern Ireland specifically.

[Sammy Wilson (East Antrim) (DUP)]

Does the Minister of State agree that it is difficult to tackle unemployment when the major bank in Northern Ireland is implicated in a report that shows that the Royal Bank of Scotland was responsible for making viable businesses go to the wall in order to plunder their assets? Will he ensure that any investigation arising from the Tomlinson report includes the activities of Ulster bank and how it dealt with businesses in Northern Ireland?

[Mr Robathan]

The hon. Gentleman raises a very important issue, and I agree with him, of course. That is not the specific responsibility of the Northern Ireland Office; it is more for the Treasury and the Department for Business, Innovation and Skills. However, I absolutely support what he says. Everyone in the Chamber should deprecate the actions of any bank that has been pushing small businesses out of business.

[Ms Margaret Ritchie (South Down) (SDLP)]

9. As part of the need to address worklessness in Northern Ireland, will the Minister have immediate discussions with his ministerial colleagues in the Treasury to address the issue of the closure, in March 2015, of Her Majesty’s Revenue and Customs centre in Newry, which makes a major contribution to the local economy in the southern part of my constituency? Will the Minister meet my colleagues and me to discuss that important issue?

[Mr Robathan]

I am happy to meet the hon. Lady and her colleagues. We should be clear that any redundancies in HMRC in Newry are voluntary. Nobody likes to see people lose their jobs be it voluntarily or otherwise. However, I say gently to her that the way in which people do business with HMRC and other Government agencies is changing, with much more being done online. I think she would agree that the most important thing is that customers of HMRC—the taxpayers—get a decent service. It might be the case that by doing business online there is less need for the current number of employees.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

5. What recent assessment she has made of the effect of the Government’s welfare reforms on Northern Ireland.

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

8. What recent assessment she has made of the effect of the Government’s welfare reforms on Northern Ireland.

[The Minister of State, Northern Ireland Office (Mr Andrew Robathan)]

When fully implemented, the introduction of universal credit will make over 3 million low to middle-income households in Northern Ireland and the rest of the UK better off. These reforms will ensure work always pays and help lift people out of poverty by helping them into work.

[Debbie Abrahams]

Given that families in Northern Ireland are on average £800 a year worse off under this Government, will the Minister tell us what the Government are doing to ease the cost of living crisis in Northern Ireland?

[Mr Robathan]

First, I do not recognise the figure that the hon. Lady has used, although I am sure that it has been put out by Labour party headquarters. As I have said in answer to previous questions, the way in which we can help people to prosper in Northern Ireland, as we all want, is to improve the economy and to get people into well-paid work. That is what we are doing. We are rebalancing the economy away from the disproportionate number of public sector employees in Northern Ireland. Currently, 30% of people in Northern Ireland are employed in the public sector whereas in the rest of the United Kingdom the figure is only 20%.

[Mark Lazarowicz]

Some 32,000 households in Northern Ireland are affected by the bedroom tax. Although existing tenants are exempt, new tenants will be hit by the fact that the vast majority of social housing in Northern Ireland has three bedrooms or more. Is that not just another example of how the bedroom tax is unworkable? It is costing more money than it saves and should be abolished in Northern Ireland and in the rest of the UK.

[Mr Robathan]

The purpose of social housing is to help those who cannot afford their own housing, which I welcome. However, I am sure that the hon. Gentleman would like to discuss with his constituents and, indeed, the people of Northern Ireland whether the general taxpayer should pay for unnecessary housing for people who do not use it. That is why we are ending the spare room subsidy and that, I think, is supported by the people of Northern Ireland as well as the rest of the United Kingdom. I suspect that the hon. Gentleman might find that he is on the wrong side of the argument with his constituents.

[Mr Speaker]

Order. These are extremely important matters affecting people in Northern Ireland and there is far too much noise. Let us hear the Rev. William McCrea.

[Dr William McCrea (South Antrim) (DUP)]

But does the Minister of State not accept that if what was termed the “bedroom tax” here on the mainland was introduced in Northern Ireland, it would cause rent arrears to rocket, cause havoc across settled communities and increase already high levels of poverty?

[Mr Robathan]

I am afraid that I do not entirely accept that. I do not think the hon. Gentleman is right. I know that the Northern Ireland Executive are considering, through the discretionary housing payments, having a transitional period, which is sensible. If he asks his constituents in Northern Ireland whether they believe that the general taxpayer should support extra accommodation for people in social housing, he will find that most of them do not.

[Alex Cunningham (Stockton North) (Lab)]

13. Does the Minister agree with the Minister of State, Department for Work and Pensions, the hon. Member for Hemel Hempstead (Mike Penning) that Northern Ireland is getting the best deal on welfare when changes could potentially take £450 million a year out of vulnerable people’s—[Interruption.]

[Mr Robathan]

I am afraid that I did not entirely hear the question, as it is a little noisy in the Chamber.

[Alex Cunningham]

Does the Minister agree with the Minister of State, Department for Work and Pensions, that Northern Ireland is getting the best deal on welfare when changes could potentially take £450 million a year out of vulnerable people’s pockets?

[Mr Robathan]

I agree with commentators in Northern Ireland, including the Belfast Telegraph, which stated:

“Quite simply, we cannot pretend that we can have it both ways; that we can continue to benefit from the Treasury—we get back more than we raise in taxes—while people in other parts of the UK suffer from the reforms.”

These are necessary welfare reforms across the United Kingdom. We support them and I think the hon. Gentleman will find that his constituents support them, too—[Interruption.]

[Mr Speaker]

Order. There is still rather a lot of noise. Let us have a courteous hearing for Mr Andrew Bridgen.

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

7. What assessment she has made of the effect of the investment conference held in Belfast in October 2013.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

The investment conference was attended by my right hon. Friend the Prime Minister and successfully highlighted the many benefits of doing business in Northern Ireland. Although it is too early to assess the full impact, Invest Northern Ireland has said that it is actively engaging with a number of companies as a direct result of the conference.

[Andrew Bridgen]

Does my right hon. Friend agree that Northern Ireland is a fantastic location to do business, as demonstrated by the firms that have already invested there, such as Allstate, HBO and Bombardier? Does she also agree that what would be disastrous for the Northern Irish economy as a location for investment and jobs would be any repeat of the scenes we saw because of the flag protest in the run-up to last Christmas and earlier this year?

[Mrs Villiers]

I agree that there have been tremendous success stories in Northern Ireland in terms of inward investment, including the ones that my hon. Friend has mentioned and others like the New York Stock Exchange. It is true that riots on the streets are a huge deterrent to inward investment and I strongly urge anyone involved in protesting to make sure that their protests are both peaceful and entirely lawful.

[David Simpson (Upper Bann) (DUP)]

Will the Secretary of State agree with me that we need to see more conferences of this type? It was successful; investment will come from it. But will she also agree that the companies that attended it were impressed by the skills base in Northern Ireland and the innovation shown by companies?

[Mrs Villiers]

I entirely agree with the hon. Gentleman. The education system in Northern Ireland produces some tremendous results. Its two universities are producing thousands of excellent graduates every year. That is one of the reasons why companies investing in Northern Ireland are so successful. They may come for the low cost base but they stay for the people.

The Prime Minister was asked—

[Stephen McPartland (Stevenage) (Con)]

Q1. If he will list his official engagements for Wednesday 27 November.

[The Prime Minister (Mr David Cameron)]

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

[Stephen McPartland]

This week I have launched a cross-party campaign with the support of the GMB union, to provide justice for the 3,213 workers and their families who were victims of blacklisting by 44 construction companies. We have written to all the companies involved and will post their responses on our website, stoptheblacklisting.com. Will the Prime Minister join me in this campaign to support hard-working people and stamp out the terrible disease of blacklisting?

[The Prime Minister]

I am very glad to join my hon. Friend and I congratulate him on the work that he has done on this issue. Blacklisting is illegal and wrong. This sort of intimidation is wrong, just as intimidation of non-striking workers, or indeed managers, is wrong. I am happy to condemn both forms of intimidation and I hope that others will as well.

[Edward Miliband (Doncaster North) (Lab)]

Following his U-turn on payday lending, can I ask the Prime Minister why he has moved in two short months from believing that intervening in broken markets is living in a “Marxist universe” to believing that it is a solemn duty of Government?

[The Prime Minister]

As I have said, there are some dreadful practices that take place in the payday lending market. There are some very disturbing cases. And frankly, for 13 years, Labour did absolutely nothing about it. So I am proud of the fact that we have intervened to regulate this market properly, and we are also going to be putting in place a cap. But let me be very fair to the right hon. Gentleman: I followed very carefully his interview on “Desert Island Discs” and I think it is fair to say he is no longer a follower of Marx; he is loving Engels instead.

[Edward Miliband]

You would have thought the right hon. Gentleman would be spending his time trying to be the Prime Minister, Mr Speaker. What is surprising is that the Chancellor said, just a few weeks ago, that

“attempts to fix prices…crush endeavour and blunt aspiration”.

For the avoidance of doubt, can the Prime Minister reassure us that his U-turn had nothing to do with the prospect of losing a vote in Parliament the following day?

[The Prime Minister]

I am sorry that the right hon. Gentleman has had a slight sense of humour failure. I do not think that is a very good start to these exchanges. I have done a little bit of research, and in three years he has never asked me a question about payday lending—not once, not a single question. I have been asked about all sorts of things. Look, it is right to intervene when markets are not working and people are getting hurt. That is what we are doing. Labour had 13 years. They looked at a cap in 2004 and they rejected it. That was when the right hon. Gentleman was working in the Treasury. We have looked at a cap. We have looked at the evidence from Australia, Florida and elsewhere. It is the right thing to do and I am proud that we are doing it.

[Edward Miliband]

Even by the right hon. Gentleman’s standards, this is a bit rich. On 22 May 2012, the Government voted against capping payday lenders; on 4 July 2011 they voted against capping payday lenders; and on 3 February 2011 they voted against capping payday lenders. We were for it; they were against it. Now clearly, he wants to claim that this is a principled decision, so can the Prime Minister explain why the Government intervening to cap the cost of credit is right, but the Government capping energy bills is communism?

[The Prime Minister]

I feel like one of those radio hosts who say, “And your complaint is, caller, exactly?” We are taking action, but they did not. We are doing the right thing. The right hon. Gentleman should stand up and congratulate us. He wants to turn to energy, so let me turn specifically to that. The point is, we do not have control of the international price of gas, so we need more competition to get profits down and roll back the costs of regulation to get prices down. That is a proper energy policy. We know his version of intervention: take money off the Co-op and don’t ask any questions.

[Edward Miliband]

Here is the reality. This is not a minor policy adjustment—it is an intellectual collapse of the Government’s position. For two months, they have been saying that if we take action to intervene in markets it is back to the ’70s—it is Marxism—but now they realise that they are on the wrong side of public opinion. That is the reality. On energy, the Prime Minister must realise—[Interruption.]

[Mr Speaker]

Order. We will get through Question Time, however long it takes. I appeal to Members simply to calm down and think of the electorate, whom we are here to serve—very straightforward.

[Edward Miliband]

They are shouting because they have no answer, Mr Speaker. The Prime Minister must realise the gravity of the situation, as figures this week show that there were 31,000 deaths as a result of the cold winter, with about 10,000 as the result of cold homes. Can he explain how things will be better this winter than they were last?

[The Prime Minister]

What there will be this winter—and this is a vitally important issue—are the cold weather payments that we have doubled from their previous level. The winter fuel payment will be in place, as will the warm home discount, which helps 2 million people in our country. Last year’s increase in the pension of £5.30 a week will be in place. Every excess death in the winter is a tragedy, and there were 31,000 last year. The right hon. Gentleman might care to recall that when he was Energy Secretary there were 36,500.

[Edward Miliband]

I asked the Prime Minister a very specific question: how are things going to be better this winter than last? The reality is that prices will be higher this winter than last. For the average household, the British Gas bill went up £123 this week. It was also revealed that the profits of the energy companies were up 75% in the last year alone. Why, under his Government, is it acceptable for the British people to pay exorbitant prices to fund exorbitant profits?

[The Prime Minister]

What is intellectual incoherence is not to address the fact that there were 36,500 winter deaths when the right hon. Gentleman was standing here as Energy Secretary. That number was lower last year. What is intellectually incoherent is to promise a price freeze for 20 months’ time when we do not control the global price of gas—that is completely incoherent and a total con. When we are on the collapse of intellectual positions, more borrowing, more spending and more taxing are exactly the things that got us into this mess in the first place, and he remains committed to each and every one.

[Edward Miliband]

I will tell you what is the con, Mr Speaker. It is saying one thing before the election and another thing as Prime Minister. Here is what the hon. Member for Richmond Park (Zac Goldsmith) said about him. He likes reading out tweets, so perhaps he will listen to this one:

“‘If the PM can casually drop something that was so central to his identity, he can drop anything.’… #greencrap”.

That is this Prime Minister all over. The truth is that any action he takes on the cost of living crisis is because he has been dragged there kicking and screaming. On the cost of living crisis, he is not the solution—he is the problem. Nobody believes that he or his Cabinet have any sense of the pressures facing the people of Britain.

[The Prime Minister]

I think everyone can recognise a collapse when they see one, and we just saw one right now. Is it not interesting? The week before the autumn statement, and the right hon. Gentleman cannot ask about the economy because it is growing. He cannot ask about the deficit because it is falling. He cannot ask about the numbers in work because they are rising. People can see that we have a long-term plan to turn our country around, and people can also see him sitting in his room, desperate for bad news to suit his own short-term political interests.

[George Freeman (Mid Norfolk) (Con)]

One in eight men will be diagnosed with prostate cancer, the silent killer of middle-aged men. Survival rates have risen from 30% to 80% because of breakthroughs in genetics, diagnostics and drugs, and because of charities such as Movember, which has gone from five blokes raising $500 to the world’s biggest prostate charity raising $300 million. Will the Prime Minister agree to meet me and representatives of UK research charities to see what we can do to make the NHS adopt innovation more quickly?

[The Prime Minister]

My hon. Friend raises a very important issue. Everyone wants to see more research and better outcomes for prostate cancer. May I personally praise him for that magnificent growth on his top lip? I have noticed the number of my colleagues, and others on these Benches, suddenly resembling banditos. It is not something that I am fully capable of myself, so I am jealous of that. It is an important campaign. Better diagnosis, better knowledge and better information are all vital to beat prostate cancer.

[Alex Cunningham (Stockton North) (Lab)]

Q2. The Prime Minister once said that he wanted to see rising living standards for all, not just rewards for those in high finance. Why, then, are real wages down by more than £1,600, while bank bonuses are up by 83%?

[The Prime Minister]

What we see happening is that because we are cutting taxes, disposable income went up last year. What we have done is lift the first £10,000 that people earn out of tax altogether. That is worth £700 for every person who pays that tax. That is something that the hon. Gentleman should welcome. In addition, we have frozen the council tax, cut the petrol duty, and helped in all sorts of ways with families’ income—every single step opposed by Labour.

[Richard Fuller (Bedford) (Con)]

Q3. The Tibbs Foundation provides uplifting support for people living with dementia in Bedfordshire and for their carers. Following his challenge on dementia last year, and ahead of the G8 summit that he will host in London next month, will my right hon. Friend send a message to my constituents about his commitment to achieving real progress on dementia research and care?

[The Prime Minister]

I am grateful to my hon. Friend for raising this issue. For too long in our country people thought of dementia as a natural part of ageing, rather than what it is, which is a disease that we should be fighting with all the energy with which we are fighting heart disease and cancer. As part of the dementia challenge, we have said that we will double research funding over the lifetime of this Government from £26 million to more than £66 million a year in 2014-15. But we also want to see an increase in diagnosis rates, because getting to grips with dementia early is vital, and we want the diagnosis rate to go from less than a half to two thirds. I think my hon. Friend’s constituents will welcome those pledges, and obviously, through our G8 chairmanship, we can galvanise action around the world as well.

[Anas Sarwar (Glasgow Central) (Lab)]

For two years the people of Scotland were promised that they would receive a detailed and costed White Paper that would answer all the questions. Instead, they got a thick document full of false promises. In the absence of any detailed costings, it was not a blueprint for independence, but a wish list. Given that the entire White Paper is based on the assumption that Scotland would keep the pound as part of a sterling zone with no plan B, can the Prime Minister tell us whether the lack of that plan B calls into question the entire credibility of the White Paper?

[The Prime Minister]

I very much agree with the hon. Gentleman. We have been waiting a long time for this document. We were told that it would answer every question, yet there is no answer on the currency, no answer on the issue of EU membership, and no proper answers on NATO. We are just left with a huge set of questions and, for Scottish people, the prospect of a £1,000 bill as the price of separation.

[Laura Sandys (South Thanet) (Con)]

Q4. We are celebrating a year since new owners took over the former Pfizer site, and with the Prime Minister’s commitment to £40 million for our small and medium-sized enterprises in Kent, we now have 1,400 jobs and 60 companies. Does the Prime Minister agree that when the private sector meets a proactive Government, we can replicate such successes around the country?

[The Prime Minister]

First of all, may I praise my hon. Friend for the work that she put in? Clearly, it was a blow when Pfizer made its announcement and its decision. I think that many people thought that that would be end for the site in terms of jobs and investment, but because of the hard work that she has put in—my right hon. Friends the Business Secretary and the Science Minister have also put in a huge amount of work—the enterprise zone is working well and it has attracted over 20 high-tech companies. Pfizer is now staying, with 700 jobs as well. It has been a success and it shows that if you work together with the private sector, you can get good results like this.

[Andy McDonald (Middlesbrough) (Lab)]

The Disability Benefits Consortium of over 50 charities has signed a letter to the Secretary of State for Work and Pensions calling for immediate action to exempt disabled people from the bedroom tax. Why on earth do the Prime Minister and his Government refuse to listen?

[The Prime Minister]

Obviously, what we have done is to exempt disabled people who need an extra room. This does, I think, come back to a basic issue of fairness, which is this: people in private sector rented accommodation who get housing benefit do not get a subsidy for spare rooms, whereas people in council houses do get a subsidy for spare rooms. That is why it was right to end it, and it is right to end it thinking of the 1.8 million people in our country on housing waiting lists.

[Mark Pawsey (Rugby) (Con)]

Q5. I wonder whether the Prime Minister has had a chance to watch any of the fantastic rugby league world cup semi-final match that took place between England and New Zealand at the weekend. The tournament has been a great success, and shortly rugby fans will have the rugby union world cup to look forward to in 2015, with games in England and some games in Wales. Does he agree that this great interest in the game of rugby presents a real opportunity for my constituency to attract visitors to the birthplace of the game?

[The Prime Minister]

My hon. Friend is absolutely right that it is the best possible advertisement for his town. I have done a public meeting in his high street and know what a warm, interesting and varied reception you can get in the town of Rugby. It is hard to keep up at the moment with the quantity and quality of rugby union and rugby league games. I made a wager with the New Zealand Prime Minister that I would wear Kiwi cufflinks if they won in the rugby union match. I did so last week but fortunately nobody noticed.

[Pete Wishart (Perth and North Perthshire) (SNP)]

The Prime Minister has vowed to fight for the United Kingdom with his head, heart and soul, but when it comes to a debate it is some guts that he needs to find. We now have the blueprint for independence, and we know what his United Kingdom will look like. Will he now stop being a pathetic big feartie and get out and debate the issues with the First Minister?

[The Prime Minister]

I am enjoying the debate we are having now; that is where the debate should take place. Of course there should be a debate, including televised debates, but this is a debate between people in Scotland. This is not a debate between the leader of the Conservative party, or even the UK Prime Minister and the Scottish First Minister; it is a debate, rightly, between the leader of the no campaign and the leader of the yes campaign, and they should fight it out on the facts and on the issues. I know the hon. Gentleman wants to find every sort of distraction possible because when it comes to the economy, when it comes to jobs, and when it comes to Europe, all the arguments are for staying together. [Interruption.]

[Mr Speaker]

For future reference, Mr MacNeil, you should not be yapping at the Prime Minister like an overexcited puppy dog. It is unseemly. You can do a lot better if you try.

[Mary Macleod (Brentford and Isleworth) (Con)]

Q6. Small businesses and traders are the lifeblood of our economy, with 14 million people employed in them. In Brentford and Isleworth, 825 new businesses have been set up in the past two years. In preparation for small business Saturday on 7 December, will my right hon. Friend join me in urging businesses to become business and enterprise champions in all our secondary schools to foster and inspire another generation of entrepreneurs?

[The Prime Minister]

My hon. Friend makes a very important point, first of all, about the new businesses setting up in Britain. We have 400,000 more businesses than three years ago. The point she makes about encouraging businesses into schools to inspire young people about enterprise, about small business, and about what that can involve is really, really important. I would urge all MPs to make the most of small business Saturday, but also, in the visits that they make to primary and secondary schools, to push the case for good business access and good business discussions.

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

Four weeks ago in Eccles, I met Joy Watson, who is 55 years old, a mum and married to Tony. For the past four years, Joy has had problems with her memory and on her 55th birthday she was diagnosed with early-onset dementia. Her family are devastated, but she is an inspirational woman and is now fighting for better services for people in similar circumstances. Will the Prime Minister ensure, at the G8 in London in two weeks’ time, that there will be a real push for an increase in research into the quality of care and support and prevention, as well as into the important search for a cure?

[The Prime Minister]

The right hon. Lady is absolutely right. There is no one single thing we have to do: the research budget needs to go up—and it is—but we also need to work within the health and social care sectors to improve standards. Frankly, we also need to make our communities more dementia-friendly. Something we can all do is become a dementia friend, which involves a simple, relatively short test and a bit of learning about how to help people with dementia in our communities. It is not just about the health and social care sectors, but about when people are trying to go on a bus, access their bank account or go down to the post office. How they actually live their lives is something we can all make a difference to.

[Bob Stewart (Beckenham) (Con)]

Q7. Last Friday, on the border between Gibraltar and Spain, the Guardia Civil opened one of our diplomatic pouches, which is a clear breach of our sovereignty. What further measures—political or otherwise—can we take towards Spain to stop this harassment of our people in Gibraltar?

[The Prime Minister]

First of all, my hon. Friend is right to raise this issue, because it is a breach of the principle of state immunity and the principles underlying the Vienna convention on diplomatic relations. An extremely serious action took place. We asked the Spanish authorities to investigate urgently and they have done so. We have now received an explanation from the Spanish and we are reassured that it will not happen again, but let me be absolutely clear: we will always stand up for the rights of people in Gibraltar and for the sovereignty of Gibraltar.

[Mr Gregory Campbell (East Londonderry) (DUP)]

Q8. Earlier the Prime Minister outlined what the Government are doing in relation to fuel poverty over the winter. Does he accept that the further north we go in the United Kingdom, the colder it is, incomes are lower and fuel prices are higher? What additional measures can he undertake to ensure that he alleviates the problems suffered by people in Northern Ireland?

[The Prime Minister]

As I said, I think that the cold weather payments are perhaps the key thing, because they are triggered by low temperatures and kick in at £25 a week. I think that makes the biggest difference. I outlined all of the things we are doing, including the warm home discount, which the energy companies themselves are putting in place to help tackle fuel poverty. On the previous Government’s fuel poverty measures, fuel poverty is actually lower today than it was when Labour was in office.

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

Is my right hon. Friend aware of the concern in Suffolk about using a road toll to pay for improvements to the A14 and the consequent risk that introducing tolls on roads without a toll-free alternative may undermine support for the sensible concept of road pricing?

[The Prime Minister]

I am well aware of the strong feelings in Suffolk about this issue and I have been approached about it by many Members of Parliament. I believe that road tolls can play an important part in providing new road capacity and it is important that we find ways to pay for road capacity, but I also understand the concerns about this individual case.

[Mr Iain McKenzie (Inverclyde) (Lab)]

Q9. Does the Prime Minister realise that he has something in common with the Scottish National Party? He refuses to back Labour’s call for a freeze on energy bills and the plan announced yesterday for an independent Scotland shows clearly that the First Minister will not get to grips with the energy companies. What does the Prime Minister think that says to the millions of Scots who face rocketing fuel bills this winter?

[The Prime Minister]

Getting to grips with energy bills means more competition in the market, which we are delivering. We were left the big six by the Labour party. New companies are coming in and people such as the Leader of the Opposition are sensibly deciding to switch their energy supplier, which is a very good Tory principle. We also need to roll back the cost of some of the levies, and we are looking at that as well.

[Sir Nick Harvey (North Devon) (LD)]

The Prime Minister will be aware that MPs from rural areas and across party lines have for many years campaigned for a fair funding formula for schools, ably led by David Kidney, the former Labour MP in the previous Parliament, and by the hon. Member for Worcester (Mr Walker) in this Parliament. The issue has been brought to a head again and we have been led to expect news shortly. Is the Prime Minister able to reassure pupils and teachers in rural schools that good news is on its way and that they will not be disappointed?

[The Prime Minister]

I do understand the concerns, because these funding formulas have built up over many years. There are places in our country that do feel disadvantaged, particularly those in rural areas that can suffer exclusion and poverty, and feel that that is not properly reflected in the funding formula. My right hon. Friend the Education Secretary continues to look at this, and we will see what we can do.

[Teresa Pearce (Erith and Thamesmead) (Lab)]

Q10. In my constituency, as in many others, small and medium-sized enterprises are the engine room of the economy, so why are business rates rising by an average of nearly £2,000 in this Parliament?

[The Prime Minister]

I can tell the hon. Lady what we have done on business rates, which is to extend the freeze on business rates that the last Government were going to get rid of. What we are also doing on business rates is to have a £2,000 cut in national insurance for every business in the country. For small businesses up and down our high streets, I cannot think of anything that will make a bigger difference than seeing their national insurance bill go down by £2,000 and being able to employ more people.

On the subject of how to help business, how on earth can it be a good idea to say that you want to increase corporation tax as you go into the next Parliament? That seems to me absolutely mad—a new Labour jobs tax.

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

By the end of this year, more than 8,000 people in our country will have been diagnosed with pancreatic cancer, of which only 4% will have even the chance of a five-year survival rate. Those figures have not changed for the last 30 years. Will the Prime Minister join the all-party group on pancreatic cancer and Pancreatic Cancer UK in their aim, which is that it is time to change and improve on those dreadful outcomes?

[The Prime Minister]

My hon. Friend makes a good point. An issue always raised by charities campaigning on some of the less well-known and less prevalent cancers is that they do not get a fair share of the research funding. That is an issue that I have taken up with the Health Secretary. We need to make sure that we are spreading research funding and the work we do into cancer fairly across the different disciplines and across the different cancers.

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

Q11. May I repeat that energy companies made 77% more profit per customer in 2012? Does the Prime Minister agree that this is not acceptable, and if so, what immediate steps does he propose to take to protect customers from blatant profiteering?

[The Prime Minister]

What we need to do is to create a more competitive energy market. As I said, we inherited a situation with just six big companies. We have seen seven new companies come into the market and the number of people with independent suppliers—such as the Leader of the Opposition—has actually doubled during this Parliament, so we are making progress.

I always follow what the hon. Gentleman says. Recently, he gave an interview when he went on the radio and said about Labour’s policy: “Do you know, I don’t know our position on welfare, I don’t know our position on education, I don’t know our position on how we’d run the health service?” I think a question about that would be a good thing.

[Chris Kelly (Dudley South) (Con)]

Q12. The Prime Minister’s plans to restrict benefits to immigrants are wise and welcome. What lessons has my right hon. Friend learned from the failures of the last Labour Government who, despite claiming that just 13,000 Polish immigrants would arrive in the UK, deliberately allowed more than 1 million to come into our country?

[The Prime Minister]

My hon. Friend raises an important point. Of course there are benefits of free movement within the EU, but there should be proper transition controls. We increased the transition controls on Bulgaria and Romania from five years to seven years when we became the Government, but it still absolutely baffles me why the last Labour Government decided in 2004 to have no transitional controls at all. They predicted 14,000 Polish people would arrive to work in Britain; in the event, the number was over 700,000. It was a shameful dereliction of duty.

[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)]

Q15. The Prime Minister will be aware that the Mayor of London, Boris Johnson, proposes to close nearly every single ticket office on the London Underground network, with more than 700 jobs being lost. Does the Prime Minister believe that that is the way to raise living standards for ordinary Londoners?

[The Prime Minister]

The best way to help Londoners is to ensure that we have a safe and affordable tube, and that we use modern technology to deliver that. The conversation that the hon. Lady needs to have is with the trade union that has done so much damage to our underground. We ought to have no-strike deals on the underground and permanent systems that provide a good service.

[Simon Kirby (Brighton, Kemptown) (Con)]

Q13. Earlier this week in Brighton, I was tested for HIV. This Sunday is world AIDS day. In view of the fact that one in five people with HIV in this country does not know that they have it, does the Prime Minister agree that regular testing is to be encouraged?

[The Prime Minister]

I pay tribute to my hon. Friend, all hon. Members across the House and everyone in politics who campaign so persistently and consistently on this issue. It is vital that we improve the livelihoods of people who have HIV and AIDS in the UK, but it is also vital that we continue working internationally, including through our aid budget, to tackle HIV and AIDS around the world. We can be proud of the money that we have put into things such as the global fund and of the fact that this country has achieved the target of 0.7% of gross national income, when many other countries have broken their promises.

[Mr Gerry Sutcliffe (Bradford South) (Lab)]

The Prime Minister is very keen to encourage energy users to switch providers to get the best tariff. Why has it been so difficult over the past three years to switch mobile phone providers?

[The Prime Minister]

Across all the utilities, we want it to be easier for people to switch. We have done that on banks. It is now easier to switch bank accounts because of the hard work of the Chancellor of the Exchequer. It is now easier to switch energy providers because of the excellent work of the Secretary of State for Energy and Climate Change. It ought to be easier to switch with other utilities. That is an important bit of work that we are doing.

[Stephen Gilbert (St Austell and Newquay) (LD)]

Q14. The number of apprenticeships in Cornwall has doubled since 2010, which is helping to create a stronger economy and a fairer society. Will the Prime Minister meet me and a delegation of young people from Cornwall to see how we can further promote these very worthwhile schemes?

[The Prime Minister]

I am delighted with the news about the number of apprenticeships in Cornwall. The Government have made a major financial commitment to funding apprenticeships. That is making a difference, but there is far further to go in tackling youth unemployment and worklessness among people between the ages of 16 and 24. I am always happy to meet the hon. Gentleman. Perhaps a suitable moment might be when I am in Cornwall.

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

House prices are going up at a time when real wages are going down. Does the Prime Minister accept that when interest rates go up after the election, it will detonate a sub-prime debt crisis of his making?

[The Prime Minister]

The greatest danger in terms of interest rates would be to have a Government who believed in more borrowing, more spending and more taxing. That is what would drive up interest rates, that is what would hit the cost of living and that is what every family in this country should dread.

[Richard Drax (South Dorset) (Con)]

On a point of order, Mr Speaker.

[Mr Speaker]

Points of order come after statements. That is a well-established feature of our system.

We will come to the urgent question in a moment. There is another urgent question to follow and a statement by a Minister. I therefore hope that the House will understand that I do not intend to run the first urgent question at great length. It concerns an extremely important matter, but the House will have to treat of it briefly.

Gas and Electricity Bills

Wednesday 27th November 2013 Commons Chamber

Nic Dakin (Scunthorpe) (Lab)

- Hansard - - Excerpts

People in my constituency are worried about the rising cost of their energy bills. As the winter looms, they are looking for the Government to take action to protect them from rising prices.

The petition states:

The Petition of residents of Scunthorpe,

Declares that the Petitioners support gas and electricity bills being frozen.

The Petitioners therefore request that the House of Commons urges the Government to introduce legislation that will freeze gas and electricity bills.

And the Petitioners remain, etc.

[P001300]

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

- Hansard - - Excerpts

The petition states:

To the House of Commons.

The Petition of a resident of the UK,

Declares that under Prime Minister David Cameron gas and electricity bills have gone up by £300 for the average household and further that the Leader of the Opposition Ed Miliband will freeze gas and electricity bills until 2017.

The Petitioner therefore requests that the House of Commons supports Labour's proposals to freeze energy bills.

And the Petitioner remains, etc.

[P001301]

Diplomatic Relations (Spain)

Wednesday 27th November 2013 Commons Chamber

12:34

[Mr Nigel Evans (Ribble Valley) (Ind)]

(Urgent Question): To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on diplomatic relations between the United Kingdom and Spain in the light of recent escalating events concerning Gibraltar, most recently the searching of a diplomatic bag as it was leaving the Rock.

[The Minister for Europe (Mr David Lidington)]

On Friday 22 November, two British Government bags containing official correspondence and communications, and clearly marked as such, were opened by Spanish officials while the bags were in transit. That represents a serious interference with the official correspondence and property of Her Majesty’s Government, and therefore a breach of the principles underlying the Vienna convention on diplomatic relations, and the principle of state immunity. We take any infringement of those principles very seriously.

Following reports of the incident, the Foreign and Commonwealth Office made representations to the Spanish Ministry of Foreign Affairs and Co-operation at senior level over the weekend of 23 and 24 November, and the British Embassy in Madrid submitted a formal written protest to the Ministry on Monday 25 November. In our protests we requested an urgent explanation of the incident from the Spanish Government, and sought assurances that there will be no further interference with the UK’s official correspondence. The unauthorised opening of UK official communications, including diplomatic bags, is a matter of grave concern and we made that clear to the Spanish Government. If the Spanish authorities had concerns about the contents of our bags, internationally accepted practice would require them to contact the British authorities.

We have now received an explanation from the Spanish Government and been assured that we will not see a repeat of those actions. As the Spanish authorities know, overriding international principles provide for both state immunity and the freedom of official communication between a state and its representatives. Tampering with the bags was a breach of the principles embodied in the Vienna convention on diplomatic relations. The UK strictly adheres to those principles, and expects other states to do the same.

We are maintaining strong pressure on the Spanish Government to de-escalate current tensions and work with us to manage our differences through diplomatic and political routes. A major escalation could harm all parties, not least the many thousands of Spanish families who benefit, directly or indirectly, from the economic prosperity of Gibraltar. The UK wants to maintain a strong bilateral relationship with Spain across a range of policy areas, and such a relationship benefits the interests of this country, Gibraltar and Spain alike. We have reiterated to the Spanish Government the Foreign Secretary’s proposal of April 2012 for ad hoc talks involving all relevant parties, and there have been constructive discussions with the Spanish about these proposals.

[Mr Evans]

I am grateful to the Minister of State for that response. As he said, the serious incident last Friday goes against the 1961 Vienna convention on diplomatic relations. Official correspondence and diplomatic bags should simply not be tampered with. Last time anything such as this happened was 13 years ago with the Zimbabwean regime of Robert Mugabe—not the best company to be associated with. This is the first time that an EU state or NATO ally has opened a UK diplomatic bag, violating the 1961 Vienna convention. That enormously serious breach comes on top of tedious and spiteful delays at the Gibraltar-Spanish border, and the incursion of a Spanish vessel into waters off Gibraltar. The deterioration of relations between the United Kingdom, Gibraltar and Spain serves nobody well.

The Spanish ambassador was summoned to the Foreign Office last week but clearly that has not had the desired effect. Nobody wants a further escalation of events or further deterioration in relations, but at the same time Spain must be made to know that its actions are intolerable, unwarranted, and will be met with an appropriate response, defending the rights of the people of Gibraltar and respecting international conventions. What actions will Her Majesty’s Government take to ensure that once and for all Spain gets the message? Hands off the Rock!

[Mr Lidington]

I think the Spanish authorities are in no doubt about the Government’s resolve and, I believe, the resolve of the House as a whole that there should be no transfer of the sovereignty of Gibraltar to any other country, unless that were freely consented to by the people of Gibraltar. I reiterate that we will not engage in any process of talks or negotiations about sovereignty with which Gibraltar is not content. I hope that that reiteration will be some assurance to my hon. Friend.

[Mr John Spellar (Warley) (Lab)]

I congratulate the hon. Member for Ribble Valley (Mr Evans) on securing the urgent question. I reiterate the Opposition’s growing concerns, and those on both sides of the House, about this latest event in a series of events around Gibraltar’s borders.

We heard yesterday that two diplomatic bags were opened by Spanish police at the Gibraltarian border. It has been reported that the bags were taken from Gibraltar to Seville airport in Spain. As the Minister has rightly said, that represents a serious interference with the official correspondence of Her Majesty’s Government, and a serious breach of both the principles underlying the Vienna convention on diplomatic relations and the principles of state immunity.

In the written statement before the House today, the Minister says he has received an explanation from the Spanish Government—he reiterated that just now. I am sure Members on both sides of the House would welcome hearing the specific details of that explanation, which were missing from the Minister’s written statement. Will he therefore set out the details of that explanation and say whether they came in writing? Will he agree to lay them before the House by placing them in the House of Commons Library? Will he also set out how long it took to receive the explanation from the Spanish Government once he had become aware of the incident? Will he be clear for the House on whether the British Government have a taken a view that the explanation was sufficient? If it was not sufficient, will he set out what further assurances the Government will seek from Spain on the matter, and how such incidents can be prevented from happening in future?

Will the Minister tell the House whether the Prime Minister has been in touch with his counterpart in Spain to discuss not just this matter but the series of recent incidents at the Gibraltarian border? Will the Minister also make it clear whether it is the British Government’s view that this was a case of Spanish officials locally failing to follow due process, or whether it was an intentional provocation authorised by the Spanish authorities?

Following the EU Commission’s observation mission to Gibraltar in September, from which it concluded that there was “no evidence” of Spain’s infringing rules of the border controls, will the Minster call on the Commission to carry out an urgent further mission and investigate any further incidents as they arise?

Finally, it is vital that the Spanish Government today hear a united statement from the House that such provocative and unlawful acts are not acceptable to this Parliament or to the British people. They cannot be ignored.

[Mr Lidington]

I thank the right hon. Gentleman for his overall support for the Government’s position. I shall try to answer his questions.

As I have said, we were alerted to the incident over the weekend, and we made representations to the most senior officials we could reach in Madrid over the weekend. We also ensured that the Spanish authorities at all levels were well aware of the gravity of our concern about the incident.

The explanation that the Spanish have given to us—it arrived late yesterday—was that there was an error at junior operational level at the crossing point between Gibraltar and Spain, and that the more senior Spanish official present put a stop to that interference with our official correspondence as soon as he realised what was happening.

As I have said, we have had assurance that such action will not be repeated. We trust that Spain will live up fully to its obligations under the Vienna conventions and international law.

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

It is rather an easy explanation—is it not?—to say that the decision was taken at junior operational level. If I may say so, I think we are entitled to press the Spanish Government further on the protocol and the understanding of those who have responsibility for these matters at the border. The House will be united in condemnation of any breach of the Vienna convention. Have we had an unequivocal apology for the incident from the Spanish Government at the necessarily highest level, and an equally unequivocal assurance that steps will be taken to ensure that it never happens again?

[Mr Lidington]

The protocol that should be observed, not simply at the border between Gibraltar and Spain but at any international crossing point, is that containers that are clearly marked as diplomatic and official correspondence are inviolate under the terms of the Vienna convention. It is true that, from time to time, people at operational level make mistakes. I trust that the Spanish authorities will now show, by their actions, that they will adhere fully to their international obligations.

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

I am grateful to the hon. Member for Ribble Valley (Mr Evans) for putting this question. If this alleged error by a jobsworth was the only act of interference and aggression by the Spanish authorities on the frontier with Gibraltar, it might just get by, but it is part of a succession of harassment after harassment after harassment, and it will not do. The Government’s softly, softly approach is simply not working. May I put it to the Minister that if anything like this ever happens again, the Spanish ambassador should be expelled from this country?

[Mr Lidington]

Clearly, any repetition, in the light of the weekend’s events, would be a matter of the utmost seriousness. The right hon. Gentleman decries the Government’s approach, but last week we had evidence that it worked in the case of the Spanish oceanographic survey vessel, which mounted an incursion into Gibraltar waters and sought to carry out survey work. Following the Government’s vigorous protests, including summoning the Spanish ambassador, and the strong views expressed in this House, notably in questions put to the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for Boston and Skegness (Mark Simmonds) following his oral statement last week, the Spanish vessel pursued its survey work but did not mount any further incursion into British Gibraltar waters. The vessel carried out its survey work within Spanish waters. That shows that we should not write off the Government’s approach.

[Andrew Rosindell (Romford) (Con)]

The Minister of State must surely now realise that this is a long series of acts of aggression by the Spanish Government against the loyal subjects of Gibraltar, and that the time has come to take firm and decisive action. Is it not time to send the Spanish ambassador back to Madrid?

[Mr Lidington]

No.

[Mr Peter Hain (Neath) (Lab)]

I endorse the strong criticism across the House of the serious breach of an international treaty in opening the bag, but may I probe the Minister’s diplomatic strategy to resolve the escalating tension of the past few months? Will he revisit the work done by Lord Howe and Lord Garel-Jones under his party’s leadership in government, and by my right hon. Friend the Member for Blackburn (Mr Straw) and I under the previous Labour Government, which respects the paramount rights of Gibraltarians but recognises that Spain, currently one of our closest friends, has an historic grievance? Until we bring people together for proper negotiations, we will not resolve these matters.

[Mr Lidington]

I would like to see people come together through the ad hoc talks on practical issues, which were proposed in 2012 by my right hon. Friend the Foreign Secretary. We still hope that it will be possible for such talks to take place. I am grateful to the right hon. Gentleman for his support, but may I add, as gently as I can, that I do not believe that the example he and the former Foreign Secretary set when they were in government would help? It added hugely to the sense of mistrust in Gibraltar about the intentions of the British Government.

[Sir Edward Leigh (Gainsborough) (Con)]

Which Royal Navy warships are currently in the waters around Gibraltar, and do not these provocations give the lie to those who have complacently argued for years that the Royal Navy was not important? The best preservation of peace is the strength of the Royal Navy.

[Mr Lidington]

No one in this Government has ever decried the importance of the Royal Navy. I am sure that my hon. Friend would not expect me to comment on ship deployments.

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

Spain is a fellow member of the European Union and a NATO ally. What are the Government doing with the member states of both those bodies to bring pressure to bear on the Spanish Government? Surely that is an important aspect.

[Mr Lidington]

The most important thing that we can do with fellow members of the European Union and other allied countries—indeed, this is what we have been seeking to do—is draw their attention to the fact that Gibraltar is not some exploited colony; it is a self-governing territory whose people have time and again freely expressed their wish to remain under the sovereignty of the United Kingdom.

[Mr Peter Bone (Wellingborough) (Con)]

In order to build more trust with the Gibraltarians, would not it be a good idea for some Royal Navy ships to make a good will visit there—preferably a couple of gunboats?

[Mr Lidington]

Royal Navy vessels make frequent good will visits to Gibraltar as part of their operations, and I am sure that pattern will continue in future.

[Mike Gapes (Ilford South) (Lab/Co-op)]

Hundreds of thousands of British people live in Spain and large numbers of Spanish people live in this country. Many of them will be very concerned about a possible deterioration in the relationship between the two countries. What action will the Minister take to resolve the matter by involving the European Commission again, given that we are both member states of the European Union?

[Mr Lidington]

We will always consider trying to involve the European Commission where it has competence, but it does not have competence to determine sovereignty. That sovereignty was set out in the treaty of Utrecht and has been confirmed by the freely expressed vote of the people of Gibraltar many times.

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

Does the Minister agree that the explanation that the Spanish Government have given is extraordinary and, frankly, would not pass muster in the Bromley magistrates court, let alone anywhere else? Will he redouble his efforts to explain through our NATO allies that the behaviour of the current Spanish Government, who are stooping to the levels of Franco’s Government, is not that of a NATO ally and is not acceptable? Will he consider reinforcing the naval deployments available to us in Gibraltar?

[Mr Lidington]

What would be in the interests of both this country and Spain, as fellow members of NATO and the European Union, would be to take forward talks on practical issues concerning co-operation on matters that affect Gibraltar and the campo, to park the admitted irreconcilable difference over sovereignty and to focus on the wider agenda, where the UK and Spain have a great deal on which they should be able to work together constructively.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

Just a few days ago Members on both sides of the House warned that every time the Foreign Office summoned the ambassador there was some sort of nonsense from the Spanish in response. Will the Minister answer the specific question from my right hon. Friend the Member for Warley (Mr Spellar), which he forgot to answer? Has either the Prime Minister or the Foreign Secretary personally spoken with their counterparts in Spain?

[Mr Lidington]

The contacts with the Spanish authorities have been at all appropriate senior levels. We remain ready, in the event of further serious incidents—we hope that they will not happen—to make representations to Spain at whatever level we consider appropriate given the circumstances.

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

About 200 metres off the coast of Morocco lies Perejil island, a rocky and disputed outcrop in sight of the Moroccan coast. The Spanish refuse even to negotiate or discuss its position. Perhaps we could help our Spanish allies understand the frustration we feel with this type of interference if we recognised Morocco’s right to the island.

[Mr Lidington]

My hon. Friend makes his point very plainly.

[Several hon. Members]

rose—

[Mr Speaker]

Order. We must move on.

Romanian and Bulgarian Accession

Wednesday 27th November 2013 Commons Chamber

12:54

[Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)]

(Urgent Question): To ask the Home Secretary if she will make a statement on Romanian and Bulgarian accession.

[The Secretary of State for the Home Department (Mrs Theresa May)]

In June 2005, the previous Government signed accession treaties with Romania and Bulgaria, and in doing so they granted all Romanians and Bulgarians the right to come to Britain. The treaties came into effect in 2007, and as a result the seven-year transitional controls relating to free movement will end on 1 January 2014. From that date, Romanians and Bulgarians will have the right to largely unrestricted free movement across Europe.

Unlike the previous Government, who chose not to apply the transitional controls for countries such as Poland and Hungary in 2004, this Government are doing everything we can to ensure that we are prepared for this latest extension in EU free movement rights. First, we are making use of the full seven years available to us to impose transitional controls, something the Labour party failed to do in 2004, which meant that Britain was the only major economy in Europe to grant full access to its labour market to millions of Poles, Hungarians and others.

Secondly, we are tightening the European immigration regulations to ensure that we do not gold-plate EU free movement rules. We are therefore amending the regulations to create a statutory presumption that a European’s right to reside here ends after six months unless they can prove that they are actively seeking work and stand a real chance of finding it.

Thirdly, we are taking action to limit the pull factors that attract people to come to Britain. My right hon. Friend the Secretary of State for Work and Pensions is introducing a three-month delay before a European jobseeker can claim benefits and a new minimum earnings threshold to ensure that EU nationals are genuinely working in the UK before they can access benefits. He is also developing a tougher six-month test to assess whether benefit claimants have a genuine chance of finding work. That will apply to all EU nationals who come here to look for work and those who have already worked here. Those changes will come into effect as soon as possible in the new year. My right hon. Friend the Secretary of State for Health is ensuring that, wherever possible, the NHS claims back the cost of treating Europeans from their home country. My right hon. Friend the Secretary of State for Communities and Local Government will issue new statutory guidance to ensure that local authorities set a residency requirement, or a minimum period of residence in a community, before a person qualifies for social housing.

Fourthly, we are ensuring that there is a full and proper operational response to the challenges brought by that extension in free movement. We are working with the police, local authorities and other agencies to identify Europeans who are rough-sleeping and not exercising their treaty right to be in the UK. Where appropriate, those people will be removed. We are also changing the European immigration regulations to introduce a 12-month bar on their return to Britain, unless they can prove that they have a proper reason to be here.

Fifthly, I have lobbied other member states in the Council of Ministers about the abuse of free movement, and there is a growing coalition of support for change. In April this year, Germany, Austria and the Netherlands, along with Britain, wrote to the European presidency and the Commission to make the case for change. Although I am pleased that the European Commission has at long last admitted that there is a problem, it is still refusing to do anything meaningful about it.

Those are the measures we are taking to prepare us for the extension of free movement in January, but in the long term there is much more we need to do. The Prime Minister made it clear at the beginning of the year that any future Government he leads will seek to renegotiate Britain’s relationship with the EU before we hold a referendum, and that referendum will ask the people whether we should be in or out. As I have made clear in the past and reiterate today, that renegotiation must address the problems caused by free movement. Now, in her reply, the shadow Home Secretary needs to tell the House whether she agrees with that renegotiation and referendum and whether she agrees that the renegotiation must address the problems caused by free movement.

[Yvette Cooper]

For generations, people have come to this country and worked hard to contribute to Britain, building some of our biggest businesses and even becoming Olympic medal winners, but the principle of contribution is an important one, and the controls on immigration must be fair to those who live here. That is why we called for stronger restrictions on benefits for new arrivals from the EU, including proposals eight months ago to strengthen the habitual residence test to make it clear that people should not be able to claim benefits when they first arrive. We also said that the framework for the free movement of labour should be looked at again.

At the time, the Government dismissed those proposals, but eight months later they have changed their minds. That is welcome, but will the Home Secretary say why she did not bring those proposals forward at the time? It is now the end of November, and accession for Romania and Bulgaria will occur in a month’s time, so will she tell the House which of these measures will be in place by the beginning of January, when the transitional controls for Romania and Bulgaria end? Will the restrictions on jobseeker’s allowance be in by January? Will the housing benefit restrictions be in by January? Will the minimum wage fines be in place by January? If not, why not? We called for these proposals eight months ago, so why the delay?

We all agree that transitional arrangements should have been in place for the A8 countries. At the time, the Conservative party voted for A8 accession even without transitional arrangements. The Home Secretary’s party also supported the Romanian and Bulgarian accession agreement. The Prime Minister has today claimed that the rules on transitional controls should have been changed at that time, but he did not argue for changing transitional controls then and failed to do anything about changing transitional controls when this Government endorsed Croatian accession in 2011 with exactly the same transitional control rules in place. Will she explain why the Prime Minister failed to act in 2011, given what he has said today?

Neither are the Government doing anything about the impact of accession on the workplace. Most people from Europe come to Britain to work, not to claim benefits, and 1 million British citizens live and work elsewhere in Europe too, yet there is a serious problem of low-skilled migrant workers being exploited, undercutting local workers and responsible businesses too. That is bad for everyone, yet she is doing nothing about it. We have urged her to take action, against recruitment agencies that target only foreign workers; against factories that segregate shifts by nationality; against the loophole in the minimum wage that means migrant workers are put into overcrowded tied accommodation to get round the rules; and against employers in the care sector, for example, who have recruited heavily from abroad but failed to train or to pay the minimum wage. Each time she has refused, so what is the Home Secretary or the Prime Minister doing to address those problems for wages and jobs? Nothing.

All parties should take a responsible approach to immigration. We will not enter an arms race of rhetoric. Instead, we need practical measures to address people’s concerns. We are glad that the Prime Minister has adopted our proposals on benefit restrictions, but the Government should not have delayed them for eight months so that they will not be in place for January. It is not enough, either. They need to take action over jobs and wages now.

[Mrs May]

The hypocrisy of the Labour party is absolutely staggering. [Hon. Members: “Out of order!”] The party that despite all the evidence and expert advice—[Hon. Members: “Out of order!”]

[Mr Speaker]

Order. The temperature is rising. I keep a close eye on these things, and I understood the reference to be a collective reference, not an accusation of individual impropriety. [Interruption.] Order. I do not require any assistance, although the sage nodding of the head by the hon. Member for Wellingborough (Mr Bone) is always a matter of great parliamentary interest. That is why I took the view I did. I urge Members to be moderate in their use of language, but the Home Secretary is in order.

[Mrs May]

Despite all the evidence and warnings, the Labour party in government refused to impose transitional controls in 2004, but now it seeks to lecture us about immigration. I do not know whether the shadow Home Secretary has seen a copy of today’s Daily Mail, but it contains a fascinating article written by Britain’s ambassador in Warsaw in 2004, who describes the “incredulity” of the Poles when he told them that Britain would not be imposing transitional controls. He writes that the Polish Government

“instinctively knew what Tony Blair’s Labour government consistently denied: the immediate abolition of all border restrictions would lead to a surge of”

their people coming to these shores.

The Labour Government told us that only 13,000 people would come; the truth was that more than 1 million came. It was the biggest single influx this country has ever experienced, and who suffered as a result? The right hon. Lady talks about doing something about wages and jobs. In the five years following Labour’s failure to impose transitional controls, more than 90% of the increase in employment in Britain was accounted for by foreign nationals. Under this Government, thanks to our measures to control immigration and reform welfare, two thirds of the increase in employment has been accounted for by British people.

But if the right hon. Lady does not want to listen to me or the former British ambassador to Poland, perhaps she should listen to the succession of former Labour Home Secretaries who have admitted what the British people already knew. The right hon. Member for Blackburn (Mr Straw) describes the failure to impose transitional controls as a “spectacular mistake”. And let us remember: it was not just European immigration that Labour let get out of control, but all forms of immigration. Under Labour, net immigration reached 2.2 million, which is twice the population of the city of Birmingham.

I come again to the right hon. Lady’s point about what is being done on wages and jobs. The Labour Government knew just what they were doing. The hon. Member for Dagenham and Rainham (Jon Cruddas), the Leader of the Opposition’s policy guru, has said that Labour were

“using migration to introduce a covert 21st century incomes policy.”

Labour, which claims to be the party of the working man and woman, admits that it used immigration deliberately to keep down wages.

In answer to the right hon. Lady’s question, I have gone through what the Government are doing to prepare for January: we have been making full use of transitional controls; we are tightening the immigration rules so that we do not gold-plate EU free-movement rules; we are limiting the pull factors that attract people to Britain; we are ensuring a strong operational response to the challenges brought by free movement; and we are working with other member states to cut out the abuse of free movement. She claims we have done nothing about the habitual residence test, but my right hon. Friend the Secretary of State for Work and Pensions has tightened it, and that is already in operation. We want to renegotiate our relationship with the EU and ensure we address the problems caused by free movement as part of that renegotiation.

In its 13 years in government Labour did nothing about those issues. The shadow Home Secretary’s comments today show that she has not learned any lessons from 2004, has failed to come up with any solutions of her own and has failed to support our plan to fix the problems caused by free movement in the renegotiation. On this issue, as on others, she has no credibility whatsoever.

[Mr James Clappison (Hertsmere) (Con)]

My right hon. Friend rightly adverted to the fact that the previous Government, virtually alone among the major economies, allowed unfettered access to this country to the large populations of the accession countries in 2004. Will she assure me that this Government will not do what the previous Government further did, which was, at the same time, to grant a large number of work permits to workers from outside the EU, in a policy that has never been properly explained and remains mysterious to this day, even though it sounds very much as though the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) would like to repeat it.

[Mrs May]

Indeed, and a leading Labour party Front Bencher has already indicated that a Labour Government might consider increasing levels of immigration, were Labour to come back into power. Certainly this Government have been tightening up not just on the work permit route from outside the EU into the UK, but on every route of access into the UK. As the Conservative party committed to doing before the election and as was agreed in the coalition agreement, the Government have introduced a cap on non-EU economic migration into the UK. We have a limit on the number of people who can come here as tier 2 workers and we have reformed the other routes, and I am pleased to say that as a result we have seen immigration from outside the EU fall.

[Keith Vaz (Leicester East) (Lab)]

Of course it is right for all Governments to target the abuse of benefits. Will the Home Secretary reassure us, however, that this measure is not designed specifically to deal with Romanians and Bulgarians as the transition ends in just 30 days’ time? Does she agree that the real issue is the push and pull factors? That is why it is necessary to work with the Romanian and Bulgarian Governments to find out the reasons and causes of this migration. Romania has not as yet accessed 87% of the funds it was given on accession. We need to work with the Romanians so that they can build on their infrastructure and their citizens are able to remain there—this applies to Bulgaria, too—which is what they want to do. We cannot have freedom of movement without movement, which makes this a fundamental issue for the European Union rather than one that can be dealt with by a change in the benefit rules.

[Mrs May]

I thank the right hon. Gentleman for his measured response and his question. Of course he is right to say that making the changes to tighten the benefit rules, seeking to remove people not exercising their treaty rights and then providing a year-long ban applies not only to Romanians and Bulgarians but to all those exercising their free movement rights and coming here from the European Union. What I took from the last part of the right hon. Gentleman’s question was, I think, support for the concept that this Government have set out—that we want to renegotiate the treaty. My party has certainly set that out, and the Prime Minister has set it out. We want the treaty to be renegotiated and, within that, we want to address the issue of free movement. Crucially, other member states across the EU are now working with us, because they also see potential problems arising from the abuse of the free movement right.

[Sir Gerald Howarth (Aldershot) (Con)]

May I congratulate my right hon. Friend on her incredibly robust statement today, which will be warmly welcomed by the British people, and may I join her in condemning the nauseating hypocrisy of Labour Members, who allowed 2.2 million to come into this country as a deliberate act of policy? We saw on the television young doctors in Bulgaria wishing to come to this country because they could earn in two days here what they earn in a month in Bulgaria. Is not their membership of the EU completely contradicted if all the talent leaves Bulgaria and comes to the UK and other advanced European countries? Even at this late stage, I invite my right hon. Friend to contemplate extending the transitional arrangements so that we have another two or three years to prepare for this.

[Mrs May]

My hon. Friend makes an important and serious point about people moving to the UK who would be of benefit to their own countries if they remained in them. It is important to look at the issue he raises about the disparity of wages and salaries that can be earned, particularly when looking at renegotiation, free movement and transitional controls. My right hon. Friend the Prime Minister has made it clear that one aspect that we are currently considering is whether a more flexible approach on transitional controls, reflecting potential disparities and extending transitional controls while certain disparities remained, would be more beneficial than the blunt instrument we have now.

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

As a foreign national who came to this country, I find some of the tone of the right hon. Lady’s response to be slightly distasteful. Some of what she wants to put in place is right and proper, but she did not answer the shadow Home Secretary’s question about why those things were not put in place when we called for them eight months ago. Does she anticipate that all the provisions she mentions will be in place by 1 January?

[Mrs May]

I have made it clear on many occasions that I think immigration has been good for the United Kingdom overall. The problem we faced was uncontrolled immigration under the previous Labour Government, whom the hon. Lady supported. We therefore needed to ensure that we brought some control into our immigration system. Most members of the public think that it is only fair when they are hard working and contributing to the NHS, for example, that other people coming here should be required to contribute as well, while those who come here legitimately think it only fair that those who are here illegitimately and illegally should be removed from this country. Some of the measures—the tightening of the habitual residence test, for example—have been renegotiated in recent months. These policies are being looked at and they will be in place by 1 January; others will be put in place as soon after 1 January as is possible.

[Mr Charles Walker (Broxbourne) (Con)]

I thank the Home Secretary for her statement, but I ask her to find her inner lion or tiger and extend transitional controls until 2019. She should take the hit and not pay the EU fine.

[Mrs May]

My hon. Friend raises the same point as my hon. Friend the Member for Aldershot (Sir Gerald Howarth) raised, and I suspect that other hon. Friends would like to raise the same point. I think it right for this Government to look at everything we can do to ensure that we can maintain the control of migration to which we have been committed to introducing in the UK. The current legal position is clear, and I have set it out, but it is right to look at every possibility to ensure that we deal with the situation. I have set out in my response to the urgent question the moves that we are making.

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

Given the abject failure, as the right hon. Lady describes it, of the European Commission adequately to respond to a joint initiative that included the German Government and others, would it not be a good idea to press the matter further, to extend the transitional provisions of the 2005 treaty until such time as we can have a referendum and see what decision the British people have made, and to maintain the status quo in the meantime?

[Mrs May]

As I noted, a number of hon. Members have raised this issue, so I congratulate the right hon. Gentleman on being the third to do so. I have just responded to my hon. Friend the Member for Broxbourne (Mr Walker) on that very matter. On the point about the European Commission, I agree that it has so far failed to respond. It has, however, moved in that it has accepted that the concept of free movement can be abused and that some abuse of it does take place. This is why my right hon. Friend the Secretary of State for Work and Pensions and I are working to build within the EU, a coalition of member states—beyond those I have already mentioned—that remain concerned about this issue, wish to see something done about it and can bring greater pressure on the Commission.

[Dr Julian Huppert (Cambridge) (LD)]

It is clearly right to clamp down on abuse, but will the Home Secretary confirm that the vast majority of EU migrants here do not claim benefits and instead contribute substantially to our country and our economy—to the tune of £25 billion, according to one study from University college London?

[Mrs May]

The problem is that the last Labour Government made no attempt to collect any information, so nobody knows the number of people claiming benefits when coming into this country in 2004. This Government are now starting to collect that information so that we can build up a better picture at the same time as we are tightening up access to those benefits. We are not able to say what the picture was previously because the last Government failed to collect the figures.

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

I am sure that the Home Secretary will realise that my constituents are concerned not just about benefits. My right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) has drawn attention to the challenges posed by the large influx of Roma-Slovak migrants into our constituencies. Does she accept that that poses major challenges to community cohesion and puts significant pressures on housing overcrowding and health and school services in our constituencies? Does she agree that the Government need to develop a strategy to work with councils such as Sheffield to meet those challenges to the benefit of all concerned?

[Mrs May]

The hon. Gentleman raises an issue that I know concerns a number of communities around the country; local authorities are seeking to address it. There are a number of ways in which the Government have worked on these issues—in respect of certain groups in London, for example—including by working with the Romanian police, who have been over here to support us on this particular question. We need to ensure that we can maintain community cohesion so that we do not see a rise in the concerns to which the hon. Gentleman refers. The Government will strengthen their ability to ensure that those who are removed for not exercising their treaty rights are not able to return for a year.

[Michael Ellis (Northampton North) (Con)]

Will my right hon. Friend note Lord Mandelson’s comment that the last Labour Government sent out “search parties” to encourage mass immigration? Moreover, the right hon. Member for Blackburn (Mr Straw) has said not only that the Labour Government’s policy was a “spectacular mistake”, but that it left them—and should have left them—with “red faces”. In the light of those admissions from certain leading Labour figures, will my right hon. Friend ensure that she continues to repair the damage done to this country by the negligence of the last Government?

[Mrs May]

My hon. Friend is right, and I assure him that, working with colleagues such as my right hon. Friend the Secretary of State for Work and Pensions, I will do all that I can to repair the damage left by the last Government. Given that the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett), Lord Mandelson—as my hon. Friend pointed out—and the right hon. Member for Blackburn (Mr Straw) have all been reflecting on the mistakes made by the Labour Government in relation to immigration, I think that it would have been far preferable for the shadow Secretary of State to come to the House and apologise today.

[Mr Mike Weir (Angus) (SNP)]

The Home Secretary has announced what appear to be substantial proposed changes to freedom of movement, but freedom of movement is a two-way street. It is estimated that 2.2 million United Kingdom citizens are living or working in other parts of the European Union. What assessment has the Home Secretary made of the impact on those citizens of reciprocal changes that may be made by EU nations?

[Mrs May]

It is true that a number of people from the United Kingdom have chosen to exercise free movement rights and move to other parts of Europe. The figure that I have seen is slightly lower than the one given by the hon. Gentleman, but that does not affect the principle, or the fact that people have exercised those rights. What I think this country should do, in conjunction with other EU member states—and we are working with other member states—is decide what makes sense, and what is fair to our citizens. We must have a system that ensures that those who exercise free movement rights exercise them properly, and that we are able to reduce the pull factors that encourage people to come here and, potentially, not exercise those rights properly.

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

Will my right hon. Friend say to our colleagues in the European Union that, given that the last Labour Government let in 2.2 million migrants, Britain has taken more than its fair share of migrants throughout Europe, and it is high time that this Parliament regained sovereignty over our immigration policy?

[Mrs May]

In many respects, we have rather more control over our borders than a number of other European Union member states. We are not in Schengen, for example, and we intend to remain outside it and retain our ability to exercise border controls. I think that the measures I have announced today demonstrate that we are increasingly sending the European Commission the message that we think it important for us to be able to make decisions about such matters as the habitual residence test on the basis of what is right for people living here in the United Kingdom.

[Derek Twigg (Halton) (Lab)]

Let me say first that I think we should consider what changes could be made in relation to how free the movement of labour should be in the European Union. My constituents raise that issue with me regularly. May I also ask the Home Secretary what estimate her Department has made of the impact that the changes will have on the number of EU citizens coming to, and staying in, this country, and on what date the benefit changes will take effect?

[Mrs May]

The Government have produced no estimate, and independent commentators have expressed the view that that is a sensible approach. Because of the number of variables, it would be very difficult to make such an estimate other than within a very large range.

Some of the measures that I have announced—including the ability to ensure that people who are removed because they are not exercising their treaty rights do not return for a year—will take effect on 1 January, while others will be introduced as early as possible in the new year.

[Mr Philip Hollobone (Kettering) (Con)]

I welcome the Home Secretary’s statement, but I do not think that either the coalition Government or the Opposition are listening carefully enough to what people are saying. My constituents take the view that this country is full, and that we should not open our borders to Romania and Bulgaria. Yes, if we do not open our borders to them the country will be taken to court, but we will have sent a signal of firm intent about our renegotiation of the EU treaties—and hopefully, by the time the case comes to court the referendum will have taken place, and we will have left this wretched organisation altogether.

[Mrs May]

I note my hon. Friend’s robust remarks, which are no less than I would have expected from him on this issue. I understand people’s concern about it—and, indeed, about immigration generally—but I think that their concern is largely a response to what they saw happening under the last Government. We are taking a number of steps to deal with that, not just in terms of what will happen after the end of the transitional controls but in the Immigration Bill, which is currently going through Parliament. It is this Government who are introducing changes that I believe are absolutely fair to hard-working people in this country.

[Mr Ian Davidson (Glasgow South West) (Lab/Co-op)]

Surely the fact that new Labour got it spectacularly wrong on European immigration—as some of us argued at the time—does not entitle the Government to make the same mistake. Am I not right in thinking that by the end of the first week in January, every citizen of Romania, every citizen of Bulgaria, and everyone else who has managed to get Romanian and Bulgarian passports will be able to enter the United Kingdom without hindrance?

[Mrs May]

The hon. Gentleman said that mistakes had been made by the last Government. He also referred to new Labour; I am not sure whether that is something different from the Labour party that he now represents. He claimed that this Government were not learning from those mistakes, but we have indeed learnt from them. That is why we have been clear about transitional controls, and why we want to renegotiate the treaty and ensure that free movement is part of that renegotiation.

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

As one who strongly supports our continued membership of the European Union but was very critical of Labour’s action in doing away with the transitional arrangements for the eastern European countries, and as one who also strongly supports our not joining the Schengen agreement, I welcome the Home Secretary’s statement because it deals with some of the deep concerns expressed by our constituents. However, will she ensure that over the next few weeks the coalition Government disseminate very clearly, for the benefit of the public and local councils, information about exactly what the rules are in relation to people from other countries? There are people outside the House—and, sometimes, people in the House—who misrepresent the picture in a way that generates fear of immigrants and fear of immigration, and does no good to our community cohesion.

[Mrs May]

My right hon. Friend has made an extremely important point. We will do all that we can to ensure that people are aware of the rules that will operate—including, obviously, those who will put the rules into practice—so that everyone recognises the actions that the coalition Government are taking. The right hon. Gentleman referred specifically to councils. In my response to the urgent question, I mentioned the new guidance that will be issued by the Secretary of State for Communities and Local Government concerning the residency in the community test for access to social housing. We will ensure that those who need to know what action we are taking are given a full picture of what the Government are doing to address an issue that is of concern to them.

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

Can the Home Secretary tell us whether there will be larger fines for breaches of the national minimum wage legislation, and can she confirm that those arrangements will be in place by 1 January next year?

[Mrs May]

We will increase the maximum fine for breaches of the national minimum wage regulations, which will require parliamentary legislation.

[Robert Halfon (Harlow) (Con)]

My Harlow residents will welcome the measures announced by my right hon. Friend because they are entirely fair, but will not many hard-working immigrants who do not claim handouts from the British taxpayer welcome them as well, because they create a level playing field?

[Mrs May]

My hon. Friend has put his finger on an important point. What we are doing is fair to the hard-working people who have come to the UK legally, played by the rules and done the right thing. It is every bit as frustrating for them to see people coming here and abusing and playing the system. That is another reason why it is absolutely right for us to take this action.

[Sheila Gilmore (Edinburgh East) (Lab)]

None of us believes everything we read in the newspapers, but there have been reports of British recruitment agencies working in Romania and Bulgaria actively to recruit people to come here in January. What steps are the Home Secretary and other members of her Government taking to deal with that?

[Mrs May]

I recognise the issue that the hon. Lady has raised. If recruitment agencies were attempting to recruit only from certain countries, such as Romania and Bulgaria, that would be discriminatory and against the law. The Minister for Immigration is taking that matter up with the Equality and Human Rights Commission, which is the relevant enforcement body.

[Mr Peter Bone (Wellingborough) (Con)]

The only way for the Home Secretary to deal with the problem of thousands of people coming to this country from Romania and Bulgaria is to extend the transitional arrangements, and it would be perfectly legal for her to do so. My private Member’s Bill, which has its Second Reading this Friday, would do exactly that, and by the end of a five-year extension, the referendum would have taken place. I urge my right hon. Friend to be here on Friday if she can, and to support my Bill.

[Mrs May]

I should make it clear to my hon. Friend that when he sees me here on Friday, it might have something to do with another private Members’ Bill that is being debated on that day. It is an important Bill that will put in place the legislation on the EU referendum, which we are clear that we should have.

[Nick Smith (Blaenau Gwent) (Lab)]

Which of the benefit changes that have been identified today will not be ready on 1 January?

[Mrs May]

I have indicated that the habitual residence test will be available from 1 January, and that the measures for those people who will be removed—[Interruption.] The hon. Gentleman asked which measures would not be ready. He can work it out for himself, because I have told him which one will be in place on 1 January.

[Jacob Rees-Mogg (North East Somerset) (Con)]

I am sorry to have to ask the same question for about the sixth time. It is open to the Government to abrogate their treaty obligations, and it is open to the House to legislate. The free movement of people is no longer working in the interests of this nation, so why do Her Majesty’s Government lack the political will to change the law?

[Mrs May]

I am tempted to say that I suspect my hon. Friend was not sorry to have to ask that question for a sixth time. I have answered it in relation to an earlier question. The Government are taking steps to ensure that we can do what we believe to be necessary to address the issue of the removal of transitional controls on people coming from Romania and Bulgaria. I hope that my hon. Friend understands the intentions and good faith behind what the Government have done across the immigration system over the past three and a half years. We have explored every possible avenue to do everything we can to repair the damage, mentioned by my hon. Friend the Member for Northampton North (Michael Ellis), that was done by the last Labour Government’s policies.

[Ian Austin (Dudley North) (Lab)]

I welcome the restrictions, because I have long felt that rules designed for an EU made up of a small number of advanced economies cannot really work for a much bigger organisation. Given the Home Secretary’s admission that the new rules on the national minimum wage will not be in force on 1 January, however, why will she not introduce legislation now to make the necessary changes more quickly?

[Mrs May]

We will bring forward the various legislative requirements as and when the time to do so is appropriate. We are looking across the board in dealing with these issues. Some measures will be in place, and some regulatory changes will take place before the end of this term and before the Christmas recess. The Government are taking action.

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

My constituents are getting thoroughly fed up with being told what to do by EU officials on the radio this morning and elsewhere. Can the Home Secretary decide what will happen in the UK in future without interference from the EU?

[Mrs May]

My hon. Friend’s constituents might be interested to hear that we will find ourselves in considerable disagreement with the European Union over a number of the measures that we are taking. We are prepared to take those measures, however, because we believe that they are right for this country.

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

As I think the Home Secretary has acknowledged, the majority of people who come here will not get on a coach or a plane on spec. They will be recruited by agencies that have offered them jobs with British employers, probably with an additional offer of accommodation. With just a month or so to go, will she tell us what she has done to identify the agencies that are recruiting in that way and the employers that are offering those jobs? Will she also make it perfectly clear that the slightest breach of regulations on the minimum wage, health and safety, accommodation, benefits or anything else will be met with the full force of the law by the Government from the very first stage? Simply referring such cases to the Equality and Human Rights Commission will not be good enough.

[Mrs May]

First, I did not acknowledge that the majority of people would be recruited in that way. I accepted that there had been stories about recruitment agencies undertaking that sort of operation, and I indicated clearly that the relevant enforcement body was the EHRC. The Government are taking this issue up with the EHRC.

[Nigel Mills (Amber Valley) (Con)]

If the accession treaty had allowed the restrictions to continue beyond the end of this year, would it have been the Government’s policy to seek such an extension? If so, would the Home Secretary consider accepting the new clause that I have tabled to the Immigration Bill, which would achieve precisely that?

[Mrs May]

We believe that it is right to look at the way in which transitional controls operate because there should be more flexibility for member states in the exercise of those controls. At the moment, we have only the rather blunt instrument of an extension of a particular number of years. That is why it is important that free movement should form part of the renegotiation process. The Government should look at all options in seeking to deal with this issue.

[Charlie Elphicke (Dover) (Con)]

My constituents in Dover will welcome the robust action that the Home Secretary is taking to crack down on welfare tourism, but will she note that some people have been going round my constituency and elsewhere in east Kent saying that 29 million people will turn up when the restrictions are lifted? What does she make of those claims?

[Mrs May]

It behoves all of us to speak on this important issue in a measured and sensible way. This is a matter of grave concern, and the people who are going round making exaggerated claims of that nature do a disservice to all of us, especially those of us in the Government who are taking measures that will have an impact on the people coming here and measures to reduce the pull factors. We are also taking wider measures in the Immigration Bill to ensure that people who come here cannot use our public services without contributing to them.

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

I welcome the statement. I happily voted for the Immigration Bill, and the Opposition would have more credibility on this issue had they done so as well. Has the Home Secretary sought and received any guidance from her Department on extending the transitional arrangements, on how long the infraction procedure would take and on the likelihood and amount of any fines?

[Mrs May]

I thank my hon. Friend for reminding us of the Opposition’s failure to support the provisions in the Immigration Bill. Had they given that support, the shadow Secretary of State’s contribution today might have had a little more credibility. Given my hon. Friend’s background, he will know the legal position on the accession treaty. As I have said, the Government are taking every step they can and looking at all the issues in dealing with this matter.

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

I welcome the tone and content of the Home Secretary’s statement, which are in stark contrast to this morning’s reference by EU Commissioner Andor to “hysteria” in Britain’s reaction to the lifting of the transitional controls. Does that reference not underline how remote the EU institutions are from the British public and the British Government’s needs? Does it not also explain why so many of us in this House want the Government to seize back the transitional controls?

[Mrs May]

I fully appreciate the point that my hon. Friend is making and I fully appreciate that when statements such as the one he mentions are made, people feel strongly about the Commission’s attitude on this matter. As I indicated earlier, I think the point for the Commission is very simple: if it thinks this is simply an issue about the position being taken by the United Kingdom, it is wrong. Other member states, such as Germany, the Netherlands and Austria, are also concerned about this issue of free movement and the problems that now arise with free movement. The European Commission is beginning to find that it is on the wrong side of the argument. It makes statements such as that one, but we will continue to impress on it that this issue is important for member states across the European Union—although of course this Government’s main concern is for people here in the UK.

Post Office

Wednesday 27th November 2013 Commons Chamber

13:40

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

Today I am pleased to announce that the Government are committing a further £640 million in funding to the post office network for the three years 2015-16 to 2017-18. That enables the Post Office to complete its network transformation programme, and to protect and invest in those branches which provide vital services to their communities but are not commercially viable in their own right. In 2010 the Government committed £1.34 billion to maintain a national post office network, modernise branches and safeguard the future of post offices that play a vital role in urban deprived and rural areas. Since then, the post office network has been at its most stable for more than 20 years, which is in stark contrast to the 7,000 closures that took place under the previous Government.

This Government remain fully committed to maintaining a network of at least 11,500 post offices, fully compliant with our access criteria and with a sustainable long-term future. To achieve that, the post office network must meet the changing needs of customers through longer opening hours and more modern premises which are easier and faster to use. Already more than 1,400 communities have benefited from Government investment into their post offices, with a total of 34,000 extra opening hours per week across the network. A further 830 post offices are also signed up to change to the new main or local operating models. In total, that represents nearly one in five of our post offices, and most hon. Members have one or more modernised branch in their constituencies. More than 200 hon. Members, including me, have personally opened a new-look post office in their area.

The Post Office is drawing on the experience from the first year of the network transformation programme to introduce changes that will see the programme completed by 2018. These changes, developed by the Post Office in conjunction with the National Federation of SubPostmasters, were endorsed yesterday by sub-postmasters at a special conference. We will deliver the benefits of longer opening hours and more modern premises to customers at a swifter pace, while making more investment available and providing greater clarity and certainty for sub-postmasters.

The Government do not underestimate the challenges facing the network, the Post Office centrally and, in particular, individual sub-postmasters. In recent years, the retail environment on the high street, and more widely, has been far from easy for sub-postmasters. This new investment recognises that reality. The network needs to build on its core strengths of unparalleled national reach, and the trust and high regard in which it is rightly held by customers. It must focus on meeting customers’ needs and expectations in a rapidly changing, highly competitive retail market. Ease of access, longer opening hours, shorter queues and modern premises are key to winning new clients and attracting and retaining customers. With more than 1,400 branches modernised to date, independent research is showing customer satisfaction levels with the new models averaging more than 95%. Satisfaction levels among sub-postmasters operating the new models are similarly impressive, at about 80%.

In many locations, new operating models are enabling post offices to be re-established after a significant break in service. At Balnamore in north Antrim, a new local branch opened in August, re-establishing post office services some five years after the closure of the previous branch. The new branch opens seven days a week, for a total of 92 hours. At Oxenhope in west Yorkshire, which had had no post office since June 2011, a new local branch opened in the Co-op, and it now offers post office services from 7 am to 10 pm, seven days a week.

However, this is not just about new post office operating models. The post office network is incredibly diverse, and it is just as important to customers in remote rural areas that their post office stays open as it is for busy town centre branches to be open for longer. There are about 3,000 post offices for which the new main or local models are not suitable. Those branches predominantly serve small, often remote, communities and they may be the last shop in the village. They are hugely valuable to their communities. The updated network transformation programme provides, for the first time in Post Office history, a £20 million investment fund allocated specifically to that part of the network. The fund will enable the improvement and modernisation of those branches to strengthen their long-term sustainability.

The investments being made by the Post Office are already creating a strong platform from which it can compete for new work from government and the private sector. Some customers and sub-postmasters have expressed understandable concerns about continued access to Post Office card accounts beyond 2015, when the current contract is due to expire. The Department for Work and Pensions and the Post Office are in discussions about a long-term successor to the Post Office card account, and I can confirm today that all options under consideration conclude that access to pensions and benefits will continue beyond March 2015 across the whole post office network of at least 11,500 branches.

The Post Office is also doing much more for government. Over the past two years, the Post Office has won every single government contract it has bid for. It is winning this work competitively, and winning it because it is such a strong partner for government. There is even more that the Post Office can do for government in the future. For example, under the existing contract with the passport office, the Post Office is discussing the introduction of new in-branch services which would allow the majority of customers to apply for their passports digitally, without the need for any supporting paper forms. The intention is to introduce those services from the middle of 2014. The Department of Energy and Climate Change recently announced that it will work with the Post Office to signpost elderly and vulnerable people to the 500 volunteers being trained by the big energy saving network to help people to find ways to cut their bills.

Such innovations demonstrate a forward-thinking Post Office, which is introducing new services, growing new revenue streams and bringing new customers into post office branches. With the additional funding in place, we have the basis for building a thriving and sustainable Post Office. I believe that in the next few years we will see the Post Office continuing to grow its business, and its network flourish and potentially expand in due course.

Creating a financially sustainable network will be key to delivering a Post Office that can be mutualised. Significant progress has been made by the Post Office and its stakeholders already, and that will be boosted by the Government’s funding commitments today. The Post Office will shortly publish further details of the steps it is taking to build a mutual future.

The £640 million investment I am announcing funds the completion of a transformation programme. It establishes the platform for a vibrant, commercially sustainable post office network with a mutual future. I commend this statement to the House.

13:47

[Ian Murray (Edinburgh South) (Lab)]

I thank the Minister for her statement and for advance sight of it. Let me start by paying tribute to our sub-postmasters up and down the country. They are integral to all our local communities across our constituencies, and are indeed the social fabric of this country. However, the job of a sub-postmaster has become much more difficult in recent years. Research from the National Federation of SubPostmasters shows that incomes have fallen and many sub-postmasters work very hard, over very long hours, for very little return. That situation has not been assisted by the Government, who in 2010 announced plans to use post offices as the “front office for government”. The Government have failed to deliver on their pledge. No new major government services have been awarded to post offices since May 2010. The Minister says that the Post Office has won all that it has bid for, but these were contracts that it already had, and, according to the National Federation of SubPostmasters, many services do not make the Post Office any money at all.

The situation resulted in the NFSP removing its support for the Postal Services Act 2011, because the Government promised £466 million of government work but the Post Office is currently gaining only £130 million from government business—that is 7% less than last year. That failure has resulted in the post office network being under more pressure than ever before. In addition to that is the abject failure of the network transformation programme to do what the Government planned. Consumer Futures wrote to the Business, Innovation and Skills Committee last month saying that of the 6,000 branches that were predicted by the Government to convert to the new model, only 1,100 have done so. That shows that the programme is not working, which is why a degree of compulsion has been introduced, with additional funding to deliver it.

The Minister dresses up this statement as good news, but today’s announcement of an additional £200 million on top of the £440 million already trailed beyond 2015 means that we can firmly say that this is a vote of no confidence in what the Government are doing to the post office network. In effect, the Government are increasing the compensation for people to leave and providing more money to convert. Of that, £23 million alone is for completing a retail survey to determine who should be converted or removed from the network on a compulsory basis. If the Government had delivered on their front office for government work that they promised back in 2010, the £640 million would not be required. It is a payment for abject failure and for yet another broken Government promise.

The National Federation of SubPostmasters voted to approve the package yesterday, because most operators feel that the traditional post office model under this Government is not working. Sub-postmasters know that they face a degree of compulsion, but they will take the package as they are struggling on their incomes. The fact that members of the National Federation of SubPostmasters voted so wholeheartedly to support this package shows that they want out. It is the epitome of taking the money and running. Crucially, the money will be used to subsidise exit from the network rather than to go into the network to make it sustainable in the long term.

I welcome the last shop in the village and community post office funding and support the fact that there will be no compulsion in that area. The £20 million will assist in modernisation and help these critical community assets. Rural communities in particular need their post office services to survive.

By the end of the process, the Government will have spent £2 billion on network transformation, and there is a concern that we still do not have a model that is sufficiently attractive to current or future operators. If the model were attractive, it would not require additional funding, as the current programme would not be failing. Given that the National Federation of SubPostmasters has called the privatisation of Royal Mail a “reckless gamble” for the post office network, is it not the case that although the Minister is throwing as many sub-postmasters as she can into lifeboats, those lifeboats could already be sinking as retailers will not take on the local model? The Government are content not just with selling off the Royal Mail for a song but with hastening the demise of yet another cherished national institution.

In answer to a question from the hon. Member for Argyll and Bute (Mr Reid) a few weeks ago, the Prime Minister said that

“we have committed that no post office will close in this Parliament.”—[Official Report, 23 October 2013; Vol. 569, c. 296.]

If that is the case, post offices in which owners are paid to leave with no alternative in place are closing by stealth, showing that the Prime Minister’s claim is indeed hollow and shallow.

Let me ask the Minister a series of questions. First, will the current criteria be used for compulsion, or will it be updated? Secondly, will the new announcement require new state aid applications to the European Union? Thirdly, if a sub-postmaster stays and converts to a new model, they will have their salary subsidised until 2015, but what happens beyond that? Despite the fact that more than 1,000 sub-postmasters have said that they wish to leave the network voluntarily, only 94 retailers have been found to replace them in the past two years. What happens to the post office if other retailers are not prepared to take it on after a postmaster leaves the network on a compulsory basis?

As shareholders get a significant financial benefit from a privatised Royal Mail, the taxpayer picks up a new £650 million plan B for post office network transformation. It is clear that the Government have created chaos in our postal services, and that the era of Postman Pat and Mrs Goggins is well and truly over.

[Jo Swinson]

I thank the hon. Member for Edinburgh South (Ian Murray) for his contribution. I agreed with some parts of it. Of course we all join him in paying tribute to the sub-postmasters who do such a fantastic job in all our constituencies up and down the country. I also agree that it has been a very difficult environment for sub-postmasters. However, small businesses and retailers have also found the past few years difficult. We could go over the argument that takes place in this House on a regular basis about where blame for that lies, but suffice it to say that we have seen a challenging set of economic times, and that has had an impact on the post offices, as it has on other businesses in the high street. However, the Post Office is a key partner of the front office for government, and it has won all the contracts that have come forward. Potential streams of income are coming down the track in the form of assisted digital services and identity verification. A whole range of different models are being explored, including those with local government. Indeed, a number of contracts have been won with various local government services, and there is probably more that can be done there, too. However, it is about not only the front office for government or mail, but having a diverse range of income streams for the post office. Financial services is one on which we have focused. For example, the roll out of the current account, which was piloted earlier this year in East Anglia, will be welcomed by many sub-postmasters, as it will provide regular transactions and regular footfall into post offices to give them the customer input they need to run thriving businesses.

I do not recognise the hon. Gentleman’s comments on network transformation. We are talking about a process in which more than 2,000 post offices are already signed up to convert to network transformation. I am sure that Members will report that customers have been positive about it, and the customer satisfaction statistics speak for themselves. Indeed, retailers in some of the new models, with the brighter and more modern environments, have experienced a 10% uplift in sales. This is about building a sustainable future. The hon. Gentleman tries to talk down the network transformation, but we should be talking it up.

I make no apologies for providing welcome funding to sub-postmasters for participating in important surveys, which will also help to gather valuable management data across the network. We are dealing with a diverse and dispersed network of nearly 12,000 branches across the country. It is important to have that management data for the Post Office to work out how best to plan the network for the future. Ensuring that sub-postmasters are properly remunerated for undertaking those surveys is particularly helpful.

The hon. Gentleman asked a few questions about whether new state aid applications will be required. The answer is yes, but as the package runs from 2015, there is plenty of time to ensure that we get through that necessary process. On the payments that sub-postmasters will receive, he is right that there will be an enhanced package up until 2015 because we recognise that in making a change and a transition, new customer bases and income streams will have to be built up. It is important that sub-postmasters are helped and encouraged to do that.

The hon. Gentleman was wrong to say that we were subsidising the exit of sub-postmasters and leaving communities stranded without post offices. That would be taking a leaf out of the previous Government’s book. Under this plan and under this Government, that cannot happen. There cannot be a subsidised exit if there is not already alternative provision in that community. Importantly, communities have to be happy with the changes that are being made, and provision has to continue. In those circumstances, if some sub-postmasters want to leave the network and retire or perhaps take on a new challenge, we will compensate them for doing so, as long as the service continues. That is the key difference between what the hon. Gentleman’s party did in government and what this coalition Government are doing. Labour closed 7,000 post offices. That was its answer to these particular challenges. We are creating a sustainable future for the post office network at a stable level. That is the difference between what they would have done and what we are doing.

[Several hon. Members]

rose—

[Mr Speaker]

Order. A great many right hon. and hon. Members are seeking to catch my eye. This is of course an important matter that must be treated thoroughly. I remind the House that there is an Opposition day debate to follow, which is heavily subscribed, and the interest in which I am keen to accommodate. As a consequence, there is a premium on brevity from Back Benchers and Front Benchers alike. The first to exhibit that will be Mr Stewart Jackson.

[Mr Stewart Jackson (Peterborough) (Con)]

My constituency suffered under Labour’s Orwellian urban reinvention programme. We also remember the unedifying sight of Labour voting against motions condemning post office closures before scurrying to their constituencies to address public meetings about the same thing. Will my hon. Friend carefully make the point that the voluntary sector and local authorities have an important part to play in advice and information services and maintaining the viability of rural and urban post offices?

[Jo Swinson]

My hon. Friend makes a good point. There are many examples across the country of local government and voluntary services working in strong partnership with the Post Office and that can be of great mutual benefit.

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

I broadly welcome the Minister’s announcement, which reflects the difficulties successive Governments have had in sustaining the sort of post office network we all want. The future of the network will depend, however, on the perception of sub-postmasters and would-be sub-postmasters of the long-term viability of the model. Will the Minister explain what that perception is following Royal Mail’s arrangement with Post Office Ltd?

[Jo Swinson]

I welcome that contribution and those words of welcome from the Chair of the Select Committee. He is right that this Government and previous Governments have faced the challenge of how a much-loved institution reforms and modernises for a very different retail environment from that of some decades ago. That is not necessarily always an easy process. He asks about the perception of the future viability of the network. The range of different services for which the Post Office can bid—not just Government services but the huge opportunities in the parcels market and financial services—are very significant. We must bear in mind the 10-year intra-business agreement between Royal Mail and the Post Office. The chief executive of the Royal Mail, Moya Greene, has said that it would be unthinkable for there not to be that commercial relationship between the two companies, so I hope that hon. Members will also respect that and not indulge in the scaremongering that has gone on in some corners about the future of the Post Office following Royal Mail privatisation.

[Harriett Baldwin (West Worcestershire) (Con)]

Mr Speaker, have you ever heard a more grudging contribution from the Labour party, after the closure of 7,346 post offices? I thank the Minister on behalf of my constituents in West Worcestershire. Will any of the money that she has announced today help the Post Office to modernise its computer system for my sub-postmasters and, to reflect rural concerns, update the algorithm that allows post offices to hold cash ?

[Jo Swinson]

I am happy to look in more detail at some of the specific technological issues that the hon. Lady raises. The money we are announcing today is for a continuation of the network subsidy for the three years and to invest in the future network transformation programme. Of course, we must ensure that the central IT systems, managing a network of nearly 12,000 retail outlets, are also fit for the 21st century. I will happily get back to her with further details.

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

Will the Minister explain why, despite what she says, Government work undertaken by post offices has gone down by more than 7% over the past year? Surely she should be doing more to get new work for the Post Office.

[Jo Swinson]

The hon. Lady is right that Government work is important for the Post Office. As the Minister responsible for the Post Office, I am engaged in promoting and encouraging that. Obviously, the Post Office must win work on its merits, and the environment is competitive. Whether we are talking about the mail market, the retail market or bidding for Government work, a range of competitors would be more than happy to take some of the contracts. It is a testament to the strength of the Post Office that, despite that strong competition, it has continued to win contract after contract, but I am in no doubt that bidding for that work on a more competitive basis creates significant pressures, particularly for some sub-postmasters.

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

I welcome the Government’s commitment to protecting and potentially expanding the post office network. As my hon. Friend is aware, I have been campaigning for the reopening of my post office in Ladybarn, which was shamefully closed by the previous Government. Will the Minister assure me that when decisions are made on any new post offices, consideration will be given to reopening old post offices that were closed and that would not impact on the viability of other offices in an area?

[Jo Swinson]

I thank my hon. Friend for his question and pay tribute to him for his assiduous campaigning on behalf of his post offices, and particularly for the community of Ladybarn, which he has raised with me on a number of occasions. In my statement, I gave some examples of new post offices that have opened and been able to plug some of the gaps left in communities under the previous closure programmes and when sub-postmasters retired. If we consider any new models or new offices, the obvious places to see whether such provision could be inserted would be such locations.

[Ian Paisley (North Antrim) (DUP)]

I welcome the Minister’s statement and associate myself with the tribute paid by the Opposition Front-Bench spokesman, the hon. Member for Edinburgh South (Ian Murray), to sub-postmasters, who in Northern Ireland provide an essential service and have gone the extra mile in years past when they were targeted by terrorist attacks. That should be put on the record.

The Minister kindly mentioned Balnamore in my North Antrim constituency, just outside Ballymoney. Given that success story, for which I am very grateful, will the Minister tell us how much of the £640 million will apply to Northern Ireland over the years from 2015 to 2018?

[Jo Swinson]

Just last week I met in this House representatives of the sub-postmasters in Northern Ireland. The points that they made about how post offices had often been seen as a safe haven where people from different communities could come together were incredibly moving. The hon. Gentleman makes a particularly important point about the service in areas that have seen such difficulties. The subsidy payment will depend on the specifics of which sub-postmasters bid for which money and how that breaks down, but I know that Northern Ireland has a higher than average proportion of rural offices, so I am sure that the community fund for community offices will be of particular interest to sub-postmasters there.

[Neil Carmichael (Stroud) (Con)]

Given that the previous Labour Government closed a third of our post offices—a staggering fact—we should listen to the Opposition with that in mind. Does the Minister agree that it is fantastic news that organisations such as National Express are using the Post Office to promote and sell their tickets? That is exactly what we need to see to promote post offices in our communities.

[Jo Swinson]

My hon. Friend makes a powerful point. The fact that we have a network with such a fantastic reach into communities up and down the country means that it is ideally placed for a range of different commercial contracts and potential partnerships, such as the one that he mentions with National Express.

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

At a time when so many of our constituents face crippling debts, I think the Minister might agree that local post offices should be able to play a bigger role in providing alternatives to loan sharks. It has been argued that credit unions could be co-located with local post offices, but all too often that does not stack up financially for the post office or the credit union. What does she feel she can do to bring them together and remove those barriers?

[Jo Swinson]

The hon. Gentleman makes an important point, not just about the suitability of post offices for such ventures but about the need for such projects in our communities. As he will be aware, the Government are investing £38 million to support credit unions to modernise and to ensure that they can be accessible to people in communities. There might be ways in which that can be used to create collaboration with the Post Office in communities where that makes sense.

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

I congratulate the Minister on her statement. Steven Like, the postmaster in Hay-on-Wye in my constituency, was concerned that the small and very important letter-sorting facility in his premises might be closed to the detriment of the viability of his business. The Minister was able to give him encouraging news, but will she encourage Royal Mail and the Post Office to work together for the benefit of both businesses?

[Jo Swinson]

I can certainly assure my hon. Friend that I will do that. As he says, he raised the issue of Hay-on-Wye with me and, thankfully, there is no threat to that service. He raises the wider point of the important commercial relationship between Royal Mail and the Post Office. They are natural partners that operate together for a mutual benefit, which will, I am sure, continue long into the future.

[Ms Margaret Ritchie (South Down) (SDLP)]

I thank the Minister for her statement. With particular reference to Northern Ireland, where there have been bank branch closures, will she give assurances that she will have discussions with the major banks and her colleagues in the Treasury to ensure that banking services can be transferred to post offices, particularly in rural areas, to provide accessibility to services and, in so doing, sustain rural post offices?

[Jo Swinson]

Absolutely. The hon. Lady is right to raise that issue. Of course it is very good news that 95% of the main UK bank accounts are now available through post offices; only Santander is so far holding out. But in the meeting that I had with sub-postmasters from Northern Ireland last week, they did mention that there were some specific Northern Ireland issues around the full range of banking services. I am more than happy to look into those and encourage banks to ensure that they are provided. Of course, there is also the new current account, which has been piloted and will be rolled out across the post office network. The post office should be an obvious place for people to undertake their banking transactions.

[Steve Brine (Winchester) (Con)]

I welcome the Minister’s statement. Just this week, I received news from the Post Office that the Chandler’s Ford post office, in the Fryern Arcade part of my constituency, is to be modernised and moved with some of the funding that she announced today. The additional funding will obviously ensure that post offices remain, but can she assure the people I represent that communities that lost out and were so bitterly disappointed—such as Littleton village in my constituency—will have a chance for a glorious return of their post office services? Will she meet me and other Members interested, to explore how we go about that?

[Jo Swinson]

My hon. Friend raises an important point. Many communities up and down the country were devastated by the loss of their post office under the previous closure programmes. Where it makes sense, and where there are new models—whether those are the local, main or other models that the Post Office has been trialling—that would make sense in those areas, of course we should look at whether that is appropriate, and I would be happy to receive representations from my hon. Friend and other hon. Members on that issue.

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

Will the Minister intervene to see whether her rescue package can be used to prevent the closure of Kings Heath Crown post office and the shoehorning of services into a corner of WH Smith that is unable to handle buggies, wheelchairs or mobility scooters—hardly modern, easier premises to use?

[Jo Swinson]

The hon. Gentleman mentions an apparent closure, but of course a post office service will continue, and that is vital to that community. He mentions the Crown office network. It is simply unsustainable to have 370 post offices out of a network of nearly 12,000 that lose £37 million a year, as of the last financial year for which we have figures. We need to take action to get the Crown network to break even, given that these are offices, in city centre and town centre locations, that are busy places and should be able to at least break even, if not provide a profit to go back into the network. That is why we are looking at franchising proposals. We do need to get them right and they are the subject of consultation. I am not sure of the exact timetable of the hon. Gentleman’s particular consultation process, but it is a six-week consultation for any suggested move. Where that is not right for the community, of course we should look again at different locations and ensure that a post office is continuing in all those areas that are up for franchising.

[Mr Alan Reid (Argyll and Bute) (LD)]

I very much welcome my hon. Friend’s statement, especially the recognition that the local model is not suitable for small communities, and the £20 million for small community post offices, but may I draw her attention to the fact that the Post Office is threatening to close the Carradale East post office a fortnight on Monday? Can a rescue package be put together to save that post office for that small community?

[Jo Swinson]

I pay tribute to my hon. Friend’s campaigning on behalf of the numerous post offices in Argyll and Bute. In a constituency like his, they truly provide a lifeline. I am aware of the case that he has raised and I will happily look further into it. Clearly, there are circumstances where sometimes a sub-postmaster will decide to retire, but we need to ensure that what is put in that post office’s place is appropriate for that local community.

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

May I say how strongly I agree with my hon. Friend about the importance of the post office network, especially to rural areas? Is she aware that, under the last Labour Government, they closed a massive 12 out of 34 post offices? In contrast, under this Government, a post office at Stratton has been reopened and the post office at Bourton-on-the-Water is now open seven days a week. Would she agree that the best way to maintain the viability of the post office network is to introduce an increasing and innovative range of services?

[Jo Swinson]

I agree with my hon. Friend. He is right to highlight the challenges that his community and others faced under the previous Government. I am delighted to hear the news that the Post Office is delivering for his constituents, and he is right that a diverse and innovative range of services will help to ensure that the Post Office has a sustainable and secure future.

[Bill Esterson (Sefton Central) (Lab)]

The people running a number of post offices in my constituency just cannot make them work. They are not viable, for many reasons. They have a knock-on effect on other retailers, and they will not be able to provide the vital community service to the local community, including the older people who rely on them. What is needed is the kind of Government work that my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) mentioned. That is the essential long-term future for those post offices; otherwise, the measure announced today is just delaying the inevitable, and we will still have a closure programme by another name.

[Jo Swinson]

We are modernising the post office network because we recognise that it cannot look the same in the future as it did 50 years ago. There have been a range of changes in the way that we live our lives and the way that people access financial services through bank accounts. For example, there is less demand for people to be paid at post offices. Those all have an impact on the services that post offices offer. That is why we need to diversify into a range of new services, and why the new models are often based on co-locating a post office with a thriving retail business, where they can mutually benefit, with the post office driving footfall to help the retail business drive sales. In the new models, sales of the other retail businesses have increased. That is how we can build a sustainable future. We cannot set the post office in aspic and keep it as it was 50 years ago.

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

The loss of a rural post office can impact on the cost of living for those living in that area. Would the Minister look closely at the model of the community post office at Stillington as a way forward? Will she also review what will happen to rural post offices at the end of the 10-year operational agreement between Royal Mail and the Post Office, and the possible implications for rural post offices?

[Jo Swinson]

I will be happy to hear more about the post office at Stillington and how members of the community have been working to sustain it. I hope that the announcement of the funding for community post offices will be of interest to my hon. Friend’s constituents also. She is right to highlight that the mails work through Royal Mail is an important part of what the Post Office does, and we certainly want to ensure that that continues long beyond the inter-business agreement. People should bear in mind the reassurance that the chief executive of Royal Mail has given about that.

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

Will the Minister explain exactly what happens if a sub-postmaster wants to take the compensation and cease to operate a post office and a new operator cannot be found?

[Jo Swinson]

We shall not compensate people to leave the post office network and leave communities without post offices because that would not be in keeping with what we want to provide for communities; so the compensation for sub-postmasters who want to leave is dependent on a new operator being found in that area. Obviously, at any stage sub-postmasters can decide whether they want to retire or to leave the network, but if we going to pay them and compensate them to do so, we want to ensure that the community still has a post office service that it can access.

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

In West Aberdeenshire and Kincardine there are many small local communities where the community model will be an excellent solution to their need to sustain the last access to public services in the community. Can the Minister confirm that the extension of the card account, and the funding model that has been put in today, will be used to grow other services for the Post Office, particularly financial services?

[Jo Swinson]

My hon. Friend is right to highlight the vital role of the community post office, particularly where that is literally the last shop in the village. That is where the investment in those branches that did not qualify under the previous programme but will now, will help to ensure that they too can provide a modern service and make available the widest range of financial services in a community where there may not be other banking facilities. In such areas, where people may depend significantly on deliveries and online shopping because of the access it gives to large retail areas and conurbations, the parcels market is increasingly important as part of the business model of post offices.

[Roberta Blackman-Woods (City of Durham) (Lab)]

A designated post office recently closed in a village in my constituency. It has been replaced by post office facilities in a shop. Although local people are pleased that a service is continuing, they are worried about the lack of privacy in the new location. What steps is the Minister taking to ensure that old and vulnerable people are not put at risk by moves of that nature?

[Jo Swinson]

The hon. Lady makes a genuine point, and it is important, depending on what the transaction is, that appropriate privacy can be given. At the same time, the old model of the post office with a sort of fortress that had to be built in, seemed outdated to many people, putting a barrier between the customer service assistant and the customer. It also added a huge amount of cost to the way in which the network was run. It is important that retailers and sub-postmasters providing services can take into account the needs of all their customers, and if the hon. Lady has concerns about what is happening in a particular post office, I am certainly happy to look at that.

[Mr Philip Hollobone (Kettering) (Con)]

May I welcome this massive new investment in sub-post offices? Many sub-post offices that were much loved and well used in my Kettering constituency were closed under the Labour Government. I congratulate the coalition Government on lifting the long, deep, dark shadow of closure that has hung over local sub-post offices for so long.

[Jo Swinson]

I thank my hon. Friend for his intervention. The figures speak for themselves. If we look at the number of post offices that have been in place over the past decade or so, the network is at its most stable for many, many years, and the Government are absolutely committed to maintaining that. Although the post office network must change, the answer is not to cull it but to support it.

[Lisa Nandy (Wigan) (Lab)]

The Minister has repeatedly said that the post office network is at its most sustainable for years, but that is not a picture that many people in Wigan and across the country—or I—would recognise. Government business to the post office network has fallen by 7% over the past year, and the National Federation of SubPostmasters says that we need

“a determined and co-ordinated effort across Government to provide a wide range of services through the post office network”.

Where is it?

[Jo Swinson]

The numbers in the post office network are at their most stable for decades and, as I say, the facts speak for themselves. Government services are an important part of post office income, but they are not the only part, because that is not the way to achieve a secure future for post offices. They need a diverse range of income streams, including mails and financial services.

As for where the Government work is, we have heard today that the post office card account, or its successor, will continue through the post office network, which is welcome. Last year, the Post Office competed for the framework contract for the Driver and Vehicle Licensing Agency and won, and that framework contract will allow further contracts to be put through, as indeed was the case with the UK Passport Service work earlier this year.

I am not for a second trying to suggest that things are easy for sub-postmasters. Things are not easy, and they have not been easy, in these difficult economic times. We recognise that, which is why we have enhanced the packages available to make them more attractive and make sure that sub-postmasters have more opportunity either to make the choice if they wish to leave the network or enable them to continue and invest in their business, get more customers through the door and build a thriving retail business.

[John Pugh (Southport) (LD)]

In welcoming the statement, may I draw the Minister’s attention to the Crown post office network, and the fact that those post offices selected for closure are not necessarily, as is the case with mine in Southport, making the most losses? Will she tell the House what will happen if WH Smith, like other high street firms, goes out of business?

[Jo Swinson]

The selection from the Crown network is based on a range of criteria but, in every single case in which we are seeking to franchise, we are talking about Crown post offices that have made losses. I understand that in Southport, every £1 of income cost £1.75. People will accept that that is not sustainable. That said, it is important that we make sure that those services continue. I encourage my hon. Friend to ensure that he is involved in the consultation on the right location for continuing that post office service, to make sure that his constituents still have access to the full range of post office services.

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

Royal Mail shares are selling today at about 70% above the price at which they were sold by the Government when the business was privatised. Does the Minister at least admit, if she is as determined on privatisation as she seems to be that, that had the Government not undervalued Royal Mail shares, she might have an extra £2 billion, which could be used to support the Post Office, now and in future years.

[Jo Swinson]

First, I would point out to the hon. Gentleman that he is talking about two entirely separate companies, because Royal Mail is separate from the Post Office. The privatisation of Royal Mail has, I understand, been discussed at length in the House and, indeed, this morning in the Select Committee on Business, Innovation and Skills, which took evidence from my right hon. Friend the Secretary of State for Business, Innovation and Skills and the Minister of State, Department for Business, Innovation and Skills, my right hon. Friend the Member for Sevenoaks (Michael Fallon). I would gently say that making a judgment some short weeks after flotation is perhaps not the best way of judging a company’s long-term share price.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

As chair of the all-party group on post offices, may I tell the Minister that I warmly welcome the additional investment that she has announced? However, I think that there is an element of denial about what is going on out there. Perhaps she can share with the House how many post offices have been closed temporarily and how many are under temporary management? How much of the £1.34 billion allocation has been spent on modernisation, and how much has been spent to provide an enhanced package for people to leave? Can she tell the House the value of the 10 contracts that have been won, and how many of them were new contracts, not contracts up for renewal?

[Jo Swinson]

I shall endeavour to give a full answer to all those points but, if the House will forgive me, I shall write with all the details on those questions. As for temporary closures, I think it is about 400, but I can obtain the most up-to-date figures. As the hon. Gentleman can imagine, the figure fluctuates. I accept that it is important that we make sure that Government work is available as part of a mix of services and income streams that the Post Office can access. I absolutely accept that things are not easy, and I have said that a number of times when responding to questions this afternoon. I would not wish to suggest that it is an easy life being a sub-postmaster, because it is not, but we are trying to create a sustainable network for the future and, indeed, in communities that have experienced temporary closures, to look at what more we can do to make sure that post office services are delivered to those communities.

[Mr Mike Weir (Angus) (SNP)]

The sad fact is that many post offices in rural areas continue to close and have been replaced by outreach services. The £20 million investment fund is said to enable the improvement and modernisation of branches, but that is not the problem—it is postmasters’ income in those branches. Is there anything in the statement that will allow the Post Office to give more direct subsidy to the income of postmasters in remote rural areas to stop the closure of those branches?

[Jo Swinson]

We have to recognise that across a network of nearly 12,000 branches some post offices are not commercially sustainable by themselves, but none the less they play a huge social and economic role in their community. I believe that there will always be a role for continued Government subsidy for those branches. That said, we are using taxpayers’ money, which must be spent judiciously. It is about making sure that those branches that can become viable without subsidy proceed without subsidy, but branches that require ongoing subsidy should have the certainty that that is the situation. At the moment, that is not the case, because those post offices do not know whether they are designated as community branches or whether they can access subsidies.

That certainty will help, but as for the question of whether we can increase the money for those branches on an ongoing revenue basis, that is not something which, in the current economic circumstances, I can promise to deliver for the hon. Gentleman. Investment in those branches is sometimes needed to ensure that they can become more sustainable, perhaps by improving the layout or structure of the office so that it can do more parcels work, for example. There could be ways to enhance income streams by using a bit of capital investment.

Points of Order

Wednesday 27th November 2013 Commons Chamber

14:28

[Graham Jones (Hyndburn) (Lab)]

On a point of order, Mr Speaker. May I seek your advice on a reply given by the Prime Minister in Prime Minister’s questions, as he may inadvertently have misled the House? When asked about the impact of the bedroom tax on disabled people, he told the House: “Obviously, what we have done is to exempt disabled people who need an extra room.” Leading charities claim in a letter to the Secretary of State for Work and Pensions today that there is “stark evidence” to the contrary.

[Mr Speaker]

I am extremely grateful to the hon. Gentleman for that attempted point of order. The juxtaposition of the two lines of argument has been made perfectly clear from his first quotation and from his second, of which no more is needed for me to rule. My ruling is that it is not a matter for the Chair. I understand the hon. Gentleman’s concern, but it is a point of debate. Of course, all Members, including Ministers, are responsible for the accuracy of what they say in the House, and everyone will be conscious of that. The hon. Gentleman has made his point, it is on the record, and I trust that he is satisfied.

[Mr Charles Walker (Broxbourne) (Con)]

On a point of order, Mr Speaker. I draw your attention to remaining orders and notices in the Order Paper—future business item 40 on changes to Standing Order No. 33, as tabled by the Leader of the House and the Deputy Leader of the House. The Procedure Committee, which I chair, has been in discussion with the office of the Leader of the House, and we thought we had been in a fruitful discussion. The Leader of the House is promoting the proposal that there may be three amendments to the motion on the Queen’s Speech, and the Procedure Committee has advised that it should be four amendments, so there seems to be a point of disagreement on the matter. I seek your advice: is it not the established principle that it is the Procedure Committee in this House, not the Executive, that leads changes to Standing Orders?

[Mr Speaker]

I am grateful to the hon. Gentleman for his point of order. He is substantively correct, as far as I am aware, on the latter front. Indeed, that point has been made to me in the past in other contexts by Ministers when they have thought it convenient to deploy that line of argument. I would always hope that Ministers would treat Committees of the House with courtesy. However, nothing disorderly within the rules of the House appears to have occurred and I do not think there is a point of order for the Chair. Those on the Treasury Bench will have heard what the Chair of the Procedure Committee—a very important Committee with a very illustrious Chair—has said, and we will leave it there for today.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

Further to that point of order, Mr Speaker. Would it be helpful if I were to release a letter that I received from the Clerks of this House which said, in effect, that there was no need for the Leader of the House to be helpful to you as the Chair, as you already had sufficient discretion as to how many subsequent amendments could be chosen on the day of the Queen’s Speech debates?

[Mr Speaker]

Well, in one sense it is very flattering that the hon. Gentleman seeks my advice and asks whether a proposed course of action on his part would be helpful or not, but I feel that the hon. Gentleman is, in most circumstances, his own best counsellor. He will judge whether or not he wishes to release the said letter. I think he can rest content with that emollient and non-committal response from me. He knows how to look after himself. We will leave it there for now.

Winter Fuel Allowance Payments

Wednesday 27th November 2013 Commons Chamber

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

14:32

[Mr Mike Weir (Angus) (SNP)]

I beg to move,

That leave be given to bring in a Bill to provide for the early payment of winter fuel allowance to eligible persons whose residences are not connected to the mains gas grid and whose principal source of fuel is home fuel oil, liquid petroleum gas or propane gas; and for connected purposes.

This is an issue that I have raised on numerous occasions, during the passage of energy Bills, in debate and by means of a private Member’s Bill, and it has had support across the House on other occasions.

I do not intend to speak on the general problem of fuel poverty, the details of which should be well known by Members in all parts of the House. I merely note that the percentage of households off the gas grid that are in fuel poverty is more than twice as high as those that are on the gas grid. I acknowledge that the present Government have taken some action in respect of off-gas grid consumers, including the establishment of the ministerial round table on heating oil and liquefied petroleum gas, which led to the Federation of Petroleum Suppliers’ customer charter.

My proposal will not end fuel poverty for off-grid consumers; nor does it seek to extend winter fuel payments to additional groups or to tread on the contentious subject of means-testing which concerns some Members. It does not attempt to tackle the many issues that surround the topic of off-grid energy, but it is tightly drawn to give some relief to a particularly vulnerable sector—those pensioners who are off the gas grid. I have many of these pensioners in my constituency and they face a number of particular problems.

Like all forms of energy, the price of home fuel oil has rocketed in recent years, but there is clear evidence that the price of home fuel oil rises in the early autumn and stays high over the winter period. This year it has been somewhat skewed by the long cold spring, with prices staying stubbornly high over the spring before falling in the summer, but they are now rising again. The rise in prices affects all areas of the United Kingdom over the winter months. It is important to note that this is as much an issue for the rural areas of England, Wales and particularly Northern Ireland as it is for the rural areas of Scotland.

The House of Commons Library note that was produced for my Bill in the previous Session states:

“The average costs of heating and providing hot water for a typical three bedroom house with LPG have been estimated at around £2,300 per year (based on April 2012 prices with a conventional boiler), heating oil is thought to cost around £1,700 and gas around £1,200.”

The figures may now have changed but the general point stands: the cost of heating an average home with propane or home fuel oil is higher than heating with mains gas. Not only that, but the costs are also rising much more sharply. It is also important to note that the main use of LPG and home fuel oil is for heating, so although those homes generally have electricity, they still face greater costs.

Traditionally the Government have called for an extension of the mains gas grid as one way of tackling the problem, but realistically such schemes will help only those homes where there is a gas mains nearby, although even then the costs can be very substantial. I have had cases in my constituency in urban areas where the quoted cost of connecting to the grid is thousands of pounds, even when the mains are relatively close by. In many rural and island areas, where the cost of connection would be enormous, there is absolutely no chance of that being done.

The Government’s advice to switch does not work in a market where there is often a practical local monopoly on supplies. The problem in many rural areas is exacerbated by the fact that much of the housing is old and of a construction that makes it very difficult to install energy-saving measures, such as cavity wall insulation.

Of course, these households will receive the same winter fuel allowances as pensioners on the gas grid, but the crucial difference is how the energy is delivered. Those who are on the gas grid will receive their winter fuel bill around the time that the winter fuel allowance is generally paid, and it therefore works well for them. Indeed, in the explanatory notes to the regulations that last amended the benefit, the previous Government said specifically:

“They are paid in a lump sum each winter to ensure that money is available when fuel bills arrive.”

This is clearly not the case for those off the gas grid. They face the difficulty that they have to pay for their LPG or home fuel oil up front at the beginning of winter, well before they have the benefit of the winter fuel allowance. Many find it difficult to do so and may not fill up the tank completely, leaving them having to do so, if they can afford it, in the depths of winter, which brings problems of its own in getting a supply through in bad weather. That has been a serious problem in many rural areas in past winters.

The price of fuel is rising substantially as winter approaches, and even those suppliers who offer a fixed winter price will do so at a price higher than the summer price. My Bill suggests how we might tackle this problem. The current winter fuel allowances are paid as a result of regulations that specify a date by which pensioners must apply. It is worth noting that once they are on the system, they do not have to apply every year. Clause 1 seeks to vary the regulation to bring forward for those off the gas grid the qualifying date from late September to late July. Clause 2 seeks to bring forward the payment date for those off-gas grid to no later that 30 September to allow them to buy a complete tank of gas prior to the winter.

These proposals would ensure that money is available when fuel bills arrive, as the regulations put it. I have debated this with the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb) and, with the greatest respect to the hon. Gentleman, it seems to me that the objections to the proposal are bureaucratic excuses. The first objection is that the payment would have to be paid to everyone earlier or other claimants may feel aggrieved at being denied early access. The whole point, however, is to tackle the problem of having to pay for energy up front. Other claimants will have access to the allowance when their quarterly bills become due. I reiterate the point made in the memo to the regulations that the payment was meant to be available when the bill arrives: for those who pay up front, the most appropriate way to achieve parity would be to make payment as close as possible to the time of the outlay, which is precisely what I am attempting to do.

The second objection is that the Department would need to create a separate category of people who are off-grid, and that the situation of individuals could change from year to year. I recall the Minister giving us a rundown of his own situation—by buying a house, he subsequently became connected to the grid. That objection seems ludicrous, as the number of new connections would be low, and unlikely to be a major problem. As Members know, it is not unheard of for the Department to insist on claimants of other benefits notifying a change in circumstances, so I do not see the problem. A low number of claimants are likely to be affected in any event.

Moving the date forward could result in some people losing out on the payment in the initial year. I accept that that could be a problem, but it is hardly insurmountable. As I said, it would be a problem only in the first year of each claim, since once applicants are on the system they do not have to apply each year but receive an allowance automatically. It would be possible, for example, to allow off-grid consumers who miss the earlier date to apply at the later date but be transferred to the earlier date for year 2, so avoiding any difficulties. If, on the other hand, the Government have real problems with an earlier date, we could keep the September date and simply allow payment to off-grid consumers at an earlier date from year 2.

There is nothing revolutionary about this proposal, which simply seeks a very minor change to begin to address the problems of off-gas-grid consumers by targeting a particularly vulnerable group. With political will, none of the problems is insurmountable. I hope that the House will support this Bill and allow it to proceed.

Question put and agreed to.

Ordered,

That Mr Mike Weir, Dr Eilidh Whiteford, Hywel Williams, Angus Robertson, Mr Elfyn Llwyd, Sarah Newton, Mr Nigel Dodds, Jonathan Edwards, Ms Margaret Ritchie and Mr Angus Brendan MacNeil present the Bill.

Mr Mike Weir accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 28 February and to be printed (Bill 135).

Opposition Day

Wednesday 27th November 2013 Commons Chamber

13th Allotted Day

Cost of Living

Wednesday 27th November 2013 Commons Chamber

14:41

[Chris Leslie (Nottingham East) (Lab/Co-op)]

I beg to move,

That this House notes that the Government has failed to meet its own economic goals over the last three years with prices rising faster than wages for 40 out of 41 months, average earnings for working people £1,600 a year lower in real terms than in May 2010, economic growth far slower than expected, the Government’s pledge to balance the books by 2015 set to be broken and the UK’s credit rating downgraded; further notes that growth of 1.5 per cent is needed in every quarter between now and May 2015 in order to catch up the lost ground from three damaging years of flat-lining growth; believes the Chancellor of the Exchequer’s Autumn Statement should take action to tackle the cost-of-living crisis which means that for most families there is still no economic recovery and to ensure recovery delivers rising living standards for all, is balanced and built to last; and calls on the Government to bring forward measures including an energy price freeze and long-term reforms to the energy market, an extension of free childcare for working parents of three and four year olds, action to boost long-term housing supply and a compulsory jobs guarantee for young people and the long-term unemployed.

On Thursday next week the Chancellor of the Exchequer will address this House in his autumn statement. My hon. Friends will know that we have come to expect a tin ear from this Chancellor, who in last year’s autumn statement cut tax credits and child benefit in the face of millions of people struggling to make ends meet while sticking firmly by his decision to deliver a millionaires’ tax cut for the richest 1%. This year, the time has surely come for the Chancellor to wake up to the chronic and unremitting cost of living crisis facing millions of households across the country. Never before have so many worked so hard for so little, working week after week only to find that their pay packet has shrunk in real terms and that they are unable to buy as much as the month before, with wages failing to keep up with prices and the pound in their pocket diminishing in value as everyday costs—rent, the weekly shop, child care, and gas and electricity bills—get higher and higher.

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

Does the hon. Gentleman welcome the fact that the Government have taken many people out of income tax, such that next April 4,041 people in Suffolk Coastal will no longer pay income tax, alongside the freeze in council tax that they have enjoyed for the past few years?

[Chris Leslie]

The hon. Lady makes her point. Unfortunately, a lot of Conservatives like to pretend that they are giving with one hand, yet they are taking away so much more with the other—not just the tax rises that they pretend never happened but the unremitting rise in the costs that people face daily.

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

My hon. Friend is right to say that the Government give with one hand and take with another. Does he agree that of the £14 billion of tax adjustments last year, £11 billion was inflicted on women and their cost of living?

[Chris Leslie]

Absolutely. In last week’s Opposition day debate, my hon. Friend the Member for Ashfield (Gloria De Piero) correctly highlighted not only the impact of the cost of living crisis on households up and down the country but how it is particularly hitting women.

[Christopher Pincher (Tamworth) (Con)]

On the subject of giving and taking, is the hon. Gentleman aware that in 20-odd years of Labour control of Staffordshire county council, Labour hiked council tax time after time, whereas this year the Conservative-controlled county council has cut the tax? Does that not show that Tories give money back and Labour takes it away?

[Chris Leslie]

The trouble for the hon. Gentleman is that an awful lot of Conservative councils have metaphorically stuck two fingers up to the Secretary of State for Communities and Local Government and, indeed, the Chancellor by deciding to increase council tax because the Government’s approach to local government finance has squeezed services. Even Conservative councils and authorities are finding themselves in a position where they are raising council tax.

[Sheila Gilmore (Edinburgh East) (Lab)]

The Social Mobility and Child Poverty Commission has stated that the fiscal consolidation has been regressive. Does my hon. Friend think that that should be taken into account?

[Kwasi Kwarteng (Spelthorne) (Con)]

It has worked.

[Chris Leslie]

My hon. Friend is correct. The fiscal consolidation is not only regressive but entirely the opposite of what the hon. Member for Spelthorne (Kwasi Kwarteng) shouted from a sedentary position, because it has not worked. I will be talking about him in a moment as I have given him a special place in my speech; several hon. Members will know why. The notion that fiscal consolidation has been successful is disproved by the fact that we now have an inordinate level of borrowing thanks to the lack of economic growth.

[Kwasi Kwarteng]

Will the hon. Gentleman give way?

[Chris Leslie]

Of course I would love to give way to the hon. Gentleman.

[Kwasi Kwarteng]

I am very grateful to the hon. Gentleman and touched that he specially mentions me in his opening remarks. If the fiscal consolidation has not worked, why is the UK currently growing faster than any other country in the G7 and in the OECD?

[Chris Leslie]

The hon. Gentleman should be shamefaced even to mention economic growth when for the vast majority of his esteemed time as a Member of Parliament growth has flatlined and he has failed to deliver. He needs to recognise that unless we get some serious and sustained economic growth, we will never deal with the deficit issues we have in this country.

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

Is my hon. Friend as surprised as I am by the amnesia among Government Members, bearing in mind that we were coming out of recession in 2010 but have since been flatlining and that they have failed to explain why prices have risen faster than wages for 40 out of 41 months?

[Chris Leslie]

This is the problem that Government Members, who seem to think it is funny that we have not had any growth for such a long time, do not understand. They think, “Oh, the cost of living—that’s nothing to do with the economy, it’s a completely separate issue.” Not only my hon. Friends but my right hon. Friend the Leader of the Opposition have relentlessly called on Ministers to act now to alleviate the pressures that are facing many families’ household budgets. They do not just need to make the case for a living wage and a 10p starting tax rate; they need to act now to stand up to the large corporations who know that customers have little choice but to cough up and pay higher prices for life’s essentials.

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

My hon. Friend is being extremely kind and generous with his time. Returning to Staffordshire, is he aware that a Money Advice Service report shows that in Stoke-on-Trent the number of people in debt has now reached the 35% mark? More than a third of people in Stoke-on-Trent are now suffering in debt because of this Government’s policies.

[Chris Leslie]

The report published by the Money Advice Service, which the Government trumpeted as an organisation that was set up some while ago, is very startling. Certainly, the number of people in my hon. Friend’s constituency who are suffering from indebtedness is exceptionally high. In my constituency, over 40% of people are struggling to make ends meet when faced with these crippling burdens and debts.

[Robert Halfon (Harlow) (Con)]

Whenever the Government introduce fundamental measures to help with the cost of living, such as freezing council tax, freezing fuel duty and cutting it in 2011, and cutting taxes for lower earners, why do you vote against them?

[Chris Leslie]

I do not know whether you voted against those measures, Mr Deputy Speaker, but we appreciate any efforts to help alleviate the cost of living. Does the hon. Gentleman believe that when people fill up their tank at the petrol station, they think, “How grateful we are to the Conservatives for the cost of petrol today”? When it comes to the cost of living—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The hon. Gentleman has been very generous so far, but he cannot give way to six people at once. Let us get our act together and try to get through the debate. There are 21 Members who want to speak, and I am sure that other Members will want to hear them.

[Chris Leslie]

Thank you, Mr Deputy Speaker. I am still on the first page of my speech. I remind Government Members that the profits of the energy companies, which in many ways are the drivers hurting many of our constituents, have risen astronomically in recent years. Since the general election, energy company profits are up from £2 billion to £3.7 billion. Members will have read in The Independent yesterday that profits were £30 per household at the time of the general election, that they rose to £53 per household in 2012 and that they are now expected to be £105 per household this year, and yet the Government continually cower in trepidation of the big six gas and electricity corporations. They are not just recoiling from any willingness to challenge their behaviour, but in their cowardice the Government defend the status quo as though nothing can be done.

Labour says that energy bills can and should be frozen while Parliament legislates to reset the energy market to one that provides true competition, reduces scope for excessive profiteering and offers reductions for customers when wholesale prices fall.

[Several hon. Members]

rose—

[Chris Leslie]

I will give way to Government Members if they can answer this point: what was the Government’s reaction to our call to take action on energy prices? They dithered and argued among themselves, frozen like rabbits in headlights, flailed around and attacked us for daring to stand up to excessive profiteering and then, finally, No. 10 Downing street said, “Wear a jumper.”

[Mr Brooks Newmark (Braintree) (Con)]

Will the hon. Gentleman give way?

[Chris Leslie]

I will give way to one of the woollier Members on the Government Benches.

[Mr Newmark]

Fuel prices would be 13p a litre higher if Labour were in power. Consumers have saved £170 on average, which is a saving on the cost of living. That is one area in which the Government have done a lot to help motorists.

[Chris Leslie]

When the public faced difficulties, the previous Government took action to freeze prices and duty for petrol and diesel. The hon. Gentleman mentions a fictional 13p and seems to think that when people fill up their petrol tanks they say, “Thanks goodness these prices are so low; I must thank the hon. Gentleman.” He is living in cloud cuckoo land. The Government are not just out of touch; they are out of ideas and they are running out of time.

[Several hon. Members]

rose—

[Chris Leslie]

I will give way in a moment. [Interruption.]

[Mr Deputy Speaker]

Order. Everybody else has sat down, but somehow the hon. Member for Vale of Glamorgan (Alun Cairns) feels he can hang around for another five minutes. I assure him that he cannot. The Minister will give way when he wishes to, not when the hon. Gentleman demands. [Interruption.] I do not need help from others, either.

[Chris Leslie]

I think that shows that we have touched a nerve. We know that the best we can expect from the autumn statement—[Interruption.]

[Mr Deputy Speaker]

Order. Did somebody shout out something about cowardice? No; okay, carry on.

[Chris Leslie]

I did not catch what was said, but we will see what Hansard records.

We know what will be in the autumn statement next week. The best we can expect is that the Chancellor will probably transfer about £100 or so off people’s energy bill and on to their tax bill instead. That is a ruse.

[Robert Halfon]

On a point of order, Mr Deputy Speaker. The hon. Gentleman has said that his Government tried to help motorists, but he inadvertently forgot to mention that they raised fuel duty 12 times.

[Mr Deputy Speaker]

I assure the hon. Gentleman that that is not a point of order. He has made that point on many occasions and I did not need reminding.

[Chris Leslie]

Thank you, Mr Deputy Speaker.

[Toby Perkins (Chesterfield) (Lab)]

My hon. Friend is being incredibly generous in taking interventions. May I encourage him to continue taking them, because every time he does so he utterly destroys the weak arguments made by Government Members? Does my hon. Friend recognise, like the 5,000 people who signed the “freeze that bill” petition in Chesterfield, that the Conservative party has nothing to say on energy prices because it is utterly beholden to the very energy companies that are impoverishing my constituents?

[Chris Leslie]

My hon. Friend is correct. The Government are afraid of the energy companies. We are not yet sure why they are so afraid to stand up to the big six, but it is clear that the Chancellor’s solution of simply shifting £100 or so off an energy bill and on to the taxes of all our constituents will not convince people that they have the answers. The switch is so obvious it can be seen in the dark. It is a palliative that merely shunts the costs from a bill payer to a taxpayer. It fails to tackle the root cause of the problem, which, as my hon. Friend has said, is the excessive profiteering of the utility companies. Government Members are going to have to try a lot better than that next week.

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

I am grateful to the hon. Gentleman for giving way. He makes an extremely important point on the need to freeze bills, which is largely what has happened over recent years to council taxes in England. In Wales, however, where the Labour party runs the Welsh Government, there have been council tax increases of nearly 9% over recent years. That is a bill that can genuinely be frozen by politicians. Will the hon. Gentleman stand up to the Labour party in Wales to ensure that my constituents are not forced to pay 9% increases in council taxes?

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

That was worth waiting for.

[Mr Deputy Speaker]

Order. We can all make a judgment about that, but it might be helpful to remind Members that there are many speakers to come, so if we are going to have interventions they have to be short and not speeches. I will be honest with Members: anyone on my list of speakers who makes a long intervention will go down the list accordingly.

[Chris Leslie]

The hon. Member for Vale of Glamorgan (Alun Cairns) is short in his contributions on most occasions. I note that he wanted to change the subject from energy prices. The problem is that, time after time, the Conservative party has no answers for the public, who want politicians—their elected representatives—to take action on the cost of living, particularly on energy prices. As long as the hon. Gentleman and all his colleagues let the rip-off merchants and unfair profiteers continue with business as usual, the public will take exception to the deceitful claim that we are all in it together.

[Several hon. Members]

rose—

[Chris Leslie]

I want to make some progress.

For most people life is getting harder and for most people there is still no economic recovery, but that is not what they were promised. Before the election, the Prime Minister said:

“Our plans don’t involve an increase in VAT”

and

“I wouldn’t change child benefit”.

He also said that tax credits would be cut only “for families on £50,000” and that his party would

“not scrap the Education Maintenance Allowances”.

Those are the promises the Conservatives made before the general election. They famously airbrushed a poster of the Prime Minister and in their efforts to cover up their website pledges they are trying to airbrush the past.

[Mr Ellwood]

I urge the hon. Gentleman to be cautious about questioning whether this subject is being taken seriously by Government Members, because the record should note that there are more Government Members than Opposition Members present to debate this important issue. On energy, will he now concede that Labour failed to ensure that the lights will be kept on in this country by failing to invest in nuclear energy? More than six nuclear power stations have closed down. That is why energy prices have gone up—because we are not making our own energy.

[Mr Deputy Speaker]

Order. I asked for short interventions. Please shorten them, Mr Ellwood, or we will not take any more from you. I am sure you will want to get another one in later.

[Chris Leslie]

There are only another 18 months during which there will be more Conservative Members than Labour ones in this Chamber. I hope that the hon. Member for Bournemouth East (Mr Ellwood) is watching the clock, because they are running out of time.

The Prime Minister has broken not only that list of promises, but more records than most Prime Ministers over the decades, and not in a good way. How has he been a record breaker? Since entering No. 10 Downing street, he has delivered a record-breaking cost of living crisis, with wages failing to keep pace with prices for an unprecedented 40 out of his 41 months in office. That is the longest period of diminishing real wage values since records began.

A record-breaking number of people now rely on food banks just to get by—it has tripled in the past year alone—with more than 350,000 families requiring food parcels in the past six months.

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

On the cost of living crisis that is driving people to food banks, does my hon. Friend share my shock at the hon. Member for Vale of Glamorgan (Alun Cairns) saying that people use food banks because they are drug addicts and cannot manage their money, rather than because of the cost of living crisis?

[Chris Leslie]

I am happy to give way to the hon. Member for Vale of Glamorgan if he wants to explain.

[Alun Cairns]

On a point of order, Mr Deputy Speaker. The hon. Member for Cardiff South and Penarth (Stephen Doughty) has inadvertently misled the House in that the quotes attributed to me are wholly inaccurate. I ask him to withdraw what he said.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I do not know whether what was said is true or false, but the hon. Gentleman has put the facts on the record. I am sure that that point can be sorted out later, no doubt over a cup of tea.

[Stephen Doughty]

rose—

[Chris Leslie]

I will happily give way to my hon. Friend in a moment, so that he can relay the quote that he has to the House. Perhaps a journalist wrote it down incorrectly, but I am sure that there is an explanation.

The point about food banks is that the crisis is so bad that the Red Cross has launched an emergency food appeal right here in the United Kingdom, something that has not happened since the second world war.

The Prime Minister’s broken records include real-term wage levels plunging to a new low and average weekly earnings at their lowest level since the Office for National Statistics started to record the figures in 2001. Not only has he hit record lows on incomes, but he has delivered record fuel bills and average household energy costs—

[Stephen Doughty]

On a point of order, Mr Deputy Speaker. I am sorry to raise another point of order, but the hon. Member for Vale of Glamorgan suggested that I may have misled the House—

[Mr Deputy Speaker]

Order. Let me reassure both hon. Gentlemen that I am not going to decide who is right. You have each claimed that you are right and that the other is wrong. It is on the record, and people can make up their minds tomorrow. I want to continue with this debate.

[Chris Leslie]

My hon. Friend the Member for Cardiff South and Penarth may have time later to elaborate on the quote. It may be incorrect, and we will see whether journalists want to look into that.

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

My hon. Friend is absolutely right to list this Government’s catalogue of broken promises on the cost of living crisis, but the crisis is far worse than the spiralling energy bills and the rising cost of living. He was moving on to make the serious point that, at the same time as prices are increasing, people’s wages have plummeted since 2010 by about £1,600. Is that not the real cause of this cost of living crisis?

[Chris Leslie]

Absolutely. This is an unprecedented period—we can characterise it as record breaking—during which wages have not been able to keep pace with the costs our constituents are facing.

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

Will the hon. Gentleman give way?

[Chris Leslie]

In a moment.

Let me give another example, private sector rents are at a record high. Average rent rises across England and Wales have just hit the highest level ever recorded, at £757 a month.

[Robert Flello]

Will my hon. Friend give way?

[Chris Leslie]

Will my hon. Friend allow me to make a little more progress on housing? The Prime Minister is also a record breaker because he is presiding over the lowest net supply of housing since records began. The Government’s own figures show that the number of dwellings added to our housing stock fell by 8% last year, which is the lowest level since such statistics were first collected. That is quite some achievement. It does not bode well for the affordability needed by many first-time buyers in this country. By the way, a record number of people are seeking help from the housing charity Shelter, which has reported an all-time high of almost 175,000 calls in the past year, up 10% on the previous year.

Government Members even like to portray the jobs market as wholly positive, but a record number of people are working part time because they cannot find full-time jobs. Nearly 1.5 million people say that they need to find full-time work, but cannot, which is the highest figure since records began.

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

I have done some work on this subject. Is not a consequence of the number of part-time jobs advertised not just in my constituency but across the country that wages have dropped to today’s level?

[Chris Leslie]

That is precisely what baffles Government Members so much: they cannot understand the ingratitude of the British people, who somehow seem not to recognise the work that the Government are supposedly doing. The reality is that these are the pressure points—the points of stress and anxiety—faced by so many people up and down this country.

[James Morris]

Will the hon. Gentleman give way on that point?

[Chris Leslie]

The hon. Gentleman has been very persistent, so I will give way.

[James Morris]

It has taken the hon. Gentleman 20-odd minutes to talk about one of the keys to solving the cost of living crisis, which is the creation of new jobs. I presume he welcomes the 11% fall in unemployment in his constituency during the past year, with a 15% fall in youth unemployment. Is that not absolutely key to our recovery and to solving the cost of living crisis that he has taken so long to talk about?

[Chris Leslie]

The hon. Gentleman, whose name is sometimes mixed up with that of others, should do better than to pick on my constituency of Nottingham East, where unemployment has been a persistent and long-running problem. Of course there have been fluctuations in the past few months, but I must tell him that the number of young people out of work for more than a year on jobseeker’s allowance has rocketed astronomically in this country: it is up 127% since the last general election. The number of long-term unemployed, who have been out of work for two years or more—we must turn our attention to that persistent problem—has gone up 374% since the last general election.

[Several hon. Members]

rose—

[Chris Leslie]

I just want the House to hear a few more record-breaking facts about the Prime Minister. Do my hon. Friends remember, from a Budget some time ago, the Chancellor of the Exchequer’s poetic declaration that he would create

“a Britain carried aloft by the march of the makers”?—[Official Report, 23 March 2011; Vol. 525, c. 966.]

We now have a record-breaking trade deficit with the European Union of £6 billion, which is a sign that the rebalancing of our economy has tilted in the wrong direction. The “Guinness Book of Records” is already familiar with the Prime Minister’s achievement in delivering the slowest ever, snail’s pace recovery out of an economic downturn since records began, taking Britain longer to claw our way back than after the great depression. That record-breaking performance is thanks to the drag anchor policies that have held back growth for the past three years.

The record-breaking let-down on growth has of course led to the Prime Minister’s biggest failure of all—more borrowing than any peacetime Government in history. The Prime Minister and the Chancellor have added £430 billion to our national debt in the three years since May 2010, which is more than the last Labour Government did in 13 years and more than any previous Government have done in peacetime. They are record-breaking borrowers, because no Government have ever neglected economic growth quite like this one.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Is it not a fact that the economy will have to grow by 1.5% every quarter to make up for the lack of growth since 2010?

[Chris Leslie]

Government Members see what they regard as green shoots for our economy. They hope that the public will just forget what has happened for the past three and a half years, but the public have long memories and will remember the harm and anxiety that the cost of living crisis is now causing them. Perhaps those record-breaking extremes from this Prime Minister and Government reflect the new extremism in the Conservative party and the drift away from the centre ground of British politics.

[Gordon Birtwistle (Burnley) (LD)]

Will the hon. Gentleman give way?

[Chris Leslie]

I will come to the Liberal Democrats in a moment. I am talking about the Conservative party.

The Conservatives and the Prime Minister like to pretend that they understand the concerns of hard-working people. When they finally realise the strength of public opinion, they will grudgingly come up with a half-baked effort on energy bills, just as they finally caved in with a long overdue cap on payday loans. The trouble is that they just don’t get it, because their hearts aren’t in it. As with the action on payday loans and banking reform in this week alone, why does the Chancellor always have to be pushed into doing the right thing?

The forces of moderation in the Conservative party—I am looking around desperately to see them; perhaps there are a couple of them here—complain that they are seen as the party of the rich and that voters do not trust their motives. Twenty-five of the dwindling number of those anxious Conservative Members of Parliament had a meeting with the Prime Minister to express their concerns, although that was before some of them announced that they were standing down from Parliament.

The moderates—there is one opposite me—are right to worry, because the Prime Minister’s pretence that he represents the middle of British politics has finally stretched beyond belief, as time and again his true instincts shine through. In the lord mayor’s banquet speech a fortnight ago, the mask slipped as the Prime Minister proclaimed the need for permanent austerity and the shrinking of public investment in perpetuity. The true ideological intentions of the Conservatives are there for all to see. Perhaps that is why the party’s Free Enterprise Group published its plans—

[Kwasi Kwarteng]

Will the hon. Gentleman give way?

[Chris Leslie]

I will give way to the hon. Gentleman because he is in the Conservative Free Market Group. He wrote the pamphlet. Will he tell us what it was about his pamphlet that hit the headlines?

[Kwasi Kwarteng]

I have no idea what the hon. Gentleman is talking about. I am very pleased and somewhat flattered that he should be referring to the Free Enterprise Group on the Floor of the House. What was the size of the deficit when his party left government in 2010? What was the absolute size of the deficit and what was the proportion of the deficit—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We have got the point.

[Chris Leslie]

The national debt was about £800 million. The national debt—[Hon. Members: “The deficit.”] I know what the hon. Gentleman said. I could hear what he said. I am giving him the figures. The national debt—[Interruption.] It seems that Government Members do not want to talk about the national debt. The national debt was about £800 million. It is now £1.2 trillion. As Brucie might say, “Higher, higher!”

[Mr Newmark]

On a point of order, Mr Deputy Speaker.

[Mr Deputy Speaker]

It had better be a point of order, Mr Newmark, if you want to get in early. I do not want to have to put you near the bottom, because I know that this matter is important to you.

[Mr Newmark]

I want clarification, Mr Deputy Speaker.

[Mr Deputy Speaker]

Order. I was not taking a point of clarification, but a point of order.

[Mr Newmark]

It is a point of order, Mr Deputy Speaker. The hon. Member for Nottingham East (Chris Leslie) was asked a question about the deficit. Unfortunately, his answer was about debt. Rather like Rev. Paul Flowers, he does not know basic economics. [Interruption.]

[Mr Deputy Speaker]

Order. I will let that go. It is up to the shadow Minister how he wishes to answer the question. It is not for you, Mr Newmark, to waste the House’s time on an irrelevant—[Interruption.] Order. On an irrelevant point of order. If you do not mind, we will have no more.

[Chris Leslie]

It goes to show—

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

Will the hon. Gentleman give way?

[Chris Leslie]

I have not even said a word in response to the point of order. I will do so if the hon. Gentleman will allow me. It just goes to show that the Conservatives will do everything they can to distract attention from the cost of living crisis that is facing this country. As Corporal Jones might have put it, “They don’t like it up ’em!”

The hon. Member for Spelthorne (Kwasi Kwarteng)—

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

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. You also want to speak, Mr Davies. You are constantly on your feet. I want to hear Mr Leslie. I also want to hear what the Government have to say. I will not hear either of them with the amount of time we have taken so far.

[Chris Leslie]

That is a good point, Mr Deputy Speaker, so I will be brief in talking about the hon. Member for Spelthorne and the Free Enterprise Group. The Free Enterprise Group published plans to slap a 15% increase on essentials such as food and children’s clothes through VAT and to triple the tax on heating bills. A number of hon. Members who are in the Chamber today are members of the Free Enterprise Group. They might be shuffling away from the hon. Member for Spelthorne now.

[Charlie Elphicke (Dover) (Con)]

Will the hon. Gentleman give way?

[Chris Leslie]

Perhaps the hon. Gentleman wants to account for that plan. Does he agree with charging VAT at 15% on food and children’s clothes and increasing the tax on heating bills—yes or no?

[Charlie Elphicke]

What was the size of the deficit at the time of the general election in 2010? Was it £150 billion-plus—yes or no?

[Chris Leslie]

There is no answer to my question from the hon. Gentleman. I have given him the figures for the national debt.

The extremism and rightwards shift in the Conservative party are visible for all to see. As we can tell from the tactics that they are using, the Prime Minister, the Chancellor and all the Conservative Back Benchers are scraping the barnacles off the 1992 election strategy. They have a barely disguised plan to fight the next election in the gutter. Their tactics are visible for all to see.

The Prime Minister once spoke fondly of environmentalism while hugging the huskies. Perhaps I should ask this on a point of order, Mr Deputy Speaker, but is it using unparliamentary language to quote No. 10 when it allegedly said that it wanted to cut out all of the “green crap”? I know that that is appalling language, but it is a quotation from No. 10 Downing street. The Government are certainly cutting some things out: 578 Sure Start children’s centres have been cut, 76 NHS walk-in centres have been cut, 48 accident and emergency departments have been shut, 200 ambulance stations have been axed and 6,000 nurses have gone from the NHS, but 707 food banks have opened. Perhaps Government Members regard that as a success.

[Several hon. Members]

rose—

[Chris Leslie]

I will take one final intervention from my hon. Friend.

[Helen Jones (Warrington North) (Lab)]

Does my hon. Friend realise that the reason why some of us worry about the proposals of the Free Enterprise Group is that they are all of a piece with what the Tories have done already, including a drop of £35 a week in real wages in my constituency, the imposition of the bedroom tax on the poorest people and, contrary to what they say, increases in council tax for the poorest people? The reason Tory Back Benchers worry about being seen as the party of the rich is that they are the party of the rich.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I am concerned because the debate has been going for 36 minutes already. The time limit on Back-Bench speeches is due to be five minutes. I do not want it to go below that. At this rate, a lot of Members will drop off the list.

[Chris Leslie]

I want to draw my remarks to a close, so I will not take any more interventions.

In a moment, my hon. Friends will be subjected to the Minister claiming that the Government alone are responsible for the long overdue return of economic growth. What he cannot grasp is that growth is appearing despite his policies, not because of them. As the Nobel prize-winning economist, Paul Krugman, said of the Government’s attitude just the other day,

“It’s like hitting yourself over the head with a baseball bat for years. Then, you stop hitting yourself with the baseball bat and say, ‘See? I feel much better now—hitting myself with a baseball bat was clearly the right thing to do’.”

That sums up their view perfectly. They do not understand that only the return of strong economic growth will tackle the deficit in any meaningful way. Three years on, they still have not cottoned on.

The reason we have a cost of living crisis is that the historic connection between economic growth and household wealth has been severed. Even though it looks like we are finally seeing some growth in some parts of the economy, that growth is not being shared fairly. Indeed, GDP per capita remains flat. I pay tribute to the companies and households that have managed to keep it together despite the Chancellor’s inaction. What we need now is help for those who are trying to do their best—the people who never complain, who never say that they should be at the front of the queue, who go to work and who manage as best they can. Those people need real help with their energy bills and child care costs. They need us to tackle low pay and to freeze business rates for small firms.

The challenge for the autumn statement is to take action now on the cost of living, not to use sleight of hand to pile more burdens on the taxpayer. We need long-term reforms that ensure that there is a balanced recovery that is built to last, not short-term, knee-jerk flip-flopping. We need fairness for the many, not tax cuts for the few. The Government are out of touch with the mood of the public—the wealthy elite are looking after the wealthy elite and are all in it together. They are timid in the face of excessive profiteering from big energy companies, while the rest get broken promises on the economy and the deficit from a Government who are lurching to the right and reverting to type. The British people cannot afford this Government any longer. Britain deserves better.

15:20

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

When the Opposition first tabled this motion, the title referred to the Government’s “economic failure”. The word “failure” has been mysteriously removed and replaced with “policy”. Perhaps the Opposition originally asked the Rev. Paul Flowers, who was their economic adviser, to help draft the motion. Now that they have been forced to sack him, they have had to amend the deluded original title of the motion. Even before the debate started, the Opposition have had to back down.

The Government recognise that many people up and down the country are facing living standards challenges. Each and every week I speak to many hard-working people in my constituency who are still suffering from Labour’s recession, and whose businesses or employers were hit hard in 2008 and 2009 and are still feeling the impact. Of course we all want the situation to improve.

[Geraint Davies]

On failure, does the hon. Gentleman accept that the movement of debt to GDP from 55% when he came into office, to 75% now and 85% by 2015, is a sign of failure both in increasing debt to a higher level than we borrowed throughout our term, and through not getting any growth?

[Sajid Javid]

I accept that the sharpest move in debt to GDP that this country has seen in recent times was under 13 years of Labour rule when national debt more than doubled. We will take no lectures from the Labour party about growing public debt. Allow me to remind the House, especially Labour Members, why people are facing such challenges.

[Helen Jones]

On a point of order, Mr Deputy Speaker. I note that the Chief Secretary to the Treasury is not present. Can you investigate whether that is because the Lib Dem part of the coalition no longer takes responsibility for economic policy?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

As the hon. Lady well knows, that is not a point of order. It is certainly not a matter for the Chair and does not want to be. I call the Financial Secretary.

[Sajid Javid]

I give way to my hon. Friend the Member for Bedford (Richard Fuller).

[Richard Fuller (Bedford) (Con)]

I was concerned that the shadow Chief Secretary to the Treasury did not seem to understand the difference between deficit and debt, which I thought would be a prerequisite for talking about economics. Will my hon. Friend explain to the House what the circumstances were when this Government came to office?

[Sajid Javid]

My hon. Friend tempts me and I will do just that in a moment, after I have given way to my hon. Friend the Member for Burnley (Gordon Birtwistle).

[Gordon Birtwistle]

The shadow Chief Secretary to the Treasury did not want to take an intervention from a Liberal Democrat, perhaps because it used to be a Labour Member who sat here and now it is a Liberal Democrat. Will my hon. Friend comment on the fact that in 2009 Burnley was classed as a basket case under the Labour Government with a Labour MP, but it has now won an award for the most enterprising town in the UK? Unemployment has collapsed under this Government.

[Sajid Javid]

I will comment on that because it reflects the hard work of the people of Burnley and their local MP. Why are people facing challenges up and down the country? The reason is simple and can be summed up in just three words: the Labour party.

[Toby Perkins]

The Minister asks why people are suffering a cost of living crisis, and he referred previously to Labour’s recession. Labour’s recession was over by the time he became a Member of Parliament, and it was a recession caused by the bankers. Will he remind the House what he was doing when Labour’s recession finished?

[Sajid Javid]

What I can do is remind the hon. Gentleman what was going on in his constituency during Labour’s recession. During Labour’s last term, unemployment in his constituency increased by 56%. So far, under this Government it has declined by 26%, which I think he would welcome.

[Several hon. Members]

rose—

[Sajid Javid]

I will give way to my hon. Friends in a moment. The Opposition spokesman talked about breaking records, so let us take a quick look at Labour’s record breakers—they are enough to make Roy Castle jump up and down with excitement. Labour gave this country the deepest recession in living memory, and the biggest budget deficit in our post-war history, and the largest in the G20. To answer the question from my hon. Friend the Member for Bedford (Richard Fuller), Labour was borrowing almost £160 billion—£300,000 a minute, or £5,000 every second. Labour gave this country the largest bail-out the world has ever seen. [Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I find it strange that I cannot hear the Financial Secretary because Government Members are making so much noise. I would have thought they ought to listen to him, just as I wish to hear him.

[Sajid Javid]

I think the House missed hearing about another record breaker that Labour gave this country, which was the largest bank bail-out the world has ever seen. That is Labour’s legacy, and if the Opposition spokesman wants to apologise, he is welcome to do so.

[Chris Leslie]

The Minister, who worked for Deutsche Bank before the general election, might wish to explain and answer a specific question on borrowing, the deficit and national debt. Can he tell the House how much the Chancellor has borrowed and added to the national debt since the last general election? What is that amount of money in cash terms?

[Sajid Javid]

We know that if we had continued the plans recommended by the Labour party, the country would be borrowing a lot more. According to the independent Institute for Fiscal Studies, Labour plans to borrow at least £200 billion more, which would push up borrowing costs for many hard-working families up and down the country.

[Guy Opperman (Hexham) (Con)]

Does the Minister agree with the North East chamber of commerce, which said that the most important factor in raising living standards is to increase skills levels with an increase in skills funding and a doubling of apprenticeships? Is that not the true foundation of a long-term recovery?

[Sajid Javid]

I agree wholeheartedly with my hon. Friend, and I am sure he agrees that the Government were right to increase funding for apprenticeships, which are up by more than 1.5 million since the start of 2010.

[Mr Donohoe]

Will the Minister accept that a number of the jobs brought into the economy are part time? Would it be better for the Government to calculate the number of jobs in terms of hours worked by individuals, and would they find that the number of jobs has actually dropped in real terms if those hours are taken into account?

[Sajid Javid]

The hon. Gentleman tempts me and I will come to jobs shortly as there is plenty to tell. He should recognise that employment is at its highest level since records began, and that most jobs created are full time. Also, there is nothing wrong with part-time work.

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

Because the Government have taken the difficult decisions necessary and stuck to a long-term plan, the claimant count has fallen by more than a third in my constituency, where 730 more people are in work than when the other lot were in power.

[Sajid Javid]

The information my hon. Friend provides is true of almost every constituency in the country.

[Debbie Abrahams]

The Government consistently make that point, but it is totally misleading. The employment rate is lower now than it was in 2008. Absolute figures mean nothing; the Minister must quote a rate to make them mean something.

[Sajid Javid]

The hon. Lady is still fairly new to the House, but she will know that the Government changed hands in 2010. There is no point making comparisons with 2008. She will be interested to hear that unemployment in her constituency increased by a shocking 119% during Labour’s last term. I will say that again, because Labour Members have a hard time believing it: unemployment increased in her constituency by 119%. Under this Government, unemployment in her constituency is down by 24%.

[Neil Carmichael (Stroud) (Con)]

The Government have increased the number of private sector jobs by 1.4 million, and 88% of those jobs in the past six months were full time. Does that not illustrate that we are rebalancing the economy towards manufacturing and engineering, which we definitely need to do? That is part of an economic plan to recover this country from the disastrous situation in which we found ourselves in 2010.

[Sajid Javid]

I agree completely with my hon. Friend—I shall make further remarks on that in a moment.

In short, Labour left our country a lot poorer, and it still has not apologised for the damage it did, despite many opportunities, including this afternoon. The Labour Government destroyed the aspirations of millions of hard-working people up and down the country. Instead, Labour Members sneer over the Dispatch Box and oppose every single measure the Government take to clean up the mess they left behind.

[Robert Flello]

I say in all sincerity that it would have been nice to see the Minister’s boss in the Chamber—where is he?—but will he answer this question? A moment ago—[Interruption.] Conservative Members should listen for a moment. A moment ago at the Dispatch Box—Hansard will show this—the Minister criticised the Labour Government for bailing out the banks. Is he saying we should not have done that?

[Sajid Javid]

The hon. Gentleman needs to listen more closely to my remarks. He will be interested to know that unemployment increased by 104% in his constituency during Labour’s last term. The bail-outs and the other action the previous Government took did not help unemployment in his constituency but, thankfully, under this Government, unemployment there is down by 24%.

It is good to remind ourselves that office and government are a privilege given to us by the people of the United Kingdom. We are the tenants; the British public are our landlord. The Labour party was the tenant who trashed the house. It is left to this Government to clean up its mess.

We need to treat the public with the respect they deserve. We know that times are tough. Labour left our country a lot poorer, and families are feeling it. That is why we had to put in place a long-term, sustainable economic plan to fix things.

[Yasmin Qureshi (Bolton South East) (Lab)]

The Minister says that Labour left the economy in difficulties or a mess, but does he accept that, in 2006, the GDP to national debt ratio was about 42%, whereas it is now 91%? How is that responsible?

[Sajid Javid]

The hon. Lady—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The hon. Lady has made her intervention. She cannot keep going.

[Sajid Javid]

The hon. Lady needs to check her figures. She will see that, as I have said, the sharpest rise in the debt-to-GDP ratio took place during the last 10 years of the Labour Government.

[Kwasi Kwarteng]

With regard to the deficit, why, for nine years, and for seven years of economic growth, did the Labour Government run persistent deficits?

[Sajid Javid]

My hon. Friend makes a good point. He reminds the House that the previous Government began running a deficit from 2001, way before any financial crisis. They ran a structural deficit from 2006 onwards. Hon. Members will remember that the shadow Chancellor, the right hon. Member for Morley and Outwood (Ed Balls), tried to deny that until he was corrected by the International Monetary Fund.

Without a credible economic plan, we cannot have a plan for helping families with living standards challenges. Anyone, including the Labour party, can come up with a list of interventions, but they are completely meaningless and unsustainable if there is no long-term economic plan to back them up. Labour’s only plan is for more spending, more borrowing and more debt, which is exactly what got us into this mess in the first place.

[Charlie Elphicke]

I have a deep concern that many hard-working people lost earnings when interest was suspended on Co-op bonds in March. I am concerned that, 11 days later, it lent substantial amounts of money to the Labour party. Will the inquiry cover the bank’s relationship with the Co-operative party and whether the bank was unduly influenced by the national executive committee?

[Sajid Javid]

My hon. Friend raises a good point, but he will know that I am not in the best position to answer his question in detail. Perhaps the shadow Chief Secretary will rise to his feet to do so. I understand that he is a Labour and Co-operative Member and receives money from the Co-op. I am happy to give way if he would like to answer the question.

[Chris Leslie]

I am proud to be a Co-operative Member and a supporter of mutuality—I thought Conservative Members supported that, too. Will the Minister tell us the number of occasions on which his Treasury had meetings to discuss the Co-op Verde deal and the takeover of those Lloyds branches? How many times did Treasury Ministers have those meetings after the general election? Can he give us that fact now?

[Sajid Javid]

I am sure that question will be looked at further during the Co-op inquiry. The number and nature of meetings between the Leader of the Opposition, the shadow Chancellor and Co-op representatives will also be looked at—[Interruption.]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. The House cannot hear the Minister. If hon. Members want to argue with him, they must hear what he has to say first.

[Richard Graham (Gloucester) (Con)]

rose—

[Sajid Javid]

Thank you, Madam Deputy Speaker. I give way to my hon. Friend.

[Richard Graham]

I am very grateful to the Minister for giving way—he has been gracious throughout the debate. It is appropriate that we follow Madam Deputy Speaker’s advice and listen to him carefully. I would reinforce his point from my experience in Gloucester. Under the previous Government, 6,000 people in business lost their jobs, but since the last election, 3,000 new business jobs have been created and four times the number of apprentices have been employed, and unemployment and youth unemployment are lower. Does the Minister agree that this debate should not be about the cost of living, but be about the cost of having a Labour Government to people with jobs in my constituency?

[Sajid Javid]

My hon. Friend is right. Hon. Members know—I am highlighting this as much as I can in the debate—just how many lives and aspirations the Labour Government destroyed in their time in office.

The House has just heard the shadow Treasury Minister. His speech was more interesting for what was not in it than for what was. There is no talk today of plan B—[Interruption.] What the shadow Treasury did not mention was predictable. Let me say what it was, because four or five months ago, we heard what he did not say today in virtually every single speech from Labour Front Benchers. We heard no talk today of plan B. I did not hear anyone say, “Too far, too fast.” There was no mention of a double-dip, let alone of a triple-dip, because Labour Members know that there has been only one dip in recent times: Labour’s dip. They have comprehensively lost the economic argument. They have no plan and no answers for the problems they helped to create.

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

rose—

[Sajid Javid]

Does the hon. Gentleman have any answers to the problems Labour helped to create?

[Tom Blenkinsop]

I have no answer to the fact that we saw more growth in the last quarter of 2010 under the Labour Government than we did in the whole of 2011.

[Sajid Javid]

Let us talk about the growth in Middlesbrough South and East Cleveland. Is the hon. Gentleman referring to the record 92% increase in unemployment in his constituency in Labour’s last term? I notice that he did not refer to the 18% decline under this Government.

[James Morris]

My hon. Friend refers to what the Labour Front-Bench team will not mention. In the past two years, export growth in the west midlands has gone up by 30%—the best performance of any region. Is that not further evidence that the Government are on track with a sustainable, long-term plan to rebalance the British economy?

[Sajid Javid]

My hon. Friend is right. As a fellow west midlands MP, I have seen at first hand record growth, particularly in manufacturing and in the car industry.

Enough on the mistakes of the past. This Government are working hard to secure the country’s future. The only way we can deliver a sustained improvement in living standards is to continue to tackle the economy’s problems head-on and to deliver a recovery that works for all.

[Guto Bebb (Aberconwy) (Con)]

My hon. Friend talks about the future. How does he respond to the approval, given by the Labour party yesterday, of a 5% increase in council tax in my constituency—a decision made with no consideration of the cost of living for my constituents?

[Sajid Javid]

My hon. Friend makes an excellent point. What goes on in Wales is an excellent example of what a Labour Government would do, if they had the chance, in the United Kingdom. As well as increases in council tax, there has been a 10% cut in the NHS budget in Wales. That tells us exactly what Labour’s priorities are.

[Stewart Hosie (Dundee East) (SNP)]

On exports, in 2011 the deficit for trading goods was £100 billion. In 2012, that rose to £110 billion in the red, and has been running at about £20 billion in the red every quarter this year. I am not sure if I am seeing the green shoots of export recovery that the Minister is seeing.

[Sajid Javid]

I will speak on exports in more detail shortly. I am not sure that Scottish independence would help the record on exports.

Under this Government, Labour’s record budget deficit is down by a third, confidence and investment is on the rise, and the economy has turned a corner. The UK is growing faster than any other developed economy, including the US, Germany and Japan. Just last week, while downgrading global growth the OECD revised up UK growth by more than any other developed country. That growth is spread broadly across all sectors of the economy. Recent survey data show that construction is at its strongest level in six years and that activity in the services sector has not been this strong since 1997. New orders in manufacturing have risen to their highest level since 1995, according to the CBI.

[Mr Gordon Marsden (Blackpool South) (Lab)]

The Financial Secretary is taking pains to show that there is a long-term economic plan. What sort of plan is it when the number of young people on jobseeker’s allowance has gone up by 174% in a year? He and his colleagues have failed to provide 19 to 24-year-olds in traineeships with any funding to continue, JSA or otherwise.

[Sajid Javid]

I can tell the hon. Gentleman how our plan is panning out. Under the previous Government, he saw a 91% increase in unemployment in his constituency. Unemployment in his constituency is down by 7% under this Government. Youth unemployment is down by 24%. Rather than making cheap political points, he would do well to welcome the economic improvement in his constituency.

[Debbie Abrahams]

The Minister was making an international comparison with the UK economy. I remind him that the UK economy remains 2.5% below its pre-crisis peak, and the US economy is now 4.6% above its pre-crisis peak.

[Sajid Javid]

The US did not have a Government as incompetent as the one we had in Britain, who boasted the sharpest decline in GDP in this country in living memory and in our post-war history. When I said earlier that Labour left this country poorer, I am sure the hon. Lady realised—if she did not, I am happy to repeat it—that we saw the sharpest decline in GDP of any major developed country during Labour’s term in office.

Our economic plan is pulling in growing inward investment, with inflows into the UK in the first half of this year greater than any other country in the world except China. As I mentioned earlier, we are increasing exports to growing economies. From 2009 to 2012, exports to Brazil were up by 49%, to India by 59%, to China by 96%, and to Russia by 133%. We have become a net exporter of cars for the first time since 1976.

[Tom Blenkinsop]

Will the Minister please explain why, since 2011, lending to small and medium-sized enterprises has gone down by £30 billion? Long-term female unemployment in my constituency has increased by 144% since his Government came to power.

[Sajid Javid]

The hon. Gentleman will know that SME lending was hit from 2010 to 2011 because of Labour’s banking crisis. We had the deepest banking crisis and the largest bank bail-out the world has ever seen. What did he think the impact was going to be? He should welcome the Government’s action to help SME lending, including the funding for lending scheme, which has helped thousands of companies.

The Opposition claim that economic growth is not felt by people across the UK and that living standards are falling. The truth is that the previous Labour Government left the country a lot poorer and, as a result, many hard-working families are finding it difficult. Our long-term plan for the economy, the plan that has put our country on a path to prosperity, will help those families. What better way to increase standards of living than by making sure that as many Britons as possible can take home a steady wage at the end of each month? With more than 1.4 million private sector jobs created in the past three years—more private sector jobs created in three years of this Government than in 13 years of the previous Labour Government—we now have more people employed than at any time in our history.

We are also taking measures that help to keep more cash in the pockets of hard-working people up and down the country, while economic confidence has helped to keep mortgage bills low. If mortgage rates rose by just 1%, the average mortgage bill would increase by about £1,000 a year. We are also letting people keep more of their hard-earned income. Our increases in the personal allowance are worth £700 each year to every average taxpayer—a tax cut for more than 25 million people—while 2.7 million people on low incomes have been taken out of income tax altogether.

[Simon Kirby (Brighton, Kemptown) (Con)]

Does the Minister realise that from next April 36,000 people in my constituency will be better off because of this policy?

[Sajid Javid]

My hon. Friend is right to make that point. I think every MP in this illustrious House could share similar numbers. Indeed, in the shadow Chief Secretary to the Treasury’s constituency, 4,000 people have been taken out of income tax altogether and more than 38,000 have had an income tax cut.

Our changes to the personal allowance mean that someone working full time on the minimum wage has seen their income tax bill more than halved under this Government. It also means that for any income on which people would pay Labour’s 10p tax rate, which it previously abolished, they pay a 0% tax rate under this Government.

[Stephen Doughty]

Is the Minister still a member of the Free Enterprise Group of Conservative MPs and does he agree with that group and the hon. Member for Spelthorne (Kwasi Kwarteng) that VAT could be increased to 15% on food and children’s clothes, which are currently zero-rated? How would that help with the cost of living crisis for my constituents?

[Sajid Javid]

I am pleased that the hon. Gentleman is so interested in tax, because he will be sure to welcome the news that 38,000 people in his constituency have had an income tax cut and 4,500 have been taken out of income tax altogether.

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

I am grateful to the Opposition for pointing out earlier that before the election the Minister worked for a bank that the British Government did not need to bail out, whereas the shadow Chief Secretary to the Treasury ran the campaign of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). Nevertheless, does my hon. Friend agree that the Prime Minister made it absolutely clear at the Dispatch Box only last Wednesday that he did not agree with putting VAT on children’s clothes and food?

[Sajid Javid]

My hon. Friend makes a good point. [Hon. Members: “Answer the question!”] The Prime Minister answered it. The Government have absolutely no plans to increase VAT.

[Kwasi Kwarteng]

This proposal has been ripped out of context and completely distorted by the Daily Mirror and some of Labour’s other friends in the media. Let me be clear: this proposal was designed as a tax simplification measure that would cut the VAT rate and allow the savings to be targeted at people who really needed the money. It was a complex proposal whose details, I am afraid, got lost in the Labour spin machine.

[Sajid Javid]

My hon. Friend has made his point well, and I will not dwell on it further, in the interests of time.

We have also frozen fuel duty. Petrol is now 13p per litre lower than under Labour’s plans. Each time the average motorist fills up their car, they are saving £7 because we have refused to implement Labour’s fuel duty escalator. We are also helping local authorities to freeze council tax, and our tax-free child care plan will mean savings for parents of up to £1,200 per child.

[Alun Cairns]

rose—

[David Rutley (Macclesfield) (Con)]

rose—

[Sajid Javid]

I give way to my hon. Friend for Wales first.

[Hon. Members]

For Wales? [Laughter.]

[Alun Cairns]

I am grateful to my hon. Friend for giving way.—[Laughter.]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. The hon. Gentleman is making a brief intervention, and he must be heard.

[Alun Cairns]

My hon. Friend makes an extremely important point about council tax, highlighting the freezing of council tax here in England. Sadly, in Labour-run Wales, council tax has risen by nearly 9% over recent years, in the same time as it has been nearly frozen here. Will he join me in calling on the Labour Front-Bench team to pressure their colleagues in Cardiff Bay to freeze council tax for my constituents in the same way that he is doing for constituents in England?

[Sajid Javid]

My hon. Friend has made his point very well, and the shadow Front-Bench team will have heard it. If they really cared about citizens in Wales, they would pressure their Government in Wales to take action on council tax.

We are also making it easier for hard-working people to put some of their savings towards buying their own home. Our Help to Buy mortgage guarantee and equity loans are making home ownership a real possibility for aspiring people. Just one month since its launch, more than 2,000 people have put in offers for homes under the mortgage guarantee scheme. More than three quarters of the applicants were first-time buyers, many of them in their early 30s. Since the launch of the equity loan scheme in April, 92% of the 5,000 new homes built have been bought by first-time buyers. This is how we are helping to raise living standards: we create a business environment in which more people can go to work every day; we create a tax environment in which people can keep more of the money they earn every month; and we work with the banks so that every year more people can secure the dream of their own home.

Our plans are improving living standards, but what is the Labour party’s solution? I am sure it will tell the public that the only way is up—and they would be right: under Labour, taxes would go up; mortgage rates would go up; inflation would go up; and unemployment would go up. That is what economic failure looks like.

As I said at the outset, the shadow Minister needs to give the British public more credit. They are a lot smarter than he realises. They recognise that it was the Labour party that got the country into this mess, and that it will take time and difficult decisions to clear up that mess. We, the coalition Govt, have put our faith in the British public, and because of their hard work over the past three and a half years, jobs are being created at a record rate, the economy is growing faster than in any other developed country, and as Governor Carney said just last week, the recovery has finally taken hold. There was never going to be a magical short-term fix, but our sensible, sustainable economic strategy will raise living standards, so let us not lose ground on the progress we have made; let us not allow Labour to take Britain back towards economic ruin. I beg the House to oppose this motion.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Before I call the next speaker, the House will be aware of the high demand for time to speak and the lack of supply of it before we reach the end of the debate. I therefore impose with immediate effect a limit of eight minutes on speeches from Back Benchers.

15:57

[Yvonne Fovargue (Makerfield) (Lab)]

No subject impacts more on my constituents than the cost of living. Wages are dropping—in the north-west by 7.8%, a loss in spending power of nearly £1,700 a year—while more people are being given part-time hours or zero-hours contracts. That is not their choice, yet food and fuel prices continue to rise.

People in my Makerfield constituency are “doing the right thing”: they are working or looking for work. For those looking for work, a quick glance at the universal jobmatch site will superficially show that many jobs are available after searching for retail jobs in Wigan. Let us look a bit deeper at these “jobs”, however. In the three pages I checked at random, 67 of the 75 jobs available were for self-employed catalogue distributors—jobs that the site stated it had been assured “may” enable people to earn a wage equivalent to the national minimum wage. Really? How many people have tried these jobs, paid up front for their catalogues—about £150—and found that they consistently earned the national minimum wage after paying all their contributions? It certainly does not include the people who have been to my surgeries after trying these non-jobs and finding that they could make very little—not even enough to heat and eat.

Domestic energy bills have risen by an eye-watering average of 37% over the last three years. In 2012-13, citizens advice bureaux received 92,000 inquiries about fuel debt alone, while Which? estimates that flaws in the market have left consumers paying £3.9 billion over the odds since 2010. We intend to stand up for consumers in this failing market and break the stranglehold of the big six. What have this Government proposed? Nothing. It is no wonder that citizens advice bureaux saw a 78% increase in the number of people having to use food banks last year. Many of those people were in work, yet were unable to pay their bills and could not afford to eat.

[Mr Newmark]

As the hon. Lady has mentioned jobs, I thought that it would be useful to give her a little information and a few facts. Is she aware that unemployment in her constituency has fallen by 26% in the past year, and that youth unemployment has fallen by 40%?

[Yvonne Fovargue]

I am grateful to the hon. Gentleman for mentioning the unemployment figures in my constituency. I recently received an e-mail from the Audit Office telling me that the figures were not reliable because the constituency was a pilot area and people were coming off the register.

Admitting that you cannot feed your family is not easy or comfortable. For many people, going to a food bank is a last resort and a source of shame, although it is not their fault but is due to an accumulation of Tory-led policies that are punishing, not rewarding, hard-working people.

I would not be doing justice to my constituency postbag, or to the people who attend my surgeries, if I did not mention the economically unsound bedroom tax. As I have often said before, in Wigan we have a shortage of one and two-bedroom properties and a surplus of three-bedroom properties. People are being forced either to move to the more expensive private rented sector, uprooting their families and incurring further expense, or to pay the difference. Given that 4,200 people in my constituency are affected by reductions in housing benefit ranging from £517 to £1,273, it is no surprise that in October, 2,500 people contacted Wigan and Leigh Housing about rent arrears and debt. That represents an increase of 50% in the last three months.

The bedroom tax means yet another cut in the available income of many of my constituents, forcing them to make stark choices about how they spend their money. Far from being a case of what luxury item they must do without, it is a case of “Can we afford to have the heating on, or should we shiver and buy food—and what about that new pair of school shoes? Heaven forbid that the washing machine or the fridge should break down!” There is certainly no money to save for a rainy day. In fact, many of my constituents are already swamped and drowning in debt.

No wonder the payday lenders, the home credit providers, the log book loan companies and the rest are proliferating. According to a recent report, 48% of people who go to payday lenders are female, and the majority of females have borrowed for everyday necessities. They have borrowed to buy food for the family, or to pay the heating bills. Capping the cost of credit constitutes a welcome recognition that these companies are making profit from despair, but there is much more to be done. The root cause of rising prices and low incomes needs to be addressed if people are to be saved from being dragged into a spiral of debt.

The people I represent are hard-working people who want the best for their families and who are doing the right thing, but they are being let down by this Tory-led Government in so many ways. Every time they go to the supermarket, every time they receive a fuel bill, and every time they turn on the television or walk down the high street and see more advertisements for payday lenders, they are reminded of the Government’s failure to address the issue that is most important to them: the cost of living.

16:03

[Robert Halfon (Harlow) (Con)]

Thank you for calling me, Madam Deputy Speaker. This is the first time I have spoken in front of you, and it is an honour to do so.

I am delighted that the Labour party has initiated this debate. I say to Labour Members “Bring it on!” I am glad that they have at last woken up to the cost of living crisis. While many of us were going on about it for a number of years, they were talking about predistributions or other “chattering classes” subjects that no one understood. While we were cutting and freezing fuel duty, cutting taxes and raising thresholds for lower earners, and increasing taxes for the rich by, for instance, increasing capital gains tax, they were voting against all those measures. They created a handout society, whereas we want to create a “hand back” society, and to give people back their own money through lower taxes. They created a society of dependency: a society of high tax, high debt and high borrowing.

[David Rutley]

My hon. Friend is making a very passionate speech. I know that he feels strongly about these matters, and has campaigned strongly on them in the past. Does he agree that, although our hon. Friend the Financial Secretary made an outstanding speech, what was omitted from it was a reference to the importance of the employment allowances that will allow a first-time employer to take on a new employee, thus helping even more people into the workplace?

[Robert Halfon]

My hon. Friend is absolutely right. That is another example of why we are the party of small business. Labour showed during its years in office that it was, as Peter Mandelson said, the party of the filthy rich and of big business, sucking up to bankers in the City—Fred the Shred, Flowers and all those kinds of people.

The main elements of the cost of living are jobs, pay and energy. Let us look at the Labour Government’s record. They scrapped the 10p rate of tax under Gordon Brown in 2008. They talk about wages, but median wages stopped rising in 2003, in times of plenty, and hourly pay rose at only a quarter of the rate of economic growth. They increased fuel duty 12 times while in office, and the cost of bus travel increased by 59%. Council tax increased by 67%, and energy bills doubled. That is the record of the Labour party, which says that it wants to help with the cost of living. Sadly, it has nothing to show for it at all.

Energy and fuel prices are among the key indicators of the cost of living. As we have heard from the Minister, this Government have cut fuel duty and said that they will freeze it for the lifetime of this Parliament—an historic move. Of course, I would like the Government to do more and to cut fuel duty further, and I hope that when economic conditions allow, that will be the No. 1 tax cut. We need to continue to help hard-pressed motorists.

On energy, let us remember that there were about 17 energy companies under Labour; now, there are only six. Labour decreased competition, but we are doing things to increase it. I believe that the Government should do more on VAT, particularly through renegotiating our VAT rates with the European Union. They should also consider imposing windfall taxes—de facto fines—on some of the energy companies and passing the money back to the consumer. They should also cut Labour’s green taxes, which make up 17% of the average energy bill.

[Mr Ellwood]

My hon. Friend is making a powerful speech. I understand that Labour intends to make energy its focus in the forthcoming EU elections. I intervened on the hon. Member for Nottingham East (Chris Leslie), but he declined to answer my question. Does my hon. Friend agree that we should look not only at the six energy companies but at how we make energy in this country? We now need to import it, and we are over-reliant on expensive energy imports because the previous Government failed to replace the nuclear fleet in time. They did nothing during their 13 years, and that energy offering went down from 25% to 15%. That is why we now have to pay more for expensive oil and gas from abroad.

[Robert Halfon]

As always, my hon. Friend hits the nail on the head. It is funny how we hear in the media that energy prices fell under the right hon. Member for Doncaster North (Edward Miliband), because they actually doubled during Labour’s time in office.

There were 2.5 million people, including 1 million young people, unemployed when Labour left office. That did not happen over 18 months solely as a result of the recession; it was happening even in times of plenty. Under this Government, youth unemployment in my constituency has gone down by 7.6%, long-term unemployment by 4.3% and overall unemployment by 4.4% over the past 12 months. This Government are helping with the cost of living and helping people to get back into work. I met a chap who was helping me with my car at Halfords, and he told me that he was going to vote Conservative for the first time in his life. When I asked him why, he said it was because the Conservatives helped people who work. That is what this party is all about. We are the party of hard-working people. We are the party that helps people with the cost of living.

Pay and taxes are another indicator of the cost of living. There are 3,749 people in my constituency who have been taken out of tax altogether. They are on low earnings. A total of 36,861 lower earners have had a tax cut. I want the Government to do more, however. I want them to raise the threshold at which people pay national insurance, because that would make a huge difference. Let us take people on low earnings out of all tax altogether, not just out of income tax. Nevertheless, the Government have made huge progress, which has been opposed massively and has been voted against by the Labour party. We have to remind our constituents that Labour voted against people on lower earnings getting lower taxes. As I said, median wages stopped rising in 2003, so the previous Government’s record on wages is nothing to shout about. We need to improve the minimum wage; we should have a regional minimum wage top-up, on top of the national minimum wage. We need to reform national insurance as I have described, but at least this Government have started doing the things that are helping to address the cost of living most; we have taken action on energy, jobs and national insurance.

A thing that gets my goat is that the Labour party claims to have the monopoly on compassion. As my constituents found out, the reality is that Labour had a monopoly on failure—on the cost of living, on taxes and on the economy. Through our history, the Conservative party has always been on the side of hard-working people; we have always helped lower earners. Despite the very difficult economic conditions that the Labour party left us, this Government have done everything possible. The Conservatives do not have a monopoly on compassion, but we are the party of aspiration. We give people ladders of opportunity; we give them skills and apprenticeships, the number of which has increased by more than 80% in my constituency. We are giving people jobs, and we are creating a new nation of property owners through the right to buy and the Help to Buy scheme. We recognise that the best way to help the poor and lower earners is not through the dependency culture and welfare society so beloved of Labour Members, but by cutting taxes, cutting fuel duty, freezing council tax, restoring the link between pensions and earnings, and helping hard-working people.

16:11

[Stewart Hosie (Dundee East) (SNP)]

I wish to say a little about the motion before I start my speech proper. The motion is in two parts, the first of which describes the failure of the Conservative Government—I intend to say most about that—and the second calls for action to mitigate the cost of living crisis. Although the Scottish National party does not agree with the Labour party on the precise mechanism of its fuel price freeze—we would prefer to see a cut—the principle of taking action on fuel is important in tackling the cost of living, so we will certainly be able to support this tonight.

I wish to start by discussing tax, because that clearly has as much of a bearing on people’s ability to cope with rising prices as do earnings or the prices themselves. The Government are right to try to take as many people on low and modest wages out of tax as possible. The saving of £595 a year for basic rate taxpayers through the change in the basic allowance from £6,500 in 2010 to £9,440 this year makes sense. However, a saving of £595 for basic rate taxpayers makes rather less sense when the same Government are embarked on a £40,000 tax give-away for millionaires.

The people I really want to talk about are those in the middle, who are paying some of the heaviest price for the mistakes this Government have made. These people have seen the tax relief before they pay the 40% band fall from £37,500 in 2010 to £34,700 last year and to £32,000 this year. So for every £595 saved as a result of changes to the basic rate, they have had to shell out an extra £2,000 at 40p in the pound. That does not make people better off; it exacerbates the crisis faced by people, particularly hard-working people on middle incomes. I am not talking about the very poorest and I am certainly not talking about the very wealthy; I am discussing those on genuinely middle incomes. It means that this Government have taken the number of people paying 40% tax to a whopping 4.3 million; whereas barely 5% of taxpayers did so 25 years ago, the figure has rocketed and 16% of all taxpayers now pay a 40% tax rate—even a quarter of a century ago this was a band only for the rich. They are not paying that because they are wealthier or even because the economy has come out of the austerity period. Indeed, people feel poorer because they are poorer.

Last year, the Office for Budget Responsibility changed its forecast—I think this contradicts what the Minister said—by reducing household disposable income every year from 2013 onwards in the forecast period. In the March economic and fiscal outlook, it marked down real disposable income again to be negative or zero every year until 2017. People will not simply be not wealthier but will feel the burden of higher costs and stagnating real disposable income year after year after year of this Government.

It is no surprise that households should feel poorer given that since the Government came to power inflation has constantly exceeded targets, pay has been frozen and benefits have been cut. Even the calculation of pensions, notwithstanding the much-vaunted triple lock, has changed from the retail prices index to the consumer prices index. People need to understand that the actions of this Chancellor have caused untold damage to, and put pressure on, families throughout the UK, and much of that is because, as the motion says, he has failed to meet any of the economic targets that he set himself.

When the Government came to power in 2010, they told us that the current account deficit for this year would be a mere £40 billion. This year, in the Budget, the Chancellor told that it would be £84 billion, which is more than double the original figure. In 2010, the Chancellor told us that public sector net borrowing for this year would be barely £60 billion. This year, he told us that it was £108 billion, but when we add on the fiddled stuff with the pension funds, we find that it was actually £120 billion—again, more than double the figure.

[Kwasi Kwarteng]

Is the hon. Gentleman suggesting that it would have been a better plan to borrow more money to reduce those deficits?

[Stewart Hosie]

I am suggesting that to try to remove the structural deficit and fail over a fixed time scale, taking no cognisance of external shocks, was a stupid thing to do and a daft economic and political decision, which the Government were warned about in advance. The warnings failed precisely because this Chancellor promised that national debt would peak at 85% of GDP on the treaty calculation, or at £1.162 trillion on the normal calculation. However, we were then told this year that it would not peak until 2015-16 at over 100% of GDP on the treaty calculation, or at more than £1.5 trillion on the normal calculation.

[Mr Ellwood]

There is a comparison here with what those on the Labour Front Bench are saying. The hon. Gentleman said his speech was in two halves, but his argument is in two halves. He has just said that he is upset that the Government are taxing people too much, and now he is complaining that targets have not been met. Will he at least join me in welcoming the IMF’s upgraded forecast, which suggests that for this year growth will move from 0.9% to 1.4%, and next year from 1.5% to 1.9%? That must be welcome news.

[Stewart Hosie]

I always welcome growth in the economy, but the error that the hon. Gentleman and his Government have made is that by increasing tax and cutting to the extent that they have—the ratio of cuts to tax increases is four to one—they will have sucked out of the economy by 2016-17 roughly £155 billion a year. That is the equivalent of sucking 7.5% of GDP in terms of consumption out of the economy.

[Kwasi Kwarteng]

rose—

[Stewart Hosie]

I will not give way, because we only get two minutes’ stoppage time, and I have had my two minutes.

This Government are also borrowing more and we are all paying the cost of failure. The Government’s main failure is on the fiscal rules they set themselves: that the structural current account deficit should be in balance in the final year of a future five-year programme—it will not be; and that debt should be falling as a share of GDP by the end of that period—it is not. Both objectives, were, and remain, highly dependent on GDP growth, which, as we have noted in previous Budgets, is massively dependent, at least according to the OBR, on extraordinary unmet and unmeetable levels of business investment. Let us remember that in 2010 the Government suggested, with a straight face, that business investment would have to grow between 8% and 11% a year between 2011 and 2015. By the time of the OBR fiscal outlook in November 2011, growth in business investment had turned negative again and the forecast had to be changed to show future projections of growth of up to 12%.

The Chancellor was at it again this year. Having failed to get the growth in business investment we needed, he is now suggesting growth in business investment of 8.6% in three out of the next four years. I hope that that happens, but based on the evidence we have seen so far and the inability of the banks to take their share in providing credit and liquidity to businesses, I fear that is a forlorn hope.

We have also been told—this point was mentioned earlier—that we will see the benefits to GDP growth of exports from the UK. In 2011, however, we had a deficit in trade in goods of £100 billion, which rose to £110 billion the following year. The deficit in trade in goods has been sitting at about £20 billion for every quarter of this year. The balance of goods and services was £23 billion in the red in 2011, and that figure worsened to £35 billion last year after four and a half years of depreciation in sterling. I would hope that at the very least the Government recognised that that part of the plan simply has not worked.

I hope that the Government will be less stubborn about recognising where they have failed and that their optimistic Budgets have simply collapsed into dust when faced with the stark reality of austerity economics, which strips consumption out of the economy in the way I have described.

[David Rutley]

Will the hon. Gentleman give way?

[Stewart Hosie]

I will not.

The pain of all that, as always, is felt by ordinary people, because, as I said earlier, we know this much from the Red Book: the Government intend to take £155 billion a year out of the economy in discretionary consolidation by 2016-17. They will do that for that year and every year, the equivalent of stripping consumption worth about 7.5% of GDP from the economy. Given that they have increased the ratio of discretionary consolidation to four to one—four cuts for every one tax rise—we can see where the Government’s priorities lie: not with jobs, not with growth, not with recovery and not with lifting the burden of the cost of living crisis off the backs of ordinary people, but with balancing the books on the backs of ordinary people in this country. If nothing else, they should recognise that it is not working. The pain is intense for communities throughout the UK and they should think again when we get to the autumn statement.

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

On a point of order, Madam Deputy Speaker. I am sorry to interrupt the debate, but have you have had any indication from Mr Speaker whether he intends to make any statement to the House about his speech to the Hansard Society this evening, in which he proposes to announce the establishment of a Speaker’s commission on digital democracy? Furthermore, briefing of the media on the speech and the announcement within it has been taking place for some four hours already without any announcement being made to the House.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

I am not aware of any such plans for any such statement and, as the right hon. Gentleman knows, that is not a matter for the Chair.

16:23

[Mr Brooks Newmark (Braintree) (Con)]

It is always a pleasure to speak after the hon. Member for Dundee East (Stewart Hosie), for whom I have great respect. Unfortunately, he can sometimes be a little dour and sees a glass of water as half empty rather than half full. I would rather talk about a glass of water being half full than half empty, so my speech might have a more positive tone than his.

The Government have made huge strides to clean up the economic mess created in 2010. As the Governor of the Bank of England, Mark Carney, said on Wednesday 13 November:

“Inflation is now as low as it has been since 2009. Jobs are being created at a rate of 60,000 per month. The economy is growing at its fastest pace in 6 years. For the first time in a long time you don’t have to be an optimist to see the glass as half full.”

[Ian Paisley (North Antrim) (DUP)]

Will the hon. Gentleman give way on that point?

[Mr Newmark]

No.

“The recovery”,

the Governor of the Bank of England says,

“has finally taken hold.”

If I may, I would like to begin by highlighting some of the economic achievements of this Government since 2010. The Government have cut the budget deficit by a third. The Government have helped the private sector create 1.4 million new jobs, offsetting any jobs lost in the public sector by 3:1. The Government have ensured that borrowing costs have fallen to record lows, saving money for taxpayers, businesses and families alike. The Government have helped bring inflation down to 2.2% as of October 2013. That is important because of the damaging effect that rising prices can have on the cost of living. The Government have helped bring back growth to the UK economy, with growth now projected to be 2.9% by year end 2014. The Government have ensured that the UK has more men and more women in work than ever before. The Government have seen the number of people claiming unemployment benefit fall at the fastest rate since 1997. Indeed, in my constituency of Braintree, both unemployment and youth unemployment are down 20% in the past year alone.

[David Rutley]

My hon. Friend sets out an impressive track record of achievement in the economy. Does he also recognise that our economic growth in the UK is projected to be the fastest in any country in Europe?

[Mr Newmark]

I thank my hon. Friend for that intervention. I am just getting to that point.

[David Rutley]

Oh, I see.

[Mr Newmark]

Furthermore, British manufacturing recently reported the strongest growth on record, exceeding that in every quarter since 1989, and Reuters recently reported that growth in UK services is the strongest in 16 years. The Government have indeed achieved much to rebalance our economy.

Finally on economic performance, as my hon. Friend the Member for Macclesfield (David Rutley) just mentioned, according to the OECD the UK has the fastest growth in the developed world, beating the US, Germany and Japan. So by almost every benchmark, the UK has made huge strides in turning around the UK economy, and the Chancellor and his team at the Treasury should be congratulated on sticking with plan A and ensuring that the UK is on the path to recovery.

The Government also have much to be proud of on the cost of living. The 2013 Budget raised the personal tax allowance to £10,000 from April 2014. That ensured a tax cut for 25 million people, with individuals paying an average of £705 less in income tax than they did in 2010. Indeed, 2.7 million people have been taken out of tax altogether, thereby reducing the cost of living.

[Ian Paisley]

rose—

[Mr Newmark]

The Government have already reduced energy bills by £193 by removing the green levies imposed by the Leader of the Opposition and are ensuring that energy companies offer the lowest tariffs to customers, thereby reducing the cost of living.

The Government have frozen fuel duty for the longest period in more than 20 years, with pump prices 13p per litre lower than when Labour was in power. Indeed, the average motorist will save at least £170, the average van driver will save £340 and the average haulier will save £5,200 each year as a result, thereby reducing the cost of living.

[Sheila Gilmore (Edinburgh East) (Lab)]

The hon. Gentleman and his party must be greatly relieved to be able to report an increase in GDP, given that in June 2010 the Office for Budget Responsibility was predicting that it would be 2.5%, 2.5% and 2.6% in the three years coming. So it must be a big relief to have at last turned the corner.

[Mr Newmark]

Yes, it is a big relief, but as anyone in business knows—I had been in business for 20 years before I came to this place—turning around a business, particularly in an economy that was as messed up as that created by the Labour Government, takes a while. Progress is not necessarily linear. What we do have is growth returning. That is recognised by the Governor of the Bank of England, the OECD and the International Monetary Fund.

[Mr Ellwood]

Will my hon. Friend give way?

[Mr Newmark]

I cannot give way; I have allowed the two interventions I am permitted.

Furthermore, the Government froze council tax in 2013-14 for the third year in a row. The combined effect of the Government’s actions means that council tax bills, which doubled under the previous Government, have fallen by 9.5% since 2010, thereby again reducing the cost of living. The Government have increased child care support for low-income working families on universal credit, thereby reducing the cost of living. In 2011, child tax credit increased by £225—the largest increase ever—and in April this year, it went up by 5.2%, a further increase of £135, thereby reducing the cost of living. The Government introduced the triple lock, which means that pensions increase every year by price inflation, earnings growth or 2.5%, whichever is highest. Over the course of their retirement, the average pensioner will be about £12,000 better off under the triple lock, which helps with the cost of living.

Furthermore, the Government introduced the warm home discount scheme, which gives pensioners a £120 rebate on their electricity bill, thereby reducing the cost of living. The Government have increased cold weather payments permanently from a measly £8.50 under the previous Government to £25, thereby reducing the cost of living.

In conclusion, the Government have much to be proud of. The Chancellor made some difficult decisions in 2010 to ensure that the country could have a long-term sustainable economic recovery. As the Governor of the Bank of England reiterated in the Treasury Committee yesterday, the economic recovery has finally taken hold. We should not jeopardise all this by returning to Labour’s tax and spend policies, which created the financial mess that we have finally begun to clear up. The Government must stick with their long-term economic plan, as that is the only sustainable way to raise living standards. I therefore oppose the motion.

16:31

[Roberta Blackman-Woods (City of Durham) (Lab)]

It is always a pleasure to follow the hon. Member for Braintree (Mr Newmark), but rather than him being positive, I think that he looks at the world through extremely strong rose-tinted spectacles. The Government’s record is failing the country, and nowhere is that failure felt harder than the north-east, which is where my constituency of City of Durham is located.

Last month, the Office for National Statistics confirmed that the north-east had the highest regional unemployment rate in 2013. It said that the unemployment rate in the region was the highest in the UK at 10.3% in the second quarter of 2013, compared with 7.8% for the UK. The employment rate stood at 66.5%, lower than the UK rate of 71.5% for the same period. Almost a fifth of children in the north-east lived in workless households in the second quarter of 2013. At 18.7%, that was the highest proportion in the regions, compared with an average of 13.6% for England.

[Mr Newmark]

Given that the hon. Lady is discussing employment and unemployment I thought it would be useful to remind her that in the past year alone in her constituency, unemployment has dropped by 26% and youth unemployment has dropped by 29.5%.

[Roberta Blackman-Woods]

I do not know where the hon. Gentleman got his figures, because I looked at the drop in unemployment and the numbers for youth unemployment in Durham showed a reduction of 19 in the last quarter. Although we welcome any increase in employment, he must pay attention to the quality of jobs that have been created. In Durham, a lot of people have lost good, stable, well-paid jobs in the public sector, and have taken insecure, low-paid, zero-hours-contract jobs in the private sector, if any employment at all.

As I was saying, the Government’s failure on living standards is impacting on people in the north-east. I shall go briefly through some of the issues that we are facing. With the current cost of living crisis, people are working longer hours for lower incomes, and despite being in work, many people find themselves in poverty. Government Members seem unable to grasp that.

[Julie Elliott (Sunderland Central) (Lab)]

As a fellow north-east MP, does my hon. Friend agree that for young people in particular, the often unsuitable and unstable employment that is out there if they manage to get a job—as she said, they are probably on zero-hours contracts—means that in many cases they have to do a variety of small jobs to make up some kind of income. That is not a long-term way to plan their future careers, is it?

[Roberta Blackman-Woods]

My hon. Friend makes an excellent point. We need to see much more action from the Government on securing decent employment and career paths for our young people, as we all want.

[Guy Opperman]

Will the hon. Lady give way?

[Roberta Blackman-Woods]

I am sorry, but I will run out of time if I give way. I apologise to the hon. Gentleman.

The north-east has the highest proportion of people paid below the living wage—32% of workers are paid less—and research published by the Resolution Foundation has further confirmed that the north-east was the region where workers were most likely to be trapped in low earnings. The Office for National Statistics said:

“In April 2012, median gross weekly earnings for full-time adult employees in the North East were £455, joint lowest with Wales and lower than the UK median of £506.”

So people in the area that I represent are having to contend with lower wages, but they are also having to deal with rising prices. They are being burdened with not only increasing energy costs, but increasing costs for child care, for example. Energy prices have angered people throughout the country and all we have heard from the Government is excuses for the actions of the big six. When npower recently announced an eye-watering rise in electricity costs of 9.3% and in gas of 11.1%, The Journal, our local newspaper, reported that Dorothy Bowman, a campaigner for elderly people from County Durham, said that the price hike would leave householders with a stark choice. She said:

“They will have to choose food or heat, it will be too expensive for both. This is at the wrong time for people”.

She went on to say that npower did not care at all

“about their customers and the dire misery they are subjecting them to, they just care about their profits. If they were going to do this why not do it in spring, now people have no choice.”

She said the elderly would suffer, but so would young families living on a tight budget. I think she makes the point very strongly indeed.

In addition, The Journal reported on 25 October that an official at thinkmoney said:

“Regionally, problems with utility bills appear most severe in Northern Ireland, London and the North East.”

That is why we need Labour’s energy price freeze and long-term reforms to the energy market.

[Jim Shannon (Strangford) (DUP)]

Will the hon. Lady give way?

[Roberta Blackman-Woods]

If the hon. Gentleman is very brief.

[Jim Shannon]

As an example of how dire things are in the high street and the household, Citizens Advice reported that 92,000 people had made inquiries about fuel debt, 81,000 people had made inquiries about water debt, and that there had been a 77% increase in child care costs over 10 years and a 78% increase in the use of food banks. Surely that is the reality of the high street and what is happening at present.

[Roberta Blackman-Woods]

The hon. Gentleman makes an excellent point and I hope to be able to come to some of those issues myself.

On child care, the cost of nursery places has risen by 30%—five times faster than pay for people on average wages. I opened a new nursery in my constituency a couple of weeks ago—Do Re Mi nursery—but without action from the Government many families will not able to take up places there. It is not good enough for Government Members to say that there is help for people and that there is universal credit. No one is on that at present and many are not getting any help with child care.

As the hon. Member for Strangford (Jim Shannon) said, there are huge problems with debt. The charity StepChange in my constituency said that almost 2,000 people in the Durham area had been referred to it with debt problems from January to June this year. R3, the insolvency trade body in the north-east, found that almost a quarter of survey respondents were extremely worried or very worried about their debts, while 56% were worried about their credit card payments.

For some time, Labour Members have been raising issues about payday lenders and the extortionate rates of interest they have been charging. We obviously welcome the Government’s announcement on this, but as yet there has been absolutely no information about what will be in place to help people who have already taken out loans that they are unable to pay back. That situation is seriously compounding the problems that many families are facing.

Moreover, food poverty is increasing in Durham. The website of Durham food bank states:

“Durham foodbank has now completed two years of distributing food to local people in crisis. In our first year we fed 3686 people, our second year total is now in excess of 10,600.”

It thanks the army of volunteers who are helping it to meet this need, but makes the point, as I do, that that demonstrates a huge increase in the number of people requiring food banks. Indeed, the local citizens advice bureau has reported a 78% increase in the number of inquiries about the use of food banks. This flies in the face of the Government’s claims that they are turning the corner. Lots and lots of families in my constituency have a genuine cost of living crisis, and things are getting worse for them because of increasing prices and, at best, flatlining wages. They simply cannot afford to make ends meet.

Labour is calling for the Government to take real action to make a difference to families in Durham and across the country. We want a list of measures to be included in the autumn statement, including an energy price freeze, an extension of free child care, action to boost long-term housing supply, and a compulsory jobs guarantee—real action that would help people who are struggling out there in our communities. The Government are standing by and doing nothing to tackle the serious pressures on families right across the country, and we cannot let them go on and on doing the same thing. We need real action from the Government to support hard-pressed families. I support the motion.

16:42

[Kwasi Kwarteng (Spelthorne) (Con)]

I am grateful to you, Madam Deputy Speaker, for calling me to speak in this important debate. We have had such debates on a number of occasions, but it is important that we have this one now, when the economy is growing. All the indicators from the IMF, the OECD and other estimable bodies suggest that the worst is over in the British economy and that we are encountering some sort of recovery.

More important than recovery in itself is understanding how we got into this position in the first place. The economy will be a very important issue in the next election. I was interested to hear the hon. Member for Dundee East (Stewart Hosie) criticise the Chancellor and the Government for not reducing the deficit fast enough. When I asked what his solution was to this conundrum—whether he wanted to borrow more—he failed to answer. I still do not know what his answer is; perhaps he will care to enlighten us in the course of my speech.

It is true that the UK economy has faced a difficult few years given our reliance on financial services and, more importantly, the appalling fiscal legacy of the previous Labour Government. It was insane for them to borrow money in every fiscal year from 2001, even when the economy was growing. I have never heard of an economy growing at 3% while running a deficit of 3% of GDP. Not even Lord Keynes would have advocated such a policy. Yet we lived through a period in which we had year after year of deficit even when the economy was growing.

[Alec Shelbrooke]

Does my hon. Friend share my deep concern that the most shocking thing that has emerged during this debate is that the shadow Chief Secretary does not appear to know the difference between deficit and debt?

[Kwasi Kwarteng]

That is absolutely right. I was as shocked and appalled as my hon. Friend that, when I asked the shadow Chief Secretary what the absolute level of the British deficit is—it was a very simple, general knowledge-type question—he did not seem to know. I then asked him whether he knew what the deficit-to-GDP ratio is, but he flannelled away that supplementary question and did not even pay me the courtesy of answering it.

We have to look very carefully at the legacy of the previous Labour Government, because it has a direct impact on living costs and this cost of living debate. People in Britain—people in my constituency and, I am sure, in other constituencies across the country—intuitively understand that after a period of excessive spending in which, to borrow a metaphor, the national credit card went way beyond its limit, it is necessary to have a period in which spending is reduced. Nearly everyone understands that and, as a consequence, any poll that Members may care to look at shows that the Government and coalition parties have a considerably better rating on the issue than that of the Labour party.

[Stephen Doughty]

What do the polls say about the attitude of the hon. Gentleman’s constituents to his proposals to put VAT at 15% on children’s clothes and food?

[Kwasi Kwarteng]

I have mentioned my specific proposal and not the Mickey Mouse, cartoon version offered by the Daily Mirror. [Interruption.] I am not sure which rag it was, but I will not return to that point.

The cost of living debate cannot be conducted without reference to the actual economic conditions or the economic legacy of the previous Government. It is a sleight of hand—I admire Labour’s political skill in that regard—and dishonest not to recognise that the cost of living debate cannot be conducted without reference to the economy. It is also not very open handed or reasonable to suggest that the previous Government’s legacy and appalling record have nothing to do with the difficulties that families up and down this country face.

[Ian Paisley]

On the cost of living, does the hon. Gentleman accept that the further north we travel in this great nation of ours, the bigger the burden of debt and cost on individuals in society? Over the past four years in Northern Ireland, everything—from utility bills to transport costs—is up 30% and more for the average household. That is a dire burden on the community.

[Kwasi Kwarteng]

People in this country understand that any Government who came in after the 2010 election, amid the appalling wreckage of the economy bequeathed to us by the previous Government, would face a difficult proposition and have a difficult time. In fact, the previous Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), outlined a plan—the newspapers dubbed it the Darling plan—that advocated spending cuts and a 22% rate of VAT. As Members will know, I advocated a much lower rate. The Darling plan was an adult, mature recognition of the appalling legacies that his Government had given us. It recognised that we needed to reduce spending and that what was then dubbed austerity was absolutely necessary for this country’s financial future.

Despite Labour’s worst predictions, the Government’s plan is now beginning to work. We have not heard anything about plan B for several months. We have not heard anyone say, “Too far, too fast.” One esteemed Labour economist said that unemployment would hit 5 million, but none of those dire predictions actually happened. Labour persists, however, in peddling the socialist, never-never land idea that borrowing more money will somehow reduce the deficit. That is absolutely insane. I understand why the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) is banging her head as a symbol of her frustration, because some of her colleagues’ ideas are remarkably foolish.

[Stewart Hosie]

Will the hon. Gentleman give way?

[Kwasi Kwarteng]

No, I will not. I tried to intervene on the hon. Gentleman, but he quite rightly wanted to use his full allocation of time.

What do the Opposition actually propose? They have no plans on the economy. Their economic credibility is severely questioned by the British public. All their prophecies and predictions have proved to be completely false. They are now left with the notion that the Government have somehow failed and that the very difficult time through which we have passed is a direct consequence of Government policies, when it has in fact been the direct consequence of the Government trying to get us out of the mess bequeathed by the Opposition.

Let us look at the Darling plan. When the Labour Chancellor was in government, he said that spending would have to be reduced, which is exactly what this Government have done and achieved. As I have mentioned, under the Darling plan the VAT rate would have been 22%. It is lower than that, so we have managed to achieve a degree of fiscal consolidation without some of the punitive tax rates suggested by the right hon. Member for Edinburgh South West.

All of this debate has a direct bearing on living standards and the difficulties that people are facing. Once again, under difficult fiscal constraints, this Government have managed to lift hundreds of thousands of people out of tax altogether. They have raised the personal allowance, which is a significant achievement in a time of relative austerity when we have not had the largesse that the previous Government enjoyed and abused. It is absolutely to the Government’s credit that we have managed to raise the personal allowance—taking people out of tax—which has alleviated living conditions and made them slightly easier for many of the poorest in this country.

Before I finish, I want to mention some of the gimmicks and wheezes that the Labour party has offered as serious policies. Government give-aways will still have to be paid for by the taxpayer. It is madness to try to freeze energy prices. Anyone who has looked at the economic history of this country knows that the price and wage controls of the 1960s and 1970s completely failed. We have abandoned such policies. Opposition Members will remember that beer duty was frozen in the 1960s for two years, and in the third year the price of beer went up by 41%. That is no way to conduct an economic policy.

16:52

[Mr Iain McKenzie (Inverclyde) (Lab)]

It has become evident from today’s debate that the Government are incapable of making any real changes to improve the cost of living for our hard-pressed families up and down the country. Nothing seems to be changing for those people who, as they have told me, see the Government putting the wrong people first. The only growth people have seen on the high street has been in prices and in pawnbrokers, payday loans, cash-for-gold companies and betting shops.

As has been said, prices are still going up faster than wages. That has been compounded by the fact that many of my constituents have experienced wage freezes over the past couple of years and/or have been moved to reduced hours or part-time working.

[Jim Shannon]

The hon. Gentleman mentioned payday loans, which are a scourge if ever there was one. Some 33% of people borrowing payday loans do so just to pay their basic household bills—just to live and get through the day—while 44% are borrowing to pay for their gas and electricity. Is that an indication of our society?

[Mr McKenzie]

Absolutely. The hon. Gentleman is spot on about that indicator of what is happening in society. I will develop that theme further.

Last April’s increase in the personal allowance does not make up for what families have already lost through tax and benefit changes. The cost of living is rising four times faster than earnings, on the back of a fall in real wages since this Chancellor took office. People are getting worse off, and the cost of living crisis is hitting hard-working families up and down this country. Families in Britain have taken a pay cut of £1,200 a year.

What do families face week in, week out as they struggle to overcome the cost of living crisis? I will give some examples to highlight the severity of the squeeze on living standards. On the basic weekly shop for food and clothing at the supermarket, families are seeing less go into the shopping trolley and more go into the till. Some families no longer do such a one-stop shop, but flit from supermarket to supermarket to cash in on the bargains and stretch their pound even further. There are growing crowds around the mark-down shelves, buying food that must be consumed that day. That is surely an indication that people are living from hand to mouth. Citizens Advice has also produced evidence on food shopping:

“On average UK households purchased 4.2 per cent less food in 2011 than in 2007 while spending 12 per cent more.”

Families are facing record energy bills, while energy companies are enjoying huge profits. Only Labour is committed to freezing prices, not freezing families. At my surgery last week, many constituents came to me with their power bills, concerned about how they would pay them. That is at the start of winter. Goodness only knows how they will pay their bills at the end of winter. Again, I will quote Citizens Advice:

“Over the last three years the average domestic dual fuel energy bill has increased by 37 per cent.”

That is a massive hit on family budgets.

Fuel prices are about 5p or 6p higher in Inverclyde than just 20 miles away. The pricing in my neck of the woods is unbelievable. There are different prices even within the boundaries of the town. The prices for one company vary from one end of the town to the other. The higher prices are predominantly in the areas where people can least manage the rising price of fuel.

A big indicator of the cost of living crisis is the increase in the number of people who are turning up at the doors of food banks. It is a national disgrace that there is food poverty in one of the world’s largest economies. In Britain today, some 13 million people live below the poverty line. The number of Scottish families that attend food banks has risen by 100%. In my constituency of Inverclyde, the number of people using food banks has increased dramatically and shows no sign of falling. The fact that 50% of those who go to food banks are in work is shocking.

What can I say about the impact of the welfare changes on my community? They have taken some £2 million out of the local economy. That money was spent on essentials such as food and clothing. That is having an impact not only on the families affected, but on high streets and shops because it threatens the survival of small businesses.

Where will the squeeze on living standards lead? It leads either in the direction of debt or towards desperate acts, of which I see more and more. In Inverclyde, one recent act—a metal theft, which we see up and down the country—sums up the desperation of families to get money to subsidise their income. Some copper cabling, worth a mere £30, was stolen from a substation in my constituency, plunging dozens of homes into darkness, leaving many people without heating and causing one home to burn to the ground—all that for £30! It was a senseless act, but for what reason? Struggling—that is why I believe that crime took place and put in danger not only the lives of those who perpetrated it, but those of the people living on that estate. Only the kind-heartedness and community spirit of the people of Inverclyde will ensure that the family who have lost their home and possessions will have a Christmas and a roof over their heads.

I know that many other Members wish to contribute to the debate, so I will conclude by saying that times are hard, living standards are definitely falling, and the Government’s economics are failing.

17:00

[Christopher Pincher (Tamworth) (Con)]

It is a pleasure to follow the hon. Member for Inverclyde (Mr McKenzie) and to speak in this debate. It gives me an opportunity to relate to the House the good news happening in Tamworth, which is not some leafy suburb but a no-nonsense, hard-working, gritty, midlands town. In Tamworth in the past 12 months, unemployment has fallen by 31%, youth unemployment by 35%, and long-term unemployment by nearly 40%.

Last month I held a jobs fair at which there were more jobs than jobseekers. There were some 400 jobs, including apprenticeships at Jaguar Land Rover and Spline Gauges, 50 jobs at Marston’s brewery, and jobs at Toys R Us. That demonstrates in a small but significant way how we have turned a corner and are creating real, sustainable jobs and growth for our constituents. It is our job to do that, and a story that Labour Members do not like to tell, just as they do not like to be reminded of their last miserable years in government, when in my town jobs were lost across the board. One could walk down the Glascote road and see repossession notices in window after window, as banks foreclosed on people’s homes. People were not just losing their jobs under Labour, they were losing their homes as well. We will not listen to lectures from Opposition Members when we remember the grisly legacy of Labour’s years, and we will not let them forget it either.

[Alec Shelbrooke]

Does my hon. Friend agree that in order to receive a lecture, someone actually has to have some information given to them?

[Christopher Pincher]

My hon. Friend is, as ever, apposite in his point, and we look forward to hearing Labour’s plan—plan A, plan B, plan Z? One day perhaps we will hear what it might be.

We have heard something from the Leader of the Opposition, whose latest stunt is to announce an energy price freeze. We should beware geeks bearing gifts, because that announcement is pretty hollow for three reasons. First, if a price freeze is imposed, companies will simply hike their prices before the freeze and afterwards, and people will be paying artificially high energy prices. That is what Professor Dieter Helm says, as well as Adam Scorer from Consumer Focus. Even the hon. Member for Southampton, Test (Dr Whitehead) has raised that concern. He is a Labour member of the Energy and Climate Change Committee and says that Labour’s plans for an energy freeze are somewhat sketchy.

The second reason a freeze will not work is that rather than break up the big six oligopoly, it will entrench it. Stephen Fitzpatrick of Ovo and the First Utility company—the company of choice for the Leader of the Opposition—say that a price freeze will make it more difficult for them to break into the market and operate, and that it will entrench the position of the big six, rather than break it up. The third reason the freeze will not work is that it will jeopardise £125 billion-worth of investment that we must make in short order in our energy infrastructure—£25 billion of that in the pipes and pylons that keep our lights switched on.

[Angie Bray (Ealing Central and Acton) (Con)]

Is there not a fourth problem? It would be a brave Government indeed who called an end to the so-called 20-month freeze precisely because, as they would know, prices would be likely to increase. Therefore, the chances are that prices would be frozen at that level.

[Christopher Pincher]

My hon. Friend makes a valid point. I suspect that, were we, heaven forfend, to have a Labour Government, they would show a great deal of pusillanimity in the face of the energy companies—the big six that they created. We need to ensure that we get that infrastructure funding flowing from private enterprise. Unless we get that money from the private sector, the poor old taxpayer must foot the bill.

We do not need an artificial, high price freeze in future; we need price cuts now. That is what will help our constituents, and that is what they want. That is what the Energy Bill will deliver. We need to make it easier for people to switch: 24-hour switching could save people up to £200 on their energy bills. We need to get rid of the array of tariffs—under Labour, there were more than 400—and put people on the lowest tariff available. That could save people £158. If we also roll back those green levies and do not impose the £125 carbon tax that Labour tried to impose through the Energy Bill in the other place just two weeks ago, that will save our constituents money. That is real help for real people now, not the conjuring trick that the Leader of the Opposition, like some street magician, wants to undertake.

We will remember at all times and in all circumstances that the Labour Government, like a bunch of boy racers behind the political wheel, wrapped our economy around a lamppost. Never, ever will we let it happen again.

17:06

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

Today at Prime Minister’s Question Time, I accused the Prime Minister, in essence, of knowingly moving the economy forward in a way that means that real wages continually fall and house prices go up. He knows as well as all of us that we are moving towards the rocks of rising interest rates and a sub-prime debt crisis. He is a man looking to the future, walking backwards.

There is a question over whether the Prime Minister is doing that completely unwittingly—is he sleepwalking towards disaster or knowingly walking towards it? I put it to the House that he is knowingly doing so. He is inflating the housing market when he knows that people cannot afford higher interest rates. He is willing to take those risks in the knowledge that, if and when the Labour party takes office, there will be a sub-prime debt disaster, and he will be able to say, “It is old Labour messing things up.” He is willing to pay that price, because he believes that the feel-good factor from inflated house prices in London and the south-east—his core area—where he is investing 80% of Britain’s new infrastructure to buoy his vote, will be enough, alongside the media spin, to get him back into power. I put it to the House that it will not be enough, and that we should be alerting the British public to it and to what we should do about it.

The Minister loosely referred to the funding for lending scheme used by our banks, but he would not take an intervention from me. The scheme provides easy lending, underpinned by the Bank of England. Lending to households for mortgages is now at the 2008 level, but lending to business is 32% lower than it was in 2008. What does that mean? It means that British money is not investing in productivity and growth for jobs, which means that wages are not growing and will not be strong enough to sustain the cost of higher house prices when interest rates go up.

Interest rates will go up. Mark Carney, the Governor of the Bank of England, has clearly said that, when unemployment goes down to 7%, interest rates can be let free. That is great, is it not? Obviously, unemployment going down must be good—I can see Government Members nodding their heads—but, if overall production has not grown, average productivity will have gone down. Since 2010, productivity, in the main, has been flatlining and there is no growth in the economy. There is growth in the number of people in work because we are sharing the production around, which is why real wages are falling. We do not have the investment in training and in research and development. On investment as a proportion of GDP, we are 159th in the world. On R and D investment, we are at the bottom of the developed world. We are a basket case and it is no surprise that our triple A rating was taken away.

We hear the same old Tory story that we always hear: “Labour messed it up and we have made the recovery.” The reality is that GDP grew by 40% between 1997 and 2008. We then had the international financial disaster. My right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) and President Obama stepped in with a fiscal stimulus to get us back to growth by 2010. Hey presto, the Tories arrived and announced that half a million people were going to be sacked, and people in the public sector stopped spending because they did not know when they were going to be sacked. So the Tories deflated consumer demand and growth has been flatlining ever since.

What has happened to our debt-to-GDP ratio? It has gone up from 55% to 75%, and will go up to 85% by 2015, because GDP has been flatlining. Debt to GDP has gone up, because debt has gone up as well. This Government have borrowed more in three and a half years than the Labour Government borrowed in 13 years. The clowns spin the story again and again in this Chamber and in the media, and the marketing campaign is working well. The Prime Minister and the Chancellor are knowingly sending us down the track towards more sub-prime debt. They hope the propaganda war will be won if Labour gets in and it blows up in its face.

This Government, and any future Labour Government, should, through the Bank of England, change the funding for lending scheme so that it focuses on business investment, not mortgage investment. Prior to the onset of the funding for lending scheme in July 2012, the mortgage market had already recovered, so we do not need the money that is going in. The scheme means that if you, Madam Deputy Speaker, were a bank, for every pound you lent to SMEs, you would have another £10 to lend elsewhere. At the moment that is going to mortgages, not SMEs. That will be changed to a ratio of 5:1. If that were to be rebalanced, the Bank of England and the Government could finance business loans—existing loans, as well as future loans—and give more money to SMEs. The financial markets are already servicing the rest of it. In addition, we have the Help to Buy scheme. All the money is therefore being channelled into a fixed stock of houses and prices will go through the roof. Would it not be better to invest in business and construction? That would increase the number of houses, reduce prices and create work.

We want a rational and sustainable economic strategy. Instead, we have a political trick that is sending us towards the abyss and the Government do not seem to care. They say that everything is recovering, but the essence of the debate is that everybody out there looks in their pockets and in their cupboards and knows that they are worse off. That will continue unless something is done to invest in business, productivity and growth.

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

If the Help to Buy scheme is such an unattractive prospect, why are the Labour Administration in Cardiff adopting it?

[Geraint Davies]

I am not quite with the hon. Gentleman. I do not know if my analysis is lost on Conservative Members who are just repeating things without understanding the economic debate, but I am saying that we should work with Mark Carney to rebalance the funding for lending scheme in favour of business, instead of supporting the mortgage market which is already on track. That would take some of the heat out of the housing market, and help to build more houses, grow productivity, increase wages and create sustainable growth. That has nothing to do with what is happening in Cardiff.

A few references have been made to Wales, and I might as well respond to them, now that we have heard another Tory intervention. The reality is that 80% of all infrastructure investment in the UK goes to London and the south-east. Wales is one of the poorest areas of the United Kingdom; a quarter of the people live in poverty, the majority of them in work. The hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart) will know, because he is a member of the Welsh Affairs Committee, that what is being put in place in Wales, the future jobs fund and so on, works much more effectively than the UK Government’s Work programme. Wales is doing its best in difficult times, but the Government will not even reduce the tolls on the Severn bridge to provide further stimulus, because they do not care. All they care about is sustaining their own backyard. We have this weakened economy when there are enormous opportunities to make us strong. It is a disgrace.

I will continue to make those points about the Government, because it is becoming ever clearer that they are knowingly heading towards a sub-prime debt crisis. They should be ashamed.

17:15

[Guy Opperman (Hexham) (Con)]

The cost of living is a legitimate subject for debate. I was interested to hear Ross Smith of the North East chamber of commerce comment on the solution:

“My answer to this is ‘it’s skills, stupid’—alas that doesn’t fit with easy election messages or election cycles.”

To be fair, that was a tweet, playing on Bill Clinton’s famous line in 1992 that, “It’s the economy, stupid”, so I asked Ross to expand on it yesterday as part of my consultation in preparation for this speech. He said that

“the most important factor in raising living standards in the long term is to increase skill levels so that people can play a more productive part in a stronger economy and be rewarded accordingly.”

I could not agree more.

To that end, we must look at apprenticeships, which surely can play a key part in any skills regeneration. The north-east is clearly leading the way. The number of apprenticeship starts in the north-east has increased by 11% since 2010-11, to 38,340. That was up from 18,510 in 2009-10 and 13,500 in 2005-06. In other words, it has trebled since the Blair Government. In my constituency, the number of apprenticeship programme starts has gone from 430 in 2009-10 to 690 in 2012-13.

Of course, it is not just about the number of apprenticeships; it is also about their quality. To that end, I am delighted that the Government have decided that one of the skills pilots will be in the north-east. In fact, it was the North East local enterprise partnership and the Adonis review that suggested the skills pilots that will go ahead. It is to be joined by the Stoke-on-Trent and Staffordshire LEP and the West of England LEP. It is a chance for businesses to engage with their skills and apprenticeship needs so that there is a focus on the particular parts of the economy where growth in jobs is needed in the long term.

There is ample evidence of the successes, whether the opening of the engineering academy in Hexham by Egger, with 40 jobs created, the work done by Nissan, the 38 new jobs in the IT sector, the new apprenticeship jobs in Accenture, whose managing director came to see me yesterday, or the work done by Siemens, particularly in relation to the university technical college in Durham. I strongly hope that the LEP will carry that forward in such a way that the Adonis report will have a true impact.

One cannot address the economy, certainly in my region, which has 2.4 million people, without looking at the Adonis report. No other region in the country has addressed its strengths and weaknesses as the north-east has with that report. It was business led, written by experts, apolitical, hard hitting and realistic. It assessed both the strengths of the local area and the weaknesses. It celebrated assets but acknowledged that there have been successive failures, by successive Governments, to improve job numbers, address skills deficits, increase university starts and generally grow the economy. I am profoundly grateful to all its authors.

At the report’s heart lay a desire for more and better jobs, as it identified the crucial lack of private sector employment. However, as it states:

“More jobs alone will not re-balance the economy. The North East needs higher skilled and higher paid jobs to produce an economy which matches others and provides the quality of opportunities that its residents and young people need to prosper.”

How do we proceed to do that? We must support the necessary investment in apprenticeships, build on the skills pilots and consider the recommendations in the Adonis report—I will not repeat its 24 pages, Madam Deputy Speaker, despite the Irn-Bru you saw me have at the Scotland Better Together event earlier. The seven local authorities must be allowed to go forward. They are coming together and driving forward with a regional voice to match the likes of Manchester which has led the way so well in these matters in the past.

I cannot finish without addressing the motion. On the proposed energy price freeze, I entirely endorse the comment from my hon. Friend the Member for Tamworth (Christopher Pincher) that one should always be wary of geeks bearing gifts. I accept that there is a need for long-term housing supply, but it is a shame that my two Labour authorities are keen to build on the green belt, rather than on the other available sites. I would certainly support action for young people, but it is this Government who have trebled the number of apprenticeships and set up the welcome north-east skills pilot. I find it very easy, therefore, to reject the motion.

[Graham Jones (Hyndburn) (Lab)]

The hon. Gentleman referred a moment ago to brownfield sites in urban areas, but does he accept that not every brownfield site is economically viable, and is he aware of his local authority’s assessment of brownfield sites and their economic viability? Perhaps he could give some figures on the viability of the sites in that area.

[Guy Opperman]

I could speak for an hour, and have done so on several previous occasions in the House, on Labour-run Northumberland county council’s failure to provide brownfield sites and its proposal to build on the green belt, whether around Ponteland, Hexham or other sites in Northumberland. Alternatively, there is Newcastle—again a Labour council—which is proposing massive building on green-belt land. We campaigned extensively against the building of more than 10,000 houses on that land.

[Graham Jones]

Does the hon. Gentleman also accept that building on greenfield sites is sometime cheaper and so provides for affordable accommodation, and that brownfield sites, particularly contaminated brownfield sites, can be comparatively very expensive?

[Guy Opperman]

I have no doubt that building on contaminated brownfield sites can be difficult, but in my constituency, for example, the police authority has sold the site of a former police station that could be built on perfectly properly. For 20 years, taxpayers—that includes the hon. Gentleman and me—paid more than £1 million to keep the former Stannington hospital site secure, yet nothing was built on it. We now have former government sites being built on and providing homes, but of course that is not green belt. He was keen to make his point about brownfield sites, but he also spoke about greenfield sites. We have huge difficulties in the north-east with investment in and building on greenbelt sites by local authorities.

I have gone on too long and been distracted—

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

indicated assent.

[Guy Opperman]

The Opposition spokesperson chunters from a sedentary position. On jobs figures and the economy, she will doubtless be addressing the fact that in her constituency unemployment has fallen by 12.5% in the last year, that youth unemployment has fallen by 16.5% and that the number of apprenticeship has risen from 620 in 2009-10 to 1,170 according to the most recent statistics. That is real action to help people in the north-east.

[Angie Bray]

Will my hon. Friend give way?

[Guy Opperman]

I will not give way to my hon. Friend. I have great respect for her, but it would not be fair on those who have yet to speak.

17:24

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

The cost of living crisis has had a fairly good airing in this debate and has been poignantly described in some detail, so I intend to concentrate on the second part of the motion, which concerns the Government’s economic policy and, on the cost of living crisis, to ask the obvious question: was it all necessary? The Government’s answer, as provided by the Financial Secretary in a rather frivolous and distinctly provocative knockabout, was, predictably, yes. He simply repeated the well-worn Tory mantra that we all know: Labour left behind a huge economic mess; there was no other way to deal with it other than through massive cuts in public expenditure; we were “all in it together”; and now the Chancellor’s policies have been vindicated as it has all come right. All four of those statements are flat wrong.

[Graham Jones]

rose—

[Mr Meacher]

I would prefer to respond to those four statements before giving way to my hon. Friend.

First, Labour did not leave an economic mess. The budget deficit in 2007-08, just before the crash, was 2.6% of gross domestic product—one of the lowest in the OECD and about the same as Germany’s. It rose to 11.6% in 2010 only as a result of the bankers’ bail-out. I noted that the Financial Secretary did not even mention the banks today, so I was beginning to wonder whether he had even heard of the bankers’ bail-out. [Interruption.] I am prepared to give way at this point, before going on to answer in some detail.

[Graham Jones]

Perhaps the Financial Secretary did not mention the bail-out because he was working in financial services as a banker himself?

[Mr Meacher]

That may well have had something to do with it, but it happened also because the Tories decided to blank out the bankers’ bail-out and put the whole blame on the Labour party. For any objective economist or objective observer of any kind, that is obviously absurd.

Secondly, there was another and much better way to deal with the budget deficit than through semi-permanent austerity. It is costing the country £19 billion a year to keep 2.5 million people unemployed. I simply say that it would have been far better to get these people off benefit and into work through public investment, so that they could earn and contribute to the Exchequer through taxes and national insurance contributions. I well know that the question will come, “How do we pay for that?”, so I shall answer it. This can still be done—and it could have been done three years ago—without any increase in public borrowing at all, despite the Chancellor’s continuous jibes to the contrary, by a further tranche of quantitative easing targeted not on the banks but directly on industry, or by instructing the publicly owned banks RBS and Lloyds to prioritise lending to industry, or by taxing the ultra-rich.

[Alec Shelbrooke]

Let me remind the right hon. Gentleman of the fact that it was his Government who did the deals with RBS, yet they did absolutely nothing in those deals to force the banks to do things that they had decided they did not want to do.

[Mr Meacher]

There has been a great deal of partisanship in this debate, and I am prepared to recognise that the problems did not start with the present Government. I agree that we should have taken a much tougher line with the banks before 2010, but let us concentrate on where we are now, because the country is in a very serious position.

That brings me to the third point. We never were “all in it together”—quite the opposite, and to a stunning degree. In The Sunday Times rich list, the richest 1,000 of the UK’s citizens—a tiny 0.003% of the population—have increased their wealth in the five years since the crash by a staggering £190 billion, while 90% of the population over exactly the same period have had to take a real-terms cut of about 9%, and their wages are still falling. So much for social solidarity! If that £190 billion were charged to capital gains tax, it could technically raise £53 billion. I do not think it would for a moment, but it could realistically raise roughly £30 billion to £35 billion—quite enough to generate 1 million to 1.5 million jobs within two or three years. That would be a far quicker way of reducing the budget deficit—which is supposed to be the aim of the exercise—than spending cuts could ever be.

The Government’s fourth point is that we have a recovery. Well, we do have a recovery of sorts, but one that has been generated in exactly the wrong way. It has been generated by consumer borrowing and an incipient bubble, and it is not—I repeat, not—a real, sustainable recovery. As my hon. Friend the Member for Swansea West (Geraint Davies) pointed out, such a recovery can come about only as a result of rising investment, increasing productivity, growing wages and healthy exports, and none of those is present now.

Over the last five years, Britain’s business investment has dropped in real terms by a devastating 25%, well below the global average. UK productivity is now almost the lowest among the OECD countries. As we were told by my hon. Friend the Member for Nottingham East (Chris Leslie), UK wages are undergoing the biggest fall since the 1870s, and are still falling. As for exports, Britain’s deficit on traded goods is still running at a mountainous rate of over £100 billion a year. If that is a recovery, God help us if we ever experience a downturn.

So has the Government’s economic policy failed? Not necessarily. It all depends on what we think the Government’s objectives really were. If the objective was to cut the budget deficit, as they claim, then yes: I think that the last three years of unending misery and austerity have involved a momentous waste of resources in return for almost nothing. According to the Government’s own figures, the budget deficit was £118 billion in 2011 and £115 billion in 2012. Like those who engaged in trench warfare during the first world war, we have advanced a few dozen yards, and have taken enormous casualties in order to do so. No sane person would continue with such a policy at such expense in blood and treasure, yet here we have a Government who are determined to slog on with exactly the same policies, and—as with the generals in the first world war—the cost is not to them, but only to the poor squaddies who are sent over the top.

My last point relates to a recent speech by the Prime Minister, which I am amazed he gave, and which I think will come back to haunt him. He said that even when the deficit was paid off—and I think that that time could be nearer to 2030 than 2020, given the direction in which we are going—there would be no restoration of spending that had been cut. The Tories, he proclaimed, believed in

“a leaner, more efficient state”.

What he really meant, of course, was a fully privatised state in which you had better succeed in the market, because otherwise there will be precious little help from public sources when you need it.

As for “efficient”, was that G4S at the Olympics? Was it Serco charging for tagging prisoners who had already died or left prison? Was it the big six energy companies ruthlessly profiteering at customers’ expense? Was it the water companies indulging in a profit bonanza for top executives and shareholders, but trying still to charge taxpayers? Was it outsourcing in the NHS, which has led to longer waiting lists and an inability to cope? Was it the free schools that have been set up in areas where there is an abundance of places, while areas where there is a shortage of places are abandoned? Lean and efficient? Come on!

I really do not believe that the Tory leadership sees the prolonged austerity and the economic disaster that have been visited on the country over the last five years as a failure at all. The Tories see that as merely the price to be paid—although not, of course, by them—for attaining the real objective, which is a permanent squeezing of the public sector and a shrinking of the state. That is what they want to do if they win the next election, and that is why I believe they will not win it.

17:34

[Ian Swales (Redcar) (LD)]

The Opposition do not have a monopoly on understanding the pressures on people or on wanting to do something about the cost of living. I represent the fourth poorest ward in the country, and I am well aware of the pressures that my constituents face. They know that they will not cut their cost of living by borrowing money and running up interest costs. They also know that shutting their eyes, going into denial and spending £4 for every £3 of their income will lead to tears. Sadly, the Labour Government did not understand those things, and everything did end in tears. This Government are now having to clear up the mess.

As we have heard, the way to deal with the cost of living crisis is to get the economy moving and to get manufacturing going again, and I welcome all the steps that the Government are taking in that direction after the catastrophic halving of our manufacturing industries under Labour. The Government can do two things about the cost of living: they can take tax and spend measures and they can interfere in industry and business. On tax and spend, I am proud of the Government’s action to scrap Labour’s fuel duty escalator, saving £7 on a tank of fuel, to scrap Labour’s beer duty escalator and to give free child care to 260,000 two-year-olds and, from next year, to three and four-year-olds.

[Graham Jones]

The hon. Gentleman mentioned the fuel duty escalator, but I wonder why he omitted to mention the rise in VAT from 17.5% to 20%, which also affected the price of fuel.

[Ian Swales]

The £7 that I mentioned is net of the £1.50 VAT increase.

Interest rates are being kept down, and council tax has been frozen for three years in many areas. Sadly, my Labour council has preferred to take money out of people’s pockets rather than taking Government money to keep the council tax down.

[Tom Blenkinsop]

As a fellow MP in the Redcar and Cleveland borough council area, the hon. Gentleman will know that, between 2003 and 2007, the coalition Lib Dem, Conservative and independent council raised council tax by more than 25%, which was more than during the previous four years or the following four years under Labour.

[Ian Swales]

The hon. Gentleman has an excellent memory. I think that people will judge the council on how it is spending the money that it raises.

This Government have also scrapped Labour’s national insurance hike and, above all, implemented the Lib Dem policy of raising the tax threshold to £10,000.

[Sheila Gilmore]

Will the hon. Gentleman give way?

[Ian Swales]

I am sorry; I have taken two interventions already.

We hear a lot from Labour about wages, but it is what ends up in people’s pay packets that really counts. When Labour left office, people on the minimum wage were paying a massive £35 a week in tax and national insurance. Since then, the minimum wage has gone up by £20 a week, but the national insurance bill for those people has gone down by £9 a week, with a further cut to come in April.

[Angie Bray]

In my constituency, there are fewer people unemployed, and employers welcome the cut in national insurance contributions because it helps to create more jobs. Also, nearly 5,000 people there are now paying no tax at all. That is the way to help people who are finding life tough: more jobs and less tax.

[Ian Swales]

I certainly agree with that. I wish that my area was as fortunate with employment, but my hon. Friend makes an excellent point. That is the direction we should be taking.

I helped to launch an event for the Living Wage Foundation two weeks ago. It has stated that it

“supports moves to increase the personal allowance for the low-paid”—

because they—

“could make the Living Wage easier to attain.”

The living wage is about net pay, not gross pay.

I have talked about tax and spend measures. I also mentioned interfering in industry. I welcome today’s announcement on payday lending, following an amendment tabled by a Lib Dem peer the other day. The Government have stepped in quickly to do something about the problem. We interfere in industry at our peril, however. The Opposition motion mentions an “energy price freeze”. I worked at a senior level in business, finance and industry for more than 25 years, five of which were spent working as an accountant in the electricity industry. I could scarcely believe Labour’s proposal for a price freeze. In three and a half years in this place, I have never heard a policy announcement so guaranteed to achieve the opposite effect to the one intended.

It has been obvious from the start that any business faced with having its prices fixed but its costs varying dramatically, as they do in the electricity industry, would have real problems. Prices would increase before the freeze and after it. Prices that had been frozen could not decrease if the costs reduced. Above all, less investment will take place, especially from new players. So what has happened since Labour’s announcement? We have seen huge price hikes, which I am sure include hedging just in case the public are stupid enough to elect a Labour Government.

[Sheila Gilmore]

Will the hon. Gentleman give way?

[Ian Swales]

I have already given way and I am in my own time now. Two weeks ago, National Grid said that half of proposed investment in energy was now on hold because of political uncertainty. This week, RWE abandoned the Atlantic array. This is what is happening in the real world of business as a result of the irresponsible announcement from Labour. At Dod’s energy lunch a Cross-Bench peer described how this policy was disastrous for commercial confidence, and he is absolutely right.

As the hon. Member for Tamworth (Christopher Pincher) said, the irony is that the policy protects the big six. When I mentioned that before, the shadow Energy Secretary, the right hon. Member for Don Valley (Caroline Flint), said from a sedentary position that we were protecting the big six by challenging the policy, but that is not true. In my constituency, three new energy investors want to invest—two in fossil fuels and one in renewables. There are US, Japanese and Korean investors behind these projects, but the projects are now in danger because their bankers are wondering what on earth is going to happen to this country’s electricity industry. So this irresponsible announcement by Labour threatens investment and security of supply, and, above all, it will raise prices, both in the short term and the long term. So I urge the Opposition to withdraw the policy as soon as possible to avoid more damage to consumers and to the electricity industry.

We do need to do things about our energy future. One key thing that must happen is that we must have genuine competition, based on more players. The fact that pay levels are too high in many industries, including the electricity industry, is clear. However, at least this Government are taxing capital gains at a higher rate, taxing pension contributions at a much higher rate and taxing income at a rate 5% higher than under the previous Government.

A few weeks ago, the shadow Health Secretary made a point about Front Benchers of all parties—I think he was thinking partly of his own. He said that we now see policies developed by people who have been trained—this is about career politicians—to write press releases rubbishing the opposition. We can tell the lack of strategic thinking behind that announcement. The Opposition have shown that they know how to write headlines, but they do not understand business and finance. As always is the case, we cannot trust Labour with the economy.

17:43

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

I am grateful for the opportunity to speak in this important debate. Over the past few months, we have seen the spectre of the Chancellor and the Prime Minister on repeated occasions suggesting that everything is rosy and that hundreds of thousands of jobs are sloshing around. It is the old attitude of, “Crisis, what crisis?” Unfortunately, such a view is completely out of touch with the daily, lived experience of many of my constituents and thousands of others across Wales, who have seen one of the greatest falls in real average earnings—a staggering drop of £1,669, or 8%, since the general election, when this Government came to power. They see this Government as out of touch, patronising and complacent; they see a Government on the side of the rich, of millionaires and of banking and energy bosses, as we heard aptly demonstrated by the hon. Member for Redcar (Ian Swales). It is Labour Members who are on the side of the British people, with solutions such as capping the cost of credit and payday loans, and freezing energy prices. These real measures would help the real lives that many on the Treasury Bench seem to have little understanding of.

[Sheila Gilmore]

Does my hon. Friend share my incredulity that the price rises that the energy companies started to announce are being blamed on us because we announced our policy on an energy freeze?

[Stephen Doughty]

My hon. Friend is right to point out that the energy price scandal has been going on for some time, and that the Government have done nothing to deal with it.

I welcome any growth and any new jobs in the economy, and I hope that any positive movement in the economy will help people in my area address the massive drop in earnings since this Government came to power. However, I caution that illusions are simply not good enough. The Government repeatedly fail to answer questions about how many new jobs are part-time and, of those, how many are on zero-hours contracts. They also do not say in what sectors those jobs are being created. The truth is that half the new jobs are in low-paid sectors, and that the minimum wage is not always being enforced.

When I hear the Chancellor crowing about recovery, I am always tempted to ask, whose recovery and what sort of recovery. Is it a recovery benefiting my constituents who are struggling to find well-paid jobs, to pay those soaring energy bills and to put food on the table for their children? Is it helping those who are struggling to cope with the bedroom tax? One well-known local Liberal Democrat member in Cardiff recently said in a tweet that she knew that it was difficult for some people, yet many Liberal Democrats proudly voted for the bedroom tax in this House the other night. It is not just difficult but increasingly impossible for many families across my constituency.

Let me share with the House three stories that I have come across recently. First—I hope that the hon. Member for Redcar is listening—one of my constituents came to me saying that his monthly direct debit to npower had been increased from £197 to £254 just after he had been reimbursed an overpayment. I contacted npower and found that that was on top of the price rise of 10.4%. For him, the rise is 28.9%, which is extraordinary. That is the sort of issue that is affecting people in the country. How will that man make ends meet over the next few months? [Interruption.] The hon. Member for Redcar is chuntering from a sedentary position. As he does not seem to be interested, perhaps he would like to intervene and respond to that sort of example.

[Ian Swales]

Does the hon. Gentleman think that the likelihood of a price freeze in 20 months’ time will make prices go down or up between now and then?

[Stephen Doughty]

The hon. Gentleman will know that we called for a price freeze now, but it was the Government who voted against it. He should look at what is happening on his own Benches before making such comments. How is the recovery helping constituents who are being slammed by energy prices?

Let me give another example. A single father in the east of Cardiff with a 12-year-old daughter who lives with him full-time has just been sanctioned for two weeks for not providing enough evidence of his job search. He has actually provided a lot of evidence. He has been applying for multiple jobs, even in the bar and restaurant industry, despite having a history of alcohol abuse and being advised not to work in that sector. He has always worked and has never claimed social security before. He is not computer literate and has only been given limited assistance with his job search and he is not allowed to submit handwritten evidence of his job search. He is not in receipt of any other social security benefits, so the only money that is coming in is child benefit and tax credits. He has been struggling to manage over the past few weeks. After paying all of his bills, he was left with £3 to feed himself and his daughter. The real tragedy is that his daughter is trying to help the family by bringing home her school lunch because she is worried that she will not get fed at home. He is absolutely distressed and mortified to be in that position. Where is the recovery for him and his daughter?

My last example is of a gentleman who came to see me at my surgery the other week. He was being sanctioned for being unwilling to travel far away from home. He does not have a car and it was extortionately expensive to travel to the area to which he was asked to go and it would have left him out of pocket. As a result, he did not take that job, but he is willing to take any other job that he is offered. None the less, he was sanctioned and his money was put down to just £40 a week. I am fighting on his behalf with the jobcentre. The reality is that he has very little on which to live. He told me that he was not able to put on the heating and electricity. He said that it was not that cold, despite the fact that the weather outside was freezing. He was putting on extra jumpers just to try to cope and to get by—he was in an absolutely awful position. He has worked all his life and now he is not putting on the heating or the electric, so where is the recovery for him?

Those are the real stories of people living under this Government. They simply do not recognise the rosy picture that the Prime Minister, the Chancellor and other Ministers have been telling us about over the past few days. The story across Wales as a whole is equally concerning. More people are hit by the bedroom tax in Wales than in any other area in the UK. Even the hon. Member for Monmouth (David T. C. Davies), despite some of his more outrageous comments the other day, has admitted, as Chair of the Select Committee on Welsh Affairs, that significant challenges are caused by its impact in Wales.

We have some of the highest energy prices in the country and 1 million households would benefit from Labour’s price freeze. Wales has the biggest increase in those in energy debt compared with anywhere in the UK, up by 24% in the past two years. People are now consistently falling into arrears with the energy companies as a result of those price rises. We have seen one of the biggest falls in real wages across the UK and one of the largest increases in under-employment—that is, people who want to work more hours but are unable to do so because of the types of jobs that are available. They do not recognise the fantasy of the 1 million or so jobs that the Government keep citing.

I have described some heart-rending cases, but we also heard earlier about food banks. The use of food banks in Wales has trebled in recent times and in every part of my constituency, from Penarth to Splott to Llanrumney, I am seeing increasing numbers of people accessing those food banks. That is why I was so disappointed to hear the remarks of the hon. Member for Vale of Glamorgan (Alun Cairns), who is no longer in his seat. He attempted to suggest earlier that I had somehow misled the House on his views about food banks. Let me put on the record the reasons for people using food banks that he gave to his local paper, the Barry & District News, on 5 September. He said, and I quote directly, that the reasons were

“inability to manage money and to budget, addiction to alcohol or substance misuse, bullying at home, neglect by the benefit recipient and a range of other reasons.”

He did not recognise or comment on the real reasons people are going to food banks: energy prices, low wages, the social security changes or delays that the Trussell Trust says are the biggest reason for people going to food banks, the low incomes that the trust also points to as another such reason, and the debt that many people are getting into with payday lenders, loan sharks and others. I believe that it was right for him to be criticised by local Labour councillors for a local Labour council that is doing an immense amount to help people in very difficult times, including working with Cardiff on a collective energy buying scheme to help reduce the pressure from the energy companies, which are ripping off consumers across the country.

The figures for the whole of Wales tell an even greater story. Some 400,000 people have been hit by the Government’s squeeze on tax credits and social security overall; that can be compared with the 4,000 richest in the country, who got a handout from the Government with the tax cut for millionaires.

My constituents and people across Wales are asking again and again: whose side are the Government on, who is benefiting from this so-called recovery and who will stand up for them? Time and again, they are left wanting by Tory and Lib Dem Members. They will get a much better deal if they vote for Labour at the next general election.

17:53

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

This is indeed a very important debate. We can hear stories from any part of the House about the struggles that our constituents are going through. Indeed, constituents who one might deem to be on very good salaries are struggling, too. Whether someone is on a good salary or unemployed, if they are on a fixed income—including even those on good salaries who have had them frozen—a rise in the cost of living has a direct impact on their lives.

We must recognise the things we have to try to do to change the situation for the long term. Unemployment in my constituency has reduced by 32% since the Government came to power. We should welcome not only that reduction but the transfer of jobs from the public to the private sector, as quite a few small industrial bases in my constituency are supplying those jobs. As the economy is now turning a corner, growth in the economy and in the productivity of companies will allow wages to go up in line. What I do not support is a false rise in wages.

The minimum wage is very important; it ensures that people are not exploited, and as the Prime Minister outlined earlier today, if companies are found to have broken the minimum wage legislation, they will be fined a huge amount of money. We hope that will crack down on some of the more ruthless employers. We talk about a living wage—we would all hope to achieve a living wage—but it should not be specified in statute. By increasing wages falsely—in London, by 40%—we ensure that a living wage is always just out of reach.

[Sheila Gilmore]

I wonder whether the hon. Gentleman remembers that exactly the same arguments were advanced, mainly by members of his party, before the minimum wage was introduced. We were told that jobs would be lost—that it would be a terrible thing—but those predictions did not come true, so perhaps the hon. Gentleman is exaggerating his case.

[Alec Shelbrooke]

I am most grateful for the hon. Lady’s intervention because she makes the point that I wanted to make. I did not say that the living wage would cost jobs; I said that it would inflate wages. Many would argue that a lot of people already earn the living wage, and that a statutory living wage would benefit all those underneath. But we are all well aware how many people, especially our friends in the unions, would demand a 40% pay rise if it was to go through.

Ultimately, there is nothing to be gained by inflating wages artificially, as we did in the 1970s. I remember my parents telling me that when they were teachers in the 1970s, they got a 25% pay rise when Harold Wilson came to power in 1975 but it was worthless the following year. The goal is always slightly out of reach. We must tackle the cost of living, and ensure that people’s real wages and real net income can advance to meet it.

[Anas Sarwar (Glasgow Central) (Lab)]

The hon. Gentleman’s Government have said that work must always pay, but we still have people who are in work living in severe poverty. More important than just having a job is the level of income, and that is why wages are so important, and that is why the living wage is so important. Does he not recognise that point?

[Alec Shelbrooke]

I could not agree more. What I am saying is that we need to grow an economy to ensure that we can get to a living wage, and that at the same time we should be looking at how we reduce the cost of living.

Why is the cost of living so high today? That is the fundamental question. Fundamentally, the cost of living comes down to one very important point—energy. We have had a lot of debate in the House this afternoon about whether to have an energy freeze, but if we freeze energy prices for a fixed period, prices will get ramped up before and after the freeze, as happened with the beer price freeze in the 1960s. We must take a more long-term view.

How did we end up where we are? It is my personal view—I support what was in our manifesto, and I wish we had moved further on it—that we need to start replacing our power stations, and at the moment nuclear power stations are by far the best way forward. It has taken a lot of effort and lengthy negotiations to get to one nuclear power station; we should be building five or six. But at the same time the world oil price is rising, and will not go down despite what anyone thinks. To put it in context, in 1998 a barrel of oil was $5 a barrel, and yesterday Brent crude was $100 a barrel—I am sure the hon. Member for Dundee East (Stewart Hosie) will correct me if I am wrong. I believe that if oil reaches $140 a barrel, there is more economically recoverable oil in the North sea than has already been extracted. That is the reality of the situation.

Energy prices will not come down, so it is no good having a freeze for a period, because energy prices permeate every aspect of the cost of living—the price of food in the shops, the price of getting to work. We always talk about the petrol price, which has a big impact on getting to work, but we must do everything that we can to reduce the cost of getting goods to the shops, because that hits people’s wages. Since the start of this recession we have been on a wage freeze, if not a wage reduction, to prevent the runaway unemployment that we saw in the past.

What frustrates me in debates such as the one we are having today is not just the barrage of criticism from the Opposition of the way in which the Government have implemented their policies. That is fine; that is what we are in the House for. We are here to say that we have a route, we are sticking to it, and we think that it is working, and the Opposition are here to say, “We don’t agree.” But I have not heard any real alternative in the Chamber today. The closest we got—one of the more sensible speeches today—was the contribution by the right hon. Member for Oldham West and Royton (Mr Meacher), who is no longer in his seat. He actually came up with some suggestions. I did not agree with them—I thought they were pie-in-the-sky thinking—but at least he stood there and put forward some policies.

Sadly, proposals were completely lacking in the shadow Chief Secretary’s speech. There was a constant barrage on what the Government had, he thought, got wrong, but no recognition of the fact that if we are going to tackle the cost of living crisis, we must tackle its root causes. The cost of living is going up because energy prices are high, and that has nothing to do with the six energy companies—there were 14 when the Leader of the Opposition was Secretary of State for Energy and Climate Change, but there were only six by the time he left that office, so it is a bit rich of him to come across saying that it is terrible. The inescapable truth is that the price of oil is not going to come down.

[Stewart Hosie]

The hon. Gentleman is making an interesting speech. He talks about having more oil and it being economically extractable, but he will accept that part of the equation is tax? Does he not regret the massive hike in the North sea supplementary charge that resulted in project after project being cancelled, and made certain fields less viable?

[Alec Shelbrooke]

The hon. Gentleman will agree that the hundreds of millions of pounds of tax credits that the Government have made available to the oil and gas industry will help make that resource more exploitable in future and keep the supplies on. It comes down to a fundamental issue: what do we need to do to tackle the cost of living crisis? What we do not need, and what my constituents do not want to hear, is “It’s your fault for going down the austerity route” or “The collapse of the banks is your fault.” They want to say, “Look, we know all that—we know what’s going on.” That is why in most opinion polls, a majority of people still blame the Labour Government for the economic mess we are in. [Interruption.] It is all very well the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) shaking his head—that is what my constituents tell me, and I am out on the doorstep all the time.

[Tom Blenkinsop]

rose—

[Alec Shelbrooke]

I have given way enough. I am sorry—I am running out of time.

We have to tackle the core issue, and we have to do two things at the same time. The Government are achieving the first one. We have put the economy on the road to recovery following the deepest recession in the history of the nation caused by lack of fiscal control of the banking system—a tripartite system that allowed the banking industry to run wild. Even today, as we see with the Co-op bank, the Labour party is unwilling to take tough decisions with regard to banking. The only public inquiry that the Leader of the Opposition does not want to call for is into the Co-op—I wonder why, but we will find out when it takes place.

We have to grow the economy, which will lead to wage rises, but we must also have a much longer strategic look at how we supply energy in this country. I agree with the Prime Minister—whether or not what was reported in the newspapers was true, green taxes are regressive, and it is amazing that the Labour party, which has always opposed regressive taxation, says that we should keep a regressive tax and not push it into a progressive tax. At the end of the day, energy prices have gone up. [Interruption.] These are luxuries from the boom time that people can ill afford. It is a disgrace that, despite the fact that we are doing everything that we can to grow the economy, and create real jobs that will last and, I hope, be better proofed against the ups and downs of Government spending in future, people are struggling to deal with the cost of heating and the cost of food. The fundamental cause is the high price of energy. It is absolutely vital that the energy reforms and fiscal reforms introduced by the Government carry on and should only be changed as we move forward with energy policies for the long term, not short-term gimmicks. That is what people need.

18:03

[Mrs Emma Lewell-Buck (South Shields) (Lab)]

The time that I have is nowhere near enough to address the magnitude of the cost of living crisis and the spectacular economic failure of the Government’s policies, but I will try my best.

The average wage in my constituency, after income tax and national insurance contributions, is £1,319 a month. That budget faces extraordinary pressure as every aspect of the cost of living is on the rise. The average energy bill is £110 per month, which over the course of the year amounts to nearly an entire month’s pay.

[Mel Stride (Central Devon) (Con)]

The hon. Lady has just stated that every aspect of the cost of living is on the rise under this Government. Does she recognise that council tax, a very important component of the cost of living, has decreased by 9.5% on average during the period of this Government, yet it doubled under the Labour party when it was in office?

[Mrs Lewell-Buck]

I thank the hon. Gentleman for that intervention, but he needs to look at the bigger picture, which is what I will go on to talk about—the cost of everyday living in general.

Water costs a further £30 per month to my constituents. Rent makes another significant impact. A single bedroom property costs £395 a month in the private rented sector. Social properties are, of course, cheaper, but as my hon. Friends have explained on numerous occasions, there are few such properties to go around. Council tax starts at £80, so we need to take that off the overall budget. We are talking about working people who, if they have children, will also need to cover the cost of child care. As Labour highlighted in last week’s debate, the cost of child care is rising five times faster than pay and now amounts to more than £100 per child per week for 25 hours. That is around £460 per month.

All this leaves the average individual in my constituency with just £244 to live on per month. That needs to cover food, transport, other bills as well as a multitude of other costs that are part of daily life. I admit that this is rather a crude calculation, but the fact is that people in South Shields living on this meagre income are the lucky ones. Despite everything, they have managed to hang on to their homes and provide for their families through sheer tenacity and the hard work ethic that permeates my constituency. But what about those who fall below the average? What about those on zero-hours contracts, the 3,592 unemployed, the elderly and frail, the homeless and the rough sleepers? And there are those who are affected by the Government’s bedroom tax, who will lose an extra £450 a year.

Five thousand children in my constituency live in poverty, and many of them live in households with a parent in work. Some 4,260 of my constituents live in fuel poverty, and 1,440 of them are affected by the bedroom tax. We have a rise in homelessness and a rise in rough sleepers, yet still this Government fail them. This is a Government led by a Prime Minister who said prior to the 2010 elections that the Conservatives

“are best placed to fight poverty in our country.”

This is an astonishing claim when we know that over a million people have fallen into poverty on his watch, including 300,000 children.

[Alec Shelbrooke]

Will the hon. Lady give way?

[Mrs Lewell-Buck]

I do not have time. I am sorry.

My local citizens advice bureau, despite taking on extra staff, is struggling to cope with the volume of inquiries it has had about debt. The once monthly requests for emergency food aid are now almost a daily occurrence. My local food bank and soup kitchen have seen demand for their service rise to unprecedented levels. Increasingly, the people coming to these agencies, I am told, are in work. This is no surprise, as we now have 1.4 million more people being paid below the living wage than in 2009.

When I was unemployed, when members of my family and I fell on hard times, I was proud to live in a country where I and they would be able to get help. This is no longer the case. I am still proud of my country, just not of the people who are running it.

People are turning to payday loans to deal with the hardship they face. Last year in my constituency the average borrowing constituent had debt to the tune of £1,610. We all know how quickly this debt can become unmanageable, with dire consequences for those who owe. But these are not people after easy money. They are working people who no longer have the ability to save for a rainy day.

As bad as things are for working people, they are worse for the unemployed. In my constituency more than 3,500 people are out of work. The Chancellor said that

“every job lost in the public sector has been offset by three new jobs in the private sector.”—[Official Report, 26 June 2013; Vol. 565, c. 305.]

This has not happened in South Shields. I recently held a jobs fair in my constituency, and had great co-operation from local employers, but the total number of jobs that these organisations were able to offer was just over 1,000, well short of filling our employment gap.

The situation is worse for our young. A constituent of mine told me how his daughter was offered a job interview and forced to travel to Leeds at short notice. She did not have the money to pay for the train ticket. When she asked the DWP for help, she was refused it. She is now on a zero-hours contract, and some weeks her pay is lower than when she was claiming benefit—but I suppose this Government do not mind about that, as long as she is no longer contributing to the unemployment statistics.

In my constituency people come together every day to help those who are struggling, but they find their task harder and harder as levels of need are rising to an unprecedented degree. Organisations such as Citizens Advice, the Key project, Hospitality and Hope, St Aidan’s, Supported Living and St Hilda’s church are all making a difference, but without the Government taking action their task will continue to be a heavy one.

To sum up, my constituents are great, hard-working, big-hearted people who show every day the ethos of hard work and social responsibility, despite the onslaught of misery caused by this Government.

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

I have listened with interest to my hon. Friend and to the previous speaker, the hon. Member for Elmet and Rothwell (Alec Shelbrooke). If there is no cost of living crisis, or no one is responsible for it, why will this Government go down in history as the Government of zero-hours contracts, payday loans, food banks and the bedroom tax? Does not that tell us all we need to know about the cost of living crisis?

[Mrs Lewell-Buck]

My hon. Friend is spot on. This Government are to blame for the cost of living crisis and economic failure in our country.

In the past, the values of my constituents were rewarded and people could be confident that hard work would bring them security and fulfilment. Now that link is broken. They are made to work for their poverty and the Government fail to uphold their responsibility towards them. We need a Labour Government to restore the link.

18:11

[Richard Fuller (Bedford) (Con)]

I listened with great interest to the hon. Member for South Shields (Mrs Lewell-Buck), as I have to many Opposition Members, but on the question of what we should do, I have not heard much. The honourable exception was the right hon. Member for Oldham West and Royton (Mr Meacher), whose speech had some coherence, but I guess he is far too moderate to be included in the Labour party’s Government-in-waiting, assuming that position remains—we hold out that hope.

The motion is a listing of some of the pain points that many of our constituents are feeling as they look to balance their budgets each week. “I feel your pain” is an important expression of empathy. Empathy is important for politicians of all parties; we have to be empathetic with the constituents we represent. However, empathy is no substitute for policy, and Opposition Members have shown a complete absence of policy in dealing with the points of pain that they can so lucidly set down in their motions. That is why I shall support the Government in the Division later.

When we have seen a policy from the Opposition, it has often been about ways in which they would seek to intervene in markets. I suggest to Opposition Members that Government intervention should always be used sparingly and where it can be effective. The Leader of the Opposition has chosen as his flagship intervention policy one where he cannot be effective, and nor does it make economic sense. As the hon. Member for Redcar (Ian Swales) pointed out, the consequence of the Labour party’s position on an energy price freeze has been to crater the willingness of energy companies to invest in effective energy in the long term. It is very sad that just a few weeks after the Chancellor had been to China to secure investment in our energy sector—something that the Labour Government sadly missed out on year after year—the Labour party came up with another policy designed to make our energy more inefficient, rather than efficient, in the long term. If we are going to address some of the issues about the cost of living for members of the public, we have to be honest about what the Government can and cannot do.

[Mr Stewart Jackson (Peterborough) (Con)]

On the subject of honesty and admitting the failures of the past, is it not strange that last week the shadow Chancellor told a National House Building Council lunch that a future Labour Government would deliver 200,000 new homes a year when, in their last year in office, the previous Labour Government presided over the lowest number of homes built since 1923? Is there not a huge chasm between Labour’s promises and its record in office?

[Richard Fuller]

My hon. Friend is absolutely right to point out the chasm between reality and certain things promised by Labour. There is also an absence of a basic understanding of economics. It is nice to see the shadow Chief Secretary in his place again. It was not clear from his opening speech whether he understood the difference between deficit and debt, which is quite an important thing to know for someone who wishes one day to hold an important Treasury position.

[Chris Leslie]

Will the hon. Gentleman give way?

[Richard Fuller]

I am very happy to give way. I recognise that the shadow Chief Secretary has been for his economic tutorial, so perhaps he can enlighten us.

[Chris Leslie]

That is very funny and droll, but does the hon. Gentleman know that borrowing accumulates and forms at the stock of national debt? Has he figured that much out? If he has, will he tell us whether it is true that, during his time in Parliament, his party has presided over the accumulation of £430 billion of borrowing? Is that not right?

[Richard Fuller]

Boy, has the hon. Gentleman picked the wrong person with whom to have an argument about debt and the Labour party’s record on debt. Let me enlighten the hon. Gentleman on that record. He will never be Chancellor of the Exchequer, but were he ever to achieve that position—

[Chris Leslie]

Answer the question.

[Richard Fuller]

I am answering the question. I know it is hard for the hon. Gentleman to follow the argument, but I will put it in bite-sized pieces so that he can keep up. It is important for a Chancellor of the Exchequer to look at not just the indebtedness of the Government, but at the way in which the entire economy is accumulating debt, which is one of the things that the previous Labour Government signally failed to understand.

If we look at the United Kingdom’s debt in the mid-1990s and take into consideration Government debt, household debt and corporate debt, we will see that that total indebtedness was, like that of many other OECD countries, two times the size of our national economy. Over the intervening 15 years—which in this country were spent mostly under a Labour Government—other OECD countries saw their total debt go from about two times to about three times the size of their economy, and that includes all of the impact of the financial crisis. One country in the G8—and only one—increased its total debt from two times to five times the size of its economy, and that was the United Kingdom under the previous Labour Government. It is the consequence of that pervasive debt in the economy that is the real cost of living crisis in this country.

Every family knows that when they have significant debts that they cannot avoid and that they have to pay, their monthly income will be less because they will have to pay back the debt of the past. They are paying the consequences of the Labour party’s failure when in office.

[Alec Shelbrooke]

Does my hon. Friend agree that, against that backdrop, it is commendable that under this Government and this Chancellor of the Exchequer, the gap between the richest and the poorest in society is the smallest it has been for 30 years? [Interruption.]

[Richard Fuller]

I see that the shadow Chief Secretary has left for more education on economics. My hon. Friend raises a point about income levels. There is an issue about how we increase the incomes of people at the low end of our economy. How do we make sure that work pays for those people who go out and work very hard?

Over the past 10 years, the United Kingdom has created a massive level of state intervention to support wages at the low end of the income spectrum. In order to try to improve living standards for people at the low end, we have to encourage employers to somehow pay higher wages. References have been made to the living wage. One of the issues about changing people’s income from the minimum wage to the living wage is that the change to their take-home pay, including any benefits they receive, becomes a very small change in their net income level, because the tapering of benefits takes away nearly all the impact of the increase in wage rates. A change to the living wage is therefore a transaction involving additional cost to the employer and additional benefit for the Exchequer; it does not result in additional pay to the employee.

We have to be clear about what we are truly promising people as we seek certain changes. It would be good to hear from my hon. Friend the Economic Secretary, who I presume will wind up the debate, what answer the Government can give people about their income and about making work pay. What are we doing about their tax and their benefits? For people in work who wish to take on additional hours or to increase their responsibilities and get more pay per hour, what are we doing to ensure that their benefits are not taken away so rapidly? If we do that, in the next period of Conservative Government we can continue the battle to make sure that work pays, which is the true answer to any cost of living crisis.

18:20

[Lyn Brown (West Ham) (Lab)]

I am grateful for the opportunity to speak in a debate that goes to the heart of the concerns of the majority in my constituency. Despite some improvement in recent times, Newham is the third most deprived local authority area in London, and the seventh most deprived in the country. It has been there or thereabouts for many decades. People from West Ham are at the sharp end of the Government’s failing economic policy, and are suffering as prices rise and wages stagnate.

As we have heard over and over again since this Tory-led coalition came to power, working people are now £1,600 per year worse off. While George Osborne—

[Mr Speaker]

Order. The right hon. Member for Tatton.

[Lyn Brown]

I can only apologise, Mr Speaker. I have spent a long time in the Whips Office.

While the right hon. Member for Tatton (Mr Osborne) is victoriously proclaiming that his plan is working, people in my constituency are really struggling. They are struggling to pay bills, to eat and to provide for their family. This Government have shamelessly failed to offer any support to hard-working people in this country, but have provided tax breaks for their friends and let ordinary families bear the brunt of their policies.

Instead of ensuring that our economy recovered, we have had three years of flatlining. This Government have borrowed more in three years than the previous one did in 13 years, and for what? Was it to help hard-working people and to protect the vulnerable, or to oversee the slowest recovery for more than 100 years and to instigate a cost of living crisis?

[Alec Shelbrooke]

rose—

[Mr Newmark]

rose—

[Lyn Brown]

I will not give way. Two hon. Members still want to speak, and I promised that I would not give way.

I recently surveyed my constituents—[Interruption.] Government Members may want to chunter, but I would like them to listen, because it is about time that they educated themselves on how difficult this is for real people. I asked my constituents how they are managing their energy costs, which we know have risen by almost £300, thanks to the inactivity of this Government. I was absolutely appalled to discover that 41% of respondents are spending more than 10% of their household income on heating their homes. That is fuel poverty.

The Prime Minister and his colleagues tell us that the answer is to switch suppliers. Well, 34% of my respondents told me that they had switched, but then found themselves paying more for their heating than they were saving. Most of the 66% who had not switched suppliers told me that that was not because they were happy with their current supplier, but because, “They’re all the same. I would end up paying more.” As for the Prime Minister’s advice on whether to wear a jumper, the response of 97% of my constituents was, “Wow, patronising or what?” I agree with them. His remarks encapsulate just how out of touch he is with the everyday lives of ordinary people in this country.

Many people told me how the rising cost of living is having a detrimental impact on their lives and those of their children. I was told, “In my household, we have to choose a room to heat and we all spend our time in that room.” How on earth do we expect young people to thrive academically in that environment, or even simply get the space to do their homework? I was told, “I don’t have the heating on as long as I’d like to, to save money”, and “We don’t heat our home until it’s nearly freezing inside.” Premature winter deaths soar in cold weather when people are not able to heat their homes. The most recent statistics show that Newham is ninth out of the 32 London boroughs for the number of excess winter deaths, despite it having the youngest population in the UK.

Paying the heating bills is only one part of the cost of living crisis. In the year to March 2013, rents increased by 2.7% on average across the country. In Newham, rents increased by 15% in the same period. That is an average of £135 more per month. Let us also put into the mix the lack of affordable child care, the difficulty in finding and holding on to employment, and the impact of zero-hours contracts on people’s ability to pay the rent. All those issues have become weekly or even daily concerns for people who live in Newham.

Under this Government, the cost of nursery places has risen by 30%—five times faster than pay. How do the Government think hard-working people in my constituency and in the other constituencies we have heard about, who are often on the minimum wage and are living in expensive private sector accommodation, can afford that hike? What advice would they offer my constituents who are working long hours just to make ends meet and who are worried about decent, affordable child care for their families? How would they advise people in my constituency who are struggling to pay exorbitant rents, but are living in overcrowded and often substandard private sector housing? What would they tell the young person who is struggling to find a decent, full-time job? I will tell you, Mr Speaker.

This Government offer empty platitudes. They are out of touch and have no clue what life is like for ordinary working families. They have allowed prices to rise faster than wages in 39 out of 40 months. And when was that halcyon month when wages rose more than prices? It was the month in which the bankers received their bonuses. Does that not tell us all we need to know about the Government? This Government put the wishes of the privileged before the needs of working people. Trust me, Mr Speaker, I could go on and on talking about the abhorrent impact that the cost of living crisis is having in my constituency. The only people who seem to be completely oblivious are the Members on the Government Benches. They care not about the consequences of their cavalier ignorance on the lives of ordinary people. Britain deserves better.

18:27

[Sheila Gilmore (Edinburgh East) (Lab)]

I am not at all surprised that the Government Members who have spoken in this debate on the cost of living—all of whom, interestingly, are men, with the exception of the Minister who will respond—seem so delighted and thrilled that they can come here and talk about a recovery, because something very strange has happened over the past three and a half years.

In June 2010, the Office for Budget Responsibility made its first pre-Budget forecast before the emergency Budget that we were rushed into because we had to do something about the economy. It predicted that GDP growth would be 2.1% in 2010-11, 2.6% in 2011-12, 2.9% in 2012-13 and 2.7% in 2013-14. It was assumed that inflation would be at its highest at 4.1%. I seem to remember that it hit 5.2% or thereabouts. Of course, the higher-than-predicted inflation was the only reason why the Government were able to boast about record increases in pensions.

Something happened between June 2010 and now. The thing that happened was the Government’s economic policy. Instead of improving the economy over the past two and a half years—

[Mr Newmark]

Will the hon. Lady give way?

[Sheila Gilmore]

Time is very limited, so I will not take any interventions. During that period, economic growth has gone backwards and we have found ourselves in a position of stagnation—[Interruption.]

[Mr Speaker]

Order. The hon. Member for Braintree (Mr Newmark) should calm down, relax, and lower the temperature. He should not get too excited; there is no need.

[Sheila Gilmore]

That stagnation is why so many of our constituents are suffering so much. I was astonished by some of the comments made this afternoon. The hon. Member for Harlow (Robert Halfon) managed to suggest that unemployment was not down to the recession but down to the entire period of the Labour Government. In fact, when the global financial crisis hit in 2008, unemployment was a little over 5% at 1.6 million, but by the end of 2009 it had risen by 1 million to 2.5 million. The cause of that rising unemployment, so suddenly and over such a short period, was the economic recession, not the Labour Government. Such rewriting of history is constantly going on. Recently, however, that rewriting seems not just to be about what caused the recession, but tries to read back to the Labour Government and put things into that period that were not the case.

The stock answer from the Government on what they have done to help people in the cost of living crisis is to talk about the increase in the tax threshold. The problem with that policy is that it unduly helps those who are already better off, and does not help those with the lowest income levels in our communities. Two thirds of the billions of pounds that have been spent on raising the tax threshold has gone to people in the top half of the income scale, because the policy benefits people on higher incomes as much—if not more—as those on lower incomes.

What has been the quid pro quo? There have been cuts to benefit payments and tax credits, which has cancelled out the rise in the tax threshold for those at the lower end of the income scale. Not only have those paying no tax not benefited, but those at the bottom end who have apparently benefited a little have had that cancelled out. That is what we must all remember. Those with the lowest earnings have not benefited from the policy. Both Government parties constantly say that the tax threshold is being raised because they want to help the lowest earners. In fact, that policy has not benefited the lowest earners, because in order to pay for it—it is very expensive—there have been constant cuts to people’s benefits.

At the extreme end, those who say there has been no change should look around their towns and cities. I have never seen so many quick lenders, payday lenders, and companies such as BrightHouse spring up in such a short period. It was not happening before. Food banks are new in my lifetime—they were something I read about in the history books of the 1930s. One of the Prime Minister’s favourite statements about food banks is, “But usage of food banks went up tenfold under a Labour Government.” The problem with that arithmetic is that 10 times a very small number is still a very small number—from 4,000 in 2005 when the Trussell Trust started up, to 40,000 in 2010. Last year, that figure rose to 347,000, and in the first six months of this year, it has risen to 350,000. That very big number is down to the policies of this Government.

18:34

[David Simpson (Upper Bann) (DUP)]

I will be brief, because time is short.

I listened to the debate with interest. Hon. Members can throw punches from now until Christmas eve about who is to blame, but the reality is that hundreds of thousands of people in the United Kingdom—men, women and children—are in poverty. It is estimated that 31,000 senior citizens will die because of the lack of heat or food in their homes. That is a tragedy for any country and for this modern-day United Kingdom.

Electricity and gas prices, and water charges, are increasing. People are finding it hard to repay their mortgages and, as we heard, interest rates could go up. People are being hit by the bedroom tax—others will use different terminology. The banks are, and have been, ripping them off. Food banks are increasing. In my constituency, which, at 200 square miles, is not the biggest in the UK, food banks are starting to increase, which never happened before. We are sending millions of pounds per year to fill Strasbourg’s coffers so that people there can waste it on some outlandish project and prop up other countries that have gone into bankruptcy.

Whenever the general public look at today’s debate, they will wonder what it is all about and ask, “Why should we bother to vote at all? We don’t seem to be getting much out of it.” I believe that, as elected Members, we should get closer to the general public and those who are going through serious poverty. It is a tragedy that people in this country have to choose between heating their homes or going out to buy their normal groceries.

A major problem we will have in future is personal debt. How that will be solved or dealt with we do not know, but it must be addressed. Millions of people will be in that difficulty.

Yes, vehicles are being exported to other countries. That is brilliant. Exports in general seem to be fairly good and moving forward, and business is looking fairly good, but the ordinary working-class general public currently do not see the benefit of any of it.

We talk about rebalancing the economy. I agree that we need to do that—it is imperative—but hon. Members have been sent to the House to represent the people of the United Kingdom. It is important that we look at rebalancing the lives of the people who sent us here.

18:37

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

The most recent GDP figures suggest that our economy might finally have started to turn a corner, which everybody, especially the Opposition, welcomes. We have had three years of flatlining growth under this Government. How much damage has that economic stagnation done? How long will it take the country, families and businesses to recover from a starting point that is so much lower than was promised back in 2010?

The Opposition motion states that

“growth of 1.5% is needed in every quarter between now and May 2015”

just to catch up on the ground that has been lost. Stagnation and no-to-low growth means that the Chancellor’s much hailed deficit reduction plan has been a failure, with borrowing rising—the coalition is set to borrow £200 billion more than it planned in autumn 2010. Will we get an explanation for that? That failure—the slowest recovery in 100 years—means that the Prime Minister and the Chancellor do not have a chance of meeting their promises to balance the books by 2015.

[Mr Stewart Jackson]

rose—

[Catherine McKinnell]

I would be interested if the hon. Gentleman answered a question. Does erasing those promises from the Conservative party website mean that people will forget they were made?

[Mr Jackson]

The hon. Lady was doing so well. She is airbrushing the previous Labour Government’s record. If Labour is elected in 2015 and the economy is growing, does she recommend running a structural deficit, as the previous Labour Government did?

[Catherine McKinnell]

It is time for Government Members to take responsibility for the economy: three wasted years, lost opportunities and the loss of jobs and growth as a result of this Government’s failing economic policies.

[Mr Newmark]

It is an inconvenient truth for the hon. Lady that in the previous Parliament unemployment in her constituency went up by a whopping 88%. Under this Government, it has gone down 12%.

[Catherine McKinnell]

There are some inconvenient truths for Government Members. Personal debt has increased on their watch by 33% in my constituency and by a significant number in the hon. Gentleman’s constituency.

Hon. Members are keen to refer to the previous Government’s borrowing figures. As of last week, the coalition Government have borrowed more in three years than the Labour Government did in 13 years of government—that is the reality. On every economic test, and on the test the Prime Minister and the Chancellor set for themselves, they have failed palpably. It is clear from the many contributions to the debate that the recovery, which appears to be taking place, has yet to touch the lives of millions of people, contrary to the impression given by Government Members. My concern is that things will get a whole lot worse before people see any signs of them getting better.

Any economic recovery needs to deliver rising standards for all, not just for the Prime Minister, the Chancellor and their friends at the top. We need a recovery that is balanced and built to last. Critically, it needs to benefit every corner and community in the country. Instead, the Government, and the Government Members who support them, continue to bury their heads in the sand. They remain oblivious to the living crisis experienced by millions of families, or, worse, they deny what they hear and see with their own eyes. It is the same old Tory party, aided and abetted by the Liberal Democrats. They are totally out of touch with the reality of life for so many in Britain today who find themselves increasingly out of pocket and increasingly in debt.

[Kwasi Kwarteng]

I will ask the hon. Lady the same question I asked her colleague, the hon. Member for Nottingham East (Chris Leslie). What was the absolute level of the deficit in 2010 when this Government took over?

[Catherine McKinnell]

The hon. Gentleman is obsessed with statistics and keen to detract from the truth, which is that it is this Government who are borrowing £200 billion more than they planned. They have failed to reduce the deficit in the past three years to even a fraction of what they promised back in 2010. It is his Government’s plans that have failed. He should wake up to that fact.

I go back to the people who are paying the price. There is the single dad in my constituency who, to pay for the bedroom tax for the room he keeps for his children to stay in, eats barely anything all week and saves the money to buy food for his children at the weekend. The Chancellor would probably call that thrift. There is the GP and his staff who hand out, from their own pockets, the money for patients to get the bus to the local food bank. The Prime Minister would probably call that the big society in action. There is the branch of a well-known bank on the outskirts of Newcastle, where 80% of customers have only the most basic bank account. It has young mums coming in on a daily basis in tears because they cannot manage to feed their children and heat their homes. Citizens advice bureaux across the country saw a 78% increase in the number of people inquiring about food banks between February and June this year alone—little wonder, when gas and electricity bills have risen by an average of £300 a year on the Prime Minister’s watch. Households are spending 12% more on food bills than they were in 2007, despite purchasing 4.2% less food, as my hon. Friend the Member for Inverclyde (Mr McKenzie) pointed out.

[Several hon. Members]

rose—

[Catherine McKinnell]

I would like to give way, but I really must make progress.

Let us cast our minds back briefly to 2010 and the Conservatives’ general election manifesto. They have attempted to wipe many previous pledges from their website and from the public’s memory, but I am afraid they cannot hide the blatant pledges printed in their manifesto. On page 8 it stated:

“We want to see an economy where not just our standard of living, but everyone’s quality of life, rises steadily and sustainably.”

What about the Liberal Democrats? We know that their manifesto needs to be taken with a very large handful of salt. They stated:

“Liberal Democrats want to make the tax and benefits system fair, so that everyone, be they young or old, can afford to get by.”

They said that Britain was

“one of the most unequal societies in the developed world, where ordinary people struggle to make ends meet while the richest benefit from tax breaks.”

Well, we know who voted through the biggest tax break for top earners as soon as they got into power.

On the back of those election promises, what is the coalition’s record on living standards three and a half years into government? Under this Government, this Prime Minister, this Chancellor, this Deputy Prime Minister and this Chief Secretary, who is not here today, prices have risen faster than wages for 40 of the last 41 months. According to a report published by the TUC over the summer, of all the jobs created since June 2010, four out of five—80%—have been in low-paid industries. The stark reality is that average earnings have fallen in every region and nation of the UK on this Government’s watch. Indeed, the Prime Minister already has the worst record on living standards—none of his predecessors comes close to matching his singular failure on the issue. He is a record-breaking Prime Minister with a record-breaking Chancellor, as my hon. Friend the Member for Nottingham East (Chris Leslie) put it so eloquently.

Let us just remind ourselves, particularly the Liberal Democrat Members previously so concerned about ordinary people struggling

“to make ends meet while the richest benefit from tax breaks”,

when the one blip in the Prime Minister’s dismal 40-month record was. In which one month of the last 41 did we see average wages rise faster than prices? Yes, it was April this year, when financial services firms deferred paying up to £1.7 billion in bonuses so that their staff could benefit from the 50p tax cut. At a time when average earnings for working people have fallen by £1,600 in real terms since May 2010, we have a Government who believed that it was right to prioritise giving a whopping tax cut to the highest earners in the country. At a time when almost 1 million young people are out of work, when long-term unemployment remains dangerously high and when the number of part-time workers wanting full-time hours stands at a record 1.5 million—another record for this Government—we have a Chancellor devoting his time and attention to taking legal action against the EU’s attempts to limit bankers’ bonuses to just one year’s salary. At a time when people are facing a genuine cost of living crisis, in the face of ever-increasing household bills and diminishing earnings, we have a Prime Minister who seems happy to sit on his hands and do nothing.

Only today, figures released by the Money Advice Service show that nearly 9 million people across the UK are living with serious debt problems. Staggeringly, 18% of Britons—8.8 million people—consider themselves to have “serious” financial issues. Many hon. Friends raised those issues on behalf of their constituents, including my hon. Friends the Members for Makerfield (Yvonne Fovargue), for City of Durham (Roberta Blackman-Woods) and for Inverclyde, my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) and my hon. Friends the Members for Cardiff South and Penarth (Stephen Doughty), for South Shields (Mrs Lewell-Buck), for West Ham (Lyn Brown) and for Edinburgh East (Sheila Gilmore). We heard none of that concern from those on the Government Benches. We have a Prime Minister who is clearly happy to let ordinary people pay the price for his economic failure and that of his Chancellor. They are the people who, in the words of my right hon. Friend the Leader of the Opposition, the Prime Minister will never meet and whose lives he will never understand.

What could the Government be doing about this crisis? It is all about priorities. With the cold winter months now upon us, it is time to stand up for hard-pressed families by supporting our energy prize freeze. It is time to do something about the staggering rise in the cost of child care—up 30% under this Government—which is preventing people from getting to work. It is time to do something about housing and to ensure that as well as helping people to buy we help people to build. We also need to do something about unemployment and bring forward the compulsory jobs guarantee.

It is clear that the Government’s policies have failed on their own terms. On living standards, economic growth and the deficit, the Government have completely failed to meet the goals they set themselves in 2010. The Opposition believe that there are specific, urgent and costed measures that the Chancellor could take in the autumn statement next week to help hard-pressed families and small businesses. The Opposition call on the Government and the Chancellor to wake up to reality and do just that. I recommend our motion to the House.

18:50

[The Economic Secretary to the Treasury (Nicky Morgan)]

I thank the 19 hon. Members, on both sides of the House, who have taken part in this afternoon’s debate.

It is said that the first step to recovery is admitting you have a problem, and the Opposition had a chance to admit they had a problem this afternoon. This debate has revealed the lack of an economic plan from Labour and the cost of a potential Labour Government. It is clear from what he said that the shadow Chief Secretary to the Treasury does not know the difference between a debt and a deficit. The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) talked about household debt. She might like to know that household debt, as a proportion of income, was 100% in 1997, grew to 150% by 2007 and was 170% by the first quarter of 2008, but has now fallen by 30 percentage points to 141%, as of the first quarter of 2013.

Another falsehood spread this afternoon was that the Government had borrowed more in three years than the last Government borrowed in 13 years. Labour increased public sector net debt by £488 billion during their term in office, but the debt this Parliament has increased by £360 billion. The shadow Chief Secretary to the Treasury talked about record breaking. If he wants to talk about record breaking, how about talking about the record-breaking deficit that his Government left us? What about the broken promise of no more boom and bust. Remember that one? We do not hear that any more. The only honest statement we have heard from a Labour MP was from the former Chief Secretary to the Treasury, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), who left a note saying, “There’s no money left”. He could not have been more right.

So what is missing from the motion today? There is no mention of the jobs created by this Government, of the 2.7 million people taken out of income tax, of the council tax freeze, of fuel duty cuts, of the deficit falling by a third, of inflation falling or of employment being at an all-time high.

[Robert Halfon]

Does my hon. Friend not think it strange that the Opposition, who say they care about the cost of living crisis, voted against cutting taxes for lower earners and raising the threshold? Far from paying for those tax cuts for lower earners through other cuts, as the hon. Member for Edinburgh East (Sheila Gilmore) said, have we not raised taxes on the rich by increasing the capital allowance from 18% to 28%?

[Nicky Morgan]

My hon. Friend is indeed right. I wanted to come to his speech, because he started by talking rightly about fuel duty and the wonderful campaign he has launched to ensure that households are not spending as much as planned under the last Labour Government. I heard his plea for a further cut. I take note, but I make no promises.

We then heard from my hon. Friend the Member for Braintree (Mr Newmark), who gave a characteristically positive speech. I note that unemployment in his constituency, including youth unemployment, is down by 20%, which is definitely something to be recognised. My hon. Friend the Member for Spelthorne (Kwasi Kwarteng) rightly talked about the recovering economy and about how debt had become endemic under the last Government. He is, of course, absolutely right.

My hon. Friend the Member for Tamworth (Christopher Pincher) coined a new phrase that I hope will spread across the Twittersphere and beyond about geeks bearing gifts. I wonder whether he would agree with Charles Clarke, the former Home Secretary, who said of Labour’s energy policy: “My criticism of that particular proposal is I think it is a one-off effort that does not deal with the overall comprehensive issue we have to address. I think there is even a case that some of the recent price rises we have seen might have been a response to the suggestion of a freeze”. That is absolutely correct.

We heard a wonderful speech from my hon. Friend the Member for Hexham (Guy Opperman), who talked about apprenticeships, noting the move from 430 to 690 apprentices in his constituency over the last year. He is absolutely right that for 13 years the last Labour Government failed to tackle the lack of skills necessary for our economy.

[Mr Newmark]

Is the Minister aware that every single Labour Government have left power with more people unemployed than when they arrived in power, while this Government are bringing unemployment down?

[Nicky Morgan]

My hon. Friend is absolutely right. Unsurprisingly, we did not hear that from Labour Members.

We heard an excellent speech, too, from the hon. Member for Redcar (Ian Swales), and I would like to thank him for his remarks, particularly his comments about energy investment and support for manufacturing.

[Sheila Gilmore]

Will the Minister give way?

[Nicky Morgan]

I am not going to give way to the hon. Lady, because she did not give way to anyone during her speech.

My hon. Friends the Members for Elmet and Rothwell (Alec Shelbrooke) and for Bedford (Richard Fuller) talked about work being the key to recovery, the need to create more jobs and making work pay, which is a critical part of our welfare reforms.

We heard from the hon. Member for Makerfield (Yvonne Fovargue), who talked about breaking the stranglehold of the big six. It was the last Labour Government who left us with the big six; we started with more and ended up with six.

I listened carefully to the speeches of the hon. Members for Dundee East (Stewart Hosie) and for Swansea West (Geraint Davies), of the right hon. Member for Oldham West and Royton (Mr Meacher), and of the hon. Members for Edinburgh East (Sheila Gilmore), for West Ham (Lyn Brown) and for South Shields (Mrs Lewell-Buck). What struck me most—I have referred to it before in this place—was the collective amnesia and total lack of understanding among Labour Members of how we ended up with the largest deficit since the second world war, which this Government have tackled by taking tough and difficult decisions.

[Alec Shelbrooke]

I may be able to help out the Treasury team by suggesting that if the Minister were to visit a scrap metal dealer, she might be able to solve the deficit with all the brass neck from Labour Members this afternoon.

[Nicky Morgan]

My hon. Friend makes a characteristically colourful intervention and speaks wonderfully, as always.

The hon. Member for City of Durham (Roberta Blackman-Woods) made a point about child care and called for action from this Government. This Government are taking action on that matter, with tax-free child care, increased provision for two-year-olds and increased provision for three and four-year-olds. I would have thought that the hon. Lady welcomed that. I noted her welcome of this week’s announcement on payday lenders by my right hon. Friend the Chancellor.

I noted the confession from the right hon. Member for Oldham West and Royton when he said that the problems did not start with this Government. He is absolutely right about that, but that was the only thing with which I could agree in his speech.

The hon. Member for Cardiff South and Penarth (Stephen Doughty) talked about being on the side of Welsh people. In that case, I am sure he would welcome the 4,560 people in his constituency who have been taken out of income tax entirely since this Government’s changes.

The only way to deliver sustained improvement in living standards is to take the difficult decisions that this Government have taken to tackle the economy’s problems head-on, delivering a sustainable, long-term recovery for all. The Labour party has demonstrated comprehensively today that it is not up to taking those decisions. I therefore ask the House to reject this motion.

Question put.

18:58

Division 140

Ayes: 245

---

Labour: 233
Scottish National Party: 5
Plaid Cymru: 3
Democratic Unionist Party: 2
Social Democratic & Labour Party: 1
Green Party: 1

Noes: 297

---

Conservative: 249
Liberal Democrat: 45
Democratic Unionist Party: 1
Independent: 1

Business without Debate

Wednesday 27th November 2013 Commons Chamber

Delegated Legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),

European Union

That the draft European Union (Definition of Treaties) (Colombia and Peru Trade Agreement) Order 2013, which was laid before this House on 21 October, be approved.—(Gavin Barwell.)

The Deputy Speaker’s opinion as to the decision of the Question being challenged, the Division was deferred until Wednesday 4 December (Standing Order No. 41A).

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Housing

That the draft Redress Schemes for Lettings Agency Work and Property Management Work (Approval and Designation of Schemes) (England) Order 2013, which was laid before this House on 25 October, be approved.—(Gavin Barwell.)

Question agreed to.

Petitions

Administration and Insolvency

Wednesday 27th November 2013 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Gavin Barwell.)

19:14

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

It is a pleasure to lead this debate on administration and insolvency. It is worth mentioning that the empty green Benches are a reflection not of the relevance or importance of the issue but of the incredibly busy lives that most parliamentarians lead.

The purpose of the debate is to try to persuade the Minister that there should be a

“mandatory requirement for licensed insolvency practitioners to give greater consideration to the social consequences of companies in administration”

rather than the current situation where perfectly viable businesses are simply sold to the highest bidder to be disassembled, with their assets flogged off and their work forces devastated.

The Minister will be aware that I met the Secretary of State to discuss this very issue. I fully appreciate that administrators are under a legal duty to ensure that they get a maximum return for creditors, but there is little, if any, cognisance of the detrimental effect that that can have on the very survival of a company if other factors are not explored, often with a resultant effect on a local community or a negative impact on UK plc. In other words, administrators almost invariably accept the highest bid, which is not always the best bid.

Before I begin my speech in earnest, I should like to place on record my thanks to both the Secretary of State and the shadow Secretary of State for their co-operation in September when I contacted them in a desperate attempt to save as many jobs as possible when Trigon Snacks in my constituency went into administration.

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Gentleman for giving way. Before the debate, I received his permission to intervene. Does he think that in the first year of trading, before a business gets into difficulties, the Government or the Minister could give them some indication of what to do when it comes to banks, regulations, skills and rates? Those four things are so critical in the first year of any business to ensure that it gets a second and a third year and that it stops insolvency.

[Steve Rotheram]

I am certain that those four factors are important, but start-up credit is a major impediment to the long-term success of smaller, micro-businesses. One in six small and medium-sized enterprises goes bust in the UK. In 2011-12, something like 120 SMEs per day were going into administration or liquidation. Anything that Parliament can do to assist those businesses to grow and to take on additional staff can only benefit the country as a whole.

I also want to put on record my thanks to Unite the union, which, despite the Prime Minister’s constant jibing, works tirelessly to support its members and which was as determined as I was to see production remain in Liverpool. I know the Minister and her Department are aware of this case, and it is this recent episode on which I wish to focus much of my contribution tonight as it clearly illustrates the issue at hand.

Trigon Snacks was a nut production factory with an annual turnover of approximately £30 million. The company produced peanuts for pub favourite brands such as Big D and Planters, and the business had profitable contracts with a number of large supermarket chains.

Following the company’s success at winning an increased order book with Sainsbury’s, Trigon doubled its production, introducing new shift patterns for the work force. That resulted in negotiations between management and the union to reward staff with a pay rise, which they had forgone for many years to secure the viability of the company. Indeed, some of the loyal work force had given more than 30 years of service to Trigon. Everything in the garden looked rosy.

To meet the new targets, Trigon stepped up production but soon encountered cash-flow problems, due to the purchase of extra plant, material, raw stock and associated manufacturing costs. To meet that short-term liquidity problem, Trigon approached the Royal Bank of Scotland for a loan totalling approximately £1.2 million. Given the developments this week with RBS, this might be another case that requires further scrutiny from the Secretary of State as it is clear that, for whatever reason, the company, despite being profitable, was not awarded the loan. When that loan could not be guaranteed, the business was destined to fail. RBS’s decision came in August and just a month later the business was put into administration. It is also worth noting that at the time of entering administration the company’s stock value alone was £2.7 million.

Disgracefully, 64 members of staff were handed immediate redundancy notices without prior warning, consultation with their trade union officers or even the courtesy of the administrator writing to me as the local MP. That still rankles with those who lost their jobs. Those employees had given decades of service and yet they were called to the works cafeteria for a routine meeting, had their names read out and were then told not only that they were losing their jobs but that they had to go promptly to clear their desks and lockers before being escorted from the premises by security guards who had been hired specifically to oversee that draconian act.

Having met Unite officials and staff at the factory immediately after the redundancies were announced, I became aware that numerous cases of unfair dismissal were set to be lodged alongside claims for protective awards by the union. Many of those shown the door have found it extremely difficult to find alternative employment despite being skilled factory workers with a wealth of experience.

I should make it clear that I am not suggesting the administrators did anything illegal, but I believe it was certainly unethical and I told them so. It remains likely that Unite will seek 30 days’ pay for its members through protective awards, a cost that is likely to be borne by the Exchequer. However, once Trigon was in administration only two outcomes were likely. First, the administrator could look to keep the business operational by selling it as a going concern. Although that would not absolutely guarantee the future of the business, it was hoped that those who bought the going concern would maintain production at the site, look to restructure the business, re-launch the brand and invest in improvements. There was another option: it would result in the administrator accepting a bid from a company that would close the factory, sell the stock, plant and machinery, transfer production to another site and make the whole work force redundant. In other words, the fear was that an asset stripper would decimate the business for a quick profit.

In the case of Trigon, despite my best efforts and those of Unite it looked likely that the doomsday scenario would be the most probable outcome and that the administrators, Duff and Phelps, would complete a sale that would maximise a better return for creditors but that would inevitably result in the loss of production at the Liverpool factory.

That is where I think that the balance is all wrong. I know that the closure of any factory is a tragedy for that particular business and work force, but when it makes no economic sense it is even harder for those facing redundancy to accept. When the result also lands the Treasury with a hefty bill for workers’ redundancy payments and increased benefit bills—not to mention the devastation to the local jobs market, the loss of business rates and the blight of a large empty factory—questions need to be asked. I believe that the need to ensure that administrators take greater control of the social impact of the bids they accept is now even greater.

The cold reality is that none of those factors could, in law, be taken into consideration by the administrators, and I believe that that is fundamentally wrong and needs to change. Some people may argue that administrators indirectly take all those factors into consideration as they look to keep businesses alive as going concerns, but they do not have a mandatory requirement to consider the social consequences. The law only directs them to make the biggest return for creditors, no matter what the consequences might be for communities.

At the end of the day, the potential to asset-strip the Walton factory collapsed, as only one bid remained, which set out to retain production locally, and this is where I do give some credit to the administrators for working with myself and the Unite union throughout the evening to secure a deal as a going concern.

We were lucky. The Trigon factory was saved. It still exists today, in the guise of a new company called Natco, but minus the 60-odd staff originally sacked. I have not given up hope of restoring the work force to its full complement, and getting those workers who were wrongly dismissed back on site. I know that many of them are facing a bleak Christmas for the first time in 30 or 40 years, through absolutely no fault of their own, with, yes, the fiscal costs borne by the state, but the human cost is much more difficult to measure. All that is because the initial shortfall loan could not be agreed with the banks.

I am aware that when it comes to the process of administration, nothing about what I have described is extraordinary, or dissimilar to the experiences of many others in this place. This is where I believe that reform should be considered, even though I appreciate that it is a complex area of law. The primary legislation governing insolvency is the Insolvency Act 1986. As the Minister is no doubt aware, the last Labour Government radically reformed legislation in this area to modify insolvency laws through the Enterprise Act 2002.

The raison d’être of our reforms was as PricewaterhouseCoopers explains:

“The Government’s intention was to create a shift in insolvency culture, with a greater emphasis placed on company rescue and rehabilitation, fairness for all creditors and making it tougher for offending directors”.

Those reforms achieved a great deal. Indeed, as PWC went on to say, the

“insolvency landscape transformed; administrations have now largely replaced administrative receiverships as the primary insolvency procedure, and many businesses have been preserved via this route. Furthermore, other solutions have evolved to facilitate the turnaround, restructuring and rescue of businesses”.

So progress can be made—it has already been made—to change the culture within this field and I am sure that this kind of independent analysis is welcomed across the House. But now I think it is time to go further.

In the list of responsibilities laid down on licensed insolvency practitioners we need a further mandatory requirement that consideration should be given to the social consequences of every bid they receive and, critically, that they should have the ability to award a sale of the asset that offers the most protection for staff, local communities and the taxpayer.

My contention is that greater consideration is needed of the impact on the public purse and our manufacturing capabilities. It seems nonsensical to me that greater consideration is not given to the impact that insolvency has on the Exchequer—and, equally importantly, the area in which the closure is proposed. I am not suggesting that those two factors should be exclusive, or that they should be given pre-eminence in deliberations, but there must be some reflection of the wider social impacts of each bid. I am acutely aware that this will not always ensure that asset-strippers are not awarded businesses. I am also aware that it will not always ensure that British workers stay in work and that their jobs will not just be exported overseas once the sale is completed.

[Bill Esterson (Sefton Central) (Lab)]

I am sure that my hon. Friend is coming to the end of his speech, but he is absolutely right about social responsibility being an important part of the way in which insolvency is handled, and I welcome that point. Does he agree that, bearing in mind the example he gave of the way in which the bank has behaved, it is vital that banks change their behaviour so that they take greater responsibility to stop insolvency in the first place?

[Steve Rotheram]

I could not agree more with my hon. Friend, because that is exactly the scenario that I am painting with this company. Trigon was a viable, profitable company with a short-term cash-flow problem that could not get a bail-out from the banks, which, we should not forget, are owned by the people of this country, who rely on those companies to provide them with suitable jobs.

We must ensure that there is a chance, as in the case of Trigon, where a factory was at the heart of one of the most economically deprived areas in the UK—that is true of Liverpool, Walton and there are areas of social deprivation in my hon. Friend’s constituency too—that other bids are considered that would keep people in work and maintain UK production.

Liverpool city council has been successful in attracting new industries to our city. In north Liverpool, we continue to work to attract inward investment and businesses, and do all that we can to ensure that our workers are in full-time employment, but that is incongruous if the net result is that we haemorrhage jobs from profitable companies, which we give to asset strippers to break up, and sell brand names for products that are manufactured abroad, then import the same products back into the country.

[Ian Lavery (Wansbeck) (Lab)]

Was there any opportunity for the company to access moneys from the Government to prevent that situation in my hon. Friend’s constituency?

[Steve Rotheram]

The Secretary of State and the Department—I spoke to some officials—were as helpful as they possibly could be. If we had had a longer lead-in period or the company was in administration for a longer period there might well have been investment or pots of money—local enterprise partnership moneys, for instance, or regional growth moneys—that could have been used. Unfortunately, things happened very quickly and it was not possible to access moneys to ensure that the shortfall of £1.2 million was covered.

If the Minister is not willing to hear my request for a mandatory requirement for administrators to consider the social consequences of each bid, will she not consider the requirement in regard to the consequences for UK industries? That is not protectionism but pragmatism. We simply cannot afford to do nothing and watch good British businesses suffer. For instance, since the global financial crisis, the impact on the retail industry has been severe. According to the Centre for Retail Research in Nottingham, in its update entitled “Who’s Gone Bust in Retail 2010-13”, since the global financial crash, 249 medium and large-sized retail businesses have failed financially, affecting more than 22,100 stores and close to 250,000 employees. We all know the names of those companies—most of them are household names, but they have become infamous for going out of business.

Not all of those companies were profit-making enterprises in the way Trigon was, but undoubtedly some businesses were wound up that produced a short-term return for asset strippers but that, in the long term, could have been kept alive, and there was no consideration of the long-term social consequences for everyone affected by closure. In other words, I contend that some creditors will have done well out of these administrations, but the workers, the local communities and the economics of the area will have suffered most from their failure, and we must do more to protect society and British industry.

In conclusion, I expect that the Minister might try to explain that this is a very complex area of law and that it would be difficult to introduce changes as there would undoubtedly be knock-on consequences. I do genuinely understand the problems of best intentions—I spoke to the Secretary of State about this—and the law of unintended consequences, but I am sure the hon. Lady will agree that it would be wrong not to look at what could be done to improve current legislation. The status quo is not good enough.

19:35

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

I congratulate the hon. Member for Liverpool, Walton (Steve Rotheram) on securing the debate, and, if I may say so, on his rather fantastic contribution to Movember. As we are now nearing the end of the month, I implore him, perhaps on behalf of other hon. Members, not to get the razor out on Sunday so that we can continue to enjoy his fine moustache. What a fantastic cause to raise money for.

I recognise the interest that the hon. Gentleman has shown in insolvency issues, and in particular his concerns about the impact that insolvency has on local communities when jobs are unfortunately lost. He outlined particularly eloquently the human cost that is paid by those involved in such businesses when they unfortunately enter insolvency. This is especially keenly felt in the run-up to Christmas. In the example he talked about, Trigon Snacks, those 64 individuals are in a very difficult situation, having, sadly, lost their jobs. I extend my full sympathies to those individuals and their families.

I recognise the efforts and discussions that the hon. Gentleman has had with the administrators and the union in this case. He was right to highlight the positive role that unions can play in such situations. It is all too easy for unions to be demonised in industrial relations, with headlines that tend to focus on circumstances where industrial relations break down and are negative, whereas the day-to-day experience is often of a much more positive and constructive working relationship, helping to create future success for a business that is going through difficulty. Although clearly for the 64 individuals who have lost their jobs there is a heavy price to pay, it is worth noting the success of at least making sure that 110 of those 174 jobs have been saved as a result of the business being sold as a going concern. The input of dedicated constituency Members of Parliament in such cases is not to be underestimated and is cause for congratulation.

I understand the hon. Gentleman’s concerns about some of the practices surrounding administration, and I will try to set out what the Government are doing to address some of them. He said that the social consequences should be explicitly recognised in the objectives of administrators, and he rightly highlighted concerns where it is the case, or sometimes the perception, that a company is asset-stripped and sold off to the highest bidder without any apparent concern for the wider consequences.

I would like to provide reassurance by going through the hierarchy of objectives for administrators. The top priority that they have to bear in mind is business rescue—to rescue a financially troubled company as a going concern. That is well aligned with the wider social objectives that the hon. Gentleman seeks to promote, including the interests of employees and other stakeholders. Generally, the best way of making sure that creditors can be paid and jobs can be saved is to ensure that the business can continue as a going concern. If that is not possible, the administrator is required to achieve a better result for the creditors of the company as a whole than would be achieved in an immediate winding-up. Only if neither of those things is possible is it their duty to realise the property and the assets for the benefit of the secured or preferential creditors. We have a system that places priority on business rescue, which is incredibly important and ultimately the best way to secure the jobs of the individuals who are working for a company.

Regrettably, to have a chance of rescuing a failed company, urgent and robust action sometimes needs to be taken to restructure and to reduce costs. That does not necessarily mean that it is the fault of the administration procedure per se; it may be a reflection of the economic reality of a company that cannot meet its obligations. Thankfully, the number of administrations and liquidations has been on a downward trend in recent years. In the 12 months that ended in the third quarter of this year, there were 2,303 administrations, which is about 300 fewer than in the previous 12 months, and the number of liquidations was about 8% lower over the same period.

The hon. Gentleman and the hon. Member for Sefton Central (Bill Esterson) asked about the behaviour of the banks. This is not only about what happens when an administration procedure is reached but what we can do to prevent businesses from getting into this situation in the first place. The hon. Gentleman outlined the scenario of Trigon Snacks, where so much stemmed from the declining of a request for a loan. I am sure he will understand that I cannot necessarily comment on the specifics of that loan application, but this is an issue on which we share some general concerns. In fact, this week the BIS entrepreneur-in-residence, Lawrence Tomlinson, published a report in which my right hon. Friend the Secretary of State has taken a great interest and has referred to the Financial Conduct Authority and the Prudential Regulation Authority, which looks at the role of banks particularly in relation to the support they give to business. The report focuses on significant concerns about the conduct of the Royal Bank of Scotland. We are looking carefully at the evidence in the report to see whether further issues need to be raised within the regulatory bodies regarding insolvency practitioners and whether any legislative framework issues need to be addressed in relation to the behaviour of banks.

Generally speaking, our insolvency regime is highly regarded internationally. A recent World Bank report rated it seventh—above those of the US, Germany and France—on resolving insolvency. That is partly a reflection of the flexibility of our regime for prioritising business rescue, which helps to preserve value and jobs. That focus, rather than any specific obligation to consider particular affected parties over others, helps to balance everyone’s interests and to create a better business environment, which improves the prospects for preserving these jobs in the long term. However, I absolutely recognise the concerns that the hon. Gentleman raises about this case and others.

Let me turn briefly to some of the other issues raised about insolvency. On the effectiveness of the regulatory regime, we believe that stronger oversight powers would help to improve confidence in it. We will therefore introduce proposals, when we can find time in the legislative programme, to strengthen the powers of the Secretary of State as oversight regulator.

Concerns have been expressed about the pre-pack administration process, particularly where there are sales back to connected parties. In the light of these concerns, I announced in July that Teresa Graham had been appointed to undertake an independent review of the pre-pack procedure, which we expect to be completed by the spring next year. There have also been changes to introduce a revised practice standard for pre-packs, known as SIP16, which is now in place. The complaints mechanism has been streamlined, with a new single complaints gateway to help to make the complex array of regulatory bodies easier to complain about.

The issue of fees charged by insolvency practitioners has been raised. Professor Elaine Kempson recently provided a review of fees that was published earlier this year, and we intend to make an announcement on the way forward in due course.

The hon. Gentleman said that in recent years significant progress has been made on insolvency to improve the situation. I hope that he is reassured that this Government are very aware of the issues he raises and are taking action on a number of fronts to make further progress in various areas to ensure that all insolvency procedures can deliver the best possible outcomes in difficult circumstances—

19:44

House adjourned without Question put (Standing Order No. 9(7)).

Petitions

Wednesday 27th November 2013 Petitions

Wednesday 27 November 2013

The Appeals Process for the Removal of Capacity in Legal Proceedings

Wednesday 27th November 2013 Petitions

The Petition of Sarah Matthews, a mother living in England,

Declares that the Petitioner’s barrister, Francesca Wiley, of 1 Garden Court Chambers without having met or being formally appointed by the Petitioner and merely on reading documents created by London Borough of Sutton applied to the court to have her mental capacity to instruct a solicitor removed because the barrister believed she was subject to querulous paranoia. Additionally her solicitors Russell & Co informed her prior to her meeting her barrister that they had jointly decided that she did not have capacity. Furthermore the solicitors refused to be instructed at this point.

The Petitioner then contacted the Honourable Member for Birmingham, Yardley who put her in touch with Sam Smith, who is a McKenzie Friend specialising in capacity issues. Sam Smith assisted her in successfully retaining her capacity to instruct a solicitor. This, however, involved paying an experts fee of £1,650 for a full assessment, followed by a further £1,500 for the expert to attend court and provide the written report. The court ordered that the Petitioner should pay the cost of this experts report if legal aid refused to pay it, which legal aid duly refused to do.

The Petitioner recognises that there is no legal support for those people who wish to argue against a removal of capacity and believes that there is a conflict of interest when legal advisors can apply to remove the capacity of their own client whilst retaining the matter when a litigation friend is appointed.

The Petitioner believes that it is difficult for someone to believe the inequality of arms when a litigant’s own legal advisors start acting against a litigant until they have experienced this.

Furthermore the Petitioner is being refused access to her files by the London Borough of Sutton. Records appear to have been altered with the intention of preventing disclosure under s77 of the Freedom of Information Act and without these she is unable to correct inaccurate information held.

The Petitioner therefore requests that the House of Commons Justice Committee investigates the procedures that are used to remove capacity in the English and Welsh courts and calls for the provision of independent legal assistance for those people who wish to resist the removal of their capacity.

And the Petitioners remain, etc.—[Presented by John Hemming.]

[P001302]

Walsall Gala Baths

Wednesday 27th November 2013 Petitions

The Petition of the users of Walsall Gala Baths,

Declares that the petitioners do not wish to see the closure of the Walsall Gala Baths as they believe that it is important to have swimming facilities in the town centre. Especially and in particular, we do not wish to lose the only BRINE pool that is centrally located, well used and much appreciated for its medical benefits to many of its users.

The Petitioners therefore request that the House of Commons urges the Government to take all possible steps to encourage Walsall Metropolitan Borough Council to consider the objections of the local residents.

And the Petitioners remain, etc.—[Presented by Valerie Vaz, Official Report, 13 June 2013; Vol. 564, c. 594.]

[P001183]

Observations from the Secretary of State for Culture, Media and Sport:

The Government acknowledge the contribution of Walsall Gala Baths to the provision of swimming facilities in the town centre. The Government understand there is a very good level of swimming pool provision within Walsall Borough with 17 pools on 14 sites. The amount of water space in the Borough is well above the national and regional averages.

Sport England is aware of the challenges facing local authorities in the current economic climate. Sport England is supporting over 80 local authorities to develop a strategic approach to facility provision. This includes Walsall, where they provided ongoing advice and support to Walsall Borough Council. Use of Sport England’s strategic planning tools enabled the Council to complete an evidence-based review of leisure provision in the Borough, in order to identify what provision is required, how it can be delivered and the need for additional investment.

By rationalising their swimming pools, local authorities can often deliver cost savings through the replacement of older facilities with modern, efficient, fit for purpose facilities which can run at no or greatly reduced subsidy and still drive higher levels of participation. In April this year, Sport England announced nearly £5 million of lottery investment to upgrade pool changing provision at 19 pools around England through the Improvement Fund. It is also managing the relocation of nine Olympic legacy swimming pools around the country. The total number of swimming pools in England has increased by 134 since 2011, and currently stands at 5116.

While decisions about the future of Walsall Gala Baths remain a matter for the local authority, this Government welcome the news that the petition prompted the Council to revisit their plans. In September, Walsall Borough Council called for a further and more detailed report for Cabinet and Council consideration, using a cost/benefit analysis approach, as to how an investment cost (of around £1 million) might ensure a further 10-year lease of life for this town centre facility.

Speed Limit in Elterwater, Cumbria

Wednesday 27th November 2013 Petitions

The Petition of a resident of the UK,

Declares that the Petitioner believes that the current speed limit of 60 mph in Elterwater, Cumbria, is hazardous for local residents.

The Petitioners therefore request that the House of Commons urge the Government to change the speed limit in the area to 20 mph, and introduce traffic calming measures.

And the Petitioners remain, etc.—[Presented by Tim Farron, Official Report, 11 November 2013; Vol. 570, c. 774.]

[P001287]

Observations from the Secretary of State for Transport:

The Department issued revised guidance in January 2013 aimed mainly at local traffic authorities who are responsible for setting speed limits on local roads. It has also been designed to help explain to everyone why and how local speed limits are determined. This circular has been revised following full public consultation in summer 2012.

Traffic authorities set local speed limits in situations where local needs and conditions suggest a speed limit which is lower than the national speed limit. It is right that local traffic authorities, not central Government, should have the flexibility to set local speed limits that are appropriate for the individual road, reflecting local needs and taking account of local considerations.

Further details can be found online at: www.gov.uk/government/publications/setting-local-speed-limits.

Westminster Hall

Wednesday 27th November 2013 Westminster Hall

Wednesday 27 November 2013

[Mr Clive Betts in the Chair]

Bradford & Bingley plc

Wednesday 27th November 2013 Westminster Hall

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

09:30

[Philip Davies (Shipley) (Con)]

It is a pleasure to serve under your chairmanship, Mr Betts. I hope you will convey my thanks to Mr Speaker for granting this debate.

As the Member of Parliament for the Shipley constituency, which includes the towns of Bingley and Crossflatts, where Bradford & Bingley was based, I have asked for this debate on behalf of the nearly 1 million Bradford & Bingley shareholders and bondholders who still do not know how or why their company was expropriated in a way that destroyed it as an ongoing business, unlike what happened to banks such as the Royal Bank of Scotland and Halifax Bank of Scotland, which had far weaker balance sheets.

I have also called the debate on behalf of the employees of Bradford & Bingley, many of whom had worked there for many years and were also shareholders. This debate is also important for the local community in Bingley and across the Bradford district, which has lost a highly valued brand from the high street. Bradford & Bingley had been in existence since 1851.

I thank many hon. Members for their support, both those here today and the many unable to attend. I particularly thank my right hon. Friend the Member for Mid Sussex (Nicholas Soames), who has been extremely helpful and supportive. He is a champion of the many shareholders in his constituency who lost out when Bradford & Bingley was nationalised in the way it was.

On Friday 26 September 2008, in the foyer of the Oval Office of the White House, the then Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), made the decision to nationalise Bradford & Bingley during a telephone conversation with his Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), who was in the UK. That decision was extremely disappointing for the shareholders, many of whom remain outraged by what they consider to be legalised theft. Indeed, it is a shame that neither right hon. Gentleman is here today to explain the part they played in the scandal.

Days after the telephone call, the Cabinet Office stated in response to a freedom of information request from a shareholder, Mr Jonathan Bloch, that it had no files whatever. David Blundell, the chairman of the Bradford & Bingley shareholder action group, whose main objective throughout has been to secure the truth on the nationalisation—he is also a director of the UK Individual Shareholders Society, a voluntary organisation whose main objective is to protect the rights of private investors—said to me at the time that he had difficulty believing that the Cabinet Office statement was true, and so it has proved.

After further freedom of information requests, the Cabinet Office finally admitted in 2011 that it did possess the relevant records, but it refused to release them on the grounds of public interest. The Cabinet Office also refused on the grounds of public interest to state whether the nationalisation decision had secured Cabinet approval. I put on the record my admiration for David Blundell’s tireless work on behalf of the Bradford & Bingley shareholder action group and his determination to get to the bottom of the events surrounding the nationalisation.

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

I put on the record my thanks to my constituent, David Blundell. He is fighting for the small person who invested their life savings in those shares and is now faced with nothing because of the decisions made at national level by the then Government. They have had no answers.

[Philip Davies]

My hon. Friend is absolutely right, and I know that he has been particularly helpful to the Bradford & Bingley shareholder action group. I thank him for all the help and support he has given to the many shareholders.

Surely the public interest demands full disclosure of the facts to secure the truth. How can the refusal even to release whether the nationalisation of Bradford & Bingley was ratified by the Cabinet ever be in the public interest in a democracy? Surely voters are entitled to know, let alone shareholders, bondholders and employees.

How do we know that the Cabinet Office’s original statement was untrue? I am probably one of the few people—I am sure you are another, Mr Betts—who has read the relevant part of “Beyond the Crash” by the right hon. Member for Kirkcaldy and Cowdenbeath, in which he admitted his part in the sorry mess. The shareholders would otherwise still be in total ignorance of the nationalisation process.

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

I congratulate my hon. Friend on securing this debate. I have had a vast amount of correspondence from just one constituent. I concur with him that the situation is bad enough, but the lack of openness for savers and investors means that they remain frustrated. It is vital that we make the information public.

[Philip Davies]

I am grateful for the hon. Lady’s support. I am sure her constituent, who is a shareholder who lost everything, is also grateful for her support. Her point on the lack of transparency is absolutely right.

The full picture of how the banking crisis developed probably goes back to 2003-04, when there were small changes in accounting standards, but the main catalyst was the introduction of the international financial reporting standards, including international accounting standard 39, by the then Government in 2005. IAS 39 proved to be a catastrophically defective standard that may even contravene UK law.

The Local Authority Pension Fund Forum, the universities superannuation scheme, Threadneedle Asset Management and other investor groups sought the opinion of leading counsel George Bompas QC. His opinion suggests that company directors must override the international reporting standards to comply with company law and may need to ignore the advice obtained by the Financial Reporting Council. The opinion also states that the defective financial outcomes of the standards, which are still in place, should be overridden by invoking the true and fair view requirement of the law. Those problems remain, as highlighted by the failure of the Co-operative bank and Britannia building society, both of which were audited by KPMG.

The concerns on accounting standards are widely held. In November 2012, the then Governor of the Bank of England, Sir Mervyn King—now Lord King—argued for a £35 billion capital raising by British banks. He is on record as saying:

“Bank accounts are dishonest because Britain’s accounting rules are faulty. Reckless lending, inflated profits, irresponsible bonuses have all been possible, not just because of greedy bankers, but because of the rules themselves—and a failure of regulators and politicians to recognise the problems.”

The banks used IFRS and IAS 39 from 2005 onwards, and it appears that the then Government were content to receive corporation tax from the inflated profits rather than exercise a duty of care towards savers and investors. People have blamed the lack of regulation for the excesses of the banks, which led to their demise. That is too simplistic. It was not the lack of regulation—banks had mountains of regulations to meet—but the lack of regulation on important things that was the problem.

I will now address the sequence of events prior to the nationalisation. The Bradford & Bingley 2007 accounts were published in April 2008. The auditors passed Bradford & Bingley as a going concern and a dividend was paid. In August 2008, a rights issue was completed at a price of 55p less than eight weeks before the nationalisation. The auditors KPMG completed extensive audit work on the rights issue, and the interim results announced on 29 August 2008 supported a solvent, well capitalised bank. With net assets of £1 a share and a tier 1 capital ratio of 9.1%, shareholders were entitled to believe that Bradford & Bingley was a going concern when the reality was that it was “going, going, gone” just one month later.

Within days of the nationalisation, the Government provided more than £60 billion of support to the two Scottish banks. Bradford & Bingley had a far stronger balance sheet than those banks, as shown in the banking crisis post mortem published by the Local Authority Pension Fund Forum. Furthermore, the public statements of the board emphasised the balance sheet strength of Bradford & Bingley on 29 August and 25 September 2008, a day before the nationalisation decision. That strength was again confirmed by Messrs Kent and Pym, the chairman and chief executive respectively, at a Treasury Committee hearing on 18 November 2008. Their statements conflict directly with the justification of the nationalisation decision by both the Government and the tripartite regulatory authorities. So who was telling the truth?

In the week after the nationalisation, the savings book and retail branch network were sold—arguably at a fire-sale price—destroying the company as an ongoing business. What shareholders, bondholders, employees and my local community want to know is why Bradford & Bingley was singled out in that way, in stark contrast to the treatment of other banks.

Every other bank bailed out at the time is still a going concern—even Northern Rock. Shareholders in some of the bigger banks at the time, such as HBOS, still have shares that have value. Why was Bradford & Bingley, uniquely, closed down, especially given that its financial situation was certainly no worse—indeed, all the evidence suggests it was better—than that of the others? Does the Minister not believe that people are entitled to know the answer to that simple question?

Whereas other banks were considered too big to fail, was Bradford & Bingley seen as too small to save? With constant speculation in the media at the time, was it felt that, if Bradford & Bingley was taken out, the speculation about the health of the banking sector would subside? Whatever the reason, and however little we like it, I hope the Minister agrees that we are entitled to know it.

The Treasury appointed Peter Clokey of PricewaterhouseCoopers as independent valuer for the purposes established under the Bradford & Bingley plc Compensation Scheme Order 2008. His nil valuation was published in July 2010, two months after the general election. Like the shareholder action group, I believe that his terms of reference were far too narrow and that the Labour Government concealed the fact that the bank had received funding support before the nationalisation, pretending for many months that the valuation would be fair and independent, when they knew it would not be, because the in-administration approach of the order ensured a nil valuation and prejudiced legal claims and submissions to the independent valuer and the upper tribunal review body.

Many shareholders—the former owners of the company —believe the valuation exercise was a cynical attempt to dampen media, press and public interest, thus kicking the matter into the long grass. I know that David Blundell has a high regard for Peter Clokey and his colleague James Worsnip. He respects their integrity and appreciates the assistance they provided, within the limits of their remit. In his view, their behaviour may be compared favourably with that of certain Ministers, the Treasury, the Financial Conduct Authority and the Cabinet Office. I met Peter Clokey at the time, and I felt he was sympathetic to the plight of shareholders, but the terms of reference the Labour Government gave him left him no alternative but to give a nil valuation.

The Government’s position on the valuation was that Bank of England support through the special liquidity scheme was not ordinary market assistance, despite more than 30 banks having, and some continuing to have, the use of that facility. That interpretation was a key factor in the nil valuation. However, the European Commissioner’s statement giving clearance to state aid following a request from the UK Government in the early part of the financial crisis in banking markets included the following:

“The UK authorities accept that the recapitalisation scheme and guarantee scheme contain State aid elements. In their view the extension of the SLS”—

the special liquidity scheme—

“is part of the essential role of the Bank of England and therefore not a state aid. In the event that the Commission concludes that the Liquidity Measures do contain aid elements, the UK Government submits that they form part of a wider package to remedy a serious disturbance in the economy of the United Kingdom which is compatible with the common market.”

Therefore, the UK Government argued to the EU that the special liquidity scheme was part of the normal workings of the Bank of England, but they specified the exact opposite in respect of the Bradford & Bingley valuation. Is that a further example of the double standards that have applied in this nationalisation process?

Since the 2008 nationalisation, there have been hundreds of freedom of information requests to Ministers, the Cabinet Office, the Treasury, the FCA, the Department for Business, Innovation and Skills and the Bank of England, but the shareholders still do not know how and why their company was expropriated. The treatment to which they have been subjected has been at best incompetent and at worst mendacious.

Leaving aside the Cabinet Office’s original untrue statement, the shareholders have been subjected to refusals on the grounds of cost and public interest, which, combined with further untrue statements and failures to reply to requests, have made a mockery of the Freedom of Information Act. The action group has made requests to the Cabinet Office and the Treasury for internal reviews in respect of their failure to provide the information requested, and it has appealed to the Information Commissioner’s Office in respect of the FCA’s failure to provide the records we all know it had.

The latter point is of particular interest, as David Blundell has a DVD recording of a telephone conversation in which a Financial Services Authority officer reassures a shareholder of the company’s financial strength just six days before the nationalisation. To date, the FCA has denied knowledge of any such records, which is rather incredible, as the DVD was sent to the shareholder by the FCA.

There is also strong evidence of a substantial level of communication between John Kingman at the Treasury and Robert Peston of the BBC, whose coverage of Bradford & Bingley caused a run on the shares and deposits. The Treasury stated it did not have such information and that Mr Kingman’s records had been cleared. In the interests of balance, I should make it clear that Mr Kingman denies being responsible for leaking any information to Robert Peston, although, as Mandy Rice-Davies said, “He would, wouldn’t he?”

Mr Kingman believes that the sole reason for the allegation is that he worked with Robert Peston at the Financial Times in the 1990s. An FOI request to the BBC was refused on the grounds that Mr Peston’s records were for journalistic purposes. The fact of the matter remains that someone at the Treasury leaked the situation to Robert Peston and to the Telegraph, precipitating a run on the bank from which it did not recover. The suspicion is that that was done deliberately to clear Bradford & Bingley from the decks so that the Treasury could focus on saving the bigger banks.

Recent letters to the then Chancellor, the then Prime Minister and the current Prime Minister have asked whether the decision to nationalise was correct and consistent with the treatment of other financial institutions at the time. The right hon. Member for Edinburgh South West suggested writing to a local MP—a particularly inadequate reply, as he was party to the nationalisation decision. The current Prime Minister passed the request to the Treasury, which responded with the usual stale excuses, similar to those of the past five years. The previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath, has not replied at all. It would appear that the spirit of Sir Humphrey is alive and well in Whitehall and Westminster.

Three key questions remain unanswered. First, what was the exact reason for the expropriation of the company? Secondly, should the rights issue have been permitted to proceed, and were shareholders wrongly induced to subscribe to it? Indeed, many employees paid their hard-earned money into the rights issue to prop up their company. Many of them lost not only their jobs, but their savings. The Government of the time were encouraging other financial institutions to support the rights issue, only to ensure that they then lost everything as a result of the way the banks were nationalised and a nil valuation was guaranteed. No wonder people do not like dealing with Governments. Thirdly, were the comments from the directors, the investor relations department and the FSA concerning the strength of the company only days before nationalisation true?

The shareholders of Bradford & Bingley believe the nationalisation of their company was a flawed decision made in haste and inconsistent with the treatment of other banks. When the Government confiscate the property of their citizens without reason, explanation or compensation, particularly when they may be seen as at fault in their duty of care to savers and investors for not adequately regulating the companies involved in the banking crisis, all concepts of democracy and equity are laid aside. I submit that that has damaged the Government’s reputation.

I would like the Minister to tell us what the future holds for UK Asset Resolution and the staff at the headquarters in Crossflatts, in my constituency. The mortgage book is being gradually wound down, but what happens then? Many people still rely on UKAR for their jobs, and there is vast experience and expertise there that should not be lost to the banking sector. The Government state they wish to see more competition among the banks, so will the Minister commit to look at whether a new bank—a modern-day Bradford & Bingley—could be born from UKAR and be seen on high streets, bringing much-needed competition to the banking sector and protecting the remaining jobs in my constituency?

In conclusion, an independent inquiry into the nationalisation of Bradford & Bingley is long overdue. The Bradford & Bingley shareholders, bondholders and employees, and the local community, are entitled to know the truth. The Prime Minister has claimed, many times, that he is committed to open and transparent government, and he has opened an inquiry into the Co-op bank failure. I believe it is not too late for the Government to do the same—open an independent inquiry—with respect to the Bradford & Bingley nationalisation. That was, arguably, the best example of what went wrong in the banking crisis, particularly in relation to the flawed accounting standards that are still in place. Justice and the British sense of fair play demand such action, and I hope that the Minister, who is a good man, will do the right thing and agree to it.

The Government rightly claim to be on the side of hard-working people. Hard-working people were the shareholders, bondholders and employees of Bradford & Bingley who all lost out. By agreeing to an independent inquiry and making all the relevant Government papers available to it, the Government can show that they will, indeed, stand up for hard-working people.

09:50

[Craig Whittaker (Calder Valley) (Con)]

It is a pleasure to speak in the debate under your chairmanship, Mr Betts. I thank my hon. Friend the Member for Shipley (Philip Davies) for securing this important debate on behalf of thousands of Bradford & Bingley investors. It finally gives us an opportunity to speak up for those among our constituents—and there are many in Calder Valley—who have been affected by the nationalisation.

The issue has perplexed and bemused many of my constituents who bought shares in the company in a rights issue in 2008, only eight weeks before the Government of the day nationalised it. They bought shares not because they were high rollers who invest in the stock market to make a quick buck, but because many of them are shrewd pensioners who thought they were making safe, long-term investments for their future in retirement. One might say, “Well, if you invest in the stock market, you should be aware of the risks. You should expect the peaks and troughs and be prepared to take the rough with the smooth.” Every one of my constituents who contacted me from Calder Valley has highlighted that very point; but they have gone on to say that the balance sheets of the bank were good, and were definitely in a stronger position than those of many banks that the Government of the day decided to bail out.

One might also argue, as Lord King did a year ago, that it was Britain’s faulty banking accounting rules that failed investors. My constituents would argue that in that case the same faulty rules applied to all banks. Even so, the Bradford & Bingley was still showing a stronger balance sheet than many of the banks that were bailed out. We know that from the banking crisis post mortem published by the Local Authority Pension Fund Forum.

It seems ludicrous that within eight weeks of the bank’s rights issue in 2008, the Government nationalised it. It is even more staggering that within days they provided a further £60 billion of support to two Scottish banks that had weaker balance sheets than the Bradford & Bingley. As my hon. Friend the Member for Shipley mentioned, his constituents, like mine, and thousands of other investors from west Yorkshire and beyond, believe that the decision to nationalise the Bradford & Bingley was a flawed one, made in haste and not consistent with the treatment given to other banks.

How must those investors feel, after the revelations of the past week about low-cost loans secured by a political party and party political donations from yet another failed bank, whose chairman is disgraced? How must they feel when they read the allegations that the Royal Bank of Scotland, one of the very Scottish banks bailed out by the previous Government, forced some customers out of business? Only yesterday I presented the Secretary of State for Business, Innovation and Skills with clear evidence of an attempt to do just that to the business of one of my constituents. How would you feel, Mr Betts, if you had invested in an organisation that was treated totally differently from other banks that have failed or are failing, I expect you would feel pretty miserable and furious. I expect you would feel abandoned by the previous Government and helpless before the current Government, who seem unwilling to launch an inquiry.

Perhaps I can sum up those feelings in the words of a 65-year-old Calder Valley resident who invested for his retirement. He wrote to me:

“after being encouraged by the Bradford & Bingley rights issue in 2008 I was staggered at the nationalisation that took place only eight weeks later. Since the mortgage books are now in good health the treatment that I have received as a member of the public in 2013 with all of the talk of honesty and transparency does nothing to help me explain to my grandchildren why they should be good members of society. Especially when their role models in government have behaved so atrociously personally with regard to their use of public money for their own ends, in ensuring the protection of our societal structures and in taking accountability for establishing the truth about many travesties that have taken place over the last few decades.”

[Mr Philip Hollobone (Kettering) (Con)]

I congratulate my hon. Friend on his impressive speech. The opening remarks of my hon. Friend the Member for Shipley (Philip Davies) were equally impressive. My constituent, John, a forestry worker on low agricultural wages, was bequeathed 2,400 Bradford & Bingley shares by his late father. They were worth about £11,000 and are now effectively worthless. We talk about the billions of pounds that have gone into saving some of Britain’s banks. However, in the case of the Bradford & Bingley, ordinary people lost sums that to them were very large, although they are inconsequential compared with the billions that the former Prime Minister and Chancellor doled out at the time.

[Craig Whittaker]

My hon. Friend is right. Many small investors, not just in Calder Valley but around the country, lost hard-earned cash that they had saved all their lives to invest in what they hoped would be a better future in retirement. That is exactly what I am talking about. My constituent whose words I quoted, Mr Anthony Ottery, suffered in exactly the same way as John did.

Mr Ottery’s comments are a small sample of the feelings of many of my constituents who feel badly let down by what happened. It does not help that many questions remain unanswered. People have struggled, as my hon. Friend the Member for Shipley said, to get the information through freedom of information requests. The Bradford & Bingley action group seems to be thwarted at every turn. There are, as my hon. Friend also noted, three key questions that remain unanswered. What was the exact reason for the expropriation of the company? Should the rights issue have been permitted to proceed, and were shareholders wrongly induced to subscribe to it? Finally, were the comments of the directors and the investor relations department about the strength of the company, made only days before nationalisation, at best misleading and possibly untrue?

When, to coin the phrase of my hon. Friend, a Government confiscate the property of their citizens without reason, explanation or compensation—particularly when they have a duty of care to those citizens—surely that alone is a reason to call for an inquiry into what happened. Governments can call inquiries—there are currently three on Co-op bank matters. Surely the citizens who cannot get answers with respect to the failed Government who failed to regulate the banking industry and took away their assets should at least be given those answers and an inquiry into the seeming scandal of the Bradford & Bingley.

On behalf of my constituents in Calder Valley and thousands of investors in west Yorkshire and beyond, I join my hon. Friend the Member for Shipley in asking the Minister for an inquiry into what happened at the Bradford & Bingley.

09:59

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I have listened with great interest to the comments of the hon. Member for Shipley (Philip Davies), whom I congratulate on securing this important debate, and of the hon. Member for Calder Valley (Craig Whittaker). I was struck by the fact that both referred to a duty of care. I therefore hope they will see fit to support the work that I and colleagues have done to try to get a fiduciary duty of care written into legislation. I have tabled amendments to that effect to financial services Bills on various occasions.

Let me return to some of the issues that have been raised. Hon. Members will no doubt be disappointed that I was not in Parliament or a member of the Government at the time of Bradford & Bingley’s nationalisation, and I am therefore not able to speak from personal experience. The collapse of Bradford & Bingley came about during the worst global economic downturn since the great depression, and we must remember the serious situation that the then Government were facing, which, to be fair, hon. Members have recognised. It is also worth remembering that we had seen just 12 months earlier the first run on a bank for 80 years at Northern Rock. I recall queues of people outside the bank’s branches seeking to withdraw their money, with police having to be deployed in some instances. It was the duty of the Government of the day not only to secure an agreement on the future of Bradford & Bingley but to steady the financial system and to ensure that the country would get through those turbulent times.

We should also remind ourselves of the surrounding circumstances at that time. It was important to take account of the 2.5 million people who had a total of £22.2 billion invested in Bradford & Bingley. A million people had a mortgage with the bank. It had also been particularly exposed to the falling house market after specialising in buy-to-let and self-certification mortgages. I am tempted to go off on a slight tangent and discuss how housing bubbles are created, but that would do a disservice to those concerned about this particular debate, so I will not at this point.

Bradford & Bingley had fallen £26.7 million into the red in the first six months of 2008, so the circumstances were serious. Bad loans increased by 86% between January and June 2008 compared with the same period the previous year. Shares had fallen some 93% in the year before nationalisation, dropping to just 20p the week before. In the first six months of 2008, more than 9,000 customers had their homes repossessed or were more than three months behind with their payments, which was twice the average. Some 370 jobs had been lost, with a further 3,000 at risk. At that time, following various plans to raise funds from shareholders, the confidence of the City had been lost.

[Duncan Hames (Chippenham) (LD)]

I do not envy the position that the hon. Lady finds herself in today. I appreciate that we cannot do anything about what occurred in 2008, but we can today do something about the culture of secrecy that followed. Will she commit to the hon. Members gathered here that she will speak with her Scottish colleagues—the previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), and the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling)—and ask the two of them to provide answers to the questions posed both here and by our constituents about what happened between the rights issue and the nationalisation of Bradford & Bingley?

[Cathy Jamieson]

I have not, to date, spoken directly to the previous Prime Minister or the former Chancellor on this particular issue. I was interested to hear what the debate would be about today, and I look forward to what the Minister has to say about any action that the current Government will take. If there is something useful to be gained from my discussing the matter with the previous Prime Minister and the former Chancellor, I would be more than willing to do so, but I do not know whether that would produce the result that the hon. Gentleman seeks.

[Philip Davies]

I am grateful to the hon. Lady for what she says, and I hope that she will pursue the previous Prime Minister and the former Chancellor. In the unlikely and catastrophic event that there is a Labour Government after the next election, the one thing that the hon. Lady could do is to promise that a Labour Government would actually release all the relevant papers and hold an inquiry. She might not be able to say anything about what happened back then, but she can certainly say what she would do if she had the chance. Will she commit to that?

[Cathy Jamieson]

I am sure that the hon. Gentleman will be aware of the conventions relating to previous Governments. I am pretty sure that I will not be in a position, even in the likely event that there is a Labour Government the next time around, to discuss releasing papers from a previous Government. I understand that that is the convention irrespective of political parties. It will be interesting to hear what the Minister has to say about the action that the current Government can take.

At the time of Bradford & Bingley’s problems, the Government of the day wanted not only to try to preserve the country’s financial stability but to ensure that ordinary savers were protected. My understanding is that they did that in good faith and believed it to be the correct thing to do. I am sure that it was not an easy decision, but following the Financial Services Authority declaring default on the bank’s borrowings, the Government took decisive action. It is also worth noting that it was not only the previous Government who thought that that was the correct decision. People who were in opposition then and who are now part of the coalition also believed that it was right. The right hon. Member for Twickenham (Vince Cable), who was then the Liberal Democrat Treasury spokesman, said that if there was no private sector rescuer for Bradford & Bingley, which of course there was not, the Government were right to step in. He said at the time:

“In these circumstances, nationalisation is the least worst option. The UK Government is getting these assets for free, so it could turn out to be quite a good deal.”

[Philip Davies]

There is a big difference between stepping in to help and obliterating a high street bank. Northern Rock is still out there. People can still visit a Northern Rock branch. That is not the issue, however. The issue is that Bradford & Bingley was treated completely differently from every other organisation. It is not about stepping in to help; it is about how that supposed help was given.

[Cathy Jamieson]

I appreciate the hon. Gentleman’s comments. He has been a powerful advocate on behalf of his constituents, and I am sure that he will have other questions, but it is important to understand the context. The then Treasury director general wrote in the March 2012 “Review of HM Treasury’s management response to the financial crisis”:

“The Treasury drew on the experience of nationalising Northern Rock to resolve subsequent failing financial institutions, such as Bradford & Bingley, more quickly and decisively.”

That suggests that people thought not only that it was the right decision, but that action had to be taken quickly to avoid further damage to savers and the wider economy.

[Craig Whittaker]

In light of what the hon. Lady has just said, will she enlighten us as to why Bradford & Bingley was treated entirely differently from other banks, some of which received more than £60 billion in taxpayer money only a short time later?

[Cathy Jamieson]

I said at the beginning that I was sure that hon. Members would be disappointed that I would not be able to describe the day-to-day dealings of the previous Government. I am looking at the case on the basis of the information currently available.

The role of the European Commission was also mentioned. The Competition Commissioner has said:

“The Bradford & Bingley decision illustrates once again the positive contribution of EU state aid policy to ensuring orderly and effective solutions to tackle the financial crisis. The UK authorities’ market-oriented solution has avoided any disproportionate distortions of competition while enabling the preservation of the viable parts of the business.”

At the time, people seemed to be of the belief that the correct decision was made. It was not easy, but it was taken in good faith and because people thought that it was the right thing to do.

[Mr Gregory Campbell (East Londonderry) (DUP)]

I appreciate the hon. Lady’s position—she was not a Member of Parliament at the time. However, given the context five years ago, which she is outlining in some detail, and the problems with the Co-op bank now, will she commit to a fully independent investigation into how and why it came about, and put in place steps to ensure that it never happens again?

[Cathy Jamieson]

I want to come on to some of the things we can do to continue to ensure that the things that happened in the past and recently do not happen again. We need to restore confidence in the banking world for customers, consumers and the wider economy. It has given me no pleasure to see yet more allegations and accusations about the practices in RBS in the past few weeks. Various inquiries are looking into those practices.

As hon. Members are aware, I am a Labour and Co-operative MP, and I have had a long involvement in the co-operative movement. It gives me no pleasure to see the situation that the Co-operative bank is in. I am sure that the inquiries will give us further clues about what we need to do to ensure that such things are not repeated in the future. I understand that what I am saying will not be much of a consolation to those who lost their jobs during the Bradford & Bingley situation, or to the shareholders who lost their money. I understand that the hon. Member for Shipley, who has worked hard as a constituency MP, continues to raise these issues to ensure that his constituents get answers.

The Bradford & Bingley shareholder action group, which speaks on behalf of the former shareholders, has run a lengthy campaign. We must ensure that no one else goes through what the people who lost their jobs and those who lost out in the crisis went through. That is why it is important that we work harder to reform the banking system, to ensure that such situations never happen again, and, as we discussed many times in Committee on financial services Bills, to future-proof against anything that could happen in the future. That is why I am making these points.

I am somewhat surprised that the Government have not given their full support to many of the recommendations of the cross-party Parliamentary Commission on Banking Standards and the Vickers Independent Commission on Banking, which the Government set up. The Financial Services (Banking Reform) Bill was a pretty thin volume in Committee, although it increased exponentially in size thereafter. Labour Members tabled various amendments during the passage of the Bill to ensure more protection for taxpayers and to rebuild consumer choice, financial inclusion and a diverse market. Crucially, we aimed to reform banking standards and the high-risk culture, while boosting the economy. It was disappointing that the Government either watered down or ignored the recommendations of the commissions and voted against most of our amendments. However, there was one victory in the other place yesterday.

I note that in the past couple of days we have heard that the Chancellor has now written to the Bank of England to review the Financial Policy Committee’s powers on leverage ratios. Although it is good news that the Chancellor has belatedly seen the importance of that issue, now that the Bill is in its final stages in the other place, it is a shame that it has taken him so long to do so.

I hope for some leadership from the Minister this morning—I know that he has a thorough understanding of the banking sector. I hope that we will see more of a change of heart from the Chancellor on wider banking reform, so that we can ensure that a similar crisis can never happen again. The Opposition will continue to press for that.

I will conclude on the point with which I started. The hon. Members for Shipley and for Calder Valley talked about a duty of care, which is important for everyone in every sector of the financial services markets. Whether people are in banking, insurance or other institutions, they must realise that they have a responsibility to the customers whose money they look after. I hope that the Government will support the call for a fiduciary duty of care that we have made on many occasions. Will the Minister comment on that, as well as answering the questions that other hon. Members have put to him?

10:15

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

I welcome you to the Chair, Mr Betts. It is a pleasure to serve under your chairmanship.

I thank my hon. Friend the Member for Shipley (Philip Davies) for securing the debate and for his continued commitment and effort in tirelessly pursuing the issue on behalf of his constituents. I have not been long in Parliament, but one thing I noted right from the start, which has been reaffirmed today, is that few colleagues so assiduously pursue their constituents’ causes as my hon. Friend. He is an example to us all. I also thank my hon. Friend the Member for Calder Valley (Craig Whittaker) for his tireless work on behalf of his constituents, as we have seen today.

Before I get into the specifics of Bradford & Bingley, I will give some context on the time, the policies that we have heard reference to today, which contributed to the banking crisis, and this Government’s response, which hon. Members have spoken about during the debate.

The nationalisation of Bradford & Bingley was one of the key outcomes of the financial crisis. The crisis was the biggest failure of economic management and banking regulation in this country’s history. Let me remind hon. Members of the events preceding the crisis. Over the decade before the crash, Britain experienced the biggest increase in debt of any major economy in the world. The total of household, corporate, financial and public sector debt reached a staggering 500% of GDP. UK banks became the most leveraged in the world.

None of that, however, caused concern or invited intervention under the failed tripartite system of regulation created 16 years ago. The Bank of England was stripped of its historical responsibility for regulating the banking system, which was given to a new Financial Services Authority. Let me quote a warning from 16 years ago by the then shadow Chancellor, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley). During the passage of the Bank of England Act 1998, which created the failed tripartite system, he said:

“The process of setting up the FSA may cause regulators to take their eye off the ball, while spivs and crooks have a field day.”—[Official Report, 11 November 1997; Vol. 300, c. 732.]

Sixteen years later, the consensus is clear. There were fundamental flaws in the tripartite system right from the start, which are today painfully apparent to the whole world.

I respect the comments of the shadow Treasury Minister, the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), and I accept that she was not responsible for the actions of the previous Government. However, she was close to some of the key decision makers at the time, and I hoped that we would hear an apology from her on behalf of the previous Government—that was wishful thinking.

The situation that I have described is why this Government have embarked upon a fundamental reform of our system of financial regulation. We have introduced domestic legislation to increase the resilience of financial institutions to shocks. The Financial Services Act 2012 fundamentally reformed the previous, failed tripartite system by giving the Bank of England clear responsibility for maintaining financial stability; establishing the Financial Policy Committee within the Bank as a strong and expert macro-prudential authority; creating the Prudential Regulation Authority, a new micro-prudential regulator, as a subsidiary of the Bank of England; and creating a new independent conduct of business regulator, the Financial Conduct Authority.

[Martin Vickers (Cleethorpes) (Con)]

The Minister is outlining a tightening up of the regulatory regime, which I am sure all our constituents would welcome. However, does he recognise that those who have been let down by the Bradford & Bingley scandal and other financial scandals feel that regulators go native, stand back and, instead of being on the side of consumers, are too close to the people they are supposed to be regulating?

[Sajid Javid]

My hon. Friend makes a good point that has been brought up by many hon. Members. With the reforms we have implemented, and some that we are still in the process of implementing, the Government have created a stronger, more rigorous system, with regulators with a lot more teeth and a greater degree of independence.

The Government have also set up the Independent Commission on Banking, or ICB, to recommend further reforms to enhance financial stability. The Government accepted the recommendations of the ICB and are putting them into law this year through the Financial Services (Banking Reform) Bill. The Government also supported Parliament in setting up the Parliamentary Commission on Banking Standards and have accepted that commission’s main recommendations.

I turn now specifically to Bradford & Bingley. Following the difficulties Bradford & Bingley experienced in 2008, the previous Government transferred its retail deposit taking business and branch network to Abbey National after a competitive process; its mortgage business was brought into public ownership. At the time of the nationalisation of Bradford & Bingley, the UK was in the grip of a rapidly evolving crisis, as we have heard today. I cannot speak for the actions that the previous Government took to deal with the crisis, as I was not privy to the relevant discussions; nor, rightly, have I seen the papers that relate to the previous Administration, although I understand that the Treasury is handling all freedom of information requests in the proper manner.

Extensive information is already in the public domain: events leading up to the nationalisation have been looked at by both the National Audit Office and the Treasury Committee. But on the matter of information, I have to agree with the comments made by my hon. Friend the Member for Shipley, and, in particular, with the request made by my hon. Friend the Member for Chippenham (Duncan Hames), who asked the shadow Minister to use her good offices to speak to the former Prime Minister, the former Chancellor and others who were Ministers under the previous Government and closely involved in events at that time. That is a reasonable request; I hope she will act on it and get back to my hon. Friend about it. It could lead to further information that many stakeholders would find useful.

Following the transfer of Bradford & Bingley into public ownership, the previous Government made the Bradford & Bingley plc Compensation Scheme Order 2008, which was debated and approved by each House. The order provided for a mechanism through which compensation for former shareholders would be assessed by an independent valuer. As we have heard, after conducting a robust and rigorous process the independent valuer determined that no compensation was payable.

My hon. Friend the Member for Shipley asked whether it was right that the valuer should have been asked to work on the basis that there was no Government support. I believe that it cannot be right, or in the best interests of the taxpayer, that the valuer should have been asked to compensate for value that existed only by virtue of support that taxpayers themselves were providing.

Following the determination, all affected parties had the opportunity to submit requests for the valuer to reconsider his decision. The valuer considered all requests before concluding that no compensation was payable. That decision was further upheld in the upper tribunal review.

I believe that due process has been followed at every stage. Transparent and independent arrangements for compensation have been put in place and there has been a proper process in the courts. As I mentioned, there have also been investigations by the NAO and the Treasury Committee. I have to say to my hon. Friend that I have looked at the matter closely using the limited information available to me, and from what I have seen I am not persuaded that there is a case for a further investigation or inquiry.

Before I conclude, I want to respond specifically to a number of my hon. Friend’s questions. He talked about the rights issue that took place just before nationalisation. From the information I have seen, I can tell him that the Treasury had no involvement in that rights issue at all; as we have heard, the rights issue was conducted in the summer of 2008, prior to nationalisation, and was a matter solely for Bradford & Bingley’s board and senior management. Like many banks and building societies at that time or thereabouts, Bradford & Bingley was required to meet FSA regulatory capital requirements in order to continue with those regulated activities.

My hon. Friend also raised the issue of accounting standards, and in particular IAS 39, which he said was problematic and could perhaps take some blame for the financial crisis. He is right to raise accounting standards and the contribution they could have made to the crisis. The issue has been looked at extensively by authorities around the world, including the International Accounting Standards Board. The board has proposed a series of changes to IAS 39 and other, similar accounting practices. Those changes essentially mean that, in future, banks will have to hold more capital or take losses earlier on problematic loans.

My hon. Friend also rightly expressed his concerns about the future of a number of his constituents who were transferred to UKAR during nationalisation and are currently UKAR employees. He was absolutely right to say that those people have considerable expertise and experience in an important sector. My understanding is that currently over 2,000 staff are still employed in managing the closed mortgage books of both Bradford & Bingley and Northern Rock, and are doing an excellent job.

My hon. Friend may take some comfort from knowing that those people’s skills are such that it seems they will face growing demand for them: the Council of Mortgage Lenders recently said that mortgage lending in the third quarter of this year was at its highest level since 2007 and is growing strongly thanks to the Government’s policies and the economic growth we are experiencing. I am sure that the value of the skills they hold will give some comfort to the constituents he mentioned.

[Philip Davies]

I am grateful to my hon. Friend for his comments, although clearly I am disappointed that he does not believe that there is a need for an inquiry: we are still no further forward when it comes to knowing why Bradford & Bingley was treated so differently from other banks and building societies.

In the light of the comments my hon. Friend has just made about the future of Bradford & Bingley, will he go away and think about whether a new Bradford & Bingley could be born out of what is there at the moment to be a new challenger to the banking sector on the high street and to introduce the competition that we all want?

[Sajid Javid]

I will give a commitment to my hon. Friend that I will think about that further. In fact, I will do more: he will know that UKAR is part of United Kingdom Financial Investments Ltd, the agency that acts as the Government’s shareholder in the former assets of Bradford & Bingley, and of the Royal Bank of Scotland, Lloyds and others. I will write to the head of UKFI and to the head of UKAR to ask them to consider the case that my hon. Friend has made today.

I congratulate my hon. Friend once more on securing this debate. This is an issue that he, rightly, feels very strongly about. I assure him that we are taking what we believe are the right steps to ensure the future stability of our banking system.

[Mr Clive Betts (in the Chair)]

I now suspend the sitting until 11 o’clock, although if the hon. Member responsible for the next debate and the Minister responding both arrive a little early, I am happy to start the debate a few minutes earlier.

10:28

Sitting suspended.

Skills (North-East)

Wednesday 27th November 2013 Westminster Hall

10:56

[Guy Opperman (Hexham) (Con)]

It is a pleasure to serve under your chairmanship, Mr Betts, and a great privilege to introduce this debate about how we create skills and apprenticeships in the north-east.

The north-east has a proud manufacturing heritage. We are home to Stephenson’s trains, Armstrong’s hydraulics, ships and artillery, Swan’s electric light bulbs and Parsons’ steam turbine, to name but a few of the great key inventions derived from the north-east. Today, we need to ensure that the next generation have the training and resources to put skills in manufacturing and engineering, in all its forms, once again at the heart of our growing private sector economy.

Those great engineers of the north not only built our region, but shaped Victorian Britain. This matters. It is great that the North East local enterprise partnership is one of only three LEPs in the country to pilot the new approaches to skills development. The key point is that the north-east is showing the way, whereas sometimes in the past, it is fair to say, we have been at the back of the bus. We have, I suggest, little to fear from our co-pilots: the Stoke-on-Trent and Staffordshire LEP and the West of England LEP. Frankly, we welcome the competition—but I would say that, wouldn’t I?

In the north-east, we have a number of strong sectors: manufacturing, engineering, subsea, oil and gas, and renewable construction—I could go on. The success of the skills pilots must be in matching the appropriate skills to the relevant sectors, where the growth and the jobs will be. This pilot will, I believe, allow that to happen, but I ask my hon. Friend the Minister, in his response to the House today, to set out the details in relation to the skills pilot, so that we can fully understand the direction of travel and what he wishes us to do. I want to address the Minister also on the issue of a university technical college in Northumberland, Tyne and Wear.

For me, this debate is part of a personal crusade. I was the first Member of Parliament to hire, train and retain an apprentice—Jade Scott, who is now the business administrator in my Hexham office. Along with Jacqui Henderson, I opened the new Hexham office of Northumberland college in 2012. It is a state-of-the-art local facility in rural west Northumberland and provides a multitude of courses, including hairdressing. I have taken the plunge and had a haircut there myself—I probably need another one now.

We have also led the charge with Ministers. I was pleased to welcome my right hon. Friend the Member for Epsom and Ewell (Chris Grayling), when he was the jobs Minister, to the Fuse media centre in Prudhoe for a jobs summit. I then invited the present Minister to Kirkley Hall on 9 February this year to preside over the apprenticeship awards, with the wonderful Jacqui Henderson and her team, and hear at first hand about the difference that apprenticeships are making in the north-east.

I regularly meet representatives of Newcastle college, and only two months ago I sat down with Angela Allan and her team to discuss how we can help them, both from the skills point of view and on the issue of international student visa numbers. I also took this Minister to see for himself the huge investment going into Newcastle college. The building that he and I looked around in February of this year was a shell; it is now up and running and a thriving, bustling hub for students.

I will give three specific examples from business later in my speech, but I want to start with a strategic overview of where we are and where we have come from, and the lessons we can learn from the past three years. Apprenticeships are, as everybody acknowledges, key to securing the prosperity of the north-east economy. We are moving in the right direction. The number of apprenticeship starts in 2011-12 in the north-east was 38,340, an increase of 11% since 2010-11. That, in turn, was up from 18,510 in 2009-10 and 13,500 in 2005-06. In my constituency, the number of apprenticeship programme starts rose from 430 in 2009-10 to 800 in 2011-12, which is the last fully assessed year. There is not a single one of the 29 constituencies in the north-east in which apprenticeship starts have not increased dramatically since 2010.

[James Wharton (Stockton South) (Con)]

I congratulate my hon. Friend on securing this debate, which is incredibly important for our region. Does he agree that we need not only a high number of apprenticeship starts, but the right types of apprenticeships to replenish the skills base that has built the industry in the north-east over so many years? It is welcome that numbers are up, but it is also welcome that we are starting to get the right sort of apprenticeships, because of the good work that the Government are doing.

[Guy Opperman]

With amazing ability, my hon. Friend has touched on the next key point of my speech. It is not just about numbers; it is about the quality of apprenticeships. It is also about the skills pilot that we have managed to secure in the north-east matching the types of apprenticeship starts to the sorts of businesses in the north-east, to ensure that they are specifically focused and provide what business needs. The Adonis report talked about exactly that point.

In preparation for the debate, I blogged, tweeted and invited comments on the matter. Who says that social media do not work? I was deluged with ideas and contributions, and I thank everyone for taking the trouble to get involved. I was contacted by businesses, trade organisations such as the north-east chamber of commerce, health trusts and even the Department for Education, which was keen for me to advance and support some of its ideas. I spoke to three businesses in particular. SCA is the second largest manufacturer in my constituency. It employs some 400 people, and it is a manufacturing success. Richard Sutcliffe, the factory manager at SCA, has said:

“There is a need to acknowledge that the technical skills/engineering skills that are needed in manufacturing are not currently in place; we are continually striving to encourage and develop the young talent of today.

As the number of apprentices over many years has reduced and many employees come towards their retirement we have a challenge in industry as a whole to plug these gaps. By linking with schools and educational establishments we are keen for people to realise and see that an apprentice scheme is a great/equivalent alternative to university and we must remove the stigma that still exists in some areas.

An apprentice at SCA can also move on after their initial training to complete a degree, giving the person a solid footing in a working environment, a keen skill that can take them in many directions and the opportunity to start life without the burden of excessive debt. We need to encourage and help people realise apprentice schemes are key, current and available for all types of people, whatever their ambitions might be.”

I could not have put it better myself.

I want to give examples of two other local businesses. The first is Egger, in my constituency, which is the biggest private sector employer in Northumberland, with more than 550 employees. Recently, £4 million has been invested in an engineering academy for more than 40 apprentices and other engineering staff, which I opened last month with Michael Egger. He clearly sees his employees as the key to the future prosperity of the business, and the academy is the latest phase in more than £100 million of investment in the Hexham plant over the past six years. Egger’s importance cannot be overstated; it is responsible not only for 550 local jobs, but for 1,500 other jobs that are linked in through forestry and other businesses. I was lucky enough to work on the factory floor as part of Children in Need. I was not very good, but it was a great experience. I particularly liked meeting the apprentices, who were, by and large, from Hexham. They had started in Queen Elizabeth high school and been on away days and visits to the factory, after which they followed the apprenticeship path, which enabled them to get a local job with a local firm and live at home. That, surely, is the way forward.

[Ian Lavery (Wansbeck) (Lab)]

I congratulate the hon. Gentleman on bringing this important debate to Westminster Hall. Are the valuable apprenticeships that he has mentioned ones that last for three or four years, in which apprentices work on the shop floor and in college, and are guaranteed a job at the end? In other words, are they indentured apprenticeships as we knew them, or do the apprenticeships last only six months, with only the possibility of the job at the end?

[Guy Opperman]

I thank the hon. Gentleman for his contribution; it is a perfectly fair point, which the Adonis report deals with. The north-east skills pilot is an attempt to achieve that. Some are shorter apprenticeships—no one would deny that—but the majority are exactly what he and I, who are of venerable years, would understand to be a traditional apprenticeship. [Interruption.] The hon. Gentleman is looking at me as though I am ageing him too much. I am sure he is still a stripling.

Yesterday I spoke to Bob Paton, another of my constituents from the Hexham shire, who took time out to come and talk to me on exactly that issue. He described the apprenticeships offered by Accenture, a big multinational of which he is a director. Accenture’s IT apprentices spend three years in the business and complete coursework and college work on a repeated basis, at the end of which they can achieve a university degree. The apprentices are working and learning, and they achieve both an apprenticeship and a degree.

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

In this context, is it not vital that we ensure that further education linked with apprenticeships is spread more readily around the rural parts of Northumberland? Access to further education is essential to making good apprenticeships work.

[Guy Opperman]

I thank my right hon. Friend for that point. He was not quite in his place when I said that my key desire arising out of this debate was for a technical college for Northumberland, Gateshead, Tyne and Wear. At the moment, there is the potential for a college linked to Hitachi in Durham, but we need something in the northern part of the north-east to address the skills gap between school and a job, which is central to fulfilling the manufacturing and engineering demands of our businesses.

[Ian Lavery]

I apologise for missing the start of the debate; I was not late, but it started slightly early. I have not heard the hon. Gentleman mention Northumberland college in Wansbeck, which has developed into a really good force for further education, apprenticeships and meeting the skills gap. We really need to encourage Northumberland college and the Kirkley Hall campus in the hon. Gentleman’s constituency, because the college has great potential.

[Guy Opperman]

It is in no way the hon. Gentleman’s fault that he missed my elaborate description of how wonderful Northumberland college is, because we started early. The Minister and I went to Kirkley Hall and visited parts of the site. As the hon. Gentleman knows, another branch of Northumberland college has opened in Hexham, so quite a small hub has expanded to other parts of the region. That addresses the hon. Gentleman’s point and that made by my right hon. Friend the Member for Berwick-upon-Tweed (Sir Alan Beith).

When Bob Paton came to see me yesterday, he told me that Accenture is not only increasing its job numbers, but recently took on 38 new IT apprentices, working with the local college. He reckoned that he had

“the biggest and best…higher level IT apprenticeships in the country,”

and the programme is expanding. We do not just need manufacturing and engineering apprenticeships, but IT apprenticeships. We need to encourage people to take on such jobs.

I could give other examples, but I do not want all my speech to be about the fact that Nissan is offering enhanced apprenticeship programmes, enabling new recruits to work in manufacturing production; the fact that Sembcorp Utilities UK is recruiting 100 new apprentices aged 16 to 18 to do three-year apprenticeships from 16 onwards; the fact that we need more work like that of the North East Skills Alliance for Advanced Manufacturing, chaired by Nissan and the Engineering Employers Federation; or the fact that the North East Skills group does good work.

I cannot praise enough the campaigns run by The Journal and my constituent, Brian Aitken, who has pushed the excellent “Proud to Back Apprentices” campaign in the past year. Nor can I praise enough events such as the north-east engineering and manufacturing careers conference, which brings teachers from across the region together to hear first hand about opportunities in the sector, or schemes such as the primary engineer scheme, which encourages girls and boys from a very young age, in first and primary schools, to become the engineers of the future, by forging links with local businesses. I welcome the work of the local NHS trust and the Department for Education in boosting schemes such as the apprenticeship bursary scheme for the early-years profession.

I want to turn to the North East local enterprise partnership, because we cannot discuss skills and apprenticeships without addressing the role of the LEP and the Adonis report. I pay tribute to everyone involved in both the organisation and the report—in particular, Ed Twiddy, Paul Woolston, Justin Welby and Andrew Hodgson, the latter of whom specifically addressed the problem area of skills.

We in the north-east welcome the fact that we have been chosen for the skills pilot. That sends a message that the north-east is not only open for business, but a skills hub and a destination for the sorts of jobs we wish to see. I call on the Minister to set out what the skills pilot is doing and what the next steps will be if it is successful. How can key local businesses and stakeholders influence the development of the skills revolution in the north-east? We do not need a route map set in stone by Government, but we do need a clear direction of travel, allied to the Adonis report, setting out the hurdles we need to cross along the way.

No other region has addressed its strengths and weaknesses as the north-east has with the Adonis report. It was business-led, written by experts, apolitical, hard-hitting and realistic. It pulled few punches. It celebrated the region’s assets and successes, but acknowledged that successive Governments have struggled to improve job numbers, the skills deficit and university starts, or to grow the regional economy, which was such a powerhouse in days gone by. At the heart of the report lies a desire for more and better jobs. It identified the crucial lack of private sector employment, but, to quote from the report:

“More jobs alone will not re-balance the economy. The North East needs higher skilled and higher paid jobs to produce an economy which matches others and provide the quality of opportunities its residents and young people need to prosper.”

An alternative way of looking at the problem was provided by the recent debate on how Governments, of any form, can address the cost of living as the election approaches. I was interested by the comments of Ross Smith from the North East chamber of commerce and industry, who tweeted, following an article in the New Statesman:

“My answer to this is ‘it’s skills, stupid’—alas that doesn’t fit with easy election messages or election cycles.”

That builds on the famous Bill Clinton comment—“It’s the economy stupid.” I asked Ross to expand on his comment yesterday, as part of the consultation for my speech, and he said:

“The most important factor in raising living standards in the long term is to increase skill levels, so that people can play a more productive part a stronger economy, and be rewarded accordingly.”

He is right and his tweet was right.

My copy of the Adonis report is well thumbed and much written on. I urge everyone interested in addressing the problem to read the report. We need action from big employers, and I have set out what some have been doing. We need the support of media and key partners; it is welcome and expanding. I will address university technical colleges briefly in a moment.

We also need a north-east schools challenge, based on the successful London challenge, to support local partners to achieve a step change in local education. I support the efforts of the local authority seven, and we will talk in the House on another occasion about how the LA7 should be fully supported by one and all. I will, however, make one particular point now. There is a slight problem for small businesses, which are struggling to get the niche, tailored skill sets for their apprenticeship demands. Given the lack of time, I will write to the Minister on that point to set out the issue in more detail.

I shall finish on the point about university technical colleges or UTCs. We need to encourage more people to build vocational skills and not to stop doing so at 16. A key solution in the Adonis report is the creation of UTCs in the north-east. The Adonis report demands four UTCs, but frankly I would take two. We have one in Durham, and I would very much like one in Northumberland or Tyne and Weir. As UTCs have been established across the UK, their success has been dramatically transformative. I will make it my mission to see a UTC created in the northern part of the region. I hope that is something for which the Minister can offer his support. Although the south of the region is making progress, the message is obvious: we need far greater links between business and schools. UTCs make a difference, so we need one.

We can be in no doubt that skills, and apprenticeships in their many forms, are the key to the further improvement of every bit of the north-east, job numbers and growth. The north-east is the cradle of manufacturing, engineering and much more. We are powering the country out of recession. We are the only region with a positive balance of payments. Give us the tools to do the job.

11:16

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

It is a pleasure to serve under your chairmanship, Mr Betts. I will respond to as many of the points that my hon. Friend the Member for Hexham (Guy Opperman) made in his excellent speech as I can. He is a passionate supporter of not only Hexham, but the whole north-east. He made a strong case in an important debate. One particular reason why it is good news that we are debating the north-east approach to skills and apprenticeships is that the region is blazing the trail and is at the forefront of some of our policy thinking, which I shall come to later.

I thoroughly enjoyed my visits to Newcastle college and Northumberland college earlier this year with my hon. Friend. We were photographed in an empty shell of a building and I very much look forward to seeing the college now the new building is up, running and, I understand, buzzing with learners. That is just as well, because the number of over-19s in further education in the north-east went up by 6% in the last year for which figures are available. There is clearly an increasing demand for education and skills at that level, among not only employers—we heard a lot of stories that corroborate the evidence I have on the demand from employers—but students as well.

My hon. Friend mentioned the need for university technical colleges in the area. We warmly welcome all applications for UTCs. We approve those proposed by the strongest groups in areas where new schools are needed most and those that have rigorous education and recruitment plans. I am sure he agrees that it is important to ensure that new provision is rigorous and responds to the needs of local employers, not least because UTCs provide the opportunity for employers and universities to work together, and therefore drive up the standard of technical education between 14 and 18. We are considering the south Durham UTC application, with others we have recently received, and we have interviewed the applicant group. Applicants will be notified of the outcome in the new year. Lord Nash and the Secretary of State will make the decision in due course.

My hon. Friend also talked about the need to improve standards and quality in the skills system. I strongly endorse that point. Last month’s report by the OECD, comparing skills levels across the whole developed world, was a stark reminder of how much more we need to do. We—England and Northern Ireland—were the only country in which the skill level in maths and English of our 15 to 25-year-olds was no higher than that of our 55 to 65-year-olds. In the long-running debate about whether more exam passes mean better education, that is extremely strong independent evidence that we have to stop that flatlining and start improving our standards, because every other country in the developed world is doing that. That is hugely motivating in the task of driving up standards, especially when youth unemployment is far too high, although thankfully it is now falling. At the same time, there are increasing skills shortages, some of which my hon. Friend mentioned.

We have introduced faster and more robust intervention processes for failing colleges and we driven up the quality of provision through a new and more rigorous Ofsted inspection framework. We are reforming qualifications so that we fund only those that employers sign off. I do not know whether my hon. Friend has managed to read Nigel Whitehead’s report, but its recommendations are sensible and are about driving rigour and responsiveness through the adult qualifications system.

That brings me to the proposal by the north-east LEP. My hon. Friend mentioned that it is one of three LEPs through which we are piloting a new mechanism to ensure that there is local influence over the use of the skills system. He said that he was thrilled that the north-east LEP was chosen for the pilot. I would go further: the north-east LEP invented the idea and brought it to us. We were impressed by it, and two other LEPs came on board to ensure that the mechanism was piloted in more than one area. The north-east LEP is not only a leader on piloting; it is a thought leader on how we can ensure that the skills system is responsive to local need.

My hon. Friend asked for details on how the proposal will work. The proposal is that 5% of funding for all adult provision outside apprenticeships will be allocated if, and only if, the provision is in line with LEP priorities. The LEP will have sign-off. Rather than giving 5% of the funding to the LEP, we have instead said that the LEP will have the final say over what is essentially a quality payment—the final 5% of all adult skills funding outside apprenticeships. That will ensure that the whole provision is targeted at LEPs’ needs. There is good collaboration in the north-east between the LEP and colleges, and the proposal will help to incentivise education providers to look to the strategic needs of business—not only directly but through the LEP—and ensure that the LEP focuses on that. Our job is to ensure that there is enough flexibility in the funding system to allow providers to switch provision according to the needs of local private or public sector employers. That will ensure that the system is filling skills shortages.

In the past, when there have been shortages of training in one area, people have come to the Minister and said, “There is a shortage in this area. Can you fix it?” There is one thing I know for sure, and that is that I do not and cannot know, through a central bureaucracy, the skills needs of every area. It is far better to try to make the system responsive to local need, instead of trying to direct solutions to skills shortages from Whitehall. The proposal is about making it easier for colleges to respond to the needs of employers.

The proposal is also about providing capital for skills provision. Capital funding will follow LEP priorities from 2015-16. Very recently, the Secretary of State for Business, Innovation and Skills announced that we would be financing a further £330 million of skills capital in 2016-17, which provides the long planning horizons that many crave. Those horizons have been too short term in the past.

I pay tribute to the work of all those involved in getting the pilot with the north-east LEP up and running as a policy. It will hit the ground running from September 2014. That policy is part of a broader attempt at making the skills system more responsive to employers. I mentioned that it does not cover apprenticeship funding, which is because we have a broader set of reforms on how apprenticeships are funded to ensure that funding is directly responsive to employers’ needs. We will be working through employers. The taxpayer rightly pays a subsidy towards apprenticeships, because if someone is in an apprenticeship, they are not only doing the job but learning. Apprenticeships benefit the employer, the apprentice and wider society. Recognising that, the taxpayer subsidises apprenticeships. We are changing how they are delivered so that the employer has more of a say over what training happens within an apprenticeship. That will ensure that the training fits the needs of the apprentices and the employer, which will drive up standards.

My hon. Friend quoted the views of a local site manager and talked about spreading the word on the benefits of apprenticeships. As the Minister responsible, I could not agree more. It is just as competitive to secure an apprenticeship at a top employer, such as Rolls-Royce or BT, as it is to get into Oxford or Harvard.

[Ian Lavery]

Does the Minister, like me, welcome the announcement by Northumberland county council earlier this week that it has an ambition to double the number of apprentices linked to the council? It is looking to employ 360 apprentices directly with the council. Some 23 apprenticeships will be immediately created, adding to the total of 134 already on the council’s books already.

[Matthew Hancock]

I had not heard that, but at face value that sounds absolutely terrific. We have a goal of making it a norm in this country that every young person who leaves school goes to university or into an apprenticeship. Rather than trying to push them one way or the other, we want to ensure that there are good choices available on either side. Increasingly, employers, whether private or public sector—including Northumberland county council—are introducing an apprenticeship stream in addition to a graduate scheme. The civil service has just brought in an apprenticeship fast stream to match its graduate fast stream. This week, MI5 and MI6 announced that they are introducing an apprenticeship scheme in addition to their more traditional graduate recruitment. That is happening across different businesses and different parts of government. Someone can now become an apprentice spy, which is interesting, although MI5 and MI6 have not yet told me all the details that someone would learn.

We have an ambition, but we will only be able to persuade people that it is the right ambition so long as we continue to drive up the quality of apprenticeships. The very best apprenticeships are world class, but we have to ensure that quality goes up across the board. We have brought in some tough measures to increase quality by ensuring that all apprenticeships last a minimum of a year, that the English and maths requirements are stronger and that there is actually a job. In the past, some apprenticeships happened without a job attached. Those measures have meant that we have had to remove some low-quality provision. In the medium to long term, that is undoubtedly worth it and will ensure that the apprenticeship brand remains strong.

I agree strongly with the point that several hon. Members have made, including my hon. Friend the Member for Stockton South (James Wharton), that apprenticeships need to reflect the whole economy. The old industries in which apprenticeships were strong, such as engineering and manufacturing, are important, but it is also important that apprenticeships cover the whole economy as it is today. They should include professional services and computing, for instance, in a way that they did not in the past.

The north-east LEP is one of our thought leaders, and we listen carefully to its suggestions. I am watching the pilot’s progress closely to see whether it should be spread more broadly. There is no stronger advocate for the passion with which the north-east is coming together to deliver on skills training and ensure that everyone reaches their potential than my hon. Friend the Member for Hexham, although my hon. Friend the Member for Stockton South and all the other hon. Members who have spoken in this debate are strong advocates, too.

11:29

Sitting suspended.

Tuberculosis

Wednesday 27th November 2013 Westminster Hall

[Jim Dobbin in the Chair]

14:29

[Nic Dakin (Scunthorpe) (Lab)]

Let me start in the past. In 1821, Maria Brontë died of consumption. Two of her daughters died of the disease in infancy and her four older children—Bramwell and his famous sisters, Anne, Emily and Charlotte—also died of it. According to the history books, they became

“ill from dampness and terrible living conditions”.

Consumption, or tuberculosis, is a disease that many people believe belongs to the past. Nothing could be further from the truth. TB kills more people in the world today than any other infectious disease. Every day, 3,800 people die from it. Sunday is world AIDS day, so it is worth remembering that TB is the leading killer of people living with HIV. At least one third of the 35.3 million people living with HIV worldwide are infected with latent TB. People co-infected with TB and HIV are about 30 times more likely to develop active TB disease than people without HIV. Given the devastating synergy that exists between the two infections and the impact that they have on people living in the developing world, it is absolutely vital that resources are stepped up now so that we not only effectively tackle TB-HIV co-infection but ensure that the health-related millennium development goals are achieved. The Department for International Development is about to launch its policy review paper on HIV/AIDS. I hope that it will make clear the importance of linking the approaches to TB and HIV, and that it will have clear commitments to tackle those diseases.

In the UK, we can be tempted to believe that TB no longer poses a threat to public health. There is a widespread belief that the BCG vaccine is effective and that today TB only affects other countries. However, in a connected world of global travel, TB is never far away. That came home to me forcibly when an English student returned from foreign travel with the disease and subsequently infected other students attending the college of which I was principal. Students and staff found dealing with the anti-TB drugs to be an ordeal. For a standard, non-drug-resistant case, the treatment regime can require a six-month course of a cocktail of four drugs. Those “front-line” drugs are more than 40 years old now and have unpleasant side-effects. It was a challenge for me as college principal, working with the local NHS, to get people to take the drugs they had to take. It must be an even bigger challenge to help patients in the developing world who not have access to the type of care and support offered by the NHS.

The stigma attached to the disease here was a barrier to patients accessing treatment. In sub-Saharan Africa, the stigma is even greater. Dr Simon Blankley, a Voluntary Services Overseas chest physician working in Uganda, reported that patients could often be locked away in cupboards or forced to leave their villages, and that health care workers were worried for their own health when TB patients were admitted to wards. TB needs to be tackled in a sustainable way that reassures people and builds community resilience. Dr Blankley was able to use a team of VSO volunteers to provide education and reassurance, and to get TB patients in and around Kampala to complete their eight-month course of treatment. The team’s work drastically increased completion rates. He then expanded the work, adding work on TB to the community health education that was already in place. That sustainable approach can be replicated elsewhere.

Dr Mario Raviglione, director of the global TB programme at the World Health Organisation, said just last month, when he launched the WHO’s global TB report in partnership with the all-party group on global tuberculosis, that

“at the current rate of progress, we will not be rid of TB for over a century.”

The efforts of the global health fund and its partners have made fantastic progress against TB, HIV and malaria, and the Government are to be applauded for their recent pledge of up to £l billion for the fund. However, we need absolute urgency, unremitting determination and co-ordinated effort to tackle TB.

[Andrew George (St Ives) (LD)]

I congratulate the hon. Gentleman on securing this debate. I also warmly applaud the Government on the contribution and the commitment that they have made to the global health fund, which continues the work of the previous Government.

The hon. Gentleman mentioned the HIV position paper, which in fact was published only moments ago. He may be disappointed to note that the Government appear not to be putting quite as much emphasis on ensuring that they make the connection between HIV and TB. Will he insist that the Government continue a commitment to TB REACH and other programmes that address that serious problem?

[Jim Dobbin (in the Chair)]

Order. I suggest that when we have interventions, they are short.

[Nic Dakin]

Thank you, Mr Dobbin, and I thank the hon. Gentleman for his contribution. I am sure that the Minister will reflect on his point when he responds to the debate. It reinforces the point that I made earlier about the importance of the Government taking the opportunity to co-ordinate their efforts in relation to both HIV and TB, and the Minister will have heard those points.

[Mr Peter Hain (Neath) (Lab)]

Is my hon. Friend aware that 750,000 TB cases—the most lethal ones—come from South Africa’s gold mines, and contribute 9% of the global total of TB cases, which are often linked to HIV? If so, does he agree that it is vital for the British Government to talk to British-owned companies that are mining gold in South Africa to try to resolve that terrible epidemic?

[Nic Dakin]

I thank my right hon. Friend for that intervention. He is absolutely right that the Government have a leadership role to play both globally and in relation to British companies involved in South Africa and elsewhere. I am sure that the Minister will also pick up on that point when he responds to the debate.

Dr Raviglione said that it would take more than a century to get rid of TB. Waiting a hundred years to get rid of this disease is just not good enough. Dr Raviglione also drew attention to the shameful fact that one in every three TB cases on the planet is not properly diagnosed or treated, which equates to 3 million people every year going undiagnosed, the majority of whom will have infectious pulmonary TB. Many of them are estimated to have drug-resistant strains. That is 3 million people a year going undiagnosed for the past six years—that is not good enough, either. Until everyone in the world with TB is diagnosed and correctly treated, we will never succeed in bringing the global TB epidemic under control and it will continue to blight our world, ruining millions of lives every year.

TB has killed more people than every other pandemic in history combined, by a margin of several hundred million. It is a global disease of the here and now. It affects every country, and every country must have a role to play in tackling it. It requires global leadership from our Government and every other Government. Tackling it requires support and investment through multilateral organisations such as the global health fund, as well as through targeted interventions. We need important technical and co-ordinating agencies, such as the WHO’s global TB programme and the Stop TB Partnership, to work together to enhance co-operation and cohesion across the world’s responses to TB. We need the brightest and the best of the scientific and business communities to work with high-burden countries, in order to step up the fight against this disease and save as many lives as possible.

Consumption, or TB, is a disease of the present. It is a scourge on our humanity and deserves the full force of all our efforts. Although new tools to tackle HIV and TB are badly needed, if we scale up the use of the tools that are already available we have the opportunity to save an additional million lives in the next few years.

I hope that the Minister, when he responds to the debate, will take the opportunity to reaffirm the Government’s commitment to ensuring full replenishment of the global health fund; to continuing to fund TB REACH to a level that allows it to carry on supporting new and innovative projects to find “the missing 3 million”; and to continuing to push for the development and uptake of better diagnosis, treatment and prevention treatments for TB, in a way that can be sustainable.

Finally, let us recognise the work done by all those people across the globe on the front line of the fight against this terrible disease. Their effort is a call to arms for us and a call for us, as policy makers, to step up to the mark and provide them with the tools and the wherewithal to eradicate TB and place it firmly in the past.

14:40

[Nick Herbert (Arundel and South Downs) (Con)]

I congratulate the hon. Member for Scunthorpe (Nic Dakin) on securing this debate. I am delighted to be taking part in it, particularly as I have resumed the co-chairmanship of the all-party group on global tuberculosis, now that I am free to do so. It is, quite properly, a cross-party co-chairmanship, which reflects growing concern in the House about what is often a “Cinderella” disease—one that is not talked about as much as some other diseases that are still claiming lives today.

We are, properly, concerned about the terrible tragedy in the Philippines and the loss of thousands of lives and we are, properly, marking world AIDS day on Sunday and the millions of lives that have been claimed by that disease. There is a strong overlap, as the hon. Gentleman pointed out, between HIV and tuberculosis, which many still believe is essentially a disease of the past. Indeed, before I became involved in this movement, I thought so too. In the 19th century, tuberculosis—consumption—was regarded sometimes even as a romantic disease, as featured in many operas of that era, yet one in four people in Europe were dying of consumption at that time. It was only with the advent of modern medicine—antibiotics—and the west’s attack on poverty in the late 19th and early 20th century that the disease was brought under control.

There are some sobering observations to make about the rate at which TB—which, as the hon. Gentleman said, has now resurged here, as a disease of the present—is being tackled, compared with the rate at which the west dealt with it in that era. At the current level of progress that the west in making in dealing with a disease that is still claiming 1.3 million lives a year—unnecessarily, because in the main it is easily and cheaply curable—we will have to rapidly step up the efforts that are being made, because the incidence of this disease is currently declining by 2% a year. If we continue at this rate, it will take more than a whole lifetime—a whole generation—and it will be more than 100 years before we tackle this disease properly and get it under control. That will mean that millions of lives will needlessly be lost.

On top of that, there is a growing threat—one that now amounts to a serious issue for this country as well—of drug-resistant TB, the emergence of which is entirely a reflection of the ancient way in which we treat this disease. Were it not for the fact that people with TB require lengthy treatment with antibiotics, because the drug regimens are old-fashioned and no new drugs have been developed, and were it not for the prevalence of counterfeit drugs and the inadequacy of health regimes, drug-resistant TB might not have developed with such ferocity. However, it is now a serious matter of concern, and not just in developing countries, where people unlucky enough to be diagnosed with drug-resistant TB—and few are—almost always face a death sentence. Acquiring drug-resistant TB in a developed country with an advanced health system would still require an expensive and extremely painful course of treatment over months and years.

[Mr Gregory Campbell (East Londonderry) (DUP)]

While the right hon. Gentleman is elaborating on the complications that follow diagnosis, does he agree that there is a shocking compounding of the problem worldwide, because in some countries lung cancer is being diagnosed to a considerable degree in people who are subsequently diagnosed with TB?

[Nick Herbert]

The hon. Gentleman raises an interesting point. The starting position has been that we need the means to diagnose this disease.

Let us face up to the fact that if the resurgence of this disease had been in the west, it would already have been tackled by now. The pharmaceutical companies would have had a commercial interest in developing better diagnostics and tools, better drugs and, indeed, a vaccine. Another common misconception is that a vaccine is available to deal with TB, but only the BCG vaccine exists, and that is generally ineffective for most forms of TB and works for children for a limited time. Had this disease resurged in the west, by now we would already have these things, but we do not, because the drug companies did not have a commercial interest in developing them, essentially because the disease was found in developing countries without the economies or the wherewithal to pay for these new tools.

There can be no better example of the necessity for intervention by wealthy western Governments, who have the resources to ensure that such a disease can be tackled, not just in the interests of ensuring that lives can be saved—there is a profound moral reason to tackle this anyway—but in the west’s interests in securing the economic development of high-burden countries that are afflicted with this disease, which is a tremendous brake on economic development. Of course, TB is a disease that knows no borders, and with migration, and so on, we face the prospect of it resurging in our country. We have higher rates of TB in this country now—although they are low by comparison with high-burden countries in the rest of the world—than in the rest of Europe. We have failed to reduce rates in the past 10 years, as compared with the United States, for example, which has got on top of the problem. This is a pressing public health issue in this country.

There are lots of reasons for western Governments to be concerned about this issue. Therefore, I strongly endorse what my hon. Friend the Member for St Ives (Andrew George) said about the UK Government’s recent commitment, which has not been sufficiently noticed, to replenish the global health fund. That is a fantastic commitment, not just because of the absolute sums pledged to the global health fund—which is an effective means of tackling TB and is responsible for 80% of the funding for TB programmes across the world—but because it sends a powerful message, ahead of the replenishment summit next Monday, to other potential donor countries about the value of stepping up our efforts at this time.

The west faces a choice. We have the opportunity, with the potential emergence of new treatments, diagnostics, and so on, to get on top of this disease. If we relax our efforts and fall victim to the idea that, at a time of austerity, the west might pull back from some commitments that it is making, our efforts to tackle TB would go into reverse. This is an important moment to step up to the plate. Britain has done so admirably. I commend the work of the Secretary of State for International Development and Ministers in making that commitment, and I encourage other countries to do the same.

[Andrew George]

Again, I congratulate the Government on their efforts regarding the global health fund, which sets the tone, but is my right hon. Friend and co-chair of the all-party group aware that just before this debate the Government published the HIV position paper, which appears to suggest that the UK’s contribution to eradicating TB can largely be delivered through the global health fund, whereas for HIV it can also be delivered by a significant strategy pursued by the Department?

[Nick Herbert]

I hope the Minister has noted my hon. Friend’s point, because TB control programmes rely on funding from the global health fund. We need to send that message to the global health fund as it determines resource allocations and to other countries as they consider replenishing their support.

My final point is that although the Government’s support for the global health fund is welcome, it is important to understand that that is not the only thing we need to do if we are to get on top of TB globally. Setting aside the action that needs to be taken domestically—Health Ministers are making progress on what needs to be done through a TB control programme—we cannot rely on the generous commitment to the global health fund for the international effort that is needed.

I want to raise the cause of an important programme run by the Stop TB Partnership called TB REACH, which addresses the problem of the missing 3 million cases to which the hon. Member for Scunthorpe referred. Until we find those who are affected by TB, we have no chance of treating them or getting hold of the disease. The power of TB REACH is that it funds innovative programmes on the ground that are finding new ways to go out and identify the missing 3 million cases. TB REACH has been robustly evaluated and shown to deliver value for money. It is relatively cost-effective, but its funding is coming to an end. TB REACH was largely set up with funding from the Canadian Government and now does not have sufficient funding to identify all the necessary cases. TB REACH has helped to identify some 500,000 cases in the past year, and it needs to do more. If we are serious about the level of the challenge we face, it would be worth while for the Government to seriously consider contributing to the ongoing work of TB REACH to ensure that the programme can survive.

[Mr Kevin Barron (Rother Valley) (Lab)]

Earlier this year I was a member of the parliamentary delegation that visited TB REACH in Awasa, in Ethiopia. TB REACH is doing outstanding work to find those missing people. I concur with the right hon. Gentleman and add my support. Hopefully the Government can find money to put into TB REACH, as it is not funded through the global health fund.

[Nick Herbert]

I am grateful to the right hon. Gentleman, because that is precisely the point I am trying to make. I understand that TB REACH has helped to identify some 750,000 cases of TB and prevent those people from becoming infectious, as they would otherwise have continued to infect others.

The budget of TB REACH is relatively small. It is asking for $40 million a year. In the overall scale of the interventions that the west is now making to control the major diseases of HIV, malaria and TB, the funding is relatively small, although obviously it is not insignificant. The programme is worth while; I therefore ask the Minister to address that point. I have just written to the Secretary of State for International Development and hope to meet her to discuss TB REACH at this important moment, as the programme’s future is being considered.

I am grateful to the Government and to hon. Members on both sides of the House for the interest they have shown in TB. A few years ago, very little interest was shown in the disease, despite the huge interest shown in other international development issues. That has changed. I believe that the work of the all-party group has helped, as have the many non-governmental organisations that are supporting us—in particular, Results UK has played an important role in raising the profile of TB. We have a moral imperative to tackle the disease, and doing so is within our reach. It is now essential that we step up the efforts to ensure that it is not another 100 years before we beat a disease that the west once thought it had beaten.

[Several hon. Members]

rose—

[Jim Dobbin (in the Chair)]

Order. We have five speakers left, and I intend to call the shadow Minister at 3.40 pm.

14:49

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

It is a pleasure to serve under your chairmanship, Mr Dobbin.

In the last three Westminster Hall debates that I have attended—on the privatisation of the east coast main line, the privatisation of blood products laboratories and free schools—I have found myself at loggerheads with Government Members. Unusually, however, today I find myself nodding in agreement with the excellent contribution of the right hon. Member for Arundel and South Downs (Nick Herbert). I pay tribute to my hon. Friend the Member for Scunthorpe (Nic Dakin) for securing this timely, important and significant debate.

I echo the right hon. Member for Arundel and South Downs in paying tribute to the work of the all-party group on global tuberculosis and its members and officers, including the hon. Member for St Ives (Andrew George), who has been an absolute stalwart of the group for a number of years.

I will concentrate on one aspect of this terrible condition that is close to my heart. As Members know, I have the pleasure of representing Easington in east Durham. Easington is a coal mining constituency with a long and distinguished history as one of the great heartlands of the north-east coalfields. I thought it would be poignant in this debate to reflect on why our pits were closed and why Britain now imports more than two thirds of the coal burned in our power stations, when once we imported none.

The UK coal industry was modern, efficient and very health conscious. My right hon. Friend the Member for Neath (Mr Hain) spoke about the incidence of TB among South African miners, which is relevant. I have just come from the annual general meeting of the all-party group on coalfield communities, where we talked about the problems that we face in coal mining communities, the physical legacy of pollution and the ill health associated with mining. That is another reason why this debate is close to my heart.

Although, by its very nature, mining will never be completely safe—it is an extractive process—our mines were about as safe as they could be, and the health, safety and well-being of miners was paramount. There are those who would argue that that drove up costs.

Today, much of the world’s coal production has been offshored and outsourced to countries where health and safety standards are minimal and labour is cheap. There is still blood on the coal, but nowadays it is more likely to be the blood of miners in Colombia, China or South Africa. The price of the irresponsible pursuit of profit and cheap labour is the health and safety of mineworkers worldwide.

Mining is one of the biggest employers of men in South Africa. Tens of thousands of those miners are migrant workers, from neighbouring countries such as Mozambique, Lesotho and Swaziland, who work and live in crowded townships in mining areas. As has been said, diseases such as malaria, TB and HIV/AIDS are rife. South Africa’s mining industry has been the subject of intense international and national media scrutiny due to the recent industrial unrest. Members will be aware of the appalling shooting of striking miners by armed police in scenes reminiscent of the worst days of apartheid. Mining is one of the driving forces of the South African economy; it contributes some 20% of the country’s gross domestic product and is a major employer.

What has not been subject to the same degree of media attention is the devastation caused to miners and their families by TB. The disease remains the leading cause of death in South Africa today. One third of all cases in sub-Saharan Africa have a link to the mines. TB is an airborne disease, spreading through the air when people who have it cough or sneeze, and it is often fatal if left untreated. Rates of TB among South African mineworkers are estimated to be as high as 7,000 per 100,000. That huge figure is 28 times the World Health Organisation’s definition of a health emergency and is the highest such figure in the world.

As we have heard, TB is closely linked to HIV, which is also a challenge in the mines. It is estimated that people with HIV are 21 to 34 times more likely to develop active TB. As we approach world AIDS day, it is important to reflect on that and on the interactions between the two. Such high HIV infection rates, coupled with cramped living conditions and exposure to silica dust, which damages miners’ lungs, creates a perfect breeding ground for the disease. The effects are devastating not only for the families of the many miners who die from TB, but also for communities, companies and Governments.

From a commercial point of view, the disease dents productivity—the issues I am raising are relevant to the British mining companies involved in South Africa—puts a drain on health budgets and spreads far into the rural areas that miners migrate from. Migration also means that the problem is not exclusive to South Africa, which is one reason why sub-Saharan Africa is not on track to meet the target of reducing deaths from TB by half by the expiration of the United Nations millennium development goals in 2015.

[Jim Shannon (Strangford) (DUP)]

I apologise for not being here earlier; I had other business and could not get here any quicker.

The hon. Gentleman mentioned world figures for TB, but the exact number of TB sufferers is not known and many of them cannot be found. How does he think we can best address that problem?

[Grahame M. Morris]

I am grateful to the hon. Gentleman for that relevant point. An estimated 3 million people with TB in southern Africa have not been reached, but programmes, such as TB REACH and those supported by the Department for International Development, exist to identify those people and to secure treatment for them. My point is about the incidence of known TB among miners in South Africa.

TB is curable with drugs, and the costs are relatively modest. Spending £15 a person should be easily affordable. Global underinvestment and indifference mean that the disease killed an estimated 1.3 million people globally in 2012. The failure to deal decisively with TB has allowed drug-resistant strains of the airborne disease to develop, which are much more difficult and significantly more expensive to treat.

Earlier this year, members of the all-party parliamentary group on global tuberculosis, including me, met the Secretary of State for International Development. I want to echo the words of Government Members and compliment the Minister and the Secretary of State for their commitment on this issue. We met them to put TB at the forefront of their dealings with major Anglo-American mining interests, particularly in the gold mining industry, which has a high incidence of TB as well as high rates of HIV. As my right hon. Friend the Member for Neath mentioned, an estimated 750,000 cases—I had to check that incredible figure, as I thought it was a printing error—of TB each year, 9% of the global total, come from South Africa’s gold mines.

Colleagues who represent former British mining communities, such as my right hon. Friend the Member for Rother Valley (Mr Barron), and I are determined to push the battle against TB up the political agenda here in the UK. Along with the South African mining unions, I want to see the British Government make the British mining companies involved in South Africa sign up to a new protocol launched by the South African Department of Health. That would help ensure that mining companies abide by a legal framework governing the treatment and compensation of occupational TB.

In the past, too many stricken miners simply returned to their towns and villages to die lingering and often painful deaths. In the 21st century, it simply cannot be acceptable that mining companies, or any other employers, should systematically endanger the health of their workers. Rates of TB in the mines have been estimated at 28 times the World Health Organisation’s definition of a health emergency. This is a global health emergency. We need Governments, employers and drug companies to act accordingly.

People do not have to live in a mining constituency to know that keeping the lights on should not come at the expense of the health and lives of South African miners and their families, or those in any other countries. That is simply wrong. Global mining operations headquartered in the UK must accept their social, moral and ethical obligations to address the issue as a matter of urgency.

15:05

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

It is a pleasure to serve under your chairmanship, Mr Dobbin. I congratulate the hon. Member for Scunthorpe (Nic Dakin) on securing the debate. Discussing the link between tuberculosis and HIV/AIDS is particularly pertinent given our proximity to world AIDS day.

I would like primarily to focus on the need to ensure the consistent global provision of cheap, effective, high-quality drugs. I also want briefly to reflect on the past in a slightly different way from other hon. Members. More than 50 years ago, I actually caught TB, just while I was waiting for my BCG vaccination. If the timing had been otherwise, my life would obviously have been rather different. It is important to reflect on the fact that the BCG vaccination is over 90 years old, and it seems incredible that we do not yet have an effective vaccination. I really want to stress that aspect of the problem today.

I was in the sanatorium for seven months and can still remember the awful drugs, which I think are exactly the same as those given today. Day after day, I received injections and the most appalling tasting medicine. To make things slightly better for us young teenagers, we were given a book to read about how TB was treated in this country at the beginning of the 20th century, which was also pretty awful. Things moved on pretty quickly from the time when I was ill, however, and it was not long before the sanatorium was closed down and TB stamped out. That experience drives my interest in tackling worldwide TB.

It seems incredible that, as we have heard, an estimated 1.3 million people died from TB last year. It is most distressing to think that we are still relying on the same drugs for standard TB. We need rapid developments across the range of drugs. As has been mentioned, drug-resistant TB and extreme drug resistant TB also exist, both of which require a cocktail of drugs with horrendous side effects. The duration and difficulty of treatment represents a major challenge to patients completing treatment and therefore being fully cured. I was fortunate enough to go on a trip with the organisation Results UK to a village in Rwanda to meet patients who could not afford the transport to access the slightly more advanced drugs. There is so much more to be done.

We must also look at diagnosis. For the most part, just as when I had TB, the diagnosis is through sputum smear microscopy, which can take months, does not detect drug resistance and is ineffective at diagnosing TB in children and among HIV-positive patients. A new machine, GeneXpert, can detect some forms of drug resistance and can provide an accurate result in two hours. It has been approved by the WHO and rolled out across the world, but it is heavily dependent on local infrastructure. A point-of-care, cheap, easy-to-use diagnostic remains absolutely vital to achieving the quick diagnosis required to reduce transmission.

I, too, congratulate DFID and the Government on making a real commitment to UK aid overseas and, in particular, on topping up the global fund. However, what we are really saying, beyond congratulating the Government, is that much more needs to be done. Every year, 3 million TB patients globally are not officially treated, so we need other countries to add to the contribution we are making. We need to support important programmes such as TB REACH, which other Members have mentioned. We need the maximum provision of high-quality drugs at affordable prices. The Government must use their connections at the highest level to encourage countries to take a harder line on the quality control of drugs.

Global drug provision remains a challenge. The UK needs to increase the number of countries engaged in pooled procurement programmes such as the Global Drug Facility. That will increase demand and draw together a fragmented market, thus helping to ensure a more economically appealing market for manufacturers and suppliers.

Poor health is a driver and a consequence of poverty; we can look back at our history and see that, and we see it today worldwide. The Prime Minister co-chaired a UN high-level panel on the post-2015 framework, which reported earlier this year. Its report revealed that TB case finding and treatment was the most cost-effective intervention measured, returning £30 for every £1 spent. With its record, the UK is in a unique position that enables it to continue giving leadership and to do much more to tackle this big global problem.

15:11

[Mr Kevin Barron (Rother Valley) (Lab)]

I congratulate my hon. Friend the Member for Scunthorpe (Nic Dakin) on applying for and securing the debate. We have heard some of the dreadful statistics on TB throughout the world, and I want to spend a few minutes looking in detail at the cost of treating TB when it has not been caught first time round.

Last year, there were an estimated 450,000 cases of multi-drug-resistant TB. It is believed that 10% of those involve extensively drug-resistant TB and are, effectively, impossible to treat. Drug resistance is really a man-made problem resulting from the misuse of anti-TB drugs and the poor management of the disease. Drug-resistant TB can be passed from person to person in the same way as TB that is not drug-resistant. Clearly, early and rapid diagnosis and treatment completion are essential to control TB. As many Members, including my hon. Friend the Member for Scunthorpe, have said, TB is the leading killer of people living with HIV/AIDS and accounts for one in five AIDS-related deaths.

Drug-resistant TB develops primarily because it is treated with a number of drugs taken over six to nine months. If medication is taken incorrectly or stopped prematurely, the TB bacteria can re-emerge and become resistant to the drugs used to treat TB. That sometimes happens because of the provision of substandard drugs, because patients do not complete their treatment or because the drugs are available only intermittently.

Multi-drug-resistant TB is a form of TB that does not respond to the standard treatment using first-line drugs and that is extremely difficult and expensive to treat. As I suggested earlier, extensively drug-resistant TB occurs when resistance to second-line drugs develops on top of multi-drug resistance. Drug-resistant TB can take two years or more to treat with drugs that are less potent, more toxic and much more expensive than those used to treat a standard case of TB. The drugs are toxic and are commonly associated with severe side effects, of which permanent deafness is the most common. Almost all of them have limited effectiveness, and most are more than 40 years old, as the hon. Member for Mid Dorset and North Poole (Annette Brooke) said. Fewer than 50% of multi-drug-resistant TB cases are successfully treated and considered cured.

On costs, multi-drug-resistant TB can be up to 450 times as expensive to treat as a standard case of TB. In all 27 high-burden multi-drug-resistant TB countries, the treatment cost is greater than the annual average income. If multi-drug-resistant TB is not correctly treated and develops into extensively drug-resistant TB, the chances of someone being successfully cured are less than one in 10. The world needs to recognise that. Extensively drug-resistant TB patients are practically impossible to treat, but they often remain infectious and capable of transmitting the disease to others. That scenario is often described as a time bomb.

[Jim Shannon]

Everyone is aware of the high prices of the normal drugs, but a number of countries—India is one—can produce similar, effective drugs more cheaply. Should we source those similar, cheaper drugs to help spread the cost?

[Mr Barron]

I am sure that is the case; indeed, the global fund does do that. However, that does not prevent the supply of drugs, even if they are affordable in part, from becoming intermittent. As a consequence, we end up with the more extreme cases of TB.

The UK Government have played a leading role in the response to TB globally, investing in research and development on new tools to tackle TB, supporting efforts to increase the profile of the disease through the Stop TB Partnership and supporting key institutions such as the global fund, which accounts for more than 80% of donor funding to tackle TB in developing countries.

I mentioned in an intervention that I visited Ethiopia earlier this year. I went there with Results UK in the February recess, along with the hon. Member for South Derbyshire (Heather Wheeler), my hon. Friend the Member for Workington (Sir Tony Cunningham) and two Members of the other place. In Addis Ababa, we visited St Peter’s hospital, which is Ethiopia’s national TB referral hospital. With support from the global fund, St Peter’s provides care for TB referral cases and patients with multi-drug-resistant tuberculosis. It also provides care and treatment to people living with HIV/AIDS, which is of course closely linked to TB.

The hospital demonstrated that, with proper funding, low-income countries can use minimal resources efficiently and effectively to respond to the threat of drug-resistant TB. As I said in my intervention on the right hon. Member for Arundel and South Downs (Nick Herbert), we also visited Awasa and looked at the great work TB REACH was doing there to find the missing 3 million cases.

While we were in Ethiopia, we did not look just at TB, although that was our primary aim. We also looked at Ethiopia’s strong planning and innovative response to its human resource crisis. It is using its health extension programme, which quite a lot of our money has gone into developing. Funding to support such successful interventions has been provided by key multilateral organisations, including the global fund and TB REACH. I reiterate that, in addition to what they have done already, the UK Government have put £1 billion over three years into the global fund, and they are much to be credited for that.

Finally, I have travelled the Commonwealth on many occasions over the years. When we were out in Addis Ababa, we had a meeting with DFID—I say this because the Minister is here—and it was one of the most positive meetings I have ever had. The DFID people knew exactly where global fund money and our taxpayers’ money was going: to help people in dire need of an improvement in their health, as well as in their quality of life, through water supplies and things like that. We always hear negative views about what happens to taxpayers’ money when it goes to the developing world, so it is worth putting on record that that was the most positive experience I have had since becoming a Member of the House.

15:19

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

I congratulate the hon. Member for Scunthorpe (Nic Dakin) on securing this debate on tuberculosis, a disease that 8.6 million people catch, and of which 1.3 million people die, every year. It is a huge issue.

I was fortunate enough to join the Results UK delegation to Zambia last year, when we examined the link between HIV and TB. We visited Lusaka central prison. I do not know whether you have ever been to a prison in central Africa, Mr Dobbin, but, a couple of months before we attended, the vice-president of Zambia, Guy Scott, visited another prison and described it as hell on earth. I must say I have never been anywhere like Lusaka central prison. It was shocking.

The prison was built by the colonial authorities in the 1920s to house between 180 and 200 prisoners. Now it houses almost 2,000. We were taken to cells no bigger than my bedroom at home. They were designed to sleep between six and 10 people, but now there are 80 to 100 prisoners locked in those rooms for up to 14 hours a day. I looked at the room and wondered how they even fitted so many people in it. Apparently the sleeping arrangement is to line up 12 people against the wall, who crouch down with their backs to it. They sit down and open their legs and the next 10 or 12 come and lie between their legs, and so on, to cram them into all the available space. Mattresses and blankets are completely lacking. The toilet facilities are completely inadequate for the number of prisoners, and an open drain or sewer, containing a disgusting-looking brown liquid, runs through the middle of the courtyard. Medical facilities are lacking—the site has no health clinic and sick prisoners lack medicine—and so is food. There is one basic meal a day, which is completely lacking in protein. It is fair to say that the conditions in the prison are not conducive to general health.

Catching TB should not be part of someone’s prison sentence, but in that prison it was. At one stage the TB infection rate was almost 100%. TB is one of the fastest-growing epidemics in sub-Saharan Africa’s prison populations. It presents a threat not only to the inmates but to the wider population, because the prisons act as a reservoir for TB. It gets into the wider community through visiting, staff visits and the fact that prisoners who leave have been inadequately treated. TB does not respect prison walls.

There was a bright spot to the visit. We were taken to the prison by the commissioner of prison services, who was very open, and keen for us to see the reality. Several hon. Members have mentioned TB REACH, and we were shown a project that it had set up in the prison together with the Centre for Infectious Disease Research in Zambia. That programme included TB and HIV screening, treatment, and the introduction of isolation cells for prisoners with multiple drug-resistant TB. A prisoners’ drama group had been organised to teach prisoners to look for the signs of TB and understand how important it is for those with the disease to make people aware of it and get the required treatment. The programme was massively successful. The TB infection rate was down to 30%. That is still huge, but it is an awful lot better than it had been a year before.

Early diagnosis and treatment are essential for the control of TB. As we saw in Zambia, TB REACH runs pretty much the only mechanism designed to target and treat the 3 million missing TB victims we have heard about. One of its advantages is that it can react very quickly. It can provide fast-track funding for projects, to get them up and running quickly—often within six months. It is also willing to fund new and innovative approaches. That is important, because organisations such as the Global Fund to Fight AIDS, Tuberculosis and Malaria will fund projects only if they have been proved successful. They will not finance new ideas or do experimental things to see whether they will work.

We need new approaches. Many places that we visited in Zambia—whether clinics, hospitals, or community groups—were in isolated communities. There is a need for new, mobile technology, and we need to roll out new diagnostic tests. That can happen only when testing and experimentation has been carried out, and when an organisation such as TB REACH is willing to provide funding. We saw that process in action when we visited Kanyama clinic, run by the Zambia AIDS Related Tuberculosis Project. Like my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke), we saw the GeneXpert machine in action.

For hon. Members who do not know what the GeneXpert machine is, the relevant website describes it as follows:

“The GeneXpert System automates and integrates sample preparation, nucleic acid amplification, and detection of the target sequence in simple or complex samples using real-time Polymerase Chain Reaction”.

In basic terms, it is a diagnostic tool that can diagnose TB much more accurately than the use of a microscope, as well as more quickly—often within two hours. It can detect TB in HIV-positive patients too. That of course is a massive advantage in rural clinics, because people can have the test and wait for the result. At the clinic, people from the community were encouraged to become involved as volunteers and to help people by talking them through the process, the results, and what the treatment would entail, and by going out into communities to ensure that they continued taking the treatment in the weeks ahead.

The GeneXpert machine works well in some environments, but it is not perfect. It can be difficult to use in isolated rural areas, because it requires a constant electricity supply, so on our visit we looked at how alternative energy supplies such as solar power could be used to power medical equipment in rural areas.

On our visits to Kanyama clinic and Lusaka central prison we saw at first hand the effect of TB REACH projects—improving TB diagnosis and providing fast treatment. However, as we have heard from my right hon. Friend the Member for Arundel and South Downs (Nick Herbert), the project is time-limited, and new funding is required now that its grant is coming to an end. There is concern about how some of the projects can be integrated into national health care systems. TB REACH grants are for short periods, to get a new technique into use in a locality. For permanent solutions it is necessary to integrate an approach into the relevant national health scheme, or to reach a position where it can be funded by the global health fund or donor countries will be willing to continue to support it.

As we have heard, the majority of the TB burden is concentrated in countries that often receive less donor funding. Whether it is the burden of drug-resistant TB in eastern Europe, TB in prisons in Zambia, or the epidemic, on an enormous scale, in India, domestic Governments must step up their own response. The UK has a unique opportunity to use its global leadership position to call on those Governments to increase their investment in the fight against TB, especially given our strong links to southern Africa and India, which account for the greatest part of the missing 3 million—the ones missed by their health systems. TB is a global disease on which the UK can have an impact.

The Minister and DFID have done a fantastic job and have made Britain a world leader in the battle against malaria. The UK Government should also use their position to become a global leader in the fight against TB, which is another of the top infectious disease killers. Global political commitment to that fight has so far been missing.

15:30

[Mr Virendra Sharma (Ealing, Southall) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Dobbin; I thank you for giving me the time to speak in the debate. I congratulate my hon. Friend the Member for Scunthorpe (Nic Dakin) on securing the debate, which is close to my heart, as I am the co-chair of the all-party group on global tuberculosis. I also congratulate and thank the many agencies and non-governmental organisations that work in this field, which have helped to raise the issue and bring it to the top of the world agenda.

There is an urgent need to address TB worldwide, but we must not forget that it is still a big concern in the UK, where the rate of TB cases is the highest in western Europe, with 9,000 cases last year alone. My constituency has the second highest rate in the country—156.8 cases per 100,000 people, roughly six times higher than the UK average and equivalent to the rate in Tanzania. It is important to remember that TB is very much a public health threat in parts of the UK, and that it affects people’s health every day, often with long-lasting consequences.

One of the key barriers to treating and eliminating TB in this country is stigma. TB is an airborne, infectious disease, which is deemed incurable and is associated with poverty. Many people are reluctant to tell their families, partners and community when they have the disease, which means they are much less likely to be treated. In the UK, stigma is a barrier that prevents people from seeking treatment when they start to feel ill. It also makes it difficult for health workers to identify other people who might have been exposed, because patients are often reluctant to admit to the possibility of their having infected others.

We cannot afford to ignore TB. It needs to be prioritised and talked about so that people do not feel marginalised and ashamed. We need to ensure that they are aware that TB can be treated and that they seek treatment when they fall ill.

We have a great health centre in Southall that offers TB screening, diagnosis and treatment. However, a third of patients in the area had a delay of more than three months between symptom onset and diagnosis. Although the proportion of people completing treatment was similar to the London average, slightly more were lost to follow-up.

We need to support social outreach projects in high-risk areas as a means of engaging directly with the community, rather than wait for people to come to the health services. That will help to raise awareness and stymie stigmatising, and will enable us to diagnose and treat TB earlier in at-risk communities. Case finding needs to be an active process to ensure that cases of TB do not fall between the cracks and remain untreated.

On a local and community level, outreach projects are crucial, but it is essential that we also have a national strategy on TB. The all-party group on global tuberculosis led the way in calling for a national strategy on TB. It is encouraging that Public Health England is currently developing such a strategy, which will be published in 2014. The national strategy will drive best practice throughout the UK’s clinical and social care for TB, but we must ensure that it is closely integrated with other Government policies on TB, including those of the UK Border Agency and the Department for International Development.

An interdepartmental ministerial group on TB performed that task at the turn of the century, but unfortunately it produced only one report before folding. That group should be revived. TB affects a wide range of Departments, and efforts must be made to enhance co-operation and co-ordination across their policies and interventions to provide the most effective response to TB in this country. A formalised, recognised structure with appropriate support is the best way to make that happen.

TB has been neglected for too long. It is a disease that people do not talk about and have forgotten, which increases stigma and reduces the likelihood that those in need will receive treatment and care. The UK does not need to commit finances to make a difference to how the disease is perceived, but it does need to show leadership and commitment domestically and abroad. It can do that by reaffirming that TB is a serious threat and a priority, and by committing to a local community strategy accompanied by a national, co-ordinated interdepartmental approach.

[Jim Dobbin (in the Chair)]

I have enjoyed the debate very much. In a former life, I worked in an infectious diseases hospital, specialising in TB.

15:36

[Alison McGovern (Wirral South) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Dobbin. I was going to mention your experience, which I am well aware of. Perhaps you should have spoken in the debate, rather than being in the Chair.

I congratulate my hon. Friend the Member for Scunthorpe (Nic Dakin)on securing such an important debate. The unity that we have heard in the contributions is telling. We often spend our time disagreeing, but today we have not. That should be a message to everybody who cares about this incredibly important issue.

There have been seven excellent contributions to the debate, and I was struck by the amount of personal experience that we have heard. My hon. Friend talked about his experience as a college principal and the stigma of the disease in this country. The right hon. Member for Arundel and South Downs (Nick Herbert) gave a brilliant contribution about his role in the all-party group. He was rightly frustrated about progress and the wildly different standards across the globe, although we are all equally vulnerable to this terrible disease.

My hon. Friend the Member for Easington (Grahame M. Morris) spoke from a mining perspective about his experience and that of his constituents. The hon. Member for Mid Dorset and North Poole (Annette Brooke) spoke personally and directly about her experience of the disease. My right hon. Friend the Member for Rother Valley (Mr Barron) brought his considerable health experience to the debate. The hon. Member for City of Chester (Stephen Mosley) painted a serious and distressing picture of what the disease can mean in places in which people are weak and vulnerable, but also talked about what can be done practically. Finally, my hon. Friend the Member for Ealing, Southall (Mr Sharma) rightly spoke about the picture globally and in the UK, and about his experience in his constituency.

Tuberculosis has cast a long shadow over our country; I can recall my grandparents talking about life alongside people with TB. That shadow led to the bright sunlight of our NHS, which we are proud of. TB preys on the vulnerable, the poor and the weak. I will ask questions of the Minister, but it is worth remembering that, as the hon. Member for City of Chester pointed out, we are talking about putting in place systems to protect people.

TB is a horrible, debilitating disease. To add to the picture drawn by my hon. Friend the Member for Scunthorpe, in our own country TB robbed us of John Keats at age 25 and George Orwell at age 46—think about what those two people might have contributed to our country had they not left us at a young age.

The tragedy of the 1 million deaths from TB each year is the fact that it is a curable disease. As other hon. Members have made clear, we face a growing problem of drug resistance, as well as basic issues about resources and infrastructure; those factors are holding back our ability to cut the persistently high mortality rate for the disease.

TB is not solely a problem in the poorest countries; as my hon. Friend the Member for Ealing, Southall pointed out, it is also a problem here in the UK. Although I am responding to this debate as a shadow International Development Minister, tackling TB demonstrates why we must never see development as some kind of offshore policy issue. Real action to tackle TB diagnosis, treatment, drug resistance and co-morbidities across the developing world will benefit the NHS and public health at home, as well as right across the globe.

I was pleased to serve on the International Development Committee in 2012, when we considered the contribution of the Department for International Development to the Global Fund to Fight AIDS, Tuberculosis and Malaria. At the time, the Committee expressed real concerns about delays to DFID funding for that crucial organisation, which is estimated to have saved as many as 8.7 million lives. I am pleased that Ministers took the Committee’s concerns seriously and that next week the UK will be part of the global health fund replenishment. If we are to eliminate TB globally, the fund requires sustained, guaranteed funding. Will the Minister set out how Britain will make sure that there is more long-term stability for such funding?

Although the global health fund is a vital player and the UK’s contribution to it is extremely welcome, it remains the case that DFID does not currently engage in bilateral funding of programmes related to TB. That is despite the fact that, as has already been mentioned, the UN high-level panel on the post-millennium development goals framework, co-chaired by the Prime Minister himself, found that spending on TB diagnosis, prevention and treatment returns £30 of benefits for every pound spent; that surely satisfies the Government’s demands for value for money. Will the Minister tell us more about how DFID keeps under review its potential for funding TB-specific programmes through bilateral programmes?

Clearly, Britain’s strategy for improving prevention, diagnosis and cure of TB in the poorest countries has to go beyond specific funds—here I develop the point made by the hon. Member for City of Chester—in that it needs to be part of a holistic set of policies to build up functioning, universal health services, the lack of which holds back the fight against tuberculosis. Weak health care systems are thought to be a key reason for the estimated 3 million missed diagnoses of TB and increasing mortality rates from the disease. As I mentioned, our own experience of the disease before the days of the NHS should tell us that, if nothing else does.

In the UK we are right to be proud of the NHS, and we should not be shy about promoting through our development work the benefits of universal health care that is free at the point of use. Curbing a disease such as TB, which is widespread and hits some of the world’s poorest people disproportionately, is simply not going to happen if, when we attempt to do so through health systems, user fees are levied. Put starkly, 27 nations are considered to have a high burden of TB drug resistance. In each of those countries, the average cost of treatment exceeds the annual GDP per capita. If the poorest people cannot afford treatment, they will not receive it.

Britain has a good story to tell in this regard: in 2009, faced with concerns about TB diagnosis at home, the then Government took the decision to remove prescription charges for anyone attending a TB clinic. That should be what we advocate and support in every developing nation we work with that has a high TB incidence. Will the Minister put on the record DFID’s position on providing bilateral support for health care systems where user fees are currently charged? What specific work is being done to ensure that TB treatments are available free of charge in the nations with which DFID has a bilateral relationship? It is important to set out that principle.

Once again, I thank my hon. Friend the Member for Scunthorpe for securing such an important debate and bringing his experience to it. I also thank all right hon. and hon. Members who have contributed today.

15:45

[The Minister of State, Department for International Development (Mr Alan Duncan)]

I thank the hon. Member for Scunthorpe (Nic Dakin) for securing this important debate. If I may say so, it has been one of the best Westminster Hall debates I have been to. The speeches have all been passionate and have each come from a slightly different angle. Together, they form a comprehensive picture of the action that this issue requires.

We all know that tuberculosis remains one of the world’s biggest killers. It causes untold suffering and kills more than 1 million people across the world every year. What makes that tragedy much worse is that every single one of those deaths is preventable. The World Health Organisation’s recently launched annual global TB report outlines the progress and challenges in reaching international TB targets. Efforts to tackle TB are having a real effect. The incidence of TB has fallen in all six WHO regions and TB cases have been falling worldwide for a decade. However, the rate of decline remains too slow, at just 2% a year.

Resistance to TB drugs is a growing threat and the risk of resurgence is therefore always present. The figures are compelling: 8.6 million people still developed TB in 2012, and 1.3 million died. TB is one of the top 10 killers of children worldwide—a situation that is wholly unacceptable, as it is wholly preventable. There are wider social and economic costs as well, as TB primarily affects young adults in what should be their most productive years. Right hon. and hon. Members have spoken passionately about the areas for action highlighted in the global TB report.

The UK remains absolutely committed to the global goal of halving deaths from TB by 2015. We are helping people to have effective diagnosis and treatment, including for TB and HIV co-infection and for multi-drug-resistant TB. We are also helping to develop more effective treatment and better vaccines. All that work needs good health systems, so we are helping countries to build effective, efficient and durable health systems to support the delivery of TB programmes. Without such systems, we can have the best intentions, but there will be no means of achieving enough.

What is more, the Department for International Development is tackling the underlying risk factors for developing active TB. TB is a disease of poverty and squalor. Factors associated with poverty, such as malnutrition, overcrowding and poor sanitation, dramatically increase the chance of someone becoming infected and developing active TB. It is no wonder, therefore, that the ghastly prison described by my hon. Friend the Member for City of Chester (Stephen Mosley) —in what I thought was a remarkable speech—is so obviously perilous.

[Grahame M. Morris]

The Minister is responding systematically to the debate, which I appreciate, but will he turn his attention to the issues I raised about the incidence of TB among miners in South Africa? The hon. Member for City of Chester talked about chronic conditions in prisons; the hostel accommodation for miners, along with the confines of the mines they work in, is causing TB to spread. Will the Minister also comment on the obligations on UK-headquartered mining companies?

[Mr Duncan]

The hon. Gentleman has raised a serious point. If he will bear with me, I will come to the issue of South Africa in just a moment. As he and the right hon. Member for Neath (Mr Hain) said, the issue is obvious and compelling, and has to be addressed.

In spite of tough times, the broad picture for the UK is that we are delivering on our promise to spend 0.7% of gross national income on development. This year we will become the first G8 nation ever to do so. We are clear about our responsibility to deliver aid that is transparent, that delivers value for money and that produces the best results for the world’s poorest people. Our support to the Global Fund to Fight AIDS, Tuberculosis and Malaria helps to do just that. Between 2002 and 2012, the global health fund supported the detection and treatment of 9.7 million cases of TB.

To respond to the continuity point raised by the hon. Member for Wirral South (Alison McGovern), who spoke from the Opposition Front Bench, last month the UK Government committed up to £1 billion over the next three years, which is enough to save a life every three minutes. The global health fund allocates 18% of its funds to TB, which equates to £180 million of UK development funding specifically for that disease. Improving basic TB control is critical to prevent the further spread of TB, and includes early detection and diagnosis of people with the illness, ensuring that they get the right treatment and care, and checking that their families and other close contacts do not also have active TB. Also important is the reporting of cases, so that health authorities can better monitor them and improve their services.

Let me turn to the work we are doing through our country bilateral support programmes. DFID is working closely with the Government of South Africa to expand the quality and access of public sector services, including TB control, and is increasing the speed with which new TB drugs are registered. In conjunction with the World Bank, DFID is also engaged in a new partnership with the private sector in South Africa. The partnership has been set up to increase public-private collaboration to reduce the high incidence of TB specifically in miners and in the communities around them. We will continue to focus on that important target group, to which the hon. Member for Easington (Grahame M. Morris) referred. In India, DFID is working with Indian pharmaceutical manufacturers to improve the price and security of supply for high-quality drugs for resistant TB and new low-cost diagnostic products.

Co-infection has been covered thoroughly today. Many countries have made considerable progress in addressing the combined epidemic of TB and HIV. However, there were still 320,000 deaths from HIV-associated TB in 2012. DFID is supporting improved co-ordination and collaboration between TB and HIV services jointly. As part of our commitment to the global health fund, we are pushing it to do more to prevent, diagnose and treat TB and HIV co-infection.

The UK Government are very concerned about the spread of drug-resistant TB, which probably results from the improper use of antibiotics. A patient who develops active disease with a drug-resistant TB strain can transmit that form of TB to other individuals, which threatens the whole global response to TB. Drug resistance increases the cost of treatment and makes it more difficult to ensure that effective treatment is accessible to the poorest. We support efforts to tackle drug-resistant TB through our support to UNITAID, the global health fund and research.

The UK has a strong record of supporting research and development for effective treatments, diagnostics and vaccines. We support a number of product development partnerships that bring together a range of public, private and community organisations. They are designed to develop and deliver new products more rapidly and more cheaply than either the public or private sectors can do alone.

I should mention TB REACH, to which four or five hon. Members referred. The issue is not as straightforward as any of us in public policy would like. We have reviewed the external mid-term evaluation of TB REACH, and the findings suggest that it has successfully funded pilot projects and innovative approaches, which we applaud. The question is whether it will be able to roll them out effectively in the long term and on an adequate scale. We propose that DFID officials should meet the executive director of the Stop TB Partnership to discuss how the global health fund can better support the expansion of proven TB REACH projects. It is important the TB REACH implementers co-ordinate more closely with national TB control programmes—again, that was raised today—and are part of national planning processes. That is crucial to secure longer-term support.

[Nick Herbert]

I am grateful to the Minister for responding to our points about TB REACH. Does he accept that although it will no doubt be worth having a dialogue with the global health fund about supporting proven TB REACH projects, further projects will rely on the continued funding of that programme? As my hon. Friend the Member for City of Chester (Stephen Mosley) effectively said, TB REACH funds projects that the global health fund will not fund because they are unproven. TB REACH allows innovation on the ground in such projects. Will the Minister reflect on that and consider my request for a meeting to discuss the TB REACH programme before a final decision is taken about its funding?

[Mr Duncan]

I certainly undertake to consider that, but obviously, as I am on my feet at the moment, I cannot give a commitment. We provide core funding to the Stop TB Partnership, some of which is used to support TB REACH continuously. I understand exactly what my right hon. Friend is saying, and I hope that the meeting to which I have referred can explore that point in more detail and address his concerns conclusively.

DFID has also supported the Foundation for Innovative and New Diagnostics—FIND—to develop a rapid molecular test, GeneXpert, to which reference has been made. It can be used by health care workers with minimal training and laboratory facilities. The test is associated with a 40% improvement in case detection rates and can provide test results within two hours. Working through the Stop TB Partnership and UNITAID, the Department has supported the policy development and distribution of GeneXpert, which is available in 29 countries. In August, DFID announced support to nine public-private partnerships, including FIND, the TB Alliance and Aeras. Those partnerships will help to fund crucial work on developing new and more effective tools to prevent, diagnose and treat TB.

We cannot shelter the UK from what is happening around the world. In 2011, nearly 9,000 cases of TB were reported in the UK. More than 6,000 of them were in people born outside the UK. The patterns must be analysed, followed and fully understood. A cross-government approach is also essential. Public Health England has made TB one of its priorities and is working to oversee a stronger national approach.

Resistance to all antimicrobials—the drugs used to prevent and treat bacterial, fungal, viral and some parasitic infections in humans and animals—is increasing, but of greatest concern is the rapid increase in bacterial resistance to antibiotics, including those used to treat TB. In September, the Government published a new five-year antimicrobial resistance strategy, which sets out actions to slow the development and spread of anti- microbial resistance, including strengthened international collaboration. That is why DFID will continue to work with the Department of Health and others to provide national and international policy leadership. We must play our part in ensuring co-ordinated action to tackle TB at home and abroad.

In conclusion, significant progress has been made since 1995 in controlling TB, with more than 56 million cases treated and 22 million lives saved. That progress has been rooted in improved partnership, policy, innovation, and national and international leadership. We have grounds for optimism, but we are not complacent about the significant challenges ahead, in which the UK will continue to play its full part.

Helicopters (North Sea)

Wednesday 27th November 2013 Westminster Hall

16:00

[Mr Frank Doran (Aberdeen North) (Lab)]

It is a pleasure to be here under your chairmanship, Mr Dobbin. This is a short debate, which I intend to use to put on record the major reasons why the Department for Transport should order a public inquiry under the Inquiries Act 2005 into the offshore oil and gas helicopter transport system.

The North sea oil and gas industry is crucial to the UK economy. The industry and its supply chain claim 440,000 employees, around 30,000 of whom work offshore. Its investment this year will be in excess of £13 billion. It is an extremely important industry. Because of the hostile environment of the North sea, the only reasonable method of transport to and from offshore installations is by helicopter. Since 1976, there have been 13 helicopter-related incidents, in which 118 people have died. In addition to those, there were a further seven fatalities in an incident in Morecambe bay in 2006.

In the past four years, we have had five separate incidents. In three of those, the helicopter ditched in the North sea, thankfully without any fatalities, but on 1 April 2009, 16 people died when a Super Puma L2 aircraft crashed near Peterhead, and on 23 August this year, four people died when a Super Puma AS332 crashed off Sumburgh. In all five incidents, various models of the Super Puma aircraft were involved. That aircraft is the workhorse of the North sea industry, and it should be no surprise that those successive incidents have wrecked the morale and confidence of offshore workers and their families, as shown by a recent survey undertaken by Unite the union.

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

I am grateful to my hon. Friend for giving way. I declare an interest, in that my nephew, Alan Lawson, was involved in a helicopter crash on 18 February 2009. The helicopter landed in the North sea in the most dreadful conditions. Fortunately, all the people on the helicopter, including Alan, survived, but I want to congratulate my hon. Friend on pursuing these matters as tenaciously as he is, because I know from the sidelines of the terrible trauma that the family of that young man—my sister’s son—experienced. The matter still has not been resolved, and I want my hon. Friend to be reassured that there is great support for the marvellous work that he is doing.

[Mr Doran]

I am grateful to my right hon. Friend for those remarks—I promise I did not pay him.

There are many reasons why an inquiry is necessary, but I will focus on three principal reasons. First, the relationship between the oil industry and the helicopter industry needs to be considered in some detail. The Competition Commission carried out an inquiry into the industry in 2003 and recognised at that time:

“Oil companies are much larger and commercially stronger organisations than the helicopter operators”,

and

“oil companies had become more determined to force down their supply costs.”

That statement is accurate, but it is an understatement of the true position. The contracts reached by the oil industry with helicopter and other service companies are very one-sided. The contractor has obligations for a period. In the case of the helicopter operators, it is usually for five years, whereas the oil majors can change the contract terms at any time. When the oil price dips, oil companies look at their supply contracts. In the late 1990s, when the oil price was consistently low, many supply chain companies, including helicopter operators, had their contracted prices cut severely. In one helicopter company with which I had discussions, the cut was 20%. Something similar happened five or six years ago when the oil price dropped again. The practice is common in the North sea, but it is very difficult to see how a helicopter company, when its prices are cut without notice to that extent, can respond and at the same time maintain the maintenance and other costs that are crucial to the safety of the service.

I do not know whether the Civil Aviation Authority is aware of that practice. It should be, because significant cuts in income and elsewhere could severely restrict an operator’s ability to maintain safe standards. We should all know whether the CAA takes into account the huge imbalance between the oil industry client and the helicopter operators.

Given the importance of the transport industry in the North sea, it does not seem appropriate, at least to me, that the helicopter companies are treated in exactly the same way as any other supplier. The service is far too important. The huge imbalance between the oil and gas companies and the helicopter contractors should not be allowed to prejudice safety. The relationship should be subjected to the most intense scrutiny. Given the recent international agreement with Iran, a drop in the oil price is foreseeable when Iranian oil comes back into the market. It is worth emphasising that as a good example of how volatile the oil price can be.

The second issue to consider is the significant disparity in how different helicopter companies operate, particularly in how helicopters are maintained, the training of engineers and other staff and company cultures generally. I have spoken with a number of employees of different companies, and it is clear that training regimes, the number of flight hours and procedures vary considerably between companies. This is not the place to go into that in detail, but the available evidence suggests that the CAA should be taking a stricter line in its scrutiny of individual companies, their practices and their safety culture.

[Dame Anne Begg (Aberdeen South) (Lab)]

Is not the reason why there has to be a much more wide-ranging inquiry into helicopter safety, rather than the individual inquiries that go on when something has gone wrong, that we should look to see what is the best regime for helicopter companies to apply to both their work force and their maintenance regime?

[Mr Doran]

I agree entirely with my hon. Friend. There is a huge issue about the advice and recommendations that the regulator makes and how they are implemented.

The third area of concern also relates to the companies, and it is about how the CAA regulates the industry. Individual companies have different practices for checks and maintenance during operating hours, which are usually from 7 am to 7 pm. There should be a benchmark of best practice that is rigorously enforced.

In the past, one or more helicopter operators have attempted to develop a gold standard in safety in all aspects of the operation, but those efforts usually fail because of the fear of being undercut, or because of actually being undercut, by a competitor. I understand, however, that all three of the companies currently providing a service in the North sea are meeting to see whether they can agree on improved practices that they will all share. That is a move in the right direction, but it prompts the question why the CAA did not take the initiative a long time ago and insist on a gold standard across the board.

In the correspondence that I have had with the Department, the focus of Minister’s responses has been on the most recent incident, which was the crash of 23 August 2013. Of course, that incident prompted my involvement, but I was concerned with the whole history of transport in the North sea, and in particular the experience over the past four years. It is worth looking at some of the incidents in detail.

In 1992, a helicopter crashed in the North sea from the Cormorant Alpha platform. There were 11 fatalities. The weather conditions, the fact that it was night-time, poor visibility and so on were major contributors to the accident. As a result of that disaster, the CAA introduced operating policies to improve the management of helicopter operations in adverse weather conditions.

On 27 December 2006, an Aerospatiale SA365N helicopter crashed near the North Morecambe gas platform. The investigation found:

“The co-pilot was flying an approach to the North Morecambe platform at night, in poor weather conditions, when he lost control of the helicopter”.

The air accidents investigation branch recommended that the CAA ensure that personnel who are required to conduct weather observations from offshore installations are suitably trained, qualified and provided with equipment that can accurately measure the cloud base and visibility.

On 18 February 2009, a Eurocopter EC 225 LP Super Puma crashed into the North sea close to the ETAP—eastern trough area project—platform. Again, the major findings of the AAIB inquiry included the impact of reduced visibility in the immediate vicinity of the ETAP platform as a major contributory factor. The safety recommendation that it made to the CAA was that the guidance in the CAA’s relevant publication should be re-emphasised—I underline that—implying that it was not being followed properly in the industry.

On 23 August 2013, a helicopter crashed into the North sea off Sumburgh. We do not have the full AAIB report on the incident, but it is clear that the weather conditions and visibility were very poor. I cannot say for certain that this latest incident was linked to the others that I have mentioned. However, I and the pilots I have spoken to believe that all four incidents, from the Cormorant Alpha through to the incident this year, are linked by the impact of poor weather and visibility.

As I have mentioned, since 1992 there has been a specific recommendation drawing attention to the need for suitably trained and qualified staff, with appropriate equipment to measure the cloud base and visibility. That was repeated by the AAIB in more detail in 2006. Since 1992, there have been at least two failures and perhaps three in the implementation of that recommendation. That raises again the question of how the CAA ensures that its recommendations are being properly implemented. It does not seem that it operates with a hands-on approach.

I have deliberately focused on major areas of concern, and my approach may seem unfair, particularly to the oil industry and to the CAA. There are many positives that I could have raised in both cases, but my objective is fairly simple. The Government, in the shape of the Department for Transport, have a responsibility. There are serious issues to be addressed in the North sea transport system. They cannot be properly addressed with the piecemeal approach that is being adopted at the moment. In particular, the role of the regulator needs to be considered. The CAA should not and cannot be expected to review its own performance. The situation demands a full public inquiry.

The Secretary of State for Scotland, in a recent press interview, said that the Government’s approach would be faster and better, particularly for the families of victims. I do not think that the families of the victims of the 2009 crash, who have waited nearly five years for their fatal accident inquiry, would agree. The Secretary of State also said that a public inquiry would be too expensive. The Piper Alpha inquiry looked into the whole safety regime on offshore installations and produced a comprehensive report that is now the benchmark for safety in the oil and gas industry around the world. The value of that is incalculable.

I asked the Department of Energy and Climate Change what the Piper Alpha inquiry cost. To say the least, I was a little disappointed in the reply:

“The Department has checked internal records and with The National Archives, but we have been unable to locate any documents relating to the cost of the inquiry.”—[Official Report, 25 November 2013; Vol. 571, c. 14W.]

That came as a bit of a surprise to me, because it was a very high-profile inquiry.

However, I did manage to dig out, again with the help of the Library, a question asked by the late Donald Dewar of the then Secretary of State for Scotland, the right hon. and learned Member for Kensington (Sir Malcolm Rifkind). According to the answer, the cost of the inquiry was estimated to be—this was before the inquiry had completely finished—about £3 million. That is fairly cheap, given the scope and length of the inquiry. The Library tells me that in today’s money it is about £5.7 million. I checked the cost of a Super Puma helicopter, which I thought would be of some interest. It is $18 million, which is roughly £11 million, so for the price of one Super Puma, we could have two Cullen inquiries.

I understand why Ministers may have some inhibitions about the costs of a public inquiry, particularly in these austere times, but also because one or two have swallowed up a lot of public money. However, the issues in this case are fairly straightforward and focused. I would expect the inquiry to be shorter than the Piper Alpha one and, in relative terms, cheaper.

A number of inquiries have been set up, including one by the CAA working with the Norwegian CAA and the European Aviation Safety Agency. There is also the likely oil industry independent inquiry. The fatal accident inquiry into the 2009 crash, which I have mentioned, is due to commence on 6 January next year. I repeat: it is a disgrace that the families have had to wait for nearly five years for that. At some future date, an August 2013 fatal accident inquiry will be required, and of course the Select Committee on Transport has announced an inquiry.

Although I am sure that each of those inquiries will be useful, they are not the inquiry that is necessary. I strongly believe that what the industry needs is a full inquiry into every aspect of the offshore transport industry, similar to the Piper Alpha inquiry. I believe that nothing else will restore the confidence of the work force, root out the problems in the industry and provide us with the essential blueprint to operate offshore helicopter transport safely in the future.

16:16

[The Parliamentary Under-Secretary of State for Transport (Mr Robert Goodwill)]

It is a great pleasure to serve under your chairmanship again, Mr Dobbin. I thank the hon. Member for Aberdeen North (Mr Doran) for securing this debate on helicopter transport over the North sea. That gave me the opportunity to be briefed by my officials, and his speech contained information that I also found very useful in understanding the situation. I have also read his letter to the Secretary of State for Transport, which was a comprehensive outline of the position that he takes.

As the hon. Gentleman knows, there are approximately 57,000 individuals in the North sea, working across 600 facilities. The only viable means of transferring workers in the North sea industry from shore to installation and from one installation to another is by helicopter. I have travelled myself in a helicopter from Aberdeen to the Captain field and also made the short and rather precarious jump from the production platform to the tanker where oil was being pumped. Having gone through the safety drill that one has to go through before travelling on a helicopter, I was all too aware myself of the dangers that helicopter flights in the North sea can, sadly, present at times. I also understand the strategic importance of maintaining links to the North sea oil industry and, during the recent unfortunate problems at Grangemouth, the Department was keen to ensure that sufficient oil supplies—four tankers a day—would be available to ensure that those flights could continue to service the industry.

There are approximately 100 flights a day operating in one of the most hostile environments in the UK, and I recognise that there have been a number of helicopter incidents in the past five years, which have caused unacceptable and tragic fatalities and provoked great apprehension about the safety of helicopter operations among the work force.

I would like to take this opportunity to offer my own condolences to the families who suffered such a tragic loss in the recent accident involving a Super Puma helicopter off Sumburgh airport in the Shetland Islands on 23 August 2013.

The hon. Gentleman will understand that I cannot say much about that specific accident, as the AAIB investigation is ongoing. However, the AAIB, in its special bulletin published on 5 September 2013, provided initial information on the circumstances of the accident. That bulletin provides an update on the significant investigation findings to date. My understanding of that report is that a detailed examination of the wreckage and analysis of the recorded data has been carried out and has not found any evidence of a technical fault that could have caused the accident, although some work remains to be completed. The ongoing AAIB investigation will focus on the operational aspects of the flight—specifically on the effectiveness of pilot monitoring of instruments during the approach, operational procedures and the training of flight crews.

In the circumstances, Super Puma operations were grounded until further information was available. However, based on the evidence from the AAIB investigation that there was no reason to believe that the accident was caused by airworthiness or technical failure of the Super Puma helicopter, the CAA endorsed the decision taken by the operators to resume flights. The CAA would not have allowed the helicopter to resume services if it was not completely satisfied that to do so was safe, and I understand that the pilots’ union advised that their members would not be flying the helicopters unless they were equally confident that it was safe to do so.

As the hon. Gentleman makes clear, however, we are concerned not simply about a single accident but about the number of accidents that have occurred over a relatively short period. I support the fact that the CAA is conducting a review that will rigorously examine the risks and hazards of operating in the North sea and consider how those risks can be managed most effectively. The review covers all the main areas of safety, and it takes a close look at the operators, protection for passengers and pilots, helicopter airworthiness, regulation and pilot training. I promise to study it when it is published.

The CAA is undertaking that review jointly with the Norwegian CAA so that a direct comparison can be made between experiences and approaches to safety in the two countries, to see whether any lessons can be learned. The UK and Norway both operate within the wider rules set by Europe, however, so the regulatory framework is the same for both countries.

It will be no surprise that the European Aviation Safety Agency is contributing to the work, which will be advised and challenged by a panel of independent experts. The CAA has held a workshop with the Norwegian CAA and the EASA as part of the review to examine the risks and issues identified, to share information on differences between UK and Norwegian operations and to discuss initial recommendations. The CAA is still waiting for information from the Norwegian authorities before it conducts its deliberations on those aspects of the review.

[Mr Doran]

I acknowledge everything the Minister is saying, but the point I was making about the CAA inquiry is that the regulator cannot examine itself, and it should not be required to. Another type of inquiry is needed. I have raised a number of questions about the CAA’s operation in the North sea, and I would be interested to hear the Minister’s response.

[Mr Goodwill]

As a former member of the Transport Committee, I visited the CAA with Gwyneth Dunwoody, who did not take any hostages when it came to examining the organisation. I am confident that the CAA is the gold standard of aviation authorities, and it is well respected internationally. I have no doubts about the integrity and the safety culture that permeates the CAA. I will be visiting it very soon, and I will ensure that I raise the points that the hon. Gentleman has made.

[Mr Doran]

In that case, will the Minister write to me later on the issues that I have raised?

[Mr Goodwill]

By all means; I am happy to do so. It is reassuring to note that the review will not only study current operations, but look at previous incidents and accidents and offshore helicopter flying in other countries to make recommendations aimed at improving the safety of offshore flying.

The hon. Gentleman raised the shocking number of deaths, of which there have been 118 since 1976. Although I have not had the opportunity to review all those accidents, I can tell him that in the five most recent incidents, two of which involved fatalities, there was no common factor that would tend to affect all such incidents. No picture is emerging of a particular problem that must be addressed.

I note the point that the hon. Gentleman made about the 2009 case, which sadly resulted in 16 deaths. A fatal accident inquiry will commence on 14 January, and I understand the distress that the delay in holding it has caused the families. I am sure that the hon. Gentleman understands that one of the reasons why the inquiry could not take place sooner was that there was, at one point, a prospect of possible legal action in connection with the case. I understand the distress that that has caused the families, however, and I hope that when the inquiry has concluded and presented its findings, they will obtain better closure.

I also note the point that the hon. Gentleman made about cloud-based and meteorological information, and I will raise that with officials to see whether anything can be done to address it, and how big a factor it might have been in any of the accidents.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I have been listening carefully to the Minister’s contribution, and it strikes me that one of the most powerful points made by the hon. Member for Aberdeen North (Mr Doran) was that weather might well be a factor. The Minister said that there were no common factors in the most recent incidents, but surely that would be the purpose of an overarching inquiry.

[Mr Goodwill]

I understand the point that the hon. Lady makes. However, gearboxes in helicopters are notoriously problematic if they are not properly maintained. My point is that other factors, which may or may not include pilot error, can contribute to accidents. I am pleased that the inquiry will at least determine the cause of the accident, which resulted in so many fatalities.

I agree with the hon. Member for Aberdeen North that the Piper Alpha inquiry revolutionised the safety culture in the North sea. It reminded me of the maxim often heard in industry, “If you think health and safety is expensive, try having an accident”. The health and safety of those operating in such a hazardous environment must be paramount.

It is clear that any accident is one too many, and there will always be lessons that must be learned when such accidents happen. To date, the UK has played a leading role in introducing a number of significant safety improvements in North sea operations. Electronic monitoring on board helicopters provides an early warning of any developing technical issues, and there has been significant research and development of helideck lighting to assist helicopter pilots when landing.

Satellite-guided approaches for landing and other operational improvements are under development. The CAA plans to publish its findings in early 2014, so the hon. Gentleman will understand why I do not support his call for a Cullen-style public inquiry at this stage. The Government think that it would be premature to call for a public inquiry before the AAIB investigation and the CAA review are concluded.

DWP Offices (Fylde)

Wednesday 27th November 2013 Westminster Hall

16:27

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

I am delighted to serve under your chairmanship, Mr Dobbin, and to see so many colleagues from the Fylde coast here, particularly the shadow Transport Minister, the hon. Member for Blackpool South (Mr Marsden), who has moved back one row following the previous debate. I know that my hon. Friend the Member for Fylde (Mark Menzies), who would have been here were it not for personal circumstances, would wish me to place on record his support for the points I intend to make today.

At a time of rapid changes in welfare provision, it can be forgotten that we need a large, active, professional and highly qualified staff to deliver those changes. The staff of the Department for Work and Pensions at the numerous sites across the Fylde coast perform with great professionalism, delivering consistently high levels of service against a challenging backdrop.

That backdrop is doubly uncertain because we know the rigours under which the Department is working. Its core budget is to be reduced by 26% by 2014-15, and corporate overheads are to be reduced by 40% by the same date. Clearly, that has resulted in some difficult decisions for Ministers and those who manage the service. As a written answer to my hon. Friend the Member for Wyre and Preston North (Mr Wallace) in June 2011 demonstrated, the headcount at the three main sites on the Fylde has declined from 5,116 in 2002 to 4,600 in 2011.

That, of course, raises many questions in the minds of those who work for the DWP on the Fylde about what the future might hold. It is unsurprising—indeed, it is natural—that they wish to see more job opportunities come to the Fylde. I do not think the Minister will be surprised to hear that: it is natural to want more work to come to the Fylde.

In defence of the Minister, the last time I asked how many compulsory redundancies we had seen on the Fylde specifically, the answer was three. The headcount has reduced due to managed programmes of people leaving the service. We have been fortunate on some levels that the cuts on the Fylde coast have not been worse. We must recognise that there will be ongoing challenges. We cannot assume that because we have escaped lightly so far, we will continue to escape lightly in future. For example, we will shortly face the closure of the Marton Mere site, which will mean 300 jobs have to move elsewhere.

The purpose of today’s debate is not to rehearse statistics about job losses or even to demand extra work for Fylde, but to look specifically at how decisions are being taken about which sites are to remain open, which are to close and, most importantly, where to move the staff to from the three main sites. I may end up being arcane in a moment—those who do not live on the Fylde might think, “What is he talking about?”—but although the three sites are only seven or eight miles apart, getting from Norcross to Peel Park is a significant logistical challenge. It is not something that many people who live on the Fylde would voluntarily choose to do, but the decisions being made are forcing many people to make difficult decisions about whether they can continue to work at the DWP, given the caring responsibilities they have in their families.

In 2006, my hon. Friend the Member for Wyre and Preston North secured an Adjournment debate on the identical issue of how decisions were being made about the Fylde. He was successful, in that he got the then Minister, the right hon. Member for Stirling (Mrs McGuire), to visit the Fylde coast to look at what was occurring there. We were fortunate in that she agreed to appoint a “cluster lead” for the Fylde, who would have an overall perspective on what was happening on the Fylde coast. Each of the main sites would also have a site lead, who would feed into that pyramid process. The key point I want to communicate to the Minister today is that that model added value to decision making.

Let me also remind the Minister that we are looking at the future of the sites. The future can be a difficult concept in government—we do not know what next week will bring, let alone what will happen in 2018. Many at Warbreck house see 2018, when the transfer from the disability living allowance to the personal independence payment will be completed, as something of a crunch point for the future of the DWP on the Fylde. Any comments the Minister can make about the future of Warbreck house in particular will be gratefully received.

Since 2006, we have seen natural wastage, as we would in any organisation. Cluster leads have retired or moved to other jobs, and the architecture has broken down. The decision-making process that made for better decisions has broken down. I shall take one, admittedly convoluted example, which might demonstrate my point. The decision was taken to wind down the most northerly site, Norcross, in September 2012. The last date of occupation was to be 31 August 2013, but on 18 December 2012, it was announced that some 220 staff would remain on the Norcross site at Tomlinson house, while the remaining staff would still transfer to Warbreck and Peel Park. Peel Park is the most southerly of the locations and Warbreck is squarely in the middle. Coping with the changes caused problems for our constituents. We were grateful that jobs were maintained on the Fylde, but the consequences of doing so were difficult.

More recently, the DWP announced that the landlord at Marton Mere wanted the DWP to leave the site, which meant that 265 people had to be rehoused, but there was great confusion. Marton Mere is nearest to Peel Park, at the southern end of the Fylde. There was uncertainty over whether the staff would move to Warbreck or Peel Park. No one could decide; there was oscillation between the two. In the end, the decision was made to switch from Peel Park to Warbreck, specifically because Peel Park had to accommodate those moving from Norcross. The most northerly staff had to go to the most southerly site. A cluster lead might have said, “Hang on a minute. Can’t we put the people nearest to Norcross into the spaces at Warbreck and accommodate the people from Marton Mere at Peel Park?” It might not have been possible, but at least a cluster lead and a system of site leads would have allowed such a debate to occur.

[Mr Gordon Marsden (Blackpool South) (Lab)]

I am grateful to the hon. Gentleman, my constituency neighbour, for giving way. I want to reinforce the point he is making. Does he agree that the complexities and difficulties in the area are exacerbated by the fact that public transport access to Peel Park is still problematic?

[Paul Maynard]

The hon. Gentleman is entirely right. Maintaining public transport links to ensure that staff can get to the new locations has been an ongoing battle. I was grateful to one of the Minister’s predecessors, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling)—now Lord Chancellor and Secretary of State for Justice—who was vociferous in saying that no change could occur at Norcross without sufficient public transport links. I agree that maintaining such links is a vital battle that we must hold.

The local branch of the Public and Commercial Services Union has informed me that, because we do not have cluster leads, there have been 35 local piecemeal meetings with different business units, here, there and everywhere, discussing all the different manoeuvres. A more streamlined system might have brought about not only a better decision, but a smoother decision that was less disruptive for those in the system.

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

I congratulate my hon. Friend on securing the debate, particularly given that today is Lancashire day. I agree with him about the context. I want to underline the fact that MPs in all parties have a good relationship with the PCS union. We have always had a practical and constructive relationship. There is a problem with the suggested moves. We are not talking about the most highly paid jobs in the DWP. Suggesting that people move around and deal with the transport connections on extremely low salaries is perhaps a major factor in causing a great deal of unease, particularly among those from Fleetwood employed at the sites.

[Paul Maynard]

I agree entirely. If I was minded to be cheeky today, which I rarely am, I would suggest that many of those making such high-level human resources decisions find it very easy to get to the locations on the Fylde, because they come straight down the M55 from outside the Fylde. They have incredible access, whereas those who live on the Fylde and have to move around it struggle the most.

I urge the Minister to look again at reappointing a cluster lead to ensure that any future changes are managed with a strategic perspective to avoid such piecemeal, unco-ordinated and occasionally contradictory decisions about where people are located on the Fylde. I do not mean to be critical at all; I just observe that the best use of the DWP estate must come from looking across the Fylde as a whole, from a Fylde perspective, not just from looking at the distances on a map between one location and another. A cluster lead could also lead the debate more effectively about how we best use Fylde recourses post-2018. Great concerns remain about what will happen to the staff in 2018.

Will the Minister look at whether the Ministry of Defence’s Service Personnel and Veterans Agency, which is based at the Norcross site, can be brought into the cluster discussion? The Norcross site encompasses both the MOD and the DWP, which are the two main Departments that employ civil servants on the Fylde, so if we are discussing the fate of civil servants on the Fylde, it seems eminently sensible for both Departments to be part of that discussion. I recently heard rumours—they are no more than rumours—that 50 people are being relocated to the SPVA from Liverpool to replace 50 casual staff taken on in the Blackpool area. Clearly discussions are still ongoing about what the SPVA does—I know that that does not fall under the Minister’s remit—but all that demonstrates once again that discussions are ongoing that have real consequences, but are not coherent.

We can all recognise that the DWP faces immense financial challenges. As my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw) mentioned, there is a strong cross-party, non-partisan relationship with the PCS on the Fylde coast. We always seek to do our best on behalf of those we represent. That is because they are doing a superb job, often on low wages and in difficult circumstances. Warbreck house does not have the most heart-warming of HR departments, to put it mildly. I have heard some appalling horror stories at times, but I want the civil servants on the Fylde to have a strong and vibrant future. A key part of achieving that will be to have a strategic cluster lead to enable the Minister to be confident that decisions take into account the reality of what is occurring on the Fylde, not just what a civil servant in Sheffield has spotted on Google Maps that morning.

16:41

[The Minister of State, Department for Work and Pensions (Mike Penning)]

It is a pleasure, Mr Dobbin, to serve under your chairmanship with a new portfolio; I am in my third position in the past 18 months. I congratulate my hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard). I understand he was first reserve or last reserve—whatever reserve it was—and it is right and proper that he was ready to represent his constituents. Given that this is a half-hour debate, he has done well to get colleagues from across the House to talk about this constituency issue.

As I am relatively new to my portfolio, a lot of what I say will have been written for me by my civil servants. I will challenge that as we go forward; if some of the things I say do not match my colleagues’ local knowledge, they should let me know. I intend to visit this wonderful part of England in the near future to look at the points that have been raised and carefully consider what we can do. I cannot draw a line in the sand on the Norcross site because demolition is taking place as we speak. I hope I can, however, alleviate some of my colleagues’ concerns about what is going on with other parts of the site.

I have a piece of paper in front of me from the MOD on the part of the site that is not within my portfolio. It has shared services from the DWP and the Service Personnel and Veterans Agency, an executive agency of the MOD. That piece of paper says that that part of the site is not part of the redevelopment plans and is there to stay. It is a completely different set of buildings and their quality is completely different from the pre-war prefabs, which would have cost us a lot of money to refurbish and would not have given us any degree of longevity. I hope I can alleviate any concerns on the shared services.

The other thing I want to address is the concept that a civil servant is a civil servant. They are not completely interoperable. They are a bit like us, in many ways; there are many different sorts of MPs and we all do things in a slightly different way. Inside the civil service, people have specific jobs to do. It is not the case that because closer desks are available, those civil servants could have automatically gone to them. I know that it is logical that if there are closer desks, they should move to them, but it does not always work that way.

Given the skills that we need from civil servants in the Fylde, we could not just have moved them to the closer premises, not least because I have a responsibility to the taxpayer to ensure that we get best value. If we look at how the Government estate, for want of a better word, has been managed and operated around the UK over the years, we see that there has been, to say the least, a lack of joined-up government, no matter who has been in power. That is because the estate is complicated.

Demolition is taking place on the Warbreck site. We are not the owners of the site, but we have a contractual agreement on the site. We have a financial interest in what is developed on the site, once it is levelled and redeveloped. After costs, we will get an income into the Department from it.

[Paul Maynard]

It is the Norcross site that is being demolished.

[Mike Penning]

As soon as I said it, I knew I had said the wrong one. It is the Norcross site; Warbreck is a completely different kettle of fish and we are using it to its fullest capacity.

Coming back to Norcross, which is what I was supposed to have been talking about, demolition has started and it would be expensive for us to row back from that. It would have cost in excess of £30 million to do it up to a standard that would have given us any longevity. It would have cost us £100,000, should we have had a problem.

The costs are immaterial—we are where we are. There would have been legal costs and a new negotiation, because we are not the freeholders but the tenants. An income to the Department is built into the redevelopment, although we do not yet know what the exact amount will be, because we do not know how the market will perform. There is an exciting future for the Norcross site and things will move forward. [Interruption.] This is where the note comes through saying, “Minister, you might have said the wrong thing.” The cost of redevelopment would have been £20 million, not £30 million as I said, so I apologise and put that on record.

The important point made by my hon. Friend was that we must work much harder on the concept that someone sitting in Sheffield, London or Timbuktu can look at Google Maps and think, “That’s a great idea. We’ll do it that way.” Anyone who knows my previous roles—I know that my hon. Friend was on the Select Committee on Transport—will know that when I made the decision on the future of the coastguards, I specifically did not do things in that way. I looked at the needs, where it could be done and the economic effects on that part of the community. I assure him that that is exactly what I will do as we move forward.

The debate on this topic back in 2006 or 2007, secured by my hon. Friend the Member for Wyre and Preston North (Mr Wallace),was the right debate. He managed to secure a commitment from the Minister to visit. Ministers get huge demands on their time for visits around the country, but it is important that they are seen not to be London-centric—that they actually go out and understand what is going on in the community and see the effects of decisions.

I also want to praise the civil servants in the Department for Work and Pensions. The welfare reforms have been a massive transformation. There has been a lot of uncertainty, which I fully understand, as we have moved from the disability living allowance to personal independence payments, but the civil servants have done a brilliant job and the enthusiasm I have found in offices around the United Kingdom has been overwhelming. They have asked for a chance to get on with it, because they now know where they are and how to move forward.

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

I have two things to say on that point of reform. I want to put in a bid for the Fylde to be seriously considered as a location for a universal credit hub as it is rolled out across the country. As the Minister rightly said, we have excellent civil servants, who could operate it brilliantly. It is therefore even more important that we do not have just a civil servant, but a senior-grade civil servant like a camp commandant, who can provide answers. Much of the work force feel disjointed from the management in Sheffield and London, because they cannot get the answers locally as the senior grades that they should have are not there.

[Mike Penning]

That is an enormously important point. Both my hon. Friend and I come from the military, so I understand exactly the concept of ownership—the feeling that someone is part of a bigger picture. We will certainly look at the issue that he raises, as services come on stream. There is a huge amount of work still to be done, particularly in my portfolio—this issue is not all mine, even though the Department estates we are talking about are very much mine; the DLA to PIP transfer is also mine.

In conclusion, I have huge admiration for the staff involved; I will personally come to the area and thank them. In the meantime, I would be grateful if colleagues thanked their constituents on my behalf. I come with an open mind as to where we can go forward, but I cannot rewrite the books. We are where we are, and we need to move forward with this particular development.

Question put and agreed to.

16:50

Sitting adjourned.

Written Statement

Wednesday 27th November 2013 Written Statements

Wednesday 27 November 2013

Government Official Communications

Wednesday 27th November 2013 Written Statements

[The Minister for Europe (Mr David Lidington)]

On Friday 22 November two UK Government bags containing official correspondence and communications, and clearly marked as such, were opened by Spanish officials, while the bags were in transit. This represents a serious interference with the official correspondence and property of Her Majesty’s Government, and therefore a breach of both the principles underlying the Vienna convention on diplomatic relations and the principle of state immunity. We take any infringement of these principles very seriously.

Following reports of the incident, the Foreign and Commonwealth Office made representations to the Spanish Ministry of Foreign Affairs at senior level over the weekend of 23 and 24 November and the British embassy in Madrid submitted a formal written protest to the Ministry on 25 November. In our protests we requested an urgent explanation of this incident from the Spanish Government and sought assurances that there will be no further interference with the UK’s official correspondence. We have now received that explanation from the Spanish and have been assured that we will not see a repeat of these actions.

The Vienna convention on diplomatic relations provides a legal framework for diplomatic relations between countries, including the privileges that enable diplomats to perform their functions, including official correspondence and the diplomatic bag. It embodies important international principles that protect official correspondence and communication between a state and its representatives. The UK strictly adheres to these principles and we expect other states to do the same.

House of Lords

Wednesday 27th November 2013 Lords Chamber

Wednesday, 27 November 2013.

15:00

Prayers—read by the Lord Bishop of Wakefield.

United Nations: Secretary-General

Wednesday 27th November 2013 Lords Chamber

Question

15:07

Asked by

[Lord Judd]

To ask Her Majesty’s Government what is their strategy in relation to the appointment of the next Secretary-General of the United Nations, and what criteria should be paramount in that appointment.

[The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con)]

My Lords, we do not expect discussions on the current Secretary-General’s replacement until the start of 2016. No candidates have emerged yet and, as such, we believe that it is too early to speculate on a successor to Ban Ki-Moon. However, we would want to see a proven leader who is fully committed to the values of the UN, with sufficient political authority and expertise as well as the ability to lead and manage such a large and complex organisation.

[Lord Judd (Lab)]

In our highly interdependent but highly unstable bipolarised world, is it not true that the UN has a potentially more significant role than ever and that the appointment of the Secretary-General is therefore an absolutely crucial international appointment? Should not the criteria for that appointment have maximum possible international agreement and be transparent—irrespective, of course, of gender? Does the Minister agree that the days when we can cobble together some sort of compromise behind closed doors in the Security Council or the P5 are over and that credibility depends on as much transparency and international agreement as possible?

[Baroness Warsi]

I thank the noble Lord for his question. I pay tribute to the work that he has consistently done with the UN Association going back many years and for being persistent in relation to this question. It is important for us to keep focusing on how we can improve these international appointments and the elections that take place for them. We continue to focus on the fact that we want the best candidate for the job, but the candidate must also command the greatest possible support from the international community as well as that of the P5. We must conduct the process in a way which does not form divisions within the international community to ensure that the office bearer, once elected, has the greatest amount of support rather than undermining them through the process.

[Baroness Falkner of Margravine (LD)]

My Lords, given that by 2016 it will be nearly 70 years since the establishment of the United Nations, does my noble friend agree that it would be helpful if we could see a woman at the helm after all this time? On criteria, does she accept the general view that the two terms a Secretary-General gets may not be adequate given the desire for regional representation? Could we possibly contemplate from the United Kingdom the Canadian proposal for a longer single term—similar to that recently proposed for the House of Lords, incidentally?

[Baroness Warsi]

Of course, I would be delighted to see a woman in the position of UN Secretary-General. Indeed, this House has produced some fantastic international appointments in the past—we have only to look at the noble Baroness, Lady Ashton, to see what amazing work she is doing on the international scene. However, I come back to what I said at the outset: it is important to have a transparent system and to make sure that we get the best possible candidate for the job, who may well be a woman. It is important also that we maintain consensus during the process, because UN reform is a difficult enough subject without the Secretary-General having to do the job when he does not command the support of the General Assembly.

[Lord Hannay of Chiswick (CB)]

My Lords, can the noble Baroness tell the House that the Government will do their best to prevent what is called regional pre-emption—that is, the presumption being established ahead of time that a particular region will provide the next Secretary-General? That, of course, narrows the candidate list enormously. If the Government were to push hard against that with other influential members, that would count. Will she also consider the possibility that, on this occasion, we might try to broker a gentlemen’s agreement between the five permanent members that none of them will exercise a veto at the next election?

[Baroness Warsi]

The process that the noble Lord mentions involving the concept of a regional rotation has of course happened in practice, but the UK has never endorsed the idea of a formal rotation. We believe that every region should have the opportunity to put forward a candidate—no region should be denied that. The noble Lord will be aware of the speculation as to which region that will be next time round. Going back to the issue of consensus, it is important that the discussions between the P5 take place in accordance with protocol in a way that builds consensus so that we do not end up with public splits which could damage the process.

[Lord Dykes (LD)]

Does my noble friend further agree that real reform of the United Nations cannot be done without the Security Council being modernised in a much more fundamental way to reduce the traditional excessive dominance of the United States and some of her close allies?

[Baroness Warsi]

We of course agree that the United Nations Security Council has to be reformed. Many proposals have been put forward for both its operation and its membership. I think that it needs to go further than that. As the Minister with responsibility for the UN, I have been pushing for a United Nations that is much more responsive and competitive, and that in a difficult economic climate gives us better value for money, improves its performance management and makes better use of IT. Much could be done to reform the UN.

[Lord Stern of Brentford (CB)]

Does the noble Baroness agree that our credibility on openness would be much greater if we did not tacitly collude in the IMF for Europe and the World Bank for the United States?

[Baroness Warsi]

I think that the noble Lord’s question may go beyond the remit of this Question, but I am quite prepared to read it in Hansard, consider it and write to him formally.

NHS: Clinical Commissioning Groups

Wednesday 27th November 2013 Lords Chamber

Question

15:13

Asked by

[Lord Hunt of Kings Heath]

To ask Her Majesty’s Government what discussions they have had with NHS England regarding proposals to change the funding allocation formula to Clinical Commissioning Groups.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and refer noble Lords to my health interests in the register.

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)]

My Lords, the Government have been discussing health funding, including progress on the fundamental review of allocations, at regular accountability meetings with NHS England. This NHS England-led review began in December 2012. The independent Advisory Committee on Resource Allocation, ACRA, is providing advice on changes to the formula. NHS England will consider ACRA’s recommendations. Initial views should be available to inform 2014-15 allocations.

[Lord Hunt of Kings Heath]

My Lords, my understanding of the formula is that it would move resources from areas where people have worse health outcomes to areas where they have better health outcomes. The noble Earl has said that he and his ministerial colleagues are in discussion with NHS England. Can he confirm that this is a decision for NHS England? If that is so, what is the nature of the discussion that has taken place between Ministers and NHS England? Is it being left to NHS England to decide?

[Earl Howe]

My Lords, very definitely yes. It is precisely to avoid any perception of political interference that we made NHS England responsible for the allocation of resources to clinical commissioning groups. However, we were very specific in the mandate, as the noble Lord will recall, that the principle on which NHS England has to operate is equal access for equal need, with particular attention being paid to health inequalities while not destabilising the NHS. Those are the things we discuss in our regular meetings with NHS England but the actual nature of the formula that it will decide in its board meeting next month is entirely up to it.

[Lord Patel (CB)]

My Lords, we know that the single most significant factor associated with poor health outcomes is deprivation, particularly for diseases such as chronic lung diseases, cardiovascular diseases and cancers—and, even more importantly, for chronic diseases in children. Would it not be wrong therefore if the tariff did not include the deprivation in the population when setting it for the community?

[Earl Howe]

My Lords, the CCG target formula recommended by ACRA this time a year ago was rejected by NHS England for the very reasons that the noble Lord cites: because it did not include an adjustment for deprivation and health inequalities. At a recent Health Select Committee hearing, Paul Baumann, the chief finance officer of NHS England, indicated that the proposed new formula would have an adjustment for a health economy’s unmet need—in other words, an adjustment for deprivation where low life expectancy suggests that people are not accessing health services.

[Baroness Manzoor (LD)]

My Lords, can my noble friend the Minister clarify that responsibility for the development of primary care is to be shared between CCGs and NHS England area teams, particularly as CCGs now control two-thirds of the NHS budget?

[Earl Howe]

My Lords, at present primary care is commissioned by NHS England and has three broad ingredients: primary medical care, primary pharmaceutical services and primary dental services. However, we are looking at ways of making the whole process of primary care commissioning more creative. That could well involve a joint process by NHS England and clinical commissioning groups.

[Lord Campbell-Savours (Lab)]

In light of what the Minister said before, are we being assured therefore that age and gender will not be given priority over gross health inequalities and needs in areas of social deprivation, such as in the north of England? If that is not the case, surely the principles on which the National Health Service was created are being undermined.

[Earl Howe]

My Lords, age is and has always been, in the formula, the primary driver of an individual’s need for health services. The very young and elderly, whose populations are not evenly distributed throughout the country, tend to make more use of health services than the rest of the population. Having said that, the formula contains elements relating to unavoidable differences in the costs of providing services due to location alone—that is, the market forces factor—and a number of other measures of adjustment. As I say, we are assured by NHS England that deprivation will feature in the formula that is published for next year.

[Baroness Masham of Ilton (CB)]

My Lords, is the noble Earl aware that in Yorkshire, many of the hospitals which are PFI are very seriously in debt? Is there not a rumour that the poorer north will have its money taken to the richer south?

[Earl Howe]

It was for very much that reason that NHS England decided last year not to interfere with the formula but to give a 2.3% real-terms uplift to all CCGs. The last thing we want to do is to take money away from areas where health outcomes are the worst.

[Baroness Quin (Lab)]

My Lords, does the Minister accept that in the north-east of England huge concern has been expressed about the initial proposals? This has been widely and repeatedly trailed in the press in the north-east. While I welcome what the Minister said about tackling health inequalities, can he give us an assurance that the most vulnerable communities and the most vulnerable people will not lose out as a result of this consultation?

[Earl Howe]

There are two elements to consider here. One is the target allocation, which is what NHS England is currently working on, and the other is the actual allocation—the money given to individual areas. The task for NHS England will be to decide how quickly or slowly to move from current allocations to the target. The key will be not to destabilise any NHS area in that process.

[Lord Harris of Haringey (Lab)]

I do not think the noble Earl answered my noble friend Lord Hunt’s Question about the discussions that have taken place between the Government and NHS England on this topic. Will he tell us what steer the Government have given on these matters?

[Earl Howe]

We give no steer. As I said to the noble Lord, Lord Hunt, the principles on which NHS England should operate are clearly of concern to Ministers—namely, equal access for equal need, the need to take account of health inequalities in an area, and not destabilising the NHS. We also believe that NHS England should be transparent in whatever it does. Those are legitimate concerns for Ministers, but we do not seek to steer NHS England in any particular direction.

[Baroness Hussein-Ece (LD)]

Will the Minister reassure me that child and adolescent mental health services will be given sufficient weight in these discussions?

[Earl Howe]

My Lords, ACRA has recommended that CCG mental health services allocations should be set using the same overall approach as that for other hospital and community health services. That means that a large part of the allocation is linked to the diagnoses reported for people registered with each GP. That makes the formula very sensitive to need. It has the potential to improve the way we allocate resources for mental health services, in particular.

[Lord Hunt of Kings Heath]

My Lords, will the noble Earl arrange for NHS England to meet interested parliamentarians before it takes its decision at the meeting next month?

[Earl Howe]

My Lords, I will certainly feed that request back to NHS England.

EU: Regulation on Chemicals

Wednesday 27th November 2013 Lords Chamber

Question

15:22

Asked by

[Lord Hoyle]

To ask Her Majesty’s Government what steps they are taking to enable small and medium-sized enterprises to meet the requirements of the European Union Regulation on the Registration, Evaluation, Authorisation and Restriction of Chemicals.

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con)]

My Lords, we recognise the concerns, particularly of small businesses, about burdens arising from the EU regulation on the registration, evaluation, authorisation and restriction of chemicals. We welcome the recommendations for better guidance for small businesses in the recent report of the Prime Minister’s business task force. These closely reflect the work that we have been doing to bring together those interested, including the Commission and UK industry, to develop guidance that is more focused and relevant to SMEs.

[Lord Hoyle (Lab)]

I thank the Minister for that reply. I know that he is very knowledgeable and has a lot of expertise in this matter so perhaps I may ask him to spell out in a little more detail, in relation to SMEs, whether they will they be given financial assistance; whether they will be allowed to use these substances until alternatives are brought forward; how this will be licensed; and whether they will have the right of appeal.

[Lord De Mauley]

My Lords, it would take me quite a while to answer all those questions properly. However, in the context of the financial question he asked, there are two aspects to this—the first is about fair cost-sharing, and the second about fee levels. Businesses tell us that a major concern is the lack of transparent and fair cost -sharing when companies are pooling data on the same substance. As a result, that was the top recommendation for helping SMEs in the review report. There is a commitment across the board to sort that out, and we are playing a major role in it. As regards fee levels—that is, for fees payable to the European Chemicals Agency—the revised fee levels were voted through by the UK and other member states and came into force in March. They mean that the smallest companies are now eligible for fee discounts of up to 95%, which can mean a one-off registration fee of as little as €64.

[Lord Vinson (Con)]

My Lords, is this not another example of the perverse effects of EU overregulation? Thousands of products that have been with us and fully approved for many decades by our own safety regulation authorities are now to be banned; and that, in many instances, will put out of work small businesses which cannot afford the very high costs of trying to prove that something that is safe, is safe. Is this really the sort of democratic situation we want to be in—where our own Ministers can do nothing to put this matter right except mumble about trying to ease the pain in some way or another? The actual effect will be devastating on small businesses. It is a gross pity that we cannot control these affairs ourselves.

[Lord De Mauley]

My Lords, it might be helpful if I quote the words of the Chemical Industry Association to the business task force. It said that,

“we see REACH as a positive development and support its principles. It has made many businesses outside our sector realise that they do in fact use chemicals every day and that they also have to comply with controls. For us, this is an important step towards achieving safe chemical management and we support the scope and objectives of the legislation as a consequence. However”—

in line with what my noble friend says, it goes on to say that—

“interpreting the legislation is proving extremely complex”.

Reducing those burdens is the focus of our attention here and in Europe.

[Lord Brookman (Lab)]

My Lords, I think that the whole House is concerned about the future of manufacturing in the United Kingdom, and we are keen to see a strong manufacturing base. My noble friend Lord Hoyle has touched on a very complicated industry on which the Minister has given positive answers. Therefore, could the Minister advise—

[A noble Lord]

No.

[Lord Brookman]

No? Can he tell me then—can he tell the House—how applications from companies in the United Kingdom to use banned substances while alternatives are being developed will be judged? What will be the cost of such applications to the companies themselves? Is the Minister happy with that?

[Lord De Mauley]

My Lords, I touched on the matter of cost earlier, but the noble Lord will appreciate that this is definitively a complex area, regardless of how we regulate it. Chemicals are a complicated business and they need careful attention. However, I am now going to go into some technical language.

Adding a substance to annexe 14 is a multi-stage process involving several factors. The ECHA has recently finished conducting a public consultation on its draft recommendation. It will then consider the opinion of the member state committee in its final recommendation to the European Commission. It is important to stress that this is a recommendation. The ECHA does not have the power to ban a chemical. It is the European Commission, in conjunction with member states and the European Parliament, which decides whether to take a recommendation forward to add a chemical to annexe 14. I emphasise that if a substance is added to the annexe, it does not constitute a ban. Instead, it is the trigger for industry to make the case for continued authorised use of a chemical.

[Lord Forsyth of Drumlean (Con)]

My Lords, is my noble friend’s quote from the trade association not a classic example of how big business loves regulation which destroys small business and removes its competition? What has happened to the Government’s initiative to stop the continuing gold-plating of legislation from Europe? Is it simply to say that nothing can be done because we cannot change European regulations?

[Lord De Mauley]

As my noble friend asks about gold- plating, perhaps I may say that REACH is a directly acting regulation so there is little scope for gold-plating. However, the UK approach is in fact the opposite of that; for example, our approach to enforcement is to help companies get back into compliance. My noble friend might like to know that the Environment Agency has developed helpful tools for that process. It uses its expertise to look for illegal use of restricted chemicals, and it can then focus on suspected wrongdoing with little or no burden on compliant companies.

[Lord Cormack (Con)]

My Lords—

[Lord Knight of Weymouth (Lab)]

My Lords, there are significant consequences for small and medium-sized enterprises of incomplete registration. Can the Minister please tell us how many businesses have already been informed by the European Chemicals Agency that their registration is incomplete, and what action has he taken to ensure that businesses complete all of the agency’s registration requirements in time to avoid those significant consequences?

[Lord De Mauley]

In terms of specific numbers, no, I cannot. However, I will write to the noble Lord on his question.

[Lord Cormack]

My Lords, I will ask the question that I tried to ask. Would not the best tool be the use of plain English which everyone can understand, whether they are in small business, medium business or any other sort of business?

[Lord De Mauley]

My noble friend, as always, speaks so much sense. I am discovering, as Defra’s science Minister, that the world of chemicals does not easily lend itself to simple language. However, I will do my best for my noble friend.

Care Sector: Minimum Wage

Wednesday 27th November 2013 Lords Chamber

Question

15:30

Asked by

[Lord Beecham]

To ask Her Majesty’s Government what steps they will take to enforce minimum wage legislation in the care sector, in the light of publication by Her Majesty’s Revenue and Customs of figures disclosing non-compliance with the legislation.

[Lord Newby (LD)]

My Lords, employers found not to pay minimum wage must pay arrears plus a penalty, and may be prosecuted. From 1 October 2013, all those who break minimum wage law will be named, as an additional deterrent alongside existing financial penalties. Non-compliant employers identified during this evaluation in the care sector will meet the new criteria for naming if investigated from 1 October this year. HMRC continues to investigate every worker complaint from the care sector.

[Lord Beecham (Lab)]

My Lords, the announcement of naming and shaming and perhaps heavier financial penalties is welcome. However, given that the HMRC investigation showed that 48% of care sector employers surveyed were paying staff below the minimum wage and that only a tiny number of prosecutions had been brought, what further steps will the Government take to enforce the law. and what additional resources will they make available for this purpose?

[Lord Newby]

My Lords, in addition to the naming and shaming, the noble Lord will have heard the Prime Minister announce today that the maximum fine payable under the law will be increased fourfold. However, the work that is done with key stakeholders is a very important element of ensuring that the law is enforced and indeed understood. The Government work very closely in this sector with the UK Home Care Association and the trade union enforcement group, of which UNISON is the principal member.

[Baroness Gardner of Parkes (Con)]

My Lords, is the Minister aware—I have mentioned this to the House before—that self-employed carers are often paid as little as £3 per hour, and that there is no control whatever over the self-employed? People who work officially for care sources are paid the minimum wage per hour but get nothing for the travel time between jobs. It could be that for every hour they work as a carer there is another unpaid hour, which surely makes a nonsense of saying that they are getting that amount per hour. What does the Minister believe can be done to improve the situation, because the care service is very important?

[Lord Newby]

My Lords, if people are paid the minimum wage for hours when they are working and not being paid for travelling time between periods of work, that brings down the average amount paid per time at work to below the minimum wage. Therefore, employers are acting illegally. One of the principal findings in the study, which is the subject of this Question, is that the travelling time of people working in domiciliary care is one of the main reasons for people being paid below the minimum wage. HMRC operates under a contract from BIS to manage this process. The system has remained essentially unaltered since the minimum wage was introduced some 15 years ago, and the resources made available to it have been protected during the period of this Parliament.

[Lord Morris of Handsworth (Lab)]

My Lords, does the Minister agree that the biggest single problem regarding deprivation and poor health is, in fact, low pay? Will the Minister therefore show support not just for the minimum wage but for a living wage?

[Lord Newby]

I agree with the noble Lord; the Government encourage employers to pay the living wage. However, another thing we are doing is that my colleague Vince Cable has asked the Low Pay Commission to see what scope there is for increasing the minimum wage beyond the rate of inflation without having a significant negative impact on jobs.

[Lord Palmer (CB)]

My Lords, how many actual prosecutions have there been of those who failed to comply with this legislation?

[Lord Newby]

My Lords, in the period since 2006 there have been nine prosecutions. The policy on prosecutions was set by the previous Government and is based on the concept of selective and exemplary cases. That is why the number of prosecutions is relatively low, whereas the amounts of arrears collected and the number of employers who have received penalties are significantly greater. The number of employers who received a penalty in the past financial year is 708.

[Baroness Pitkeathley (Lab)]

My Lords, the Minister mentioned stakeholders. I believe the Government are committed to seeing service users and patients as the most important stakeholders in service provision. Since care workers often have the first and the closest contact with such service users, does the Minister believe that the way we value and support such workers is of the utmost importance? Does he further believe that the current problems with local authority budgets are bound to have an effect on both the number and the quality of care workers?

[Lord Newby]

My Lords, I certainly pay tribute to the work done by care workers. Obviously, local budgets are constrained. However, to the extent that local authorities are commissioning care, they have an obligation to ensure that their commissioning is done in such a way that the people providing it are not in breach of the conditions on low pay. One of the key points in this area is the provision by HMRC of a free pay and work rights helpline for people who feel that they may be suffering because they are not getting the minimum wage as a result of things such as the travelling time problem that we discussed earlier. The helpline is heavily used, but everybody who rings it will have their case looked into.

[Lord Stoneham of Droxford (LD)]

Does not this report indicate the determination of the Government to insist on compliance with the minimum wage legislation? Within what timetable does the Secretary of State for Business expect his investigation on linking minimum wages to the living wage to come to fruition?

[Lord Newby]

My Lords, the Secretary of State at BIS—Vince Cable—very recently asked the Low Pay Unit to look into this matter with considerable urgency, although I do not think that he has put an absolute date on it. However, the Government take this issue extremely seriously. We hope very much that we can make quicker progress than we have in the past in raising the level of the minimum wage.

Gambling (Licensing and Advertising) Bill

Wednesday 27th November 2013 Lords Chamber

First Reading

15:37

The Bill was brought from the Commons, read a first time and ordered to be printed.

Humber Bridge Bill

Wednesday 27th November 2013 Lords Chamber

Third Reading

15:38

Motion

Moved by

[The Chairman of Committees]

That the Bill do now pass.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I reassure the House that I do not seek to oppose the passing of the Bill although it is worth remarking that we are only three years off the 50th anniversary of the timely decision by Barbara Castle during the Hull North by-election to agree to the building of the bridge.

I take the opportunity of the Chairman of Committees being at the Dispatch Box to ask him about the arrangements for obtaining copies of Scotland’s Future, the document published yesterday by the Scottish Government. My understanding is that because it is a Scottish government document the arrangements are that there is one copy in the Library of this House and one copy in the Library of the Commons. I understand why the Scottish Government might not want your Lordships to consider all the pages of the full document, but to expect noble Lords to download it will cause great concern and overtime among our rather lowly and inadequate printers. Will the Minister arrange for noble Lords to receive copies when they wish to have one?

[Lord Foulkes of Cumnock (Lab)]

My Lords, further to the matter raised by my noble friend Lord Hunt, this is a very serious matter. The Scottish Government are proceeding as if this so-called White Paper is of no concern to the people of the rest of the United Kingdom—indeed, of no concern to this Parliament—yet constitutional matters are still reserved to this Parliament. Thanks to the noble Lord, Lord Forsyth, next Thursday we are going to have a debate of only an hour to discuss an astonishing unilateral declaration by the Scottish Government of the date of independence, assuming that this matter is going to go through without any difficulty. Much more is needed than this and I am glad that, as well as the Chairman of Committees, the Leader of the House, the Chief Whip and the Deputy Leader of the House, who is very knowledgeable on these matters, are in their places.

I suggest that, as well as what my noble friend has suggested, every Member of this House should be provided with a copy of this document. It is relevant to us and we should be considering it. Further, there should be a Statement in this House and in the other House of the implications of this document for the rest of the United Kingdom and, as well as the one-hour debate that the noble Lord, Lord Forsyth, has secured, there ought to be a full day’s debate in government time so that we can discuss the implications. If not, we are going to sleep-walk into the break-up of the United Kingdom. If that is what other noble Members want, it is certainly not what I want and I hope that we will do something about it.

[The Chairman of Committees (Lord Sewel)]

I could just say yes, but let me say a little more. The future of the United Kingdom is clearly a constitutional matter. The constitution, under the Scotland Act 1998, is a reserved matter, so the publication and the contents of the guide are clearly a matter of legitimate interest to all Members of this House but technically, because it is a Scottish government publication, the noble Lord is right: it is not deposited in the Printed Paper Office and the Scottish Government have not made paper copies of the guide available to the PPO. However, photocopies of the abstract of the guide have been in the PPO since yesterday. The PPO will print, on demand, copies of the full 670-page guide for those Members who need one. Members who would like a copy of the full guide should accordingly ask for one from the PPO. However, in the interests of economy, to say nothing of saving quite a few trees, copies of the full guide will also be available for consultation in the Library.

Bill passed and returned to the Commons with amendments.

Delegated Powers and Regulatory Reform Committee

Wednesday 27th November 2013 Lords Chamber

Membership Motion

15:43

Moved by

[The Chairman of Committees]

That Lord Horam be appointed a member of the Select Committee, in place of Baroness Gardner of Parkes, resigned.

Motion agreed.

Small Companies (Micro-Entities’ Accounts) Regulations 2013

Wednesday 27th November 2013 Lords Chamber

Motion to Approve

15:43

Moved by

[Viscount Younger of Leckie]

That the draft regulations laid before the House on 23 October be approved.

Relevant document: 12th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 26 November.

Motion agreed.

Financial Services (Banking Reform) Bill

Wednesday 27th November 2013 Lords Chamber

Report (2nd Day)

15:44

Relevant documents: 8th and 12th Reports from the Delegated Powers Committee.

Clause 30: Overview

Amendment 122

Moved by

[Lord Newby]

122: Clause 30, page 42, line 9, leave out “38” and insert “(Publication)”

[Lord Newby (LD)]

My Lords, the Government are committed to bringing payment systems under formal economic regulation to address deeply rooted failures in the UK’s payments market. In Committee, the Government tabled amendments to establish the new Payment Systems Regulator. The Government are now introducing a small number of further provisions and making amendments to some of the clauses previously tabled to ensure that the regulator is able to perform its functions effectively and that the right procedures apply to powers contained in the Bill.

First, these amendments will introduce provisions modelled on measures in the Financial Services and Markets Act 2000 which prohibit the regulator and those working for or on behalf of it from disclosing confidential information without the consent of the information owner. The prohibition will be enforced by a new criminal offence. However, further provisions will permit confidential information to be disclosed to certain prescribed persons in specific circumstances, including the provision to the regulator of certain information held by the Bank of England. This will be an important element of the Payment Systems Regulator’s regulatory regime. Without a prohibition on the disclosure of confidential information, people may be dissuaded from providing to the regulator important information which would assist it in the discharge of its regulatory functions.

The Government are bringing forward a number of other amendments which mirror provisions that already exist for the FCA under the Financial Services and Markets Act. The FCA will be able to collect levies for the purpose of maintaining adequate reserves for the regulator, which will help it to meet any contingencies. Another amendment will require that the regulator uses a sum equal to its enforcement costs for the benefit of its regulated population by reducing their levy the following year. A further amendment will ensure that the FCA does not have to produce a cost-benefit analysis when drawing up fee-levying rules to govern the collection of fees to meet the costs of the Payment Systems Regulator.

The other amendments tabled today will ensure that the right procedural requirements apply in respect of certain powers in the regulator clauses. The regulator will have a power to direct participants to take or not take specified action, and amendments are tabled to expand the concept of a “general” direction that applies to more than one person. The consequence will be that more directions fall within the category to which consultation requirements apply. Another amendment will require the Treasury to publish its decisions to designate payment systems to bring them within the regulator’s scope. The amendments also make some technical drafting changes to assist the reader of the legislation, as well as some consequential amendments to other legislation to include references to the regulator—for example, to ensure that the Freedom of Information Act applies to information held by it.

Overall, this set of provisions will contribute to the creation of a robust and well functioning regulatory regime for payment systems that can deliver on the Government’s objectives. I commend these government amendments to the House.

There is also an amendment in this group in the name of the noble Baroness, Lady Noakes. In Committee, the Government tabled amendments which included a provision for the regulator to order banks to give indirect access to payment systems to other financial institutions. The noble Baroness has tabled amendments to this power with a view to addressing a concern that ordering a bank to provide another institution with indirect access to a payment system would expose the access-providing bank to additional operational and compliance risks. I should like to reassure the House that the amendments tabled by the noble Baroness are not required to address the concerns that have motivated them.

This power was designed to serve as a necessary back-stop in case banks with direct access to payment systems reacted to being brought within the regulator’s scope by ceasing to provide indirect access. This would have left smaller players with no access to the vital systems. The Government envisage that the regulator will be likely to exercise this power only in such a situation. It would be used to safeguard the position of the smaller banks reliant on the larger banks for continued access to the systems and to prevent the detrimental consequences for competition in UK retail banking if such access were denied.

The Government are confident that the regulator will not exercise this power in any way that results in banks having to take on undue operational or compliance risks. The power can be exercised only if an institution applies to the regulator to exercise it. The regulator would, in practice, inform the bank which it was proposed be ordered to grant the access and would consider the circumstances of the applicant. It would be open to the bank that was subject to any order to make representations to the regulator about the applicant or any other matter concerning the application. The regulator would consider any such representations in making its decisions. It would not exercise the power if it thought to do so would expose the bank, the subject of the order, to additional risks which it would not be reasonable for it to bear. The Government would expect the regulator to provide in industry guidance more detail on the circumstances and manner in which it would consider using its powers. In the light of that, I would ask the noble Baroness to withdraw her amendment.

At this point, I shall deal with the amendments tabled by the noble Lord, Lord Brennan, to certain of the provisions of the proposed regulatory system for payment systems. I should like to reassure the noble Lord that his amendments are not necessary to achieve the end of a proportionate and balanced regulatory system, which I am sure we share. The noble Lord has proposed some additional safeguards to the Treasury’s power to designate payment systems so that they fall within the regulator’s scope. I should like to reassure the noble Lord that the power would be exercised by the Treasury only after proper consideration and where it is genuinely satisfied that the available evidence indicates the designation criteria are met, and that the exercise of its discretion to designate is necessary and proportionate in the circumstances. It is not necessary to make this an express requirement in the Bill. No such provision was included in the precedent power, contained in Section 185 of the Banking Act 2009, under which the Treasury recognises systems for Bank of England oversight. I should also like to reassure the noble Lord that the additional matters that he has proposed should be considered by the Treasury when deciding to designate a system would in any event be considered, and that it is not necessary to state them in the Bill.

Under the procedural provisions, the Treasury must notify operators of payment systems that it proposes to designate and consider any representations made, so we do not believe it is necessary to write into the legislation that the operators must be consulted as that is, in practice, what the Treasury would do. The drafting of this provision matches that contained in the precedent—Section 186 of the Banking Act 2009. In relation to the regulator’s competition objective, it is important to maintain flexibility as to the matters to which the regulator may, rather than must, have regard when considering the effectiveness of competition, particularly given the fast-moving, high-tech nature of the payments industry. The Government do not think that it would be right to accept the noble Lord’s proposal to change this discretion to a duty. The regulator should be free to consider the factors which it considers relevant at any given time to its assessment of the effectiveness of competition. The Government also do not think it is necessary to add to the list of factors the two proposed by the noble Lord. The consistency of treatment of payment systems operators and the impact of any past or proposed regulatory intervention are matters to which the regulator will generally be obliged to have regard as a matter of good administration. For the same reason, the Government believe that the amendments tabled by the noble Lord to the regulatory principles to which the regulator is to have regard are unnecessary. The regulator, as a public authority, would need to act fairly and consistently, and not take action if not necessary or not justified on the basis of the evidence available.

In relation to the regulator’s innovation objective, the Government believe that the noble Lord’s suggestion to supplement it with the objective of promoting the creation and sustaining of a regulatory environment that is conducive to innovation is unnecessary. It is implicit that the regulator will consider how its system of regulation can best support innovation, and it will exercise its regulatory powers only where it thinks that will serve to promote innovation.

On the regulator’s power to order a disposal of an interest in an operator of a payment system and its power to vary certain agreements relating to payment systems, the Government disagree with the noble Lord’s proposal that these powers should be exercisable only where the Competition and Markets Authority has decided that the interest held in the operator of the system has resulted, or is likely to result, in a substantial lessening of competition. This is a power that the Government want the regulator to be able to exercise independently, given the specific knowledge and expertise it is hoped the regulator will acquire in relation to the markets in payment systems and the services provided by them. However, it is important that the interests of all concerned are adequately protected, so the use of this power, and the power to vary agreements concerning payment systems, will be subject to appeal to the Competition and Markets Authority, which could, on the application of the appellant, suspend the effect of the regulator’s decision pending the determination of the appeal. It would be open to the CMA to quash the regulator’s decision and substitute its own for that of the regulator.

In summary, the Government believe that the legislation as drafted provides a balanced and fair regulatory system. In light of that, I would ask the noble Lord not to move his amendments.

[Baroness Noakes (Con)]

My Lords, as the Minister has said, I have Amendment 138 in this group. He has explained the amendment and the answer to it so well that I did not need to bring my speaking note with me. I thank him for the comments he has made, which have fully answered the points that lay behind my tabling of the amendment. He asked me to withdraw the amendment but as I have not moved it I cannot withdraw it. However, I confirm that I shall not be moving it when we reach the appropriate time on the Marshalled List.

[Lord Brennan (Lab)]

My Lords, I congratulate the Minister on his patience and courtesy in always being the Minister to answer my criticisms of the Bill. The patience and courtesy with which he meets my generosity in this regard fairly ought to be shared at some stage by the noble Lord, Lord Deighton.

The purpose of the amendments is to raise with the House and the Government two broad questions: first, on the need to avoid regulatory overload; and, secondly, on the need to ensure the adoption of robust regulatory principles in dealing with different sectors of the banking world. The amendments are directed at card payment systems, not the interbank arrangements to do with BACS, CHAPS, the clearance of cheques and so on, which have caused a great deal of difficulty.

First, on regulatory overload, this system, described in more than 60 sections, will be under the overall control of the Financial Conduct Authority, albeit the payment system regulatory structure will have its own chairman and board. It is a matter of real concern to note how much the FCA is being given to do in so many different regulatory contexts. This is a concern, first, as to manpower; secondly, as to skill and competence; and, therefore, thirdly, as to effectiveness.

Yesterday afternoon, in one of our debates, it was pointed out to me that the banking sector, or the financial sector, will pay for these regulatory costs. That is to state the obvious. The reality is, I assume, that the regulatory system hereby created will not be permanently in debt and bailed out annually by the financial services sector. Rather, it sets a budget a year ahead and the financial system pays it at the end of the second year in arrears. That gives the regulators two years of a relatively fixed budget. So, in determining how much responsibility to give to the regulators, including the Payment Systems Regulator, particular regard should be had to their capacity to carry out the job effectively.

It is therefore very important for the regulatory principle that the FCA and the PSR should not be given jobs they feel they have to do when present circumstances do not require them to do them.

15:59

The card payment system works whereby you go into a shop and use your own bank card to acquire goods, the merchant bank and your bank exchange information, and the transaction is completed. The way it is carried out is that MasterCard, Visa and Amex act as the intermediate processors. It involves £140 billion a year of purchases in this country. We are number one in volume of e-commerce. The vast majority of the consultation rounds that took place in 2012 and 2013 was directed at bank lending arrangements such as I have described, CHAPS and so on, not the card payment system. Indeed, references to that system in the consultation papers were modest in the extreme and gave no real cause for any present concern. As a result, no serious regulatory impact assessment has been made of how these new powers will affect our card payment system. In the rush to put so much into this Bill in order to make sure that everything is covered, the card payment has been put in on the side, so to speak—just in case and while we are at it—not because of any present need.

In the circumstances, good regulatory principles would suggest that where a regulator is given the task of managing a sector where at present there is no significant risk, the task should be circumscribed. Do not create teams. Do not multiply unless the evidence and the circumstances require it. If you are going to interfere in a system of such great commercial importance to ordinary life in this country, make sure that the evidence is strong enough, be transparent about it and involve all those who play a part in making the system work, so that the consumer is properly looked after. Do not lurch from one temporary, superficial assessment to another inadequate reaction. This is serious stuff. If the card payment system were to be adversely affected by ill judged and inadequately prepared financial regulatory systems, in terms of their competence, our economy would rapidly suffer, as it has in several countries where people have tried to interfere without proper cause.

I am not here simply to describe the card payment system. I have put these amendments down to ensure that the regulators are not drowned in a series of things that they are expected to cover when circumstances do not presently require that. I am not objecting to an ultimate designation power provided that it is based on proper evidence which is fully debated at the time, or to the exercise of proper regulatory powers if that step becomes necessary, provided that the same regulatory standards are applied. Finally, if the objectives of all this are to promote competition and innovation, as the statute states, that also should be a high regulatory principle to be observed by the people who will be carrying out the regulation. We are being put under pressure to pass this Bill in order to ensure that the public are safeguarded. Regulation at this level is of the highest national importance in order to remedy that which is wrong, but not to overload the system by telling people to get ready to deal with that which is not yet wrong, nor is there any evidence that it might be. Yesterday, I was talking about anti-money-laundering and the fact that there were only 22 people dealing with it. The answer is not that the financial services sector will pay for it; the answer is to make it efficient and have an Act when it is necessary.

I turn briefly to the amendments, which I shall not go into in detail. The first batch of amendments, dealing with Clauses 35 and 36, relates to designation. If the regulator feels that he must interfere, he must do so by reference to clear principle and good evidence. The second set refers to process—to make sure that everybody is properly involved and consulted. The third set of amendments aims to promote competition and innovation. I assume that means that the regulator is not just a disciplinary entity: it has a range of disciplines, where required, to improve competition and innovation. Is the PSR equipped for that? Do we know—I certainly do not—how expertise is to be introduced into it to meet its statutory objectives? I do not want to be unduly critical of the Government. It is a major piece of legislation of great public importance, but it is our responsibility to ensure that it is made to work for the benefit of the public.

I close on a reasonably reassuring note: the sentiment expressed by the Government is that the PSR, and above it the FCA, will do their best to produce the best kind of regulatory activity. We are really here to talk about regulators following principles, not just rules. I hope that the Government, in reply, will seek to satisfy the House that in this particular area of card payments, safety from commerce, high principle and effective regulation will be the order of the day.

[Lord Flight (Con)]

My Lords, I support what the noble Lord, Lord Brennan, had to say about the card payment system. Having looked at it in some detail, it strikes me that it is a classic situation of, “If it ain’t bust, don’t fix it”. There are so many other priorities that I urge the Government to think again about this one.

[Lord Newby]

My Lords, I think the burden of the case of the noble Lord, Lord Brennan, is that the Government are acting disproportionately in seeking to regulate something that is working very well and, in doing so, if they are not careful, they will cause major problems to a system that is currently without major problems. I hope I can reassure him that the principles that he set out at the end of his speech are ones that the Government share. There is no sense in which this regulator is being established with a remit to deal in the heavy-handed way that he fears. Given that we want to cover all payment systems, it would have been remiss to have excluded credit card payment systems. There is, however, no sudden plan to start a new, hugely intensive regime.

The noble Lord made the perfectly valid point that the regulator is slightly unusual in that it not only is a classic regulator but has a function to promote innovation as well. He raised a perfectly valid concern about the staff and whether we will be able to find people with the relevant expertise. We believe that there are people who have the relevant expertise and that it is an extremely interesting area in which innovation can be developed. The FCA will therefore be successful in finding staff who have the expertise and can do the job satisfactorily.

As I say, I am content that we are acting proportionately. We are not going to disrupt a system that is working well and we will be able to find people with the relevant expertise to manage it.

Amendment 122 agreed.

Amendment 123

Moved by

[Lord Newby]

123: Clause 30, page 42, line 18, after “to” insert “(Disclosure of information by Bank to Regulator) contain information and investigation powers and provision about the disclosure of information.
( ) Sections 81 and”

Amendment 123 agreed.

Schedule 4: The Payment Systems Regulator

Amendments 124 to 133

Moved by

[Lord Newby]

124: Schedule 4, page 134, line 1, after “imposing” insert “generally-imposed”

125: Schedule 4, page 134, line 1, leave out from “45” to end of line 2

126: Schedule 4, page 135, line 32, at beginning insert—
“(A1) For the purposes mentioned in sub-paragraph (A2) the FCA may make rules requiring participants in regulated payment systems to pay to the FCA specified amounts or amounts calculated in a specified way.
(A2) The purposes are—
(a) meeting the relevant costs (see sub-paragraph (1)), and(b) enabling the Regulator to maintain adequate reserves.”

127: Schedule 4, page 136, line 1, leave out sub-paragraph (2)

128: Schedule 4, page 136, line 4, leave out “(2)” and insert “(A1)”

129: Schedule 4, page 136, line 16, at end insert—
“( ) But the requirements to carry out a cost benefit analysis under section 138I of FSMA 2000 do not apply in relation to rules made under this paragraph.”

130: Schedule 4, page 136, line 19, leave out from “Treasury” to end of line 20 and insert “its penalty receipts after deducting its enforcement costs.
(1A) The Regulator’s “penalty receipts” in respect of a financial year are any amounts received by it during the year by way of penalties imposed under section 63.
(1B) The Regulator’s “enforcement costs” in respect of a financial year are the expenses incurred by it during the year in connection with—
(a) the exercise, or consideration of the possible exercise, of any of its enforcement powers in particular cases, or(b) the recovery of penalties imposed under section 63.(1C) For the purposes of sub-paragraph (1B) the Regulator’s enforcement powers are—
(a) its powers under sections 62 to 65;(b) its powers under any other enactment specified by the Treasury by order;(c) its powers in relation to the investigation of relevant offences;(d) its powers in England and Wales or Northern Ireland in relation to the prosecution of relevant offences.(1D) In sub-paragraph (1C) “relevant offences” means—
(a) offences under this Part;(b) any other offences specified by the Treasury by order.”

131: Schedule 4, page 136, line 24, leave out paragraphs (a) and (b) and insert—
“(a) specify descriptions of expenditure that are, or are not, to be regarded as incurred in connection with either of the matters mentioned in sub-paragraph (1B),(b) relate to the calculation and timing of the deduction in respect of the Regulator’s enforcement costs, and (c) specify the time when any payment is required to be made to the Treasury.( ) The directions may also require the Regulator to provide the Treasury at specified times with specified information relating to—
(a) penalties that the Regulator has imposed under section 63, or(b) the Regulator’s enforcement costs.”

132: Schedule 4, page 136, line 30, at end insert—
“10A (1) The Regulator must prepare and operate a scheme (“the financial penalty scheme”) for ensuring that the amounts that, as a result of the deduction for which paragraph 10(1) provides, are retained by the Regulator in respect of amounts paid to it by way of penalties imposed under section 63 are applied for the benefit of participants in regulated payment systems.
(2) The financial penalty scheme may, in particular, make different provision with respect to different classes of participant.
(3) The financial penalty scheme must ensure that those who have become liable to pay a penalty to the Regulator in any financial year do not receive any benefit under the scheme in the following financial year.
(4) Up-to-date details of the financial penalty scheme must be set out in a document (the “scheme details”).
10B (1) The scheme details must be published by the Regulator in the way appearing to it to be best calculated to bring them to the attention of the public.
(2) Before making the financial penalty scheme, the Regulator must publish a draft of the proposed scheme in the way appearing to the Regulator to be best calculated to bring it to the attention of the public.
(3) The draft must be accompanied by notice that representations about the proposals may be made to the Regulator within a specified time.
(4) Before making the scheme, the Regulator must have regard to any representations made to it in accordance with sub-paragraph (3).
(5) If the Regulator makes the proposed scheme, it must publish an account, in general terms, of—
(a) the representations made to it in accordance with sub-paragraph (3), and(b) its response to them.(6) If the scheme differs from the draft published under sub-paragraph (2) in a way which is, in the opinion of the Regulator, significant, the Regulator must (in addition to complying with sub-paragraph (5)) publish details of the difference.
(7) The Regulator must, without delay, give the Treasury a copy of any scheme details published by it.
(8) The Regulator may charge a reasonable fee for providing a person with a copy of—
(a) a draft published under sub-paragraph (2);(b) scheme details.(9) Sub-paragraphs (2) to (6) and (8)(a) also apply to a proposal to alter or replace the financial penalty scheme.”

133: Schedule 4, page 137, line 17, at end insert—
“Freedom of information13 In Part 6 of Schedule 1 to the Freedom of Information Act 2000 (public authorities to which Act applies), at the appropriate place insert—
“The Payment Systems Regulator established under section 31 of the Financial Services (Banking Reform) Act 2013.”Equality14 In Part 1 of Schedule 19 to the Equality Act 2010 (public authorities: general), under the heading “Industry, business, finance etc.”, at the appropriate place insert—
“The Payment Systems Regulator established under section 31 of the Financial Services (Banking Reform) Act 2013.””

Amendments 124 to 133 agreed.

Clause 35: Designation criteria

Amendments 133A to 133F not moved.

Clause 36: Procedure

Amendments 133G to 133J not moved.

Amendment 134

Moved by

[Lord Newby]

134: After Clause 38, insert the following new Clause—
“Publication
(1) The Treasury must publish any designation order.
(2) If the Treasury amends a designation order, the Treasury must publish the amended order.
(3) The Treasury must publish any revocation of a designation order.”

Amendment 134 agreed.

Clause 40: The competition objective

Amendments 134A and 134B not moved.

Clause 41: The innovation objective

Amendment 134C not moved.

Clause 43: Regulatory principles

Amendments 134D and 134E not moved.

Clause 44: Directions

Amendments 135 and 136

Moved by

[Lord Newby]

135: Clause 44, page 48, line 15, leave out paragraph (b) and insert—
“(b) in relation to—(i) all operators, or every operator of a regulated payment system of a specified description,(ii) all infrastructure providers, or every person who is an infrastructure provider in relation to a regulated payment system of a specified description, or(iii) all payment service providers, or every person who is a payment service provider in relation to a regulated payment system of a specified description,”

136: Clause 44, page 48, line 20, after “(3)(a)” insert “or (b)”

Amendments 135 and 136 agreed.

Clause 45: System rules

Amendment 137

Moved by

[Lord Newby]

137: Clause 45, page 48, line 32, at end insert—
“(3) A requirement under this section that is imposed on—
(a) all operators of regulated payment systems, or(b) every operator of a regulated payment system of a specified description,is referred to in this Part as a “generally-imposed requirement”.”

Amendment 137 agreed.

Clause 46: Power to require granting of access to payment systems

Amendment 138 not moved.

Clause 48: Power to require disposal of interest in payment system

Amendments 138A to 138D not moved.

Clause 49: The Regulator’s functions under Part 4 of the Enterprise Act 2002

Amendment 139

Moved by

[Lord Newby]

139: Clause 49, page 50, line 14, leave out “(“the concurrent functions”)”

Amendment 139 agreed.

Clause 50: Restrictions on exercise of functions under Part 4 of the Enterprise Act 2002

Amendments 140 and 141

Moved by

[Lord Newby]

140: Clause 50, page 51, line 11, leave out “has the same meaning as in section 49” and insert “means the functions which by virtue of section 49 are concurrent functions of the Payment Systems Regulator and the CMA.”

141: Clause 50, page 51, line 19, leave out “has the same meaning as in section 49” and insert “means the functions which by virtue of section 49 are concurrent functions of the Payment Systems Regulator and the CMA”

Amendments 140 and 141 agreed.

Clause 52: Duty to consider exercise of powers under Competition Act 1998

Amendment 142

Moved by

[Lord Newby]

142: Clause 52, page 52, line 16, leave out “requirment on all operators of regulated payment systems)” and insert “generally-imposed requirement);”

Amendment 142 agreed.

Clause 66: Appeals: general

Amendment 143

Moved by

[Lord Newby]

143: Clause 66, page 57, leave out line 22 and insert “generally-imposed requirement),”

Amendment 143 agreed.

Schedule 5: Procedure for appeals to the CMA

Amendment 144

Moved by

[Lord Newby]

144: Schedule 5, page 145, line 35, at end insert—
““appellant” has the meaning given by paragraph 3(4);”

Amendment 144 agreed.

Clause 71: Power to obtain information or documents

Amendment 145

Moved by

[Lord Newby]

145: Clause 71, page 60, line 38, leave out subsections (4) to (9)

Amendment 145 agreed.

Clause 72: Reports by skilled persons

Amendments 146 to 148

Moved by

[Lord Newby]

146: Clause 72, page 61, line 23, leave out “(“the relevant participant”)”

147: Clause 72, page 61, line 24, after “to” insert “the person’s participation in”

148: Clause 72, page 61, line 27, at end insert—
“The person whose participation in the payment system is to be the subject of the report is referred to in this section as “the relevant participant”.”

Amendments 146 to 148 agreed.

Amendments 149 to 153

Moved by

[Lord Newby]

149: After Clause 80, insert the following new Clause—
“Restrictions on disclosure of confidential information
(1) Confidential information must not be disclosed by a primary recipient, or by any person obtaining the information directly or indirectly from a primary recipient, without the consent of—
(a) the person from whom the primary recipient obtained the information, and(b) if different, the person to whom it relates.(2) In this section “confidential information” means information which—
(a) relates to the business or other affairs of any person,(b) was received by the primary recipient for the purposes of, or in the discharge of, any functions of the Payment Systems Regulator under this Part, and(c) is not prevented from being confidential information by subsection (4).(3) It is immaterial for the purposes of subsection (2) whether or not the information was received—
(a) as a result of a requirement to provide it imposed by or under any enactment;(b) for other purposes as well as purposes mentioned in that subsection.(4) Information is not confidential information if—
(a) it has been made available to the public by virtue of being disclosed in any circumstances in which, or for any purposes for which, disclosure is not precluded by this section, or(b) it is in the form of a summary or a collection of information that is framed in such a way that it is not possible to ascertain from it information relating to any particular person.(5) Each of the following is a primary recipient for the purposes of this section—
(a) the Payment Systems Regulator;(b) the FCA;(c) a person who is or has been employed by the Payment Systems Regulator or the FCA;(d) a person who is or has been engaged to provide services to the Payment Systems Regulator or the FCA;(e) any auditor or expert instructed by the Payment Systems Regulator or the FCA;(f) a person appointed to make a report under section 72;(g) a person appointed under section 73.(6) Nothing in this section applies to information received by a primary recipient for the purposes of, or in the discharge of, any functions of the Payment Systems Regulator under the Competition Act 1998 or the Enterprise Act 2002 by virtue of section 49 or 51.
(For provision about the disclosure of such information, see Part 9 of the Enterprise Act 2002.)”

150: After Clause 80, insert the following new Clause—
“Exemptions from section (Restrictions on disclosure of confidential information)
(1) Section (Restrictions on disclosure of confidential information) does not prevent a disclosure of confidential information which—
(a) is made for the purpose of facilitating the carrying out of a public function, and(b) is permitted by regulations made by the Treasury under this section.(2) For the purposes of this section “public functions” includes—
(a) functions conferred by or in accordance with any provision contained in any enactment;(b) functions conferred by or in accordance with any provision contained in the EU Treaties or any EU instrument;(c) similar functions conferred on persons by or under provisions having effect as part of the law of a country or territory outside the United Kingdom;(d) functions exercisable in relation to specified disciplinary proceedings.(3) Regulations under this section may, in particular, make provision permitting the disclosure of confidential information or of confidential information of a specified kind—
(a) by specified recipients, or recipients of a specified description, to any person for the purpose of enabling or assisting the recipient to discharge specified public functions;(b) by specified recipients, or recipients of a specified description, to specified persons, or persons of specified descriptions, for the purpose of enabling or assisting those persons to discharge specified public functions;(c) by the Payment Systems Regulator to the Treasury for any purpose;(d) by any recipient if the disclosure is with a view to or in connection with specified proceedings. (4) Regulations under this section may also include provision— In relation to confidential information, each of the following is a “recipient”—
(a) making any permission to disclose confidential information subject to conditions (which may relate to the obtaining of consents or any other matter);(b) restricting the uses to which confidential information disclosed under the regulations may be put.(a) a primary recipient;(b) a person obtaining the information directly or indirectly from a primary recipient.(6) In this section—
“confidential information” and “primary recipient” have the same meaning as in section (Restrictions on disclosure of confidential information);
“specified” means specified in regulations.”

151: After Clause 80, insert the following new Clause—
“Offences relating to disclosure of confidential information
(1) A person who discloses information in contravention of section (Restrictions on disclosure of confidential information) is guilty of an offence.
(2) A person guilty of an offence under subsection (1) is liable—
(a) on summary conviction— (i) in England and Wales, to imprisonment for a term not exceeding 3 months or a fine, or both;(ii) in Scotland, to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum, or both;(iii) in Northern Ireland, to imprisonment for a term not exceeding 3 months or a fine not exceeding the statutory maximum, or both;(b) on conviction on indictment, to imprisonment for a term not exceeding 2 years or a fine, or both.(3) A person is guilty of an offence if—
(a) information has been disclosed to the person in accordance with regulations made under section (Exemptions from section (Restrictions on disclosure of confidential information)), and(b) the person uses the information in contravention of any provision of those regulations.(4) A person guilty of an offence under subsection (3) is liable on summary conviction—
(a) in England and Wales, to imprisonment for a term not exceeding 51 weeks (or 3 months, if the offence was committed before the commencement of section 280(2) of the Criminal Justice Act 2003) or a fine, or both;(b) in Scotland, to imprisonment for a term not exceeding 3 months or a fine not exceeding level 5 on the standard scale, or both;(c) in Northern Ireland, to imprisonment for a term not exceeding 3 months or a fine not exceeding level 5 on the standard scale, or both.(5) In proceedings against a person (“P”) for an offence under this section it is a defence for P to prove—
(a) that P did not know and had no reason to suspect that the information was confidential information;(b) that P took all reasonable precautions and exercised all due diligence to avoid committing the offence.(6) In this section “confidential information” has the same meaning as in section (Restrictions on disclosure of confidential information).”

152: After Clause 80, insert the following new Clause—
“Information received from Bank of England
(1) The following are regulators for the purposes of this section—
(a) the Payment Systems Regulator;(b) the FCA.(2) A regulator must not disclose to any person specially protected information.
(3) “Specially protected information” is information in relation to which the first and second conditions are met.
(4) The first condition is that the regulator received the information from—
(a) the Bank of England (“the Bank”), or(b) the other regulator where that regulator had received the information from the Bank.(5) The second condition is that the Bank notified the regulator to which it disclosed the information that the Bank held the information for the purpose of its functions with respect to any of the following—
(a) monetary policy;(b) financial operations intended to support financial institutions for the purposes of maintaining stability;(c) the provision of private banking services and related services.(6) The notification referred to in subsection (5) must be—
(a) in writing, and(b) given before, or at the same time as, the Bank discloses the information.(7) The prohibition in subsection (2) does not apply—
(a) to disclosure by one regulator to the other regulator where the regulator making the disclosure informs the other regulator that the information is specially protected information by virtue of this section;(b) where the Bank has consented to disclosure of the information;(c) to information which has been made available to the public by virtue of being disclosed in any circumstances in which, or for any purposes for which, disclosure is not precluded by this section;(d) to information which the regulator is required to disclose in pursuance of any EU obligation.(8) In this section references to disclosure by or to a regulator or by the Bank include references to disclosure by or to any of the following—
(a) persons who are, or are acting as, officers of, or members of the staff of, the regulator;(b) persons who are, or are acting as, officers, employees or agents of the Bank;(c) auditors, experts, contractors or investigators appointed by the regulator or the Bank under powers conferred by this Part or otherwise.(9) References to disclosure by a regulator do not include references to disclosure between persons who fall within subsection (8)(a) or (b) in relation to that regulator.
(10) Each regulator must take such steps as are reasonable in the circumstances to prevent the disclosure of specially protected information, in cases not excluded by subsection (7), by those who are or have been—
(a) its officers or members of staff (including persons acting as its officers or members of staff);(b) auditors, experts, contractors or investigators appointed by the regulator under powers conferred by this Part or otherwise;(c) persons to whom the regulator has delegated any of its functions.”

153: After Clause 80, insert the following new Clause—
“Disclosure of information by Bank to Regulator
(none) In section 246 of the Banking Act 2009 (information), in subsection (2), after paragraph (c) insert—
“(ca) the Payment Systems Regulator (established under section 31 of the Financial Services (Banking Reform) Act 2013);”.”

Amendments 149 to 153 agreed.

Clause 87: Power of PRA to require Regulator to refrain from specified action

Amendments 154 and 155

Moved by

[Lord Newby]

154: Clause 87, page 72, line 33, after “system,” insert—
“( ) threaten the continuity of core services provided in the United Kingdom,”

155: Clause 87, page 73, line 7, after “section” insert “—
“core services” has the same meaning as in FSMA 2000 (see section 142C of that Act), and”

Amendments 154 and 155 agreed.

Clause 89: Consultation in relation to generally applicable requirements

Amendments 156 to 158

Moved by

[Lord Newby]

156: Clause 89, page 73, line 35, after “direction” insert “under section 44”

157: Clause 89, page 73, line 36, after “a” insert “generally-imposed”

158: Clause 89, page 73, line 36, leave out from “45” to end of line 37

Amendments 156 to 158 agreed.

Clause 92: Competition scrutiny

Amendments 159 and 160

Moved by

[Lord Newby]

159: Clause 92, page 77, line 8, leave out “requirements imposed” and insert “generally-imposed requirements”

160: Clause 92, page 77, line 8, leave out from “45” to end of line 9

Amendments 159 and 160 agreed.

Clause 95: Interpretation of Part

Amendments 161 and 162

Moved by

[Lord Newby]

161: Clause 95, page 77, line 35, at end insert—
““CAT-appealable decision” has the meaning given by section 66(4);
“CMA-appealable decision” has the meaning given by section 66(7);”

162: Clause 95, page 78, line 4, at end insert—
““generally-imposed requirement” has the meaning given by section 45(3);”

Amendments 161 and 162 agreed.

16:15

Clause 104: Continuity of supply

Amendment 163

Moved by

[Lord Newby]

163: Clause 104, page 83, line 30, at end insert—
“(f) staff.”

[Lord Newby]

My Lords, the purpose of this amendment is to restrict the early termination of contracts by suppliers of staff to infrastructure companies in respect of which a FMI administration order has been made.

Part 6 of the Bill establishes a special administration regime, to be known as FMI administration, which will be capable of applying to what are known as infrastructure companies. These infrastructure companies are the operators of payment and settlement systems and designated service providers to those operators. Clause 104 is a continuity of supply provision, which restricts the ability of suppliers to terminate the provision of certain listed supplies to an infrastructure company once the company has entered FMI administration. The supplies that are currently within the scope of the restriction are: computer hardware or software; financial data; infrastructure permitting electronic communication services; data processing and access to secure data networks.

This amendment would add the provision of staff to this list of supplies. Agency staff are critical to the functioning of payment and settlement systems, and several payment systems are staffed entirely by agency staff. The early termination of a contract for the supply of staff could result in the discontinuation of the provision of critical services by the payment or settlement system. This amendment will ensure that staff will continue to be supplied during the period of FMI administration.

The FMI administrator would pay for the provision of staff throughout the period of the administration. If during the period of the administration the supplier goes unpaid for 28 days or more, the supplier will be entitled to terminate the supply. I beg to move.

Amendment 163 agreed.

Amendment 164

Moved by

[Lord Phillips of Sudbury]

164: After Clause 113, insert the following new Clause—
“Review of the effects of the exemption of certain business and financial contracts from the Gaming Acts
(1) The Treasury must institute a review of the effects of certain business and financial gaming contracts having been made enforceable at law by the repeal of certain provisions of the Gaming Acts pursuant to the Financial Services Act 1986 (as amended).
(2) “Effects” shall include the national social, cultural and ethical effects as well as the commercial and economic effects.
(3) The Treasury shall appoint one or more persons to undertake the review after consultation with the Bank of England, the PRA and the FCA and such others as it shall decide on such terms as it thinks fit.
(4) The review shall culminate in a report to the Treasury within two and a half years of the coming into force of this Act.
(5) The Treasury must lay the report before Parliament and thereafter publish the same.”

[Lord Phillips of Sudbury (LD)]

My Lords, when this amendment was moved in Committee on 15 October there were 10 of us here at 10.20 pm. On that occasion my noble friend Lord Newby, summing up the debate, said that the amendment was superfluous, might have problems with EU law; and was,

“not proportionate or objectively justified”.—[Official Report, 15/10/13; col. 528.]

I shall endeavour to briefly answer those objections this afternoon.

Talking of superfluity, nothing in the Bill touches on the issue of gaming and gaming trades of all sorts. I will give a few statistics in a minute to show just how huge gaming now is in the City of London. Then we have the issue of the EU. If I may say so, it is slightly premature for the Government to anticipate the outcome of any recommendations that the review I am suggesting might come out with. That is a long way down the line: two and a half years is the time given for the review and heaven knows what that outcome might be, least of all whether it would be in any way in breach of EU law, which is in any event changing.

Lastly, perhaps the most important ground for rejection was the thought that this proposal to set up a review to look at the effects of gaming on the wider culture—social, ethical and cultural as well as economic and commercial—would be unnecessary and objectively unjustified. If one considers that these gaming trades now amount to many trillions—some estimate quadrillions; I had never heard that word before—it seems bizarre to say that this modest proposal is disproportionate.

The background to all this is the legislation brought in in 1986 in anticipation of the big bang. The Financial Services Act 1986 contained provisions that for the first time ever said that the gaming laws of the land would not apply to these City gaming contracts. Since then there has been a staggering explosion of such contracts. They are simply massive across the world, not just here. Derivatives, which are the most common form of gaming contracts or trades but not the only one, are largely below the radar, although steps are being taken to make them more transparent and measurable. The Bank for International Settlements has calculated this year that the value of derivatives alone—the over-the-counter derivatives, as they are called—is $693 trillion. Others reckon that if you add in the other form of gaming contracts, that goes up to a figure of $1.2 quadrillion in terms of face value, which may work out in real terms at some $20 trillion, or 30% of global gross national product—or gross international product, I should say.

Let us look briefly at the collapse of the world financial centres, particularly Wall Street and London. Lehman Brothers, had 1.2 million derivative contracts on its books when it collapsed in 2008, of which the face value was $39 trillion—that is one bank. It is calculated that 80% of the income of Lehman Brothers before it collapsed was from such gaming trades. Bear Sterns’ proportion of income from gaming was even higher than 80%. The statistics show capital debts of $384 billion against a capital of $11.8 billion; that is, 30 times more. If you look at the collapses of AIG, MF Global, Merrill Lynch, Northern Rock, Countrywide, Wachovia and so on, you will find in all cases that derivative gaming was absolutely central, usually key, to them. I just throw that back at my noble friend when he says that a review of all that, in terms of its cultural outfall, is not objectively justified.

Banks of course are still doing it today and it is creeping up, and I have no doubt that it will go on and on with its potentially malevolent effects just as heretofore. Huge profits are made from these types of contract, but on the other side of the coin they are matched by huge losses, which was the principal spur to this devastating collapse, a collapse which, do not let us ever forget, was stemmed internationally only by Governments moving in with massive sums of money—what was it here, $800 trillion? Not trillion, million—or am I wrong?

[A noble Lord]

Billion.

[Lord Phillips of Sudbury]

Yes.

I want to see, and I think that this may commend itself to the House, a cool look at just what the consequences are beyond the merely financial—you can scarcely use “merely” in terms of the numbers concerned. In Committee, I tried to remember a quote from John Maynard Keynes in 1936, when this type of trade was trivial when compared with today. He stated in his great book, The General Theory of Employment, Interest and Money:

“When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done”.

How pre-eminently true that is. The noble Lord, Lord Turner of Ecchinswell, made the bold but timeless statement when he was head of the FSA that a great deal—I am not sure that he did not say the majority—of what the City now does is socially useless, because, sadly, only a tiny proportion of these gaming trades has any commercial purpose whatever. They are pure gambling. It is not that they are buying forward raw supplies for some manufacturer to even out the ebb and flow of world prices in whatever commodity or mineral it is—nothing to do with it; it is pure, unalloyed gambling.

[Lord Higgins (Con)]

My Lords, I am trying to follow my noble friend’s argument. Precisely what contract is he describing as a gaming contract?

[Lord Phillips of Sudbury]

I will do my best to explain. Let us consider Merrill Lynch. It cornered, it is estimated, 50% to 80% of the world’s copper in a series of purchases last year, I think it was. That was pure gaming. It was not to satisfy any of its customer needs; it saw potentially vast gains in moving into the world copper market and simply buying it up. Can you imagine: 50% to 80% of all the world’s copper was purchased? That was pure gaming. In fact, I think that it went wrong and was part of the collapse, but I would not lay my life on that.

These are extremely difficult issues. The cultural and ethical aspects are deep. The vast majority of people engaged in such trading are decent, good people. They are not all crooks, but the system in which they are trapped is one which, first, was at the root of the disastrous financial and banking collapse from which we are still suffering—and there is a long way yet to go. Also, we should be interested in the wider outfall. The noble Lord, Lord Lawson, coined a rather vivid phrase last night about the cultural contamination that can go on when one part of a system loses all contact with any ethical underpinning.

Let us consider what is happening in our nation at large, and the extent to which gaming is now spreading rapidly. This week, I heard of one medium-sized town that has more than 70 betting shops. In my town, they have spread like a disease. I am the first to accept that it will be a difficult set of issues to address, but taking a cool, calm look at the wider effects of what is going on in the City of London must surely be for the public benefit.

My noble friend may argue that we have review overload and that the City must be allowed to settle down and not have any further big inquiries. We have had all sorts of them, have we not? That would be a profound mistake, because, often, the more difficult the inquiry, the more important the potential outcome. This proposal has no pre-judgment. Some of my remarks in opening the debate on the amendment, and some of my assumptions, may, in the light of a deep, extended inquiry that looks at all aspects of these difficult matters, be proved wrong. As I emphasise, it would be an open-eyed inquiry.

I refer to the Kay inquiry, which was published in July 2012. Many noble Lords will remember it. John Kay undertook an interesting and important inquiry. He stated that,

“trust and confidence are not generally created by trading between anonymous agents attempting to make short term gains at each other’s expense. Trust and confidence, or their absence, are the product of the prevailing culture”.

I want a better hold on what the prevailing culture is and what part in it is played by the City of London, which is central to our economic future and our thriving.

I hope that there will be support for this proposal. Even if the Government do not like some of the detail, I hope that they will take the nub of it away and, conceivably, come back at Third Reading with their own amendment. Such a review will speak to the prevailing values of Britain today and to the spirit of our times. In a profoundly and dangerously materialistic society, surely nothing could be more material to us all than to seek to get beneath these complex and technical facts and issues, in order to understand the wider underlying effects. I beg to move.

16:30

[Lord Eatwell (Lab)]

My Lords, I confess I was a little puzzled by the introduction to the amendment of the noble Lord, Lord Phillips. He portrayed it as being so broad as to cover virtually all derivatives trading, whereas I had presumed that he was focusing on those derivative trades that are classified as gambling—in other words, financial spread betting. The crucial issue with respect to financial spread betting is that it is free from capital gains tax and stamp duty, and that traders are typically free from income tax. This is a really extraordinary form of tax avoidance within the financial services industry. If that was what the noble Lord really sought to focus on, a review of such forms of transaction would be very useful, particularly in light of the fact that the Australian Government have now declared that those forms of contracts are not exempt from tax. Indeed, they are subject to both income tax and capital gains tax under Australian tax law. What is remarkable is that the number of these contracts being traded in Australia has dropped dramatically.

If the noble Lord, Lord Phillips, hopes to reduce the scope of what he referred to, especially in quoting Keynes, as the financial casino, it would perhaps be valuable if there were a review—I would encourage the Government to think about having one—of the designation of particular derivative contracts as gambling, which has had these unfortunate consequences, including a significant loss of revenue to the Treasury.

[The Archbishop of Canterbury]

My Lords, I add my support to what the noble Lord, Lord Eatwell, said in specifying these particular contracts, not only for their tax avoidance capacity but because participation in them within the trading community leads to obvious conflicts of interest between their main work during the day, for their employer, and any potential gains or losses they have through the spread betting operations which they are capable of undertaking. In other words, it is very much a cultural problem and it is specifically to do with contracts that are considered to come under the purview of the gaming Acts. That is how I understood this amendment to apply, rather than more generally. From my point of view, I am not certain that it needs to be in the Bill, but it would certainly be useful if the Government were to say that the scope and impact of this should be looked at.

[Lord Newby]

My Lords, the purpose of the amendment is to require the Treasury to undertake a review of the consequences of exempting certain gaming contracts from the rule that used to provide that no gaming contract or wager could be enforced in a court of law. Such a review would consider the national, commercial and economic effects, in addition to the social, cultural and ethical effects, proposed in the equivalent amendment in Committee. I understand my noble friend’s desire to know more about the consequences of what appears to have been an extensive gambling culture in the City of London, which flourished in the derivative markets that expanded significantly following the gaming contracts rule change but was not limited to those markets.

The financial crisis exposed serious problems in derivative markets—particularly, as the most reverend Primate pointed out during our last debate on the equivalent amendment, in OTC activities. Clearly, the proliferation of such activities and the lack of adequate regulation showed up a need for change.

Following extensive international regulatory debate, a set of significant international reforms was agreed by the G20 to address these concerns. It may be helpful if I provide noble Lords with a short update on what they are. They include measures to ensure transparency by requiring all OTC derivatives transactions to be reported to trade repositories, and the requirement for all standardised derivatives to be centrally cleared and, where appropriate, traded on electronic platforms. These reforms are now being implemented in the UK and should go some way towards limiting the risks associated with these instruments.

So far as the wider effects of gaming in the City are concerned, the PCBS undertook an extensive and wide-ranging examination of the professional standards and culture of the UK banking sector. Its final report made a number of findings on the existing standards and culture in the banking sector, and recommendations as to what might be done to improve the position. We are seeking to give effect to those recommendations in this Bill. As the noble Lord will be aware, we will have a debate on the broader cultural aspects of the PCBS’s report next week.

In the circumstances, I am not sure that a formal Treasury review, as proposed by the noble Lord, is the best way forward. In Committee, I suggested to him that a more appropriate way forward to address his concerns might be for him and, possibly, other Members of your Lordships’ House to work with a think tank that specialises in financial services to undertake such a review. The precedent I had in mind was the review of the banking sector undertaken in the previous Parliament. The Future of Banking Commission was chaired by David Davis MP and included not only my colleague Vince Cable but the noble Lord, Lord McFall. That report had a major impact at the time in influencing the consideration of how we should be looking at the banking sector. The advantage of such a structure over a formal Treasury structure is that it enables a wide range of individuals, including serving politicians, to sit on it. That is much more likely to happen if it is done under the aegis of that sort of think tank than if it is initiated by the Treasury. As a result, when the report came out, it commanded a broad degree of public respect.

I take the point made by the noble Lord, Lord Eatwell, and the most reverend Primate the Archbishop of Canterbury about the specific consequences of potential tax avoidance or evasion by people involved in this sector. I undertake to discuss that with my colleagues in the Treasury in the context of measures that might be brought forward in a future finance Bill. I agree that at first sight it appears to be a loophole that we should have a look at. As noble Lords know, the Government have devoted considerable resource and attention to these issues. I am sure my colleagues in the Treasury will be happy to have a look at the issue.

With those suggestions, I hope my noble friend will feel able to withdraw his amendment.

[Lord Phillips of Sudbury]

I thank the Minister for what he said. I am particularly pleased to hear him say that he will take up the two practical points made by the noble Lord, Lord Eatwell, which are entirely germane to the review that I was thinking of. That will be an important step forward. I am obviously disappointed that the Government will not go further, but I do not think that I can take the matter any further today.

In opening, I should have said how grateful I was to two professors at the University of Essex, on whom I relied substantially for a lot of the statistics: Professor Sikka and Professor Markose. With that, I beg leave to withdraw the amendment.

Amendment 164 withdrawn.

Amendment 165

Moved by

[Lord Eatwell]

165: Before Clause 114, insert the following new Clause—
“Duty of care
At all times when carrying out core activities, a ring-fenced body shall—(a) be subject to a fiduciary duty towards its customers in the operation of core services; and(b) be subject to a duty of care towards its customers across the financial services sector.”

[Lord Eatwell]

My Lords, as noble Lords will see on the Marshalled List, Amendment 165 would insert a new clause entitled “Duty of care”. Over the past several months, we have seen a variety of scandals which have, let us say, polluted the relationship between banks and their customers, particularly those holding household accounts or those which are small or medium-sized enterprises. We have had the PPI scandal, the scandal over the mis-selling of interest rate swaps and now newspaper headlines cover the accusations which come from within the Government that RBS has been winding up small firms and seizing their assets to its own advantage. Just yesterday, the Governor of the Bank of England, Mr Carney, referring to RBS, said that this behaviour is a fundamental violation of the integrity of the banking relationship.

The amendment is addressed directly towards the banking relationship. It is in the best interests of the banking industry and, indeed, of the UK economy as a whole, that that relationship is repaired and that trust is restored between the ordinary customer and his or her bank. The amendment is carefully drawn. It proposes first that, with respect to core services, a ring-fenced body will have a fiduciary duty towards its customers. Not being a lawyer, I went to the law library in my college to check that I knew exactly what “a fiduciary duty” actually meant. I quote from a law textbook, which says:

“A fiduciary relationship encompasses the idea of faith and confidence and is generally established only when the confidence given by one person is actually accepted by the other person. Mere respect for another individual’s judgment or general trust in his or her character is ordinarily insufficient for the creation of a fiduciary relationship. The duties of a fiduciary include … reasonable care of the assets within custody. All of the fiduciary’s actions are performed for the advantage of the beneficiary”.

The law textbook which I consulted also went on to describe the way in which the courts have interpreted this relationship, embracing,

“legal relationships such as those between attorney and client, Broker and principal, principal and agent”.

It is striking that the Securities and Exchange Commission in the United States has now passed a regulation which imposes a fiduciary responsibility on those regulated by the SEC.

The fiduciary duty to which I refer in the amendment is with respect to “core services”. I remind the House what that means. The core services are the facilities for the accepting of deposits or other payments into an account which is provided in the course of the core activity of accepting deposits, facilities for withdrawing money or making payments from such an account, and overdraft facilities. It is that relationship of depositing your money in the bank which then says that the bank has your best interests at heart in looking after your money. That is the case of the fiduciary responsibility.

The amendment goes on to say that, with respect to other financial services provided by a ring-fenced organisation, there should be a “duty of care”. I returned to the law textbook, just to make sure that I knew the difference between fiduciary responsibilities and “duty of care”. I was told that a duty of care is a,

“legal obligation which is imposed on an individual requiring adherence to a standard of reasonable care while performing any acts that could foreseeably harm others. It is the first element that must be established to proceed with an action in negligence”.

It goes on to discuss the case law and common law associated with the notion of duty of care.

16:45

It seems that in restoring trust to our banking system, which has been so seriously eroded by the various scandals to which I referred, nothing could be better than a clear fiduciary duty with respect to the acceptance of deposits and a duty of care with respect to the other activities of a ring-fenced bank. Therefore, for example, if a small or medium-sized enterprise is in trouble, it will be the duty of the bank to help that enterprise wind up if necessary in a way which best safeguards the owner of the small or medium-sized company. It would not be a duty of care if the bank simply forced a small company into receivership in a way which resulted in financial benefit to that bank. This amendment would therefore first impose the fiduciary relationship which I am sure most people thought they had with their bank but did not have, and the duty of care, which has been so sadly neglected over the past few years.

In reply to the discussion of this amendment in Committee, the noble Lord, Lord Deighton, put forward four objections. He said that, first, the main thing the Government were doing to protect customers was to encourage competition. Of course, competition may be helpful and may help to protect customers. However, we are dealing with an industry in which there is severe asymmetric information—that is, the information and the skills that the bank has are not matched on the other side by the skills of the customer. That is why we need to ensure that the bank regards its responsibility as a responsibility of trust with respect to the customer.

The noble Lord then said that surely this was covered by contractual relationships. However, we are not looking at a contractual relationship—a division of rights and responsibilities previously agreed and divided between equal partners to a contract. We are considering simply the deposit of a family’s or of a small firm’s money within a bank, and the bank’s attitude towards its responsibility to that family or small business. Therefore we are not talking about contractual relationships.

The noble Lord, Lord Deighton, then said that if bankers were given a fiduciary responsibility, they would not understand it; they would not understand the range of their responsibilities. First, since other professions are perfectly capable of understanding the notion of fiduciary responsibility, why should bankers not understand it? The alternative he proposed of listing specific responsibilities always has the problem that once you have a specific list you leave things out at the end. In an industry in which there is so much innovation, specific lists are likely to be inadequate. Finally, the noble Lord said that this is unnecessary because we have FiSMA rules that already cover it. If those rules already cover the situation, why are we having this succession of extraordinary scandals, which are damaging the banking industry so badly?

Therefore, this is a point in the Bill at which we can really address the issue of the culture of banking today, by restoring trust in our banking system with a fiduciary responsibility with respect to deposits, and a duty of care with respect to other elements in financial activities. If we do that, we will have performed a major service for the banking industry, for the British economy, and for ordinary households and small firms throughout this country. I beg to move.

[Lord Phillips of Sudbury]

Before the noble Lord sits down, why does he not propose extending his fiduciary liability to all banks rather than just the ring-fenced entities?

[Lord Eatwell]

That is because I think the distinction between commercial banking and investment banking is relevant in this case. One would expect investment bankers to behave honestly and in an appropriate manner in their business transactions. I would not expect an investment banker necessarily to display a duty of care and certainly not a fiduciary responsibility whereas I really would expect a commercial banker to exercise those responsibilities in all circumstances when dealing with families and small businesses.

[Lord Sharkey (LD)]

Before the noble Lord sits down again, I ask for a brief clarification. Ring-fenced banks may well have dealings with local authorities and pension funds, but I think that under the terms of the Financial Services Act 2012 and the FSA rules these are not legally customers; they are eligible counterparties. Did the noble Lord mean to exclude local authorities and pension funds from the protections he sets out in his amendment?

[Lord Eatwell]

I am very grateful to the noble Lord for his comments. I had overlooked that point. Once the House has accepted this amendment, we can move on, perhaps at Third Reading, to add the elements that the noble Lord suggests.

[Baroness O'Neill of Bengarve (CB)]

My Lords, before the noble Lord sits down again, I offer another friendly thought—I hope. I have it in mind because the Netherlands has reintroduced a bankers’ oath analogous to an oath for physicians. As part of that move, we should note that the relationship with the persons who are here designated as customers should, indeed, properly be that of a client. This is a professional service and the fiduciary duties are in place precisely because this is a relationship not to a customer from whom one might make money but to a client to whom one owes a service.

[Lord Eatwell]

I am grateful to the noble Baroness. I am sure that her suggestion and, indeed, the example of the Netherlands might well be followed here.

[Lord James of Blackheath (Con)]

My Lords, I have a reputation for introducing sidetrack issues which distract the House. However, I have just listened very intently to the noble Lord, Lord Eatwell, and I think that I disagree with most of what he said. I would like to cite a case history and then invite him to say how what he said would relate to it.

I was very concerned to read in recent weeks about the Royal Bank of Scotland being accused of deliberately pulling down companies. I believe that I have been involved in one of those cases as the person brought in from outside to engineer the kind of scenario that that bank has been accused of engineering. I shall explain what occurred and then ask the noble Lord, Lord Eatwell, how this relates to his perceptions of a duty of care and fiduciary responsibility.

Once upon a time in a muddy field in the Herefordshire area, a man who had come back from the war bought a caravan in which he lived with his wife. He hit upon the idea of a much more efficient process for aerating water for soft drinks and decided to go into production. He went from very small beginnings, with nothing more than his Army gratuity from the war, but by 1986 he was making £19 million a year profit and doing very nicely indeed. However, at that point his wife found him sleeping with his secretary and thought that that was pretty poor loyalty for nearly 40 years of dedicated support, so divorce proceedings were instigated but by this time they had a son. The son brought an action to prohibit his parents divorcing and dividing his asset between them. I believe that it is the only such action that has ever been brought.

He won his case so they had a settlement whereby the wife went to live in Monte Carlo, the husband stayed with the company and the son owned the company. However, the son now decided that his father had really not done very well with the company, although he had got it to £19 million a year, and that he could do a great deal better. So he went to Lloyds Bank. The company had nil borrowings at that time, not a penny. This is where I disagree with the noble Lord’s analysis, because it is not a question of what you do with the deposits—there is no cash being used from a bank at all here. He said, “Give me £75 million of borrowings and I will create a much bigger and better company out of this, in which we can all have a vast amount of earnings”. Lloyds Bank looked at his plan and his options and said yes. I challenge the noble Lord, Lord Eatwell, on this. The first breach in fiduciary responsibility was that the bank said yes. It was not a question of what happened with the deposit, but a question of an ill advised loan, because the company was quite adequate as it was.

Lloyds gave him the £75 million and he went out and bought the plushest factory and upgraded every bit of engineering he could to put into it. Finally, after two years he re-opened and immediately found that he was losing £600,000 a month, at which point Lloyds sent for me. I found that the company was not losing £600,000 a month. It was losing more than £1.5 million a month and at that level we would be way out. All that the bank wanted was to get its money back. One might say that it did not deserve to get it back—in some respects I would agree with that—but we got it back in the end because we were able to break the business up into its various components. The splendid factory could be sold to Mitsubishi for quite a lot of money, the business streams could be sold for another £30 million or £40 million, and then we discovered that the company had the most valuable crop of freshwater springs in the Lake District of any British company. We sold it for tens of millions of pounds and got the bank out 100%, whereupon the son decided that he wanted to sue the bank for failure of fiduciary responsibility for lending him the £75 million in the first place. He said that the bank had engineered to bring the company down so that it could strip it out, take all his money and ruin his family and descendants for all time.

This is the reality behind what noble Lords are hearing about the Royal Bank of Scotland at the present time. Banks are pressured into making bad decisions to lend and they then take appropriate defensive action on behalf of their shareholders and depositors. That is discharging their fiduciary responsibility, but they have been put under pressure by other market forces to invest in businesses which really do not know what they are doing and when the time comes to dismantle, dismember and unbundle them, we get the sort of consequence we have had here. This individual failed in his action against the bank for having stolen his company, as he put it. He is now very ill, I am sorry to say, and is unlikely to last long in this world. His family is ruined completely—it has lost everything. Is that a fiduciary responsibility? Yes. The bank should have looked much more closely at the options that were available to the business at the time and should have looked to see what expertise was going to be brought in, and it did not. As to whether there is a duty of care, that is a very simple and separate issue running alongside. I think that there is and that that is where the concentration should be.

[Lord Eatwell]

I should point out to the noble Lord that the case he has described would come, under the terms of my amendment, under duty of care, not fiduciary responsibility.

[Baroness Cohen of Pimlico (Lab)]

My Lords, as a lawyer I have always believed that I have a contract with my bank, inasmuch as it is making an offer capable of acceptance and I have accepted it, in the case of provision of deposit and current account services, which I believe are the areas which my noble friend Lord Eatwell is proposing to cover. I do, however, support the amendment. It never does any harm to repeat these things. By analogy with part of the criminal law, it has been illegal since 1861 to beat one’s wife, but it took the Domestic Violence and Matrimonial Proceedings Act 1976 to remind the general public and the police of their duties in the matter.

The real problem lies with how to enforce any of this. Through all these debates I have found myself wondering where our lawyers are. Why have we not been suing banks? In many cases there is a perfectly clear case of action against a bank. The answer, of course, is that they are many times bigger than us and have more resources than any individual. If the purpose of the amendment is to encourage, or indeed force, the regulators to take the action on our behalf, which we are not about to do because of the risk of very severe financial consequences, it will be well received by everyone. In any case, I support the amendment.

17:00

[Lord Flight]

My Lords, I simply add that there is surely a strong duty of care to the depositors, whose money a bank is lending. The bank has a balancing role of looking after the interests of its depositors and looking after the interests of its loan customers. I also echo the point made by the noble Baroness, Lady Cohen. The “treat your customer fairly” principle has been applied across the financial services sector and I think that, in the main, the investment management industry has put it into practice well. However, it is a nightmare to police. If the individuals are not going to be motivated to act properly, then the law, or whatever is in the regulations, will not necessarily lead to that. We can say that we will pass a law and everything will be wonderful but the question is: will people behave correctly?

[Lord Newby]

My Lords, I am sorry that when we discussed this amendment on a previous occasion, the Government failed to convince the noble Lord, Lord Eatwell, that his amendment was not necessary. I hope that I will have more success this time because I believe that the amendment is neither necessary nor helpful.

We all share the objective of driving up standards in banking and improving the treatment of customers. That is why the Chancellor set up the Parliamentary Commission on Banking Standards and why we have accepted the vast majority of its recommendations. However, we remain unconvinced that the noble Lord’s amendment will add anything meaningful to these reforms.

The regulator’s FSA Principles for Business already includes what is virtually a fiduciary duty. Principle 10 states:

“A firm must arrange adequate protection for clients’ assets when it is responsible for them”.

As other noble Lords have mentioned, these high-level principles also already include the principle that:

“A firm must pay due regard to the interests of its customers and treat them fairly”.

I am not sure how the noble Lord’s amendment would improve standards or help bank customers; nor do I think that he has explained what the new duties on firms really mean. When he spoke in Committee, he said:

“This will increase consumer protection and help to restore confidence of the retail customer in banks. It will raise standards of conduct because banks will know they are responsible for acting according to these duties”. —[Official Report, 23/10/13; col. 1092.]

But my question is: how will it do that? How will it, as he hopes, stop the kind of scandals that we have had in the past? I think that that is an extremely difficult question for the noble Lord to answer in that neither “fiduciary duty” nor “duty of care” in this context describes a specific, precise obligation. As I have explained before, regulators’ rules provide very specific obligations.

I should add that the Official Opposition in the other place seemed to understand this difficulty. When an identical amendment was considered in Committee there, the opposition spokesperson, Cathy Jamieson MP, acknowledged the risk of unintended consequences or lack of clarity. She emphasised that the purpose of the amendment was to ensure that,

“customers are looked after and that banks are clear about their responsibilities and remember the part of the contractual relationship with customers that is about looking after their money”.—[Official Report, Commons, Financial Services (Banking Reform) Bill Committee, 16/4/13; col. 247.]

Of course, that is what we all want. That is why the Government introduced the regulatory reforms and new properly focused regulators. The FCA, in particular, will focus on protecting consumers and maintaining market integrity.

This Bill will take the process further by strengthening the regime of individual accountability and standards for those who work in firms, in line with the recommendations of the Parliamentary Commission on Banking Standards. These rules will be specific. They will be precise. They will set out the responsibilities of banking staff and senior persons to their customers. Moreover, they will be enforceable by the regulator. If they are broken, those people will be punished and could be subject to fines or public censure.

If we were to have the general duty of care or fiduciary duty as set out in the amendment, how would that be enforced? In law a fiduciary duty is enforced by the person to whom the duty is owed taking action in the courts. Does the noble Lord really believe that those people, some of the most vulnerable at the sharp end of bank practices, are likely to pursue their bank through the courts? Instead, the Government’s reforms have established a regulator with real teeth, of whom the banks will genuinely be scared—indeed, I think they are. Bolstered by a clear and binding set of banking standards rules, which specify codes of conduct and personal responsibility through the senior persons regime, this will mean a real change for consumers. The noble Lord referred to the SEC introducing a fiduciary duty in the United States. The proposed fiduciary duty in US securities law is not comparable. The proposal, on which incidentally the SEC itself has not yet taken any clear position, extends only to covering activities that involve giving advice. In any case, in the UK, when a firm provides advice to a customer, a duty of care already exists under the general law. In that respect, the US is simply looking to catch up.

To sum up, attempting to add duties of care or fiduciary duties of the kind proposed in this amendment would add nothing to the existing protections for customers. It is unnecessary and would not add any clarity to existing requirements. I hope, therefore, that the noble Lord will withdraw the amendment.

[Lord Eatwell]

My Lords, I regret that the Government seem to have learnt nothing since Committee stage. We have heard the repetition of high-level principles of the regulator protecting customers. What has actually happened? There have been successive scandals when customers were not protected by the regulators and successive scandals in which treating customers fairly was simply a joke.

The noble Lord also referred to a number of specific provisions. That is the great weakness of the regulatory structure. We have simply specified conditions. As we all know, that which is not specified is permitted. The whole point of having a fiduciary responsibility and duty of care in the terms that I set out when I moved the amendment is to create a general responsibility that will be enforceable in law by individuals and, indeed, by collective actions. Therefore, it seems to me that simply saying, “We have made things better by making them more specific and providing regulators with teeth”, is not the same as providing protection for the individual, which is exactly what the amendment would do. Given that the notions of fiduciary duty and duty of care are successful in other professions, why—the Government failed to answer this question—can they not be successful in the banking profession? That question was not answered. This is so important that I wish to test the opinion of the House.

17:08

Division 1

Ayes: 204

---

Labour: 153
Crossbench: 37
Independent: 4
Bishops: 2
Democratic Unionist Party: 1
Ulster Unionist Party: 1
Plaid Cymru: 1

Noes: 237

---

Conservative: 147
Liberal Democrat: 67
Crossbench: 14
Independent: 5
Ulster Unionist Party: 1

17:22

Schedule 8: Functions of FCA under competition legislation

Amendment 166

Moved by

[Lord Newby]

166: Schedule 8, page 157, leave out lines 11 to 14

[Lord Newby]

My Lords, in Committee, the Government proposed that the FCA should be given competition powers, to be exercisable concurrently with the Competition and Markets Authority, to make sure that the FCA has the right tools to get the job done. The amendment that we tabled to achieve this set out the scope of the FCA’s concurrent competition powers as applying to “financial sector activities”, defined as relating to,

“the provision of financial services”.

The amendment also included a delegated power that would allow the definition of “financial services activities” to be changed in future. It was felt that allowing this definition to be amended by order helped to future-proof the legislation by providing the flexibility to adjust the scope of the FCA’s competition powers should this be warranted—for example, because some new activity that arose in the future did not qualify as the provision of financial services.

However, concerns over this were raised by the Delegated Powers and Regulatory Reform Committee, particularly that the power was too wide-reaching and unnecessary, given the breadth of the definition of “financial sector activities”. I am grateful to the committee for its efforts in scrutinising the Bill and the Government’s amendments. In the light of the already very wide definition of “financial sector activities” and the views of the committee, the Government have decided to remove this power, along with procedural provisions concerning its exercise, from the proposed legislation.

The Government have tabled another amendment to ensure that the competition powers conferred on the FCA are capable of being exercised effectively. One of the powers conferred on the FCA is the ability to conduct a market study in the context of markets for the provision of financial services. If the FCA discovers competition-related concerns, it can refer the market for investigation by the Competition and Markets Authority. The amendment we are discussing today serves to ensure that a legal restriction on the FCA disclosing confidential information would not prevent the FCA from sharing with the Competition and Markets Authority confidential information which was relevant to a CMA market investigation. The amendment would also ensure that the provisions concerning treatment of confidential information that apply to other regulators with concurrent competition powers would also apply to the FCA, ensuring consistency. I beg to move.

Amendment 166 agreed.

Amendments 167 to 171

Moved by

[Lord Newby]

167: Schedule 8, page 157, line 26, leave out “financial sector activities” and insert “the provision of financial services”

168: Schedule 8, page 158, line 7, leave out from beginning to “and” in line 8 and insert “the acquisition or provision in the United Kingdom of financial services,”

169: Schedule 8, page 158, line 23, leave out “financial sector activities” and insert “the provision of financial services”

170: Schedule 8, page 160, line 24, at end insert—
“In section 348 of FSMA 2000 (restrictions on disclosure of confidential information by FCA, PRA etc), after subsection (6) insert—
“(7) Nothing in this section applies to information received by a primary recipient for the purposes of, or in the discharge of, any functions of the FCA under the Competition Act 1998 or the Enterprise Act 2002 by virtue of Part 16A of this Act.
(For provision about the disclosure of such information, see Part 9 of the Enterprise Act 2002.)””

171: Schedule 8, page 160, line 42, at end insert “; but this sub-paragraph is not to be regarded as limiting the effect of the definition of “functions” in paragraph 1.””

Amendments 167 to 171 agreed.

Amendment 172

Moved by

[Lord Eatwell]

172: After Clause 116, insert the following new Clause—
“Arrangements for consulting practitioners and consumers
After section 2L of FSMA 2000 (the PRA’s general duty to consult) insert—“2LA PRA duty to consider representations from the FCA Consumer Panel
(1) The PRA must consider and respond to representations made by the Consumer Panel established by the FCA under section 1Q of the Financial Services Act 2012.
(2) The PRA must from time to time publish in such manner as it thinks fit responses to the representations.””

[Lord Eatwell]

My Lords, Amendment 172 derives from, and is a response to, an amendment that the Government successfully moved in Committee, which gave the PRA a secondary competition objective directly related to issues of market structure and performance. We have developed in this Bill, and in the previous Financial Services Bill which we also considered in this Session, a twin-peaks approach to financial regulation, with the Financial Conduct Authority looking at conduct of business and the Prudential Regulation Authority looking at issues associated with the prudential behaviour of firms.

Given that the PRA now has a competition objective, we should not allow the twin peaks to isolate consumer representation. The FCA consumer panel has an important role in advising on and responding to FCA proposals with respect to conduct of business but, with the PRA now having a competition objective, the issues which affect consumers directly will involve the competition element of prudential regulation. It is important, and entirely appropriate, that the PRA at least considers and responds to representations made by the FCA’s Consumer Panel—that is all we are asking for—so that decisions which the PRA makes with respect to market structure and performance have an appropriate consumer input. I beg to move.

[Lord Newby]

My Lords, this amendment concerns the important issue of consumer representation at the PRA and requires the PRA to consider and respond to representations from the FCA’s Consumer Panel.

There is much to welcome in the approach suggested. It is important to ensure that there is sufficient regard to consumer concerns at the PRA, especially where there are specific issues of consumer protection that the PRA should take into account. I welcome the recognition that it will not require the creation of a completely new body in order to achieve this. We need, of course, to be mindful of maintaining flexibility on the best way for the PRA to take into account representations from consumers and the need to avoid overly burdensome arrangements.

Following the earlier discussions on this issue, the regulators have considered how best to ensure consumer interests are communicated to the PRA. The regulators have come to the view that there should be arrangements for the FCA Consumer Panel to be able to raise concerns with the PRA, and I believe that it is worth considering putting arrangements on a statutory basis. We will therefore consider coming back at Third Reading with amendments, subject to reflection on the best way to do that without incurring unnecessary costs or burdens for the regulators or the panel. We would be happy to discuss further with noble Lords opposite the most effective approach to doing this. In view of that, I hope that the amendment can be withdrawn.

[Lord Eatwell]

There I was with my notes saying how inadequate the noble Lord’s answer was going to be. I am delighted that the Government have recognised the power of this argument and I look forward to discussions with them and to the moving of amendments at Third Reading.

Amendment 172 withdrawn.

Clause 117: Fees to meet Treasury expenditure relating to international organisations

Amendment 173

Moved by

[Lord Newby]

173: Clause 117, page 92, line 14, at end insert—
“(2) In section 3A of FSMA 2000 (meaning of “regulator”), in subsection (3)—
(a) omit the “or” at the end of paragraph (a), and(b) after paragraph (b) insert “or(c) the meaning of “regulator” in sections 410A and 410B (fees to meet certain expenses of Treasury).””

Amendment 173 agreed.

Clause 118: Amendments of section 429 of FSMA 2000

Amendment 174

Moved by

[Lord Newby]

174: Clause 118, page 92, line 21, leave out from “(e)”,” to end of line 22

Amendment 174 agreed.

17:30

Amendment 175

Moved by

[The Archbishop of Canterbury]

175: Before Clause 119, insert the following new Clause—
“Leverage ratio
(1) The Treasury must make an order under section 9L of the Bank of England Act 1998 (macro-prudential measures) enabling the Financial Policy Committee to give a direction under section 9H in respect of a leverage ratio for relevant authorised persons.
(2) The direction above may specify the leverage ratio to be used.
(3) For the purposes of this section “leverage ratio” has the meaning which the Financial Policy Committee considers that it has in European Union Law or procedure from time to time.
(4) The order under subsection (1) must be made within the period of 6 months beginning with the day on which this Act is passed.
(5) In this section, “relevant authorised person” has the meaning given in section 71A of FSMA 2000.”

[The Archbishop of Canterbury]

My Lords, this amendment stands in my name and in the names of the noble Lords, Lord Turnbull, Lord Lawson and Lord McFall. The issue of leverage ratios may at first sight be less emotionally gripping than some of the other things that we have been discussing over the past few days, but it is central to the recommendations made by the commission. The leverage ratios that banks employ are a vital backstop in ensuring that they hold adequate capital, and ensure the safety and security both of individual banks and the industry as a whole.

A remarkable lecture given by Andy Haldane of the Bank of England sets out the necessity for this amendment. It is called The Dog and the Frisbee and I warmly recommend it, not least for its light humour. Essentially, as the Basel process has gone on through Basel I, Basel II and Basel III, there has been an exponential increase in the complexity of the internal measurements of different categories of loan for the amount of capital that had to be set against them. This opened the way very effectively to banks using different internal measures and to the inability of regulators to audit and examine adequately the ways in which banks were setting aside capital for particular risks.

A leverage ratio, because it is relatively if not absolutely simple, acts as a backstop which sets minimum levels of security and safety. The debate around a similar amendment in Committee was rather confusing. Although, as I have mentioned previously, I was unfortunately not able to be in the House that day owing to other duties, I have looked at the Hansard and concluded that the Government’s position on this recommendation seems unclear. On the one hand, the House was told that the amendment was not needed, as the Financial Policy Committee had the power to set the leverage ratio; on the other, the Minister indicated that responsibility for setting the leverage ratio would be considered once the international levels were implemented through Basel III, which would be some time in 2017 or 2018.

In the light of this, the commission warmly welcomes the clarity of an announcement made yesterday that the Financial Policy Committee will conduct a review into the role of the leverage ratio within the capital framework of UK banks, as this indicates that the Treasury and the Government recognise that they are an important part of the structures that guide the banking system and that it is necessary that we move forward without delay. My commission colleagues and I are grateful to the Government for their willingness to allow the FPC to conduct a thorough and wide- ranging review of its current powers and to make recommendations on further powers it needs. We would welcome a clear statement that the review will not seek to establish whether it is right for the FPC to request this power but that it will have the power and the review will be about how it will exercise it.

We also welcome warmly the accelerated timetable set out in the Government’s announcement. It is right that this power should be available to the FPC as soon as possible and the expectation that the Bank of England will complete its review within 12 months reflects this need. I hope that the Minister can confirm these points. I beg to move.

[Lord Eatwell]

My Lords, I support the sentiments expressed by the most reverend Primate, in particular in pointing out the considerable confusion in the Government’s position in Committee when they told us, on the one hand, that the FPC had this power already and, on the other hand, that they proposed to give the FPC the power in 2018. We were told both things at once and it was not at all clear that the Government really knew what was happening with respect to the development of the use of the leverage ratio as an important element in the FPC’s toolkit.

However, the matters have been clarified by the correspondence between the Chancellor and the Governor of the Bank of England which was made available to us yesterday. I would like to hear confirmation from the Government that this is a case not of whether a leverage ratio will be available to the FPC, nor of whether the FPC will have that within its macroprudential toolkit, but simply of when this power will be available—I hope that it is sooner rather than later—and perhaps how it might be exercised. However, given that the use of macroprudential tools is already set out in great detail in the previous Financial Services Act, even that may be unnecessary.

[Lord Lawson of Blaby (Con)]

My Lords, I support strongly what the most reverend Primate the Archbishop of Canterbury and the noble Lord, Lord Eatwell, have said. I speak in support of them because this is a particularly important issue.

In constructing a safe banking system, a number of things are taken into account, including risk-weighted assets and other matters of that kind, but there is no doubt that the leverage ratio is the single most important element in having a strong and robust banking system. This amendment is not about what number it should be. I mention en passant that the Government say that we must not interfere with what the Vickers committee recommended, yet when the Vickers committee recommended a number which they did not like they disagreed with it. Nevertheless, that is water under the bridge.

The review is quite unnecessary—although it will probably not do any harm—because the issue of the leverage ratio is peculiarly simple. Who will be responsible for setting the leverage ratio, the Treasury or the Financial Policy Committee of the Bank of England? The amendment is important because it would give the Minister the opportunity to make a clear statement. There has been movement since Committee. The Governor of the Bank of England, Mr Carney, gave evidence to the Treasury Committee in another place only yesterday saying that his understanding was that it would be the responsibility of the Financial Policy Committee of the Bank of England. We would like to have that explicitly stated by my noble friend here today.

[The Commercial Secretary to the Treasury (Lord Deighton) (Con)]

My Lords, the amendment would require the Government to make an order giving the FPC a power to direct the PRA to set a leverage ratio within six months of Royal Assent. It is absolutely the case that it will be the FPC which exercises these powers. It has never been the intention that the Treasury would have those powers. For those who are not so familiar with the context, I shall have another go at being less confusing about the background, because it is important to understand why the review is necessary to get to that end case and what the current situation is.

There was a lot of concern around the idea that the Chancellor has the power to set a leverage ratio, which I think was in part a result of some confusion about how the law currently stands and works—which in turn is partly because of the various domestic and international reforms running to different timescales. We are in a process of change and a lot is moving around.

I tried last time to clarify the current powers of the regulator and the future powers of the FPC during Committee. I thought that I nearly succeeded, because I think that the noble Lord, Lord Lawson, is on record as saying that he was encouraged to some extent. That was a ringing endorsement compared to how I did on some of the other amendments, so I thought that I had done quite well.

The Government have sought to provide further clarity on this point through the recent exchange of letters with the Governor of the Bank of England. I will return to that. I hope that, with that explanation and a description of the steps that the Government will take to clarify matters further, I can satisfy your Lordships that their concerns about what I agree is a very important issue will be addressed.

First, I shall try to explain the current state of the law. Then I will explain our proposals in that context, because I think that that will give noble Lords the full picture.

Under current law, three bodies are concerned with the leverage ratio: the Treasury, the FPC and the PRA. Of course, the last two are part of the Bank of England group. Of those three, one has the direct power to set a minimum leverage ratio now. That is the PRA. Let me make it absolutely clear: it can do that not just on a firm-specific basis but on a system-wide basis. It can do that now; it has that power. It can set the leverage ratio directly, as it did back in June, or on the basis of a recommendation from the FPC. When I replied to the noble Lord, Lord Turnbull, I talked about the June action of the PRA as the killer fact; it was obviously not as emphatic as I hoped.

Under FiSMA, the FPC has two sorts of powers. First, there is a wide power of recommendation on any issue with regard to financial stability, which it makes to the PRA to exercise under its powers on a “comply or explain” basis. For that to work, the PRA must have powers to apply rules across the whole sector, which, as I have just explained, it does. It is envisaged that that is how most of the FPC’s decisions will be enacted. Secondly, the FPC has a narrow set of macro-prudential tools, which are powers to direct the PRA to act. There are currently two powers of direction. Currently, they are a counter-cyclical capital buffer and sectoral capital requirements. The Government also committed—this was the original situation—to giving the FPC a third direction tool to vary the minimum leverage ratio once the minimum was set in 2017.

For the avoidance of doubt, the Treasury plays no role here. If the PRA wants to set a leverage ratio either under its own initiative or under the recommendation of the FPC, it does not have to ask the Treasury, and the Treasury has no veto. The Treasury is the only body of the three that does not have the power or influence to set the leverage ratio. So the debate is essentially about how and when the Treasury grants the FPC that specific power of direction over the PRA, rather than the PRA retaining some discretion in the matter.

That being established, let me turn to the Government’s recent exchange of letters with the Bank of England. The Government have already committed to give the FPC the power of direction to vary the leverage ratio through time in 2018, subject to a review in 2017, but, given progress internationally—all the transformational change that we just discussed—there is a case for such powers being given earlier, or specified in a different form. To settle this debate, the Chancellor asked the governor, who is the chair of the FPC, to review the matter and make a recommendation to him that he could take to Parliament. The Government believe that that is the right approach to granting the FPC additional powers of direction, for a number of reasons.

First, there is an existing process for the FPC being granted such powers, established under the Financial Services Act, which many in this House and the other place, including the chair of the PCBS, helped to design. These are prescribed by the Treasury by order under Section 9L of the Bank of England Act 1998. Before making an order, the Treasury must consult the FPC and make an order in Parliament. This is subject to the affirmative resolution procedure, so must be approved by each House of Parliament.

To fulfil their duty of proper consultation before bringing a proposal under the Act, the Government believe that it is appropriate and necessary that the Bank furnish them with the relevant information from the planned review of the leverage ratio. As noble Lords can see from the governor’s response to the Chancellor, he is more than happy to go along with that process, given the things that are going on this year. Secondly, as a matter of policy, there are a number of outstanding technical issues that will need to be settled before the Chancellor can bring fully fleshed-out proposals back to Parliament.

17:45

It would be helpful if I explained some of the technical issues which are alluded to in the Chancellor’s and governor’s letters. The first issue to fix is: at what level should it be set, relative to risk-weighted requirements? That is not currently settled internationally, which is why the Basel process and the European Banking Authority are going through a long process of review and calibration. We envisage that the FPC would have to consider this too for the UK and, most importantly, explain the circumstances in which it would wish to set a higher level for UK banks, if it believes that necessary. Secondly, if this is a macroprudential tool, how will it operate? If the tool gives the FPC the power to direct the PRA to vary the leverage through time, it will need to be clear under what circumstances it would be varied and how it will interact with other tools such as the countercyclical capital buffer, which does a similar thing for the risk-weighting framework. Thirdly, there is the important question of timing. The international timetable will set a minimum in 2017-18, so there is a question for the FPC as to what the right timetable is for the UK and how it should get there.

These are very important and technical questions in the design of a leverage tool. Once that review has provided evidence to support its recommendations, the Government have committed that they will use their existing powers to grant a power of direction to the FPC before the end of this Parliament.

I have a note next to me confirming that the Chancellor is happy with “when”. That is probably what noble Lords really wanted to hear but I thought that it would be useful to have some background. That timetable fits in with the FPC’s own timetable for defining the medium-term capital framework for UK banks. The governor has confirmed, in his letter to the Chancellor, that this timetable is appropriate.

I hope that on the basis of all the background information that I have provided, which I hope gives the context for a very specific answer to a specific question, your Lordships will be comfortable in withdrawing this amendment.

[The Archbishop of Canterbury]

I am very grateful to the Minister for such an extremely technical answer and I beg leave to withdraw the amendment.

Amendment 175 withdrawn.

Amendment 176

Moved by

[Lord Turnbull]

176: After Clause 119, insert the following new Clause—
“Other provisions about the FCA and the PRAAbolition of strategic objective of the FCA
In FSMA 2000—(a) In section 1B, omit—(i) in subsection (1), paragraph (a) (and the “and” following it)and, in paragraph (b), “operational”,(ii) subsection (2),(iii) in subsection (3), “operational”,(b) omit section 1F,(c) in subsection (1K), omit “operational”,(d) omit section 3B(3),(e) omit section 3D(4),(f) in section 55B(4), for the words after “advance” substitute “any of its objectives”,(g) in section 55H(4), omit “operational”,(h) in section 55I(5), omit “operational”,(i) in section 55J(1)(c), for the words after “advance” substitute “any of its objectives”,(j) in section 55L(6), omit “operational”,(k) in section 55T, omit “operational”,(l) in section 88E, in subsection (1) and in the heading, omit “operational”,(m) in section 89U, in subsection (1) and in the heading, omit “operational”,(n) in section 137A(1), omit “operational”,(o) in section 138A(5), omit “operational”,(p) in section 192C(2), for the words after “advance” substitute “any of its objectives”,(q) in section 194(1)(c), for the words after “advance” substitute “any of its objectives”,(r) in section 232A, omit “operational”,(s) in section 314(1), omit “operational”,(t) in section 316(1A)(a), omit “operational”,(u) in section 318(3A)(a), omit “operational”,(v) in section 340(8), for the words after “expedient” substitute “for the purpose of advancing any of its objectives”, (w) in section 395(3), for the words after “procedure and” substitute “the regulator considers that, in the particular case, it is necessary in order to advance any of its objectives.”,(x) in paragraph 11(1)(b) of Schedule 1ZA, omit “operational”,(y) in paragraphs 6 and 6B of Schedule 1A, omit “operational”, and (z) in paragraphs 3C(1) and 3D(1) of Schedule 6, omit “operational”.”

[Lord Turnbull (CB)]

My Lords, this amendment repeats an amendment tabled in Committee, the aim of which was to delete what the commission thought was an otiose strategic objective for the FCA and thereby increase the prominence and importance of what were previously called its three operational objectives, one of which was the promotion of competition. I thought that the reply from the noble Lord, Lord Newby, was unsatisfactory and I wanted to pursue it a bit further. The noble Lord concluded with the following remarks:

“After taking legal advice, the FCA has subsequently written and confirmed that it is happy with the strategic objective. On that basis, we are happy that the FCA is happy and wish to retain it”.—[Official Report, 15/10/13; col. 508.]

Perhaps I might respectfully comment that the object here is not to make the FCA happy but to make it pursue diligently the competition objective, about which a number of people have reservations. I would like to give the Minister the opportunity to give us some further assurance that the competition objective of the FCA will be pursued with the vigour that I think the Treasury and this House want.

[Lord Deighton]

My Lords, I confirm the observation of the noble Lord, Lord Turnbull, that it is of course not our objective simply to make the FCA happy. I will give a slightly longer explanation of why we think that the current situation will work just fine but, to get straight to the point, it is absolutely because we believe that the overriding mission statement is entirely consistent with the vigorous pursuit of the competition objective.

In looking at this from a personal point of view, I am very comfortable with the notion of an overriding mission statement which works in harmony with the operational objectives, can be used to support and enforce them and is very useful when it comes to shades of difference between them. I am very comfortable in this case because the overriding objective of making markets work well is entirely consistent with our mutual objective of ensuring that the FCA is pursing its competition objective with the utmost vigour.

I hope noble Lords have been able to witness that where we have been able to compromise, I have been very keen to compromise, but I am afraid here it is either yes or no, and in this case I ask the noble Lord to withdraw the amendment on the basis of my suggestion that I think it is going to be okay.

[Lord Flight]

My Lords, I have one issue to raise with the Minister. The competitive objective, as I understand it, applies equally to the PRA as to the FCA. As noble Lords may be aware, one of the immediate issues is that the capital requirements for banks of different sizes are dramatically different, such that a small bank’s capital requirement for certain forms of mortgage lending is about 30 times the capital requirement for one of the established clearing banks. The PRA has enthusiastically welcomed changing those arrangements and taking up the challenge to create a more competitive environment, but when I recently asked why the huge difference in capital requirements relating to mortgages had not been addressed, I was told that the PRA could not move until it was able to get agreement from the EU. I am not sure whether that is correct, but it is quite important to know whether meeting the competition objective is not just a question of having our own powers to do it but that EU requirements impinge upon it.

[Lord Deighton]

I shall look into that for my noble friend.

[Lord Turnbull]

In tabling amendments, there are a number of objectives. The first is to get an amendment accepted, the second is to make a point and the third is to receive an assurance. I think I have achieved the second and third objectives. On that basis, I beg leave to withdraw the amendment.

Amendment 176 withdrawn.

Amendment 177

Moved by

[Lord Turnbull]

177: After Clause 119, insert the following new Clause—
“Independent Banking Regulatory Decisions Committee of the FCA
(1) After section 1L of FSMA 2000 insert—
“1LA Independent Banking Regulatory Decisions Committee
(1) There is to be a Banking Regulatory Decisions Committee of the FCA (“the Committee”).
(2) The members of the Committee are to be appointed jointly by the FCA and the PRA and hold office in accordance with the terms of their appointment.
(3) The person appointed to chair the Committee must have experience of acting in a senior judicial capacity.
(4) A majority of the members of the Committee must be persons appearing to the FCA and the PRA to have (and to have had) no professional connection with the provision of financial services.
(5) The remaining members of the Committee must include persons appearing to the FCA and the PRA to have extensive experience in senior roles in banking.
(6) The function of the Committee is to exercise the banking regulatory decisions function of the FCA and the PRA.
(7) “Banking regulatory decisions function” means the function of taking decisions for enforcing compliance with relevant requirements, within the meaning of Part 14, in cases where the authorised person is a relevant authorised person within the meaning of section 71A of this Act.
(8) The banking regulatory decisions function of the FCA and the PRA is delegated to the Committee; and references in this Act to the FCA and the PRA in relation to that function are to be construed accordingly.
(9) The FCA shall meet the reasonable costs of the Committee in discharging its function but the Committee—
(a) is not subject to direction by the FCA or the PRA as to the exercise of its function,(b) is not accountable to the FCA or the PRA for the exercise of its function, and(c) may appoint its own officers and staff.(10) At least once a year the Committee must make a report to the Treasury on the discharge of its function.
(11) The Treasury must lay before Parliament a copy of each report received by them under subsection (10).”
(2) The FCA and the PRA must carry out a review of the operation of the Banking Regulatory Decisions Committee of the FCA.
(3) The review must be completed before the end of 2018.
(4) The FCA and the PRA must give the Treasury a report of the review.
(5) The report must include an assessment of whether the function of the Banking Regulatory Decisions Committee would be better discharged by a body that was entirely independent of the FCA and the PRA.
(6) The Treasury must lay a copy of the report before Parliament and publish it in such manner as they think fit.”

[Lord Turnbull]

This amendment is about the future structure of the Regulatory Decisions Committee. This is avowedly a placeholder amendment to allow further discussion. The commission originally proposed that the RDC should be given statutory autonomy within the FCA and that that new regulatory structure should be reviewed by 2018. On further reflection, my commission colleagues and I put forward a rather different proposition, which is that there should be a wider review but there is no reason why it should not start as soon as maybe.

There are a number of reasons why a wider review is justified. The first is obvious. Although we now have two regulators rather than one—the PRA and the FCA—events where enforcement is justified can arise from either of these domains and enforcement action taken by one could help or hinder the work of the other. The enforcement division and the RDC are embedded in the FCA, and it raises the question of whether the RDC should be placed, in a sense, more equidistant between the two.

The second reason for raising this question is that, in banking at least, enforcement decisions could be taking on a greater significance than in the past. Indeed, the past has been characterised by a surprising absence of enforcement, at least in relation to the events of the financial crisis. There have been some major enforcement decisions and some colossal fines around conduct, but virtually none in relation to events leading up to the financial crash. This therefore raises the question as to whether the RDC needs to be upgraded in terms of its chairmanship and membership so that it is capable of handling bigger and more important cases.

The third reason is that, in response to a regulatory infraction or lapse, there is a balance to be struck between using enforcement as an instrument and the supervisory instrument. We should not get into the mode of thinking that enforcement is always the first and best recourse. Supervisors may take the view that a case is better handled by what elsewhere might be called “special measures”, such as seeing that the people who are responsible for the poor behaviour and decisions are moved on, and possibly even sacked; or by getting new people in; or by securing undertakings from management about future conduct. Often, this can produce a quicker and more effective result, whereas recourse to enforcement can cut across this so that instead of a bank immediately getting into a constructive dialogue about what to do next, it begins to dig in and wait for a long, drawn-out litigation.

We therefore need to ensure that, in any particular case, the full range of options has been considered and that the interests of other regulators have been taken into account. In other words, the RDC should only receive a case after that balancing process has taken place. It would be helpful if the RDC was able to question whether all the options and possible responses have been explored.

The fourth reason is that, in many walks of life, there has been a trend which continues to this day of greater separation between those investigating a case, those who decide whether a prosecution should be undertaken and those who reach a verdict. You could go back to the creation of the Crown Prosecution Service more than two decades ago, and you can see this in a number of professional bodies covering medicine, solicitors and accounting. The hot topic of the moment is the Independent Police Complaints Commission. There is a perception that the RDC is not as independent of enforcement as it could be. It is co-located. It is part of the FCA. Would we be able to achieve both actual enhancement of its independence and, certainly, the perception of that independence if it stood in a more independent position?

Finally, the RDC has to ensure that before any accusation is made in a decision notice that enforcement has been properly researched, the accused has been given a proper chance to put their case, and the case has been gone into thoroughly. This is of particular relevance to smaller practitioners who can be severely damaged by accusations and are not able to clear their name until maybe years later. Unlike big firms, such businesses, such as IFAs, can find that they clear their name but there is no business left to go back to.

All this indicates to me that there is more than enough material on which to base a review and no reason to delay that until 2018, which was included in the earlier amendment. Rather than attempt to legislate now in a process that does not allow proper consultation with practitioners, and which would be confined only to banks, I argue that we should have a wider review. I hope that between now and Third Reading we can have further discussions on this idea. I beg to move.

17:59

[Lord Eatwell]

My Lords, I was a member of the original regulatory decisions committee at the Financial Services Authority, which noble Lords may remember was set up after FiSMA ran head first into the human rights legislation because the regulator was in many cases judge and jury. The RDC was set up as a filter, to be an independent assessor of regulatory decisions by the various divisions of the FSA and to stand as a relatively simple procedure prior to the final stage of going to a tribunal if agreement could not be reached between the regulator and the regulated person. In that respect the RDC and the old FSA worked moderately well—but only moderately.

It did not work so well for two reasons. First, there was considerable confusion over its independence. The noble Lord, Lord Turnbull, has, in this amendment, quite rightly emphasised that the RDC should be independent of the various regulatory authorities. The second reason it did not work very well is, unfortunately, contained within the amendment, which states:

“A majority of the members of the Committee must be persons”,

with,

“no professional connection with … financial services”.

I am afraid that that, on the old RDC, caused us a lot of difficulty. Many of the cases which were quite complicated, with respect to financial services, took a long time because people who were very bright and committed but who had had no previous connection with the industry took a long time to get up to speed on the relevant issues that were considered. That condition in the old RDC arose because the FSA was succeeding the self-regulatory organisations. Therefore that was an overreaction to the role of the self-regulatory organisations such as the Securities and Futures Authority, which I also had the honour to serve on. That was abolished at that time and the reaction was, “Let’s have people from outside the industry in this particular role”.

Therefore, the idea of an independent RDC is a good one. That would avoid some of the very great expense of going to tribunal, where there might be disagreements, and it would also have the great advantage, which the noble Lord, Lord Turnbull, pointed out, of balancing the views of various regulators in any particular case. Of course, that was not necessary under the FSA, but it will be necessary under the new structure. This is worthy of very careful thought and consideration. It could be a very useful, positive step within the sequence of enforcement activities by the regulator.

[Lord Deighton]

In the spirit of the noble Lord’s approach, which was to move on from the specific amendment, I will not read out my speaking note, as entertaining and well structured as it is. I thank the noble Lord, Lord Eatwell, for his valuable experience here. I feel as the noble Lord does—something in here needs to be sorted out, but at the moment we are not exactly sure quite what the right thing is. However, it is certainly likely to involve a review, as is recommended as part of the amendment. Therefore I am more than happy, in preparation for Report—I am sorry, I mean Third Reading—to see what we can come up with together on a review.

[Lord Turnbull]

On the basis of that quite generous assurance, I am very happy to withdraw the amendment.

Amendment 177 withdrawn.

Amendments 178 and 179 not moved.

Amendment 180

Moved by

[Lord Lawson of Blaby]

180: After Clause 120, insert the following new Clause—
“MiscellaneousMeetings between regulators and auditors of relevant authorised persons
(1) The FCA and the PRA must make arrangements to meet the auditors of each relevant authorised person at least twice in each calendar year.
(2) The FCA and the PRA may conduct meetings under subsection (1) jointly or separately (but each relevant authorised person’s auditors must be met separately).
(3) The purpose of each meeting is to discuss matters about which the FCA or the PRA believe that the auditors may have views or information.
(4) A relevant authorised person has a duty to ensure that its auditors attend meetings in accordance with this section (and compliance with that duty may be considered for purposes of the exercise of functions under FSMA 2000).
(5) In this section, “relevant authorised person” has the meaning given in section 71A of FSMA 2000.”

[Lord Lawson of Blaby]

I will try to be brief; I hope that the Government can readily accept this. This amendment concerns the need to have regular meetings between the bank’s supervisors and its auditors. I use the old-fashioned word “supervisors” rather than “regulators” because it gives a more accurate picture. I was very glad that the new Governor of the Bank of England, in his recent speech at some Financial Times junket or other—a very good speech indeed—referred throughout to “banking supervision”, which is a more accurate, old-fashioned term. It is important that there should be this regular dialogue. I will briefly go back a little into the history of this.

When I was Chancellor in the 1980s, I was very concerned to discover that there was no discussion between the auditors and the supervisors of banks—which was the Bank of England at that time, as it is now. I looked into it and discovered that it was because they were prevented from doing so. Under their duty of confidentiality to their client, the auditors were not able to speak to anybody about any concerns they might have had about what was going on in a particular bank. It applied to other clients, but the important thing was that it applied to the banks. Therefore, when I greatly strengthened banking supervision in what became the Banking Act 1987, I included legislation to remove that legal barrier. In introducing that I made it quite clear that I expected as a result that there would be a regular dialogue between the banking supervisors and the bank’s auditors so that each could compare notes about concerns they might have had about a particular bank.

I now regret that that was not in the Bill, but it was a clear expectation, stated from the Dispatch Box. These meetings took place for a number of years. Then, as time went on, fewer and fewer of them took place. In the run-up to the terrible crisis of 2008 it was significant—the Economic Affairs Committee of your Lordships’ House took evidence about this—that the meetings had virtually ceased. They did not happen at all, which was a huge mistake. Therefore the Economic Affairs Committee of your Lordships’ House recommended that there should be a mandatory requirement for those meetings to take place. That is all the more important with banks because with other businesses the auditor can qualify the bank’s accounts if it has a concern which the board of the client does not address. That is a signal that everybody can see. However, no auditor ever qualifies a bank’s accounts, and for a very good reason—because it would lead to a run on the bank. That is all the more reason for this dialogue to happen.

The Economic Affairs Committee of your Lordships’ House recommended this mandatory duty. When the parliamentary banking commission came to look at it again, we, too, recommended that there should be this mandatory duty. The Government have said that they entirely agree that there should be these meetings. They have announced that they have been moving gradually—I hope that they will move a little further—and have said, “Yes, these should take place, specifically at least twice a year”. However, they have so far resisted having that on the statute book. As noble Lords will know, once bitten, twice shy. We have been through this before: although we had all the good intentions, it was not on the statute book, and eventually it did not happen. Therefore, I say to the Minister, the Government have agreed that this should happen, and I cannot see any reason why it should not be in the Bill. Furthermore, from the history I have recounted, I can see a good reason why it would be folly, and dangerous, not to have it in the Bill. I beg to move.

[Lord McFall of Alcluith (Lab)]

My Lords, as a fellow member of the Parliamentary Commission on Banking Standards, I support the amendment moved by the noble Lord, Lord Lawson. The lack of a relationship with auditors is something that I have noticed since the beginning of the financial crisis. Indeed, at that time regulators told me that, when deciding what regulation banks should be subject to, they sent their less experienced regulators to the smaller banks and their more experienced regulators to the larger ones. By the way, when the regulators go to the larger banks they are sometimes taught by the people working in them because the quality is higher there. So the relationship between the regulators and the auditors is very important.

Martin Wheatley, who is now chairman of the FCA, is on record as saying that the FSA never looked at banks’ business models. In other words, it did not look at the profit and loss element of banks because it felt that it was none of its business. If the FCA is now to adopt the new policy of looking at business models, which tell you everything about a company, then the auditor is going to have a central role to play. I know that the audit profession has been rather taken aback by the criticism of the Treasury Committee and the Parliamentary Commission on Banking Standards, which posed the question, “What is an audit?”. The profession will have to do an awful lot of work on that because it has largely believed that audits cover something that has occurred in the past and not something that will happen in the future. It has not taken high-risk, low-probability strategies or low-risk, high-probability strategies into consideration. Auditors are in the unique position of looking at the business model and so can assist banks in having a forward look at that. They can also help regulators to understand what a business model is about. As the noble Lord, Lord Lawson, said, this measure was not put on the statute book previously and therefore lapsed by default. In the interests of being constructive on this issue and wanting to ensure that we have auditors who keep bank executives on their toes, I agree wholeheartedly with the noble Lord, Lord Lawson, that we need to see this measure written into the Bill.

[Lord Eatwell]

My Lords, I add the support of these Benches for the commissioners’ amendment. I was particularly struck, as I hope the Government were, by the account related by the noble Lord, Lord Lawson, of what happened when he made these meetings legal but overlooked the need to put them into statute law, with the result that they did not happen. We have an opportunity here to make these meetings take place and be effective. Both the Economic Affairs Committee of your Lordships’ House and the commission stand behind this amendment and the views that have been expressed, and I hope that the Government will as well.

18:13

[Lord Deighton]

My Lords, we are considering a proposal to mandate the regulators to meet the auditors of all the banks they supervise at least twice a year. Strengthening the quality of engagement between auditors and supervisors is an objective that the Government share. I think that there is absolutely no disagreement between us about how important that is and how it has not always worked well in the past. I listened to the concerns of the noble Lord, Lord Lawson, that voluntary commitments for regulators and auditors to meet regularly could easily fall into abeyance. However, some lessons have been learnt from the financial crisis, and the Government have taken meaningful steps to ensure that the new regulator does not slip into the habit of neglecting engagement with auditors.

FiSMA now includes new Section 339A, which requires the PRA to have arrangements for sharing information and opinions with auditors of PRA-authorised firms, and to publish a code of practice to set out the way in which it will comply with this obligation. This code of practice sets out in detail the principles governing the relationship between the regulators and bank auditors and must be laid before Parliament whenever it is changed. This change to the law has greatly improved the regulators’ engagement with auditors since the crisis, so the Government have taken action here. The Government believe that the action they have taken in this respect is in line with changes to ensure that the regulators now follow a judgment-led approach to supervision that ensures regulators are clear in their purpose and direct resources to the most important cases.

One of the criticisms of the old FSA was that its approach did not focus on the most significant issues and too much resource was taken up by inflexible processes. Operationally, this new legal framework forces regulators to be more diligent and allows them to be held accountable. The essential strength of the new legal framework is that it demands diligence from the regulators through parliamentary review and encourages proportionality by allowing them to specify where they will focus their resources. The result has been that the PRA will meet with firms which have the potential to cause major economic disruption in the case of failure at least three to four times per year. The FCA will meet with the auditors of those firms at least twice a year. This is exactly what we want—prioritised, high-quality engagement where it matters.

The Government therefore remain unconvinced of the value of changing the frequency of this dialogue in statute without some reference to proportionality. Two meetings a year with the auditors of important firms is too little, while the same number for very small firms may be too many. The Government favour the current legal framework with its provisions for diligence and prioritised application of resources. Of course, there may be refinements that can be made in the law to ensure that the requirements on regulators are always express.

[Lord Lawson of Blaby]

For clarification, if my noble friend reads the amendment, he will see that it does not say that the meetings should be held twice a year but that they should be held at least twice a year, so there is flexibility there. I hope that he will take this back and bring forward something better than he has said so far—interesting though that is—at Third Reading, because he has not addressed the critical point of the need to have a statutory requirement for these meetings to take place. He can decide what the right periodicity is; what I am anxious about is that there should be this statutory requirement.

[Lord Deighton]

I was just getting to that. The Government believe that there is a superior approach to strengthening the law in this area by clarifying the requirements on regulators to meet auditors enough times to accomplish their objectives. I think we agree that the periodicity should not be the constraint, although perhaps we could deal with that by a requirement to disclose the frequency of meetings with certain types of firm to ensure accountability. Such an approach would, in the view of the Government, be superior and retain proportionality and the judgment-based approach while increasing accountability. If the noble Lord will withdraw his amendment I will be willing to return to it at Third Reading, subject to further consideration of these issues.

[Lord Higgins]

Before my noble friend sits down, can we be absolutely clear what he is saying? He is saying that he is going to come forward with an amendment at Third Reading to put this measure on a statutory basis, but leave the frequency point on one side. Is that what he is saying? If not, we should reach a decision on this.

[Lord Deighton]

That is what I am saying, yes.

[Lord Lawson of Blaby]

In answer to the useful point of clarification by my noble friend Lord Higgins, will this measure definitely be on the face of the Bill?

[Lord Deighton]

Yes.

[Lord Lawson of Blaby]

Given that undertaking, for which I am extremely grateful, I beg leave to withdraw the amendment.

Amendment 180 withdrawn.

Amendment 181

Moved by

[Lord Lawson of Blaby]

181: After Clause 120, insert the following new Clause—
“Proprietary trading
(1) The PRA and the FCA must carry out a review of proprietary trading by relevant authorised persons.
(2) The review must be completed before the end of the period of 3 years beginning with the day on which this Act is passed.
(3) The PRA and the FCA must give the Treasury a report of the review.
(4) The report must include—
(a) an analysis of any action taken by the PRA and the FCA to monitor whether and to what extent relevant authorised persons engage in proprietary trading and any action taken by the PRA or the FCA to discourage relevant authorised persons from doing so;(b) an account of any difficulties encountered by the PRA or the FCA in taking that action and an assessment of its efficacy;(c) an account of any requirement imposed on relevant authorised persons which the PRA or the FCA consider may be engaging in proprietary trading to publish a statement of the exposure to risk of relevant authorised persons in their trading operations and of the controls applied to limit that risk;(d) an assessment of the impact of the ring-fencing rules on proprietary trading by relevant authorised persons;(e) an assessment, drawing on experience in countries other than the United Kingdom, of the feasibility of prohibiting relevant authorised persons from engaging in proprietary trading or limiting the extent to which, or circumstances in which, they may do so (having regard, in particular, to any difficulties of definition); and(f) a comprehensive analysis of the advantages and disadvantages of prohibiting relevant authorised persons from engaging in proprietary trading or limiting the extent to which, or circumstances in which, they may do so.(5) The Treasury must lay a copy of the report before Parliament.
(6) The PRA and the FCA must publish the report in such manner as they think fit.
(7) The Treasury must, following receipt of the report, make arrangements for the carrying out of an independent review to consider the case for the taking of action in relation to proprietary trading by relevant authorised persons.
(8) The appointment by the Treasury of persons to carry out the review requires the consent of the Treasury Committee of the House of Commons.
(9) The reference in subsection (8) to the Treasury Committee of the House of Commons—
(a) if the name of that Committee is changed, is to be treated as a reference to that Committee by its new name, and(b) if the functions of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons, is to be treated as a reference to the Committee by which the functions are exercisable;and any question arising under paragraph (a) or (b) is to be determined by the Speaker of the House of Commons.(10) The persons appointed to carry out the review must give the Treasury a report of the review once it has been concluded.
(11) The Treasury must lay a copy of the report before Parliament and publish it in such manner as it thinks fit.
(12) In this section—
(a) “proprietary trading”, in relation to a relevant authorised person, means trading with funds on markets on the relevant authorised person’s own account (whether or not in connection with business with the relevant authorised person’s customers),(b) “ring-fencing rules” has the meaning given by section 417 of FSMA 2000,(c) “relevant authorised person” has the meaning given by section 71A of FSMA 2000.”

[Lord Lawson of Blaby]

This is one of the most important matters that we will have to decide, not merely to make the banking system safer but to address the cultural problem. Proprietary trading is, as noble Lords will be aware, trading which a bank does entirely on its own behalf. There is no client at all. It is the furthest from the culture that we expect of banking, which is a culture of prudence and of servicing clients. Here, there is no client and we know from experience that, far from there being a culture of prudence, proprietary trading tends to be of a highly speculative and gambling nature.

It has also, incidentally, been connected with some of the greatest scandals. The LIBOR scandal, for example, was a proprietary trading scandal. Even when there is not a scandal, even when it is perfectly reasonable—I have nothing against speculation as such—in my judgment it is alien to what the banking culture should be. Speculation should be left to the hedge funds. It is a hedge fund activity par excellence and it should not be conducted by banks. That is my view. The view of the commission was slightly different. It was that, while that is probably so, there are practical difficulties and therefore there needs to be a full-scale review a few years hence to see how this is working.

At the moment, of course, there is very little proprietary trading going on in this country. Before the great crash of 2008, the amount of proprietary trading that some banks were doing accounted for more than 30% of their total business; it was as big as that. It has now disappeared, but it will almost certainly come back. Incidentally, when we had this debate in Committee my noble friend Lord Deighton said that there was no need to do anything now because there was no proprietary trading going on. With the greatest respect, he missed the point. We are saying that we should review this a few years hence when there may well be something going on. In fact, there almost certainly will be something going on. We are not legislating just for the here and now, but for the medium term and, so far as we can, for the long term. There will not be another banking Act for a very long time, so it is important that this review is in place.

There is one other thing that the review will be able to do. My good friend Paul Volcker, a very distinguished former chairman of the Federal Reserve in the United States, has been largely responsible for introducing what is known as the Volcker rule in the United States, which attempts to ban proprietary trading. Their system of legislation is so appalling that the rule has got encrusted with myriad barnacles which may make it less effective, but, nevertheless, the clear intention was to ban proprietary trading. He is a very wise observer of the banking scene over many years and he understands full well the practical and cultural problems that derive from banks engaging in proprietary trading.

A review a few years hence will be able to take account not merely of what is happening in the banking world in England at the time but will be able to see how the Volcker rule has worked in practical terms in the United States—and, if it has been defective in any way, we can learn from their experience. Therefore, I urge my noble friend, who made a remark yesterday, almost en passant, about proprietary trading when we were talking about the ring-fence, to go further today and to accept the amendment which we, as a commission, feel is right. He may want to change the wording in some way or other—I suspect that the period we set was a bit too soon; it might be sensible to have it a little further out—but I will leave that to his excellent judgment. The important thing is that the essence of this must be accepted by the Government. I beg to move.

[Lord Lucas (Con)]

My Lords, I am interested in a side effect of this amendment. I hope that it may result in us taking a proper look at high-frequency trading, which seems to me to be pretty close to theft, organised on behalf of stock exchanges at the expense of the rest of us in mutual funds and pensions. It seems extraordinary that we allow a certain group of investors privileged access to the stream of information coming out of an exchange, and allow them advantages over real investors. Real investors invest in real funds for long-term real return, performing the function of the market in terms of the allocation of capital and giving people an opportunity to invest their money at risk for return in order to enable them to live in retirement and to prosper from giving other people the use of their money. These are important functions of the market and high-frequency trading seems to me to be parasitical on that.

I have heard it argued that it improves, net-net, the terms on which investors are able to trade. That is not what investors tell me. They say it is as if someone is moving ahead of them. Every time they get into the market they can feel the market being moved ahead by the high-frequency traders. I think that that is an aspect of proprietary trading to which we should pay close attention, and I very much hope that this review will allow us to do so.

[Baroness Cohen of Pimlico]

I support the amendment. Most of what we are legislating to do is prevent banks doing terrible things to customers. Proprietary trading allows banks to do terrible things to themselves. They are no good at controlling it. The real horrors and the things that, more importantly, threaten the financial system are banks getting proprietary trading horribly wrong. There are examples of distinguished banks coming completely unglued in this. Deutsche Bank, UBS and Morgan Stanley all spring to mind. They seem to have a completely uncontrollable Wild West operation—and if the owners of the operation cannot control it, is it not a serious risk to the financial system and something that, as the noble Lord, Lord Lawson, suggested, should not be taking place inside a bank?

[Lord Hamilton of Epsom (Con)]

I, too, support the amendment. The problem that we have in the City today is that everything is moving so fast, and that traders have the capacity to use computers for all sorts of things. My noble friend Lord Lucas talked about high-frequency trading. I suspect that in three years’ time the new way of operating and making money will be something that none of us has even dreamt of. It is very important that this is reviewed and that there is an opportunity to take a very close look at it in a few years’ time.

[Lord Deighton]

My Lords, the PCBS did express concern, very understandably, despite the fact that proprietary trading is not as big a part of the current challenge as it perhaps was and perhaps will be. The concern is—just to show that I have grasped the point—that it will come back and become a major risk in the future. Therefore, the PCBS tabled an amendment that proposed two reviews. The first is a requirement on the regulator to review the steps it has taken to bear down on proprietary trading, and the difficulties it has encountered. The second, following such a review, would be a review commissioned by the Government into the issue, and into the case for changing the law.

I reassure noble Lords that at present we have a robust set of safeguards to deal with risks from proprietary trading. Indeed, as Andrew Bailey made clear in his response to the PCBS, the PRA thinks that it currently has the appropriate powers and tools to address risks from proprietary trading where it endangers the safety and soundness of a firm. The PRA continually monitors and reviews all risks that banks take, including those from proprietary trading, and it uses the capital regime to make these risks safe.

The new conduct regulator, the FCA, has a similarly wide range of tools, including sanctions, to ensure that banks adhere to a high standard of conduct in their business. Finally, ring-fenced banks, which are at the heart of this new legislation, will already be banned from any proprietary trading, further shielding them from any risks to which it might give rise. Therefore, the Government do not believe that there is a case for reviewing a ban on proprietary trading so shortly after these reviews and before ring-fencing has been put in place.

18:30

However, while the regulators are currently equipped to deal with risks if and when they arise, it seems only reasonable that these arrangements should be reviewed over time and that we should take a strategic look at what any future risks from proprietary trading might mean for the UK banking sector as a whole, including whether the regulators’ powers are appropriate.

I believe that the approach recommended by the PCBS on this is the right one. First, it should be for the PRA and FCA to review the situation, assess their powers and recommend further action to the Government. However, it also seems right that we review this matter once ring-fencing is in place and its effects have been analysed. It would therefore make sense for any such review to incorporate the thinking from the wider review into the ring-fence.

Therefore, I propose to noble Lords that the Government commit to a review of proprietary trading if the PRA deems it necessary, having evaluated its powers and practices in this area. The Treasury will therefore ask the PRA whether it feels equipped to deal with any risks from proprietary trading that may have arisen by that time. If the PRA does not think that it has the right tools, the Treasury will conduct a review of proprietary trading and its impacts, including on ring-fenced banks. That review of course will consider further safeguards against potential future risks from proprietary trading, including a ban, should it conclude that such safeguards are necessary.

Any review that does its job will also consider the experience that other countries have had with structural reforms. The Volcker rule in the US would of course be an obvious candidate, as my noble friend Lord Lawson said. By the time of the review, implementation of the Volcker rule—“encrusted with barnacles” was, I think, the phrase used; my notes refer simply to “practical difficulties”—may be further advanced. It is more likely that we can learn lessons then, rather than in three years’ time.

It is reasonable to suggest that ring-fencing should be in place before such a review takes place. I suggest that it should take place only after ring-fencing has been in place for at least a year, and possibly should coincide with the wider review into the operation of the ring-fence. The evidence base will then be much richer.

Therefore, I confirm to my noble friend Lord Lawson that I think we are in vigorous agreement and that we will come back at Third Reading with some agreed wording—in particular, to deal with the timing. On that basis, I ask my noble friend to withdraw his amendment.

[Lord Lawson of Blaby]

I am grateful that my noble friend said that he would come forward with something at Third Reading. That something will have to be not the possibility of a review but a clear commitment to a review. I think that it is a separate matter from the ring-fence. The ring-fence is about a division of banking; this is a ban. As the noble Baroness, Lady Cohen, said, this is not something that banks should be doing at all. It is a perfectly legitimate hedge fund activity, but there is a fundamental difference. On the basis of what my noble friend said—I hope that I have interpreted it correctly—I beg leave to withdraw the amendment.

Amendment 181 withdrawn.

Amendment 182

Moved by

[Lord Turnbull]

182: After Clause 120, insert the following new Clause—
“Remuneration code
(1) The FCA and the PRA must prepare (and may from time to time revise) a remuneration code.
(2) The remuneration code is to apply to all persons who have approval under section 59 of FSMA 2000 to perform a function in relation to the carrying on by a relevant authorised person of a regulated activity which is designated under subsection (6B) or (6C) of that section as a senior management function.
(3) The remuneration code must—
(a) require that persons to whom the remuneration code applies are, except in specified circumstances, to receive a proportion of their remuneration in the form of variable remuneration,(b) require that a specified measure of profits is to be used in calculating any variable remuneration which is calculated by reference to profits,(c) require that the nature and amount of variable remuneration is to strike an appropriate balance between risk to the relevant authorised person providing it and fair reward for the recipient of it,(d) require a proportion of variable remuneration to be deferred for such period, not exceeding 10 years, as is appropriate to strike a balance between risk to the relevant authorised person providing it and fair reward for the recipient of it,(e) require that no, or only a limited amount of, variable remuneration of a person to whom the remuneration code applies is to be calculated by reference to sales made by the person or by any group of persons employed by the relevant authorised person providing it, and (f) require that non-executive directors of a relevant authorised person are not to receive variable remuneration.(4) A requirement imposed by the remuneration code is a relevant requirement for the purposes of Part 14 of FSMA 2000.
(5) In this section—
(a) “relevant authorised person” has the meaning given by section 71A of FSMA 2000,(b) “variable remuneration” means remuneration (whether in money or in securities or any other form of money’s worth) the amount or value of which varies in accordance with profits, sales or other matters.”

[Lord Turnbull]

I shall speak also to Amendment 183. This is about whether there should be a statutory basis for the existing remuneration code. One can analyse this at three levels. First, does the current code permit the kind of actions that the parliamentary commission recommended, such as longer deferrals where the nature of the risk justifies it, and more extensive clawback? Secondly, will those powers be used more rigorously than they have been in the past, particularly for banks? Thirdly, is giving statutory backing through the Bill necessary in order to ensure the correct answer to the second question?

Since tabling this amendment, we received a letter from the noble Lord, Lord Newby, on Monday, which in my view gives a satisfactory answer to the first question. All that the parliamentary commission sought, with the possible exception of forfeiture of some pension rights, can be imposed under existing powers. With regard to the second question—will those powers be used more rigorously?—the letter from the noble Lord, Lord Newby, says that the regulators,

“have stated that they will revise the … Code following consultation in 2014. The Government will work with regulators to ensure that …the Code [takes] full account of the views of the PCBS and the debates”,

on this Bill. Therefore, it is a matter of judgment for the House. Does it want to accept those assurances or does it feel that further amendments are needed to embed this presumption more fully? I think that the correct way forward is for there to be some further discussion about precisely what the review and the outcome might be. I look forward to hearing what the noble Lord has to say.

[Lord Newby]

My Lords, I am extremely pleased that my letter has at least partially satisfied the noble Lord. He has left me with a remaining question, which is: are we happy to continue to engage with him and his colleagues as we work towards, and consider, the review? I can give him the absolute assurance that we will be very happy to do so. On that basis, I hope that he will feel content to withdraw his amendment.

[Lord Turnbull]

On the basis of that assurance, I am indeed content to beg leave to withdraw the amendment.

Amendment 182 withdrawn.

Amendment 183 not moved.

Amendment 184

Moved by

[Lord Turnbull]

184: After Clause 120, insert the following new Clause—
“Special measures
(1) This section applies where the FCA or the PRA—
(a) has reason to believe that a relevant authorised person’s systems or professional standards or culture do not provide sufficient safeguards against the commission of actions in respect of which the FCA or the PRA has power to take action, but(b) do not have reason to believe that any such action has been committed (ignoring any action which is already being investigated or in respect of which action has been or is being taken).(2) The FCA or the PRA may give notice to the relevant authorised person of the belief mentioned in subsection (1)(a).
(3) If the FCA or the PRA gives notice under subsection (2), it must invite the relevant authorised person to make representations showing that sufficient safeguards are in place.
(4) Following the giving of a notice under subsection (2) and the receipt of representations under subsection (3) (if any are made), the FCA or the PRA may commission an independent investigation into the relevant authorised person’s systems and professional standards and culture with a view to establishing whether sufficient safeguards are in place; and for that purpose—
(a) “independent” means independent of the FCA, the PRA and the relevant authorised person, and(b) an investigation may not be commissioned from a person involved in the auditing of companies.(5) The relevant authorised person must cooperate with the investigation.
(6) Following receipt of the report of the investigation under subsection (4), the FCA or the PRA may by notice require the relevant authorised person to take measures to provide sufficient safeguards and to monitor their effectiveness.
(7) The relevant authorised person must—
(a) comply with the notice, and(b) appoint an appropriately senior member of the relevant authorised person’s staff to oversee compliance.(8) Compliance by a relevant authorised person with a duty under this section may be considered for the purposes of the exercise by the FCA or the PRA of functions under FSMA 2000.
(9) In this section, “relevant authorised person” has the meaning given by section 71A of FSMA 2000.”

[Lord Turnbull]

This amendment concerns the concept of special measures. We were again told, as we often have been, that all the powers necessary are there and that, indeed, they are being used. That may well be the case. However, the Minister did not respond to my suggestion that, if this is part of the armoury of the regulators, it would be helpful if they set that out so that there was wider understanding of the special measures regime. I do not think that the regime has an identity in the way that it has in the US, where they talk about memorandums of understanding. Subject to that, I would be happy to put this matter into the box labelled “For further discussions”. I beg to move.

[Lord Newby]

My Lords, I think that this is now having the appearance of a Christmas box, in that the noble Lord is asking the Government to agree to things and we are tending to agree to agree to things.

Given all the powers that the regulators already have, we have been slightly sceptical about whether they need to have, as it were, an Ofsted power of special measures. We do not think that they need more powers but, in order to address the noble Lord’s concern that failings in professional standards and cultures should not be overlooked, we shall be happy to discuss this with him further and to involve the PRA in discussions about how we move towards a firm policy in this area.

[Lord Lawson of Blaby]

My Lords, I am very grateful regarding a number of issues. The Government have said that they are going to move further and will probably —and, in most cases, definitely—bring something forward at Third Reading. That is excellent, but it means that we are going to have a lot of government amendments to consider for Third Reading. I stress what I said yesterday about how important it is that this House has plenty of time to consider the amendments that the Government, to whom I am grateful, will bring forward. They must be tabled at the earliest practicable date and well before the date set for Third Reading otherwise it will be necessary for that date to be postponed.

[Lord Newby]

My Lords, I understand the point being made by the noble Lord. I am not sure at this point, without further discussion, whether we need an amendment at Third Reading. We think that the way forward might be a PRA policy statement, but we can have urgent discussions with the noble Lord on that.

[Lord Turnbull]

It is indeed a PRA policy statement that I am after. I am trying to establish a regime in which the regulator sees things that are going wrong and gets into dialogue with the company about remedial measures to head off the long-drawn-out agony of enforcement. If it is already doing it, it would be helpful to codify it but I am very happy to work with the Minister on that basis. I beg leave to withdraw the amendment.

Amendment 184 withdrawn.

Amendment 185

Moved by

[Lord Newby]

185: Before Clause 121, insert the following new Clause—
“Power to impose penalties on persons providing claims management services
(1) The Schedule to the Compensation Act 2006 (claims management regulations) is amended as follows.
(2) In paragraph 8 (rules about conduct of authorised persons), in sub-paragraph (2)(b), after sub-paragraph (i) insert—
“(ia) provision enabling the Regulator to require an authorised person to pay a penalty;”.(3) In paragraph 9 (codes of practice about conduct of authorised persons), in sub-paragraph (2)(b), after sub-paragraph (i) insert—
“(ia) enable the Regulator to require an authorised person to pay a penalty;”.(4) In paragraph 10 (complaints about conduct of authorised persons), after sub-paragraph (2) insert—
“(3) Regulations under sub-paragraph (1) may enable the Regulator to require an authorised person to pay a penalty.”
(5) In paragraph 11 (requirement to have indemnity insurance), in sub-paragraph (2)(b), after “Regulator” insert “to require the payment of a penalty by an authorised person or”.
(6) In paragraph 14 (enforcement), in sub-paragraph (4), for the words from “impose” to “authorisation” substitute “require an authorised person to pay a penalty, or to impose conditions on, suspend or cancel a person’s authorisation,”.
(7) After paragraph 15 insert—
“Penalties: supplementary provision16 (1) This paragraph applies in any case where regulations include provision enabling the Regulator to require an authorised person to pay a penalty.
(2) The regulations—
(a) shall include provision about how the Regulator is to determine the amount of a penalty, and(b) may, in particular, include provision specifying a minimum or maximum amount.(3) The regulations—
(a) shall provide for income from penalties imposed by the Regulator to be paid into the Consolidated Fund, but(b) may provide that such income is to be paid into the Consolidated Fund after the deduction of costs incurred by the Regulator in collecting, or enforcing the payment of, such penalties.(4) The regulations may also include, in particular—
(a) provision for a penalty imposed by the Regulator to be enforced as a debt;(b) provision specifying conditions that must be met before any action to enforce a penalty may be taken.”(8) In section 13 of the Compensation Act 2006 (appeals and references to Tribunal)—
(a) in subsection (1), omit the “or” at the end of paragraph (d) and after paragraph (e) insert “, or(f) imposes a penalty on the person.”;(b) after subsection (1) insert—“(1A) A person who is appealing to the Tribunal against a decision to impose a penalty may appeal against—
(a) the imposition of the penalty,(b) the amount of the penalty, or(c) any date by which the penalty, or any part of it, is required to be paid.”;(c) in subsection (3), after paragraph (d) insert—“(da) may require a person to pay a penalty (which may be of a different amount from that of any penalty imposed by the Regulator);(db) may vary any date by which a penalty, or any part of a penalty, is required to be paid;”.”

[Lord Newby]

My Lords, Amendments 185 to 189, 191 to 194 and 197 to 198 are government amendments on claims management companies and non-government amendments on the consumer’s access to redress from CMCs through the Office for Legal Complaints.

Turning first to the government amendments on CMCs, it is clear that bad practice by certain claims management companies operating in the financial services sector has created poor outcomes for both consumers and businesses. As the scale of potential claims for PPI compensation has become clear, CMCs have become particularly active in this market. Unfortunately, this increase in activity has in some cases been accompanied by an unacceptable fall in standards. CMCs have a legitimate role to play in helping consumers claim compensation. However, a minority have been acting irresponsibly. Some CMCs submitted illegitimate claims which clog up the system. This poor behaviour has led to delays in receiving compensation for consumers who have legitimate claims and has increased costs for defendant financial services firms where claims are unsubstantiated. This issue is most prevalent in, but not limited to, the financial services sector and the PPI claims market in particular. Despite the threat of the suspension or cancellation of authorisation, some CMCs act speculatively which can impose unnecessary costs on defendant businesses and ultimately on consumers.

These amendments enable the Secretary of State to make regulations giving the claims management regulator the power to impose financial penalties on those CMCs guilty of misconduct, which will lead to tighter regulation of the industry and better outcomes for consumers and businesses. They also make a number of consequential amendments, ensuring that the provisions of the Bill on secondary legislation, including the power to make incidental or transitional provision, are extended to apply to the Secretary of State as well as the Treasury; that the commencement power applies to these provisions; and that providers of claims management services are referred to in the Long Title of the Bill.

Bolstering the claims management regulator’s enforcement toolkit by giving it a power to fine those engaged in malpractice provides an additional means to deter speculative activity. Further, a power to fine could serve as a useful alternative penalty in cases where it can be disproportionate to vary, suspend or cancel the authorisation of a CMC despite it not being compliant. Where a CMC’s authorisation is suspended or cancelled, for example, it can no longer act on behalf of its clients and this can lead to further consumer detriment. We can ensure that these CMCs go on to work in the best interests of consumers by making sure that they adhere to the codes of practice and Conduct of Authorised Persons Rules issued by the claims management regulator. These rules require CMCs to conduct themselves with honesty and integrity, including requirements to not make speculative claims, to not use misleading advertising, and to not partake in high-pressure selling. I apologise for that stream of split infinitives.

18:45

Not only will those who break these rules be subject to fines, the claims management regulator is also currently consulting on these rules in parallel to this amendment to further strengthen the consumer, business and third-party protections they offer. This ability to impose a financial penalty will be implemented by secondary legislation. It will be done by way of amendments to the existing regulations—the Compensation (Claims Management Services) Regulations 2006. A public consultation regarding the detail of the necessary changes to facilitate a claims management regulation financial penalty scheme will be launched in early 2014. Also, any changes to these regulations, including the measure of the financial penalties to be imposed, will be subject to the affirmative procedure, allowing for necessary scrutiny of the detail of the proposals in Parliament. It is critical that we tackle poor practice in this sector. These amendments, giving the Secretary of State power to permit the claims management regulator to fine claims management companies will mean that those non-compliant CMCs will have to pay the price of their poor behaviour.

I turn now to the amendment tabled by the noble Baroness, Lady Hayter, which, like the power to fine, is aimed at bringing about better outcomes for consumers who engage with the CMC sector. The noble Baroness has raised a very important issue of enabling the Office for Legal Complaints—OLC—to act as an important route of redress for consumers who feel that they have been treated unfairly by CMCs. The Government are in full agreement with the noble Baroness that consumers should be able to seek redress through the OLC. Although her intention is clear in tabling the amendment, in its current form it does not fully bring about the changes that she seeks to implement. However, as the Government support the spirit of the noble Baroness’s amendment we will give further consideration on how best to put it into effect. With that assurance, I hope that she will feel able to withdraw it.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, first, I welcome the government amendments within this group. As the Minister said, this is undoubtedly a useful addition to the regulator’s toolkit. However, although I am of course delighted that the spirit of my amendment is acknowledged, we cannot wait any longer for this. The Legal Services Act 2007 envisaged that complaints against claims management firms would be able to go to the legal services ombudsman. That was widely welcomed by Which? and everybody else. We know that in August last year the Government made the formal announcement that complaints by consumers against claims management firms would be able to go to the legal services ombudsman. That was agreed on both sides of the House and was warmly welcomed by us.

However, that was in August last year. Since then we keep hearing, “Don’t worry about it, don’t worry about it”. I have raised this issue in other Bills and there was an exchange of correspondence between me and the noble Lord, Lord McNally, about the importance of getting this done. Nothing happened—the last letter was in November. I should explain briefly to the House that the absolute desire is that these complaints should go to the legal services ombudsman. The Legal Services Act only enables that procedure to take money from barristers and not from claims management firms to pay for the ombudsman. Of course, because the regulator is the MoJ, that is a form of taxation so the only thing stopping this happening is the technicality of how we fund it.

That was accepted by the Government but they did not seem to come up with a vehicle to do this. I offered to do it for them via a Private Member’s Bill. That was prepared with the help of Which?, particularly Mark McLaren who did a lot of work on drafting that Private Member’s Bill, which we then offered as the vehicle to solve this. Nothing happened to that, although it was not declined until 12 November when the Government laid these amendments—which we were not expecting. The amendments are very welcome but do not solve the problem for two reasons: first, they do not allow consumers to get redress; and secondly, they therefore preclude the intelligence that would come from complaints. Frankly, people complain against something only if they have a chance of compensation.

Although the Government say that they will look at this, that is what they have said continuously since August last year. That being the case, we will want to put this to the House, either today or at Third Reading. I had hoped that the Government would say today that they would bring this matter back by Third Reading. Perhaps they could clarify whether that will be at some time in the future—which basically means another couple of years—or whether they are willing to do it by Third Reading.

[Lord Newby]

My Lords, if we can do it at Third Reading, we will. I am advised that there are a number of technical and procedural issues that we have to go through. I hope we can do it at Third Reading. I shall certainly press very hard that we do, and every effort will be made to achieve that.

Amendment 185 agreed.

Amendment 185A not moved.

Amendment 186

Moved by

[Lord Deighton]

186: Before Clause 122, insert the following new Clause—
“Orders and regulations: general
(1) Any power of the Treasury or the Secretary of State to make an order or regulations under this Act is exercisable by statutory instrument.
(2) Subsection (1) does not apply to an order under section 34 (payment systems: designation orders).
(3) An order or regulations made by the Treasury or Secretary of State under this Act may—
(a) make different provision for different cases, and(b) contain such incidental or transitional provision as the Treasury or Secretary of State considers appropriate.”

Amendment 186 agreed.

Clause 122: Orders and regulations

Amendment 187

Moved by

[Lord Deighton]

187: Clause 122, page 94, line 9, leave out subsection (1)

Amendment 187 agreed.

Clause 124: Power to make further consequential amendments

Amendments 188 and 189

Moved by

[Lord Deighton]

188: Clause 124, page 95, line 7, after “Treasury” insert “or Secretary of State”

189: Clause 124, page 95, line 9, leave out “they consider” and insert “the Treasury or Secretary of State considers”

Amendments 188 and 189 agreed.

Amendment 190

Moved by

[Lord Brennan]

190: Clause 124, page 95, line 13, leave out paragraph (b)

[Lord Brennan]

My Lords, this amendment raises an issue of parliamentary importance well beyond the scope of the Bill. Clause 124 is a Henry VIII clause. Its contents involve the usual provision to make consequential amendments following the enactment of the Bill. My amendment is expressly related to the additional power the clause gives to amend subsequent legislation passed in this House in the same Session as the present Bill.

In restricting the amendment to that particular subsection, it should not be understood that I approve of the use of Henry VIII clauses. They are often the result of a bureaucratic, slipshod approach, whereas years ago statutes in draft form were dealt with with great care. The more such clauses are introduced, the more will be eroded the parliamentary sovereignty that is exercised over primary legislation.

Subsection (b) contains the power to amend future legislation in this Session of Parliament. In Committee, I invited the Government to explain the necessity for this and to note that it was most unusual. In fact, I have been able to identify only one statute where this phraseology has been used—the Financial Services and Markets Act 2000, a Treasury Bill. Please note the difference. You can amend an existing statute under a Henry VIII clause if it is passed, whether it is as a consequence of this Bill or some Bill that has become an Act in the past. However, we are talking about this Bill giving a power for subordinate legislation to amend future legislation. That is an extraordinary power for Parliament to seek to give, no matter how often it is declared that it is only for consequential matters.

It is the one example that I can find and occurred in circumstances which are extremely concerning. The amendment deals with a clause that was introduced in Committee. It was not considered by the Delegated Powers Committee because it came subsequent to that committee’s report, and it was not considered by the Constitution Committee, both of which would normally consider and report on a Henry VIII clause. The Government would then respond to that report and the committee would reply. That process fulfils what the Constitution Committee’s report on the Public Bodies Bill in 2010 said should occur in respect of these clauses—they should be clearly limited, exercisable only for specific purposes and subject to adequate parliamentary scrutiny. That does not mean only on the Floor of the Chamber: it is the committee’s report, the Government’s response and that then informing this Chamber as to whether the Henry VIII power is appropriate. The Government introduced the clause by amendment and, as far as I am aware, they did not bring it to the attention of either of these committees or engage in the exchange that would normally have occurred.

The noble and learned Lord, Lord Judge—who now sits on the Cross Benches—as Lord Chief Justice, described Henry VIII clauses in general as pernicious because they make for sloppy legislation and potential injustice, as well as a lack of parliamentary sovereignty. However, he did not have in mind a Henry VIII clause that allowed amendment of future legislation. Is this academic? No, it is not. Within the present Bill and the Government’s commentary on the Parliamentary Commission on Banking Standard’s report, I identified to the committee three issues which the Government were continuing to consider, each of which would require legislation if they introduced a change in respect of any one of the three. This could occur, presumably, during this Session.

This is important. Is it not rare that a Chamber in a legislature should allow subsidiary legislation to dominate future primary legislation in the sense that it can amend it? That state of affairs—something arising that affects a previous Act—should result in the Government of the day amending the new Act accordingly, as is their statutory duty in introducing legislation to the House.

In Committee, the noble Lord, Lord Newby—surely trying to be helpful, as he always is—said:

“I am very happy for Treasury lawyers to set out in a letter the precedents that these powers exactly replicate”.—[Official Report, 23/10/13; col. 1171.]

Five weeks later, I have received nothing and the Government have not given an explanation. It is not good enough. If the matter comes up again at Third Reading, it will be incumbent on the Government, at the very least, to make sure that any amendment concerning this clause should take place in the Chamber, if possible in the presence of noble Lords from those two committees playing their part. I beg to move.

18:58

[Lord Eatwell]

My Lords, I support my noble friend Lord Brennan in his attempt to remove subsection (2)(b) from Clause 124. As he has clearly told the House, it would enable secondary legislation to amend future Acts prior to the end of the Session—not this Act, but other enactments. This is an extraordinary power which was justified in Committee by using the argument that there are precedents. No precedents have been produced. It is shocking that the promise of a letter made over five weeks ago has not actually been kept on something which raised considerable concern in Committee. I think that the Government need to take this matter very seriously indeed and not palm it off with what seem to be entirely unsubstantiated stories of precedence.

[Lord Newby]

My Lords, I understand the concerns expressed by the noble Lord, Lord Brennan, and I assure him again that there is nothing unusual about the form of the power to make consequential amendments in Clause 124, and in particular, subsection (2)(b) does not extend the power unreasonably. My memory of exactly what I have written to whom, given that I have written to quite a number of people, is slightly hazy. I think I may have referred to this issue in what was a sort of portmanteau letter to the noble Lord, Lord Eatwell. It covered a whole raft of issues that had been raised not only by him but by other noble Lords. If I did not do so, I apologise to the noble Lord, Lord Brennan. However, in what I am about to say, I think that I can deal with the main point that he made.

Removing paragraph (b) would limit the power to make consequential amendments to Acts which are passed before the passing of this Act. That can produce unpredictable results depending on the progress of Bills and the dates on which they happen to reach Royal Assent. For this reason, powers to make consequential amendments to existing legislation often refer to Acts which are passed in the same Session as the Act in question. Noble Lords have asked for examples of this, and I can give them several. Such powers can be found in Section 51 of the Constitutional Reform and Governance Act 2010, Section 237 of the Planning Act 2008, Section 28 of the Welfare Reform Act 2007 and Section 118 of the Financial Services Act 2012—the provision on which Clause 124 was modelled.

The assumption is that Bills of the same Session are likely to have been prepared by reference to the existing law at the beginning of the Session, while the Bills of the next Session would have to take account of the change in the law produced by the Act in question. Where a Bill is amended significantly in its passage through the second House, it is particularly unlikely that Bills passed or made in the same Session will have taken account of all the provisions of the new Bill. That clearly applies in this case, as your Lordships know. The need to implement the recommendations of the Parliamentary Commission on Banking Standards has required very extensive amendments to the Bill in this House, and therefore it will not have been possible for the Bills which are being considered by Parliament in this Session to have taken full account of all the changes in the law which will be made by this Bill. Nor has there been time for the Government to consider all the Bills currently before the House to see if any consequential amendments may be required, or to follow all the amendments being proposed to these Bills. We have not, for example, had the opportunity to review the Pensions Bill, which may have provisions relevant to the subject matter of this Bill, or the Immigration Bill, which has some provisions on banking. We cannot rule out the possibility that it may be necessary for the Government to make consequential amendments to them.

I assure the House that the amendment introducing this power was considered by the Delegated Powers and Regulatory Reform Committee, and that committee has not expressed any concerns in relation to this power. I hope that, in the light of these assurances, the noble Lord will feel able to withdraw his amendment.

[Lord Brennan]

Will the Minister clarify, first, his reference to the Delegated Powers and Regulatory Reform Committee? Was its response made in writing, has it been published, and is it available in the Printed Paper Office? Secondly, and much more important, is that as his research appears to have been done, can he clarify whether on any previous occasion this power has actually led to the amendment of another Bill being passed in the same Session, but after the Act which gave rise to the power?

[Lord Newby]

I thank the noble Lord for that question. It is the normal practice of the Delegated Powers and Regulatory Reform Committee to include in one report its views on a number of Bills. I believe that that is what happened in this case and I will definitely write to the noble Lord if it has not.

[Lord Brennan]

Would it be possible for the Minister to confirm that because I asked specifically in the Printed Paper Office for all the relevant paperwork about this, and I was not given any report.

[Lord Newby]

I will absolutely confirm that, and I will write to the noble Lord on the second point, which I promise to do speedily.

Amendment 190 withdrawn.

Clause 125: Transitional provisions and savings

Amendments 191 and 192

Moved by

[Lord Deighton]

191: Clause 125, page 95, line 18, after “Treasury” insert “or Secretary of State”

192: Clause 125, page 95, line 18, leave out “they consider” and insert “the Treasury or Secretary of State considers”

Amendments 191 and 192 agreed.

Clause 126: Extent

Amendment 193

Moved by

[Lord Deighton]

193: Clause 126, page 95, line 28, after “Britain)” insert “and section (Power to impose penalties on persons providing claims management services) (power to impose penalties on persons providing claims management services)”

Amendment 193 agreed.

Amendment 193A not moved.

Clause 127: Commencement and short title

Amendment 194

Moved by

[Lord Deighton]

194: Clause 127, page 95, line 33, at end insert—
“( ) Section (Power to impose penalties on persons providing claims management services) comes into force on such day as the Secretary of State may by order appoint.”

Amendment 194 agreed.

Amendments 194A to 196 not moved.

In the Title

Amendment 197

Moved by

[Lord Deighton]

197:In the Title, line 6, after “subsidiaries;” insert “to make provision for penalties to be imposed on persons providing claims management services;”

Amendment 197 agreed.

Amendment 198 not moved.

Post Office

Wednesday 27th November 2013 Lords Chamber

Statement

19:06

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie) (Con)]

My Lords, with permission, I shall now repeat a Statement made in another place by my honourable friend the Minister for Employment Relations and Consumer Affairs. The Statement is as follows.

“Mr Speaker, I am pleased to announce that the Government are committing a further £640 million in funding to the post office network for three years, 2015-16 up to 2017-18. This enables the Post Office to complete its network transformation programme and to protect and invest in those branches that provide vital services to their communities but which are not commercially viable in their own right.

In 2010, the Government committed £1.34 billion to maintain a national post office network, modernise branches and safeguard the future of post offices which play a vital role in urban deprived and rural areas. Since then, the post office network has been at its most stable level in over 20 years, in stark contrast to 7,000 closures under the previous Government. This Government remain fully committed to maintaining a network of at least 11,500 post offices, fully compliant with our access criteria, and with a sustainable long-term future. To achieve this, the post office network must meet the changing needs of customers through longer opening hours and more modern premises which are easier and faster to use.

Already more than 1,400 communities have benefited from government investment into their post offices, with a total of 34,000 extra opening hours per week across the network. A further 830 post offices are also signed up to change to the new main or local operating models. In total, this represents nearly one in five of our post offices, and most honourable Members have one or more modernised branches in their constituencies. In fact, over 200 honourable Members, including myself, have personally opened a new-look post office in their area.

The Post Office is drawing on experience from the first year of the network transformation programme to introduce changes that will see the programme completed by 2018. These changes, developed by the Post Office in conjunction with the National Federation of SubPostmasters, were endorsed yesterday by sub-postmasters at a special conference. We will deliver the benefits of longer opening hours and more modern premises to customers at a swifter pace, while making more investment available and providing greater clarity and certainty for sub-postmasters.

The Government do not underestimate the challenges facing the network, the Post Office centrally and, in particular, individual sub-postmasters. In recent years, the retail environment on the high street and more widely has been far from easy for sub-postmasters, and this new investment recognises that reality. The network needs to build on its core strengths of unparalleled national reach and the trust and high regard in which it is rightly held by customers. It must focus on meeting customers’ needs and expectations in a rapidly changing, highly competitive retail market. Ease of access, longer opening hours, shorter queues and modern premises are key to winning new clients and attracting and retaining customers.

With more than 1,400 branches modernised to date, independent research is showing customer satisfaction levels with the new models averaging over 95%. Satisfaction levels among sub-postmasters operating the new models are similarly impressive, at around 80%.

In many locations, new operating models are enabling post offices to be re-established after a significant break in service. At Balnamore in North Antrim, a new local branch opened in August, re-establishing post office services some five years after the closure of the previous branch. The new branch opens seven days a week for a total of 92 hours. At Oxenhope in West Yorkshire, with no post office since June 2011, a new local branch opened in the Co-op now offers post office services from 7 am to 10 pm seven days a week. But it is not just about new post office operating models. The post office network is incredibly diverse, and it is just as important to customers in remote rural areas that their post office stays open, as it is for busy town centre branches to be open for longer.

There are around 3,000 post offices for which the new main or local models are not suitable. These branches predominantly serve small, often remote, communities and may be the last shop in the village. They are hugely valuable to their communities. The updated network transformation programme provides, for the first time in Post Office history, a £20 million investment fund allocated specifically to this part of the network. This fund will enable the improvement and modernisation of these branches to strengthen their long-term sustainability.

The investments being made by the Post Office are already creating a strong platform from which it can compete for new work from government and the private sector. Some customers and sub-postmasters have expressed understandable concerns about continued access to Post Office card accounts beyond 2015, when the current contract is due to expire. The Department for Work and Pensions and the Post Office are in discussion about a long-term successor to the Post Office card account, and I can confirm today that all options under consideration conclude that access to pensions and benefits will continue beyond March 2015 across the whole post office network of at least 11,500 branches.

However, the Post Office is also doing much more for government. Over the past two years, the Post Office has won every single government contract it has bid for. It is winning this work competitively, and winning it because it is such a strong partner for government. And there is even more that the Post Office can do for government in the future. For example, under the existing contract with the Passport Office, the Post Office is discussing the introduction of new in-branch services which would allow the majority of customers to apply for their passports digitally, without the need for any supporting paper forms. The intention is to introduce these services from the middle of 2014.

Recently, the Department for Energy and Climate Change announced that it will work with the Post Office to signpost elderly and vulnerable people to the 500 volunteers being trained by the Big Energy Saving Network to help people find ways to cut their bills. These innovations demonstrate a forward-thinking Post Office, introducing new services, growing new revenue streams and bringing new customers into post office branches. With the additional funding in place, we have the basis for building a thriving and sustainable Post Office.

I believe that in the next few years, we will see the Post Office continuing to grow its business, and its network flourish and potentially expand in due course. Creating a financially sustainable network will be key to delivering a Post Office that can be mutualised. Significant progress has been made by the Post Office and its stakeholders already and this will be boosted by the funding committed by the Government today. The Post Office will shortly publish further details of the steps it is taking to build a mutual future. The £640 million investment that I am announcing today funds the completion of a transformation programme. It establishes the platform for a vibrant, commercially sustainable post office network with a mutual future. I commend this Statement to the House”.

19:14

[Lord Young of Norwood Green (Lab)]

My Lords, I thank the Minister for repeating the Statement. Let me start by paying tribute to our sub-postmasters up and down the country. They are integral to all our local communities and the social fabric of the country. However, the job of a sub-postmaster has become much more difficult in recent years. Research from the National Federation of SubPostmasters shows that incomes are falling and many work very long hours for very little return.

That situation has not been assisted by the Government, who in 2010 announced plans to use post offices as the “front office for government”. The Government have failed to deliver on that pledge. No new major government services have been awarded to post offices since May 2010. Indeed, the National Federation of SubPostmasters has said that the few new services which have been introduced are one-off transactions available only in a small number of post offices and many services do not make the post office any revenues at all. This resulted in the National Federation of SubPostmasters removing its support for the Postal Services Act. The Government promised £466 million of government work, but the post offices are currently gaining only £130 million from government business. That failure has resulted in the post office network being under more pressure than ever before.

On top of this failure is the abject failure of the network transformation programme as planned. Consumer Futures wrote to the BIS Select Committee just last month showing that only 1,100 have converted to the new models, and the Government require 6,000 by 2015. It shows that the programme is not working, and that is why a degree of compulsion has been introduced.

We can firmly say that today's announcement of additional funding of £200 million on top of the £420 million already trailed beyond 2015 is a vote of no confidence in what this Government are doing to the network. In effect, the Government are increasing the compensation for people to leave and offering more money to convert. Of this, £23 million is for completing a retail survey in order to determine who should be compulsorily converted or removed from the network. If they had delivered on their “front office for government” work, as they said they would, then the £200 million would not be required. It is a payment for failure and yet another broken government promise.

It is true that the National Federation of SubPostmasters voted to approve this yesterday, as most operators feel that the traditional post office model under this Government is not working. Sub-postmasters know that they will now have a degree of compulsion, but they will take the package as they are really struggling. That the federation’s members are voting to support this package so wholeheartedly shows that they want to get out. It is the epitome of taking the money and running. Crucially, this money will be used to subsidise exit from the network rather than to go into the network to make it sustainable in the long term.

We welcome the Government’s commitment to the Post Office card account beyond 2015, although I am not sure how absolute that guarantee is. We also welcome the “last shop in the village and community” post office funding, and support the policy that there will be no compulsion. The £20 million will assist in modernisation and help these vital community assets.

By the end of this process £2 billion will have been spent on network transformation and there is concern that we still do not have a model that is sufficiently attractive to current or future operators. It is true that in the past 7,000 offices were closed, but that was a necessary programme to ensure stability of the network. Is the Minister confident that there are sufficient retailers willing to take on the local model?

The Prime Minister said in PMQs in the other place, in answer to a question from the honourable Member for Argyll and Bute, that,

“we have committed that no post office will close in this Parliament”.—[Official Report, Commons, 23/10/2013; col. 296.]

However, if you stay and convert and have your salary subsidised until 2015, the question is: what will happen beyond 2015? I would also welcome answers from the Minister to the following questions. Will the current criteria be used for compulsion or will they be updated? Will this require a new state aid application? Where does all this current activity leave the Government’s plan for mutualisation? Finally, if other outlets are not prepared to take on a post office when a sub-postmaster leaves the network, what will happen?

19:20

[Viscount Younger of Leckie]

First, I thank the noble Lord, Lord Young of Norwood Green, for his response and agree with his tribute to the sub-postmasters. As he alluded to, they do a sterling job around the country, often in quite difficult environments, and I pay tribute to them for all the work that they do and all the hours that they put in. I also agree with the noble Lord when he said, I think, that sub-postmasters have had quite a difficult few years. The past two or three years have been pretty tricky for everyone, particularly in the retail sector, and sub-postmasters have been no exception in terms of the post offices that they run.

However, it is not true to say that no new government services have been won. I can provide evidence that many contracts have been won, including some government contracts, and am very happy to furnish him with that information. The past two years, since 2010, have been, in effect, a success story in terms of the number of new government contracts won, which is a great testament to the work that the Post Office has done.

The noble Lord also raised the issue of the new model. The £1.34 billion that was announced back in 2010 was of course designed to see the Post Office through the next few years, up to 2015, with the objective of renovating 6,000 branches. The noble Lord, I think, agreed that more than 2,000 branches—it is in fact 2,250—have pledged to go forward with renovation. Already, 1,400 have been renovated and those post offices have proved their worth in terms of customer satisfaction. He made the point that the money to cover all 6,000 had not been spent, but it is a rolling programme—the extra £640 million is designed to take us further forward, for the period from 2015 to 2018, and to extend the 6,000 to 8,000. It is an extremely good success story and testament to the fact that the money that we spent in 2010 has been used to such good effect in improving the 6,000.

The noble Lord said that more than 7,000 branches were closed by the previous Government, which is true. He said that it was because of the need to create stability, but there was a huge cost to doing it. We are now at the stage where we can say that we have created much more stability for the Post Office. It has never been more stable, and it is certainly more stable than during the previous Government.

Where branches have already been converted, customers are benefiting from much longer opening hours and fewer queues—more than double under the local model and up by 35% in the main branches. We also pledged, back in 2010, that there would be no office closures, a point I will address directly with the noble Lord. We are often challenged on that pledge but I say again, for clarity, that we seek, and have pledged, to keep open 11,500 branches.

The noble Lord raised the issue of state aid. He is quite correct that we need to apply for state aid, as we did for the initial £1.34 billion. We are looking ahead and making sure that we do that in good time. We have every confidence that the state aid application will be accepted. We do not see a problem with it but it is right to clarify that that is indeed the case.

The noble Lord also focused on the issue of mutualisation. I will just add a word of caution here: although seeking mutualisation is a nice long-term aim, there is a long way to go and some settling-down is needed. What is certain is that we are looking ahead, ideally to see how sub-postmasters, and maybe communities, might become more directly involved in investing in the post office network, which we see as vital for the future of this country.

19:25

[Lord Stoneham of Droxford (LD)]

My Lords, in contrast to the gloom and pessimism on the opposition Benches, I welcome the additional funding to speed up and complete the modernisation of the post office network, plus the new funding for the smaller post offices that are not suitable for the principal modernisation programme.

I congratulate the Government on the stability they have achieved and the commitment they have given to the post office network, against a background of a very difficult retail environment and after a decline of one-third in the number of post offices in the previous 13 years. This initiative recognises the importance of a local post office to the social fabric of our communities. It is important now that we work hard to ensure the commercial sustainability of the current network. That will need vital new business.

I have two questions for the Minister. What prospects does my noble friend see for the development of the Post Office current account business given the damage the commercial banks—along with, sadly, the Co-operative Bank in recent weeks—have done to their brand? With the growth of internet shopping, are our modernised post offices equipped with secure storage space and the technology to notify customers when their deliveries arrive?

[Viscount Younger of Leckie]

I thank my noble friend Lord Stoneham for his very strong and broad support for what the Government are doing. He makes the very important point that the post office network, and individual post offices, whether local or main branches, will now be in a much better position to compete and to offer much better, streamlined services for the customer. The whole point is that we want to create a more stable environment so that the customer can come in and have a greater offering of retail opportunities, including the financial options.

The Post Office is making good progress towards meeting its commitment to provide affordable and accessible financial services, including current accounts. In May 2013, as the noble Lord will know, it launched a current account pilot, with a national rollout expected in 2014. Alongside that, the Post Office continues to offer an extensive range of savings, credit card and mortgage products. I have no doubt that this offering will be extended as confidence is brought in again and increases in the network around the UK.

[Lord Skelmersdale (Con)]

My Lords, I should probably declare an interest as a director of a mail order firm. I know this debate is nothing to do with Royal Mail whatever but the firm that I am director of uses the local sub-postmaster branches somewhat extensively.

More than 20 years ago, I was in the Minister’s position speaking for the Post Office in your Lordships’ House. At the time, I wondered why sub-postmasters, in particular, were not allowed to hold passport forms, so I welcome this half-change that the Government have made in considering allowing the Post Office to digitise the passport application forms for customers. However, of course, in this day and age, many of us think too much in terms of computers. A vast number of people in this country would not dream of either owning a computer or using somebody else’s computer—for example, the post office’s. Therefore I maintain my plea from all that time ago that the post office, sub-postmasters particularly, be allowed to both issue and receive completed paper passport forms. In my view, that is long overdue.

The other thing I would like to say is that of course it is not only for the Government to produce services for the Post Office to offer. For example, you can go into my local post office in a village on the outskirts of Taunton and ask for either dollars or euros. That is not a government service; that is an arrangement with the banks. If I wanted some Argentinean pesos, they would probably take only three days to arrive. There are all sorts of other non-government services that the Post Office should or could be able to provide. I hope that it is thinking along thelines of extra activities that it could offer; for example, booking airline seats. I congratulate theGovernment on a small step in what I regard as the right direction.

[Viscount Younger of Leckie]

I thank my noble friend Lord Skelmersdale for his support for what we are doing. I am glad that he has made it clear that we are not talking about Royal Mail today and that the focus is indeed on the Post Office for once—a very important part of our life in the UK. I am also glad to hear that he frequents his local post office.

I agree entirely that as the post office system looks towards becoming more confident and settling into offering different types of services, the range of services will entirely depend on the remit of the contracts between the independent post office sub-postmasters and the Post Office. But I am sure that most of them will be thinking about how they can best make their post offices pay and offer the best possible range of services to customers. These extra activities could include the opportunity to get online and go on to a computer, and even perhaps introducing some coffee shops into post offices—who knows?

With regard to his point about passports, the situation is going to remain that those who wish to renew passports will be able to do so, primarily at the main post offices. We do not want to create lengthening queues at local post offices when people want simply to buy a bar of chocolate or some stamps. These issues have been well thought out. Bearing in mind that we want to stick to our pledge of having 93% of the population living within a mile of a post office, being able to renew driving licences and passports is very important, and that is all very much part of the future.

British Indian Ocean Territory

Wednesday 27th November 2013 Lords Chamber

Question for Short Debate

19:32

Asked by

[Baroness Whitaker]

To ask Her Majesty’s Government what plans they have for the future of the British Indian Ocean Territory.

[Baroness Whitaker (Lab)]

My Lords, I will not rehearse the tragic story of the exile of the Chagossians again. Numerous Hansard references can do that. I will just remind your Lordships that it was an acknowledged fundamental injustice—acknowledged not least by the present Government.

As the noble Lord, Lord Luce, said in the most recent parliamentary mention on 17 October:

“This remains a blot on our copybook which we must rectify”.—[Official Report, 17/10/13; col. 695.]

I am very pleased that he will speak tonight, and I look forward to the contributions of my friends the noble Lords, and my noble friends. The noble Lord, Lord Ramsbotham, added that it was,

“contrary to the core values … in the Commonwealth charter”.—[Official Report, 17/10/13; col. 703]

Their views are shared all round this House and very widely in the media, including the Times and ConservativeHome, so all efforts to put all or part of this injustice right will be widely welcomed.

The Minister will be aware that five years ago an all-party parliamentary group, of which I am a member, was established to press for justice. It will have its 40th meeting on 17 December. I congratulate the chair, my honourable friend Jeremy Corbyn, for his unshakeable determination to restore the rights of the Chagossian people, and our indefatigable co-ordinator, David Snoxell, whose advice has been unfailingly constructive. On 17 December we shall have something to celebrate: the latest step in the progress that has been made since the Foreign Secretary’s announcement 11 months ago that he would take stock of the policy on resettlement. I commend the Minister, Mark Simmonds, for the publication on 19 November of the draft terms of reference for a new feasibility study into the resettlement of the Chagos Islands.

The draft terms are thorough, far-reaching, objective and imaginative. It is a very good start to have a wide range of options and a comprehensive analysis of factors, including environmental, social, economic and legal. I am very pleased to see that the legal section explicitly includes human rights. Clearly the Foreign Office is not frightened, like some, of using these words, part of our core native values. Incidentally, Magna Carta, too, has something to say about wrongful exile. This draft, in fact, implicitly acknowledges the violation of the human rights of the Chagossians. The reasoning for the abolition of the rights of return and abode in 2004 has now largely been discredited by this whole new approach, so they should be restored.

I was particularly taken by the possibility that the British Indian Ocean Territory could become a new model for sustainable development. I remind noble Lords that the UK’s latest marine protected area, in the Pitcairn Islands, will seek to employ the people living there to maintain it. That is surely the right model, rather than depopulating it of its rightful inhabitants.

It was very good to see emphasis on possible resettlement on Diego Garcia. I assume that there must have been some prior consultation with the United States, which is also progress and will be supported everywhere. The commitment to wide consultation, especially with the Chagossians, is also to be commended. Can the noble Baroness assure me that Mauritius will also be consulted?

As to costs, I would demur from the assumption in the draft that these fall solely to the UK. I myself established with Commissioner Piebalgs of the European Union—through the offices of my noble friend Lady Ashton, which is not the only good thing she has done recently—that the UK would be eligible for resettlement funds for the Chagos Islanders, and it is not unrealistic to expect contributions from the international community, the American Government or, modestly, the Commonwealth. Let us not give up before asking.

When we come to the timeframe, let us remember that this most welcome progress has not been rapid. The Foreign Secretary’s commitment to work towards a just solution was first made in March 2010, over three years ago. On the timetable proposed, it looks as if the terms of reference will not be in final form until next year, to be followed by a period for selecting the consultants, so that the study might not be ready until just before the election in 2015. This is a risk. I understand that following the completed study, there will be a policy review into which it will feed. This, of course, will go wider, and include, for instance, renegotiation of the 1966 UK/US agreement, sovereignty and future management of the marine protected area.

There really must be a solution before the election. I urge Her Majesty’s Government to shorten this timetable to get it in well before the election. Can the noble Baroness advise her colleagues that procedures should be simplified where possible so that it takes six not 12 months; that the consultants should be chosen by the quickest appropriate means rather than lengthy tender; and that experts be identified without delay? These must, of course, be drawn from specialists in small island development, familiar with the culture, strengths and history of the Chagossians. I ask for the Minister’s response to these points, if not now, in a letter.

We have come a long way from the lament of the noble Lord, Lord Skelmersdale, the noble Baroness’s predecessor at the Dispatch Box, answering my late noble friend Lord Brockway—Fenner Brockway—on 11 November 1982, that,

“the departure of the Ilois from the island settlements must have been a sad and distressing occasion”.—[Official Report, 11/11/82; col. 411.]

That is a far cry from the present Foreign Secretary’s admirable statement that,

“it is not in our character as a nation to have a foreign policy without a conscience, and neither is it in our interests”.

But it has taken too long to get there and we still need to make up for that.

19:40

[Lord Avebury (LD)]

My Lords, I congratulate warmly the noble Baroness, Lady Whitaker, on securing this debate and on all the hard work that she has put into securing a just solution for the problems of the Chagos Islands and their inhabitants over many years.

I agree with the noble Baroness in welcoming the feasibility study on resettlement of the Chagos Islands announced by the Government last week, and I also agree with her that the consultants should be invited to produce their final report in time for the policy review to be carried out, and conclusions reached on it, before the 2015 general election campaign. That was the view expressed by the Chagossians themselves in their response to the initial consultation published by the FCO in September, and by the chairman of the All-Party Group on the Chagos Islands in a letter to the Foreign Secretary of 16 July—a reply to which, I am sorry to say, has yet to be received.

One would hope that there would be consensus between the political parties on the absolute right of the inhabitants to return to the homeland from which their ancestors were unlawfully evicted almost half a century ago. Certainly, my right honourable friend the Deputy Prime Minister has always been strongly supportive of the rights of the Chagossians, and I am sure that he would have a major input into the policy review if it took place this side of the election. I can say much the same about the right honourable gentleman the Foreign Secretary, who was always supportive of the rights of the Chagossians when his party was in opposition. I therefore hope that when the policy review is conducted the coalition will come to the conclusion that we all hope for: namely, that the Chagossians should have that right of return. However, if the feasibility study does not take place this side of the election and the review has not been held by the time the campaign begins, the principle of those rights, and the attitude of the parties to it, would obviously be factors to be considered by the British electorate in deciding how to vote in 2015.

The only factor mentioned in the ministerial Statement as needing to be considered, other than the practicality of resettlement, is whether the presence of the Ilois on the outer islands, 140 miles from Diego Garcia, would have any adverse effects on the operations of the US base. We know from WikiLeaks that the US embassy did not respond to an FCO request to,

“affirm that the USG requires the entire BIOT for defense purposes”.

The embassy received the famous assurance from the FCO’s director of overseas territories, Colin Roberts, that there would be no “Man Fridays” on the BIOT’s uninhabited islands. It would be useful if the Government would now cancel that 2009 undertaking and obtain an assurance from the Americans that they would have no objections under the UK/US 1966 exchange of letters to a repopulation of the outer islands. There is no reason why this clarification should be deferred until the feasibility study has reported, as the ministerial Statement appears to suggest. The obvious peg for the matter to be settled is when the 1966 agreement comes up for renewal in 2014.

Picking up the point made by the noble Baroness, there is no mention of Mauritius being consulted at the stage when preliminary views were sought on the feasibility study, in spite of the fact that we are committed to returning the islands to Mauritian sovereignty when they are no longer required for defence purposes. Yet we are nearing the point when major decisions will be made about the future of the Chagossian people and of the Chagos Islands, in which it is inconceivable that Mauritius, as the future sovereign power, would not be involved.

There is an appeal pending in a case brought by Mauritius against the UK under the international Convention on the Law of the Sea, to be heard in mid-2014, which is indirectly about the UK’s failure to consult Mauritius on the declaration of the BIOT as a marine protected area—the motivation for which, as we now know from the WikiLeaks cable, was to make resettlement impossible.

There is also an appeal to be heard in March 2014, in a case brought by Monsieur Olivier Bancoult on behalf of the Chagossians, challenging the consultation process on the MPA, where the High Court had ruled that the WikiLeaks cables were inadmissible as evidence. It would be a disaster for justice, not just for the Chagossians, if this decision was upheld, but I hope that neither of these cases will be used as a reason for boycotting the Mauritians now, thereby risking further litigation in the future.

As my noble friend is aware from our correspondence, I strongly believe that we should attempt to engage Mauritius in a dialogue about the future management of the islands and of the MPA, both of which will ultimately be its responsibility. Certainly, Mauritius should be invited to comment on the draft terms of reference for the feasibility study, including in particular the proposed timeframe, which was discussed so ably by the noble Baroness, Lady Whitaker.

I also suggest that to help break the ice, the new BIOT science adviser, Dr Mark Spalding, who seems ideally suited to the task, along with scientists on the BIOT Science Advisory Group, should have a meeting with their Mauritian counterparts to discuss a joint approach to the MPA and the science of Chagos, sharing data, current research and scientific measurements. The draft terms of reference of the feasibility study make it clear that the MPA can be amended. Revising it now, in consultation with Mauritius and with the Chagossians to take account of their interests, would potentially save much trouble in the future.

19:47

[Lord Luce (CB)]

My Lords, like the noble Lord, Lord Avebury, I am very grateful to the noble Baroness, Lady Whitaker, for introducing this debate, particularly at this time, in the light of the Government’s decision—a good decision—to have a wide-ranging feasibility study on the future of the Chagossians.

I think that it was in early 1982, when I was a Minister of State at the Foreign Office and had responsibilities for the African continent and the Indian Ocean, that I paid my first visit to Mauritius. When we landed, we were the only aeroplane at the airport. I came down the steps and the high commissioner whisked me away. At that point, I noticed that there were some 2,000 people at the airport. I expressed surprise that for one aeroplane there should be 2,000 people and I asked him why they were there. He said, “That’s a demonstration”. I said, “A demonstration against whom?” He said, “A demonstration against you”. So I said, “Look, if there’s a demonstration, the important thing is to meet the leaders. Please lay on the demonstration again and ask them to demonstrate again”.

They demonstrated the next day outside the high commission. I invited the five leaders, five marvellous Chagossian ladies, to come in and have tea. That was the first time that I realised that what we had done in the late 1960s and early 1970s by expelling 1,500 people, going back two, three and even four generations, was a really black mark for our country. It was serious abuse of human rights. I very much regret that, because I decided with the noble Lord, Lord Carrington, to resign very soon after that, I did not do more about the issue at that time.

I believe that the issue has undermined our voice in the case that we put for human rights all over the world. If we are going to argue for upholding the Commonwealth charter on core values, which we do, we have to be able to say that we are strong, in our own country and in our own foreign policy, on respecting human rights. Last week, on 21 November, we had a splendid debate, led by the noble Lord, Lord Alton, in which I could not take part, on human rights all round the world. When we do that, we need occasionally to pause to remember that we abuse human rights from time to time. In this case, we have, and we need to put it right.

I commend the Government for taking this action. I commend the Foreign Secretary and Mr Simmonds, the Minister, and the previous Minister for Africa and the Indian Ocean, Mr Bellingham, for the thought that they have given to this issue and for the way in which they are searching for a way forward. We should also remember the late Robin Cook, who, in 2000, restored the right of return, which was then abrogated in 2004. He should be remembered for that.

As the noble Lord, Lord Avebury, and the noble Baroness, Lady Whitaker, said, as the Government have now taken the lead on that issue, it is also essential that they should decide on the way forward before the 2015 election. As the noble Lord, Lord Avebury, said, the critical factor is that, under the 1966 exchange of letters between the United States and the United Kingdom on Diego Garcia and the British Indian Ocean Territory, the idea was that after the completion of 50 years, renewal for another 20 years from 2016 would be considered. This is the critical factor in why decisions need to be taken speedily. There would not be adequate time between the summer of 2015 and the renewal, if there is to be one, in Diego Garcia in 2016, for a new Government to give proper consideration to all those issues. The time span would be too short.

I should like to mention three aspects of this that are relevant to the timing. First, there is the feasibility study, which is admirably broad-ranging. It is imaginative and takes into account every facet of the issue, looking at all the options, costs, environmental issues, employment, political and economic issues, the fishing problem—which is very important to the Chagossians—ecotourism, and so on. Against that background, as the noble Baroness, Lady Whitaker, said, there is the study by the Foreign Office of the bigger issues to do with the future of the British Indian Ocean Territory, the future of the marine protection area, the sovereignty issues, resettlement of the Chagossians and relations with the United States and Mauritius.

I agree that it is very necessary that the feasibility study should be completed speedily, preferably by mid-2014, to give time for the Government to have discussions with the United States and Mauritius, after the completion of the study but before the election. That means speeding things up. That is why this debate is important.

The second issue is our relations with the United States and the need, in my view, for informal discussions, even at this stage, before the study is completed. Both the United Kingdom and the United States need to understand the mutual parameters on this issue that we have to live with. In the past two or three years, during my visits to Washington, I have called in on the State Department. On all occasions, I have asked where it stands on Diego Garcia and the British Indian Ocean Territory. One positive answer that I have always had is that the United States is prepared seriously to consider the employment of Chagossians in Diego Garcia itself, if that is what Chagossians want.

Where there may be a problem—this would be for discussion with the British Government—is over security issues, if there is any arrangement made by the British Government for the outer islands, 150 miles or so from Diego Garcia, to be settled. Even then, the State Department says, “If the British Government put a proposition to us, we would certainly be concerned about security but we would look at it seriously”. We need to facilitate things by having informal discussions with the United States now, rather than leaving it until later.

My last point is about Mauritius. I entirely agree with what the noble Lord, Lord Avebury, said. We need to engage; we need a diplomatic dialogue. After all, Mauritius is a strong partner of ours in the Commonwealth. It is a former colony. We therefore have very strong links. It is an old friend of ours, and we have a common interest in the issues that have recently been discussed at CHOGM in Sri Lanka about maintenance of human rights in Sri Lanka itself. That is an important factor. We have common ground on human rights issues. Relations between the British Government and Mauritius have soured over the past three or four years. That is a pity. It is largely due to the imposition of the marine protection area, just before the previous Government lost office, without any proper discussion with the Mauritian Government.

We need to restore good relations with Mauritius. We need to have a good dialogue. I hope that the Minister can say something about that. After all, when we eventually decide—as we will at some point—that sovereignty over the British Indian Ocean Territory should be handed back to the Mauritians, it will be fundamental for them. It is essential that they are regarded as a vital player in any Chagossian solution. Many questions need to be covered, such as the future of the Chagossians, the possibility of co-management of the outer islands and sovereignty issues. We are all aware that there is a legal appeal at the moment against the marine protection area, but it would be much better if we could pursue a dialogue and get talking about how it may evolve in the longer term.

I congratulate the Government on what they have done. I hope that they will move forward urgently with things—particularly the feasibility study—and, at the end of the day, will get the credit for finding a solution before the next election.

19:56

[Lord Anderson of Swansea (Lab)]

My Lords, it is good that my noble friend Lady Whitaker has raised the plight and the future of the Ilois as, in the words of the noble Lord, Lord Luce, a considerable black mark on our late colonial history, which has been revealed in documents provided for various court cases. Of course, the Ministers and civil servants involved are now either dead or retired. Most of the Ilois have no personal knowledge of life on the islands. Things have moved on remarkably from that black mark in the late 1960s. We should perhaps partially understand the problems of those decision-makers in the context of the Cold War. Strategically, our ally, the US, needed a secure base, and the local population was cleared—indeed, sacrificed—to provide that. Successive UK Governments have since ignored the problem, except when forced to take note during litigation.

Of course, more weight is now given to the case for the islanders, but the strategic importance of the islands to the US remains: a secure base within easy distance of that most volatile region, the Middle East. Presumably the United States will wish to renew the lease in 2016. It will have to be fully consulted on future plans as, as all colleagues have said, will the Government of Mauritius. Hence, I ask: have the US authorities given any clear indication that they are prepared to be helpful not only in employment of those Ilois who so wish but, for example, in the use of the airfield to supply those Ilois who choose to return?

The complex history is set out very well in last December’s decision of the European Court of Human Rights, where proceedings started almost 10 years ago. There have been many excuses over the years. The first is that there is no settled population, only migrant workers. That was shown conclusively to be false. The second was that adequate compensation was offered and accepted as full and final settlement. That was confirmed by the courts and, indeed, the European court. Global warming and rising sea levels make a return to some of the islands precarious. Again, there is the excuse that since the evacuation the Ilois have been given the opportunity to settle in the UK, with all the benefits of life in a developed country. Will life under the palm trees be attractive, particularly to the younger generation who have seen the bright lights of the West? Questions must be asked about the viability of the old way of life, as described in another context by Arthur Grimble in A Pattern Of Islands, which was about his work in the Gilbert and Ellis Islands. Perhaps he romanticised a rather benign colonial rule, with indigenous people waiting for the coconuts to fall from the trees and the fish to enter their nets.

Now we approach the end game. The UK Government deserve congratulations on accepting their responsibilities. A feasibility study will take place, so in perhaps less than 18 months the Ilois will know their future. I adopt what has been said; it must ideally be done before the election. We must recall that a similar study in 2004, nine years ago, concluded as follows:

“whilst it may be feasible to resettle the islands in the short-term, the costs of maintaining long-term inhabitation are likely to be prohibitive … resettlement is likely to become less feasible over time”.

Well, time has passed and the question for the feasibility study is whether that statement remains true.

I have met representatives of the Ilois over the years and have enjoyed their hospitality, having met them socially in Mauritius. I have listened sympathetically to their justified complaints but I am troubled by one key consideration. They have been in exile now for perhaps almost 50 years and it is tempting when forced into exile, as they have been, to have a rather rosy view of life before that exile. How long would such a memory survive, in the potentially harsh and isolated reality?

Although opinions vary, it is said conclusively that most Ilois wish to return. There is of course a cost. There will be renewed infrastructure and modern facilities—those which they have enjoyed in the West and in Mauritius, such as hospitals, schools, drinking water and energy—will have to be provided. Is settlement likely to be precarious in the medium and long term? How will the Ilois be supplied by air and by sea? How far will the US be constrained for security reasons in any help that it can provide? What will be the nature and extent of the consultation with the Government of Mauritius? Will the clear majority for settling in BIOT survive the change for long, particularly for any younger people who “return” but have never been to the islands? What jobs will there be on the US base? Will there be scope for eco-tourism?

I concede of course that these are all questions for the feasibility study. It is important that the independent experts be appointed as soon as possible, because there must be a limited field of experts in this esoteric area of small island development. Perhaps a staged return is called for, with a small pilot project. The problem there is that the people who are likely to return will be those most enthused about and committed to the prospect of return. If they stay there for a relatively short time, it is hardly a case for spending vast sums on the infrastructure.

After almost 50 years, the problem certainly bristles with complexities but I am glad that our Government have at last recognised their responsibility. I hope that as a result of regular consultation with the islanders, they will get a clearer picture of the options. Surely, a just solution can be found consistent with both the wishes of the islanders—the Ilois—and their interests. That is what they deserve, as a grave injustice has been done to them over the past decades.

00:00

[Lord Selsdon (Con)]

My Lords, about an hour and a half ago a charming lady came up to me and said, “I wonder if I could persuade you to speak in my debate”. It was the noble Baroness, Lady Whitaker. I realised that the rest of my party had gone off to some smart dinner, while I was going to eat quietly here, but what the noble Baroness did not know is that I have a great affection for Mauritius.

When I was in the banking world we dealt with most of the world’s countries, including the Commonwealth ones, and I used to allocate Easter for an adventure and take my small son with me. One year, that adventure was to Mauritius to see whether we could help it compete with the Seychelles on tourism. I happened to mention it to Lord Jellicoe, who was the Leader of the House. He said, “They’ve got sugar over there. Go and have a look round, will you?”. Anyway, I went with my family, including my five year-old son.

I arrived at the airport to find a crowd there, rather as it was for the noble Lord, Lord Luce. The crowd was clapping, cheering and waving and a man came up to me and said, “How nice to meet you. My name’s Ramgoolam—I am the premier. How nice of you to come. Have you come to look into sugar? But why don’t you enjoy yourself on holiday? I’ve made a booking for you in a hotel and here’s my driver Dypoo, who will take you around and show you things”. We had a really wonderful time and 10 years later, Dypoo became one of my international spies—he was driving the ambassadors in Washington. However, I fell in love with the place. It was not really the most suitable for sugar but, at that time, tourism was on the make. The Seychelles had grabbed everything, rather as the Maldives have now, and Mauritius was a bit flat. However, we happened to own Thomas Cook and managed to do some help out there.

Being an islander, I have always had affection for islands. I love the sea and coastlines. One thing I keep citing in your Lordships’ House is that if you take the coastlines of the Commonwealth, it has 60% of the total in the world. In the Mauritian area of the Indian Ocean there are 112,000 kilometres of coastline. What do the seas mean to us? In fact, they mean fish, which is effectively one of the highest added-value products in the world at the moment. Your Lordships will be aware that illegal fishing is now estimated to be at between $10 billion and $24 billion per annum, and that there is worry about the depletion of fish stocks. Going with that illegal fishing, there is then the piracy and extortion taking place worldwide. If you take a view of the islands in that part of the world, it becomes quite a significant business.

I speak of Mauritius but I do not know the other islands. I have them all plotted on a map; I have the coastlines and the population of each, the distances they cover, whether the coral is good or not and whether any underground cables were laid there. But it is an important place as a staging post, as the United States reckons. We should not forget that RAF Gan, as I think it was called, used to be there. As an island nation, dependent on the sea and with our own large fishing fleet, we cannot ignore it. At the moment, our own fleet is 21% of the world’s fleet and has 27% of its gross tonnage. Mauritius has 49 vessels totalling 53,000 tonnes.

It is in the maritime sector that we could attach much importance to our relationship with this place, which I love and to which I would like to find a reason to go back again. There was a moment there when I saw someone on a stick and a bit of board, windsurfing. I had never seen a windsurfer before. In a short time, I had fallen in again and again but there was my small son, aged five, windsurfing on the back of some door or other with a Mauritian boy. I fell in love with that place, as I do with any islands. When I look at the whole Indian Ocean I say that we should have a political, economic and commercial strategy of our own. The Indian Ocean is important. I have not come to piracy yet, which is a favourite subject, but that will be for another day.

20:10

[Baroness Morgan of Ely (Lab)]

My Lords, how marvellous it was to hear about the fantastic trips the noble Lord, Lord Selsdon, took to Mauritius. I hope that one day I will be able to do the same. I congratulate my noble friend Lady Whitaker on securing this debate and on her commitment to this important cause.

Britain has always considered itself to be a country where fair play is important, where the rule of law is respected and where rights are enforced, but there is a land far away which should prick the nation’s moral conscience, in the unfair treatment meted out to the inhabitants of the Chagos Islands, otherwise known as the British Indian Ocean Territory, by the UK Government.

This group of 54 individual tropical islands was home to around 1,500 people—the Chagossians—for more than a century and a half. The UK Government evicted them in the early 1970s in order to allow the United States to build a military base on Diego Garcia, the largest island in the area. This is now the only island which is inhabited and it is inhabited only by US military and civilian contracted personnel.

Today only around 700 Chagossians survive, scattered around the globe following their forced exit from the island. Many are living in profound poverty and are still reeling and suffering severe psychological problems from their sense of dislocation and from being separated from their homeland. This is a complicated story interwoven with imperialist overtones, environmental concerns, military and defence considerations, costs concerns, compensation claims and an unfolding tragedy of a people wronged.

The 1966 exchange of notes between the UK and the US, which led to the forced evacuation of the island, can be extended for a further 20 years in 2016, but with a provision for termination in 2014 so, as the noble Lord, Lord Luce, suggested, now is a good time to reassess what should happen next.

A number of the islanders still yearn for the opportunity to go back to their native land. I therefore begin by welcoming the fact that the Government will commission a new feasibility study on the resettlement of the British Indian Ocean Territory. The draft terms of the study are comprehensive and thorough. There are some difficult issues to assess in the feasibility study. The Government will be aware that the Labour Government in 2000 also commissioned a study to assess to what extent it would be feasible for the outer islands to be reinhabited. I am afraid that the report concluded that resettlement was not feasible. As time has passed, many have concluded that some of the findings, in particular the scientific predictions relating to climate change, have proved not to have been accurate. While welcoming the new study, I first ask the Minister: are there any other significant factors which have changed since 2000 to make the Government think that this study will come to a different conclusion from the one commissioned in 2000?

The first obstacle to overcome would be the renegotiation of the terms of the agreement with the US defence authorities, which have an agreed right to use the island. I am sure it is not beyond the wit of the US defence force to live alongside, or to protect their base from, the Chagos Islanders. They seem to manage fairly well in Guantanamo, where they have lived side by side with the Cubans for decades. Who knows, it might even be helpful for the US to employ some of the islanders at its base.

Beyond that, in theory it would be fairly simple to allow the Chagossians to return—to simply say, “Yes, home you go”—but the real question and issue is: what would they be going home to? What, if any, is our responsibility in the UK to the islanders and their standard of living, in particular in view of the fact that successive UK Governments have undertaken to cede the territory to Mauritius when it is no longer needed for defence purposes? Will the Minister confirm that the current Government also agree that the islands should be transferred to Mauritius at some future date?

There is very little on the islands. The islanders led a basic existence prior to 1966 with very little infrastructure in place, just a few schools and clinics. The marine protection area status which has been granted to the waters around the islands in recent years would have to be developed and adjusted to allow artisanal fishing, as already happens outside the marine protection area around Diego Garcia. The costs of resettlement and a clear understanding by all sides of what resettlement will entail must be explored in the feasibility study, and we must be sensitive in what we ask of the British taxpayer in a time of austerity. However, I urge the Government to heed the advice given by my noble friend Lady Whitaker and explore fully the opportunities for the costs of resettlement to be shared between other interested Governments, the EU and the US.

There are significant risks associated with resettlement, including an understanding that most of the islanders who left in the late 1960s will be well over 60 years of age, and there will be very little access to healthcare. These people may not want to settle on the island; they may want simply to visit the country of their birth. At the very least, the opportunity to visit is surely something which should be explored in the feasibility study.

It is, however, also an opportunity to be creative in what could be offered. Will the Minister say whether the designation of the seas surrounding the islands as a marine protection area will be seen as a threat or an opportunity, and who will make the judgment on this? Will the consultants appointed to make the recommendation be given any kind of political steer?

We welcome the fact that there will be ongoing consultation with stakeholders before the document is finalised, in particular with the Chagossian community. I echo the suggestion that the consultation should be extended to the Mauritians.

Finally, I echo my noble friend Lady Whitaker’s concerns about the speed of the process. There is a suggestion that the feasibility study will take at least 18 months to conclude. It need not take that long. We will be nudging right up against the general election, so will the Minister undertake to ensure that Her Majesty’s Opposition are consulted on the final wording of the terms of reference prior to its commissioning?

20:10

[The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con)]

My Lords, I begin by expressing my thanks to the noble Baroness, Lady Whitaker, for highlighting the important issue of the future of the British Indian Ocean Territory. I am grateful for the important contribution she makes through her membership of the All-Party Parliamentary Group on the Chagos Islands, and I am sure many noble Lords share her deep interest.

I will therefore focus on the Chagos Islands and the question of the resettlement of the islanders after their compulsory evacuation in the late 1960s and early 1970s. This Government have expressed regret about the way the resettlement was carried out at that time, and we do not seek to justify those actions or excuse the conduct of an earlier generation. What happened was clearly wrong, and therefore it was right to pay substantial compensation. Both the British courts and the European Court of Human Rights have confirmed that compensation has been paid in full and final settlement.

Decisions about the future of the British Indian Ocean Territory are more difficult. Successive Governments have opposed resettlement on the grounds of feasibility and defence. Noble Lords will recognise that we must be honest about the challenges and concerns. In 2000, we looked at the practical challenges of returning the Chagossians to the territory permanently, concluding that it would be precarious and entail expensive underwriting by the British Government for an open-ended period.

However, the Government recognise the strength of feeling on this issue and are not dogmatic. In December, my right honourable friend the Foreign Secretary announced that we would review our policy, and my honourable friend Mark Simmonds announced in July that we intend to commission a new study into the feasibility of resettlement. Officials from the Foreign and Commonwealth Office consulted extensively with more than 400 members of the Chagossian community and their supporters on that issue over the summer. Views within Chagossian communities varied widely on the issue of resettlement. Although a majority expressed a preference to return to the territory, many concerns and issues were highlighted which this study will need to consider carefully.

The Government have taken these views into account in shaping the proposed terms of reference for the study which we published, as announced by my honourable friend Mark Simmonds, on 19 November. We will continue to consult widely throughout the review, sharing emerging findings as the study develops and seeking views so that all relevant factors are taken into consideration. I will make sure that the Opposition are informed of that.

The noble Lord, Lord Anderson, and the noble Baroness, Lady Morgan, asked about the 2002 study and what had changed. We have no reason to doubt the 2002 study conclusions, which showed that lasting settlement would be precarious and would entail expensive underwriting by the UK Government. However, the Government recognise the strength of feeling on this issue and that others believe that resettlement could feasibly be carried out. It is therefore right that we look at this issue again.

The noble Baroness, Lady Whitaker, and the noble Lord, Lord Anderson, asked whether the US had agreed to the study. The territory is British and our policy there is a matter for us. We have of course kept the US closely informed on progress, and we welcome the US presence on Diego Garcia, which is important. We consider it to be a significant and important strategic asset, both to us and to them.

The noble Baroness, Lady Whitaker, also spoke about the policy review in relation to Diego Garcia. This policy review will deal with the issue of resettlement. Ministers’ decisions on this issue will bring helpful clarity to both sides in time for discussions on the continuation of the 1966 UK/US agreement. We are clear about the sovereignty of the islands.

The noble Lord, Lord Avebury, asked whether the feasibility study would also include Diego Garcia. We said in the Written Ministerial Statement announcing the terms of reference for the study that a key factor for Ministers to assess when considering the study will be the ability of a military base to continue and to be able to function undisturbed within each option being considered. The study will bring helpful clarity to a range of issues when we begin substantive discussions with the US Government on the successor agreement to the exchange of notes which govern the use of the island.

The noble Lord, Lord Luce, my noble friend Lord Avebury and the noble Baroness, Lady Morgan, asked about the handover of the island and the role of Mauritius. We are of course keen to return to constructive dialogue with Mauritius on the British Indian Ocean Territory and have invited the Mauritian Government to input their views on the study’s terms of reference. The study is of course without prejudice to ongoing legal proceedings which the UK is defending. We will not be making concessions on sovereignty.

My noble friend Lord Avebury also asked about a joint scientific committee, and potential for joint work between Mauritius and the British Indian Ocean Territory. We welcome the engagement of Mauritian scientists in helping the scientific community better understand the unique and pristine environment of the British Indian Ocean Territory, and in the scientific structures co-ordinating that science.

The Government are acutely aware of the need to make progress on implementing this important study. Officials are taking forward the procurement process so that we can start the study promptly and, to that end, a supplier will be appointed from a selection of those that have already competed for a place on an HM Government framework agreement, rather than a full tender. We must, however, ensure the best value for money and access to a range of credible suppliers so that the right product is delivered.

The noble Baroness, Lady Whitaker, stressed the need for speed. We recognise the desire for speed, but that should not detract from our ability to conduct a thorough review which draws on the best possible expertise. By using an existing, pre-competed, government framework in order to benefit from a streamlined route for purchasing consultancy services, we are deploying the quickest timeframe possible. It is our intention to complete the study within 12 months of appointing a consultant. The previous study took 18 months to complete. That study and other relevant background material will need to be considered as part of the new review.

The noble Lord, Lord Anderson, outlined practical concerns and difficulties that could come from a resettlement. We have not set any parameters in predetermining whether or not resettlement would be feasible. We have said that it will not prejudice the outcome of the study and that we will publish the study in its entirety. However, we recognise the challenges to resettlement, especially of low-lying islands.

It is important for us to get this work right. This study is a complex one. It will require expertise in a range of issues such as the infrastructure, amenities and economic sustainability for a modern community. It will also consider the impact on the unique environment of the British Indian Ocean Territory. The selected consultants will draw on the advice of independent experts where they do not have that expertise themselves. In assessing the potential options for resettlement, the Government will wish to balance a range of factors, including whether they could be accommodated without inhibiting the operation of the existing military base. In addition, I am sure that noble Lords will agree that the study must also capture the full costs of any resettlement options, associated risks and the costs of mitigating them, to make an informed decision.

To conclude, I reassure the House that, while it is the Government’s intention to complete the study as quickly as possible and to ensure value for money, all relevant issues will be properly considered. However, the Government will not prejudge the outcome. It will be for Ministers to make their assessment after completion of the study.

The challenges to resettlement of these islands after all these years are very real. Nevertheless, the Government recognise the interest of Members of this House and the importance of a renewed debate on this issue. That has been an important aspect of that consideration. I will continue to keep the House informed and updated as the feasibility study progresses.

House adjourned at 8.26 pm.