House of Commons

Tuesday 10th December 2013 Commons Chamber

Tuesday 10 December 2013

The House met at half-past Eleven o’clock

Prayers

Tuesday 10th December 2013 Commons Chamber

[Mr Speaker in the Chair]

[Mr Speaker]

Order. Before I call the Clerk to read the title of the private Bill set down for consideration at this time, I must inform the House that there was an error on the Order Paper, which listed the wrong Bill. A corrigendum has been issued. The Clerk will now proceed to read the correct title of the private Bill set down for this day.

business before questions

humber bridge bill

Motion made, That the Lords amendments be now considered.

[Hon. Members]

Object.

Lords amendments to be considered today at 4 o’clock.

Oral Answers to Questions

Tuesday 10th December 2013 Commons Chamber

The Chancellor of the Exchequer was asked—

[Julie Hilling (Bolton West) (Lab)]

1. What comparative assessment he has made of trends in the annual rates of inflation and growth in average earnings since May 2010.

[Clive Efford (Eltham) (Lab)]

3. What assessment he has made of recent trends in the level of average earnings.

[The Economic Secretary to the Treasury (Nicky Morgan)]

Real average weekly earnings have fallen since 2010, owing to the previous Government’s financial legacy left to us. However, last year real household disposable income grew at its fastest pace since 2009. In its latest forecast, the Office for Budget Responsibility expects the growth of real household disposable income to accelerate in every year of the forecast period, reaching 2.6% in 2018.

[Julie Hilling]

Will the Minister confirm that the UK has suffered the second biggest fall in wages of any G20 country since this Government took office? Is that not a damning indictment of this Chancellor’s record over three wasted years?

[Nicky Morgan]

If the hon. Lady wants to talk about the largest anything, perhaps she would agree with Paul Johnson, who said that wages have increased much less quickly than inflation. As I say, that is not surprising. We have had a great big recession. We had the biggest recession in 100 years. It would be astonishing if household incomes and earnings had not fallen.

[Clive Efford]

Her Majesty’s Revenue and Customs liabilities table published in May shows that the number of people earning more than £1 million jumped from 13,000 in January to 18,000 after the Budget. Their combined income rose from £27 billion to more than £47 billion. Is that why April was the only month in which earnings rose above inflation?

[Nicky Morgan]

That is a very interesting question. The hon. Gentleman will know that the OBR last week said that the only thing that would raise wages was increased productivity in the economy. That means more people creating more jobs and more growth in our economy. I would have thought the hon. Gentleman welcomed the fact that 2.7 million people have been taken out of income tax completely as a result of our changes and 25 million people are paying less income tax.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does my hon. Friend agree that Opposition Members seem to misunderstand the fact that rises in the personal tax-free allowance are putting money back into the hands of the lowest earners? Does she agree further that the best way to raise people’s living standards is by creating new jobs and new growth in our economy?

[Nicky Morgan]

My hon. Friend is, of course, right. The fall in living standards is a consequence of the economic crisis left to us, and the best way to deal with living standards is to deal with that economic crisis so that families can find work in a growing economy.

[Mr Julian Brazier (Canterbury) (Con)]

Does my hon. Friend agree that the reason we have had a big drop in living standards is that we had the largest drop in output since the second world war? As my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) says, we need to rebuild that output, as we are now doing, if we want to rebuild living standards.

[Nicky Morgan]

My hon. Friend is right. As I said, Paul Johnson of the Institute for Fiscal Studies said:

“We’ve have had the biggest recession we’ve had in 100 years”.

It is hardly surprising that household incomes and wages have fallen. We recognise that times have been very tough for households and for businesses, but as my right hon. Friend the Chancellor’s autumn statement showed last week, we are on the right path to a responsible recovery now.

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

Does the Minister expect that after the autumn statement average earnings will keep pace with rising energy bills this winter?

[Nicky Morgan]

What we have done in the autumn statement is to give £50 off energy bills. We are putting money in people’s pockets with the personal allowance, through capping rail fares, through the council tax freeze and with the fuel duty freeze. The hon. Gentleman has a cheek to talk about putting money in people’s pockets when the Government whom he supported left behind the economic crisis from which we are having to pick up the pieces.

[Chris Leslie]

I guess we have to take that as confirmation that the Minister does not expect average earnings to keep pace with rising energy bills this year. Is it not true that, despite the autumn statement, all we have seen is a policy that tinkers around the edges and means that energy companies will still see their profits rising as households continue to see their bills rising? When will she be on the side of households who are worried about heating their homes, and when will she support an energy price freeze and stop always defending the excessive profits of the big six energy companies?

[Nicky Morgan]

The hon. Gentleman has clearly learned nothing. Does he realise that his energy policy is a complete con, that energy companies have already said that they would have to freeze investment, and that they would put prices up beforehand and afterwards? The Government are absolutely on the side of hard-working families and their household budgets, and we are putting £50 in their pockets now.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

Is not the point that the average income of the bottom third of the population stopped growing in real terms in 2003?

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

Under Labour.

[Jesse Norman]

Under Labour. Therefore, it is a matter of catch-up before the Government can get the economy back on track.

[Nicky Morgan]

My hon. Friend is right to say that wages and salaries suffered their fastest drop between 2007 and 2009, and that drop started in 2004, as the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) has already admitted. Interestingly, the shadow Chief Secretary to the Treasury could not answer the question about whether Labour’s calculation of wages and household disposable income includes the tax changes we have made, and therefore does not reflect the fact that we are putting more money into people’s pockets.

[Mr Charles Kennedy (Ross, Skye and Lochaber) (LD)]

2. What progress he has made in extending the rural fuel rebate pilot scheme; and if he will make a statement.

[The Chief Secretary to the Treasury (Danny Alexander)]

I have been asked to reply on behalf of my right hon. Friend the Chancellor who is at ECOFIN in Brussels.

On 8 November, the Government launched a supplementary call for information that gave fuel retailers in remote areas a further opportunity to submit information to the Treasury as part of our plan to extend the fuel discount to mainland rural areas. That call for information closed on Friday, although we extended the deadline until yesterday for areas affected by the recent severe weather. We received information from a further 42 filling stations. We are analysing the data at the moment, and will make a full application to Brussels in January.

[Mr Kennedy]

I thank my right hon. Friend for that reply, and for the helpful way his Department and officials have taken account of local factors that have led to such an upsurge in feedback. Does he agree that one of the real lessons of the previous discount scheme and its success is that, despite a lot of scepticism at home at a European level, when we engage positively and constructively with the European Commission—and do so punching our weight as the United Kingdom—we are much more likely to deliver the results our constituents need and want?

[Danny Alexander]

I wholeheartedly agree—as I usually do—with my right hon. Friend about that. It is a statement of fact that British leadership as a strong and committed member of the European Union is hugely to our country’s benefit. The scheme for communities in remote areas across the United Kingdom shows the benefits we get from positive engagement at European level, and that is the way we will take the proposal forward.

[Mr Simon Burns (Chelmsford) (Con)]

17. Does the right hon. Gentleman agree that those who will benefit from the rural fuel rebate scheme will also benefit from the Chancellor’s freeze on fuel duty? What benefits in pence per litre will that bring to rural people, compared with the Labour party’s plans?

[Danny Alexander]

It is noteworthy that no one from the Labour Benches wanted to comment on cutting fuel duty in remote and rural areas. I wholeheartedly agree with my right hon. Friend, and by the end of this Parliament, motorists will be paying 20p a litre less every time they fill up their tank than they would have paid had Labour’s fuel duty escalator been allowed to go forward.

[Nicola Blackwood (Oxford West and Abingdon) (Con)]

4. What steps he has taken to increase infrastructure investment.

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

6. What steps he has taken to increase infrastructure investment.

[The Chief Secretary to the Treasury (Danny Alexander)]

Average annual investment in infrastructure has risen to £45 billion per year under this Government, compared with just £41 billion during the last five years of the previous Government. Last week we published an updated national infrastructure plan that set out our long-term plan for meeting those ambitions for the next decade and beyond. That included a pipeline of £375 billion-worth of projects, building on the announcements we made in June.

[Nicola Blackwood]

I thank the Chief Secretary for his answer. Does he agree that investing in strategic roads such as the A34 in my constituency can be key to unlocking vital growth and inward investment in priority sectors? Will he investigate the economic case for urgent investment in the A34?

[Danny Alexander]

I agree about the importance of the A34, which is why, through the national pinch-point programme announced in the 2011 autumn statement, we committed to a scheme to improve links between the A34 and the M40. Work on that scheme will start in March, and I am sure the hon. Lady will agree that it will make a significant difference to the economy in her part of the country.

[Andrew Selous]

Does the Chief Secretary agree that if we are to compete internationally it is essential that we build our infrastructure more quickly? Over the past decade or so, progress has been glacially slow. In my constituency, the A5-M1 link road was announced 10 years ago, in 2003, and a shovel has yet to hit the ground.

[Danny Alexander]

I agree very much with my hon. Friend, and that is why part of our national infrastructure plan last week included further improvements to the planning system for major infrastructure projects. The A5-M1 link road has been prioritised as a key project and I understand that funding was announced last year and work will start next spring.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

Is the Chief Secretary aware that figures from the Office for National Statistics show that infrastructure work, since this Government came to power, has dropped by 15%? Given its importance as a motor for growth, why is he now planning to cut it yet again in 2015?

[Danny Alexander]

I gave the figures for investment in infrastructure in answer to my hon. Friend the Member for Oxford West and Abingdon (Nicola Blackwood). We set them out in our national infrastructure plan and, what is more, with public and private investment taken together over the next decade or so, we have a pipeline of £375 billion-worth of projects. This is the first time that this country has had a serious long-term plan for investing in infrastructure. If the hon. Gentleman believes in the long-term health of the British economy, he should support our national infrastructure plan, not criticise it.

[Helen Jones (Warrington North) (Lab)]

Can the Chief Secretary confirm that the cost of High Speed 2 has increased by £10 billion under this Government, and can he tell the House when he will get a grip on the costs of this huge infrastructure project?

[Danny Alexander]

I do not recognise those figures. Back in the spending round in June, I set a cap on the costs of HS2 at £42.6 billion. We intend that it will be delivered substantially under that budget. The question for Labour Members is whether they support this project or not. Frankly, given the enormous benefits it will provide for cities across the north, Labour Members should support the scheme, not constantly undermine it.

[Priti Patel (Witham) (Con)]

I welcome the Chancellor’s decision to establish the great eastern main line taskforce, so can my right hon. Friend give an assurance that in this era of record capital spending on infrastructure he will look favourably on investing in measures that the taskforce proposes?

[Danny Alexander]

I certainly will. I know that my hon. Friend has campaigned assiduously for this, as has my hon. Friend the Member for Norwich South (Simon Wright) and many other Members in that part of the country, and the ambition that the taskforce has set out is a good one. It is very much in keeping with the direction of travel in our national infrastructure plan, so I look forward with interest to the proposals from the taskforce and to taking them forward in due course.

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

I refer the Chief Secretary to the graph on page 6 of his new infrastructure plan, which looks like one of those dodgy “Labour can’t win here” graphics on a Lib Dem “Focus” leaflet. The graph apparently shows, as he has boasted this morning, that annual infrastructure investment is up under the coalition, but in the footnote it says that the Treasury had “challenges” putting the graph together and that the data are “not comparable” with the rest of the document. Will he agree to submit the figures to independent scrutiny by the UK Statistics Authority or the Office for Budget Responsibility?

[Danny Alexander]

After the shadow Chancellor’s performance last week, “Labour can’t win here” is a good description of the Chamber of the House of Commons.

Any Member of this House can submit statistics to the UK Statistics Authority, but I think that those statistics present an accurate picture of the level of overall infrastructure investment in this country. I welcome the strong interest that the right hon. Gentleman has shown in infrastructure and the commitment that he has made to taking these proposals forward. I wish that other members of his party showed a similarly constructive attitude.

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

5. How many of the lowest paid workers have been taken out of income tax since 2010.

[The Chief Secretary to the Treasury (Danny Alexander)]

This year 2.4 million low earners have been taken out of income tax since 2010. The number will increase further to 2.7 million next April, once the personal allowance reaches the £10,000 goal that we set in our election manifesto. By next year, the Government’s increases to the personal allowance will have reduced income tax bills by up to £705 a year for 26 million working people in this country.

[Annette Brooke]

The policy is important for a fairer society, and it incentivises work. Does my right hon. Friend share my aspiration to raise the tax threshold to £10,500 and achieve equality up to the age of 74, and, in due course, further increase the threshold for all age groups to incentivise both work and savings for lower and middle-income groups?

[Danny Alexander]

I very much share my hon. Friend’s ambition for this policy. We should consider a threshold of at least £10,500 in this Parliament, and that will be an objective of my Liberal Democrat party. It would be right for the age-related threshold and the main threshold, once they are aligned, to rise in tandem thereafter.

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

18. Does the Chief Secretary share the concerns of Citizens Advice that changes to the threshold are more than swamped by the changes to benefits in other areas?

[Danny Alexander]

No, I do not share that analysis. It ignores the fact that increases to the personal allowance, along with many of our reforms to the welfare system, increase substantially the incentives for people to go into work. The private sector has created a net 1.4 million jobs since 2010, so there are more job opportunities to go around too.

[Mr David Ruffley (Bury St Edmunds) (Con)]

The Chancellor last week published evidence showing that his bold cuts to corporation tax more or less paid for themselves because of the extra economic activity they generated. Can a similar piece of work not be done to demonstrate that further cuts in income tax will also pay for themselves in a similar way?

[Danny Alexander]

I think that is rather a good idea and I will take it up in the Treasury.

[Sheila Gilmore (Edinburgh East) (Lab)]

What does the Chief Secretary intend to do to help low-paid workers who are below the tax threshold? They will not gain from a further increase in the tax threshold and have seen previous gains wiped out by the loss of tax credits. How will it help low-paid workers?

[Danny Alexander]

I intend to stick to our economic plan, which is leading to economic growth, job creation and a sustainable economic recovery matched by rising productivity. That is the only way to raise living standards and that is what we intend to do.

[Mr Peter Bone (Wellingborough) (Con)]

Does the deputy Chancellor agree that we make a lot of the number of people taken out of tax, but do not say enough on how everybody benefits from the personal allowance increase? It is effectively a cut in income tax.

[Danny Alexander]

I am grateful, as always, to my hon. Friend for his question. He is absolutely right: it is a huge cut in income tax. In fact, over the course of this Parliament and before we take any decisions on next year’s Budget, we are already committed to spending £38 billion to reduce the income tax of working people. That is a massive commitment from this Government to cut income tax for the working people of the United Kingdom.

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

7. What recent representations he has received on reform of the Office for Budget Responsibility.

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

The Chancellor receives representations on a wide range of matters, including on the role of the independent Office for Budget Responsibility.

[Huw Irranca-Davies]

Labour has called for the OBR charter to be amended so that it can independently audit the manifestos of political parties in the run up to elections. Will the Minister now support that proposal?

[Mr Gauke]

We are cautious about that because, as a Labour spokesman in the House of Lords said in 2010:

“the OBR should not become embroiled in political controversy.”

I understand that the Labour party is seeking ways to improve its economic credibility. I suggest that a better, more obvious approach would be to change the shadow Chancellor.

[Charlie Elphicke (Dover) (Con)]

Does my hon. Friend agree that, while we are all indebted to the shadow Chancellor for this idea and so much more, the OBR is working well and should not become a political football or controversial?

[Mr Gauke]

My hon. Friend is absolutely right. The OBR is a very good change—one that I am pleased has finally won support across the House—and we do not want to jeopardise its credibility or reputation.

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

After those answers, we still do not know why the Chancellor is resisting our proposal to allow the OBR to audit all party spending and tax plans ahead of the general election. We know that in private the Chief Secretary agrees that it is a good idea, so what is the Chancellor so afraid of?

[Mr Gauke]

In 2010, the noble Lord Eatwell said that

“we on this side agree…to confine the activities of the OBR to consideration of the impact of government policies alone. I am sure it is right that the OBR should not become embroiled in political controversy.”—[Official Report, House of Lords, 8 November 2010; Vol. 722, c. 16-17.]

I think he made a reasonable point.

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

8. What estimate he has made of the cost to the economy of the leased pub company model.

[The Economic Secretary to the Treasury (Nicky Morgan)]

The Government recognise the important role that pubs play in communities. To support them, we ended the beer duty escalator and reduced the tax on a pint of beer at Budget 2013. The Department for Business, Innovation and Skills is currently considering responses to its consultation on pub companies and their tenants. This includes the independent economic analysis of the impact on pub numbers and employment levels from London Economics. BIS intends to publish this analysis in due course.

[Greg Mulholland]

The catastrophic effect of the financial engineering in the leased pubco model has been shown by the fact that one third of Punch and Enterprise pubs were disposed of in four years and that those two companies have more than £4 billion of debt. Considering the huge cost—hundreds of millions of pounds—both to the Treasury in lost tax and to the economy in money going abroad to foreign creditors, will the Treasury pledge today not to block attempts by BIS finally to introduce pubco reform, as was recommended by the Business, Innovation and Skills Committee?

[Nicky Morgan]

We need to let BIS respond to the consultation—it received 7,000 responses online and more than 1,100 written responses. In the meantime, I am sure that the hon. Gentleman, like me, will welcome the fact that pubs will benefit from the national insurance contributions £2,000 allowance next year and all the moves on business rates announced last week, including the £1,000 discount, which will help pubs.

[Kevin Brennan (Cardiff West) (Lab)]

My right hon. Friend the Member for Wentworth and Dearne (John Healey) and I did a lot of work in the last Government on the pub code, and I commend the hon. Member for Leeds North West (Greg Mulholland) for his work too. Why, after all this time, are the Government still dragging their feet on a matter that adds a great deal to the price of a pint for ordinary customers struggling with the cost of living?

[Nicky Morgan]

That was a rather churlish response, given that this Government ended the beer duty escalator and cut 1p per pint earlier this year. As I have said, there have been an awful lot of responses to the consultation, and it will take time to work through them, but interestingly the figures show that slightly more free-of-tie pubs are closing than tied pubs—about 4.5% compared with 4.3%—so I suggest the hon. Gentleman waits for the Department’s response.

[Sir Andrew Stunell (Hazel Grove) (LD)]

9. What fiscal steps the Government are taking to encourage the building of social housing.

[The Chief Secretary to the Treasury (Danny Alexander)]

I pay tribute to my right hon. Friend for his contribution on the housing issue while a Minister in the Department for Communities and Local Government, particularly on helping to ensure that the £4.5 billion affordable homes programme is on track to deliver 170,000 new affordable homes by March 2015—100,000 are completed so far—and to fund an extra 165,000 houses over three years from 2015.

[Sir Andrew Stunell]

That is a remarkable contrast with Labour’s disgraceful approach, which got rid of those houses. Will my right hon. Friend assure me that highly successful arm’s length management organisations, such as Stockport Homes, which just opened the 4 millionth social home in the housing stock, will have an opportunity, under the Chancellor’s proposals, to build more social housing to meet the urgent need of my constituents?

[Danny Alexander]

My hon. Friend is absolutely right, and I congratulate Stockport Homes on its success—I think it was recently voted one of the best landlords in the country. The 4 millionth social home was part of the Government’s commitment to reverse the trend under Labour, where the social housing stock in this country fell by 421,000. Over the term of our housing plan, we will build at least 315,000 new social homes, and he will also have noted that in the autumn statement we announced an increase of £300 million in headroom under the housing revenue account precisely to allow local authorities to build more social homes in this country.

[Sarah Champion (Rotherham) (Lab)]

24. The Government have presided over the lowest level of house building since the 1920s—[Interruption.] Is it not clear that we need bold action to boost housing supply, especially social housing, and to deal with housing demand?

[Danny Alexander]

Insofar as I as I could hear what the hon. Lady was saying—

[Mr Speaker]

Order. Insofar as the Chief Secretary was having trouble hearing what the hon. Lady was saying, it was because of extreme and frankly discourteous noise from his own Benches, a fact of which I know the Government’s deputy Chief Whip will have taken full note.

[Danny Alexander]

Wherever the noise was coming from, I should say that, of course, house building and construction is important in every sector, social and private. That is why, in the autumn statement last week, we announced both the increase in the housing revenue account—something for which my party, the Liberal Democrats, has campaigned for some time—and the extra funding for large sites to unlock another 250,000 new homes in the private sector.

[Robert Halfon (Harlow) (Con)]

As well as supporting the building of social housing, will my right hon. Friend continue to support the right to buy, given that over 30,000 tenants have benefited from right to buy, including many in Harlow?

[Danny Alexander]

The right to buy is an important part of the coalition Government’s housing programme. It has been substantially improved by the commitment to one-for-one replacement for social housing when each house is sold. If that policy had been in place under the previous Government, we would not have seen a net loss of 421,000 social homes throughout their time in office.

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

Why is it that, over the last 18 months, 11,000 homes have been sold under right to buy, but fewer than 2,000 replacements have been started? That does not seem to me to be one-for-one replacement. How does the Minister explain it?

[Danny Alexander]

Local authorities—[Interruption.]

[Mr Speaker]

Order. I said a moment ago that the hon. Member for Rotherham (Sarah Champion) should be heard. The Chief Secretary similarly must be heard.

[Danny Alexander]

We have made a commitment to one-for-one replacement. Housing starts, under the planning system, cannot be started instantly, which is surely a lesson that the hon. Gentleman should have learned during his many years in this House. The commitment is there and every one of those homes sold will be replaced by a newly built home.

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

10. What assessment he has made of the current level of the national deficit.

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

Last week the Office for Budget Responsibility forecast public sector net borrowing on an underlying basis to be £111 billion, or 7.3 per cent. of GDP in 2013-14, down from 11 per cent. of GDP in 2009-10, the highest deficit in our peacetime history. By 2018-19 the OBR forecasts that the UK will be running a small surplus.

[Dr Coffey]

I thank my hon. Friend for that terrific answer. Does he agree that calls to abandon the Government’s long-term economic plan and to borrow and spend more would mean higher taxes and mortgage rates going up for hard-working families in Suffolk Coastal?

[Mr Gauke]

I thank my hon. Friend for her terrific question. Yes, I agree.

[Alison McGovern (Wirral South) (Lab)]

When the Chancellor made all his cuts in his emergency Budget, he said that it was because he had to close the deficit by the end of this Parliament. We said that that would be a false economy and that it would not work. In the autumn statement, the Chancellor agreed with us. What do they have to say for themselves now?

[Mr Gauke]

I am not sure that the hon. Lady heard the Chancellor correctly if that is what she thinks he said. The reality is that we have to get the deficit down and we have gone through two years of great challenges in the economy. Our argument was that because of those challenges it was more difficult to get the deficit down. Labour argued that the economy could not grow while getting the deficit down. We were right; they were wrong.

[Richard Fuller (Bedford) (Con)]

The record deficit left by the last Labour Government was, in essence, a tax on the future opportunities of our children and grandchildren, denying them opportunities that our generation was able to have. Will my hon. Friend assure the House that he will not repeat the mistakes of the last Labour Government and that he will prioritise further reductions in the deficit so that our grandchildren can have the same futures that we have enjoyed?

[Mr Gauke]

My hon. Friend is absolutely right. It is irresponsible to future generations if we do not take action to reduce the deficit. The approach we had from the party—[Interruption.] The shadow Chancellor has just said that the deficit is going up. He has been saying that all along, and I am afraid he is just plain wrong.

[Ian Lucas (Wrexham) (Lab)]

In 2010, the Chancellor of the Exchequer told us that the deficit would be gone by 2015. Why should we believe him this time?

[Mr Gauke]

This is coming from the party that has opposed every single measure we have taken to reduce the deficit. If we had taken the approach that the Labour party advocated, we would have borrowed a further £200 billion. That is not responsible or fair on future generations; that would put our economy at risk.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

11. If he will introduce limits on debt interest deductions used by private equity companies to reduce their corporation tax liabilities.

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

The UK tax system, as with those of most other OECD countries and in accordance with international accounting standards, gives reductions for interest as a business expense. The UK already has a variety of defences that protect against excessive interest deductions. These include the worldwide debt cap, transfer pricing rules, anti-arbitrage rules, unallowable purpose rules, distribution rules and withholding tax on interest under certain circumstances.

[Michael Connarty]

I thank the Minister for that extremely interesting answer. We all use Boots, but is he aware that Alliance Boots, which is now equity-owned, was funded by £9 billion of loans, which allowed it to write off £1 billion of corporation tax? There is now a complaint by War on Want and Change to Win at the OECD about the company breaking the OECD’s rules by engaging in self-dealing, which allowed the owner of the new company, Stefano Pessina, to make £400 million in profit. What will the Government do about that fraud, as well as the abuse of the taxpayer’s money?

[Mr Gauke]

I am not going to comment on individual cases, but as I have said, there are a number of protections in the UK system to stop abuse in this area. We have strengthened the capacity of Her Majesty’s Revenue and Customs, and it is also worth pointing out that the UK has led the way in the OECD’s work on base erosion and profit shifting, which is also looking at interest deductibility.

[Ian Swales (Redcar) (LD)]

The previous Government left a system that encourages offshore ownership of UK business, with highly geared structures and foreign interest rates as high as 16%. Many countries limit allowable foreign interest deductions; will the UK look at doing the same?

[Mr Gauke]

Of course, we keep all these matters under review, but as I mentioned a moment ago, there are a number of protections in the UK tax system. However, we continue to monitor this area.

[Jeremy Lefroy (Stafford) (Con)]

12. What recent steps he has taken to regulate financial services.

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

Following the failure of the previous Government’s tripartite system, this Government have created a new architecture for financial regulation. The Bank of England has responsibility for financial stability, and two new regulators—the Prudential Regulation Authority and the Financial Conduct Authority—have been set up with clear responsibilities for prudential and conduct regulation.

[Jeremy Lefroy]

Good regulation can only enhance the vital contribution that financial services make to the employment, tax revenues and balance of payments of our country, but constituents of mine find that there is still insufficient protection for so-called non-sophisticated investors when they are sold products without sufficient explanation. What is the Financial Secretary doing to improve protection for customers and to ensure that the Financial Ombudsman Service is their champion?

[Sajid Javid]

My hon. Friend is right to highlight the contribution of the financial sector. Last year it paid over £60 billion in taxes and employs over 1 million people throughout the country. Where consumer detriment occurs, the Financial Ombudsman Service provides a valuable service, providing swift resolution to complaints, but of course we must stop consumer resolution occurring in the first place. That is why we have created a new regulator—the FCA, a regulator with real teeth.

[Mr Iain McKenzie (Inverclyde) (Lab)]

23. Will the Financial Secretary commit to looking more at financial services on the high street—I speak of high-cost credit—and to looking at more than just imposing a cap, including such business practices as no affordability checks, encouraging roll-overs and advertising aimed at the most vulnerable in our communities?

[Sajid Javid]

I agree with the hon. Gentleman: he is right to raise this important issue. I am sure that, like me, he will welcome the action we have already taken to transfer regulation from the Office of Fair Trading to the FCA and the consultation the FCA is holding on new rules, including on continuous payment authorities, roll-overs, advertising and strict affordability checks.

[Sir Peter Tapsell (Louth and Horncastle) (Con)]

What view should be taken of banks with a record of misbehaviour that are now promising their shareholders that they are considering moving their domicile away from Britain because they fear that the regulatory proposals by Vickers will limit their freedom to misbehave in the future?

[Sajid Javid]

The action we have taken on the back of the report issued by the Independent Commission on Banking is the right one, and I think it will be very hard indeed for the banks to try to avoid the new regulations and the new structure of banking that we are bringing in.

[Sammy Wilson (East Antrim) (DUP)]

The Minister will be aware of the scandalous behaviour highlighted in the Tomlinson report, in which RBS was alleged to have bankrupted customers in order to seize their assets. What action does he intend to take, first, to obtain redress for those affected and, secondly, to regulate the banks so that this does not happen again? Will he assure us that any discussions on this matter will include Ulster bank, which it has been alleged was at the head of queue when it comes to such behaviour?

[Sajid Javid]

The hon. Gentleman raises an important issue. He will know that the Tomlinson report is independent—it is not a Government report—but the Government and the FCA are taking it very seriously. The report raises some very serious allegations. The FCA has already committed to look carefully into them and if they are proven, it will take appropriate action.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

With the Government now in chaos over the banking Bill, with one U-turn following another, does the Minister agree that Labour was right all along to insist on a tougher licensing regime for senior bankers? Why were the Government so keen to resist Labour’s amendments, only to be defeated?

[Sajid Javid]

I have to say that I do not recognise the description that the hon. Lady has attached to the banking Bill. When she refers to Labour being right all along on banking regulation, perhaps she is referring to the changes that Labour made 13 years ago, which my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), then shadow Chancellor, described at the time as “a field day” for “spivs and crooks”.

[Ann McKechin (Glasgow North) (Lab)]

13. What representations he has made to the EU on the proposed cap on bank bonuses.

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

In September, the Government launched a legal challenge to specific remuneration rules under the EU capital requirements directive IV. These rules, rushed through without any assessment of their impact, will undermine the significant progress we have made to align remuneration with risk by pushing up fixed remuneration rather than pushing it down. In our view, regulating remuneration in this way goes beyond what is permitted under the EU treaty.

[Ann McKechin]

I am grateful to the Minister for his answer, but does he not agree that rather than using taxpayers’ money to protect the incomes of investment bankers earning more than £1 million per annum, that money would be better spent on enforcing our minimum wage legislation?

[Sajid Javid]

I am not going to take any lectures from the Labour party on bankers’ bonuses. Under Labour, bankers’ bonuses went up fivefold and peaked at £11.5 billion in 2007-08. At the very same time, the Labour Government were using taxpayers’ money to carry out the world’s biggest banking bail-out. Last year, the bonuses were down 85%.

[Christopher Pincher (Tamworth) (Con)]

Given what Robert Peston has described as the “stupendous mismanagement” of the Co-operative bank, which has exposed creditors to huge losses, does the Financial Secretary agree that no bonuses should be paid at that bank, and that anybody who has received bonuses or benefits from it should consider paying them back?

[Sajid Javid]

I agree with my hon. Friend. I understand that the Co-op bank has made donations to at least three members of the shadow Treasury team. It has been reported that the shadow Chancellor used his £50,000 donation from the Co-op group last year to hire a speaker—

[Mr Speaker]

Order. That has absolutely nothing to do with the Minister’s responsibility for a proposed cap on bank bonuses. I think he probably knew that; if he did not, he certainly does now.

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

14. What recent comparative assessment he has made of trends in real wages in the UK and in similar economies.

[The Economic Secretary to the Treasury (Nicky Morgan)]

Last year, UK take-home pay was the highest in the G7 and the third highest in the OECD. The best way of raising living standards is to deal with the economic crisis so that families can find work in a growing economy.

[Tom Blenkinsop]

The United Kingdom now has the highest rate of inflation in the European Union, and has suffered the second largest fall in wages in the G20 since the Government took office. In my constituency, women’s gross average weekly wages have fallen by £12.30 a week since May 2010. Is this a deliberate attack on wages by the Government, or is the Chancellor simply incompetent?

[Nicky Morgan]

I find it unbelievable that the hon. Gentleman really has the gall to stand up and ask that question. I wonder whether he agrees with his right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne), who said:

“From 2004 onwards, beneath the miraculous arc of rising average incomes, families on ‘median incomes’—millions of workers grafting as small employers, sales assistants, cashiers, construction and factory workers—were feeling the strain...people were working just as hard as ever—but were not getting on”.

That was happening under a Labour Government.

[Neil Carmichael (Stroud) (Con)]

Does the Minister agree that the real achievement of this Government has been the improvement in education, skills and the provision of engineers—among others—so that we can raise wages as a result of real growth in the economy?

[Nicky Morgan]

I entirely agree with the hon. Gentleman. As the Office for Budget Responsibility has said,

“Productivity growth is the only sustainable source of real income growth in the long term”.

If we do not have a skilled work force, employers will not come here and therefore will not be employing people, which means that we will not experience the increase in productivity that would feed through into higher wages.

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

22. I am bitterly disappointed by the Chief Secretary’s response to my hon. Friend the Member for Edinburgh East (Sheila Gilmore). He basically said that people on low wages were being written off. [Interruption.] If the Chief Secretary checks Hansard tomorrow, he will see that. In my area, wages are 24% lower than the national average. These people do not qualify for the—

[Mr Speaker]

Is that the end of the hon. Gentleman’s question? Has he reached the end of the sentence?

[Mr Brown]

My apologies, Mr Speaker. The question to the Minister is this: what additional support can her Government give people in low-wage economy areas?

[Nicky Morgan]

I do not recognise the hon. Gentleman’s description of the Chief Secretary, who would never say such a thing. Coming from a member of the party that abolished the 10p tax rate, which most benefited low-paid workers, that is a real nerve. I repeat that people on the minimum wage have already seen their income tax halved under this Government. With our policies of free school meals, fuel duty and council tax freezes, and increases in child care allowance and the personal allowance threshold, we are doing all that we can to help people on low incomes. However, the most important thing is to get the economy growing so that wages can rise.

[Chris White (Warwick and Leamington) (Con)]

15. What steps he has taken to increase youth employment.

[The Economic Secretary to the Treasury (Nicky Morgan)]

The number of young people receiving jobseeker’s allowance is 93,000 lower than in May 2010, and youth unemployment is falling, although the Government recognise that more can be done. As my right hon. Friend the Chancellor announced last week, we are abolishing employers national insurance contributions for those aged under 21, funding jobcentres to help 16 and 17-year-olds who are not at school to find work with training, and piloting a new mandatory skills scheme for jobseekers aged between 18 and 21 who do not have qualifications in basic maths and English.

[Chris White]

Is my hon. Friend aware that in Warwick the number of young people who are not in education, employment or training has almost halved in the last three years, from 4.6% in 2010 to 2.8% in 2013? That is a move in the right direction, but what other steps are being taken to reduce the number of NEETs and increase the number of young people in work and training?

[Nicky Morgan]

I congratulate my hon. Friend. I am sure that the fall is a result of much work in his constituency, doubtless led by him. He is a doughty champion of his constituents.

The Government are also investing in apprenticeships. Over half a million more are being created, including 20,000 more high-level apprenticeships, as was announced last week. The Youth Contract is helping up to half a million young people to take up employment and education opportunities, and in the three months since September the number of 18 to 24-year-olds in employment rose by 46,000. We know that there is more to be done, but things are moving in the right direction.

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

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

[The Chief Secretary to the Treasury (Danny Alexander)]

The core purpose of the Treasury is to ensure the stability and prosperity of the economy.

[Mr Watts]

The Chief Secretary seems to be spending most of his time feathering his own nest in his constituency, but can he take some time out from that important work to confirm that energy bills will go up by more than £50 and that energy companies, who are making fat profits, will not pay one penny to reduce bills?

[Danny Alexander]

I can confirm to the House that the action the Government are taking will ensure there is £50 off people’s bills this year. That is as a result of serious-minded work to ensure we reduce the pressure the Government are putting on people’s bills. That includes taking the warm homes discount, which helps 2 million low-income people in this country, on to the Government’s balance sheet. That is the right option, compared with the complete con that unfortunately is still being peddled by the Opposition.

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

T3. Will the Financial Secretary provide any more detail on last week’s announcement that the Government will later this month provide payment for people who bought pre-September 1992 with-profits annuities from Equitable Life?

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

At Budget 2013 the Chancellor announced that the Government would make ex gratia payment to Equitable Life with-profits annuitants who were excluded from the Equitable Life payment scheme because their annuity began before September ’92. Thanks to the legislation this Government have brought forward, we are now ready to make those payments. Today, I can confirm that over 9,000 people will receive lump-sum payments of £5,000 each next week, before Christmas, and a further 450 in receipt of pension credit will receive an additional £5,000 each.

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

On Thursday the Chancellor claimed in this House that living standards are rising, on Friday the Institute for Fiscal Studies said that living standards are falling, so who is right?

[Danny Alexander]

First, may I say what a great pleasure it is for those on this side of the House to see the shadow Chancellor in his place, and may I join him in condemning the unattributable briefing against him from the people behind him—something that never happened in his day?

The whole reason millions of Britons—[Interruption.]

[Mr Speaker]

Order. At the moment I cannot hear the Chief Secretary’s reply, but I intend to do so, however long it takes; it is very straightforward.

[Danny Alexander]

I would like you to be able to hear it as well, Mr Speaker.

The whole reason millions of Britons are under financial pressure is that Labour’s economic mess cost every household in this country £3,000. Because our plan is working, we can cut income tax, we can cut fuel duty, we can put the triple-lock on pensions, we can freeze council tax and we can take money off people’s energy bills. The only way to raise people’s living standards in this country is to have a sustainable economic recovery.

[Ed Balls]

The right hon. Gentleman is as bad as the Chancellor. Why can he not admit the truth: this Government’s economic policy is not working for working people? That is the truth. This is what the IFS said after the autumn statement—[Interruption.] Members on the Government Benches do not want to hear it. People are worse off under the Tories; that is the truth. Here is what the IFS said:

“real median household incomes will be substantially lower in 2015-16 than in 2009-10.”

And where is the Chancellor? He is in Brussels, where the Government are taking legal action to stop a cap on bank bonuses. How out of touch can they get? Let me ask the Chief Secretary: are the Liberal Democrats really right behind the Conservatives on this one, too—on stopping the bank bonus cap?

[Danny Alexander]

I know that the shadow Chancellor has made one change since last week. He has appointed a new special adviser on hand gestures: Greg Dyke. [Interruption.] That is the gesture the shadow Chancellor’s colleagues are making every time they hear him in this House of Commons. The fact is that the Liberal Democrats, as part of this coalition Government, are delivering a sustainable economic recovery. We are part of a Government who are delivering £700 for every single working person in this country and who are delivering a proactive approach in the European Union, including by ensuring that the integrity of the European treaties is maintained, and that is what this legal action is all about.

[Duncan Hames (Chippenham) (LD)]

T4. I welcome the Chief Secretary to the Treasury’s ambitious plans for capital investment for a stronger economy that were set out last week. He will have heard me urging the Prime Minister to make up for the previous Government’s failure to rebuild Wiltshire college’s Chippenham campus. Could my right hon. Friend see his way clear to making that investment, so as to equip our young people with the skills that will enable them to get on in life?

[Danny Alexander]

I know how important that project is for the college that my hon. Friend mentions. I can confirm that the Skills Funding Agency has told the college that it is prepared to make grant funding available for the project, subject to some additional assurances being received. Those assurances are being sought this week, and the agency hopes to respond to the college by the end of this week.

[Kerry McCarthy (Bristol East) (Lab)]

T2. Housing costs represent one of the biggest pressures on the cost of living, and a new study by Oxford Economics suggests that, by 2020, house prices will have risen by 35% and rents by 39%. What are the Government going to do about that?

[Danny Alexander]

I know that the hon. Lady takes a close interest in these matters, and she will have seen the Office for Budget Responsibility’s forecasts, which suggest that even by the end of the forecast period, house prices in this country will be below their level at the peak of the financial crisis in real terms. The action we are taking includes the large-scale investment in affordable housing that I described earlier, which will help people with those problems.

[Mr Simon Burns (Chelmsford) (Con)]

T6. Will the Minister update the House on the support that the Government are giving to small businesses?

[Sajid Javid]

We are committed to ensuring that small and medium-sized enterprises have the access to finance that they need, and we were pleased with the recent announcement by the Bank of England and the Treasury on refocusing the funding for lending scheme on to SMEs from next year. My right hon. Friend will also know that, in the autumn statement, we announced further improvements in the lending appeals process and a consultation on requiring banks to share more information on SME lending.

[John Cryer (Leyton and Wanstead) (Lab)]

T5. What assessment has the Chief Secretary to the Treasury made of the relationship between consistently falling real wages and the rapid growth of zero-hours contracts?

[Danny Alexander]

As the hon. Gentleman knows, the Secretary of State for Business, Innovation and Skills has been acting on zero-hours contracts; it is a subject that is currently under review in his Department. I have made a strong assessment of the connection between sustainable economic growth of the kind that this Government are delivering and the availability of jobs in the private sector, 1.4 million of which have been created since 2010.

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

T7. Given that the autumn statement contained further encouragement for companies to get involved in shale gas production through lower taxes, is there any chance of the Government giving further encouragement to local communities to accept the shale gas industry by offering somewhat more than the 1% that is now on the table?

[Danny Alexander]

My hon. Friend makes an important point. The shale gas industry has the potential to bring jobs and growth to communities across the country. In addition, the industry will give £100,000 to communities in which fracking is taking place, as well as 1% of all production revenues. However, we will of course listen to any suggestions from my hon. Friend about how that regime could be improved.

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

Does the Chief Secretary to the Treasury accept that, since the financial crash, productivity in the UK has fallen 5% but has gone up 8% in the United States, and that lending to business is down 13% and lending to mortgages is at 2008 levels? What is he doing about this? It is too little, too late.

[Danny Alexander]

The hon. Gentleman is right in his description of the fall in productivity in this country. That is related to the fact that this country was hit the hardest of almost any country in the world by the financial crisis, precisely because of the unpreparedness of his party. On the whole, however, the fact that a significant number of jobs have been created in our economy in recent years, even at the cost of falling productivity, represents a preferable balance from a welfare point of view.

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

T8. Businesses across the country will welcome the news that rate rises are to be capped at 2% and that small businesses will receive a £1,000 discount on their rate bills. Independent retailers in my market towns of Stratford, Henley-in-Arden, Shipston-on-Stour and Studley have been lobbying me on that. How many businesses nationwide will benefit from that, and how much will they save in total?

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

We estimate that about 300,000 shops, pubs and restaurants in England will benefit from the £1,000 business rates discount, and that in aggregate the measures announced in the autumn statement will save businesses around £1 billion in business rates, although the amounts will of course vary from business to business.

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

The Chief Secretary might like to reflect on the very poor answer he gave my right hon. Friend the Member for Wentworth and Dearne (John Healey) earlier, because I have in front of me Office for National Statistics Table 1A, which clearly shows that infrastructure construction output to September 2013 has fallen by 15%. What went wrong, or is he seriously disagreeing with the Office for National Statistics?

[Danny Alexander]

What this—[Interruption.] The hon. Member for Islwyn (Chris Evans) should pipe down. What this Government recognise is that infrastructure relies on both public and private sector investment. The Labour party seems to have forgotten that the private sector is involved in delivering infrastructure. Total infrastructure investment in this country is higher in this Parliament than it was in the last.

[John Stevenson (Carlisle) (Con)]

T9. Individuals, households and businesses in my constituency must live within their means. Does the Chief Secretary agree that that is exactly what Governments need to do and that one of the reasons for our current budget deficit is the fact that the previous Government did not run a surplus in the good years?

[Danny Alexander]

I wholeheartedly agree with my hon. Friend that Governments must live within their means. It is because the previous Labour Government did not do so that we have had to make so many difficult decisions to get this country back on the right track, which is what we are doing.

[Ian Paisley (North Antrim) (DUP)]

Her Majesty’s Exchequer and the Republic of Ireland’s Revenue services lose hundreds of millions of pounds every year as a result of fuel fraud. When will the Government, in partnership with the Republic of Ireland, implement a new fuel marker to frustrate the criminals engaged in that theft?

[The Economic Secretary to the Treasury (Nicky Morgan)]

The hon. Gentleman will know that we have been working hard on that. I recently visited Northern Ireland to see for myself the impact that a new fuel marker would have on the illicit trade. The rebate of fuel marker group has completed its analysis and made its recommendations, and the respective revenue authorities expect to make an announcement shortly. I shall ensure that he is kept up to date.

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

T10. Trojans sports club in my constituency is a brilliant example of a multi-sports club that encourages participation in a wide range of sports. What steps is my hon. Friend taking to help multi-sports clubs, which sometimes feel disadvantaged compared with single-sports clubs?

[Nicky Morgan]

The Government want to support all sports clubs and encourage as many people as possible to participate in grass-roots sports, which is why we recently announced changes to the community amateur sports clubs regime that we hope will benefit up to 40,000 sports clubs in this country. I hope that the club in my hon. Friend’s constituency will take advantage of that. One of the best things we have done is extend corporate gift aid so that local businesses that donate to sports clubs will be able to offset their donations against their corporation tax bill, which I hope will make a real difference to their income.

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

I ask the Chief Secretary to ponder the fact that when I talk with my constituents, the thing they always talk about first is, “Housing, housing, housing.” When are we going to give young people, and increasingly older people, the chance that many of us in this House have had to get their own homes, because we are not building enough houses? He knows that is true—get on with it.

[Danny Alexander]

In many ways I agree with the hon. Gentleman. My constituents say exactly the same thing to me. That is why we are reforming the planning system to enable housing to be built more quickly, why we are increasing substantially the number of social homes in this country, compared with his party’s lamentable record, and why we have introduced the Help to Buy scheme to help people who cannot afford a large deposit to get on the housing ladder, all of which is leading to new houses being built in this country.

[Mr Douglas Carswell (Clacton) (Con)]

Narrow measures of money show that there has been no significant growth in the money supply. However, broader measures, such as the Divisia money measure, show that there has been a significant and sharp increase since late 2011. Does that concern the Treasury, and can my hon. Friend assure the House that the monetary authorities are not cooking up yet another credit-induced boom?

[Sajid Javid]

My hon. Friend is well versed in these matters and makes a significant contribution to the debate on monetary policy. He will know, therefore, that monetary policy is determined by the independent Bank of England, but I will ensure that Governor Carney is made aware of his concerns.

[Barry Gardiner (Brent North) (Lab)]

The World Bank and the independent TEEB—the Economics of Ecosystems and Biodiversity—report both state that 7% of global GDP could be lost by the devaluation of natural capital by 2050. Will the Government investigate what percentage of UK GDP is being lost through the depletion of natural capital?

[Danny Alexander]

The hon. Gentleman makes an incredibly important point. We in the Treasury and this Government have been examining the issue of natural capital, which we have taken forward in a way that previous Governments have not. I will certainly get the Minister responsible to reply in more detail on the specific point that the hon. Gentleman raises, because it is very important.

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

In the autumn statement, in addition to very welcome changes to tax and spending in relation to housing, the Government announced a proposal to look at local authorities’ opportunities to develop much more public sector housing. How soon will that initiative see the light of day?

[Danny Alexander]

I am grateful to my right hon. Friend, who has been a doughty campaigner on these issues for many years. I am sure that he welcomes the increase in housing revenue account headroom for which local authorities will be able to bid to build more houses. We have also undertaken to carry out a wider review of this issue, and I will set out the terms and the process for that in the coming weeks.

Universal Credit

Tuesday 10th December 2013 Commons Chamber

12:35

[Rachel Reeves (Leeds West) (Lab)]

(Urgent Question): To ask the Secretary of State for Work and Pensions if he will make a statement on universal credit.

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

This is a major and challenging reform which will transform the welfare state in Britain for the better, ultimately accounting for some £70 billion of benefit spending each year, with 3 million people better off.

Rightly for a programme of this scale, the Government’s priority has been, and continues to be, its safe and secure delivery. This has been demonstrated throughout our approach to date, which started with the successful launch of the pathfinder in April 2013 and has continued with the controlled expansion of universal credit, starting as planned in October 2013 and running through to spring 2014. What is more, we are already pushing ahead with the cultural and business change required as part of universal credit. We are retraining 25,000 Jobcentre Plus advisers while implementing digital jobcentres and rolling out the new claimant commitment, which is now on track to be in place in half of all jobcentres by the end of the year, and across the country by the spring.

Yesterday I announced and discussed at length with the Work and Pensions Committee our plans for the next stage of implementing universal credit, following my Department’s work over recent months with the Government Digital Service to assess delivery options. That work has explored the use of the latest digital technologies and assessed the utility of the work we have done to date—[Interruption.]

[Mr Speaker]

Order. The Secretary of State is well able to make himself heard, and he is doing so, but it is frankly discourteous, when he is giving a statement to the House, for it to be peppered with constant heckling. Members will have the chance to question the right hon. Gentleman, but please do him the courtesy of hearing what he has to say.

[Mr Duncan Smith]

The conclusions of this work were set out yesterday. First, as part of the wider transformation in developing digital services, the Department will further develop the work started by the GDS to test and implement an enhanced digital service. This will be capable of delivering the full scope of universal credit and make provision for all claimant types.

Meanwhile, we will expand our current service and develop functionality so that from next summer we progressively start to take claims for universal credit from couples and, in the autumn, from families. Once safely tested in the 10 live universal credit areas, we will expand the roll-out to cover the north-west of England. This will enable us to learn from the live running of universal credit at scale and for more claimant types, including the more vulnerable and the more complex, while extending to more people the positive benefits of universal credit.

It is important to note that the information that we are getting back from the pathfinder tells that 90%—I stress, 90%—of people are claiming universal credit online and that 78% are confident about their ability to budget with monthly payments. It also tells us— [Interruption.] I know that Labour Members do not want to hear about this, because they have been wrong on welfare reform from day one. The majority of people who are on the programme tell us that it pays to work, with 65% to 70% reporting that universal credit offers better work incentives than jobseeker’s allowance and is less complex—upheld by the 65% who agreed that it was easier to understand their obligations as a result.

As we progress with the future delivery of this flagship programme, we will continue the same careful approach—test, learn, implement—as it is rolled out through the regions. On this basis—[Interruption.] Actually, I am going to pick this point up. The shadow Chancellor is sitting on the Opposition Front Bench. I will tell you, Mr Speaker, what we will not do: we will not take any lessons from the party that rolled out tax credits early. It rushed the delivery of tax credits, which cost £5 billion immediately and 400,000 people suffered directly as a result.

Once we have closed down the new claims, we will test, learn and implement—unlike Labour when it rolled out its information technology programmes. The new claims to the legacy benefits that universal credit replaced have been closed down, with the vast majority of the remaining legacy case load moving to universal credit during 2016 and into 2017. Final decisions on these elements of the programme will be informed by the development of the enhanced digital solution.

[Rachel Reeves]

On 5 September, the Secretary of State told the House:

“We will deliver this in time and in budget”.—[Official Report, 5 September 2013; Vol. 567, c. 472.]

On 14 October, he said:

“Universal credit will roll out very well and it will be on time and within budget.”—[Official Report, 14 October 2013; Vol. 568, c. 429.]

And just last month, on 18 November, he said that

“universal credit will roll out and deliver exactly as we said it would.”—[Official Report, 18 November 2013; Vol. 570, c. 947.]

The Secretary of State must answer these questions. How on earth can this be on time when in November 2011 he said that

“all new applications for existing benefits and credits will be entirely phased out by April 2014”,

but we now learn that this milestone will be reached only in 2016? Will the Secretary of State confirm that this is a delay of two years? Will he also confirm that, even by 2017, 700,000 people will not be on universal credit?

How can the Secretary of State say that universal credit will be on budget when, even by his own admission, £40.1 million is being written off on IT costs? What budget heading was that under? The Secretary of State also revealed yesterday that another £90 million will be written off by 2018. Does this mean an additional IT system is having to be built?

The reset exercise began in February. On 18 November, the Secretary of State still claimed that there would be no delay to universal credit. At what point did he learn that there would be a delay of two years?

The underlying problem is surely that the Secretary of State has not resolved key policy decisions before spending hundreds of millions of pounds of taxpayers’ money on an IT system.

One of the issues that has a fundamental impact on whether people are better off in work is free school meals; so which recipients of universal credit will get free school meals—some, none or all?

The Secretary of State is in denial. Doubtless, he will deny that he is in denial in a moment’s time. But we all know that until he fesses up, no one will have any confidence in his management of this programme. It is no surprise that a source close to the Chancellor says:

“There are some ministers who improve in office and others, like IDS, who show that they are just not up to it”.

[Mr Duncan Smith]

Let me deal with a couple of the points raised by the hon. Lady. I said all along, and I repeat, that this programme essentially is going to be on time. By 2017, some 6.5 million people will be on the programme, receiving the benefits.

Let me deal with the hon. Lady’s comments about what is written down and what is written off. For somebody who was supposed to have been working for the Bank at one point, she does not seem to know the difference between equipment of no use that is being written off and equipment—this is the case in any company over a period of time—that is written down each year. That is exactly right. If she drives a motor car, I wonder whether she has noticed that, over a period of years, its value actually depreciates. Perhaps she has not; perhaps she is still trying to sell the car for the same value she bought it for.

The reality is very simple. Let us take the legacy systems right now. The legacy computer systems that are working were written down years ago, but they are still delivering value to the Government by delivering benefits. Maybe the hon. Lady needs a teach-in about the difference between written-off equipment and written-down equipment.

I want to deal with one other point that is quite clear and is the reality. We have been clear—[Interruption.]

[Mr Speaker]

Order. Mr Irranca-Davies, you have a beautiful voice, with very mellifluous tones. One disadvantage for you is that when it is loud, I can very easily hear it—some miles off, I think. We need to hear a bit less of it for the time being.

[Mr Duncan Smith]

We do not take any lessons from the Opposition about computer failure: the tax credit system crashed, the health system crashed and they lost billions and billions of pounds while the shadow Chancellor was at the right hand of the then Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown).

I might also say that although the Opposition have asked an urgent question on universal credit today, the truth is that they are themselves in denial about the legacy of welfare failure they left us. Welfare spending increased by 60% in real terms under the previous Government—£3,000 a year for every household in Britain. More than £170 billion was spent on tax credits alone. There were 5 million on out-of-work benefits, and nearly a quarter of working-age people were economically inactive.

This Government have already saved £11 billion on the welfare bill, £48 billion over this Parliament. The Office for Budget Responsibility has confirmed that welfare bills will fall in real terms to below the level at which we received them. Employment is up by more than 1 million. More households are now in work than ever before, with the lowest proportion of children living in workless households since records began. Child poverty is at its lowest level since the 1990s, and pensioner poverty is at its lowest for almost 30 years.

[Mr Philip Hollobone (Kettering) (Con)]

Is not a phased roll-out of the new universal credit system far better than incurring the £2.8 billion of waste through fraud, error and overpayment incurred by the previous Government in their tax credit system?

[Mr Duncan Smith]

My hon. Friend is absolutely right. The Opposition want to talk about universal credit, but the reality is that, unlike tax credits, it will roll out without damaging a single person, and it will also deliver massive benefits, under control by our test, learn and implement approach. The waste that we inherited was the waste of people who did not listen, rushed programmes and implemented them badly.

[Dame Anne Begg (Aberdeen South) (Lab)]

The Secretary of State promised that universal credit would be digital by default—it isn’t; he promised that all new claims would be on universal credit by May 2014—they won’t; and he then promised that 10 areas would be assessing the simplest claims by the end of October—they aren’t; so why should anyone believe him when he says that the delivery of universal credit is now on track?

[Mr Duncan Smith]

The proof of this will be as we roll out the programme. I say to the Chair of the Select Committee that we intervened early when there were problems. We did not let this programme roll out so that anybody was damaged, unlike the Government whom she served, who rushed IT programmes into service, damaged vast numbers of people and wasted a huge amount of money. I wonder whether the Chair of the Work and Pensions Committee ever asked the shadow Chancellor or the previous Prime Minister why they did that.

[Ian Swales (Redcar) (LD)]

Will the Secretary of State confirm that he has seen the Public Accounts Committee report of 7 November and will take notice of its recommendations, which should be helpful in executing this vital project?

[Mr Duncan Smith]

I can tell my hon. Friend that all the recommendations have already been implemented. They were drawn from our own reports internally—both the red team report that I instigated and the PricewaterhouseCoopers report—and all these changes have been made. This roll-out programme bears complete authority on the basis of that.

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

Yesterday, the Secretary of State claimed that 700,000 people would now not be expected to join universal credit by 2017 because he was having a rethink and wanted to introduce things more slowly for vulnerable claimants. However, on 18 November—three weeks ago—he said to my hon. Friend the Member for Aberdeen South (Dame Anne Begg):

“As I said to the hon. Lady when I appeared in front of her Committee in July, we have been very clear that we would roll out universal credit on the plan and programme already set out.”—[Official Report, 18 November 2013; Vol. 570, c. 946.]

Which is it?

[Mr Duncan Smith]

The funny thing about the Opposition is that they do not know what they want. They say that they support universal credit—[Interruption.]

[Mr Speaker]

Order. I know that there are strong views on this matter, but the House must calm down. Courtesy is necessary on both sides. Let us hear the Secretary of State.

[Mr Duncan Smith]

Do the Opposition want us to rush out universal credit, as they did with tax credits, or do they want us to take our time to implement it correctly? The reason we are not moving the support group and the work-related activity group on from employment and support allowance is that they are very vulnerable. We want to take our time so that those who are on those benefits are brought on to universal credit carefully. It seems that the hon. Lady’s party wants to rush those people on as fast as possible, rather like what it did with tax credits.

[Robert Halfon (Harlow) (Con)]

Is it not the case that under the last Government, 1.4 million people spent—[Interruption.]

[Mr Speaker]

Order. The hon. Gentleman is asking a question. Mr Leslie, you are chuntering extremely noisily from a sedentary position. You might be purporting to help the Secretary of State, but I do not think that he feels any need of your help and, at this stage, neither do I.

[Robert Halfon]

Is it not the case that under the last Government, 1.4 million people spent a decade out of work on benefits and 2.6 million people spent five years out of work on benefits? Is it not also the case that universal credit will get people out of dependency and back into work, that it will eliminate the poverty trap, and that 90% of people on benefits will be on universal credit by the end of 2016?

[Mr Duncan Smith]

My hon. Friend is absolutely right. Universal credit is worth doing properly because of the benefits it brings to so many people. Just in case he does not remember, although the Opposition say that they support it, they voted against it. We will take no lessons from them because of the chaos, mess and cost that they left for us in the welfare system. We are having to pick up the details of that and put them right. We are doing that every day.

[Fiona Mactaggart (Slough) (Lab)]

The Secretary of State says that he has read and implemented the report of the Public Accounts Committee, which confirmed that the Department

“only reported good news and denied the problems”.

Unfortunately, we have seen no change today. A specific recommendation of the report was that the Government should urgently carry out an impairment review into the value of the IT assets that had been written down as a result of ineffectualness. As he has confirmed today that the recommendations have all been implemented, will he tell us what that value was according to his own impairment review?

[Mr Duncan Smith]

The Department has carried out probably the most exhaustive impairment review. It is now being signed off by the National Audit Office. I gave the figures to the Work and Pensions Committee yesterday. The total write-off figure was £40.1 million. We should bear it in mind that Opposition Front Benchers have been running around saying that hundreds and hundreds of millions of pounds will be written off. They will not be. That will be in the published accounts today.

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

May I remind the Secretary of State that when he came to office, it was possible for claimants, on returning to work, to lose 96p of every £1 that they earned? The prize for his universal credit system is to make work pay. It is not only Government Members who will support him for sticking with it, but those who are seeking to return to work, because it will help to make work pay.

[Mr Duncan Smith]

In more than 10 years in government, the last lot never did a thing to improve the quality of life for those who were seeking work. So far, we have more people in work and we have systems of change that will improve the quality of life of those who are disabled and those who are on sickness benefit. Universal credit will complete that process. It is no surprise to me that the Opposition have nothing to say on welfare reform, but want to nit-pick away about this programme.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

The implementation of universal credit has been a complete fiasco right from the start. Given the delays that there have already been and the clear indication from the Scottish Government that they would halt the roll-out in Scotland in the event of a yes vote in next year’s referendum, will the Secretary of State suspend the roll-out of universal credit to allow the people of Scotland to deliver their verdict?

[Mr Duncan Smith]

I have heard what the Scottish National party has said. All I would say is that it is in complete denial about the cost of welfare and pensions. The reality is that it will not be able to afford the pensions bill with Scotland’s demographic make-up, and welfare alone will cost it a large amount of money. I do not know where it thinks it will get the money from if Scotland breaks free from the United Kingdom.

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

The people of Somerset think that it is the mark of a statesman to take a deliberative and intelligent approach to these problems, and not to rush the process in a typical socialist fashion. I wonder whether my right hon. Friend agrees with me that his critics have forgotten to read their Bible and do not remember the line on motes and beams. Although there may be the tiniest specks in his proposals, there was a veritable forest in their IT suggestions.

[Mr Duncan Smith]

I always do my level best to agree with my hon. Friend. He talks common sense whenever he rises to his feet and today is no different.

[Jenny Chapman (Darlington) (Lab)]

How confident is the Secretary of State that the system will be able to deal with people who live in such unusual circumstances as being in a couple or having children?

[Mr Duncan Smith]

The system will roll out for all the complicated groups right the way through until we have 6.5 million on it. There were some reports in today’s papers that were wrong. The pathfinder rolled out to singles to begin with. Next it goes on to couples, then to couples with children, then we bring in the more complicated groups and then we bring in the tax credit group. I simply say to the hon. Lady that she needs to understand the difference between an approach that rolls something out at every stage and learns from it, and the approach that Labour took on tax credits, which was to rush them in and see them fail.

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

Does the Secretary of State agree that any short-term costs and delays in simplifying the welfare system are completely and utterly outweighed by the long-term benefits for taxpayers and claimants?

[Mr Duncan Smith]

I agree with my hon. Friend. He is absolutely right.

[Glenda Jackson (Hampstead and Kilburn) (Lab)]

The Work and Pensions Committee, right from the beginning of the introduction of universal credit, has warned the Secretary of State that this is one of the most complex systems to be introduced. Consistently, the Secretary of State has reassured the Select Committee and this House that everything is fine. We now know that he has failed to meet every single one of the targets that he assured us he would meet. The issue is not the people on these Benches or on the Benches opposite; the issue is our constituents who will be dependent on universal credit. The Secretary of State should stand at the Dispatch Box, apologise for the anxiety in which he has placed our constituents and try to give a straight answer to a very simple question, but that answer must be verifiable. When will universal credit be introduced for all relevant claimants?

[Mr Duncan Smith]

To deal with the first part of what the hon. Lady said, the reason we are proceeding like this—testing, learning and then implementing—is to ensure that nobody so far has been damaged at all by the changes brought in under universal credit. I repeat again that I learned my lesson from the last Government, who rolled out tax credits in a rush, all at once. The system crashed, £5 billion was lost and 400,000 people were damaged. The then Prime Minister, Mr Blair, had to go out and apologise publicly for the mess they had got in. I am saying today that we will roll this out and 6.5 million people will be on the system by 2017.

[Mr David Ruffley (Bury St Edmunds) (Con)]

The Secretary of State has the wholehearted support of those on the Government Benches because his reforms are the most beneficial reforms to the welfare system since its inception. The Labour party in government, across the whole of their Departments in 13 years, blew £25 billion on failed IT systems. Does not history therefore suggest that the best way to proceed with IT projects of the important kind that my right hon. Friend is engaged with is to do it patiently and gradually, and not to rush our fences?

[Mr Duncan Smith]

My hon. Friend is right. The way we have chosen to do this is to ensure that we test, learn and implement as we go along. This is exactly how we are rolling out the other programmes of change on disability living allowance and the personal independence payment, on the Child Maintenance and Enforcement Commission, and on the cap, all of which are now bringing benefits to many people throughout the country. The previous Government wasted £13 billion on the NHS computer system and £500 million on the Child Support Agency mess, including £120 million on the rescue scheme which was later scrapped. The benefits processing replacement programme, which some of those on the Opposition Benches were responsible for, was axed after £140 million of waste.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

Does the Secretary of State think he has the confidence of Treasury Ministers, given that as my hon. Friend the Member for Leeds West (Rachel Reeves), the shadow Secretary of State, told him, a Minister close to the Chancellor told The Times this morning:

“There are some ministers who improve in office”,

and there are those, like the Secretary of State,

“who show they are just not up to it”?

[Interruption.] No answer was given. How can a project of this scale be taken forward without the Secretary of State having the confidence of the Treasury?

[Mr Duncan Smith]

We have the confidence of the Treasury.

[David Mowat (Warrington South) (Con)]

Such programmes are highly complex, involving many hundreds, if not thousands, of man-years of work—probably more complex than delivering the Olympics. Given that the Opposition apparently support the programme’s objectives, does the Secretary of State understand why they have spent the past three quarters of an hour undermining the project team?

[Mr Duncan Smith]

My hon. Friend again raises the point that the Opposition talk a lot about supporting universal credit but they voted against it. They have nothing to say about welfare reform. That is the problem. Up till now, they have failed on welfare reform. They are known as the welfare party because they have opposed everything that we have brought in. We will save more than £40 billion over this Parliament. They have opposed everything, which would cost them an extra £40 billion if they were to get into power.

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

Given the shambles that exists here in Britain in relation to the implementation of universal credit, why are the Government so intent on imposing this unfair welfare system in Northern Ireland, where levels of disadvantage are higher, the cost of living is higher, and jobs, including new jobs, are particularly scarce?

[Mr Duncan Smith]

Welfare reform would benefit Northern Ireland as much as it is benefiting the UK. I suggest that the hon. Lady and her colleagues get on and implement it.

[Graham Evans (Weaver Vale) (Con)]

Will my right hon. Friend confirm to the House that universal credit will save £100 million in 2014-15 and £200 million in 2015-16? Will he also confirm that universal credit is currently handling complicated cases?

[Mr Duncan Smith]

My hon. Friend will see from the published accounts that the National Audit Office agrees that the proposed roll-out, which will go ahead, will in every single year save money, ultimately to the Exchequer. The point that is being made is that the net value of the asset of £152 million that we have will deliver huge benefits to the public and huge savings to the Government.

[Andy McDonald (Middlesbrough) (Lab)]

Did the Secretary of State or any of his Ministers try to apply pressure to any member of the Public Accounts Committee in the formulation of its report on the implementation of universal credit?

[Mr Duncan Smith]

No.

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

Fraud, error and overpayment led to £2.8 billion being wasted during the introduction of tax credits by the previous Government. Has my right hon. Friend made an assessment of how much has been lost during the phased introduction of universal credit to fraud, error and overpayment?

[Mr Duncan Smith]

There is no money lost to fraud, error and overpayment under the universal credit system. As we roll it out, the system itself will save a huge amount in fraud and error on the current system, which is a mess. The level of overpayments and clawbacks of tax credits every single year is a scandal; the scandal is that the policy and the programme left to us by the Opposition, which has been failing every year, is costing huge sums of money.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

The Secretary of State has been very keen to talk about what the previous Government did, but he is in charge now and he was in charge of one of the worst possible procurement processes in government. He has not yet told the House what will happen to the employment support group. It is batted off into the long grass. They are a very vulnerable group of people. Will they have to live through a similar shambles when he comes up with a solution for them?

[Mr Duncan Smith]

Quite the contrary; I have made it very clear that by 2016 universal credit will be the benefit that people go on when they apply for employment and support allowance. The people who were on it—we know them as the stock—are the most vulnerable. [Interruption.] Well, that is the term used—those are people who are on the benefit at present. [Interruption.] How pathetic is that? The Opposition used the term themselves when they were in government, and now they try to pretend that they have discovered a new way of referring to such people. Those who are on employment and support allowance will be migrated to universal credit over a period so that we can bring them in safely, securely and to their benefit. Would the hon. Lady want us to rush them in, or does she think we ought to take care over how we do it?

[Richard Graham (Gloucester) (Con)]

The mission of universal credit has always been to make work pay. I have never entirely understood what it is about that principle that the Opposition find so distasteful. Many of my constituents constantly remind me of the problem that they have under the current system. Surely all Members should be backing the roll-out of universal credit. Today we have heard that there are some problems, that they are being tackled and that the size of the gain is enormous. Will my right hon. Friend confirm for everyone, but particularly for Opposition Members, who seem so opposed to universal credit, what the total economic gain to the people of this country will be over the next 10 years?

[Mr Duncan Smith]

The gains will be enormous. The roll-out has already begun. The question is not whether it will begin; it has already begun. We have already rolled out universal credit to pilot centres in the north-west. We are rolling out to a further six centres. That will be complete early in the new year, then we will bring in couples, couples with children, and eventually the tax credits. We will roll out completely in the north-west, then every region after that. It will be complete by 2016. This will bring huge benefits to all those who struggle under the existing system to make work pay. If they lose 6p in every pound, it is hardly worth while. That is the system that the Opposition left.

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

If these plans for universal credit cannot be underpinned by a credible, working IT system by this time next year, will it be the Secretary of State’s fault or will he blame someone else?

[Mr Duncan Smith]

I take full responsibility for everything in the Department and there will progressively be an IT system that rolls out this programme. It will deliver, and I rather hope that by the time of the next election the Opposition come back and say sorry.

[Sir Tony Baldry (Banbury) (Con)]

Did my right hon. Friend listen to the “Today” programme yesterday, when the hon. Member for Leeds West (Rachel Reeves) repeatedly made it clear that the Opposition support the introduction of universal credit? Does he not consider it strange that not once did she make that clear in the House today? Does he not think it strange to support universal credit on the airwaves but seek to rubbish it here? If the Opposition really do support the introduction of universal credit, surely they want to see it introduced properly.

[Mr Duncan Smith]

My hon. Friend is right. The problem is that the hon. Lady went touring around all the studios, also saying that we would be writing off hundreds of millions of pounds. She is wrong on that. I see she has dropped that today, but the point is that the Opposition have nothing to say about this, so they want to pick away at a plan which, apparently, they support. [Interruption.] When you support something, you support it. They actually oppose it. [Interruption.]

[Mr Speaker]

Order. Mr Robertson, your voice is substantially louder than that of your hon. Friend the Member for Ogmore (Huw Irranca-Davies). I do not wish to be unkind, but it is not always quite as mellifluous.

[Mrs Anne McGuire (Stirling) (Lab)]

On 11 September 2012, the Secretary of State said:

“For what it is worth, I take absolute, direct and close interest in every single part of the IT development.”—[Official Report, 11 September 2012; Vol. 550, c. 154.]

He said he held meetings and briefings, and worked on it at weekends from his box. He also said,

“we are testing stuff”—

I think that is a technical term—

“pretty much the whole time.”—[Official Report, 11 September 2012; Vol. 550, c. 157.]

Given that 15 months ago he was taking such a personal interest in that, why is he still in his job and facing this shambles today?

[Mr Duncan Smith]

Because back in 2011-12, as a result of that work, I decided there were problems in the way the system was being developed, so I intervened and brought in a group of people from outside to look at it. They agreed with me and we have since reset the programme. The truth is that Labour never did any of that when in government, and the right hon. Lady needs to ask herself, why not?

[Charlie Elphicke (Dover) (Con)]

I urge my right hon. Friend to reject the representations of Labour Members, who the whole House can see do not really believe in making work pay, and who long for universal credit to fail. Has he noticed that the write-offs are about one tenth of a per cent. of the £26 billion of taxpayers’ money wasted by the Opposition?

[Mr Duncan Smith]

My hon. Friend is right. Again and again what is going on is a kind of hypocrisy, with Labour Members somehow claiming that they did things properly. They never did; they lost billions and billions on programmes, whether in the Ministry of Defence or in my Department. We have been picking up the pieces and putting it right.

[Wayne David (Caerphilly) (Lab)]

After today, does the Secretary of State honestly believe that he has any credibility left?

[Mr Duncan Smith]

I have more credibility than the Labour party, which wasted money galore. My answer is that I will deliver this and we are already delivering welfare reforms—[Interruption.] The right hon. Member for East Ham (Stephen Timms) needs to remember that he was in a Government who watched welfare spending rise by 60% under their watch.

[Nigel Mills (Amber Valley) (Con)]

Although writing off anything is disappointing, will the Secretary of State confirm whether he has analysed what a comparable write-off would be for schemes in the public and private sector elsewhere?

[Mr Duncan Smith]

In the private sector, programmes allow up to 30% or 40% for write-downs and reworks, which is well within the amount we have written down. I believe that this programme will roll out more efficiently than almost any other programme in the private sector.

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

In yesterday’s Work and Pensions Committee, the DWP finance director general stated that £303 million has so far been spent on developing IT. We have heard that £40 million has been written off as it could not be capitalised because it had no use, and that £97 million was capitalised and written down. That leaves a further £107 million of IT expenditure that was not capitalised as it has no useful software. Will the Secretary of State confirm that of the £303 million spent, only £97 million has resulted in useable software?

[Mr Duncan Smith]

The hon. Lady, of course, misrepresents the position. [Interruption.] The money that we were talking about yesterday, the write-offs, is for technology that will not be used, and the write-down is equipment we will be using over the next 12 months. The other value she mentioned is for equipment that will be written down over a period of years, once we start to use it. We cannot write it down until it is actually in use.

[Guy Opperman (Hexham) (Con)]

The situation is that welfare required reform and, as my hon. Friend the Member for Gloucester (Richard Graham) made clear, work was not paying. I welcome the phased roll-out of universal credit, but I am still at a loss as to the Labour position. Can the Secretary of State advise my constituents in Northumberland why he chose to test, learn and then roll out a project of such a large scale that it will be truly transformative?

[Mr Duncan Smith]

That is exactly right. The point is that we intervened early when we thought there was a problem, and we did not deliberately drive it through to roll-out. Quite frankly, we will have got this right because, unlike Labour, we are testing the system and learning first, and then finally implementing it. My hon. Friend is right: we have no idea what Labour Members really want. They just want to criticise but they have no other proposals.

[Bill Esterson (Sefton Central) (Lab)]

Will the Secretary of State tell the House how many children will qualify for free school meals in households in receipt of universal credit?

[Mr Duncan Smith]

Everybody now in receipt of free school meals will be eligible for them as we roll out universal credit, and the changes that are necessary in universal credit will be made apparent as we come to do that. I guarantee that nobody will lose out with free school meals.

[Jim Shannon (Strangford) (DUP)]

In response to the hon. Member for South Down (Ms Ritchie), the Secretary of State referred to Northern Ireland, which is very much a part of the United Kingdom. The Northern Ireland Assembly is currently discussing welfare reform legislation, and the Executive have been told there will be financial implications on the block grant for every month that changes are delayed, starting from January 2014. IT affects all of the United Kingdom. What implications does the delay in putting IT in place have for welfare reform in Northern Ireland?

[Mr Duncan Smith]

The hon. Gentleman refers to the fact that we need to get welfare reform rolled out in Northern Ireland, which I fundamentally believe is the right thing to do. His point, I think, concerns what the Chief Secretary has said, because if we do not roll out welfare reform in Northern Ireland, it has a net cost to the Exchequer. That is why a balance must be found—we need to roll out welfare reform to save money, otherwise that will affect spending in Northern Ireland.

[Several hon. Members]

rose—

[Mr Speaker]

Order. We must move on.

Defence Procurement

Tuesday 10th December 2013 Commons Chamber

13:15

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

With permission, Mr Speaker, I should like to make a statement on the Government’s plans for reform of defence procurement. The 2010 strategic defence and security review set out the Government’s vision of an agile armed forces designed to face the challenges of the 21st century. Central to delivering and sustaining that vision is the ability to procure and support the equipment the armed forces need. There is widespread acceptance that the present defence acquisition process is not good enough. While there have been notable successes, there have also been many examples of poor performance and sub-optimal outcomes for the armed forces and the taxpayer. Bernard Gray’s report for the previous Government identified three root causes of those problems: an overheated programme; a weak interface between Defence Equipment and Support and the rest of the MOD, too often leading to repeated changes to the requirement; and a lack of business skills in DE&S. This Government have moved to address all three.

In May 2012, I announced that we had resolved the £38 billion black hole we inherited and balanced the defence budget, with more than £4 billion of centrally held contingency to address risks as they crystallised and a much more disciplined and formalised approach to investment approval, committing funding only when project proposals were properly mature. As a consequence, DE&S effectiveness is no longer undermined by an overheated programme. We have also strengthened and improved the interface between DE&S and its MOD customers. We have accepted and implemented the recommendations of Lord Levene’s report on defence reform more clearly to define the customers of DE&S as the front line commands, and to give them substantial responsibility for managing their own budgets and prioritising their requirements. We still have further to go, but we can already see an improvement, and with a substantial reduction in the number of changes to requirements, that is already becoming less of a negative factor in DE&S performance.

We have also started to address the business skills gap within DE&S, through the appointment of Bernard Gray as the Chief of Defence Matériel, and by the recruitment of new senior finance and commercial staff from the private sector. We are beginning to see evidence of progress, and while I do not want to pre-empt the major projects review report that the National Audit Office will publish in the new year, I am confident that it will show significant improvement in respect of the period since we balanced the budget in May 2012.

We recognise, however, that there is still a long way to go. The reforms we have already instituted are only a start, and the challenge of recruiting and retaining the necessary business skills in DE&S is growing, not diminishing, and is likely to get bigger still as the economic recovery gathers pace. A more radical reform of DE&S is necessary if it is to sustain the skills it requires to support our armed forces effectively. That is why we developed the matériel strategy programme.

To address the skills challenge and improve delivery of complex programmes, DE&S needs the freedom to shape its work force to be world class and to engage effectively with the best of the private sector.

The matériel strategy is about removing the obstacles to bringing in critical skills and exploiting the capabilities of the private sector, by exploring alternative models for DE&S. I announced in April that the Government had concluded that a Government-owned, contractor-operated model, a GoCo, might well be best placed to deliver the changes required in DE&S, but that we needed to test the market’s appetite for that model and confirm that it would, indeed, deliver value for money, through a competition. In parallel, I announced that we would work up a public sector comparator, exploring the maximum extent of flexibility that could be achieved within the public sector—a model that we have called DE&S plus. The Government have maintained an open mind as to which option would prove, overall, to deliver the best balance of risk and potential reward once bids are received.

On 19 November, I informed the House that we had reached the detailed proposals stage of the competition, with only one proposal being received from the two consortia remaining in the process. That proposal was from the Bechtel-led Materiel Acquisition Partners. I further informed the House that the Government would consider carefully how best to proceed in the light of this development. I can confirm to the House today that I have decided not to continue the present competition.

The heart of our approach was to test the market’s appetite for delivering a GoCo along the lines we had set out, using the competitive process to drive innovation and value. We have always recognised that there are risks inherent in the GoCo approach. With only one bidder remaining in the competition at this stage, I have had to make a judgment about whether the public sector comparator alone would generate sufficient competitive tension to ensure an effective outcome for the armed forces and value for money for the taxpayer.

I wish to place on record the fact that Materiel Acquisition Partners has engaged effectively with the very challenging brief we set out. It has presented us with a credible and detailed bid, but we do not have a competitive process. I have therefore concluded that the risks of proceeding with a single bidder are too great to be acceptable.

We have gained many valuable insights from bringing the proposition this far and understanding the issues raised by both bidders and potential bidders. My conclusion is that a GoCo remains a potential future solution to the challenge of transforming DE&S, but that further work is necessary to develop DE&S financial control and management information systems to provide a more robust baseline from which to contract with a risk-taking GoCo partner.

We are clear that the only realistic prospect of resolving the challenges facing DE&S in an acceptable time scale is through a significant injection of private sector skills. I have therefore decided to build on the DE&S plus proposition, transforming DE&S further within the public sector, supported by the injection of additional private sector resource, thus ensuring that the organisation becomes “match-fit” as the public sector comparator for a future market testing of the GoCo proposition.

To do this, we will recognise the unique nature and characteristics of DE&S as a commercially facing organisation by setting it up as a bespoke central Government trading entity from April 2014; we will give the new entity a hard boundary with the rest of MOD, a separate governance and oversight structure with a strong board under an independent chairman, and a chief executive who will be an accounting officer, accountable to Parliament for the performance of the organisation—delivering another of Levene’s recommendations; and, crucially, we will permit the new organisation significant freedoms and flexibilities, agreed with the Treasury and Cabinet Office, around how it recruits, rewards, retains and manages staff along more commercial lines, to reflect its role of running some of the most complex procurement activity in the world. We will of course consult trade unions on the practical arrangements for implementation.

These changes will reinforce the customer-supplier interface between the military command customers and DE&S, facilitating a more business-like approach, allowing us to move earlier to a hard-charging regime and thus further addressing one of the weaknesses identified in the 2009 Gray report. They will allow DE&S to procure crucial private sector input through a series of support contracts to deliver key changes to systems and processes, and to strengthen programme management while organic capabilities are built. They will also permit the recruitment into DE&S of key commercial and technical staff at market rates and with minimum bureaucracy.

Bernard Gray has agreed to become the first chief executive of the new trading entity, thus providing a vital thread of continuity between the original Gray report and the continuing DE&S reform agenda. Alongside the changes to DE&S, we will continue with the reform of the MOD’s wider acquisition system, which is focusing on up-skilling our customer capabilities—a key role for our military, alongside the important role it will continue to play within DE&S.

These changes will drive significant incremental improvements in DE&S as well as delivering the mechanisms that will give the organisation a robust performance baseline. That will allow the MOD, at a future date, to re-test the market’s appetite for continuing the DE&S evolution into a GoCo, and its ability to deliver value for money against a significantly enhanced public sector comparator. On both counts, this course of action represents the best way forward, both for our armed forces and for the taxpayer, and I commend this statement to the House.

13:26

[Vernon Coaker (Gedling) (Lab)]

I thank the Secretary of State for advance and early sight of his statement.

For the second time in a few weeks the Secretary of State has been forced to come to the House to explain and clarify, and reassure Members about, key components of his Defence Reform Bill, which will be read for a Second time later today in the other place. This is the statement that the Defence Secretary did not want to make and did not think he would have to make. His flagship policy on defence procurement has come crashing down around him—not so much GoCo or DE&S plus, but a no-go and D-minus for the Defence Secretary. It is another embarrassing U-turn from the Government.

Will the Defence Secretary tell us when he decided that he could no longer proceed with plans for a Government-owned, contractor-operated model for Britain’s defence procurement? It is three weeks since the Portfield consortium withdrew from the GoCo process. Why has it taken so long for the Government to bow to the inevitable and admit the difficulty of proceeding with only one bidder?

The Secretary of State is in danger of making a bad situation worse by what he has announced today. The Government cannot run Britain’s defence and national security on an ad hoc basis. They cannot make it up as they go along. But is it not clear today that that is exactly what the Government and the Defence Secretary are doing? Why is this the first time that we have heard of this new proposal? What consultation has he had on his new proposed model? When and how will Parliament be able to scrutinise these proposals? What resources did he allocate, and when did he allocate them, to ensure the expertise and time to test the model for robustness and make sure it was properly costed and tested for viability and sustainability? When he talks about new freedoms and flexibilities, what exactly does he mean? What was the process for appointing the chief executive of the new trading entity? Can he update us on what discussions he has had with the Treasury about his new proposal and when they began? This is a mess, and it poses more questions than it gives answers.

Does the Secretary of State really expect the House and the country to think that this is anything other than a last-ditch attempt to rescue what is left of the Government’s credibility, and to try and hide the shambles and chaos that are engulfing the Ministry of Defence? The House need not take my word for that. Last Thursday, Lord Levene published his second annual review on the implementation of his defence reform report. The Secretary of State heralded it as a triumph for his political leadership. But can he explain why he failed to mention one significant part of what the report said about the issue of procurement? Lord Levene said:

“In my opinion, the quickest and most straightforward solution would seem to be via ‘DE&S plus’, and this needs to be developed to the very highest standards as a realistic option.”

Does the Secretary of State now agree with Lord Levene? He says that GoCo is a potential future solution. Is it on the table or off the table? Which is it? What will be the repercussions for part 1 of the Defence Reform Bill?

The Opposition support a DE&S plus model and have expressed similar sentiments on the record to Lord Levene. We were, and are, conscious of the need to reform Britain’s defence procurement. We want the best of the private sector to work alongside the best of the public sector, but we need to see more detail on the proposed DE&S plus model. To date, it has been the poor relation in the whole process. When will the Secretary of State provide that detail? Will he accept that throughout the Committee stage of the Bill we consistently raised poor management of the process and serious concerns about viability? Will he accept that it was wrong for Ministers to continue to insist that everything was fine when it clearly was not? That complacency and unwillingness to listen has cost the British taxpayer millions of pounds. We have been here before with the debacle over the aircraft carriers. Despite his waste and complacency, he repeats the £38 billion figure, which has never stood up to scrutiny.

Will the Secretary of State tell us exactly how much this has all cost and what further costs are envisaged? What discussions has he had with the remaining consortium, led by Bechtel, before making today’s statement, and what is its position? Is it eligible for compensation? What discussions has he had with his senior civil servants and the staff at Abbey Wood, who today must be feeling undervalued and demoralised, having seen colleagues made redundant because they were not needed, only for them to be re-employed as agency workers?

The Government could have pulled back from the brink. They could have taken the advice of distinguished military figures, senior figures from the defence industry, former Ministers from across the political spectrum and, yes, the Opposition. How and why did the Government get it so wrong? Given that, how can we have any confidence in the credibility, rigour and independent analysis that the Defence Secretary claims for his updated proposals? Is it not the case that the Government have wasted three years and millions of pounds in time and money? The Secretary of State must come forward with plans that stand up to scrutiny and are made clearly, concisely and rationally. Only then can we ensure the best way forward for much-needed reforms to defence procurement.

[Mr Hammond]

That was predictable stuff. The hon. Gentleman claims that we have wasted three years. When it comes to reforming defence procurement, his lot are responsible for wasting 13 years. If I can give him a bit of friendly advice, I would be very careful about using the words “debacle” and “aircraft carrier” in the same sentence if I was sitting on the Opposition Front Bench. Let us remember that it was his Government who, by delaying the programme for two years to manage an in-year cash-flow crisis, drove £1.6 billion of cost into it.

The hon. Gentleman tells us that the Opposition support the DE&S plus model, but until now they have supported the competition, which is exactly what we propose to do. The former Labour Defence Secretary, John Hutton, said:

“It is time for a radical rethink that can align the necessary project-management skills with the right performance incentives...This is precisely what the GOCO concept…can offer and why the British government would be well advised to pursue it.”

The former shadow Secretary of State, the right hon. Member for East Renfrewshire (Mr Murphy) said:

“There needs to be rigorous examination of all the possible options and a robust comparison between the two options of a GoCo model and DE&S+…we will support what we hope is a genuine competition.”—[Official Report, 10 June 2013; Vol. 564, c. 53-54.]

That is what we have conducted and the hon. Gentleman is standing at the Dispatch Box complaining about it.

The hon. Gentleman tells me that this is the statement I did not want to make. Well, he gets the prize—of course it is the statement I did not want to make. I hoped that we would find a wide field of GoCo competitors able to engage with the process of delivering a value for money proposition to the taxpayer, but let me tell him how it works. The Opposition can stand on the sidelines slinging mud and insults, but the Government have to deal with the situation as it exists in the real world. We have to take the situation as we find it and manage the risks. [Interruption.]

[Mr Speaker]

Order. The hon. Member for Plymouth, Moor View (Alison Seabeck) must calm down. She is shouting noisily and I can hear her above her hon. Friends, who are also misbehaving. They must calm themselves. Let us hear from the Secretary of State.

[Mr Hammond]

I will come to the hon. Lady in a minute.

We have to deal with the situation as it exists and we have to find solutions. What I have outlined today is the solution to the challenge facing DE&S in the real world.

The hon. Gentleman asked some specific questions. He asked me when the decision was taken. He says that we knew three weeks ago that we had received only one bid, and later asked me what the role of the Treasury had been. Since we received notification that we would not get a bid from the alternative consortium, we have been engaged in discussions with the Cabinet Office team, the Treasury team and my own senior officials to look not only at the risks inherent in trying to continue a contracting process with a single bidder, but how we can reinforce the DE&S plus proposition and the best way to go forward. I am sorry if he would have liked a decision more quickly, but I have to tell him that three weeks was the period it took to arrive at a robust conclusion on where we are and where we need to go. We have learned from the process. Talking to bidders and potential bidders has identified some of the challenges and issues we will be able to address to construct the DE&S plus process that I have set out today and, crucially, import private sector skills.

The hon. Gentleman mentioned Lord Levene’s report, but omitted to tell the House that the report gives the Department an excellent result overall for the delivery of the transformation process. He will know—I am sure he has studied this diligently—that Lord Levene explicitly had no remit to address DE&S plus, because it was being dealt with through a separate process driven from the Gray report. It is no secret, however, that Lord Levene, who once ran defence procurement, has always been a sceptic of the GoCo process. It is no secret that Lord Levene believes that only if DE&S plus has total freedom to hire, fire and remunerate on a fully private sector model can it succeed inside the public sector. As the hon. Gentleman and other Members with experience of Government will know, however, there are all sorts of public accountability reasons, relating to managing public money, why that is simply not possible to deliver in its purest form.

The hon. Gentleman asked me about GoCo as a potential future solution. All the evidence from this competition tells us that GoCo can deliver a value for money proposition for the taxpayer. To make it contractible, we will have to develop the DE&S proposition significantly so that it has a better and stronger baseline against which potential contractors can measure their return, and so the Department can be confident that we are not giving away public money in any contract we enter into. It remains a possibility for the MOD, once DE&S-plus is match fit, to consider running the GoCo competition again to test the proposition, in the interests of the armed forces and taxpayers, and to challenge the private sector to come forward with a proposal that will deliver value for money against the match-fit DE&S.

The hon. Gentleman asked me about part 1 of the Defence Reform Bill. Our intention is that it should continue as it stands. It will provide the legislative framework for testing the GoCo proposition, should a future Government wish to do so.

I anticipated that the hon. Gentleman would ask me, quite properly, about the costs involved in pursuing the GoCo competition. The calculation I have is that just under £7.4 million has been expended on the process.

The hon. Gentleman asked me what discussions had been held with Bechtel. He will appreciate that until the formal announcement was made to the House a few moments ago, what I could have said to, and discussed with, Bechtel was heavily constrained. In the interests of propriety, I have had no direct communication with Bechtel, but my officials have been in contact. The indication we have is that it is interested in being considered for the provision of support to the public sector DE&S plus entity through one of the support contracts that we will be letting. The invitation to negotiate that we issued for this competition made it clear that the Government could terminate the process at any point and that bidders would not be entitled to compensation or reimbursement of bid costs. The legal advice I have had is that if any such claim was received, we would be in a very strong position to resist it, and I would intend to do so.

Finally, the hon. Gentleman asked, quite properly, about the impact on staff at DE&S, not just in Abbey Wood —they are spread all across the world—but particularly in Abbey Wood. As I speak, Bernard Gray, the Chief of Defence Matériel, is, I understand, holding a town hall meeting for staff at Abbey Wood to explain to them the position and the plans for the future.

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

My right hon. Friend has just said that these changes would

“permit the recruitment into DE&S of key commercial and technical staff at market rates and with minimum bureaucracy”.

What exactly does that mean? Does it mean that the civil service terms and conditions of service have been abandoned, and only for DE&S?

[Mr Hammond]

It means that the Treasury and the Cabinet Office have agreed that we will have a bespoke regime for this central Government trading entity, recognising that it faces one of the most commercial sectors of the marketplace. We will be able to employ people with technical and high-level management skills at market-reflective salaries and to recruit them through an accelerated process that does not require us to go through the usual nine to 12-month process required to recruit senior civil servants.

[Mr Bob Ainsworth (Coventry North East) (Lab)]

The part of Bernard Gray’s report with which the previous Government, who commissioned it, had the most difficulty was that concerned with the GoCo company, because at that stage we could not see how it could be made to work. The process that the right hon. Gentleman has been through has shown the difficulties with moving to that kind of model, but rather than taking it off the table, he says it could be enacted at some time in the future. What kind of reaction does he expect to get to that from industry and DE&S staff themselves? The Chairman of the Defence Committee just raised the importance of getting the right skills into this area. With the uncertainty that the Secretary of State’s announcement today leaves hanging over the future of the organisation, will that be enhanced or made more difficult? What kind of a reaction does he expect from industry to this uncertainty?

[Mr Hammond]

I am grateful to the right hon. Gentleman for his question, because he knows something about this. I recognise his concern, but it is my judgment that the kind of people we are looking to attract into DE&S—people with high-level commercial skills—will not be afraid of the possibility of a future evolution into a GoCo.

We can do a great deal to deliver significant change within the public sector—we can bring in people with the right skills, we can upskill staff, we can install new systems, processes and controls, all of which we will now commit to doing, and we can apply external resource to programme management—but we will still essentially be talking about a system where private sector skills sets are employed to advise but civil servants make decisions. Those private sector participants will be paid flat fees; they will not be “at risk” in the structure. That does not fundamentally change the culture. It is an open question whether we can get far enough through that construct or whether, once we have made DE&S as lean and fit as it can be within the public sector, we will need to test again what additional value for the taxpayer could be generated by making the culture shift that having a risk-taking private sector strategic manager take over day-to-day running of the operation would deliver.

[Sir Gerald Howarth (Aldershot) (Con)]

I congratulate my right hon. Friend on having grasped this particularly difficult nettle. Does he agree that in addressing the skills issue so ably highlighted by Bernard Gray, these proposals raise the prospect of having an intelligent customer in the Ministry of Defence and therefore of avoiding some of the ghastly procurement mess-ups created by Labour? Would he be good enough to indicate how he sees ministerial accountability being applied to the new agency? Will it report direct to Parliament, as he mentioned, or will it report to Ministers, who would then report to the House?

[Mr Hammond]

There were two questions there. First, my hon. Friend is absolutely right to point out that for a customer-supplier interface to work, we need skills on both sides. This is not just about upskilling DE&S; simultaneously, we are also carrying out a project within the MOD that will continue to upskill the customer side to ensure that we can be an intelligent customer. On accountability, of course Ministers will be accountable to Parliament for DE&S’s activity, but as I have announced, the chief executive will be an accounting officer with a direct line of accountability, via the Public Accounts Committee, to Parliament.

[Angus Robertson (Moray) (SNP)]

The long-standing inability of the MOD properly to manage procurement continues with this debacle, but what concerns me is not just the project or financial management of procurement, but the delivery of often life-saving equipment to our service personnel. Does the Secretary of State agree, therefore, that whatever emerges from this shambles, we cannot allow a situation where the MOD recommends potentially life-saving equipment, such as anti-collision systems for Tornado jets, but then does not deliver it for 15 years?

[Mr Hammond]

This is probably not the time for a discussion about anti-collision systems, which I know is a subject the hon. Gentleman has raised recently and no doubt will want to raise again. Hon. Members must understand the distinction, however, between failures of the procurement process and the difficult prioritisation of spending decisions. The latter is the responsibility of Ministers and cannot be derogated or laid off on to any other organisation; Ministers have to make those difficult prioritisation decisions, and we then have to hope for an organisation that can execute them efficiently. Today, we are essentially talking about the execution part of the process.

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

I commend the Defence Secretary for the practical decision he has announced today and congratulate him on the progress he has already made in tackling the long-running problems of defence acquisition, not least in empowering the front-line commands, reducing the number of changes to requirements and upskilling the MOD as a customer. The entity he has described is indeed DE&S plus operating as a practical rather than simply a theoretical option. It is essential that those dealing with industry can do so with the same sorts of terms and conditions as those that industry enjoys, and this is a way of giving them that opportunity. I ask him, however, not to abandon entirely the possibility of a GoCo in the long term and to put those measures on the statute book so that a future Government, of whatever colour, could decide to take the model further.

[Mr Hammond]

My hon. Friend is absolutely right. There is a long history of failure in defence procurement by Governments of both main parties going back decades. We now have to construct a model that works. As I just said to the right hon. Member for Coventry North East (Mr Ainsworth), the former Defence Secretary, we can do a lot within the public sector in DE&S plus, but we cannot make the culture change that some people think is necessary. It is right and proper that we do what we can in the public sector to make DE&S, as a public sector body, as high a bar as we can for a private sector challenger to have to match and exceed, but we should not be afraid, once we have done our internal reform work, to allow the private sector to make proposals again to see whether it could deliver yet more value for money for the taxpayer. That is, after all, our principal responsibility.

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

There was surely no reason the Secretary of State had to wait until the GoCo option had collapsed before coming forward with these amended DE&S plus proposals. Does that not show that he was never truly neutral on the choice between an in-house option and a GoCo, that he wanted to rig the process in favour of a GoCo, and that that bias has blown up in his face, costing taxpayers and his own personal reputation?

[Mr Hammond]

I remind the hon. Gentleman that his Front-Bench spokesman welcomed the competition and said that we needed to test the GoCo proposition against the DE&S plus proposition—

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

Read Hansard.

[Mr Hammond]

I have the Hansard quote in front of me. The former shadow Secretary of State welcomed the competition and said that we needed to test the two propositions against each other, which is what we have done. The hon. Member for Barrow and Furness (John Woodcock) makes an assertion that I can tell him is wrong. I have always recognised that there are significant risks to the GoCo proposition and significant potential benefits from it. The challenge is to weigh the risks and the benefits and we would not be able to do that until we received the bids, which is why we had to run a competition.

We have seen the proposal that has been worked up by the DE&S plus team only in the last three weeks. It has worked behind a Chinese wall and has made clear that it believes that there will have to be an injection of external private sector skills in the form of an external business partner, in addition to the freedoms and flexibilities that it seeks within the organisation. That is the model that we are now going to put in place.

[Peter Luff (Mid Worcestershire) (Con)]

Although I accept that the Secretary of State had little choice but to make the announcement that he has made today to the House, I am sure that he will share my deep sense of regret that we cannot move more rapidly to the greater savings and performance improvements that a GoCo would have delivered. Can he reassure me a little about the private sector’s role in this new organisation? Can he unpack for me a little how the private sector will operate within the GoCo model and the DE&S plus model, and particularly reassure me that this is not just a recipe for more contractors?

[Mr Hammond]

I am grateful to my hon. Friend—someone who, again, knows something about this from his long service in the Department. The key distinction is between a model that puts the private sector in day-to-day leadership of the organisation—working on an incentivised fee that places it at risk—and a model where the private sector provides specific skill sets to civil service decision makers. That is the distinction. What we envisage in the DE&S plus model is probably three separate contracts; one to provide us with programme management support, a spine for the organisation; one to provide us with HR support, an area of particular weakness in DE&S; and a task-and-finish project to install some additional financial control systems within the organisation.

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

I said on Third Reading of the Defence Reform Bill that having one bidder stretched the concept of competition to absurdity, so I welcome today’s decision. However, there are 16,000 workers whose futures are still vulnerable following the Secretary of State’s statement. May I suggest that it is not just about bringing in expertise; it is about retaining expertise and skills as well? I would welcome the Secretary of State personally meeting the unions to assure them that, under his new proposals, there will be no detriment to their conditions of service.

[Mr Hammond]

I have personally met the unions and I am aware of their concerns. I have also explained to them the opportunities that this model will create for employees in DE&S. The core DE&S—that is to say the part of the organisation that is responsible for procurement —has about 9,500 people. The hon. Gentleman is absolutely right to say that one of the big challenges at the moment is retaining the highly skilled people. We are losing people to the private sector; worse, we are losing people to other parts of the public sector that have greater freedom to hire. That is why we must address this issue in the way I have outlined today.

[Bob Stewart (Beckenham) (Con)]

In 1984 I was a young major in the Ministry of Defence, and Michael Heseltine, as Secretary of State, definitively told us that he had sorted out defence procurement. It is clearly a basket case and very difficult. How will my right hon. Friend compensate majors and lieutenant-colonels who are doing equivalent jobs to those being done by people from outside the Army but are not getting the same sort of salaries? How will we balance that?

[Mr Hammond]

The military component in DE&S is vital. It is a relatively small number—about 1,500 military personnel. They will of course continue to rotate as part of a career development plan on normal military terms and conditions. For the kind of flexibility that I have talked about today, we will need to hire in specialist skills from the commercial sector and that will not alter or affect in any way the very important role that the military will continue to play.

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

The Secretary of State talked about mud-slinging from Opposition parties. I am sure that he slung some mud in years gone by when we were in government. I deal with real people and the great worry about procurement—as always, particularly on the Clyde and in shipbuilding—is that statements that have been made recently will now be shelved until we sort out the process. Can he assure me and the 2,000 people who work in the Scotstoun yard that after everything that has been said up to this point—barring the wrong result next year in the Scottish referendum—the Clyde is still secure?

[Mr Hammond]

The statement that I have made today has no impact on the announcement I made a few weeks ago about the rationalisation of the shipbuilding industry and BAE Systems’ decision to concentrate complex warship building on the Clyde.

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

I commend my right hon. Friend’s statement, not least because it is the statement that the Public Administration Committee wanted him to make, having expressed in our report on procurement some scepticism that the GoCo would work. Is not the DE&S plus plus proposal still something of a contortion to get round stupid, outdated and silly restrictions on the ability to retain senior civil servants in role as senior responsible owners over the lifetime of projects and on the ability to bring in new people with the right commercial skills? Why are we having to go through this exercise when we should be reforming the civil service so that this kind of flexibility is available to all Government Departments and all procurement projects?

[Mr Hammond]

I understand my hon. Friend’s position, which is long held and loudly expressed, but DE&S is, if not unique, a very unusual organisation within the civil service. It is almost wholly commercial in what it does. Most of its interaction is with the commercial sector and it is competing directly for skills with the private sector marketplace. It is not like a policy making department. It is absurd that we are constrained to deal with civil servants whose job is commercial in nature in the same way as we deal with policy making civil servants in a central Whitehall policy Department. The freedoms and flexibilities that the Treasury and the Cabinet Office have agreed for DE&S plus will free us from that constraint, which will make DE&S plus a much more credible and commercially focused proposition. However, as I have said, I would not like to rule out the possibility of challenging it in the future with a GoCo competition to keep it on its toes. Let us try everything and make sure we get the best value for money for the taxpayer.

[Mark Hendrick (Preston) (Lab/Co-op)]

How will the further involvement of the private sector and the introduction of the GoCo model square with the national interest of having a proper defence industrial strategy for the UK, or do the Government no longer believe in a defence industrial strategy?

[Mr Hammond]

We have a defence industrial strategy. The question from the hon. Member for Glasgow North West (John Robertson) about the Clyde yards will remind the House that, just recently, we made a very important step forward in allowing BAE Systems to explain to the world how it is going to manage complex warship building in the future to ensure that we retain a credible and viable complex warship building operation in the UK.

[Mr Julian Brazier (Canterbury) (Con)]

My right hon. Friend has won some important concessions from the Treasury, and not just on terms and conditions of service for these key people, but in other areas, such as partly restoring the ability for annual financial carry-over, which was lost under the previous Government. Does he think he would have been able to win those concessions had he not been floating a more radical alternative?

[Mr Hammond]

My hon. Friend raises a fascinating proposition: was this all some complex ruse to try to squeeze greater concessions out of the Treasury? I can assure him that that was not the intention. We genuinely wanted, and want, to explore the possibilities of using the private sector in a strategic role and, through DE&S plus, in a more traditional supportive role to get the best value-for-money proposition for the taxpayer—nothing more and nothing less.

[Nick Smith (Blaenau Gwent) (Lab)]

The Secretary of State has talked about the MOD becoming a better, intelligent customer, which is a good thing, but how will he get senior officers to adopt the different mindset and skills needed to do that?

[Mr Hammond]

There are two parts to that question. We have made substantial progress on the mindset by devolving budgets to the front-line commands, which now control their own budgets and have significant autonomy in prioritising their requirements. Front-line commands are therefore managing their own requirements, rather than having somebody else tell them what their priorities are. That has had a significant impact on the culture among the senior military cadre. As for skills, we recognise that there is an upskilling requirement, which is a key element of the intelligent customer project that we are currently running in the Ministry of Defence, which includes bringing in civilian specialist skills to support the military command budget holders in acting as customers.

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

This is a sensible decision, but one of the perennial problems with defence procurement under successive Governments has always been the way in which specifications for what is to be procured are changed by Ministers and especially by the military along the journey. Will the new model be any more capable of coping with that perennial problem than any of the previous iterations?

[Mr Hammond]

Yes. I hope we have already made good progress on this issue by introducing a much more disciplined boundary between DE&S and the customers, but the intention of setting up the body as a central Government trading entity is that there will be a hard boundary between it and its customers. We will be able to move—much more quickly, in fact, than we would with a GoCo—to a hard-charging regime, where the customer pays for the cost of the changes he is imposing. In my judgment, when front-line commands hold their own budgets and have to pay the cost of making a change, there is nothing more likely to cause them to think twice about making such changes.

[Toby Perkins (Chesterfield) (Lab)]

If I may return to the question that my hon. Friend the Member for Barrow and Furness (John Woodcock) asked a moment ago, it is now 22 months since the Government White Paper on defence procurement. Why is DE&S plus being considered as a serious option only now? Is it not because it was put on the back burner, as all the Government’s attention was focused on the GoCo?

[Mr Hammond]

No; the first phase of the overall project was about designing what we required in DE&S and looking at how the interface would work with the devolved customer—the devolution of budgets to the front-line commands is also a new step that we have introduced. We have also resourced the work on developing the DE&S plus model since we launched the MatStrat—matériel strategy—competition earlier this year, so that work has had proper resourcing. Although the proposal that has been put forward is nowhere near as detailed as that put forward by the private sector bidder for the GoCo proposition—as it is only right to expect—it is a sound framework for building a public sector solution to the challenge we face in DE&S.

[Mr Philip Hollobone (Kettering) (Con)]

Having visited Abbey Wood with the armed forces parliamentary scheme, may I congratulate my right hon. Friend on being bold and innovative in trying to reform the massive defence procurement system? Can he give the House his best examples under the current system of something that has been procured well and something that has been procured badly, and the lessons learnt from both?

[Mr Hammond]

There are countless examples of excellent procurement results in the UOR—urgent operational requirement—system. Indeed, it is common ground among Members who take an interest in this issue that we have to try to import some of the lessons from the UOR system into the routine procurement system. I do not want to pre-empt the major projects review that the National Audit Office will publish in the new year, but I can promise my hon. Friend that he will see programmes that deliver on time and within budget on a scale that he will not have seen before. That is a sign of the progress that is being made, although there is much further to go.

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

Part of getting value for money for the taxpayer out of the defence industry must surely be about sending clear, consistent signals to that industry. Does the Secretary of State believe that this affair has met that test?

[Mr Hammond]

Yes, and if the hon. Gentleman talks to the defence industry, he will find that it is getting a clear and consistent signal. Let me be clear: this is—[Interruption.] I beg to disagree with the hon. Member for North Durham (Mr Jones): that is what the industry is saying. This is not about beating people up over their profit margins; it is about working together to try to ensure that we do projects in a way that can deliver value for money. It is about not letting contracts where the costs of any overruns are split 90% to the taxpayer and 10% to the industry. No wonder the industry is having a quiet word with the hon. Gentleman.

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

Will the Secretary of State give the House an assurance that, although difficult decisions will be made, with potentially a detrimental effect on some staff at DE&S, these decisions will be made intelligently and with great sensitivity? Given what has been, to say the least, quite a long period of uncertainty, can he give an assurance about when staff at DE&S will receive some much needed clarity on how the plans will affect them individually?

[Mr Hammond]

We are 800 posts gapped in DE&S at the moment, so this is not some project to reduce the number of staff. The objective is to increase the number of staff by filling some of the gapped posts, but as the process takes place—this will not happen immediately—there will need to be a more robust approach to upskilling staff and monitoring their performance, to ensure we have the right people in the right jobs and with the right support to deliver the outcome we need. However, there is no transfer going on and no TUPE involved. I can give my hon. Friend an assurance that those concerned will remain in the public sector and remain covered by the public sector protections that they already enjoy today.

[Guy Opperman (Hexham) (Con)]

Everyone agrees that defence acquisition has troubled many Governments for many years. I welcome the Secretary of State’s statement today, but would he be so kind as to write to me in the near future about whether the decision will make any changes to the provision of equipment facilities or to the jobs of my constituents who work in Albemarle barracks, MOD Longtown or RAF Spadeadam?

[Mr Hammond]

I am happy to write to my hon. Friend, but as I have just said, there will be no changes as a direct consequence of today’s announcement in the numbers employed or the place of employment. However, obviously I cannot give him an absolute assurance that over time the organisation will not evolve, as it becomes leaner and more efficient.

[Jeremy Lefroy (Stafford) (Con)]

I welcome my right hon. Friend’s statement. He referred to more than £4 billion of centrally held contingency for defence procurement to address risks as they crystallise. Can he update the House on whether that has had to be drawn on so far and, if it is in future, whether it will be replenished?

[Mr Hammond]

The answer is no: the £4 billion—it is actually slightly over £4 billion—remains intact. As I told the House when I made the aircraft carrier statement, we originally provided a larger sum of contingency. We allocated part of that specifically to the anticipated cost increase in the aircraft carrier—that was fully provided at the time of the May 2012 statement—but we have not had to make any further call on that contingency. We will wait and see what the major projects review report says, but as I see it at the moment, I do not anticipate any call on that contingency in the foreseeable future.

[Mr Peter Bone (Wellingborough) (Con)]

I am sure the whole House would like to thank the excellent Secretary of State for making an oral statement. It is very difficult for Ministers to come and make statements that they do not want to make, and I am sure the House will welcome the right hon. Gentleman’s coming here and allowing us to put questions to him. The only issue I think the House has to deal with today is whether the announcement will improve defence procurement. If that is the case, it should be welcomed. Is it going to improve it?

[Mr Hammond]

I am happy to confirm to my hon. Friend that I am confident that the announcement will improve defence procurement and that it will set us on a path of evolution for the future, enabling us to keep our options open and allowing us to explore and continually challenge the organisation to deliver better things for our armed forces at better value for the taxpayer.

[David Mowat (Warrington South) (Con)]

The Secretary of State said that the DE&S plus bid was somewhat less detailed than the Bechtel bid, which presumably means that if they were both evaluated on a level playing field, the Bechtel bid would be likely to win. Will my right hon. Friend tell us whether the major learning points or good points in the Bechtel bid will be incorporated into what is now going forward with DE&S plus?

[Mr Hammond]

My hon. Friend asks a very good question. The material contained in the Bechtel bid is “commercial in confidence”, and Bechtel will have spent a considerable amount of money generating the bid, and would naturally not expect the Department to abuse that confidence. I can tell my hon. Friend that the broader process, the work we have done on DE&S plus and the preliminary discussions we have had with bidders and potential bidders have pointed the way to the future development of DE&S in a way that I think has been most helpful, and will inform the process going forward.

Points of Order

Tuesday 10th December 2013 Commons Chamber

14:11

[Mr Peter Bone (Wellingborough) (Con)]

On a point of order, Mr Speaker. Earlier today, we had Treasury questions. We have only a few opportunities during the year to question the Chancellor but the Chancellor was not here today; he was at a routine meeting in Brussels. Is not the first duty of the Chancellor to be in Parliament to answer questions and should not the Chief Secretary to the Treasury, his deputy, have been the one in Brussels? What is your ruling on that?

[Mr Speaker]

It is for Ministers to decide, and I must say that, so far as I was concerned, the Chancellor of the Exchequer discharged his obligations by courteously writing to inform me of his intended absence and the reason for it. The hon. Gentleman has made his point very clearly. Nothing disorderly has happened. I think there would be a general agreement across the House that it is overwhelmingly desirable for Ministers to be present for their own Department’s Question Time sessions. There are occasions on which that does not prove practical. I think it right and fair to leave it there for today.

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

On a point of order, Mr Speaker. Earlier at Treasury questions, a Treasury Minister provided an answer from the Dispatch Box that was, I am afraid, clearly based on incorrect information provided by an official. It referred to pub closure figures and the CGA statistics. The Minister said that there was evidence to show that free-of-tie pubs close in greater numbers than tied pubs. CGA, which compiled the figures, has made it clear that there are no figures in existence for that comparison, yet officials are still wrongly briefing Ministers. Can you advise us, Mr Speaker, how we can correct what was clearly an inadvertently misleading statement from the Dispatch Box?

[Mr Speaker]

I am grateful to the hon. Gentleman for his point of order, but this is the second occasion on which I have become aware of his displeasure. The first occasion was at the time of the answer, when I heard him bellowing his disapproval from a sedentary position with the words “not true” or something along those lines. The hon. Gentleman is nothing if not a persistent woodpecker. I must tell him, however, that Ministers are responsible for the accuracy of their answers. The hon. Gentleman has made his point with great force, and it is on the record. May I politely suggest that he might like to have a private conversation with the Minister if he wishes to pursue the matter further. At least for today, we will leave it there.

Business of the House (Today)

Tuesday 10th December 2013 Commons Chamber

14:14

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

I beg to move,

That, at today’s sitting, notwithstanding Standing Order No. 20 (Time for taking private business), the Private Business set down by the Chairman of Ways and Means may be entered upon at any hour, and may then be proceeded with, though opposed, for three hours, after which the Speaker shall interrupt the business.

On Thursday 5 December, I confirmed that business for today, 10 December, would be the remaining stages of the National Insurance (Contributions) Bill, followed by opposed private business. The motion on the Order Paper seeks to protect the time available to debate the proposed private business. The programme motion previously agreed by the House on 4 November for the National Insurance (Contributions) Bill provides a full day for consideration of Report and Third Reading. The House also needs to debate and approve a statutory instrument relating to terrorism.

The motion I have tabled—with the agreement of the Chairman of Ways and Means—would therefore allow the private business to run for up to three hours following the conclusion of the National Insurance (Contributions) Bill and the statutory instrument on the prevention and suppression of terrorism. A motion is needed because consideration of Government business will probably take us beyond 4 pm, the normal time for commencing opposed private business on a Tuesday. It would also allow the House to sit beyond the moment of interruption, if necessary. I hope that Members will not want to obstruct the business that the Chairman of Ways and Means has set down for today. I commend the motion to the House.

14:15

[Mr Peter Bone (Wellingborough) (Con)]

I was rather surprised to hear what the Leader of the House said in his closing remarks—that the Chairman of Ways and Means was entirely happy with this. Earlier today, I recall the Chairman of Ways and Means standing up and announcing that opposed private business would be taken at 4 o’clock today, in accordance with Standing Order No. 20. Nothing that the Leader of the House has said affects the ability of the House to sit after that. The point of the Standing Order is that there is a specific time for opposed business—between 4 pm and 7 pm. That allows those involved in the consideration of the private business to know what time the House is going to debate it.

I have heard an enormous number of complaints, and I am sure that the Leader of House will have heard them, about sitting late to discuss opposed private business. That is entirely because the Government continue to take Standing Orders, rip them apart and say that they are not going to abide by them. What should have happened today is that the debate on Government business should have continued to 4 o’clock and then stopped so that the opposed private business could be dealt with. After finishing the debate on private business, we should then have gone back to the previous debate. That is what should have happened; this Government are not being fair to those who are interested in listening to, and hearing about, opposed private business. People who are interested in those Bills do not know what time they will be debated, which is completely the wrong attitude. That is why we have Standing Orders; they are there to help the House.

I am minded to divide the House on this issue so that Members can say whether or not they want to sit late tonight to discuss opposed private business. If they are willing to do that, I do not want to hear another murmur from any hon. Member about sitting late and having to listen to my hon. Friend the Member for Christchurch (Mr Chope). This is a really important issue, with the Executive deciding that their business must overrule the procedures for Parliament. I urge the Leader of the House to think again.

14:17

[Mr Philip Hollobone (Kettering) (Con)]

I support my hon. Friend the Member for Wellingborough (Mr Bone). You will know, Mr Speaker, as the guardian of the Standing Orders in this place, how important they are to the effective running of House business. We had an interesting debate—I think it was on Monday last week—about the amendment of certain Standing Orders. I am not aware that the Government approached the Procedure Committee—or indeed any other Committee—with a view to amending Standing Order No. 20.

This issue crops up again and again with opposed private business. If the Government are not happy with the rule that allows us to debate these matters at 4 o’clock on any given afternoon, they need to make representations to the appropriate Committee to get the Standing Order permanently amended. Indeed, we would not even be having this debate at this time on this afternoon, were it not for one or two hon. Members objecting at the requisite point on previous evenings when this item was on the Order Paper and it was not possible to have debate like the one we are having this afternoon.

There must be very good reasons, laid down in “Erskine May” or other House publications, to explain why Standing Order No. 20 is in place. These Standing Orders are very difficult to make, and there must have been substantial debate about the merits and demerits of this Standing Order when it was drawn up. The House, in its wisdom, has decided that opposed private business should be debated between the hours of 4 pm and 7 pm on any given day, and I suggest that Members’ minds may be fresher at that time than later in the evening.

You will know, Mr Speaker, that some of this opposed private business is extremely arcane. Many fine points of detail are extracted by Members who are interested in scrutinising such legislation, and my hon. Friend the Member for Christchurch (Mr Chope) is an exemplar in that regard. However, when he tries to do a service to the House by scrutinising such detailed legislation, what he is faced with, again and again, is criticism from other Members who resent having to debate such detailed items well into the evening, and well past the time at which they had expected to be able to go home.

The reason such legislation is not debated between 4 pm and 7 pm is that, on each occasion, the Executive try to fiddle with the Order Paper—fiddle with the agenda—so that it is not debated at the appropriate time. Some of us, including my hon. Friend the Member for Wellingborough and me, are fed up with that abuse of the parliamentary timetable, but, despite our best efforts to obtain a reasonable response from the Executive, we are not getting that reasonable response.

I suggest to the Executive that if they want to amend Standing Order No. 20, they should set about trying to get that done through the Procedure Committee. Until they do so, I do not see why the House must debate the order of opposed private business when it is clearly laid out in the Standing Orders of the House, which all of us should do our best to abide by.

14:21

[Mr Lansley]

With the leave of the House, Mr Speaker, I shall respond to the points made by my hon. Friends the Members for Wellingborough (Mr Bone) and for Kettering (Mr Hollobone).

As was pointed out by my hon. Friend the Member for Kettering, the House could have considered this matter on earlier occasions, but the motion was objected to on those occasions. If the House had approved it at an earlier stage, it would have been clear to Members who are interested in the opposed private business that it would be dealt with later in the day.

We are not seeking to amend Standing Order No. 20. We are asking the House, “notwithstanding Standing Order No. 20”, to fix the time of the business today, our purpose being to ensure that time is available for both the public business and the opposed private business. I make no apology to the House, or beyond, for the fact that we give priority to public business in this place. As it happens, however, there is more pressure on public business than usual today as a consequence of yesterday’s tributes to Nelson Mandela. Today’s urgent question and statement, and, indeed, the motion relating to terrorism, might otherwise have been taken yesterday.

This is a decision for the House, and the House is being invited, notwithstanding Standing Order No. 20, to ensure that there is sufficient time for the public business today, followed by the protected three hours for the private business.

[Mr Hollobone]

Will the Leader of the House give way?

[Mr Lansley]

No.

Question put.

14:23

Division 155

Ayes: 264

---

Conservative: 215
Liberal Democrat: 43
Democratic Unionist Party: 3
Independent: 1
Labour: 1

Noes: 7

---

Conservative: 4
Independent: 1
Labour: 1
Democratic Unionist Party: 1

Resolved,

That, at today’s sitting, notwithstanding Standing Order No. 20 (Time for taking private business), the Private Business set down by the Chairman of Ways and Means may be entered upon at any hour, and may then be proceeded with, though opposed, for three hours, after which the Speaker shall interrupt the business.

National Insurance (Contributions) Bill

Tuesday 10th December 2013 Commons Chamber

Consideration of Bill, not amended in the Public Bill Committee.

New Clause 3

Reduction of secondary Class 1 contributions for certain age groups

‘(1) SSCBA 1992 is amended as follows.

(2) In section 9 (calculation of secondary Class 1 contributions)—

(a) in subsection (1) for “the secondary percentage” substitute “the relevant percentage”, and

(b) after subsection (1) insert—

“(1A) For the purposes of subsection (1) “the relevant percentage” is—

(a) if section 9A below applies to the earnings, the age-related secondary percentage;

(b) otherwise, the secondary percentage.”

(3) After section 9 insert—

“9A The age-related secondary percentage

(1) Where a secondary Class 1 contribution is payable as mentioned in section 6(1)(b) above, this section applies to the earnings paid in the tax week, in respect of the employment in question, if the earner falls within an age group specified in column 1 of the table in subsection (3).

(2) For the purposes of section 9(1A)(a) above, the age-related secondary percentage is the percentage for the earner’s age group specified in column 2 of the table.

(3) Here is the table—

Age group	Age-related secondary percentage
Under 21	0%

(4) The Treasury may by regulations amend the table—

(a) so as to add an age group in column 1 and to specify the percentage in column 2 for that age group;

(b) so as to reduce (or further reduce) the percentage specified in column 2 for an age group already specified in column 1 (whether for the whole of the age group or only part of it).

(5) A percentage specified under subsection (4)(a) must be lower than the secondary percentage.

(6) For the purposes of this Act a person is still to be regarded as being liable to pay a secondary Class 1 contribution even though the amount of the contribution is £0 because the age-related secondary percentage is 0%.

(7) The Treasury may by regulations provide that, in relation to an age group specified in the table, there is to be for every tax year an upper secondary threshold for secondary Class 1 contributions.

That threshold is to be the amount specified for that year by regulations made by the Treasury.

(8) Subsections (4) and (5) of section 5 above (which confer power to prescribe an equivalent of a secondary threshold in relation to earners paid otherwise than weekly), and subsection (6) of that section as it applies for the purposes of those subsections, apply for the purposes of an upper secondary threshold in relation to an age group as they apply for the purposes of a secondary threshold.

(9) Where—

(a) a secondary Class 1 contribution is payable as mentioned in section 6(1)(b) above,

(b) the earner falls within an age group in relation to which provision has been made under subsection (7), and

(c) the earnings paid in the tax week, in respect of the employment in question, exceed the current upper secondary threshold (or the prescribed equivalent) in relation to the age group,

this section is not to apply to the earnings so far as they exceed that threshold (or the prescribed equivalent); and for the purposes of section 9(1) above the relevant percentage in respect of the earnings so far as they exceed that threshold (or the prescribed equivalent) is, accordingly, to be the secondary percentage.

(10) In subsections (7) to (9) references to an age group include a part of an age group.”

(4) In section 122(1) (interpretation of Parts 1 to 6), at the appropriate place insert—

““age-related secondary percentage” is to be construed in accordance with section 9A(2) above;”.

(5) In section 176(1)(a) (parliamentary control: instruments subject to affirmative procedure) after “section 4C;” insert—

“section 9A(7);”.

(6) SSCB(NI)A 1992 is amended as follows.

(7) In section 9 (calculation of secondary Class 1 contributions)—

(a) in subsection (1) for “the secondary percentage” substitute “the relevant percentage”, and

(b) after subsection (1) insert—

“(1A) For the purposes of subsection (1) “the relevant percentage” is—

(a) if section 9A below applies to the earnings, the age-related secondary percentage;

(b) otherwise, the secondary percentage.”

(8) After section 9 insert—

“9A The age-related secondary percentage

(1) Where a secondary Class 1 contribution is payable as mentioned in section 6(1)(b) above, this section applies to the earnings paid in the tax week, in respect of the employment in question, if the earner falls within an age group specified in column 1 of the table in subsection (3).

(2) For the purposes of section 9(1A)(a) above, the age-related secondary percentage is the percentage for the earner’s age group specified in column 2 of the table.

(3) Here is the table—

Age group	Age-related secondary percentage
Under 21	0%

(4) The Treasury may by regulations amend the table—

(a) so as to add an age group in column 1 and to specify the percentage in column 2 for that age group;

(b) so as to reduce (or further reduce) the percentage specified in column 2 for an age group already specified in column 1 (whether for the whole of the age group or only part of it).

(5) A percentage specified under subsection (4)(a) must be lower than the secondary percentage.

(6) For the purposes of this Act a person is still to be regarded as being liable to pay a secondary Class 1 contribution even though the amount of the contribution is £0 because the age-related secondary percentage is 0%.

(7) The Treasury may by regulations provide that, in relation to an age group specified in the table, there is to be for every tax year an upper secondary threshold for secondary Class 1 contributions.

That threshold is to be the amount specified for that year by regulations made by the Treasury.

(8) Subsections (4) and (5) of section 5 above (which confer power to prescribe an equivalent of a secondary threshold in relation to earners paid otherwise than weekly), and subsection (6) of that section as it applies for the purposes of those subsections, apply for the purposes of an upper secondary threshold in relation to an age group as they apply for the purposes of a secondary threshold.

(9) Where—

(a) a secondary Class 1 contribution is payable as mentioned in section 6(1)(b) above,

(b) the earner falls within an age group in relation to which provision has been made under subsection (7), and

(c) the earnings paid in the tax week, in respect of the employment in question, exceed the current upper secondary threshold (or the prescribed equivalent) in relation to the age group,

this section is not to apply to the earnings so far as they exceed that threshold (or the prescribed equivalent); and for the purposes of section 9(1) above the relevant percentage in respect of the earnings so far as they exceed that threshold (or the prescribed equivalent) is, accordingly, to be the secondary percentage.

(10) In subsections (7) to (9) references to an age group include a part of an age group.”

(9) In section 121(1) (interpretation of Parts 1 to 6), at the appropriate place insert—

““age-related secondary percentage” is to be construed in accordance with section 9A(2) above;”.

(10) In section 172(11A) (parliamentary control: instruments subject to affirmative procedure) after “4C,” insert “9A(7),”.

(11) The following come into force at the end of the period of 2 months beginning with the day on which this Act is passed—

(a) any power conferred on the Treasury by virtue of this section to make regulations, and

(b) the amendments made by subsections (5) and (10).

(12) So far as not already brought into force by subsection (11), the amendments made by this section come into force on 6 April 2015.’.—(Mr Gauke.)

Brought up, and read the First time.

14:36

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

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

[Madam Deputy Speaker (Dawn Primarolo)]

With this it will be convenient to discuss amendment (a), at end insert—

‘(13) The Treasury shall publish a review of the level of youth unemployment as at December 2013 and the effect on the level of youth unemployment if the amendments made in this section were required to be brought into force on 6 April 2014.’.

[Mr Gauke]

New clause 3 brings forward an important initiative announced by my right hon. Friend the Chancellor of the Exchequer in his autumn statement of last week. He announced that employers employing workers under the age of 21 would no longer have to pay employers’ class 1 national insurance contributions. Proposed new section 9A of the Social Security Contributions and Benefits Act 1992 and its Northern Ireland equivalent bring this into effect by introducing a zero rate of secondary class 1 NICs for all employers on the earnings of employees under the age of 21. As my right hon. Friend the Chancellor made clear, the Government believe this measure will, alongside other initiatives on apprenticeships and work experience placements, help to address the problem of youth unemployment in the United Kingdom. The measure will apply both to new and existing employees aged under 21 and is not time limited.

[Mr Philip Hollobone (Kettering) (Con)]

I congratulate my hon. Friend on introducing this proposal. How much will it cost and how many young people will it help?

[Mr Gauke]

I am grateful to my hon. Friend for his question. The details of the costings can be seen in the autumn statement document published last week. The initial cost is £460 million and that then increases beyond that. All those working who are under the age of 21 will be able to benefit from it, although there is one caveat that I wish to make in a few moments.

This is a step in the right direction. It is striking that this Government came to office inheriting an increase in NICs and we have not only increased the thresholds for paying employers’ NICs, but we have introduced the employment allowance which gives £2,000 off for businesses in respect of employers’ NICs, and now we are exempting those under the age of 21. All this will help to create employment.

[Ian Swales (Redcar) (LD)]

Will the Minister clarify whether the years in which employers do not pay contributions for people under 21 will still qualify under the pension arrangements as years worked?

[Mr Gauke]

Yes; this will not make any change in that regard. It is worth bearing in mind that the changes relate to employers’ national insurance contributions, and that employees’ contributions will remain unchanged. There is no change in terms of contributory benefits.

The new clause contains regulation-making powers to vary the age group and the rate of secondary class 1 NICs for that group, and to reduce the rate of secondary class 1 contributions for a previously specified age group. For example, the Government could allow for an increase in the age bracket of employees falling into the zero-rate band of secondary class 1 contributions. I want to reassure hon. Members that that power is capable of placing an employee only in a lower percentage bracket, and that it is therefore a relieving power only.

There is also a regulation-making power to ensure that the benefit of the zero rate or reduced rate of secondary class 1 NICs will be enjoyed only in respect of earnings below a certain level. In other words, the power will provide a means of introducing an earnings limit. As the Chancellor announced in the autumn statement, this will be set initially at the level of the upper earnings limit, which is expected to be the equivalent of about £42,000 a year in 2015-16. I would be happy to take the House through the new clause, subsection by subsection, although all that information is provided in the explanatory notes. Perhaps, instead, I will respond to any questions on those subsections that arise during the debate.

Let me turn to the Opposition’s amendment (a) to the new clause. It proposes:

“The Treasury shall publish a review of the level of youth unemployment as at December 2013 and the effect on the level of youth unemployment if the amendments made in this section were required to be brought into force on 6 April 2014”—

rather than in April 2015. I hope that the hon. Member for Birmingham, Ladywood (Shabana Mahmood) will not mind my anticipating some of her remarks, but I want to take this opportunity to explain why the amendment is unnecessary.

The Government are committed to increasing employment levels for all, and employment is now at its highest ever level, while unemployment is lower than when we came to power. I recognise the challenges posed by youth unemployment, and dealing with them has long been a priority for the Government. For example, about 370,000 young people have been supported through the Work programme since June 2011. Furthermore, the Youth Contract provides almost £1 billion in funding to support up to 500,000 young people into employment and education opportunities. The autumn statement announcement on abolishing employer NICs for under-21s builds on those policies and has been widely welcomed by industry. Indeed, the director-general of the CBI, John Cridland, has said that the policy

“will make a real difference and help tackle the scourge of youth unemployment.”

[Sheila Gilmore (Edinburgh East) (Lab)]

There has been considerable criticism that there has not been a significant take-up of the wage incentive attached to the Youth Contract. To what degree has that influenced this decision to try to achieve the same thing through national insurance measures?

[Mr Gauke]

Our motivation—and, I am sure, that of any sensible Government—is to do everything we can to address the issue of youth unemployment. That means trying a number of approaches and adopting a number of policies. It is difficult to quantify the number of jobs that will be created as a consequence of the measure, because many factors will come into play, but we believe that it will be helpful none the less. As I said, the director-general of the CBI also believes that it will make a real difference in tackling the scourge of youth unemployment.

[Mr Brooks Newmark (Braintree) (Con)]

It is probably worth considering the fact that a lot of businesses, particularly retail businesses, work on very small margins. Does my hon. Friend agree that the extra money that they will receive through not having to pay this jobs tax will probably encourage them to hire a young person rather than someone who is over 21?

14:45

[Mr Gauke]

My hon. Friend makes an important point. We have to set this in the context of a range of Government measures, including the introduction of the employment allowance and the measures on business rates that we announced last week, which I am sure he will be the first to acknowledge will help retailers and small businesses in particular. All those measures will help to put in place the conditions that will encourage firms to take people on and to increase employment and wages. This is all about achieving sustainable growth in living standards. There is no short-cut to achieving that, but measures such as these will help us to ensure that the economy is on a strong footing and that we are in a position to improve the living standards of the British public.

[Ian Swales]

This might be a trivial drafting point, but will the Minister explain exactly what age he is talking about? The new clause refers to people “under 21”, which suggests that it would apply to people before they reach their 21st birthday. Is that correct?

[Mr Gauke]

The exemption is available up to, but not including, the month in which the employee turns 21. I hope that that makes the matter clear to my hon. Friend.

Returning to the Opposition’s amendment, I see little point in the Treasury publishing a review of the level of youth unemployment. The Office for National Statistics is responsible for publishing statistics on employment, and those regular releases are available to the public through the ONS website. There is a limited case for the Treasury intervening and also publishing a review.

In addition, I do not think that there is much value in attempting to estimate the impact of a policy being introduced on a theoretical date. We announced in the autumn statement that employer NICs would be abolished for those under 21 years of age from April 2015. I can understand why the hon. Lady raises the question, but attempting to deliver that a year earlier, in 2014, would increase the administrative costs to business, and rushing the measure through in that way would be likely to lead to cost confusion and the failure of many employers to take it up. Such a tight time frame would not give employers, payroll software developers and Her Majesty’s Revenue and Customs enough time to update their IT systems. It would also not give HMRC enough time to ensure that the policy could be implemented in a way that did not disrupt its other important IT systems. Given that the policy cannot be delivered in April 2014, it would not be a good use of Government time and resources to attempt to estimate the impact of something that we do not intend to do and that cannot be delivered.

I dare say that I shall return to this matter later, but in the light of those comments, I hope that the hon. Lady will not press her amendment to a vote. I also hope that the new clause will be able to stand part of the Bill. It is an excellent measure that will help many of our constituents by increasing employment.

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

I wish to speak to amendment (a) to new clause 3. I welcome the Minister’s explanation of the thinking behind the new clause and his clarification of how the age limit will be interpreted. His clarification of the measure’s impact on pensions was also helpful, given that we did not have these proposals before us when the Committee considered the Bill.

In general, the Government’s new proposal, announced in the autumn statement last week, will hopefully encourage employers to take on more young people under the age of 21. With youth unemployment so high—it is nearly 1 million—and long-term youth unemployment a real concern, some action is welcome but, as the Minister has anticipated and as our amendment suggests, we have some concerns about how the Government are going about dealing with the issue.

I will deal first with some practical points relating to new clause 3 before moving on to our more substantive concerns about the Government’s approach. I have briefly discussed the impact of the measures with various stakeholders who have been scrutinising the new clause since the Government tabled it. Given that we were unable to scrutinise it in Committee, because of when it was tabled, it would be helpful if the Minister at least gave the House the benefit of his thoughts on the issues I am about to raise. Members of the other place can then take forward some of our concerns if there is more in them.

What impact does the Minister think the new measure will have on young people who are employed part time? As he will know, we have seen a huge rise in part-time employment and insecure employment, for example through the growth of zero-hours contracts, something the House has debated a great deal in this Parliament. My understanding is that many young people who work part time will not be caught by the measure because they earn far beneath the primary threshold. What consideration has he given to the impact on young people who are employed part time, given that for so many of them their first job is part time? As many Members will know, it is now not unusual for young people on the Work programme to be offered only part-time employment of zero-hours contracts, so it would be helpful if he explained the Government’s thinking on that.

I would also welcome the Minister’s view on how the measure might interact with the willingness of employers to take on graduates and the impact it might have on graduate employment. That is not about passing a value judgment on whether someone is taken on when they are 18 or whether employers decide to employ a graduate, but the Minister knows that the other announcements made in the autumn statement in relation to young people were about an increase in student numbers of 30,000 and a removal of student number controls to enable universities to take on as many students as they like. The number of 18-year-olds, in particular, participating in higher education is likely to increase.

It would therefore be helpful if the Minister outlined the Government’s thinking on how those two changes will interact and how they will ensure that they work in a complementary way, rather than skewing one type of recruitment practice ahead of another. Those issues are worthy of much greater deliberation than we will have the opportunity for today, so we might need to return to them, depending on what happens as the Bill makes progress.

I have two other points to make on the practicalities of new clause 3. First, we need to ensure that it is promoted properly to employers, particularly micro-businesses and even one-man bands, which might be encouraged to take on a young person, perhaps a family member. How will we ensure that they know exactly how that will operate and how it will interact with the employment allowance? That is important to ensure that micro-businesses, in particular, are well aware of how the two things align and that there is no confusion that could lead to a decrease in take-up. Secondly, my understanding is that no new funding has been announced to pay for the proposal, so it would be helpful if the Minister set out where the money will come from and how the costs are expected to increase, and not only in the first or second years, but in future years.

There are two main points of difference between the Opposition and the Government in relation to the new proposal. First, it is not bold enough. The Minister will know, because we have discussed it before, about the scale of the challenge we face and what the Government could and should have done to tackle the scourge of youth unemployment.

[Jenny Chapman (Darlington) (Lab)]

Welcome though the measure surely is, does my hon. Friend not feel, as I do, that with almost 1 million young people unemployed, it might be too little, too late?

[Shabana Mahmood]

I am grateful to my hon. Friend for her intervention and agree with her entirely. I was going to move on to that point. We disagree with the Government’s approach because we do not think that the proposal is bold enough, but we are also concerned about the timing—I will return to this later—because it has a direct impact on our proposed amendment to the new clause.

Youth unemployment is nearly 1 million—around 940,000 young people are unemployed—and the most recent figures, published in November, show that long-term youth unemployment has increased. Given the scale of the problem and the impact that every single day of unemployment has on a young person’s overall life chances, I believe that the Government should have come back with a much bolder offer in the autumn statement. It was a missed opportunity to go further and faster.

The Minister will not be surprised to hear that I think the Government should have adopted our alternative proposal for a compulsory jobs guarantee for every young person under the age of 25 who is out of work, funded by a tax on bank bonuses. [Interruption.] It has been spent only once—Government Members should look at the detail. The young person would have to take up the job or risk losing their benefits.

[Sheila Gilmore]

I am sure that my hon. Friend will agree that the idea of a jobs guarantee has been proposed not only by the Labour party; it was also a recommendation of the Government’s recent social mobility commission, which criticised the impact of the Youth Contract and suggested that a jobs guarantee would be a much better approach.

[Shabana Mahmood]

My hon. Friend is absolutely right. The Government’s Youth Contract has been branded a failure by their own advisers. It is also worth noting that the Work programme is finding work for only one in six long-term unemployed people. The House heard earlier, when the Secretary of State for Work and Pensions was called to answer an urgent question, about the other difficulties with the Work programme.

The scale of the problem we face in relation to youth unemployment is stark. I speak as the Member who represents the constituency with the highest rate of unemployment in the country. I meet many young people every day in my constituency who are themselves the children of people who found themselves unemployed in the last great recession in the 1980s. They are having the same problems that their parents’ generation had. Every day that a young person tries hard but fails to get a job increases their desperation and depression. I recently held a youth jobs fair in my constituency, along with my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne) and my hon. Friend the Member for Birmingham, Erdington (Jack Dromey). More than 2,000 young people attended, and every one of them spoke of their desperation and their desire to find work and the difficulties of finding work in the current climate.

In those circumstances, knowing how much of a knock a young person’s life chances take when they find themselves unemployed for a long period, I think that it is right for the Government to consider taking much bolder action. The fact that they have failed to do so shows that they have failed to meet the scale of the challenge of our times. I fear that we are storing up a much bigger problem for the future.

In the absence of such action, my point to the Minister is that we hope the new clause will stimulate more employment for young people and encourage employers to consider taking on a young person, and that it therefore helps to get to grips with some of the problems. It is a good proposal. It does not go as far as we would like and perhaps it will not have the impact that a compulsory jobs guarantee would have, but on its own terms it is a good proposal, so why not do it now? Nothing the Minister mentioned seemed to be an insurmountable problem. He said that the IT situation would be a little difficult, but we should not let IT difficulties at HMRC stop us getting to grips with the scourge of youth unemployment. He has failed to introduce the employment allowance as soon as we believe it should have been introduced. He also decided not to scrap the regional national insurance employers holiday, so letting it run for three years, yet he knows that it fell far short of the targets that were set for it at the beginning.

The Minister said that the problem with the April 2014 date is that the Government wanted to wait until real-time information was all online and working properly. However, I have interrogated others on this point, and it was apparently not impossible or too difficult for the Government to amend the IT situation so as to enable the employment allowance to be brought in earlier than April next year. I am afraid that the same point applies to the proposal on national insurance for under-21s. The Minister has said nothing that suggests that it should not be brought in as early as possible, April 2014 being the best date on offer.

15:00

[Richard Fuller (Bedford) (Con)]

If I heard the hon. Lady correctly, she said that she wanted the cut in the jobs tax to be brought in sooner, yet in 2010 she said in Committee that she was proud to stand on a record of increasing the jobs tax. Does that represent a flip-flop?

[Shabana Mahmood]

It does not represent a flip-flop, as the hon. Gentleman well knows. It would not be a debate on this issue if he did not make the point that he has made on a number of occasions. I would have felt as though I had missed out on something if he had not made that intervention, so I am grateful to him. He will not be surprised if I repeat my previous answers to him in relation to national insurance. I was very proud to stand for election on the Labour party manifesto at the 2010 general election and proud that the Labour Government had got the recovery under way at the time of that election—a recovery that was choked off by this Government as soon as they came into power. [Interruption.] Government Members might not like to hear it, but I am afraid that that does not stop it being true.

Let me clarify my point about the employment allowance. From the moment it was announced in the Budget, our immediate critique was not that it should not be introduced —we supported its introduction from the beginning—but to say, as we have continued to say, “Bring it in as soon as possible—why wait?” If there were compelling reasons for the wait, it would be understandable, but I am afraid that I find nothing compelling in anything the Minister has ever said about the delay in bringing these proposals forward. All the issues relating to IT and systems and getting software up and running could be sorted out, with a bit of will.

I understand that software developers are still waiting on HMRC to give them the full guidelines on what software they will need to produce to make sure that take-up of the employment allowance goes ahead with relative ease. I hope that the Minister has had sight of the submission by Mr Holloway of the Learn Centre to the National Insurance Contributions Bill Committee, which was submitted after the Committee had disbanded but was still made available to all its members, because it contains concerns about the delay in getting proper clarification and explanation to software developers on what they need to do in relation to the employment allowance. Given that it is December and they have to get ready for the employment allowance to come online in April 2014, they will not have a huge amount of time to get everything in place and ready. If that is the position on the employment allowance, then why not add in the proposal on NICs for under-21s and deal with both issues at the same time?

Given that we are speaking from the Opposition Benches—unfortunately—our amendment does not propose that the measure should be introduced immediately in 2014; otherwise Government Members would no doubt have shouted at us about the cost of doing so and the spending commitment entailed. However, we have asked for a review that would look at the level of youth unemployment now and the impact that introducing the measure in April 2014 would have had on the level of youth unemployment as it stands today. That is because the Government should not escape scrutiny for the impact that this measure may have had compared with what it will have, I hope, when it comes into force in 2015. If it is found that the measure would have had a significant impact, as we believe it would, that is an important bit of information and the Government would be put under pressure to introduce it sooner than they intended.

This Government found money in the autumn statement for the married couples allowance. They have always said that the recognition of marriage in the tax system is symbolic. However, government is about choices and priorities, and if money can be found immediately to do something that is symbolic and sends a message, then surely it should be found for a practical Government measure that helps to prioritise our young people who need jobs today and not on a date far from now. The choices and priorities of this Government are wrong and they should think again. The emergency presented to this country by the current rate of youth unemployment cannot wait to be dealt with on some future date. The Government should reconsider the start date of this proposal. We therefore intend to press our amendment to a vote.

[Mr Brooks Newmark (Braintree) (Con)]

I am someone who looks at a glass of milk as being half full, not half empty, and I think that the Government have done much to help young people back into work. The hon. Member for Birmingham, Ladywood (Shabana Mahmood) may wish to mock the Youth Contract, but it has encouraged businesses to offer over 21,000 jobs to people at risk of long-term unemployment. Those 21,000 people appreciate the youth contract and want the job that it has enabled them to have.

We have over 1 million young people in apprenticeships, which are also getting young people back on to the jobs ladder. Indeed, the latest Office for National Statistics labour statistics indicate a significant rise—of about 50,000 in the past three months alone—in the number of young people in work. The number of young people seeking jobseeker’s allowance has fallen by 13,000—the 17th consecutive monthly fall. That is good news indeed. Many constituencies, of Members throughout the House, have benefited, as has Braintree, which has seen a fall in long-term unemployment, regular unemployment and youth unemployment.

On top of all that, I was absolutely delighted to hear the Chancellor supporting the Million Jobs campaign manifesto, which, I hasten to add, I helped to draft, by abolishing the jobs tax for under-21s. It is extremely important that if we are cutting taxes we do it to help those in society we really want to help. As a father of five children between the ages of 16 and 25, I am extremely sensitive to that age group. It is important that we get young people into work, and the new Government initiative does just that. It will enable even more young people to get a foothold on the employment ladder by providing a highly attractive incentive for businesses to hire a young person under 21. I thank Lottie Dexter, the director of the Million Jobs campaign, who has worked extremely hard not only in running it but ensuring that the draft manifesto that we put out only six weeks ago caught the Chancellor’s attention so much that he decided to support it in his autumn statement. I am delighted to support the new clause.

[Sheila Gilmore]

Our debate in Committee on the wider aspects of the Bill made it clear that employers may well use the allowance, which was originally the major part of the Bill, in a number of ways and that job creation would not necessarily be the only result. Some employers, for example, might choose to provide higher wages, while others might choose to provide more training for the upskilling of their work force.

The Minister did not touch on this, but I presume the same might be said for the current proposal, because it is not, as I understand it, tied to taking on a new employee; rather, it relates to anyone who employs a young person, which, obviously, simplifies the issue in many ways. It would be useful to consider and, indeed, encourage not just the take-up of new jobs—although that is very important—but the issue of upskilling.

As Members of all parties have said—Government Members often throw this at us—structural issues relating to youth unemployment have been around for some considerable time. Many things have been written about the causes, including whether there is a problem with a lack of entry-level jobs and whether people are skilled enough.

[Mr Newmark]

Would the hon. Lady at least like to join me in welcoming the fact that youth unemployment in her constituency over the past year has dropped by 19.8%?

[Sheila Gilmore]

I believe that relates to the claimant count, which is not always the same as youth unemployment, because some people in the 18-to-25 age group will have run out of contributory benefits and fallen off the claimant count. I still see an issue when I look around me, even in a city that, in comparison with the rest of Scotland, has always done better with regard to employment.

Of course, it is a good thing. [Hon. Members: “Hear, hear!”] No one is going to say that it is a bad thing. That would be ridiculous.

[Mr Newmark]

Just give the Government some credit.

[Sheila Gilmore]

I have two things to say to that. Is it a good thing that youth unemployment—or the claimant count at least—has fallen in my constituency? Yes, it is. Do I give the Government credit for that? Well, I am not sure whether it is down to the Government or not, so we should put that to one side.

We would not be debating the proposal, and it would not have been included in the autumn statement, if the Government did not believe that youth unemployment is still an issue and a problem. Many statements are being made about how wonderful it is that youth unemployment is coming down, but the Government clearly believe, like us, that there is still a problem. If there was no problem, I doubt the proposal would have been made.

Although many young people are not necessarily unemployed for long periods, there are groups of young people who find themselves unemployed for a year or even two years, which, as we know, is of huge consequence to people’s future life, health, well-being and income.

[Mr Newmark]

I am sorry to hear that the hon. Lady’s approach to what the Government are doing is one of, “Bah, humbug!” Given that it is Christmas, will she at least acknowledge, first, that the Government are doing a good job by bringing youth unemployment down in her constituency and throughout the country and, secondly, that this particular initiative of abolishing the jobs tax for under-21s is a good one? It is Christmas.

[Sheila Gilmore]

It is indeed Christmas and, given that many families up and down this country will be struggling through Christmas, I do not think the Government will receive much thanks. For example, a rising number of people are having to resort to food banks this Christmas and, indeed, throughout the year. We could trade these issues backwards and forwards.

The point I was making was about giving young people who are in employment the opportunity to be trained and to upskill because, while it is very important to get a first job, being able to progress is also extremely important. Will the Minister consider monitoring—in future or even when the proposal is implemented—what happens in practice? Perhaps the Government should tie the proposal to certain beneficial outcomes, such as making the provision available to employers who agree to use it either for the creation of a job or for the upskilling of an existing worker. It would be highly desirable not to encourage practices such as zero-hours contracts, which Members on both sides of the House said were bad when we debated them, so perhaps the allowance should be tied to employers who do not provide young people with zero-hours contracts.

15:15

[Mr Gauke]

First, I thank hon. Members for welcoming the proposal. I am grateful to the hon. Member for Birmingham, Ladywood (Shabana Mahmood) for describing it as a good one. I will respond to some of her specific questions and then deal, as she did, with the area of contention, to the extent that one exists.

On part-time workers, it is right to say that employers of staff earning below the secondary threshold of £148 per week—which applies to a lot of part-time staff—will not be affected directly by this change. It is worth pointing out, however, that some employers may at present be discouraged from increasing the hours of an under 21-year-old because they may then have to pay employers’ national insurance contributions. To that extent, the proposal may well help those part-time workers who want to extend their hours, because it will increase the incentives for their employers to do so. That will also enable an employer with both part-time and full-time employees to connect the work of the two groups.

Similarly, there is no direct interaction with the employment allowance. Obviously, the measure will reduce the national insurance contributions bill of a number of employers, which may allow the employer’s allowance to spread further: the £2,000 would be just as valuable to the employer, but it would contribute more to reducing their total NICs bill. I think that is a fair point to make.

The hon. Lady asked about the interaction with university numbers, which we have said we will increase. Again, I do not think there is a direct interaction. The Government are trying to do everything we can for young people with regard to increasing choices, providing more university places and creating a good environment with more jobs for them. If the hon. Lady is worried about graduates over the age of 21 hitting the labour market, the point I would make is that extending the policy to those under 22 or 23 would be significantly more expensive, which must be taken into consideration in the light of the pressures on the public finances. Overall, we think the package is a good one.

On youth unemployment generally, I touched on a number of measures earlier, and my hon. Friend the Member for Braintree (Mr Newmark) mentioned some that we are taking, such as the Work programme, and which should be recognised. In case it has escaped the notice of the hon. Member for Birmingham, Ladywood, youth unemployment in her constituency has fallen by 15.6% in the past 12 months, and we have ambitions to take it down even further.

I thank my hon. Friend the Member for Braintree for his work on the Million Jobs campaign and, indeed, on this policy. He certainly contributed to the policy process for the autumn statement, and I thank him for all his efforts.

To turn to the areas of contention, my hon. Friend the Member for Bedford (Richard Fuller) referred to a certain pattern: first, the Labour party goes into the general election advocating an increase in employer’s national insurance contributions and then, following the election, every time this Government come forward with policies to reduce employer’s national insurance contributions, it complains that we are not bold enough and that we should go further and faster. I must say that his characterisation of that as a flip-flop is entirely accurate.

In relation to our not making the change now, I have set out the reasons for that. Attempting to deliver it a year earlier, in April 2014, would increase the administrative cost not just to HMRC, but to business. Rushing the measure through in that manner would be likely to lead to cost, confusion and the failure of many employers to take it up. Payroll companies need time to update their software and employers need time to download it, and such a time frame would put the policy at risk. Does the hon. Member for Birmingham, Ladywood really think that, with 18 months to run in this Parliament, the Government prefer to introduce the measure in April 2015, rather than in April 2014? If we could possibly introduce it safely in April 2014, we would, but we can do it in April 2015. That is absolutely the right thing to do, and we will not jeopardise that policy.

Finally, the hon. Lady asked about progress on the employment allowance. HMRC has been in discussions with various interested parties over many months. There is ongoing engagement with relevant groups, including software providers, on the draft employer guidance, with a view to making it available on the HMRC website in the new year. HMRC will also target communications to key interested groups, and use its publications and products to build further awareness in February and March. We believe that that is all on track.

I welcome the support for the policy. I understand why the hon. Lady asks why we should not make the change in April 2014, although given that her party has at no point advocated getting rid of employer’s NICs for under-21s, it would be slightly strange for her to push the matter to a vote. There are good practical reasons why we cannot do it, much though we would like to, so I will be disappointed if she presses her amendment to a Division. None the less, I welcome the support given to the measure, and I am proud that the Government are taking real steps to deal with youth unemployment.

Question put and agreed to.

Clause accordingly read a Second time.

Amendment proposed to new clause 3: (a) at end insert—

‘(13) The Treasury shall publish a review of the level of youth unemployment as at December 2013 and the effect on the level of youth unemployment if the amendments made in this section were required to be brought into force on 6 April 2014.’.—(Shabana Mahmood.)

Question put, That the amendment be made.

15:23

Division 156

Ayes: 225

---

Labour: 217
Scottish National Party: 4
Social Democratic & Labour Party: 2
Plaid Cymru: 2
Independent: 1

Noes: 294

---

Conservative: 243
Liberal Democrat: 46
Democratic Unionist Party: 4
Independent: 1

New clause 3 added to the Bill.

New Clause 4

Class 4 contributions: partnerships

‘(1) SSCBA 1992 is amended as follows.

(2) After section 18 insert—

“18A Class 4 contributions: partnerships

(1) The Treasury may by regulations—

(a) modify the way in which liabilities for Class 4 contributions of a partner in a firm are determined, or

(b) otherwise modify the law relating to Class 4 contributions,

as they consider appropriate to take account of the passing or making of a provision of the Income Tax Acts relating to firms or partners in firms.

(2) “Firm” has the same meaning as in the Income Tax (Trading and Other Income) Act 2005 (and includes a limited liability partnership in relation to which section 863(1) of that Act applies); and “partner” is to be read accordingly and includes a former partner.

(3) Regulations under this section may have retrospective effect; but they may not have effect before the beginning of the tax year in which they are made.”

(3) In section 176(1)(a) (parliamentary control: instruments subject to affirmative procedure), after “section 18;” insert—

“section 18A;”.

(4) SSCB(NI)A 1992 is amended as follows.

(5) After section 18 insert—

“18A Class 4 contributions: partnerships

(1) The Treasury may by regulations—

(a) modify the way in which liabilities for Class 4 contributions of a partner in a firm are determined, or

(b) otherwise modify the law relating to Class 4 contributions,

as they consider appropriate to take account of the passing or making of a provision of the Income Tax Acts relating to firms or partners in firms.

(2) “Firm” has the same meaning as in the Income Tax (Trading and Other Income) Act 2005 (and includes a limited liability partnership in relation to which section 863(1) of that Act applies); and “partner” is to be read accordingly and includes a former partner.

(3) Regulations under this section may have retrospective effect; but they may not have effect before the beginning of the tax year in which they are made.”

(6) In section 172(11A) (parliamentary control: instruments subject to affirmative procedure), after “18,” insert “18A,”.

(7) The amendments made by this section come into force at the end of the period of 2 months beginning with the day on which this Act is passed.’.—(Mr Gauke.)

Brought up, and read the First time.

[Mr Gauke]

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

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following:

Government new clause 5—Limited liability partnerships.

Government amendments 1 and 2

[Mr Gauke]

New clause 4 is needed as it addresses a tax issue arising under existing partnership tax rules where the immediate entitlement to partnership profits is restricted by the alternative investment fund managers directive—AIFMD. HMRC received further information about this during the partnerships review consultation. Following their discussions with the funds sector representatives and the Financial Conduct Authority with responsibility for the AIFMD implementation in the United Kingdom, the Government intend to put in place a statutory mechanism to address the issue, subject to parliamentary approval.

It is important to note that the vast majority of fund managers would not be affected; only those who operate through a partnership would be affected. Under existing partnership tax rules, tax is charged on profits as they are earned, rather than when they are received. An unfunded tax charge can therefore arise on profits that are allocated to an individual partner of an AIFM partnership and which are then deferred in line with the regulatory requirements of the AIFMD. That is because the partner cannot access the deferred profits in the year when they arise.

The new mechanism that the Government propose is designed in such a way as to meet the Government objective of a partnership review to achieve fairer taxation by stopping tax-motivated allocation of profits in mixed membership partnerships that typically include individual and corporate members. The new power introduced under new clause 4 will support the introduction of the mechanism and will be used to change the relevant national insurance contributions legislation by regulation, once the related Finance Bill 2014 legislation becomes law. It will also allow NICs legislation to be amended in future to reflect any subsequent changes to income tax legislation in that area, to maintain symmetry between tax and NICs positions.

New clause 5 and amendment 2 replace clause 13, which would have removed limits on the Treasury categorising members of limited liability partnerships who satisfy certain conditions as employed earners for the purposes of NICs, rather than self-employed earners. New clause 2 provides an express power to treat LLP members who meet certain conditions as employed earners for NICs purposes. Those conditions will be set out in regulations and will follow income tax legislation introduced in the Finance Bill 2014. Broadly, it will mean that the individual member of the LLP has no or little real economic interest or risk in the LLP, and instead will be rewarded by a fixed salary. Those conditions will be based on proposals on which HMRC has consulted, as part of the public consultation on changes to partnership tax and NICs rules. HMRC has been advised that in response to those proposals, structures with only corporate members were being promoted as a way around the proposed legislation. The schemes involved the individual establishing a personal service company or other intermediary, with that intermediary becoming a member of the LLP in place of the individual in order to avoid those provisions.

New clause 5 provides power to make regulations to achieve the policy objective of the measure, and counteract the artificial imposition of a company or intermediary to avoid the impact of the measure. Regulations will follow new income tax legislation in the Finance Bill 2014. That power will enable the reclassification by regulation of certain LLP members as employed earners for NICs purposes, even when they hide behind a company or intermediary.

The treatment of members of LLPs as self-employed was designed to replicate the position of traditional partnerships. The new clause will ensure that those tax rules are not used to create a tax advantage, and it creates a level playing field between partnerships that have not sought to misuse tax rules for LLPs and those that have done so. I appreciate that that was a rather technical explanation for rather technical new clauses, but I hope it was of use and that the House will agree that new clauses 4 and 5 be added to the Bill, instead of clauses 12 and 13.

[Shabana Mahmood]

I am grateful to the Minister for that helpful explanation of new clauses 4 and 5, and particularly the technical points and why the Government are no longer proceeding with clauses 12 and 13. I had some concerns in Committee about the impact of clause 13 in disapplying section 4(4) of the Social Security Contributions and Benefits Act 1992. That seemed to be possibly going too far and was ripe for lawyers to have fun with—I was one in my former life. I note that the Government have got rid of that problem and clarified their intention for LLPs by tabling new clause 5.

New clauses 4 and 5 both state that the Government can bring forward regulations to deal with their more technical aspects. Will there be an opportunity for consultation on those draft statutory instruments when they are ready, so we can ensure that no further issues arise as the Government try to implement the objectives that new clauses 4 and 5 are trying to achieve?

[Mr Gauke]

I thank the hon. Lady for her support for these measures. Detailed proposals in the form of draft regulations will be published early in the new year, and they will tie in with measures in next year’s Finance Bill. There will therefore be plenty of opportunity to consult on those regulations, and I look forward to debating with her measures on partnerships in next year’s Finance Bill. In that sense, I assure the hon. Lady that the measures will receive an appropriate amount of scrutiny, and I hope that the new clauses will stand part of the Bill.

Question put and agreed to.

New clause 4 accordingly read a Second time, and added to the Bill.

New Clause 5

Limited liability partnerships

‘(1) SSCBA 1992 is amended as follows.

(2) After section 4A insert—

“4AA Limited liability partnerships

(1) The Treasury may, for the purposes of this Act, by regulations—

(a) provide that, in prescribed circumstances—

(i) a person (“E”) is to be treated as employed in employed earner’s employment by a limited liability partnership (including where E is a member of the partnership), and

(ii) the limited liability partnership is to be treated as the secondary contributor in relation to any payment of earnings to or for the benefit of E as the employed earner;

(b) prescribe how earnings in respect of E’s employed earner employment with the limited liability partnership are to be determined (including what constitutes such earnings);

(c) provide that such earnings are to be treated as being paid to or for the benefit of E at prescribed times.

(2) Regulations under subsection (1) may modify the definition of “employee” or “employer” in section 163, 171, 171ZJ or 171ZS below as the Treasury consider appropriate to take account of any provision falling within subsection (1)(a) to (c).

(3) If—

(a) a provision of the Income Tax Acts relating to limited liability partnerships or members of limited liability partnerships is passed or made, and

(b) in consequence, the Treasury consider it appropriate for provision to be made for the purpose of assimilating to any extent the law relating to income tax and the law relating to contributions under this Part,

the Treasury may by regulations make that provision.

(4) The provision that may be made under subsection (3) includes provision modifying any provision made by or under this Act.

(5) Regulations under this section are to be made with the concurrence of the Secretary of State.

(6) Section 4(4) of the Limited Liability Partnerships Act 2000 does not limit the provision that may be made by regulations under this section.”

(3) In section 4B (power to make retrospective provision in consequence of retrospective tax legislation), in subsection (3), after paragraph (c) insert—

“(d) section 4AA (power to make provision in relation to limited liability partnerships)”.

(4) In section 10 (Class 1A contributions: benefits in kind etc), at the end, insert—

“(11) The Treasury may by regulations modify the law relating to Class 1A contributions in the case of an employed earner’s employment which is treated as existing by virtue of regulations under section 4AA.”

(5) SSCB(NI)A 1992 is amended as follows.

(6) After section 4A insert—

“4AA Limited liability partnerships

(1) The Treasury may, for the purposes of this Act, by regulations—

(a) provide that, in prescribed circumstances—

(i) a person (“E”) is to be treated as employed in employed earner’s employment by a limited liability partnership (including where E is a member of the partnership), and

(ii) the limited liability partnership is to be treated as the secondary contributor in relation to any payment of earnings to or for the benefit of E as the employed earner;

(b) prescribe how earnings in respect of E’s employed earner employment with the limited liability partnership are to be determined (including what constitutes such earnings);

(c) provide that such earnings are to be treated as being paid to or for the benefit of E at prescribed times.

(2) Regulations under subsection (1) may modify the definition of “employee” or “employer” in section 159, 167, 167ZJ or 167ZS below as the Treasury consider appropriate to take account of any provision falling within subsection (1)(a) to (c).

(3) If—

(a) a provision of the Income Tax Acts relating to limited liability partnerships or members of limited liability partnerships is passed or made, and

(b) in consequence, the Treasury consider it appropriate for provision to be made for the purpose of assimilating to any extent the law relating to income tax and the law relating to contributions under this Part,

the Treasury may by regulations make that provision.

(4) The provision that may be made under subsection (3) includes provision modifying any provision made by or under this Act.

(5) Regulations under this section are to be made with the concurrence of the Department.

(6) Section 4(4) of the Limited Liability Partnerships Act 2000 does not limit the provision that may be made by regulations under this section.”

(7) In section 4B (power to make retrospective provision in consequence of retrospective tax legislation), in subsection (3), after paragraph (c) insert—

“(d) section 4AA (power to make provision in relation to limited liability partnerships)”.

(8) In section 10 (Class 1A contributions: benefits in kind etc), at the end, insert—

“(11) The Treasury may by regulations modify the law relating to Class 1A contributions in the case of an employed earner’s employment which is treated as existing by virtue of regulations under section 4AA.”’.—(Mr Gauke.)

Brought up, read the First and Second time, and added to the Bill.



New Clause 1

Post implementation review

‘(1) Her Majesty’s Revenue and Customs must, after one year, prepare a post implementation review of the employment allowance which the Minister shall lay before Parliament.

(2) The review must consider—

(a) what impact the employment allowance has had on the number of jobs;

(b) what impact the employment allowance has had on wage levels;

(c) overall take-up of the employment allowance;

(d) the geographical spread of businesses, charities and sports clubs taking up the employment allowance; and

(e) the effectiveness of Her Majesty’s Revenue and Customs’ strategy to promote the employment allowance.’.—(Shabana Mahmood.)

Brought up, and read the First time.

[Shabana Mahmood]

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

[Mr Speaker]

With this it will be convenient to discuss

New clause 2—Administrative and compliance costs review

‘(1) Her Majesty’s Revenue and Customs must, after six months of the Act coming into force, prepare a review which the Minister shall lay before Parliament.

(2) The review must consider—

(a) whether there are any administrative or compliance costs associated with the employment allowance being reported by those applying for it; and

(b) whether businesses, charities and sports clubs are having any problems in claiming the employment allowance.’.

15:45

[Shabana Mahmood]

Given that I am still relatively new to my shadow Treasury brief, I am not yet—as hon. Members who served in Committee will no doubt be pleased to note—suffering from review fatigue. Both of the new clauses seek further reviews from the Government. New clause 1 envisages a post-implementation review, which was the subject of some debate in Committee, and I felt it was worth having a further discussion to push the Government a little more in relation to the impact that the employment allowance will have on jobs and wage rates, and the effectiveness of the promotion of the employment allowance to all those who are eligible for it.

New clause 2 envisages an administrative and compliance cost review—a one-off review to take place six months after the employment allowance comes into force. It was prompted by the evidence of Mr Holloway, which I mentioned earlier, and I shall go into more detail shortly.

In Committee, the Minister helpfully indicated that he would publish information on two of the elements that I have included in new clause 1—the overall take-up of the employment allowance and its geographical spread. I understand from his comments in Committee that the information on the geographical location of those taking up the employment allowance will probably be available on a regional basis. I hope that he will clarify that point when he responds to the debate. The Minister said that he would put information on both elements in the Library so that Members can raise questions about the effectiveness of the employment allowance and its take-up levels. We have in mind the previous regional national insurance employers’ holiday, which had difficulties from the start. We have made the point that those difficulties should have been dealt with sooner, and it is in that context that we think the Government should have a formal post-implementation review of the take-up of the employment allowance.

[Richard Fuller]

The hon. Lady earlier made the breathtaking assertion that although the Labour party was proudly in favour of increasing the jobs tax in 2010, its attempt now to reduce it was not a flip-flop. With the proposal of an annual review, businesses will be concerned that the Labour party is not committed to the employment allowance, as we are. The hon. Lady said in Committee that she could not commit the Labour party to supporting the employment allowance at the next election, so will she therefore admit that Labour’s support for employment allowance is at risk in their shuffle of policies before that election?

[Shabana Mahmood]

I will repeat exactly what I said to the hon. Gentleman when we had this debate in Committee: we have been unequivocal in our support for employment allowance since it was introduced in the Budget earlier this year. We have taken every opportunity to say to the Minister and his colleagues in the Treasury team that it should be introduced sooner. We could not have been more unequivocal in our support.

The purpose of the review is not to put the employment allowance at risk. The regional national insurance employers’ holiday scheme had problems with take-up from the start. They were raised with Ministers in this House at every available opportunity—in oral and written questions—yet we had to wait for the full three years of the scheme to run before the Government brought forward a proposal without the same problems. That is the context for tabling new clause 1. We want employment allowance to succeed and not suffer from low take-up—we want it to be taken up. The Government say that it will be taken up by 90% of eligible employers. I am sure that all Members want to see 100% take-up, and there seems to be no real reason why 10% should be missed off. We want to ensure that take-up is not affected by any unforeseen issues during roll-out.

[Ian Swales]

Does the hon. Lady accept that she can comment on the previous scheme precisely because the Government keep all such schemes under review? Neither scheme needs a review to be in the Bill.

[Shabana Mahmood]

It would be helpful for the review to be in the Bill, as it would concentrate the Government’s mind in ensuring that it works. We had to wait the full three years for the previous scheme to finish before we had a change of course towards something that will not suffer the same problems. Both points are good reasons to include a review in the Bill.

In Committee, the Minister remarked on take-up and geographical location. I am sure all Members want the scheme to be taken up nationally, and for it not to be skewed by region because promotion is not good enough in some parts of the country and employers do not find out about it. We had a good debate on whether the review should consider the impact on the overall number of jobs and wage levels. I included both in the new clause because they are worth considering.

The Minister and other members of the Committee said that they hoped the £2,000 made available to employers through employment allowance will be passed on to employees, either by increasing wages or taking on more employees. There was also the hope that employers would be encouraged to reinvest that money in the business, in research or innovative practices to help productivity. It is worth trying to measure the impact of employment allowance on job levels and wage levels. I take on board the point made in Committee by the Minister, and by members of the Committee on both sides of the House, that the decision to either increase wages or take on new workers is, for any business owner, based on a number of factors, and that employment allowance may be one of them. The policy is not being introduced in a vacuum. There is a clear intent and desire for it to stimulate employment and, hopefully, an increase in wages.

It seems sensible at least to consider the relationship between the employment allowance and job and wage levels. The new clause does not envisage a methodology, but I remind the Minister and hon. Members that when the Bill was introduced, the Federation of Small Businesses carried out a survey asking its members what they expected to do with the £2,000 allowance, and many said that they would increase job or wage levels or reinvest in their business. Employer surveys and other stakeholder engagement methods would be useful means of interrogating the impact of the employment allowance on job and wage levels. It is worth putting that in the Bill.

[Ian Swales]

The hon. Lady makes an interesting argument, but who would be responsible for carrying out such a survey? Would the FSB, for example, be the best people to carry it out or does she envisage some kind of Government process?

[Shabana Mahmood]

In evidence to the Committee, the FSB said it would survey its members again anyway. The Government could look at that survey and work with the FSB to see how it surveys its members. They might want to take a representative cohort of people who have taken up the employment allowance; discuss with them its impact on their businesses; and then extrapolate lessons for national take-up. I do not seek to prescribe exactly how they should carry out the review—I am sure there are clever bods in the Treasury whose job it is to think of these things—but given what has happened already in this Parliament on national insurance, it is important that we concentrate the mind of the Government. The House expects and wants this policy to succeed and not to suffer the problems of the previous policy. It also wishes to continue pressing the Government on this point.

The last element of new clause 1 concerns the effective promotion of the employment allowance to all who are eligible. In particular, I have in mind the FSB’s evidence to the Committee about the effectiveness of that communication. It is worth considering that in a review, particularly if there is a problem, such as a geographical inequality, with overall levels of take-up. How the allowance is promoted will clearly have an effect. Charities and sports clubs are rightly eligible for this £2,000 reduction in their national insurance bill, but there is a risk that they might miss out and that we promote the allowance to businesses more effectively just because they have more stakeholders and larger bodies getting the message out. The new clause seeks to ensure that we keep across that concern and that not only eligible businesses but other groups that rightly fall within its scope take up the employment allowance.

New clause 2 seeks a short administrative and compliance costs review six months after the Bill comes into force. It is motivated by two things in particular. First, as I mentioned earlier, the Government expect 90% of those eligible to claim the employment allowance. The Institute for Fiscal Studies and others—we heard this in the Committee evidence session—have asked about the other 10%. The system for claiming the employment allowance is straightforward and everybody expects the running of it to be smooth. However, one wonders why 10 per cent. are always assumed to miss out.

16:00

The other driver behind the new clause was the evidence from Mr Holloway, which was received after the Committee concluded its deliberations. I thought it illuminating none the less, partly because it gave me an opportunity to get to grips with the details of payroll software—an expertise that I have not previously had the pleasure of enjoying in this House. Mr Holloway’s evidence, which was made available to the Committee and to the Minister, suggested that there were problems about the guidance not being available in sufficient time for developers to get their software ready. He indicated that, normally, three to six months is required for systems to be developed, including time for specification and documentation of the changes, development, testing and release to clients.

On new clause 3, the Minister said that the guidance was going to be available in January, which seems to put at risk the availability of the software being ready or, at least, software developers will be up against it in getting everything tested and working on time before the employment allowance comes into force. The purpose of the new clause is that, six months in, we will have an opportunity to make sure that software-type issues have been ironed out and that businesses are not reporting compliance or other administrative costs that we will not know about until it is rolled out. If they are, that gives an opportunity for MPs and the Government very early in the life of the allowance to consider what changes might be made to remove those issues.

Both clauses are designed to assist the Government from a perspective of support for the employment allowance, a desire to see it work effectively, a desire to make sure that every business that is eligible for it is able to take it up, and a desire to see that it has a positive impact on job levels and wage rates.

[Mr Gauke]

The hon. Member for Birmingham, Ladywood (Shabana Mahmood) said that she is not yet suffering from review fatigue; I wish I could say the same. I note that much of this debate also took place in Committee and I am tempted simply to refer the House to my speech on 21 November. However, I think that that would not be quite the appropriate thing to do, so let me address the points on the new clauses.

Let me make the case, as I did in Committee, for why new clause 1 is unnecessary. The tax information impact note already commits the Government to keep the scheme under review through ongoing communication with taxpayers’ groups affected by the measure. Moreover, in Committee on 21 November, I agreed that the Government should publish information twice a year about the overall take-up of the employment allowance, including by geographical location. I am happy to repeat that commitment today.

Nevertheless, as with the hon. Lady’s previous amendment in Committee, this new clause focuses in particular on the number of jobs created by the employment allowance. As I made clear on Second Reading on 4 November, and in the evidence session on 19 November, although the employment allowance will clearly reduce the cost of taking on new staff for small businesses and charities, it will be up to those businesses and charities to decide how they use the resulting national insurance contribution savings.

The hon. Lady will also recall the comments made by both the Institute for Fiscal Studies and the Federation of Small Businesses at the evidence session on 19 November that it is impossible to get precise numbers. We cannot conduct the equivalent of a randomised trial of tax policy to determine the number of jobs created because of the allowance because, as the IFS pointed out, there is no counterfactual, as there are a number of factors in the economy influencing the number of jobs at the same time. The Government have not set a target for the number of jobs we expect to be created, although as we have previously noted, survey evidence from the Federation of Small Businesses suggests that 28% of such businesses will use the savings to employ additional staff. Therefore, as I made clear in Committee, it would not be possible to provide information about the number of jobs created as a direct result of this measure.

[Sammy Wilson (East Antrim) (DUP)]

Although I understand the Minister’s position, given all the variables that will determine the number of people employed as a result of any change, it will nevertheless result in about £1.75 billion left with employers and not coming into the Exchequer as tax. Does he not feel, therefore, that there is at least some need to judge the effectiveness of a policy that will release a substantial amount of money?

[Mr Gauke]

The hon. Gentleman is absolutely right: the measure will release substantial amounts of money and a considerable amount of revenue will be forgone. We believe that taking less from employers is likely to have an impact on employment, wages or investment, or a combination of the three, all of which will be welcomed. However, tempting though it might be to call for a particular number of jobs to be created from the measure, I do not believe, for the reasons I have outlined—because there are so many factors in play—that we could give such a number with the necessary degree of robustness. Some 28% of the businesses surveyed by the FSB said they would use the savings to employ additional staff, while 29% would use the NICs savings to boost staff wages. Again, it would be difficult to quantify the precise effect, given that wage levels are subject to many different pressures, which vary from business to business.

The new clause also seeks an assessment of HMRC’s strategy to promote the employment allowance. HMRC has already been proactive in promoting the allowance, having spoken to various interested parties over the summer, including representatives of software providers, charities and small and medium-sized enterprises about the design and operation of the measure. There is continuing engagement between HMRC and those interested parties on guidance for employers and publicity. As a result of those discussions, communications to raise awareness of the employment allowance will begin more widely in February and March 2014, to maximise the impact in the crucial period running up to the introduction of the allowance next April, using a range of HMRC publications and products and the Department’s national network of local “working together” groups. As a result, we are confident that employers across the UK will be ready to claim the allowance next April, and those efforts to support take-up will continue after April.

[Sammy Wilson]

Does the Minister accept that there is at least some value both in looking at the geographical take-up, especially given how patchy the national insurance holiday has been across the United Kingdom—indeed, take-up in Northern Ireland was quite disappointing—and in monitoring how effective the promotion of the scheme has been in different parts of the United Kingdom?

[Mr Gauke]

Let me return to my earlier remarks and the commitment I made in Committee, which I have repeated this afternoon, that we will publish take-up numbers twice-yearly. That information will be provided on a regional basis, which I hope reassures the hon. Gentleman that he will be able to monitor take-up in Northern Ireland.

The other point I would make—again, it is a point I made in Committee and on Second Reading—is that there are a number of distinctions between the employment allowance and the NICs holiday that we had in place earlier in this Parliament and, indeed, the Opposition’s proposals for a NICs holiday. What we are proposing is a much easier policy for employers to implement; in fact, it is largely automatic. Those with an up-to-date payroll—that essentially applies to nearly every employer—will find that the employment allowance is automatically applied. Those employers essentially just need to click on a box and then it should work.

Given those reassurances and in the light of my existing agreement to make information about take-up available twice yearly, I hope that the hon. Member for Birmingham, Ladywood will withdraw her new clause.

Let me deal with the hon. Lady’s new clause 2, which seeks to require HMRC

“after six months of the Act coming into force”

to “prepare a review” to be published in Parliament. Such a review should consider

“whether there are any administrative or compliance costs”

reported by employers claiming the employment allowance, and

“whether businesses, charities and sports clubs are having any problems in claiming the…allowance.”

The new clause is unnecessary for two reasons. As I have pointed out, the tax information impact note already commits the Government to keep the scheme under review through the communication of stakeholders affected by the measure. As part of this review, HMRC will speak to interested parties to gauge their view of the employment allowance and to ascertain the ways it has been used.

As I said, HMRC talked over the summer to various interested parties, including software developers, charities and small and medium-sized businesses, about the design and operation of the allowance, including the claims process. There are continuing discussions between HMRC and these groups around the guidance and publicity, and they will continue after the launch of the employment allowance next April. These contacts between HMRC and relevant representative groups will provide the basis for a continuous review of the way in which the allowance is working. I acknowledged in Committee that hon. Members will relay any concerns or thoughts about the allowance on behalf of employers in their own constituency. Hon. Members will also recall the commitment I gave in Committee to publish the information twice yearly, as I mentioned. That in itself will provide an indication of the ease with which employers are able to claim the benefit of this relief.

As I pointed out earlier this afternoon, the employment allowance will be very easy to claim. Employers will receive it through the routine operation of PAYE—pay as you earn. Employers will simply need to confirm their eligibility by their regular payroll processes. Enabling the employment allowance to be claimed by employers through the payroll software will ensure that it is straightforward to claim. Employers simply have to indicate yes once in their EPS—employer payment summary—and the claim will continue from tax year to tax year.

After making the claim, employers will not need to pay their first £2,000 of secondary class 1 national insurance contributions if their liability is lower than £2,000 in the first month or quarter—depending on whether the employer pays his PAYE liabilities monthly or quarterly—and any unused allowance will be carried forward to the next month or quarter until it is exhausted. If an employer does not have an employer payment summary on their software, the free HMRC basic PAYE tools package can be used. For the small number—about 2,000—of eligible employers who still submit their returns to HMRC on paper, there will be a paper process to mirror the IT process.

With those reassurances, I hope that the hon. Lady will withdraw her new clause.

[Shabana Mahmood]

I am grateful to the Minister for his comments on my new clauses 1 and 2, particularly for the additional information he made available on the issues raised by new clause 2. Given his explanation, I am happy to withdraw the motion.

Clause, by leave, withdrawn.

Clause 12

Alternative Investment Fund Mangers

Amendment made: 1, line 2, leave out Clause 12.—(Mr Gauke.)

Clause 13

Members of Limited Liability Partnerships

Amendment made: 2, page 11, line 8, leave out Clause 13.—(Mr Gauke.)





Third Reading

16:14

[Mr Gauke]

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

I thank all Members for the valuable insight that they have provided throughout the Bill’s passage so far. Their expert scrutiny has gone a long way towards ensuring that it reaches the statute book in good shape. Indeed, my officials suggested that I describe it as being “in good NIC”—[Hon. Members: “Oh dear!”]—but I thought better of it.

Such has been the level of scrutiny and insight contributed by Members that I shall give the House only a brief reminder of the five main measures in the Bill. The first is a measure to help both to remove barriers to growth for businesses and to equip the United Kingdom to compete in the global race. In this year’s Budget, my right hon. Friend the Chancellor of the Exchequer announced the creation of a new £2,000 employment allowance, which will come into effect on 6 April 2014. The objective is to help businesses with the cost of employing their staff. The allowance will help thousands of small businesses that aspire to grow, and is set to benefit more than 1 million employers.

The second measure was introduced this afternoon. In last week’s autumn statement, the Chancellor announced our proposal, in effect, to abolish employers’ secondary class 1 national insurance contributions on the earnings of any employee under the age of 21 up to the level of the upper earnings limit on 6 April 2015. That will substantially reduce the fiscal burden of secondary class 1 NICs, and thus support youth employment. As the figures in the autumn statement made clear, we estimate that about 340,000 employers could benefit to the tune of more than £450 million in 2015-16, and that the figure could rise to about £530 million in 2018-19. This is another measure that will make it cheaper and easier for businesses to employ young people, and I am sure that it will be welcomed, as a latecomer, by Members in all parts of the House. I appreciate the support that it has received this afternoon.

Thirdly, we have introduced provisions relating to the general anti-abuse rule, or GAAR. We announced in last year’s Budget that we had accepted the recommendations of the Aaronson review, and would introduce a GAAR targeted at abusive tax avoidance schemes. The GAAR was introduced in part 5 of the Finance Act 2013, and has been in force since July. The Bill ensures that it will apply to NICs. While the extension to NICs is a relatively simple measure, it is an important step because it makes it harder for individuals and businesses to avoid paying what they owe.

The fourth main provision concerns oil and gas workers on the UK continental shelf. In this year’s Budget, the Chancellor announced that the Government would strengthen legislation in respect of offshore employment intermediaries. The measure, which has been subject to consultation, is specifically intended to address the non-payment of employers’ national insurance in the oil and gas industry, involving the placement of employers of oil and gas workers who are working on the UK continental shelf outside the United Kingdom.

Fifth and finally, the Bill contains provisions relating to HMRC’s partnership review. The Government propose two sets of changes. The first is intended to address an issue that can arise from the interaction of the alternative investment fund managers directive and the existing partnership tax rules. The second reclassifies certain limited liability partnership members as employed earners for tax and national insurance purposes to tackle the disguising of employment relationships through LLPs. Together, those changes will ensure that the correct NIC consequences follow the planned changes in the taxation of partnerships.

The Bill is both important and necessary. I am sure that all Members will recognise that every one of the measures that I have described will either make employing people easier, or will make avoiding taxes harder. The Bill will be good for growth, good for jobs, and hence good for the United Kingdom. On that basis, I commend it wholeheartedly to the House.

16:19

[Shabana Mahmood]

First, may I join the Minister in paying tribute to all the members of our Bill Committee, who helped to scrutinise the Bill and provided valuable insight into its measures? If there was the occasional predictable question, it was always asked with good humour and good grace.

We have supported the employment allowance from the moment it was announced in the Chancellor’s last Budget. Our bone of contention with the Government has not been about the detail of the EA or who it applies to; rather, it has been about the time scales for its introduction. We believe that the Government should have changed course much earlier, particularly given what happened with the previous regional national insurance holiday scheme. Although that helped a lot of businesses, the number certainly fell far short of the 400,000 it was supposed to assist.

The Government say this Bill is about helping our country compete in the global race, but if we are going to compete in the global race, we will have to start getting out of the starting-blocks more quickly. I therefore say to the Minister that the Government should have acted more swiftly on national insurance. If the Government had changed course sooner, we may have been well into the take-up of the EA by now instead of having to wait for it finally to be introduced in April next year, and the country might already be enjoying all the good effects that all of us across the House hope will flow from it.

In last week’s autumn statement the Government introduced a new measure that we have also supported today: the abolition of employers’ NICs for all employees under 21 years of age. I repeat what I said to the Minister in our earlier debate, however: we would have liked bolder action from the Government in their autumn statement to help deal with the problems of youth unemployment. We do not think this measure, which will come into force only in 2015, goes far enough, nor will it stimulate higher levels of youth employment as quickly as we would like. The real bone of contention, which I fear we will continue to debate until this measure finally comes into force in 2015, is the delay. None of the reasons the Minister gave in his winding-up of the debate on new clause 3 for waiting until 2015 sounded sensible to me. He said that if the Government could have done so, they would, of course, have wanted to bring the measure forward in 2014. But the Government could also have got rid of the regional national insurance employers’ holiday scheme earlier when it was clearly failing, but they did not do so. I do not understand why it is impossible to introduce this measure earlier. I am sure we will examine that issue further when the Bill is debated in the other place and through oral and written parliamentary questions. The Minister and I will continue to debate the merits of the introduction of that measure in 2015, as opposed to the introduction of the new clause, which is what we would have liked.

We have supported the EA in the Bill and we consider that the extension of the GAAR to apply to national insurance contributions is sensible, although we continue to have very real concerns about the extent of the GAAR.

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

Does the hon. Lady wish to put on record in this Chamber that she regrets that Labour did not bring an anti-avoidance rule into law during its 13 years in government?

[Shabana Mahmood]

As the hon. Gentleman knows, we had exactly the same line of questioning in the Bill Committee and I remind him that the Labour Government brought in the disclosure of tax avoidance schemes, which has raised a hell of a lot more money than the Government believe the GAAR will. We have a proud and strong record on tax avoidance. Also, that does not get the Government off the hook in respect of their GAAR, which will not make quite the impact on the tax gap that everybody would like.

The measures relating to oil and gas workers and to limited liability partnerships have changed in order to clarify the Government’s intentions in the new clauses and the removal of old clauses 12 and 13, but they are both sensible measures that we are happy to support. So, although we have real concerns about the pace at which the Government are moving to deal with the challenges that this country faces—especially youth unemployment, which we are debating today as a result of the measure in the autumn statement—we support the measures themselves and will support the Bill’s Third Reading.

16:25

[Richard Fuller]

I start by thanking the hon. Member for Birmingham, Ladywood (Shabana Mahmood), if I may, for her grace and courtesy in responding to my persistent and somewhat repetitive questions about her party’s commitment to the proposals on employment allowance, and on its continuing commitment to it in the lead-up to the next election. The reason for my persistence is that I think it is an absolutely fantastic measure. It will have a positive impact on employment, on wages and on the economy, and it should be embraced by all parties across the House, now and in the lead-up to 2015. I wish the hon. Lady every courage in talking to her colleagues to ensure that their support for it is maintained in the Labour party’s next manifesto. I wish her every success in that regard.

This small measure is so important because it has shone a light on a much broader and deeper issue—namely, the extent of Government intervention in the wages and living standards of people on low incomes. I should like to give the House some figures. Let us take the example of someone on the minimum wage earning £13,000 a year, and assume that they are the only earner in the household and have two children. Taking into account the impact of the tax and national insurance paid and the benefits received, that person’s take-home pay will be £25,000. Their wages will be £13,000, but their take-home pay including benefits will be £25,000, which is nearly twice as much. The difference will not be so significant for people without children, but even someone who is single and earning the minimum wage will see an increase on the £13,000 being paid by their employer to a total of £17,600 in pay and benefits.

I do not want to question the level of Government intervention in the labour market, other than to say that a better outcome could be achieved if it were the employers who were paying the higher levels of wages that people need to achieve an adequate living standard. That outcome can be achieved in a number of ways. There will be uplift in the economy thanks to the measures that this Government are taking to encourage growth and boost the economy, and wages should increase over time as a result. It can be achieved through measures to increase the skills of our employees, to ensure that people can aspire to take on more complex tasks and earn higher wages as a result. It can also be achieved through innovation among our entrepreneurs as they create new higher sector employment, and through action on the minimum wage. I hope that all the political parties will think carefully about their policies on each of those points, so that we can make progress.

In the proposals in the Bill for the employment allowance, the Government have found a tool to tackle the additional costs that we place on labour. The chart on page 18 of the autumn statement shows that, since early 2001, employers’ social contributions as a share of total employee compensation have increased from 13% to 17%. The employment allowance will start to make a change in that regard, and I encourage the Minister to see it as a first step, with more still to come.

16:29

[Sammy Wilson]

I want to make a short contribution to the debate, because I think that the Government are introducing an important measure. In this House we often discuss the macro-economic steps that can be taken, such as huge injections of money for infrastructure development and so on, but often—we have certainly found this in Northern Ireland—micro-interventions can be very effective in creating employment, improving conditions for employers and giving them greater confidence to invest. I believe that the measure will have that impact.

I, too, am a little disappointed that the measure’s full impact will be delayed until 2015, because I believe that unemployment among young people, especially in Northern Ireland, is a huge problem that we are trying to tackle. Once the measure is fully in place by 2015, I think that it will have a dramatic impact and will provide a big incentive for employers to take on younger people.

We must not underestimate the importance of even small amounts of money—£2,000, for instance—in influencing the decisions of some employers. One measure that was introduced back home in Northern Ireland was a 20% business rate relief for employers with a net annual value of less that £15,000. The maximum amount of money any one business received was probably £3,000, yet the feedback from employers on the impact was quite encouraging. Therefore, although some people might say that it is a small amount of money per employer initially, nevertheless I think that it will have that positive impact.

I take the Minister’s point about the difficulty in measuring how many extra jobs and how many new businesses the measure will create, but it is bound to encourage employers to hold on to existing employees, to take on an extra employee, to have a better cash flow situation, which might get them over a particular difficulty, or to invest some more money in improving their business. That is the important point.

There is one thing I am concerned about, because the national insurance holiday did not have the impact we had expected, certainly in Northern Ireland. Indeed, uptake was very low. I take the point that at least the process has now been simplified, which means that it will be much easier for employers to access it. Of course, the more universal we make these things, the wider their impact. However, I hope that the measure’s effectiveness will be monitored constantly and that, if it is seen not to have had the impact that the Government had hoped, there will be a willingness to look at what could be done to improve it.

I congratulate the Government on the measure, which I believe is another important tool in the economic toolbox. I believe that it will have a positive impact.

16:33

[David Rutley (Macclesfield) (Con)]

I, too, congratulate the Government on bringing forward this important Bill. It was a pleasure to serve on the Bill Committee. I believe that the measures it contains will make a vital contribution to helping a cause that I believe in passionately: helping more people take on employees for the first time.

We have to get more of the growing band of self-employed people in this country to want to take on an extra employee and we have to overcome the barriers to that. Some 4.2 million people in this country are self-employed, which is 14% of the population, up from 12% at the turn of the century. The good news is that part-time self-employment is down and full-time self-employment is up, which is a good thing, because people are finding that it is a worthwhile form of employment and are making a contribution to the economy. The push factors in driving people to that form of employment are on the way down and the pull factors are clearly on the way up, and more young people want to get involved in self-employment.

However, the real challenge and opportunity that the Bill addresses is that of encouraging more of the self-employed to want to take on their first employee and helping people to see the benefits of working in that environment. Sadly, the pace of improvement in that area is not keeping up with the increase in self-employment. We need to help the self-employed to nudge open the barriers to becoming first-time employers and feel confident to take on employees, whether they are tangible barriers in IT, legal matters or human resources, or perceived, more psychological barriers such as their concerns about dealing with HMRC or about getting rules wrong in employing somebody.

In the Adjournment debate I held on this subject at the beginning of November, I talked through a whole series of options that we could consider to help address this challenge, but the most important thing to do today is to acknowledge that this Bill takes some vitally important steps in doing so. It will be a boost to first-time employees, whether they are apprentices, long-term unemployed, those who are economically inactive, or those who are looking for their second, third, fourth or even fifth careers.

[Ian Swales]

The hon. Gentleman is making a good point. Does he agree that the businesses he is describing find it difficult to find the time to apply for complex reliefs, and does he therefore join me in welcoming the simplicity of these proposals?

[David Rutley]

The hon. Gentleman makes a vital point. The great thing about this initiative is that it is very simple. The hon. Member for East Antrim (Sammy Wilson) also made the important point that we need to make every effort to communicate that to small businesses. I know that the Minister is working hard in that direction as we move the Bill forward.

We need to help smaller businesses—micro-businesses —in the task of taking on employees because they are often better at taking on the long-term unemployed or those who are difficult to employ. That is another reason to welcome the Bill. I am pleased that the autumn statement went further in scrapping employers’ national insurance for under-21s completely, as in new clause 3. That is a vital step. As many Members on both sides of the House have said, it is one of the ways in which we will be able to tackle youth unemployment more comprehensively in the longer term.

This Bill is not just about improving economic growth but about tackling youth unemployment and social mobility. I congratulate my hon. Friend the Minister on bringing it to the House, helping it to progress so speedily, and doing it all with his characteristic charm, wit and dexterity. I support it because of what it will do for employment in helping more people to take on employees for the first time, and what it will do to tackle youth unemployment and drive forward sustainable economic growth that is grounded in private sector employment rather than in the public sector that was so much a focus of the previous Government and that we need to move on from. As my hon. Friend the Member for Bedford (Richard Fuller) pointed out, the hon. Member for Birmingham, Ladywood (Shabana Mahmood) might want to consider not taking her flip-flops on holiday next summer. This might be a nasty reminder of where the Labour party once stood with its jobs tax. We need to move on from that, and this Bill takes us to a better place. I commend it to the House.

16:38

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

New clause 3 was a fantastic Christmas present to members of the Bill Committee and a big boost for youth employment across the UK, particularly in North Yorkshire, where I represent a very rural set of communities and where, although we have very low unemployment figures, young people still want jobs. This will be a big boost for them.

During small business Saturday, Government Members and, I hope, Members across the House, were out seeing small businesses across the areas we represent. In the town of Settle in the Yorkshire dales, people were clamouring for more information on the Government’s policy on the employment allowance and their new policy on employing under-21s without paying tax. That makes a huge difference, as other hon. Members have said, to businesses with a small profit margin that have just been set up.

Such businesses include JW Garnett, which managed to sell me a toaster on small business Saturday; 3 Peaks Cycles, which is revving up for the Tour de France in Yorkshire, which the Government have backed with £10 million; the Talbot Arms, which is being funded by a parent of the publican who is anxious to get moving and employ more people; and the Three Peaks Gallery, which is run by Hazel, who lost her husband at the end of last year, has this year been trying to keep the business moving and is now planning to use the Government’s measures to expand and employ people.

The employment allowance and the removal of employers’ NICs for under-21s, along with the business rate announcement in the autumn statement, mean that this Government now have a bumper range of policies to ensure that we are the party of business. The policies also include start-up loans, apprenticeships, the boost to the funding for lending scheme and a tax reduction whereby we will have one of the lowest rates of corporation tax in the world and thereby one of the best places in the world in which to do business and invest. My hon. Friend the Member for Macclesfield (David Rutley) has mentioned how difficult it is to employ people, but our moderate measures on employment—which faced stiff opposition from the Labour party—will make it easier for businesses to take on people.

All those measures mean that the Conservative party is the party of business. We will ram that message home as we approach the next election, because anyone who wants to start a business, who is an entrepreneur, who is thinking about being self-employed, who wants to take a risk or who thinks it might be worth investing in an initiative, market or product has only one choice in 2015, and that is this party.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Prevention and Suppression of Terrorism

Tuesday 10th December 2013 Commons Chamber

16:42

[The Parliamentary Under-Secretary of State for the Home Department (James Brokenshire)]

I beg to move,

That the draft Terrorism Act 2000 (Proscribed Organisations) (Amendment) (No. 2) Order 2013, which was laid before this House on 2 December, be approved.

The Government are determined to do all they can to minimise the threat from terrorism to the UK and our interests abroad. Proscription is an important part of the Government’s strategy to tackle terrorist activities. In that regard, we propose to add Imarat Kavkaz, also known as the Caucasus Emirate, to the list of international terrorist organisations, amending schedule 2 of the Terrorism Act 2000. This is the 13th proscription order under that Act.

Section 3 of the Terrorism Act 2000 provides a power for the Home Secretary to proscribe an organisation if she believes it is currently concerned in terrorism. The Act specifies that an organisation is concerned in terrorism if it commits or participates in acts of terrorism; prepares for terrorism; promotes or encourages terrorism, including the unlawful glorification of terrorism; or is otherwise concerned in terrorism.

If the test is met, the Home Secretary may then exercise her discretion to proscribe the organisation. In considering whether to exercise this discretion the Home Secretary takes into account a number of factors, namely the nature and scale of an organisation’s activities; the specific threat it poses to the UK; the specific threat it poses to British nationals overseas; the organisation’s presence in the UK; and the need to support other members of the international community in tackling terrorism.

Given the wide-ranging impact of proscription, the Home Secretary exercises her power to proscribe only after a thorough review of the available relevant information and evidence on the organisation. This includes open-source material, intelligence material and advice that reflects consultation across Government, including with the intelligence and law enforcement agencies. The Home Secretary is supported in her decision-making process by the cross-Whitehall proscription review group. Decisions to proscribe are taken with great care by the Home Secretary, and it is right that the case for proscribing organisations must be approved by both Houses.

Having carefully considered all the evidence, we firmly believe that Imarat Kavkaz is currently concerned in terrorism. Right hon. and hon. Members will appreciate that I cannot comment on specific intelligence, but I hope to provide the House with a brief summary of its activities. Imarat Kavkaz or the Caucasus Emirate is a terrorist organisation that seeks a sharia-based caliphate across the north Caucasus. It regularly uses terrorist tactics, and has carried out attacks against both Russian state and civilian targets.

The organisation claimed responsibility for the January 2011 suicide attack on Domedodevo airport in Moscow that killed 35 people, including one British national, and a suicide attack on the Moscow metro in March 2010 that killed 39 people. Since, then, Imarat Kavkaz has continued its activities, including renewed threats of activity in Russia this summer. The organisation is designated by the US, and is listed by the UN under the al-Qaeda sanctions regime.

Subject to the agreement of this House and the other place, the order will come into force on Friday 13 December. It is, of course, not appropriate for us to discuss specific intelligence that leads to any decision to proscribe, but I hope that the House will agree that it is right to add Imarat Kavkaz to the list of proscribed organisations under schedule 2 to the Terrorism Act 2000.

16:44

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

I thank the Minister for his statement and explanation, and for taking the time to talk to me about the order earlier today. There is a long tradition of cross-party co-operation on issues of national security, and the Opposition will support the Government’s motion.

Under section 3 of the Terrorism Act 2000, a group can be proscribed if the Home Secretary is persuaded that it

“(a) commits or participates in acts of terrorism, (b) prepares for terrorism, (c) promotes or encourages terrorism, or (d) is otherwise concerned in terrorism.”

In addition to the Minister’s speech, a wealth of publicly available evidence links Imarat Kavkaz to acts of terror.

Indeed, the United Kingdom is two years behind the United States in proscribing the organisation. The United States acted in 2011, after Imarat Kavkaz was linked to two deadly attacks in Moscow. In January 2011, the group was linked to an attack at Moscow international airport, in which 35 people were killed and scores were wounded. The group was also linked to an attack carried out by two female bombers in March 2010, which killed 39 people in the Moscow metro.

The State Department helpfully gave us background information on Imarat Kavkaz or the Caucasus Emirate, as it is otherwise known. The group was founded in late 2007 by the Chechen extremist Doku Umarov. It is an Islamic militant organisation based in Russia’s north Caucasus. Its stated goal is the liberation of what it considers Muslim lands from the control of Moscow. It regularly conducts attacks against Russian security forces in the north Caucasus. As the Minister said, Imarat Kavkaz is linked to al-Qaeda through its leader, Doku Umarov, who I understand is one of the world’s most wanted terrorists.

Terrorist organisations originating in that part of the world have been in the spotlight because of last year’s attacks in Boston in the United States. In the light of those attacks, it is appropriate for the Government to review the activity of related groups in the United Kingdom.

The Opposition are always limited in what they can say in such cases, because we do not of course have access to the same intelligence as the Home Secretary. It would therefore be helpful if the Minister commented generally on why the United Kingdom has decided to act now.

I also want to ask the Minister about the effects of proscription on social media. Imarat Kavkaz has a number of Facebook pages and a range of fan pages are directed towards Doku Umarov. I hope that the Minister will clarify whether Facebook will be prohibited from hosting such fan pages and allowing people in the United Kingdom to access them once the group is proscribed.

[James Brokenshire]

The Government take the misuse of social media and the internet extremely seriously. The group’s Facebook page has been referred to the Counter Terrorism Internet Referral Unit, which has responsibility for assessing such issues. If the site is assessed to be illegal, the CTIRU will flag that up with Facebook directly and have it taken down.

[Diana Johnson]

I am grateful to the Minister for responding on that point.

As I said earlier, the Opposition are always limited in what they can say about proscription because it is up to the Home Secretary to analyse the evidence and make a decision. However, that did not stop the previous Opposition calling for proscription. The former Leader of the Opposition, who is now the Prime Minister, said to the House that he wanted Hizb ut-Tahrir to be banned. I hope that the Minister will say what progress has been made in banning Hizb ut-Tahrir and that he will assure the House that he continues to keep the activities of that group under review.

Earlier this year, I raised in the House my concerns about the activities of Hizb ut-Tahrir on university campuses. It was singled out by the Prevent strategy review as a group that was active in radicalising students on university campuses. That concern is particularly pertinent given the current trial of Michael Adebolajo and Michael Adebowale, who were radicalised at the university of Greenwich.

Finally, I want to raise the issue of de-proscription and time limits. The Minister is well aware that the Home Affairs Committee has long asked the Government how a group can be de-proscribed. The only group ever to be de-proscribed sought de-proscription through judicial review proceedings. The Select Committee has been pushing the Government for some time to put a proper structure in place for making such decisions. Time-limiting proscription was recommended by the independent reviewer of terrorism legislation, David Anderson QC. He felt that a proscription order should be subject to a review after a fixed period, following which it could be renewed or it would lapse. The Minister has been pressed on that issue on previous occasions. I hope that he will update the House tonight on the Government’s position or at least give an indication of the steps the Government are taking towards reaching a conclusion on how to de-proscribe.

16:52

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

I rise briefly to support the Government motion.

I take on board the comments that have been made by the hon. Member for Kingston upon Hull North (Diana Johnson). It is right that we proscribe an organisation only after a great deal of thought and when there is a lot of evidence.

As a central London MP, I want to say how lucky we are that the relations between different cultures and races in this country are so good. We too often take that for granted, particularly given the situation in many other western countries, including in the United States and other European countries. The melting pot in my constituency and throughout London operates very well. There is very little evidence of home-grown terrorism, although we rightly clamp down on it where possible.

In such debates, it is right to consider with the utmost seriousness the suppression of such groups, but we must also recognise that community relations in this country are incredibly good. That is a credit to this Government, but also to the last Labour Government. The Prevent strategy has made a real difference to communities at large and within our campuses. It is in that context that I support what the Minister is doing.

16:54

[James Brokenshire]

I will respond briefly to the short points that have been made. I welcome the support that has been offered for the motion this afternoon.

The proscription of Imarat Kavkaz will demonstrate our condemnation of that group’s activities. Proscribing Imarat Kavkaz will also enable the police to carry out disruptive action against its supporters in the UK and ensure that it cannot operate here. I strongly endorse the point made by my hon. Friend the Member for Cities of London and Westminster (Mark Field) about the strength of communities. The work of the Prevent strategy has been enhanced and taken forward through the extremism taskforce, and he will know that further steps have been identified through that work. One issue that we are examining further is whether there should be a requirement for banning orders that sit underneath proscription—in other words, proscription is focused on those who are actively engaged in terrorism, but we are considering carefully whether there should be a further order aimed at any group that undertakes extremist behaviour that is counter to our fundamental values. Following that reflection, we will bring further proposals before the House.

The hon. Member for Kingston upon Hull North (Diana Johnson) asked me about de-proscribing. There is a high bar for a decision to proscribe a group in the first place, so it is right to take a precautionary approach when considering any removal of groups from the list. As allowed by legislation, de-proscription should be considered on receipt of an application, which should set out the grounds on which it is contended that the group is no longer concerned in terrorism. The Home Secretary is required to determine the application within 90 days, and if she agrees to de-proscribe the organisation, she will lay an order before Parliament removing the organisation from the list of proscribed organisations. The order is subject to the affirmative procedure, as is the order being debated this afternoon. We believe, therefore, that there is an effective process for the Home Secretary to consider de-proscription on application from groups, and there is a right of appeal and challenge.

The hon. Lady highlighted Hizb ut-Tahrir, which is not currently proscribed. Proscription can be considered only when the Home Secretary believes an organisation to be concerned in terrorism, as defined by the Terrorism Act. However, that group is an organisation about which the Government have significant concerns, and we will continue to monitor its activities very closely. Individual members of Hizb ut-Tahrir are, of course, subject to the general criminal law.

We are taking action now in response to continued activity by Imarat Kavkaz and renewed threats in Russia during the summer. We believe that it is appropriate to bring the order before the House this afternoon, and I hope the House will support it.

Question put and agreed to.



Humber Bridge Bill

Consideration of Lords amendments

Lords amendments 1 to 22 agreed to.

City of London (Various Powers) Bill [Lords]

Tuesday 10th December 2013 Commons Chamber

Third Reading

16:59

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

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

The Bill makes relatively small but important changes to controls on street trading in the City of London, and liberalises controls to enable temporary licences so that street trading can take place outside the one area in which it is currently permitted—Middlesex street, commonly known as Petticoat lane. It will also enable ice cream and similar confectionary to be sold outside food premises—at least when the weather is slightly more conducive than it is at the moment to people wanting to buy such things.

I am pleased to report that since Second Reading in February, the last remaining issue concerning the services directive has been resolved, and the Department for Business, Innovation and Skills has no further objection to the measure. Indeed, BIS has accepted that the City of London Corporation’s justification for clause 9, which sets out how ice cream may be sold outside food premises, provides reasonable grounds that the clause is compliant with the EU services directive.

A number of important amendments were made to the Bill in an Unopposed Bill Committee—which I believe you chaired, Mr Deputy Speaker—in response to points made during a full Second Reading debate on provisions related to the sale of ice cream. The substantive amendments have been the subject of letters from the City of London Corporation to my hon. Friends the Members for Christchurch (Mr Chope) and for Shipley (Philip Davies), and I hope they provide reassurance on those points—the absence of my hon. Friends from the House today is perhaps a sign that silence is golden on that matter.

The amendments are to provisions inserted into the City of London (Various Powers) Act 1987 by clause 7(2), and I shall briefly outline their effect. The first amendment makes a change to new section 16A(1), which sets out preconditions for the exercise of the power to seize goods or vehicles in the City of London. Concern was expressed on Second Reading by my hon. Friends that the “reasonable suspicion” test was too subjective and laid too low and narrow a bar as a test. The requirement for reasonable suspicion that a person has committed a street trading offence has therefore been amended to one of reasonable belief. The new test will narrow the circumstances in which that power can be exercised, and will make it easier to claim compensation when proceedings are not brought or fail to result in a conviction.

On Second Reading my hon. Friend the Member for Shipley noted an apparent contradiction between the requirement in paragraph (c) of proposed new section 16B(4) for the City of London Corporation to obtain the best possible price that can reasonably be obtained for items it disposes of following a seizure, and the entitlement in paragraph (a) of that subsection, as presented on Second Reading, for the corporation to dispose of such items in any way it sees fit. As presented, the power of sale arose when the court made an award of costs that had not been complied with. To avoid any suggestion that the provision would justify the City of London Corporation in not seeking the best possible price, the reference in paragraph (a) to the corporation’s entitlement to dispose of items

“in any way it sees fit”

has been removed.

On Second Reading, my hon. Friends also raised new section 16B(6), which provides exceptions to the requirement for a seized ice cream van to be returned to the owner within three days of a request being made to the City of London Corporation. Objection was made to two of those three exceptions—first, where the owner is being prosecuted for a previous alleged street trading offence, and, secondly, where the vehicle has been used for a previous or alleged offence—as they were felt to conflict with the presumption of innocence. In recognition of that heartfelt concern, both those exceptions have been removed from the Bill. There is now only one exception—which the hon. Member for Christchurch felt to be justified—and arises when the owner of the vehicle has been convicted of a street trading offence within three years of the vehicle’s seizure.

The seizure of perishable goods is provided for in new section 16E. This reflects the current position in the rest of the metropolis of London. It was suggested on Second Reading that the seizure of such goods would be unfair. It is likely, perhaps inevitable, that if an ice-cream van is seized it will contain some perishables. The Bill was previously silent on how the corporation would look after any perishable goods. It now contains new section 16E(3), which imposes an obligation on the corporation to store any goods at an appropriate temperature.

[Mike Freer (Finchley and Golders Green) (Con)]

I have shepherded one of these Bills through Parliament, so I gently suggest to my hon. Friend that—given that the Bill’s opponents are not here—we move on and give the Bill a Third Reading.

[Mark Field]

I take my hon. Friend’s point, but I have spoken to my hon. Friend the Member for Christchurch and his absence is not one of omission—more a recognition that the changes that have been made are in keeping with the points he made on Second Reading and in subsequent debates.

Two new sections were added in Committee. The first, new section 16H, provides for the Corporation to publish on its website information about the street trading regime in the City so that street traders and potential traders can readily access the rules and their enforcement. The second, new section 16I, requires the corporation to ensure that any officer authorised to exercise seizure or fixed penalty powers under the Bill receives adequate training. Both requirements reflect what the corporation already practises, but these have been made explicit statutory requirements.

My hon. Friends have rightly been concerned to test the necessity for any increase in powers and to ensure that there are adequate safeguards. I hope that they feel that the City’s response meets their concerns and strikes the right balance between street-trading activities and effective administrative and enforcement processes.

The measure is intended to bring some additional enterprise to the City of London—a place I have always regarded as the heart of enterprise for our nation—to add to the vitality which is an essential element of its attraction. The provision for temporary street licences will be a useful way to add to the appeal of seasonal and commemorative events in the City. The ability to license the sale of ice cream and other confectionery outside food premises will, at least in warmer seasons, be welcomed by the increasing number of visitors to the Square Mile and add to its general ambience. I therefore hope the Bill will be allowed to pass today.

17:07

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

As hon. Members will be aware, the Government traditionally do not support or oppose private Bills unless, for some reason, they contain provisions contrary to public policy. In such a case, the Government bring those concerns to the House. In February, I raised such concerns on behalf of the Government, including in particular whether the draft Bill was compatible with the requirements of the European services directive. That concern related to clause 9, which seeks to allow only those with business premises engaged in the production and distribution of food to sell ice-cream from a receptacle outside those premises. It was the Government’s view that the clause failed to comply with the services directive by appearing to discriminate indirectly against non-UK nationals without justification.

Since that debate, I am delighted to be able to tell the House that my officials have engaged with the City of London to better understand the basis of the drafting of the clause, and to consider the issue and the policy justifications in more detail. In the light of that, we have concluded that clause 9 is not discriminatory from the point of view of nationality. This conclusion rests on two grounds. The first is public health, because persons having food premises are more likely to comply with good hygiene practices and regulations, and the second is protection of the urban environment because sites not adjacent to such premises are more likely to be in locations that could cause pedestrians to be put at risk. On balance, these justifications appear to meet the requirements in article 16(3) of the directive, so we are now satisfied that the Bill is compliant with the directive and should be allowed to proceed.

Question put and agreed to.

Bill accordingly read the Third time and passed, with amendments.

Business without Debate

Tuesday 10th December 2013 Commons Chamber

political and constitutional reform

Ordered,

That Robert Neill be a member of the Political and Constitutional Reform Committee.—(Mr Evennett.)

Backbench Business

Ordered,

That Mr Marcus Jones and Mr Mark Spencer be discharged from the Backbench Business Committee and Oliver Colvile and Alec Shelbrooke be added.—(Mr Alan Campbell, on behalf of the Committee of Selection.)

finance and services

Ordered,

That Mr James Gray be discharged from the Finance and Services Committee and Mr Robert Syms be added.—(Mr Alan Campbell, on behalf of the Committee of Selection.)

Co-operatives and Mutuals

Tuesday 10th December 2013 Commons Chamber

Motion made and Question proposed, That this House do now adjourn.—(John Penrose.)

17:10

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

At the outset, let me declare that I am one of the 6 million ordinary members of the Co-op Group. I have accounts with Nationwide, and belong to the M for Money credit union in Harrow and the Rainbow Saver credit union. I am privileged to chair the Co-operative party and to be one of its MPs in this great House.

Unusually, the co-operative movement has been in the news on a sustained basis of late. Absent from much of the coverage has been any sense of the powerful contribution co-operatives and mutuals make in our communities. They could and should, with the right support, make even more of a difference, and it is on that point that I shall focus.

It would be wrong not to acknowledge the challenges faced by the biggest UK co-operative, the Co-op Group. I welcome the progress the group board and its new management team, led by Euan Sutherland, have made in addressing the problems the Co-op bank faces. There are, no doubt, long-term lessons to be drawn, not least on the checks necessary for those in key positions and on how mutuals raise finance. Other reviews and inquiries will focus on those issues, so I will not dwell on them.

The co-operative movement has had its challenges: wartime discrimination by the Government in the first world war over call-up arrangements; Neville Chamberlain’s efforts to get the Co-op divis axed in the 1930s; and, more latterly, the Thatcherite demutualisation of building societies and friendly insurers, the majority of which have not turned out well. The movement survived all those challenges and continued to grow. I have no doubt that it will survive and prosper after facing its current challenges.

The co-op sector in Britain grew by 20% between 2008 and 2012, while the economy as a whole shrank by 2%. Co-operative businesses in the UK together have a turnover of more than £37 billion a year. Those headline economic figures are striking, but it is the often unheralded work that co-operatives and mutuals do in our local communities that deserve a much greater focus. From the first store set up by the Rochdale Pioneers to the more than 6,000 co-operatives in the UK today, co-operative businesses have been at the heart of our communities for more than 150 years. Today, we have co-operative schools, farms, credit unions and shops; and co-operative housing, co-operative energy and even co-operative pubs. In London, if the Minister will forgive me for being parochial for a moment, co-operatives employ more than 8,000 people and have a collective turnover of more than £750 million.

Of the nearly 700 registered co-operatives in London, I draw particular inspiration from the four housing co-operatives established by Coin Street Community Builders to help to meet Londoners’ need for affordable housing; part of an ambitious refurbishment plan for London’s South Bank, including the famous Oxo tower. With the dream of home ownership out of reach for too many people, housing co-operatives could provide a new and innovative solution for a new generation. About 10% of the citizens of some European countries live in housing co-operatives, compared with just 0.6% of people in the UK. I gently suggest to the House, therefore, that housing co-operatives could make a much greater contribution to tackling our housing problems.

Perhaps the Minister, like me, might draw inspiration from the example of Brixton Energy, also in London, which comprises three energy co-operatives—community-owned solar power schemes taking inspiration perhaps from the better known Baywind and Westmill energy co-operatives in Cumbria and Oxfordshire. The Brixton solar-power initiative has created co-operatively and community-owned renewable energy, the revenues from which stay within the local community. It is an innovative energy solution leading the way in generating sustainable sources of energy and it is jointly owned and operated by people in the community for their mutual benefit. As democratic enterprises, they operate with a one member, one vote policy and are surely a great example of the kind of mixed economy of energy ownership that we need to challenge the big six and move on from today’s problems in our energy market.

The Minister and the House might also draw inspiration from the success of credit unions, which in many of our communities are increasingly taking on the Wongas of this world. They provide affordable credit, empowering many of the poorest people in our communities and helping to retain funds in the local economy. In Leeds, for example, Salford university found a £10 benefit for the local economy for every £1 invested in the credit union, and indeed the Department for Work and Pensions independent evaluation of the financial inclusion growth fund established by the previous Government found that the total loans made by credit unions under the scheme between 2006 and 2011 totalled £175 million and saved loan recipients between £119 million and £135 million in interest, which they would have had to pay had they taken out a high-cost alternative.

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

For the record, I am a Labour and Co-operative MP and a member of several co-operatives and the Cardiff and Vale credit union.

My hon. Friend is making a strong speech about the value that co-operatives and mutuals play in local communities. That is certainly what I have seen in Cardiff, whether in the work of the credit union or organisations such as the Wales Co-operative Centre, which is doing much to support the growth of co-operatives and mutuals across Wales. Is it not sad, then, that the wider co-operative and mutual sector has been swept up, unfairly smeared and mixed up in some of the media coverage and commentary around the concerning and disturbing events at the Co-op bank?

[Mr Thomas]

That is an unfortunate consequence of some of the coverage, but I have no doubt that co-operatives can rise above it and continue to demonstrate strong support from their local communities. As I indicated earlier, I have no doubt that the co-op movement as a whole, be it in Wales, England, Scotland or Northern Ireland, will continue to prosper.

The London mutual credit union provides loans, savings and current accounts and insurance. It recognises that there is a market for short-term loans, but charges an interest rate of only 27% for a 30-day loan—a world away from the 5,600% annual percentage rate typical of the payday loan sharks against whom my hon. Friend the Member for Walthamstow (Stella Creasy) has rightly led the charge. Crucially, it also offers access to basic financial education and services, helping people to gain greater long-term control over their personal finances. Co-operatives and mutuals offer to local communities a crucial part of the mixed economy that our country surely needs. Of course we need a vibrant private sector and certainly a strong third sector, but surely we also need continued growth in the number of co-operatives and mutuals and their economic success.

To be fair to the Government, they have continued to support the strengthening and expansion of the credit union sector, although I hope they can be persuaded to be bolder on the idea of a military credit union. I draw the Minister’s attention to the example of the United States, where the biggest credit union in the world is Navy Federal Credit Union, the credit union for the American military. It has 4 million members and over $55 billion in assets. I gently suggest to the House that it is surely time to consider again how a British armed forces credit union could be made a reality to help our soldiers, sailors and air force personnel in our own communities. A British equivalent could help to protect service families from the scourge of payday loan companies and begin to tackle the worrying levels of financial difficulties experienced by some of our veterans.

The co-operative movement itself in the UK continues to support and encourage the development of new co-operatives and mutuals as part of the response to the needs of particular local communities. The excellent Co-ops UK—the “trade association” of the co-op movement in the UK—and the Co-op Group support the co-op enterprise hub. Examples of co-operatives that have been established and are running well thanks to their support including from—the Minister may be aware of this—Bristol ferry boats. In 2012, the previous operators went into administration and a group of determined locals approached the enterprise hub for support to launch a community share issue to raise the £250,000 needed to bring the ferries into community ownership. The share offer closed in July of this year having exceeded its target. Some 850 local people invested, therefore enabling the ferry service to continue, providing—crucially—employment for 20 local people.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

Like my hon. Friend, I should declare that I am a proud Co-op as well as Labour MP and a member of the Waltham Forest community credit union. He is making an incredibly powerful case for the need for boldness in our public policy solutions and for the way in which the co-op movement can offer that, from ferries to energy to housing as well as community credit unions. Does he therefore agree that as the concept of co-ops perhaps is being questioned, this is now the time to strengthen our relationship and our work with co-ops because of all the benefits he has outlined rather than to walk away from them?

[Mr Thomas]

My hon. Friend is absolutely right and part of the reason for wanting this debate was that I was encouraged by the fact that in the coalition document there is a commitment to supporting co-operatives and mutuals. One hopes that coalition Ministers will not draw back or resile from that commitment, weak as some of the delivery has none the less been on it. It would be good to hear from the Minister what further progress he intends to make to hold to that commitment.

There is a risk that I have appeared too urban in the examples I have offered, so perhaps I can draw attention to the example of—I hope Welsh listeners will forgive my pronunciation—Tyn-Y-Capel, an historic pub in North Wales that reopened in 2012 as a result of the efforts of a determined group of locals who formed a co-operative to resurrect their local. A community share offer raised nearly £40,000, enough to take over the leasehold of the pub and, again, as a result of support from the enterprise hub. The new co-operative is developing the pub’s potential as a community venue and I am told that numerous community events have been held there since its re-opening.

The last example I want to offer the House of the co-op movement’s initiatives to help local community co-operatives to continue to be established is Aberdeen Textiles and Workwear Services in Scotland. I understand that the co-operative was established in October last year, after the Remploy factory in Aberdeen closed down. It saved some eight jobs, with the co-operative successfully retaining most of Remploy’s former customers up there, as well as gaining new ones, too.

In football, too, the Co-op party’s original idea of fans’ co-operatives—now known as supporters trusts—has taken off in a big way since it was first suggested 10 or so years ago, from Swansea City in the premiership, with fans in the club’s boardroom, and Portsmouth more recently, down to local clubs in north London. For example, Enfield Town football club is owned by some 300 members, who keep the club running and elect their own board. As a result, they have kept a vital community asset going in Enfield.

Co-operatives and mutuals can make an enormous difference in our communities. With the right legislative support, access to sensible finance and shrewd Government encouragement, they could do even more. I therefore have a series of questions that I hope the Minister will begin to address today—if not, I will be happy to hear his answers in due course. What further support might the Government offer to encourage the growth of energy co-operatives? Will he seek to emulate the US, where 12% of the population get their energy from a co-operative, or Germany, where the figure is one in three people? How about a target to push the level of community energy ownership a stage further? What steps will he or other Ministers take to encourage local economic partnerships to support and develop co-operative, mutual or social enterprise businesses, creating local employment and growth in their communities, perhaps as part of future regional growth fund bids?

There has been some disappointment in the co-operative movement that the social investment tax relief, which was announced in the autumn statement and welcomed by many, will not cover investment in most co-operative societies or community credit unions. One of the biggest challenges facing co-operatives today is the ability to access finance to support growth, as I am sure the Minister is aware. Considering the important contribution that co-operatives and mutuals make to local communities, I hope that Ministers might be persuaded, even at this late stage, to intercede with the Treasury on this important point.

The Government have encouraged Britain’s banks to publish data on local lending patterns. I understand that the first comprehensive set of postcode lending data will be made available in January. I hope it will begin to expose the lending deserts that we know exist in the UK, where access to affordable credit for individuals and, crucially, to small and medium-sized businesses is particularly bad. I offer the Minister the example of Thamesmead in south London, which is an area of 55,000 households with no bank. Indeed, the nearest branch is some 35 to 45 minutes away by bus. Not surprisingly, there are high levels of payday loan usage and a high take-up of “Provy” loans. What provisions will Ministers put in place, once those data are made available, to encourage banks to work much better with local organisations, co-operatives, mutuals, social enterprises and even charities to respond to the needs of their areas?

What actions will Ministers take to encourage housing co-operatives? Will the Minister instruct the Homes and Communities Agency to allocate a proportion of its apparently considerable capital funds for new affordable housing to support housing co-operatives? Will the Minister particularly look at the suggestion advocated by my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) that the Government adopt the approach taken by the Welsh Assembly and recognise co-operative housing in law, as it is in much of the rest of Europe? What action will Ministers take to encourage lottery operators to support a new strand of community resilience projects to help make start-up support available for new co-operative and mutual initiatives?

Those are the ideas and questions that I have gently offered to the House today, and I hope they will be seen by the Minister as a genuine attempt to encourage new ways of driving continued growth in the co-operative and mutual sector—a sector that I believe offers considerable benefit not only to my community, but to communities across the UK.

17:30

[Jim Shannon (Strangford) (DUP)]

Thank you, Mr Deputy Speaker. I asked for your indulgence and appreciate the opportunity to contribute to the debate. I congratulate the hon. Member for Harrow West (Mr Thomas) on making such a valuable contribution on the importance of co-operatives and mutuals.

I would like to make a few quick points—they will be quick—about co-operatives in Northern Ireland. The hon. Member for Harrow West outlined the importance of co-operatives for England, Wales, Scotland and Northern Ireland, so I shall follow that up in respect of the benefits for Northern Ireland. The benefits of co-operatives could be seen when workers in Northern Ireland decided it was time to do something and they got the expertise they needed. The Belfast Cleaning Society was set up by six cleaners, and the company, established as a social co-operative, is now winning contracts, including from local councils. That happened after help from the co-operative enterprise hub with legal and business advice—the very advice to which the hon. Gentleman referred earlier. That is what led to this company starting up with just six workers. The success of the Belfast Cleaning Society has been tracked by other groups of cleaners, frustrated by an industry that typically pays the people who do this work only the minimum wage. That illustrates why it is important to have a co-operative that works for the people and benefits the people and all involved.

Many more examples could be cited. The hon. Gentleman referred to some examples in England and Scotland. I am aware of one example in Clevedon in Somerset, where the town’s bookshop was threatened with closure. A community share issue was raised, and the 600 people participating raised the £20,000 needed to buy the shop. The “Clevedon Community Bookshop” has since gone on to advise other communities about how to keep vital local businesses going. There are two examples—one in Belfast and one in Clevedon, Somerset—and the hon. Gentleman put forward many other examples of where co-operatives can be of great benefit.

Let me deal briefly with a new initiative for Northern Ireland that is coming off the backs of the co-operatives and the mutuals. I refer to the Building Change Trust and the Co-Operative Alternatives, which are leading the way in developing a community shares programme in Northern Ireland. This project is the first initiative of this kind, proposing to make community shares more known and understood in Northern Ireland and identifying and selecting a sample of local enterprises and initiatives with community investment potential to help them to become community share investment ready. These are the very businesses to which the hon. Gentleman referred in respect of ferries, for example. These community shares will enable people who collectively want to ensure that co-operatives and mutuals can happen to initiate business opportunities.

Community shares are a unique form of share called a “withdrawable share”, which can be issued by co-operatives and community benefit societies. A withdrawable share is very different from an ordinary share. A withdrawable share can be cashed in or withdrawn, subject to the rules of the society, and is not tradable on the stock exchange. The co-operative societies are for the mutual benefit of all their members, while community benefit societies are for the broader benefit of the community. Both legal structures uphold the principles and values of co-operation.

I believe that these community shares provide long-term risk capital that can leverage further funding. Societies can use community shares to raise finance, but also to recruit members and to initiate business opportunities for collectives across the whole of Northern Ireland. I believe that these opportunities will support the social aims of the community enterprise concerned by investing the money, purchasing these shares, making the community investor a part owner in the community initiative, able to have a democratic say and further social aims, as the principle of one vote per shareholder implies.

I have given just a small synopsis of what is happening in Northern Ireland, but I wanted to put it on record and ensure that it appeared in Hansard. I think that this evening we should concentrate on the pluses, for there are many pluses involved in what co-operatives do throughout the United Kingdom. They provide an opportunity for those who might not have had it in the past to start businesses and to come together and benefit the community as a whole, which is what many people want to do. All that is needed is a wee push, a wee nudge, a wee bit of legal advice and a wee bit of support—and then, hopefully, co-operatives and mutuals throughout the United Kingdom of Great Britain and Northern Ireland will be able to continue to grow.

17:35

[The Parliamentary Under-Secretary of State for Communities and Local Government (Stephen Williams)]

I do not think that any of us expected this debate to be taking place at 5.35 pm. Earlier today, I was told several times via the Whips Office that the House might sit late tonight, and my officials were told the same. I am sure that the hon. Member for Harrow West (Mr Thomas) asked many questions while I was not only listening to his speech but reading my own for the first time. I must confess that I was “Boxless”—I do not know whether there is such a word in the English language—and, although I do not think that I am technically Boxless any more, it is probably best for me to deal with some of the hon. Gentleman’s questions by writing to him. However, they will all be in Hansard and on the record.

[Mr Thomas]

I entirely accept that the Minister will want to mull over some of my questions, but perhaps I can throw him another one to mull over. It concerns the future of the industrial and provident society legislation, which is, I understand, a Treasury responsibility. When the Minister writes to me, will he also check whether the Treasury has any plans to modernise that legislation further?

[Stephen Williams]

I thank the hon. Gentleman for his question, which is now on the record and will be added to the already fairly long list of items about which I shall have to write back to him.

I congratulate the hon. Gentleman on securing the debate, and thank him for his constructive speech. I also thank the hon. Member for Strangford (Jim Shannon) for his comments about the situation in his constituency, and for the intervention from my namesake the hon. Member for Cardiff South and Penarth (Stephen Doughty).

The Government are committed to opening up and transforming public services and giving communities an opportunity to take control of the places in which they live and which they may well love. Localism is fundamental to that, and the powers and opportunities that we have introduced to support it are already demonstrating their value. When I entered my Department and discovered the range of responsibilities that I would be taking on, I was, as a Liberal, genuinely excited by the whole localism agenda. This morning I visited Poplar—in the constituency of the hon. Member for Poplar and Limehouse (Jim Fitzpatrick)—to announce the next stage of the Our Place! programme, a community empowerment programme that is one of the many suites of powers introduced under the coalition’s Localism Act 2011.

Of course, this Government did not invent community action. As the hon. Gentleman rightly acknowledged, the co-operative movement has a long history in this country. He mentioned pioneers in Rochdale, but given his first name and surname I think that he must have some Welsh antecedents, and in that context I should mention Robert Owen. All those pioneers, whether they were in Montgomeryshire or in Rochdale, would have had in their hearts a vision in which they were made stronger by working together, and could achieve more together than they could individually. Together, they could raise their own aspirations and those of their communities. Let me put that into 21st-century language that may sound familiar to some people: it is not just about building a stronger economy, but about building a fairer society and enabling every person to get on in life.

The community rights introduced in the Localism Act—along with all the other rights that we introduced in that legislation—give new opportunities to co-operatives and mutuals. Let me mention a few that are relevant to the issues raised by the hon. Gentleman.

In London—in the constituency of the deputy leader of the Labour party, I think—the Ivy House Community Pub Ltd is now a co-operative. Using a right under the 2011 Act, the community got together to save the Ivy House pub from being sold and turned into flats. It has now purchased the pub, using the right to bid introduced under that Act. That is the first co-operative pub in London. If we are feeling the Christmas spirit, as we have plenty of time we did not know we would have this evening and it is not too far away, we should perhaps consider going for a drink there later on.

We are now seeing real growth in co-operative pubs. The overall number is 22 now, and half of them opened their doors this year. My Department is helping to fund the co-operative pubs advice line, launched at the start of April. Over 100 communities have contacted this service—which shows there is a thirst for accessing it.

There are also currently 318 community shops open and trading across the UK, all using a co-operative model. They are extremely resilient, as 96% of those that have ever opened are still open, so it is a much more successful and sustainable business model than, sadly, many other small enterprises.

My Department is supporting communities across England to take on assets and make them work for local people through our community ownership and management of assets programme. This is providing expertise, support and grants to groups to buy or manage a range of assets. Many community pubs and shops have successfully used community share offers to raise funds. Community shares is a sustainable social investment model that gives communities an opportunity to purchase a stake in their local community enterprise. Hastings pier is an example I am familiar with. People throughout the country are using these new rights to preserve things that are important in their community.

Another example of where community shares are helping industrial and provident societies to save assets is the first co-operative football club, FC United of Manchester. I am not a football expert, but I must confess that that is not a club I have heard of. Community shares have been used, too, to set up several renewable power generation projects. The hon. Member for Harrow West referred to the Brixton Energy company and schemes in Cumbria. There are also schemes in my constituency in Bristol, such as in Easton, that do similar things. The great thing about these community energy schemes is that they preserve money in the local community. That can be a very localist way of dealing with fuel poverty, which is something we are all concerned about.

There are also several community-led housing schemes that have taken advantage of the £25 million the Government have set aside for them in the affordable homes programme. One example is the Bomarsund Co-op, which started a scheme this year in Sedgehill in Northumberland. It will provide 12 two-bedroom apartments. Another is the community land trust in Queen Camel in Somerset—they have some splendid names—which is funding the development of 20 affordable homes.

The chair of the Confederation of Co-operative Housing, Mr Nic Bliss, has recently set out his experience of working with the coalition Government. He said that

“we are pleased that the Coalition Government has worked with our sector to demonstrate its ongoing support for community-led housing.”

The Government have also been public about our commitment to the creation and expansion of mutuals, especially by empowering public sector workers to become their own boss and help them deliver better public services.

[Mr Thomas]

I genuinely do not want to chastise the Minister, because he is making a helpful and interesting speech, but will he take back to his Department my request for the Homes and Communities Agency to do more to encourage local authorities and housing associations to support housing co-operative initiatives? There are good examples of housing co-ops in the UK, but the number of people who are able to take advantage of them is dramatically lower than in some European countries.

[Stephen Williams]

I thank the hon. Gentleman for that helpful suggestion. I will certainly take it back to the Department and discuss it with the Housing Minister, the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Keighley (Kris Hopkins).

We genuinely want innovative models of delivery for housing provision on the ground, where we can work with social enterprises and charities and bring people together to achieve real regeneration in their area. A couple of weeks ago, as the Minister responsible for the empty homes programme, I handed over the keys to a house in Peckham. The number of people involved in that project was quite staggering: not only the formal delivery partners—the Government, Southwark council and the two housing associations—but 300 volunteers. Some had painted a bedroom, others had done the carpeting, and so on. The Government are genuinely open to innovative solutions that involve as many people as possible in shaping their own communities, and I certainly think that the co-operative model for providing new housing is something that ought to be explored a little bit further.

Returning to the question of employees who take over their own area of the public sector, our latest data show that absenteeism and staff turnover fall by 20% and 16% respectively after an organisation has spun out. Both are really impressive statistics that are surely reflective of staff having a greater sense of control and ownership. I could give the House further examples.

[Stella Creasy]

The Minister is making a powerful case for the way in which co-operative models and values have informed new solutions to a range of society’s problems. Will he put on record his support for the role of the Co-operative party in promoting those ideas and bringing them to the House’s attention?

[Stephen Williams]

Oh dear! It’s Christmas! I was hoping we would not have to discuss the Co-operative party and the recent events—fun though that might be. A lot of us, myself included, would regard ourselves as fully supportive of the co-operative model, of mutuals and of social enterprises, and we have spent a large part of our political careers doing a great deal to encourage that agenda. We are now spending time in Government pushing that agenda forward. For some reason, the Co-operative party chooses to fund only candidates who are associated with the Labour party, and that is a shame. I am going slightly off topic here, Mr Deputy Speaker, but I was led astray. I wish that the Co-operative party would use its resources to fund candidates from any party, be they Labour, Liberal Democrat or even some of our coalition partners who are genuinely interested in pushing forward co-operative ideals. The people who founded the co-operative movement in the 19th century might be surprised to find that the Co-operative party in the 21st century is now allied solely to a Labour party and not to a Liberal party, because many of them would have been Liberals at that time.

[Mr Thomas]

May I gently point out to the Minister that the Co-operative party was established in response to discrimination in the way in which staff were called up from co-operatives, as opposed to private businesses, by the Conservative and Liberal coalition Government during world war one? In the spirit of bringing a sense of Christmas back into the Chamber, let me say that if he were willing to defect, I would be willing to champion his membership of the Co-op party.

[Stephen Williams]

Even if the hon. Gentleman and I were to visit the Ivy House pub in Nunhead later and drink however much it took to get us both thoroughly inebriated, I do not think that my will would be so weakened as to accept that kind invitation, which I must admit has been offered by his colleagues many times over the years.

The hon. Gentleman also mentioned credit unions. I am a member of Bristol Credit Union—I am reminded that I need to top up my funds. The reason I became a member in the first place was to be able to use the Bristol pound. Local community currencies are another example of putting power in the hands of local people to keep more of their spending power in the local economy and to support businesses and the agenda he is putting forward.

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

I thank the Minister for giving way and hope that both he and my hon. Friend the Member for Harrow West (Mr Thomas) will accept my apology for arriving late—I, too, was surprised by how early the debate started. Will he agree to look at the financial regulations for credit unions? Barrow-in-Furness now has a credit union and has done very well to establish it, but it is dealt with in the same way as some much larger institutions even though they have nothing like the same level of financial risk.

[Stephen Williams]

I suspect that the regulations for credit unions are the responsibility of the Treasury, so I will ensure that a note of the hon. Gentleman’s point is sent to Treasury colleagues and that he receives a reply.

The hon. Member for Harrow West questioned why there is no military credit union and gave the example of north America. I was unaware of that and will raise it with colleagues in the Ministry of Defence to see whether complementary provision already exists in the United Kingdom or whether we should look at that model seriously to see if it would work in this country.

I was pleased that the hon. Gentleman mentioned the Bristol Ferry Boat Company share offer. Mr Deputy Speaker, I do not know whether you have made your life even more complete by journeying to Bristol West to see the yellow boats that plough their way around the harbour, but you are very welcome. People visiting Bristol are often surprised to see ferry boats in the heart of a city centre that they thought was well inland. Unfortunately, the company that owned them failed last year, but it has now been saved through a community share. All of us in Bristol were delighted to see that.

In conclusion, I think that all the Members who were watching the Annunciator screens carefully and managed to get into the Chamber for this debate have made useful contributions. I will ensure that the hon. Member for Harrow West receives responses to the questions he asked. I thank him for securing the debate. To end on a note of Christmas unity, I am sure that co-operatives and mutuals have a great future in this country, as do social enterprises. The coalition Government are determined to ensure that that is the case.

Question put and agreed to.

17:53

House adjourned.

Ministerial Corrections

Tuesday 10th December 2013 Ministerial Corrections

Tuesday 10 December 2013

Personal Independence Payment: South East

Tuesday 10th December 2013 Ministerial Corrections

[Fiona Mactaggart]

To ask the Secretary of State for Work and Pensions which of the 21 personal independence payment consultation centres serving South and East England cannot be reached within (a) 90 minutes and (b) 60 minutes by public transport from all parts of their catchment area.

[Official Report, 18 November 2013, Vol. 570, c. 677W.]

Letter of correction from Mike Penning:

An error has been identified in the written answer given to the hon. Member for Slough (Fiona Mactaggart) on 18 November 2013.

The full answer given was as follows:

[Mike Penning]

No claimant should travel more than 90 minutes (single journey) by public transport, for their consultation. As part of the process Atos, as the assessment provider in the south and east of England, will offer an assessment at their nearest location and it is only when that location is full would claimants be sent to an alternative site. As part of their bid, Atos stated that 75-90% of claimants will have no journey longer than 60 minutes. In the exceptional circumstance where a claimant is unable to make a journey within 90 minutes via public transport Atos will offer either a home visit or the ability to use a taxi.

The correct answer should have been:

[Mike Penning]

No claimant should travel more than 90 minutes (single journey) by public transport, for their consultation. As part of the process Atos, as the assessment provider in the south and east of England, will offer an assessment at their nearest location and it is only when that location is full would claimants be sent to an alternative site. As part of their bid, Atos stated that 75-90% of claimants will have no journey longer than 30 minutes. In the exceptional circumstance where a claimant is unable to make a journey within 90 minutes via public transport Atos will offer either a home visit or the ability to use a taxi.

NHS England

Tuesday 10th December 2013 Ministerial Corrections

[Liz Kendall]

To ask the Secretary of State for Health what the (a) total budget, (b) total number of staff and (c) budget for staff salaries is for those employed by NHS England but not for NHS England local area teams.

[Official Report, 28 November 2013, Vol. 571, c. 415W.]

Letter of correction from Dan Poulter:

An error has been identified in the written answer given to the hon. Member for Leicester West (Liz Kendall) on 28 November 2013.

The full answer given was as follows:

[Dr Poulter]

NHS England's total revenue budget for 2013-14 is £95.873 million, of which £2.016 million is to be spent on administration. How all spending is allocated is a matter for NHS England. NHS England has informed us that the administration budget for NHS England, excluding area teams and commissioning support units (its National Support Centre), is £332.2 million.

As at the end of October 2013, NHS England had 886.15 whole time equivalent staff in post within its National Support Centre.

The total pay budget for the total agreed staff numbers within the National Support Centre (1,106.48 whole time equivalent) is £75.2 million. There are currently vacancies within this staff structure.

The correct answer should have been:

[Dr Poulter]

NHS England's total revenue budget for 2013-14 is £95.873 billion, of which £2.016 billion is to be spent on administration. How all spending is allocated is a matter for NHS England. NHS England has informed us that the administration budget for NHS England, excluding area teams and commissioning support units (its National Support Centre), is £332.2 million.

As at the end of October 2013, NHS England had 886.15 whole time equivalent staff in post within its National Support Centre.

The total pay budget for the total agreed staff numbers within the National Support Centre (1,106.48 whole time equivalent) is £75.2 million. There are currently vacancies within this staff structure.

Priority School Building Programme

Tuesday 10th December 2013 Ministerial Corrections

[Tom Blenkinsop]

To ask the Secretary of State for Education which schools were (a) initially informed they would and (b) subsequently informed they would not receive funding for under three provision from the Priority School Building Programme by the Education Funding Agency.

[Official Report, 2 December 2013, Vol. 571, c. 540W.]

Letter of correction from David Laws:

An error has been identified in the written answer given to the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on 2 December 2013.

The full answer given was as follows:

[Mr Laws]

I am not aware of any school that has been informed that they would receive funding for under three provision from the Priority Schools Building Programme. However, we have allocated £200 million to local authorities for this specific purpose, and we expect them to contribute a proportion of this funding where they wish to provide under three places.

The correct answer should have been:

[Mr Laws]

I am not aware of any school that has been informed that they would receive funding for under three provision from the Priority Schools Building Programme. However, we have allocated £100 million to local authorities for this specific purpose, and we expect them to contribute a proportion of this funding where they wish to provide under three places.

[Tom Blenkinsop]

To ask the Secretary of State for Education what funding his Department plans to allocate to under three provision in school buildings being built as part of the Priority School Building Programme; and if he will make a statement.

[Official Report, 3 December 2013, Vol. 571, c. 651W.]

Letter of correction from David Laws:

An error has been identified in the written answer given to the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on 3 December 2013.

The full answer given was as follows:

[Mr Laws]

The purpose of the Priority Schools Building Programme is to rebuild schools in England in the worst condition. There is no provision made within the programme for under three places. However, we have allocated £200 million to local authorities for this specific purpose, and we expect them to contribute a proportion of this funding where they wish to provide under three places.

The correct answer should have been:

[Mr Laws]

The purpose of the Priority Schools Building Programme is to rebuild schools in England in the worst condition. There is no provision made within the programme for under three places. However, we have allocated £100 million to local authorities for this specific purpose, and we expect them to contribute a proportion of this funding where they wish to provide under three places.

Petitions

Tuesday 10th December 2013 Petitions

Tuesday 10 December 2013

Hawthorns Skate and BMX Park Desborough, Northamptonshire

Tuesday 10th December 2013 Petitions

The Petition of supporters of the Hawthorne Skate and BMX Park Desborough, Northamptonshire,

Declares that the Petitioners support the campaign to save the Hawthorns Skate and BMX Park in Desborough, Northamptonshire, which is a large park, with ten varied wooden ramps built to national competition standard, which was first established in 1999 and which has since benefitted from National Lottery funding and has been maintained, repaired and rebuilt by the voluntary efforts of the local community; further that it has been used by thousands of local boys and girls, and now faces the threat of closure by Kettering Borough Council, which owns the land on which the park is sited and which wishes to build residential properties on the park site and the eight acres of neighbouring green space, which were established for leisure and sports use in 1974 and which the Petitioners believe are unsuitable for housing development because they are located by a nature reserve.

The Petitioners therefore request that the House of Commons urge the Department of Communities and Local Government to encourage Kettering Borough Council to review the planned closure of the Hawthorns Skate and BMX Park.

And the Petitioners remain, etc.—[Presented by Mr Philip Hollobone, Official Report, 4 July 2013; Vol. 565, c. 1160.]

[P001193]

Observations from the Secretary of State for Communities and Local Government:

Decisions about the future of this skate park are a matter for the local authority. It is important, as with all decisions about the provision of local facilities, that there is effective consultation with the local community.

Sport England works closely with local authorities to develop a strategic approach to the provision of facilities ensuring that local authorities have the right mix of sustainable provision. Sport England is supporting the provision of new facilities in Kettering, which has now been incorporated into a borough wide sports facilities strategy currently being implemented by the council.

If there is to be a material change of use for the site this will require planning permission. In considering any application there will be an opportunity for those with an interest to submit comments which the local planning authority can consider in coming to a decision on the planning application.

While this is a matter for the local authority, it would be inappropriate to comment on the detail of any proposal as it might come before the Secretary of State in due course.

A14 road improvement and financing

Tuesday 10th December 2013 Petitions

The Petition of the people of Suffolk Coastal and the wider Suffolk area,

Declares that the planned road improvements on the A14, a key route connecting the Midlands with the UK’s leading container port of Felixstowe and designated as a Trans-European Transport Network, will be welcomed by most users of the A14, particularly by residents in Cambridgeshire, and is expected to reduce congestion on this key route for commuters and businesses alike; further declares that this is one of several major road improvements proposed by Her Majesty’s Government though notes that this is the only road improvement scheme proposed to be partially financed by a toll; further declares the concerns of the petitioners that this will have a detrimental effect on the economy of Suffolk.

The Petitioners therefore request that the House of Commons urges the Government to remove the planned requirement to toll vehicles on the A14.

And the Petitioners remain, etc.—[Presented by Dr Thérèse Coffey, Official Report, 8 November 2013; Vol. 570, c. 608.]

[P001257]

Observations from the Secretary of State for Transport:

The Highways Agency recognises the vital link of the A14 in the Trans-European Network and to the national and local economy. In developing the proposals for A14 Cambridge to Huntingdon improvement scheme the Government considered tolling as an option. A recent public consultation exercise was undertaken to consider the route options for the A14 scheme and the impact of proposals to introduce road-user tolls on part of the route.

The Government have listened to the concerns of business leaders and communities in the region centring around the impact of tolling on local competitiveness and congestion on less-suitable un-tolled alternative routes, and has decided not to introduce tolls on the A14.

The Highways Agency are currently producing a consultation report which will be published later this month on:

http:www.highways.gov.uk/roads/roads-projects/914-cambridge-to-huntingdon-improvement-Scheme.

The views received from this consultation will then be used to support the further development of the scheme design with the next stage being the publication of a Preferred Route Announcement early next year.

The Petition of the people of Suffolk Coastal and the wider Suffolk area,

Declares that the planned road improvements on the A14, a key route connecting the Midlands with the UK's leading container port of Felixstowe and designated as a Trans-European Transport Network, will be welcomed by most users of the A14, particularly by residents in Cambridgeshire, and is expected to reduce congestion on this key route for commuters and businesses alike; further declares that this is one of several major road improvements proposed by Her Majesty's Government though notes that this is the only road improvement scheme proposed to be partially financed by a toll; further declares the concerns of the petitioners that this will have a detrimental effect on the economy of Suffolk.

The Petitioners therefore request that the House of Commons urges the Government to remove the planned requirement to toll vehicles on the A14.

And the Petitioners remain, etc.—[Presented by Dr Thérèse Coffey, Official Report, 22 November 2013; Vol. 571, c. 3P.]

[P001299]

Observations from the Secretary of State for Transport:

The Highways Agency recognises the vital link of the A14 in the Trans-European Network and to the national and local economy. In developing the proposals for A14 Cambridge to Huntingdon improvement scheme the Government considered tolling as an option. A recent public consultation exercise was undertaken to consider the route options for the A14 scheme and the impact of proposals to introduce road-user tolls on part of the route.

The Government have listened to the concerns of business leaders and communities in the region centring around the impact of tolling on local competitiveness and congestion on less-suitable un-tolled alternative routes, and has decided not to introduce tolls on the A14.

The Highways Agency are currently producing a consultation report which will be published later this month on:

www.highways.gov.uk/roads/roads-projects/A14-Cambridge-to-Huntingdon-Improvement-Scheme

The views received from this consultation will then be used to support the further development of the scheme design with the next stage being the publication of a Preferred Route Announcement early next year.

Westminster Hall

Tuesday 10th December 2013 Westminster Hall

Tuesday 10 December 2013

[Jim Dobbin in the Chair]

HIV and AIDS

Tuesday 10th December 2013 Westminster Hall

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

09:30

[Pamela Nash (Airdrie and Shotts) (Lab)]

It is a pleasure to open this debate and to see you in the Chair, Mr Dobbin. I thank Mr Speaker for granting us the debate and my colleagues for attending this morning. Many of them have shown great support to the all-party group on HIV and AIDS, which I have chaired for two and a half years.

I am happy to see my hon. Friend the Member for Wirral South (Alison McGovern), in her newish role as shadow International Development Minister. I am also happy to see the Minister in attendance this morning; she has a strong personal commitment to the HIV response and has demonstrated that throughout her time at DFID. She has championed both the Global Fund to Fight AIDS, Tuberculosis and Malaria and UNAIDS, overseeing a significant increase in funding to both, which the all-party group has been delighted to see.

Today’s debate is timely, not just because we recently commemorated world AIDS day, but because today is international human rights day. As we mourn Nelson Mandela, we remember him as one of the great advocates of the AIDS response. He summed up the challenges very aptly when he said:

“AIDS is no longer just a disease; it is a human rights issue.”

The universal declaration of human rights states:

“Everyone has the right to a standard of living adequate for the health and well-being of himself…including…medical care”.

The virus has so far infected 58 million people, become the sixth biggest killer in the world and left 1.6 million people dead in the past year alone. However, it is not just the scale of the epidemic that makes it a human rights issue. It is a human rights issue because its effect on a country is dependent on that country’s wealth, and an individual’s social status still determines their risk of being infected and their ability to access treatment if they are.

HIV is the sixth biggest cause of death in the world, but it is the second biggest in low-income countries and does not even feature in the top 10 causes of death in high-income countries. The 1.6 million people did not die of AIDS last year because treatment does not exist; they died because the medicines were too expensive for them to buy, or because the stigma was too much for them to seek help in time. AIDS and poverty are now mutually reinforcing negative forces in many developing countries. We are 30 years into the epidemic, and AIDS is sadly still a major health and human rights issue, despite the leaps and bounds in progress we have made on prevention, testing and treatment.

One of the main barriers to fighting the epidemic, which stubbornly remains, is stigma. Last year, I took part in a Voluntary Service Overseas placement in Kenya to help parliamentarians and civil society there to strengthen their own all-party group on HIV and AIDS in the Kenyan Parliament. As part of that, I was lucky to work closely with Llina Kilimo MP, a much respected politician and campaigner on HIV and women’s rights. I remember her telling me that no one dies of AIDS. I was confused for a few seconds, but then realised that she meant that no one talks about dying of AIDS. When someone dies of AIDS in Kenya, the family will usually announce the cause of death as the secondary illness that was brought on by AIDS. Owing to the stigma attached, they keep their status quiet.

The best known example of that comes from Nelson Mandela’s own family. When his daughter-in-law passed away at the age of just 46, it was announced that she had died of pneumonia. It was not until her husband, Mandela’s son, died just a couple of years later that Mandela took the brave decision to announce to the world that his son had died of AIDS. In the midst of huge personal tragedy, burying his own son, he decided to use the occasion to show leadership on an issue that he feared would destabilise his country and damage the progress he had made in South Africa. He said at the time:

“That is why I have announced that my son has died of AIDS…Let us give publicity to HIV/AIDS and not hide it, because the only way to make it appear like a normal illness like TB, like cancer, is always to come out and say somebody has died because of HIV/AIDS, and people will stop regarding it as something extraordinary for which people go to hell and not to heaven.”

Mandela had already established his well known campaign 46664—named after his prisoner number on Robben island—a couple of years before he knew of his son’s HIV status. The campaign aimed to raise not just money but awareness, to get people talking about HIV and AIDS and to attempt to alleviate the stigma that too often stops people from seeking the treatment they need. Although there has been progress since Mandela’s landmark press conference in his garden following his son’s death in 2005, I fear that the stigma attached to HIV still prevails in Africa and across the world.

Mandela’s great work is not over. People are still dying from a preventable disease, and there are still 16 million people living with HIV without access to the treatment they require. We know that women, children and socially excluded groups are the people most affected by HIV, but one of the reasons for that is that they are least likely to have a political voice and are therefore not paid enough attention.

That might seem an odd statement, given the attention paid to the issue on world AIDS day recently, and the fact that many non-governmental organisations and some of the biggest ever global campaigns and organisations now provide treatment. However, we are fighting a losing battle for the political will to end AIDS in some of the countries most at risk, because of the stigma attached—not to being HIV-positive, but to talking about the matter at all.

The project in Kenya that I have mentioned was a follow-up to one carried out by my predecessor as chair of the all-party group, David Cairns, in Kenya two years previously. He helped the National Empowerment Network of People living with HIV/AIDS in Kenya— an umbrella organisation for HIV support groups—to set up an all-party group on HIV with Kenyan parliamentarians. However, that all-party group had not quite taken off.

When I was asked to go, I was concerned about the impact I could make; if David could not make a difference and set that group up, I did not see how I could. Surely, in a country as badly affected by HIV as Kenya, MPs would be falling over themselves to join a group that campaigned on it; it must be one of the biggest issues for their constituents. However, I found that HIV was not far up the political agenda—even just before the general election, when I was there.

What I am saying is not a criticism of the Kenyan Government, who have in many ways been at the forefront of the AIDS response, but politicians were not discussing HIV as a major issue for Kenya or talking about the next steps of their response to it as part of the general election campaign. With a few notable and brave exceptions, candidates and politicians told me privately that they did not feel they could speak about HIV. They were worried that the sensitive issues of HIV prevention would put voters off. A couple said that they were worried that voters would think that they were HIV-positive, and that that would damage their chances of being elected.

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

In South Africa, when senior judge Edwin Cameron said he was living with HIV/AIDS, it became possible for a number of people in representative positions to be rather more open. There are also HIV choirs in townships around Cape Town. Those developments show that a way is beginning to be found of getting what everyone knows into the open. If things are brought out from behind the curtain, it is easier for people to take the action that will reduce the spread of HIV/AIDS, and there can be greater acceptance of people with the condition.

[Pamela Nash]

I completely agree. The problem is not unique to Kenya. In fact, I spoke at last year’s international AIDS conference in Washington, where I shared a platform with Ryuhei Kawada, who is a member of the Japanese House of Councillors. I believe that he is the first politician elected while openly being HIV-positive; I know that some have revealed their status later, but he was elected having already revealed his status. At last year’s event, he spoke passionately about his hope that he would be the first of many and that others would follow in his footsteps to try to relieve the stigma around HIV. It is clear that we need more public figures to reveal their status, but it is a big ask.

Let me be clear that the news is not all bad. I did not come here to spread doom and gloom. Truly excellent progress has been made in the global fight against HIV. I do not want to bore or bamboozle Westminster Hall with stats, but four recent figures from UNAIDS highlight the success so far. There has been a 33% decrease in new HIV infections since 2001, a 29% decrease in AIDs-related deaths since 2005, a 52% decrease in new HIV infections among children since 2001 and a fortyfold increase in access to antiretroviral therapy between 2002 and 2012. That last figure, in particular, is astonishing and shows just how far we have come. Such achievements should be applauded.

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

I congratulate the hon. Lady on securing this debate and on all her work. It is so important to keep ensuring that HIV is a priority in the world. Does she agree that, when countries have a high incidence of co-infection, it is important to have joint programmes to control TB and HIV/AIDS?

[Pamela Nash]

I completely agree. I believe that colleagues will touch on that subject today, so I will not go into much depth, but it is something that my all-party group has worked on along with the all-party group on global tuberculosis. I hope that the hon. Lady will join in with such campaigns in future.

We cannot get carried away with progress, however. Many good news stories exist, but we have not yet reached our goal of ending the epidemic, the very nature of which means that we must continually work to eradicate HIV; if we do not, all our efforts will be overturned as it spreads further and further.

I am delighted that the Government have increased funding to the key multilateral organisations that fight AIDS. I congratulate the Minister on her role in achieving that, but I must highlight a few areas where the Government could and should be doing more. Strategies to combat the HIV epidemic are intrinsically linked to each country’s human rights environment.

Young people aged between 15 and 24 account for 45% of all new infections, according to the United Nations Commission on Human Rights. Two recent studies of women in Uganda and South Africa found that those who had experienced intimate partner violence were 50% more likely to have acquired HIV than those who had not experienced such violence. A study conducted in Malawi by the Salamander Trust, which works closely with the all-party group, revealed that women living with HIV were terrified that they would face violence if they told their partner or family about their status. Men who have sex with men are also particularly vulnerable, partly because of punitive laws in many countries.

Likewise, failure to provide access to education and information about HIV and AIDS treatment and care and support services further fuels the epidemic. I know that the Minister agrees that those elements are essential components of an effective response, but what does the Department for International Development plan to do specifically to ensure that human rights are at the heart of the HIV response?

One way is to invest in grass-roots community groups. One organisation that is particularly in my and others’ hearts is Sexual Minorities Uganda—SMUG. Members will remember the tragic murder of its leader, David Kato, in 2011. David Cairns met David Kato during a visit to Uganda, and I remember him being deeply pained at his death.

To honour both the memory of David Cairns and the heroic bravery of David Kato in his fight against prejudice, the David Cairns Foundation donated a staggering £10,000 to SMUG to help to establish Uganda’s first health care clinic specifically for the LGBT community in Kampala. It is projects such as that that will sustain the AIDS response in a country where homosexuality is criminalised. The most vulnerable populations need a place to get tested and treated without fear of imprisonment or death.

I was pleased to see that DFID will be giving £4 million to the Robert Carr Fund for Civil Society Networks, a vital organisation that reaches global and regional civil society networks. Although such funding is, of course, positive and given that civil society activism will be the backbone of the sustainable response to HIV/AIDS, will DFID be doing more for grass-roots organisations?

I am cutting my speech short as I was not expecting such an attendance this morning and a few hon. Members want to speak, but I want briefly to discuss carers. HIV affects the human rights of not only those living with it, but also those who care for the ill and the orphaned. That effect impacts disproportionately on the poorest and most vulnerable in society. In 2005, Nelson Mandela said:

“Women don’t only bear the burden of HIV infection, they also bear the burden of HIV care. Grandmothers are looking after their children. Women are caring for their dying husbands. Children are looking after dying parents and surviving siblings.”

In sub-Saharan Africa, an estimated 90% of care for people living with HIV is done in the home by family or community-based carers. Voluntary Service Overseas highlights that inequality between women and men continues to fuel the pandemic. What is DFID doing to encourage the Governments with whom it works in partnership to adopt policies that recognise the contribution of home-based carers affected by HIV/AIDS?

I want to touch on harm reduction. I do not have the time to go into it in much depth, but I want to mention the upcoming United Nations General Assembly special session on drugs in 2016. Concerns have been raised with me that harm reduction practices for injecting drug users could be affected by the special session. The UK has historically shown great leadership in harm reduction over the years and in reducing the impact of HIV on injecting drug users. Would DFID therefore consider calling for a cross-Whitehall working group in the lead up to the 2016 special session, to ensure that the UK maintains its strong leadership on harm reduction policies across the world and that nothing happens to jeopardise it?

Before I conclude, I want to touch on a future challenge for the global response to HIV—access to medicines. I was pleased that DFID carried out a review of its position paper on HIV and AIDS. The review is more than twice the size of the original paper and is testament to the Minister’s and the Department’s commitment to the issue. I remain concerned, however, that it is missing some key elements.

I am particularly concerned about access to antiretroviral treatment. Those who have been here longer than me will know that that was a focus of the all-party group long before I became an MP, with the group conducting an inquiry in 2009 resulting in a report titled “The Treatment Timebomb”. The report effectively laid out the case that people living with HIV are now living longer—thankfully—but that the cost of treatment will therefore continue to rise to levels unaffordable for many unless something is done to ensure that intellectual property rights and patents do not infringe on a person’s right to health.

I appreciate that that presents a complex challenge to Governments throughout the world. DFID’s review mentions the challenge, but the little attention given does not reflect the magnitude of the issue. Without affordable medicines, the AIDS response could not have existed and most certainly would not be sustainable in future. Will the Minister tell us what steps DFID will be taking to tackle this fundamental human rights issue of access to medicines for HIV patients? Has she had discussions with other Departments that might have influence?

Rhetoric on HIV in recent years has spoken much of the end of AIDS being within our grasp—we have the means to do it. However, although it is true that we can now prevent people from being infected and that we can treat people living with HIV so that in practice they live a full life span, we are a long way off achieving the end of AIDS.

Recently, I spoke at the annual general meeting of Stop AIDS, which is a fantastic organisation working to secure the global response to HIV and AIDS. At the AGM, the non-governmental organisation ONE reported that we are getting close to a tipping point in the epidemic, which it defined as the total number of people newly infected by HIV being equal to, and eventually lower than, the number of HIV-positive people newly put on ARVs. That is truly excellent news, which demonstrates that we are on the right track to end AIDS, although we cannot be complacent.

We are still off track on some key millennium development goals for treatment and prevention. Funding is insufficient to control and ultimately defeat the disease. Much work remains to be done and, as we approach a new global architecture in the post-MDG framework, it is vital that that is recognised by the UK and other countries that lead the way in development.

To conclude, I reiterate that HIV is not only a medical issue, but a social and a human rights one. It is one of our key human rights concerns today. I look forward to hearing the contributions of my colleagues and the Minister’s response.

09:52

[Jeremy Lefroy (Stafford) (Con)]

It is a pleasure to serve under your chairmanship, Mr Dobbin. I congratulate the hon. Member for Airdrie and Shotts (Pamela Nash) on her excellent speech and her leadership in the all-party group on HIV and AIDS. I apologise that I will have to leave before the end of the debate, to attend a Select Committee hearing, but I will follow the Minister’s reply and that of the shadow Minister extremely carefully in Hansard.

I pay tribute to David Cairns, who did a huge amount of work in the House on the subject, and huge tribute to Nelson Mandela for his leadership in this area, as in so many others. It is vital that we continue the battle. I lived in Tanzania for 11 years and remember, as the hon. Lady mentioned, the stigma that attached to the disease in the late 1980s and throughout the ’90s, and the courage shown by many people who came forth and said, “Look, we have to tackle this.” For that reason, a couple of years ago when my hon. Friend the Member for Mid Derbyshire (Pauline Latham) and I visited Nile Breweries, which was conducting a programme of HIV testing and treatment for the employees, she and I decided that we would publicly take an HIV test to encourage the workers at the factory to do the same, because some remained reluctant to do so, given the stigma of even taking the test.

I want to mention four areas in which we need to reinforce what we are doing and perhaps do more. The first is funding. The hon. Member for Airdrie and Shotts has mentioned the important work of the Global Fund to Fight AIDS, Tuberculosis and Malaria, which we cannot stress enough, and I am delighted that the Minister has decided to increase its funding substantially. The hon. Lady quoted the statistics on the 29% fall in AIDS-related deaths since 2005; it is no coincidence that that is roughly the time during which the Global Fund has been operating. We see the same in malaria; I do not know the statistics for TB, but I am sure the same is true. Certainly, the number of deaths from malaria has fallen by a similar percentage during the time when the Global Fund has been operating.

The Global Fund is a hugely important multilateral fund, which has received very good ratings, for example in the multilateral aid review of the UK Government in 2010 and 2011. It is vital that we continue to support it. Certain issues have been brought up in recent weeks, and last year, but the current chief executive, Mark Dybul, is excellent and is tackling them. He is visiting the House next week and I hope to have the honour of entertaining him. I encourage other Members and colleagues to meet him. We must continue with the emphasis on maintaining and increasing funding. The Global Fund has not yet reached its target of $15 billion for replenishment. We need to encourage our colleagues internationally, in particular in Europe—Germany, France and other countries—to step up to the plate and ensure that the UK and the US can fulfil their commitments, because part of our commitment was conditional on others making commitments.

Secondly, we need to concentrate on the strengthening of health systems—the shadow Minister and I have discussed this on a number of occasions. Only through proper health systems in developing countries will we achieve the universal access to diagnosis, treatment and indeed prevention that is so vital. I am delighted that one of DFID’s new priorities is to reduce new infections in women and girls, which is only possible if we have strong health systems throughout the world. I want to hear from the Minister what DFID intends in this particular area—the Select Committee on International Development certainly hopes to launch an inquiry in the coming year.

Thirdly, as the hon. Member for Airdrie and Shotts rightly mentioned, we have to work with local groups. I am proud to say that I am an honorary member of the Kilimanjaro women’s campaign to fight against AIDS, which was launched in the early ’90s and has achieved a huge amount locally in the Kilimanjaro region of northern Tanzania and beyond, often on limited resources. The group is led by women and it works in education in support of families and the education of AIDS orphans. It did work that many other, much more substantially funded organisations were not able to do, because its work was mainly run by very committed volunteers.

DFID has an important role to play in support of such groups, not necessarily with massive amounts of funding, because sometimes the effectiveness of such groups is in inverse proportion to the amount of funding that they get. I remember one particular official group, which was substantially funded, that collapsed six months after the funding stopped, simply because it had become so reliant on it and was not prepared to continue the work once the funding stopped. It is vital that we support those groups, but sensitively, so that they are led perhaps not by expatriates going in, but by local people, supported by DFID.

Finally, there is the link made by the hon. Lady between HIV/AIDS and domestic violence and the broader issue of human rights—such as the fact that homosexuality is criminalised in, I believe, 42 out of 52 Commonwealth countries. We have to tackle such matters. Whatever might be said about us in the UK, we must take a lead. I am glad to see that the Government are doing so.

I will conclude by putting on record how important I believe it is to continue the fight. There is the tendency, as we saw with malaria in the 1950s and ’60s, once a battle seems to be largely won, to stop and relax, but it can come back with a vengeance to bite us, as with malaria in the’70s, ’80s and ’90s. We cannot give up on this. We must maintain our support, and I congratulate the Government and the hon. Member for Airdrie and Shotts on doing so.

09:59

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

It is a pleasure to serve under your chairmanship this morning, Mr Dobbin, and to have the opportunity to speak in this important and timely debate. I congratulate my hon. Friend the Member for Airdrie and Shotts (Pamela Nash) on securing the debate and making an incredibly powerful opening speech. It is a pleasure to follow the hon. Member for Stafford (Jeremy Lefroy), who made an equally knowledgeable and powerful speech.

My hon. Friend the Member for Airdrie and Shotts poignantly—and rightly, at this time—highlighted the work done by Nelson Mandela in his lifetime to improve the situation for people with HIV and AIDS. He made the incredibly powerful statement:

“AIDS is no longer just a disease; it is a human rights issue.”

It is timely to think of that today, as it is international human rights day. It is an honour to mark that day with colleagues who feel equally strongly about these issues.

I want to focus on access to medicine and the human rights injustice that too many people still face in that regard. Hon. Members are already aware of the figures, but they are worth repeating: at the end of 2012, 9.7 million people worldwide had access to antiretroviral therapy in low and middle-income countries, compared with just 300,000 10 years earlier. We should recognise that achievement, but should guard against the complacency that the hon. Member for Stafford identified so poignantly.

Antiretroviral drugs have changed the way that HIV is viewed, from being a death sentence to being an illness. That achievement was propelled by a surge in donor funding and by the drastic reduction in the costs of first-line antiretroviral treatments, from $10,000 per patient 10 years ago to around $100 today. My hon. Friend the Member for Airdrie and Shotts referred to the Government’s recent review of their position paper on HIV and AIDS, “Towards Zero Infections”. I want to bring a few issues that remain of concern to the Minister’s attention.

Although remarkable progress has clearly been made in ensuring access to treatment for many, the World Health Organisation estimates that another 16 million people out of a total of 26 million are eligible for HIV treatment but lack access to it. Added to that is the fact that by 2050 it is estimated that over 50 million people will need HIV treatment. The situation is described powerfully in the excellent report by the all-party group on HIV and AIDS, “The Treatment Timebomb”. Millions of people who will need treatment in future will need more expensive medicines, as they will have become resistant to the basic HIV combination therapy; also—and this is welcome—people with HIV are living longer. Second and third-line treatments currently cost at least seven times more, and when the basic treatment stops working, getting access to them is a matter of life or death. That combination—more people needing more complex treatment—needs to be addressed now to avoid a potential crisis later.

The all-party group’s report gives a cogent argument as to how it is possible to make those medicines more accessible. Ten years ago, the basic HIV treatment cost $10,000 per person per year; today, thanks to generic production, the same medicines are available for $87 per person, enabling 3 million people to access treatment across the world. To avoid a treatment crisis, those kinds of price reductions need to happen again with newer HIV medicines. The report therefore urges pharmaceutical companies to co-operate by allowing generic manufacturers to produce HIV medicines cheaply specifically for developing countries, asking them to put their medicines into a patent pool for that purpose. That would also allow researchers to work on making HIV medicines suited to the developing world. Currently many HIV medicines are designed for a developed country market, and issues such as what happens when a patient needs to take HIV medicines in combination with TB medicines have not been considered—I know hon. Members have looked at that matter closely. There are also not many special HIV drugs for children because, thank goodness, not many children in the developed world have developed HIV.

At the request of the international community, the medicines patent pool was created. It negotiates with the patent holders of priority HIV medicines to sub-license their products to generic manufacturers to manufacture and sell them at a lower cost. Since last year we have seen a more encouraging uptake from pharmaceutical companies, from GlaxoSmithKline to Roche and Gilead Sciences, but there is still clearly a long way to go. Will the Minister outline what steps the Government are taking to ensure a much greater take-up by pharmaceutical companies? In the meantime, what alternative strategies are the Government pursuing to ensure that global access to medicines is being fully considered?

Although that issue was touched on in the Government’s review, it is a major challenge facing us. What steps are the Government taking to ensure that intellectual property rights and patent protections do not, as my hon. Friend the Member for Airdrie and Shotts aptly put it, prevent necessary treatments from being accessed by the millions around the world who are currently without the drugs they need and the millions who will need those drugs in the future?

The final issue I want to highlight concerns middle-income countries. “Towards Zero Infections” outlined plans to focus bilateral HIV funding on a narrower range of countries, in line with the Department for International Development’s 2011 bilateral aid review. It concluded that the UK should end bilateral programmes in 16 countries, many of them middle-income countries. That shift is based on the view that aid should be focused on low-income and fragile countries that are not able to eradicate poverty themselves.

The Government have decided to end their bilateral relationships with South Africa and India. But the fact is that three quarters of the world’s poorest people currently live in middle-income countries, as do 58% of people living with HIV; the projection is that that figure will rise to 70% by 2020. Three of the top five countries with the highest HIV burdens globally are middle-income countries, as are eight of the 10 countries with the highest tuberculosis burdens.

Middle-income countries also have far lower rates of antiretroviral coverage for people living with HIV than low-income countries, and much higher rates of multi-drug resistant tuberculosis. The concern has been expressed that withdrawing funding to middle-income countries too quickly could undermine the gains that have been made through scaling up access to reach key populations, which so far have prevented a global HIV pandemic. Will the Minister comment on the extent to which a more transitional approach has been considered—one that recognises the need to build countries’ capacities for the longer term?

Médecins Sans Frontières has warned of the consequences for middle-income countries of tiered pricing—the practice of selling drugs to different countries at different rates according to their socio-economic status. That is another reason why the middle-income label must be used with caution: it must not hide the fact that the majority of the poor live in those countries. MSF has voiced strong concerns about the potential consequences of those countries being locked into bad deals. I will highlight one example. Although generic competition brought the price of first-line HIV drugs down by close to 99%, from over $10,000 per person per year a decade ago to $120 today, tiered pricing leaves middle-income countries paying as much as $740 per person per year for the second-line drug combination lopinavir/ritonavir. That is over 60% more than what pharmaceutical company Abbott is charging low-income countries. What are the Government doing to address those concerns and ensure that we do not create a ticking time bomb?

To conclude, I thank my hon. Friend the Member for Airdrie and Shotts again for securing this debate and for the work that both she and the all-party group on HIV and AIDS do. Given events today, it is fitting to reflect once more on the words of Nelson Mandela, who we know experienced at first hand the suffering that HIV and AIDS can bring. He famously said:

“Poverty is not an accident. Like slavery and apartheid, it is man-made and can be removed by the actions of human beings.”

That poverty is a barrier to life-saving medicines for millions of our brothers and sisters. That is our call to action today.

10:09

[Jim Shannon (Strangford) (DUP)]

It is a pleasure, Mr Dobbin, to contribute to this debate, which I congratulate the hon. Member for Airdrie and Shotts (Pamela Nash) on bringing to the Chamber. She has been a champion of the issue here and in the House, and it is clear from the questions being asked that there is interest in and compassion for those who most need help.

I thank the hon. Member for Stafford (Jeremy Lefroy) for his contribution. Not many people can say that they belong to the Kilimanjaro club, and I do not believe any other hon. Member can do so. I also thank the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) for her valuable contribution.

It is good to make a contribution on such an important issue because MPs and parliamentarians have a role to play not just here at home, but internationally. The debate is about the international response to HIV and AIDS, and sometimes when looking elsewhere in the world, it is good also to look at home. HIV is prevalent in other parts of the world but, unfortunately, it is also an issue at home: during the past 12 years, there has been a 384% increase in Northern Ireland, which is a large increase. When focusing on the issue internationally, we must always remember what is happening in our own country.

More than 35 million people live with HIV/AIDS, and in the past year 2.3 million were newly infected. That is the magnitude of the issue. Every hour, 262 people die from AIDS. In a debate here last year, I and others asked what can be done to halt the epidemic, and the reason for this debate today is to ask what steps the Government are taking. Are they addressing the issue effectively?

There was an increase in the number of under-15-year-olds diagnosed with the disease last year, and although diagnosis is good because treatment can start, it is not good that more people are being so diagnosed. We must look at that issue. The hon. Member for Airdrie and Shotts referred to a large drop of 50% in HIV infection in sub-Saharan Africa and that is good news, which arises from steps taken by Governments internationally in the global war against AIDS, malaria and other diseases.

When addressing the international response to HIV/AIDS, we must remember groups such as the Elim church mission in Newtownards in my constituency, which works hard on issues such as health, education, house building, business, farming and orphans. It addresses such issues in Zimbabwe, Swaziland and Malawi, three countries where there has, unfortunately, been a large increase in the diagnosis of AIDS. In the last couple of years, I have had the opportunity to meet some young people from Swaziland who have AIDS, or are orphans because their mums and dads died of it. No one could be other than impressed by the smiles of those young people and their zest for life, which was a result the Elim church mission and many other groups and individuals from other churches making financial, physical and practical contributions to help such people and to give them hope and a chance in life. The hon. Member for Airdrie and Shotts talked not just about medical help but about the hope that can be given, and I too will focus on that.

When we saw and heard those young people, I thought that African choirs are some of the most wonderful. Ours are also good, but African choirs have a different flavour, especially those with young people. Their zest for life and interest in others impresses me. Their Christian belief sustains them, and makes one humble.

Just last month, the Global Fund to Fight AIDS, Tuberculosis and Malaria confirmed £12.07 billion to fight those diseases. The bigger countries have pledged to address the epidemic throughout the world, and that sum was an increase on the 2010 figure but falls short of the £15 billion that is estimated to be needed for the next three years. We have made a commitment, but it has not been significant enough to address the total issue, and we must look at that again.

[Nic Dakin (Scunthorpe) (Lab)]

I congratulate my hon. Friend the Member for Airdrie and Shotts (Pamela Nash) on securing this timely and important debate. Given that last year, 320,000 HIV-positive people died from TB, which is the leading cause of death in people with HIV, does the hon. Gentleman agree that it is crucial that TB REACH be properly resourced in future so that innovative solutions are not sacrificed as we try to tackle these dreadful diseases?

[Jim Shannon]

I thank the hon. Gentleman for his intervention. HIV cannot be considered alone; TB and malaria must also be considered because they incapacitate people who are HIV-positive. A joint strategy is required.

It has been disclosed that the Government will add £1 billion to the overseas aid budget in the next year due to an increase in Government spending. Will the Minister confirm that that money will be earmarked specifically for dealing with HIV/AIDS? We cannot ignore the overseas budget, and although some people may have concerns about increasing it, I believe that it is right to do so.

Will the Minister respond to the suggestion that the UK will deliver its contribution dependent on other countries doing their bit, and that if their pledges fall short—I hope they will not—the UK and USA may not deliver their commitment? Will she confirm that the Government’s contribution is ring-fenced and will be delivered, whatever amount other countries may deliver under the global health fund? At meetings and summits such as G8, Governments make commitments to respond to world disasters, but when looking back a year later, I sometimes wonder whether they actually delivered on their commitments. Delivery is important, particularly this year, and the present momentum of reducing HIV/AIDS must be maintained. The disease ravages those in third-world countries, makes children orphans, condemns mothers to sickness and destroys communities.

Previous speakers have referred to technology. Scientific progress has been significant. The hon. Member for Newcastle upon Tyne North referred to drugs and their availability. They can preserve life and communities. We must translate that into making a difference to the world’s population. I believe, as do many Members, that a person is measured by their compassion and interest in others. This great nation of the United Kingdom of Great Britain and Northern Ireland will also be measured by its compassion for others. I know that our Government are delivering physically and practically, and I hope the Minister, whom I have the highest respect for, will outline in detail what the United Kingdom will do in the global war against the HIV/AIDS epidemic.

10:19

[Mark Durkan (Foyle) (SDLP)]

It is a pleasure to serve under your chairmanship this morning, Mr Dobbin. Like others, I want to congratulate the hon. Member for Airdrie and Shotts (Pamela Nash) for leading us in the debate and for the leadership she provides more generally in the House through the all-party group on HIV and AIDS. Like others, I want to pay particular tribute to her predecessor, David Cairns, for the positive and challenging work he undertook in the role.

The debate has thankfully given Members an opportunity to reflect on a number of points on international human rights day and to put AIDS in its important context—not only as a serious disease that confounded everybody when awareness of it emerged in the 1980s, but as an issue that challenges us at so many levels of policy and delivery. It challenges not only politicians, political systems, governmental processes and public services, but the private sector, and not least pharmaceutical companies and others. It is important, as we mark the progress made at a number of levels in understanding and getting to grips with the problem, that we acknowledge that a number of huge challenges are still present. Several Members have pointed out that we cannot let the significant progress that has confounded the worries and expectations of many years ago—there was almost a sense that it was impossible to counter the disease, and futile to try—lead to any sense of complacency. Progress will not move along on the wheels of inevitability. We should not assume that the momentum that is to be celebrated will be sufficient to take all else in its path; nor should we neglect the fact that some of the choices that can be made now and in the coming years could compromise some of that progress.

Rightly, the hon. Members for Stafford (Jeremy Lefroy) and for Airdrie and Shotts celebrated the signal importance of the global health fund. Sustaining that fund is hugely important. Yes, there are issues such as targeting to be ironed out, but the fund has had a signal impact. It has to be sustained, as does the commitment of all countries to it. We need to ensure, however, that the decisions about how it is managed and directed do not create perverse outcomes.

The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) referred to the approach to, and emphasis placed on, the banding of countries by DFID and others. On one level, DFID’s categorisation of middle-income countries can be understood in terms of its rationale for prioritisation; but on another, it can condemn the many poor people in those countries to neglect, to their not getting the support they need. They are left facing higher prices than those faced by their counterparts in low-income countries, which is simply irrational. DFID has justified the rationale of prioritisation on the basis that the review would be all about buying results. We should not be in the business of buying a result that is bad for poor people in middle-income countries in the context of dealing with HIV/AIDS.

Many people have made the point that we should treat AIDS not just as a disease but as a human rights issue. That raises questions about not only health delivery and support, but other policies. The point was made that in many countries where there is a political difficulty in marshalling support for talking about HIV/AIDS, the criminal law on homosexuality is very regressive. As we talk to people in those countries—whether through the Commonwealth Parliamentary Association or the Inter-Parliamentary Union—we need address the AIDS question in the context of that debate, too.

I recall that when I visited Malawi a number of years ago, a politician—the then vice-president—was trying to talk about AIDS. He had broken a taboo, even by using the euphemism “the disease of the mattress”. He had to talk in very coded terms, but even that brought its own serious and adverse reaction. We have to support those who are trying to tackle the problem in those countries. We will not do that by saying, “Right, we have created enough momentum. That will look after itself.”

There has been progress on the patent pool, and I commend the leadership of companies such as Gilead and others. That poses a challenge to policy makers: how we make the most of those opportunities; how we encourage other companies to do more; how we encourage Gilead and others to make sure that more drugs go into the patent pool a lot earlier? As we deal with drugs that are needed for HIV/AIDS and other diseases such as TB and malaria, we also need to recognise that one of the major challenges is not only the supply of drugs but, in many of the developing countries, ensuring proper adherence. Systems are needed for that, but we also need to ensure that, as new and more specialised drugs capable of helping the young and the frail are targeted there, they are priced accordingly, so that there is no excuse for using anything else. However, we have made huge progress on this issue.

In 1985, I was on a staff exchange programme and worked for a number of months in Senator Teddy Kennedy’s office. The previous year, he had introduced and successfully passed in the Senate the first legislation that mentioned HIV/AIDS. However, even that had been a difficult and sensitive issue. It was time-limited legislation that provided research funding for one year. His challenge in 1985 was how to provide a second such piece of legislation. Even that was controversial. I remember sitting in meetings with him and his staff as they discussed how to frame a Bill that could also be subject to Senate hearings. The question was, how could they even conduct Senate hearings, because people did not want to talk about these issues? What would happen if there was discussion about prevention and condoms, for example? It was a highly sensitive issue. We have come a long way since that time.

Back then, Norman Fowler—now Lord Fowler—provided great leadership at Government level, and I was very pleased to see him presiding at events last week on world AIDS day, as he does so often. It is right that we recognise the quality of leadership that was shown here back then, but no less a quality of leadership is needed now as we face big issues and challenges. We need to address the questions that arise concerning the UN Special Assembly in 2016. There is the danger of complacency, and that mistakes might be made that will set back some of the work and progress that has been achieved. On world AIDS day, the Terrence Higgins Trust said that it is now providing advice and support to pensioners who are living with HIV/AIDS—something it never thought it would have to do. That is a mark of the progress that has been made. We need to celebrate that, but we also need to commit to ensuring that there will be no dropping back.

10:30

[Alison McGovern (Wirral South) (Lab)]

It is a great pleasure to serve under your chairmanship again, Mr Dobbin. I join other hon. Members in paying tribute to my hon. Friend the Member for Airdrie and Shotts (Pamela Nash)—not just for securing this debate, but for the excellent work that she has done as chair of the all-party HIV and AIDS group, one of the most active and effective groups in this place. She should be proud of that work, and her constituents should be proud of her.

I also pay tribute to all the other hon. Members who have spoken for their balanced and careful reflections. I know that the hon. Member for Stafford (Jeremy Lefroy) has had to head off to the International Development Committee, where he will no doubt do his good work in the effective way that I have witnessed at first hand. I will just note that he mentioned health systems, quite rightly. Those are a very important issue and I caveat whatever I say with my hope that the Minister will listen to her hon. Friend in that regard.

My hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) and the hon. Members for Strangford (Jim Shannon) and for Foyle (Mark Durkan) also raised serious and important points. Each of them reflected on different aspects of the issue, whether it was the shift in focus from both low and middle-income countries or the range of drugs available now and the importance of taking the widest possible look at that. They all reflected a sense of progress, but also the driving sense that there is still much more to do. I am sure the Minister would agree.

Given the scale of the global crisis that HIV/AIDS represents, it is vital that we continually examine the effectiveness of the action being taken, at home and abroad, both to ensure that there is treatment for those who need it and to slow and halt the spread of the disease. However, as other hon. Members have mentioned, today’s debate feels especially timely, for two reasons. First, and I suspect that my hon. Friend the Member for Airdrie and Shotts had this in mind when she applied for the debate, last week we marked world AIDS day, when we remember the 35 million people who have died from HIV/AIDS since the start of the epidemic; when we stand with those who live with the disease; and when we re-pledge our determination to end this scourge.

Secondly, today is the day when the world is coming together to remember the life of Nelson Mandela, so this debate seems particularly appropriate. Nelson Mandela had a particularly interesting interpretation of the word “retirement”. During his retirement, he campaigned tirelessly to stem the tide of HIV/AIDS, which he saw destroying lives and communities in his own country. On world AIDS day in 2000, he described it in this way:

“Our country is facing a disaster of immeasurable proportions from HIV/AIDS. We are facing a silent and invisible enemy that is threatening the very fabric of our society.”

Mandela fought against the prevailing attitudes and the stigma attached to HIV/AIDS, which resisted calls to fund antiretroviral drugs or to educate people on the need for safer sexual practices. He saw that HIV/AIDS was not only shortening lives and destroying families; the economic impact was also consigning many more people to poverty than would otherwise have been the case. The hollowing out of a generation placed a brake on economic development that could have reached across the country in the post-apartheid years.

South Africa continues to be haunted by AIDS, but thanks to Mandela and others who fought alongside him, things are slowly—albeit too slowly—starting to get better. Strikingly, earlier this year, Dr Olive Shisana, head of the South African Human Sciences Research Council, said that for the first time

“the glass is half full”.

There has been a dramatic increase in the numbers of people in South Africa receiving antiretroviral treatment, up to 2 million in 2012, and for the first time there has been a decline in the prevalence of HIV among 15 to 24-year-olds. That story—that there is progress, but still a long way to go—is also the story of HIV/AIDS across the world. Bill Clinton adopted the Churchillian phrase

“we are at the end of the beginning”

to describe the current situation.

There is good news. In most regions, the number of people newly infected with HIV is falling. Globally, it was down 33% in the period from 2001 to 2012. The millennium development goal of halting and reversing the growth of HIV has been achieved and in just one year, between 2011 and 2012, the numbers accessing treatment grew by 1.6 million, as has been mentioned. It is right to pay tribute to the communities, NGOs and politicians who have fought so hard to achieve that historic turnaround.

However, those glimmers of hope must not blind us to the continued severity of the situation and the requirement to do far more. Every year, 2.3 million people are newly infected with HIV, and of those, more than 1.6 million are in sub-Saharan Africa. Seven million people still lack access to antiretroviral therapy for HIV. Marginalised groups continue to be particularly prone to infection and to have lower levels of access to treatment. That includes women and girls. The reversal of the growth in new infections could be fragile. In particular, many nations in south-east and south Asia are seeing increases in the numbers of new infections.

Britain has a strong history of leading the fight against HIV/AIDS. Under the last Labour Government, we became the second largest bilateral donor in the fight against the disease and introduced long-term funding to strengthen health systems and services. I am pleased that, broadly, that legacy has been continued under the current Government and I welcome the additional £5 million of funding each year for UNAIDS—the joint UN programme on HIV/AIDS—that the Minister announced in the run-up to world AIDS day. However, I would like to conclude by asking the hon. Lady a few questions that I hope she can address in her winding-up speech.

Millennium development goal 6 has been an important spur in pushing for progress on HIV/AIDS and in that respect has been perhaps one of the more successful goals. What replaces the MDGs post-2015 could be vital in solidifying progress. Will the Minister update us on the Government’s view as to what form the next goal on HIV/AIDS should take?

The countries in which progress towards reducing HIV infections is weakest, or in which there is a deterioration, include nations for which DFID decided in its bilateral aid review to end programmes. They include India, Cambodia, Vietnam and Russia. Without reopening those questions or getting into the rights and wrongs of those decisions, will the Minister set out what work is ongoing to help middle-income countries and others in which the bilateral programme is ending to tackle HIV/AIDS, such as expert support from Britain?

Importantly, we know that one of the most effective safeguards against all forms of disease, in terms of both prevention and cure, is universal healthcare, free at the point of use. That is particularly true in the case of HIV/AIDS: community health advice and support can be an excellent means of preventing new infections. Will the Minister set out for the record DFID’s position on providing bilateral support for health care systems in which user charges are levied and what specific work is being done to ensure that HIV treatments are available free of charge in the nations with which DFID has a bilateral relationship?

As a number of hon. Members have noted, the Government’s review of their position paper on HIV/AIDS is limited, missing a number of key issues, including access to medicines. Can the Minister assure us that such issues will be dealt with as part of the review and, given that the consultation on the review ended nearly five months ago, tell us when she expects the outcome of the consultation to be published?

On global health fund replenishment, the UK pledged £1 billion, but in fact replenishment required $15 billion and it reached only $12 billion in the talks last week. What discussions are DFID Ministers having with other Governments to ensure that the global health fund reaches its $15 billion target?

Having set out those questions for the Minister, I will conclude by thanking most sincerely all hon. Members who have taken part in this important debate, which has shown once again, if it were in any doubt, this House’s commitment to ending the scourge of HIV/AIDS.

10:39

[The Parliamentary Under-Secretary of State for International Development (Lynne Featherstone)]

It is a pleasure to serve under your chairmanship, Mr Dobbin. I congratulate the hon. Member for Airdrie and Shotts (Pamela Nash) on securing this important debate so soon after world AIDS day and just after the Global Fund to Fight AIDS, Tuberculosis and Malaria replenishment last week. I congratulate her on the important work that she does as chair of the all-party parliamentary group on HIV and AIDS, and on her powerful contribution to today’s debate, which was truly excellent. All who have contributed are part of the cohort who go out and fight the fight against HIV/AIDS because, as hon. Members have emphasised, it is such an important and ongoing cause.

When I came into post, I made HIV/AIDS one of my top priorities. When I was shadow International Development Minister—the post now occupied by the hon. Member for Wirral South (Alison McGovern)—I went to South Africa with Business Action for Africa, along with a Labour and a Conservative Member of Parliament, to look at AIDS projects. During that visit, we went into the townships around Johannesburg and saw the conditions there. The trip had a profound effect on me. Many hon. Members have raised the phenomenal work done by Nelson Mandela. I was in South Africa at a time when the treatment for HIV/AIDS recommended by the country’s leadership was to take a shower. We can see the effect of Nelson Mandela’s work from the way in which things have changed and the amount of Government-funded work that now takes place.

When I visited South Africa, only the big corporations such as SABMiller and Anglo American provided facilities for their own employees, and they did so to stop them dying, not from pure altruism. Many hon. Members have spoken of the stigma associated with HIV/AIDS. I went into a hospital built by Anglo American where people came forward and declared their HIV-positive status in front of other members of staff. That gave those members of staff, who were afraid of the associated stigma, the courage to declare themselves and ask for testing. That was one of the most moving experiences of my life. I say to all who take MPs on trips to enlarge, inform and develop them that that trip, eight years ago, may have been a reason why I made HIV/AIDS one of my priorities when I came into office. In addition, I grew up in an era when HIV/AIDS first became an issue. Being terrified by the AIDS prevention adverts and having many friends who died of HIV/AIDS long before there was any treatment for it, left its mark on me.

I will address the points that have been raised as I go along, after which I will try to address any that are not in my speech. There is much to celebrate. The latest UNAIDS figures show an unprecedented pace of progress in the global AIDS response. There are 1 million fewer new HIV infections each year across the world than there were a decade ago, especially among newborn children. We do a lot of work on preventing mother-to-child transmission, which is an obvious stop point, and that work is delivering results. Nearly 10 million people now have access to treatment. Although international assistance remained flat, low and middle-income countries increased funding for HIV, accounting for 53% of all HIV-related spending in 2012. That shows that we are moving towards a lasting response.

That is all excellent news, but, as we debated in Washington last week, we need to put renewed efforts into going the extra mile and achieving an AIDS-free generation. We cannot take our foot off the pedal. Risks remain that might seriously jeopardise the incredible progress we have made. Too many people are still getting infected; 2.3 million were infected last year. As many hon. Members have said, girls and women remain disproportionately affected by the virus. Infection rates in young women are twice as high as in young men. Although tremendous progress has been made on treatment scale-up with the change in the World Health Organisation treatment guidelines in 2013, at least 16 million people who are in need of treatment are not currently receiving it. Stigma and discrimination continue to drive key affected populations underground, which inhibits prevention efforts and increases the vulnerability of those populations to HIV. In 60% of countries there are laws, regulations or policies that block effective HIV services for key populations and vulnerable groups. I will return to that point.

The UK Government were delighted and proud to pledge £1 billion of UK funds at the fourth Global Fund to Fight AIDS, Tuberculosis and Malaria replenishment in Washington last week. The UK pledge alone will save a life every three minutes for the next three years, and it will deliver life-saving antiretroviral therapy for 750,000 people living with HIV. The hon. Member for Strangford (Jim Shannon), who is not in his place and has sent his apologies for having to leave, raised the issue of leverage. The UK contribution helped to leverage, and contributed towards, an unprecedented $12 billion replenishment total. That is 30% more than was pledged at the equivalent event in 2010, and 50% of those funds will go towards dealing with HIV and AIDS.

The UK now calls on all outstanding donors to step up to the plate over the period from 2014 to 2016 to ensure that the target figure of $15 billion is reached and there is maximum impact in terms of lives saved. The Secretary of State and I are telephoning other countries to lobby them. The contribution from one country—I believe it was Switzerland, but I will correct the record if I am wrong—tripled after my telephone call. That is the point of the lobbying effort across the world, which will not end with the pledging in Washington. We must continue that effort to ensure that we reach our targets. We are also working with recipient countries to help them realise increased domestic contributions in the fight against the three diseases. We were delighted by the political commitment of recipient countries at Washington and by the financial commitment of Nigeria, which pledged $1 billion to the national fight against the three diseases. The fight is becoming truly global, with equal partnership and purpose.

This year, we conducted an internal review of our 2011 HIV position paper, which we published last month. I thank STOPAIDS for its help; I see Ben Simms wherever I go in the world. Two years on, DFID is making good progress against its expected results. Treatment-related commitments have already been achieved, and the remaining targets set out in the HIV position paper are on track to be met by 2015.

Several hon. Members mentioned the shift in funding from bilateral to multilateral. Over the past two years, we have been sharpening our focus and working more to our comparative advantage in our bilateral programmes. As the 2011 position paper predicted, the balance between multilateral and bilateral funding has shifted and our bilateral efforts are focused on fewer countries where the need is greatest. The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) asked what we were doing in the programmes where we are shifting the balance of our funding. We now have some exciting new programmes in southern Africa, which is the region hardest hit by the epidemic. Given the urgent need to reduce new infections, we have prioritised critical prevention gaps and we are moving towards complementary work to deal with those gaps. As hon. Members have said, civil society has been, and remains, an essential partner for DFID in addressing those gaps. We are proud to support other multilateral organisations, such as UNAIDS, to ramp up their efforts in the global HIV response. That will reach many more countries, at a much greater scale, than the UK alone could help.

As I have announced, we will increase our annual core contribution to UNAIDS by 50% to £15 million in 2013-14 and 2014-15. That will give the organisation an extra £5 million a year to support its critical role in co-ordinating the world response to HIV and AIDS. In total, our combined bilateral and multilateral contributions secure the UK’s place as a leader in the global HIV response and demonstrate our commitment, in providing a considerable share of total global resources, to universal access to HIV prevention, treatment care and support.

The review paper highlighted three areas of particular focus for the UK: being a voice for key affected populations; renewing efforts on reaching women and girls affected by HIV; and integrating the HIV response with wider health system strengthening, which hon. Members raised, and other development priorities. That includes tackling the structural issues driving the epidemic.

I shall refer to human rights, which many hon. Members raised. In countries with generalised epidemics, HIV prevalence is consistently higher among key affected populations: men who have sex with men; sex workers; transgender people; prisoners; and people who inject drugs. Over the years, DFID has spearheaded support to HIV programmes for key populations. They have been and they will remain a key policy priority for us. We will use DFID’s influence with multilaterals to be a voice for key populations and to push for leadership and investment. We will focus on evidence-based combination prevention services, such as condoms, HIV testing and counselling, and comprehensive harm reduction programmes.

Of particular importance are the programmes and initiatives we are supporting to reduce stigma and discrimination. Our ultimate vision for key populations is for their human rights and health to be recognised, respected and responded to by their Governments. The UK is proud to be a founding supporter of the Robert Carr civil society Networks Fund, through which we support those particularly vulnerable groups. Valuable lessons have been learnt from the fund’s first year and this world AIDS day, the fund announced a second round of grants.

[Pamela Nash]

Before the Minister moves on from the Robert Carr fund and key populations, will she clarify whether any DFID money will go to grass-roots organisations? As I said earlier, the Robert Carr fund operates regionally and I know that a lot of money goes through multilaterals. It would be good to have some clarification on how we are getting money through to smaller groups.

[Lynne Featherstone]

I will come back to that issue shortly.

Human rights was one of the key issues raised by hon. Members. The UK Government are at the forefront of work to promote human rights around the world. We regularly criticise Governments who violate those rights, including those that discriminate against individuals on the basis of sexuality. I have personally raised those issues with Ministers, Prime Ministers and Presidents in Africa. We take some of our lead in DFID bilateral countries from activist groups in the LGBT community, so that may take place behind closed doors due to the difficult, sensitive and dangerous nature of some of the work they do in countries where the law is such that they may face prosecution and for which they could face a backlash. I am committed to raising such issues with Governments across the world, as is the Foreign Secretary and many others across Government. Human rights is at the forefront of our work.

Women and girls are at the centre of our HIV response. Globally, the rate of new HIV infections among women and girls has declined, but the pace of decline is not as rapid as we would like and it is a critical area for renewed UK and global efforts. Gender equality and women and girls’ empowerment lies at the heart of DFID’s development agenda. Since 2011, each of our bilateral programmes has seen a greater focus on HIV prevention addressing the needs of women and girls. We are supporting research to improve outcomes for women and girls, including the development of female-initiated HIV-prevention technologies, and we are looking into how gender inequality drives epidemics, with a particular focus on improving what works for adolescent girls in southern Africa.

We know that in a crisis, girls and women are more vulnerable to rape and transactional sex. The highest maternal mortality and worst reproductive health is in countries experiencing crisis. Contraception, prevention and treatment of HIV and other sexually transmitted infections, and safe abortion are life-saving services, yet they are often ignored in humanitarian responses. That is why DFID is currently developing a new programme on sexual and reproductive health in emergency response and recovery, including services to reduce the transmission of HIV. We welcome the fact that the global health fund will also prioritise women and girls more in 2014 and we look forward to working closely with it on that.

In terms of integration with the wider health system, we know that for a response to be lasting, we must integrate HIV within other sectors and find concrete solutions to sustainable financing. We recognise that a strong health system is an important way to improve the reach, efficiency and resilience of services. The co-infection connection and the integration of HIV services with TB services, sexual and reproductive health services and the wider health system were raised. People living with and affected by HIV, including children and people with disabilities, need to be treated holistically and not just as a series of health problems.

We are also working with countries to ensure that they are in the lead role and increasingly financing their own national responses. In the end, that is the only way to sustainability. We are also working with the global health fund and others to look at market shaping. The hon. Member for Newcastle upon Tyne North mentioned tiered pricing—we term it market shaping—as a way of further reducing commodity prices not only for low-income countries, but for middle-income countries graduating from donor support, which many hon. Members mentioned.

I have tried to cover most of the points raised, but I have left a few things out. Integrated responses to tackling TB-HIV co-infection were highlighted in the HIV position paper review as a key area of current and ongoing effort. It will contribute to the global results to help halve TB-related deaths among people living with HIV by 2015. A cross-Whitehall group on harm reduction was called for. The UK Government remain committed to supporting harm reduction efforts to ensure that that goal gets back on track. DFID is currently liaising with other Whitehall Departments on the drafting of the Commission on Narcotic Drugs ministerial statement, and will remain engaged on that crucial issue in the lead-up to the UN special session on drug control in 2016.

Hon. Members mentioned access to medicines, which is vital. The access to medicines index, last published in November 2012 and supported by DFID, shows that companies have their own strategies for managing their intellectual property and supporting access to medicines. The medicines patent pool currently has agreements with the US National Institutes of Health, Gilead Sciences, ViiV Healthcare and Roche. The UK will continue to support actively that collaborative initiative to enhance access to more affordable treatment and to promote the development of appropriate treatment for children. The UK strongly encourages other companies that have patents for the new first-line treatment for HIV to consider beginning formal negotiations to enter the pool. The medicines patent pool idea was endorsed by the G8 and the UN General Assembly session on HIV and AIDS, to support the availability and development of new first-line treatments for HIV and AIDS.

In addition to funding for antiretroviral drugs through the global health fund, UNITAID and other agencies, DFID also works to make markets for antiretrovirals work better to reduce prices, increase the number of quality suppliers and enhance access. Our partnership with the Clinton Health Access Initiative has already contributed to secure price reductions of almost 50% on both first and second-line therapies for HIV, saving African Governments more than £500 million. That is sufficient to put an extra 500,000 people on AIDS treatment for three years. As has been said, that fall in price from $100,000 per treatment to $100 is the most incredible result. We need to keep pushing down those prices for as long as we can. In terms of civil society, we continue to provide funding for work at the grass roots through our civil society programme partnership arrangements and other DFID civil society grant awarding schemes.

I have only one minute, so I will reply to hon. Members by letter if I have missed any points. The UK and others made huge contributions last week in Washington. There is a great sense of excitement and common purpose in the world, leading towards the vision we all hope for—an AIDS-free generation—an historic moment. A sad truth of the HIV epidemic is that it is often women and girls who are most at risk of human rights abuses in developing countries and least able to get access to the services they need. Addressing gender inequality, stigma, discrimination and legal barriers remains our priority.

Road Safety

Tuesday 10th December 2013 Westminster Hall

11:00

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

It is a pleasure to serve under your chairmanship, Mr Dobbin, and a privilege and pleasure to see in his place the Minister, my hon. Friend the Member for Scarborough and Whitby (Mr Goodwill), for whom I have great admiration and respect. I am delighted to have secured this debate on road safety, an issue affecting every one of us in society; all of us use the roads at some point. The issue has been raised with me by many of my constituents, by charities campaigning for safer roads and by many other organisations.

It is fair that I should declare my interest at the beginning. I was once named by Brake as a champion of road safety for my campaigning on drink-driving. It is only right that I should put that on the record. I understand that the issue of road safety is covered by two Departments: the Department for Transport and, in relation to sentencing on matters such as drink-driving, the Ministry of Justice. There is greater collaboration on that matter.

Every death on our roads is an avoidable tragedy and every injury a preventable suffering. Our roads have become safer and are among the safest in the world, but last year more than 195,000 casualties were still reported to the police. We should not lose sight of the achievements made in improving road safety. Last year, there were fewer fatalities in the UK than in most other countries in Europe and the rest of the world, and in 2012, one third as many people were killed on our roads as 20 years ago, but more can and should be done to reduce harm to road users. In November is road safety week, which since 1997 has been organised by Brake and involves schools, organisations and community groups taking action to improve road safety. It is a reminder that we can make our roads even safer and reduce tragedy if we all work together.

This is only a short debate, so I will focus on some key factors contributing to road casualties. The first are drink-driving, driving while disqualified and driver distractions. Colleagues may have other road safety issues to put to the Minister, and they should do so.

We all know the dangers posed by those who choose to drink and drive. Department for Transport figures show that the number of deaths from drinking and driving has increased by 17%, accounting for 16% of all road deaths in the UK. The latest review of drink-driving laws in 2010 by Sir Peter North noted that a minority of drivers persist in drink-driving and that many of those caught are well above the legal limit. A staggering 40% are 2.5 times over the limit. Many go on to reoffend; more than 12,000 people a year convicted of drink-driving offences have previously been convicted for such an offence.

This year, I proposed a ten-minute rule Bill to raise the maximum prison sentence for repeat drink-drivers from six months to two years, to give the courts the additional powers that they need to tackle persistent offenders.

[Gareth Johnson (Dartford) (Con)]

I congratulate my hon. Friend on securing this debate on an issue that I know he feels strongly about. Does he agree that part of the problem with the law at the moment is that magistrates are required to give a discount for a guilty plea from defendants convicted of multiple drink-driving offences while disqualified, even if the reading is high? Their powers of punishment are insufficient, which they find frustrating when they are trying to mete out justice.

[Rehman Chishti]

My hon. Friend is absolutely right. I know that he saw that for himself when he was a solicitor and dealt with such cases. When I was a barrister, I saw that the police and all the other agencies found it frustrating that an offender could be brought to court yet given a limited—even minimal—sentence for serious offences, even taking into consideration the danger that they posed to wider society.

My hon. Friend is absolutely right about the combination of offences. Normally, somebody who has been drink-driving has probably also been done for driving while disqualified. I will refer in due course to driving while disqualified, but his point is valid. I thank him for supporting my ten-minute rule Bill on drink-driving and repeat offending and my private Member’s Bill on driving while disqualified.

My Bill has the support of Brake, the Royal Automobile Club and the Royal Society for the Prevention of Accidents. In today’s edition of The Times, there is an article by Julie Townsend, the deputy chief executive of Brake, saying that even one drink is now too many for most drivers, urging the Government to consider reviewing what is happening in other parts of Europe and asking that the legal alcohol limit be reduced. Undoubtedly, the Minister will comment on that in due course.

My first question to the Minister is this. What are the Government doing to address persistent drink-drivers? Secondly, will the Government support my Bill to raise the maximum sentence to two years for repeat offenders? Thirdly, will they also consider reviewing the sentencing guidelines for drink-drivers?

Those who repeatedly drive while disqualified are linked to repeat drink-driving offences, as my hon. Friend the Member for Dartford (Gareth Johnson) pointed out. According to a reply to my recent parliamentary questions, Government figures show that in 2012, 42% of offenders sentenced for driving while disqualified had received a conviction for the same offence within the previous 10 years, and 72% of offenders who received a custodial sentence had been convicted for the same offence within the past decade. As with drink-driving, the maximum sentence for driving while disqualified is six months’ imprisonment or a level 5 fine. The Magistrates’ Association has raised the issue with me, saying that its members are concerned by the many instances of the offence, sometimes repeated many times, and are frustrated that their powers of imprisonment are insufficient.

Last week, I introduced two Bills to strengthen the law on driving while disqualified. The first would increase the maximum sentence that a driver can receive for causing death while disqualified from the current two years’ imprisonment to 14 years, in line with the current penalty for causing death by dangerous driving. The second would increase the maximum jail sentence to two years for repeat offenders who continue to drive even after having been banned.

My fourth question to the Minister is: will the Government consider increasing the maximum sentence for disqualified drivers and support my Bills? Fifthly, will they consider reverting driving while disqualified to an either-way offence, as it was prior to 1988? I understand that such issues are dealt with predominantly by the Ministry of Justice, but their implications for road safety are immense.

On alcolocks, existing measures’ contribution to reducing drink-driving seems to have decreased due to a hard core of heavy drinkers who are not susceptible to them. We therefore need to consider new ways to reduce drinking and driving. Several EU countries, including Sweden, France and Holland, have introduced alcohol ignition interlocks, commonly referred to as alcolocks, which are alcohol testers connected to the car’s start-up mechanism. They have been found to help reduce repeat offending, especially when used as part of a rehabilitation programme. Various international studies have shown that alcolock users had 65% to 95% fewer repeat offences than drivers whose driving licence was suspended or revoked. The previous Government conducted a trial programme in 2005, but there was never any follow-up.

The North report in 2010 discussed the use of alcolocks and said that trials had shown that there are merits in such initiatives, because when alcolocks are in use they prevent people from drink-driving. There are also existing powers in place, although not in force, under the Road Safety Act 2006, for offenders to be referred to an alcohol ignition programme.

Recently the European Commission has been working on developing a common road safety enforcement strategy, which could include making use of alcolocks in certain cases. So, my sixth question to the Minister is this: what recent assessment have the Government made of the effectiveness of introducing alcolocks in the UK? Seventhly, will the Minister consider the evidence from other European countries on the potential benefits of introducing alcolocks? Eighthly, what discussions have been taking place to introduce alcolocks across the European Union?

I move on to the next category that I wish to discuss. This year, the Government made a welcome move to tighten up the rules for high-risk offenders—those offenders who have been caught more than two-and-a-half times over the legal limit, who have two or more convictions for drink-driving within two years or who refuse to provide a sample. The rule changes mean that high-risk offenders must pass a medical examination to prove that they are fit to drive before they can do so.

Although the scheme has been shown to help reduce reoffending, there are concerns that a fifth of high-risk offenders have been on the register before. Evidence shows that a driver at two times the legal limit is at least 50 times more likely to be involved in a fatal accident. So my ninth question to the Minister is this: what consideration has been given to lowering the level for high-risk offenders to two times the alcohol limit? Tenthly, how effective has the scheme been in ensuring that those people who should not be driving are not on the road?

I move on to my final category, which is distractions. The theme for this year’s road safety week was, “Tune in”, asking people to “tune in” to road safety and give it their full attention. Driver distraction is a major cause of deaths and serious injuries on our roads. Research shows that although it is now illegal to use mobile phones at the wheel, around a third of drivers continue to flout the law.

Other distractions can include eating and smoking at the wheel, which have been shown to increase the risk of a crash. Furthermore, evidence suggests that talking on a phone while driving can be worse than drinking alcohol, with reaction times 30% slower for people using a hands-free phone than for those driving with a blood alcohol level of 80 mg per 100 ml of blood. So, my final question to the Minister is this: will he review the evidence on the dangers of hands-free mobile phone use when driving?

In conclusion, further measures are needed if we are to remain a world leader on road safety, and we must consider ways to reduce deaths and injuries on our roads. I look forward to hearing the Minister respond to the questions that I have put to him.

[Jim Dobbin (in the Chair)]

Before I call the hon. Member for Worthing West (Sir Peter Bottomley) to speak, I want to inquire whether he has permission to do so from the Member who secured the debate.

[Rehman Chishti]

He has indeed.

[Jim Dobbin (in the Chair)]

Thank you.

11:12

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

I am grateful to the Minister and to my hon. Friend the Member for Gillingham and Rainham (Rehman Chishti). I congratulate my hon. Friend on introducing this debate as part of his battery of attention.

I wish to add a few words that go beyond the law and away from enforcement. I had responsibility for road casualty reduction from 1986 to 1989. We set out a plan to reduce the fatalities and serious injuries by mistake and slight injuries by a third by the year 2000. Since then, successive generations—both of Ministers and of road users—have reduced the deaths from about 5,600 a year to about 1,750 a year. The numbers will fluctuate: the year before last, there was a slight increase, then last year there was a significant reduction. Part of that fluctuation is due to chance; part of it is due to factors beyond what we actually do.

What is clear is that it is what road users themselves do that makes the biggest difference. Safer roads, yes; safer vehicles, yes; better medicine, yes. However, the biggest change, as my hon. Friend has mentioned, has been in the consequences of over-the-limit drink-driving. Deaths in that category have come down from 1,200 a year to about 200 a year; there has been a reduction of more than four-fifths in the number of deaths caused by people driving after drinking the equivalent of a bottle of wine or more.

That reduction was not achieved by enforcement—there has been no change of law, no change of sentencing and no change of penalties. It has come about because more hosts have provided alcohol-free drinks and expected people to take them; because more passengers have picked alcohol-free drivers; and because more people, like me, decide in advance, “Is it going to be drinking tonight or is it going to be driving?”

I would argue that learning those lessons would probably do as much good, if not more, as some of the proposals that have been put forward by some groups. More than 20 years ago, I received constant demands for a lower alcohol limit—automatic conviction for people with lower limits of alcohol in their bodies. However, those are not the prime people we are discussing today; as my hon. Friend the Member for Gillingham and Rainham rightly said, it is the people who are at twice the legal limit or above. I support his suggestion that bringing down the measurement for being excessively over-the-limit from two-and-a-half times the limit to two times the limit would work.

We also ought to consider introducing sureties, so that people who have been convicted for being well above the legal limit should have to pay money into a fund during the months when they are disqualified from driving, which they will get back if they are not caught reoffending by drink-driving during, say, the next five years. Instead of suddenly trying to impose a fine on them at the end of a period, there would be money in the bank that they would get back if they showed that their alcoholism, or other behaviour, could be controlled.

I will end my brief contribution by saying to the Minister that I intend today to put down some written questions on one part of the road environment that I know he is familiar with. I do not ask him to answer these questions now, but I shall be asking about the contrast between pelican and puffin crossings, and particularly whether it is right to allow any local highway authority to maintain and keep any pelican crossing with multi-lane approaches.

We have only to look at some of the pelican crossings around Westminster to see the dangers of such crossings. I will ask the Minister whether any highway authority is installing pelican crossings now and, if they are, whether they should be required to obtain his permission to put in a pelican crossing rather than a puffin crossing.

We all know that most of us are doing the things that we learned 10, 20 or 30 years ago. Well, 10, 20 or 30 years ago, we were not aware of the dangers of pelican crossings compared with puffin crossings. The Safer Roads Foundation, with Michael Woodford, which has the support of the Parliamentary Advisory Council for Transport Safety, has raised this issue. It has used research from the Transport Research Laboratory, and I think that it is time that we in Parliament put pressure on local highway authorities, through the Minister, and say to them, “No more pelican crossings, and those that do exist should not be renewed as pelican crossings. And if you intend to put in a pelican crossing, explain why you think that it is going to be safer than putting in a puffin crossing.” It is time that we took this automatic way of reducing risks and reducing the casualties associated with those risks.

11:17

[The Parliamentary Under-Secretary of State for Transport (Mr Robert Goodwill)]

Thank you very much for calling me to speak, Mr Dobbin. You seem to have drawn the short straw again in having me in one of these debates.

I congratulate my hon. Friend the Member for Gillingham and Rainham (Rehman Chishti) on securing this debate. Road safety is an issue that has long been close to my heart. The UK is a world leader in road safety. Our statistics show fewer road deaths per million population than in almost any other EU country. Road deaths in the UK are lower by almost a factor of four than in the United States, and they are also lower than in Germany or France. From 2011 to 2012, the number of people killed in road accidents reported to the police decreased by 7.7% to 1,754, which is the lowest figure on record. The number of casualties also fell by 4%, including a reduction in the number of people seriously injured on our roads. However, there is no room for complacency. Every death and serious injury is a tragedy, and it remains vital to reduce the number of people who are killed or seriously injured on the UK’s roads. Even one death on our roads is too many.

Many of the issues that my hon. Friend raised about sentencing and penalties are matters for the Ministry of Justice; it would probably expect me not to encroach too far on to its territory, but I hope that there can be an engagement between the Ministry of Justice, the Department for Transport and my hon. Friend, to consider how we can review some of these sentences and penalties. I am assured that all penalties are constantly under review in the light of experience.

I turn now to drink-driving and repeat offenders. I share my hon. Friend’s concerns about the impact of drink-driving. My hon. Friend the Member for Worthing West (Sir Peter Bottomley) outlined his own involvement in dealing with this issue. I must admit that I have not thought about it for very long, but his idea of a surety that could be built up before being returned to a driver if they are successful in not drinking and in meeting the medical requirements imposed on them seems—at the outset—to be a sensible idea. I also note the points that he made about puffin crossings. I have had a meeting with him and with those who have produced a very useful video that shows some of the dangers faced by people using the old pelican crossings with multi-lane approaches.

We have a proven strategy for tackling drink-driving and repeat offenders, which combines legislation, enforcement, engineering and communications. We work closely with the police and other organisations on education, and on communicating drink-drive messages in a consistent way. As a result, there has been a step change in public attitudes to drink-driving. Indeed, the current generation of young people regard drinking and driving as a complete no-no.

Since 1979, drink-driving casualties, deaths and serious injuries have fallen dramatically. There has been an almost sixfold reduction in the number of people killed in drink-drive related accidents and a similar drop in seriously injured casualties. In 2011, we saw the lowest level of drink-driving fatalities since detailed reporting began. Provisional figures suggest that the number of people killed in drink-drive accidents in 2012 increased by 17% on the previous year, from 240 to 280. However, that estimate is provisional; it is based on a limited sample of data and will be finalised next year when a more complete sample is available. The provisional sample is based on a large degree of uncertainty and there have been significant revisions in previous years.

[Sir Peter Bottomley]

This extra, helpful suggestion is probably more for the Department of Justice than the courts. When there is an inquest into or a prosecution resulting from a death through over-the-limit drink-driving, might I suggest that inquiries should be made and presented to the court about where the person was drinking, who knew they were drinking, who knew they were driving and whether those people did anything to dissuade the person from driving after heavy drinking?

[Mr Goodwill]

I am sure that those listening to this debate in the Justice Department will have taken heed of my hon. Friend’s point. That is part of our campaign over Christmas. One police force has been encouraging people to shop their mates who insist on drinking and driving. Often, people try to remove keys from the driver but they still insist on driving.

My hon. Friend the Member for Gillingham and Rainham mentioned the drink-drive limit. My current view is that we should not reduce the drink-drive limit; we have a gold standard limit and a gold standard penalty. Although other countries in the European Union have a lower limit, they also have lower penalties. I would not want to demote the offence of drink-driving and for it to be in a similar bracket with speeding or other motoring offences. It is right to stick with the decision made in a review some years ago about our drink-drive limit and to stick with disqualification, which is the penalty that really makes people sit up and take notice.

On campaigns and communication, just last week I launched the Think! drink-drive campaign, highlighting the snowball effect that a drink-driving conviction can have on one’s future job prospects. Up to 1 million people work in jobs that they could lose as a result of a drink-drive conviction, and almost a third of people would have to give up their job as a result of such a conviction because they rely on a car to get to work. Additionally, it could affect a person’s chance of getting another job, because any employer can ask to see unspent criminal convictions. Drink-driving is a criminal offence. A drink-driving conviction can have a devastating impact on people’s personal life, leading to a driving ban, criminal record, job loss and even imprisonment. That is the message we are giving this Christmas. The Think! drink-drive campaign has been running for more than three decades and last week it was awarded a Prince Michael international road safety award for the part it has played in helping to reduce drink-drive casualties.

Last week, the sixth annual Coca-Cola designated driver campaign was launched, in partnership with Think! This allows drivers to benefit from a “Buy one, get one free” offer on Coca-Cola products over the festive season. I must point out that other carbonated beverages are also available.

What new measures are being introduced? We are also introducing new legislation, through the Deregulation Bill, to close the loopholes on drink-drive enforcement. One of these loopholes is the so-called statutory option. If the lower of the driver’s breath readings is below 50 micrograms per 100 ml of breath, they are entitled to have their breath sample replaced by a specimen of blood or urine. This measure has been in place since 1981 and was included due to concerns about the reliability of evidential breath-testing devices at the time. But the process can lead to delays in obtaining the specimen where there is not a resident health care professional at the police station, which can result in a negative blood or urine test. Roadside breath-testing machines have been developed extensively and there are no longer concerns about reliability. More than 30 years on, it is time that the statutory option is removed.

We are improving devices further. Roadside evidential breath-testing devices are currently being type-approved by the Home Office. Once that process is complete, police officers will be able to collect evidential specimens at the time the offence is committed. We are supporting that by removing the requirement for a preliminary breath test where a roadside evidential breath test is performed. This means that in difficult operational scenarios, police officers will only need to take two breath specimens instead of three. Another measure is to allow registered health care professionals to take blood specimens in hospitals. This makes blood collection consistent with that in police stations, streamlining the process.

Drink-drivers pose a grave risk to other road users. Repeat offenders are a particular cause for concern, because previous contact with the criminal justice system has evidently done little to change their behaviour. I appreciate why my hon. Friend is keen to ensure that appropriate maximum penalties are available to the courts when dealing with these cases. The Ministry of Justice is looking at this issue. I do not wish to pre-empt the outcome of that work, but I assure the House that the Government agree that these are important issues and we are considering them carefully. In the meantime, we will continue to work to improve preventive and enforcement measures, to deter drink-drivers and communicate the implications of drink-driving convictions.

On drug-driving—

[Rehman Chishti]

Recently, I was made aware of a campaign in some parts of the country where people are given £1,000 to shop an individual they think is susceptible to drinking and driving. Does the Minister agree that it is completely unacceptable to use taxpayers’ money for that purpose? We should be doing the good thing regardless, because it is right to make the authorities aware when somebody is about to commit a crime, rather than having incentives for reporting a susceptibility to crime.

[Mr Goodwill]

I wondered when I saw that campaign by Derbyshire police—I think—whether it was more about getting headlines than getting people to shop their mates, so to speak, but I am interested in its effects. It has certainly publicised this issue and, hopefully, will deter even more people from drink-driving.

Alcohol interlocks, or alcolocks, are a relatively recent development in drink-driving, which prevent operation of the vehicle engine if the driver provides a breath sample that is above a specified alcohol limit. The provision for introducing them was included in the Road Safety Act 2006. These devices are used in some countries to manage some people with drink-driving convictions. Experience suggests that they are effective while in use, but that drivers revert to offending once the interlock is removed. Better results have been experienced where a programme is closely supervised and supplemented by education and counselling. However, the driver can get around the alcolock in other ways—for example, by changing the car they drive.

The Department undertook research in 2009 into the practicalities of a judicial programme. That concluded that the costs of implementing and enforcing a scheme are likely to be disproportionate. A scheme might also give those who could afford to take part the benefit of a discounted disqualification, without evidence that this achieves a long-term change in a drink-driver’s behaviour. Therefore, there are no plans to implement the use of alcohol interlock devices. However, I understand that some bus and lorry fleet operators use these devices.

My hon. Friend asked what discussions are going on in the European Union. There have been some informal official-level discussions on the pros and cons of the use of alcohol interlocks in EU member states. The European Commission consultation on the issue closed on 15 August. We have not yet received notification of the outcome. However, no formal proposals have been received from the EC in this regard.

As with repeat drink-drivers, drivers who flout driving bans are a significant risk to road users and repeat offenders are obviously a concern. In tragic cases where a driver causes a death, not only has a life been cut short, but it can also have a devastating effect on the victim’s family.

High-risk offenders are drink-driving offenders disqualified from driving for a number of reasons. A person is a high-risk offender if they are more than two and a half times over the legal limit for alcohol in breath, blood or urine. I am not aware of any plans to change that, but I hear my hon. Friend’s representations. People also fall into that category if they fail to provide a specimen for testing or if they refuse consent for a sample taken when they were incapacitated to be analysed. Repeat offenders are also high-risk offenders. If someone has been disqualified twice or more within 10 years for being over the legal limit or unfit to drive, they are a high-risk offender. We are considering the parameters in that regard. If correspondence from frustrated drivers who find it increasingly difficult to get their licence back is anything to go by, the system is working.

I am grateful to my hon. Friend for his hard work raising awareness and promoting the aims of road safety, and for this opportunity to speak on the subject. I hope that I have demonstrated our degree of commitment to road safety issues. The UK has one of the best road safety records in the world and we are working to ensure continued reductions in the numbers of people killed and seriously injured.

11:29

Sitting suspended.

Engineering Skills (Perkins Review)

Tuesday 10th December 2013 Westminster Hall

[Mr Dai Havard in the Chair]

14:32

[Peter Luff (Mid Worcestershire) (Con)]

Professor John Perkins’s review of engineering skills was published on 4 November to rightly favourable reviews, and I am delighted to secure this debate because it gives us an opportunity to do four things. It enables us, first, to demonstrate parliamentary support for the review’s important message; secondly, to explore some of the review’s central recommendations; thirdly, to give the Government an opportunity to demonstrate their commitment to the message of the review and to the specific recommendations addressed to the Government; and fourthly, to emphasise that the challenges engineering faces in recruitment and the need to inspire a new generation of young people to enter science, technology, engineering and maths careers are not engineering challenges but marketing ones.

This is not a criticism, but so far the Government’s response to the Perkins review has been limited to an unscripted speech by the Secretary of State for Business, Innovation and Skills on the morning of the review’s publication, a press release containing some welcome announcements on aspects of the review and a brief parliamentary answer. I hope the Minister welcomes this opportunity to say a little more, because the issue is urgent.

When the review was published, Stephen Tetlow, chief executive of the Institution of Mechanical Engineers, said:

“If we do not meet the shortfall in skills we won’t just slip down the scale of world competitiveness, we will fall off the cliff… In a time of high unemployment, especially in the 18-25 age group, it is simply wrong to rely solely on importing the necessary talent or, more seriously, to allow industry to relocate overseas.”

I hope the Minister welcomes this opportunity to make clear the Government’s strong support for the review’s conclusions and to send a powerful message to the wider engineering community that it has a crucial role to play in making Professor Perkins’s recommendations work. Indeed, of the review’s 22 recommendations, only four are directed exclusively at the Government—the other 18 either require the Government to act in partnership with others or are directed entirely at other organisations. In total, 14 of Professor Perkins’s recommendations require Government action, but seven require employers to act, six are directed at the engineering institutions, three are directed at the broadly defined engineering community and nine are directed at various others, ranging from the Daphne Jackson Trust to the Tomorrow’s Engineers programme.

Before I go any further, I refer hon. Members to my entry in the Register of Members’ Financial Interests, which shows that I am a non-executive director of two small high-tech firms and that I have received hospitality from a major technology organisation, QinetiQ. That does not explain why I am here today, however.

As I told the House when introducing a ten-minute rule Bill on STEM careers in February, one of my two heroes is that most brilliant of engineers, Isambard Kingdom Brunel. As someone who now wishes he had been an engineer, recent experience has convinced me that the shortage of engineering and technological skills is one of the greatest avoidable threats to our nation’s prosperity and security.

As Engineering UK said in its most recent assessment of the situation,

“the UK will need approximately 87,000 people per year over the next ten years to meet demand—and these people will need at least level 4 skills… Although supply has grown over the past year, we still have only 51,000 engineers coming on stream per year. In fact, the number of level 3 engineering-related apprenticeships has actually dropped from 27,000 to 23,500—falling well short of an annual demand of approximately 69,000.”

I detect a bit of a sea change. Suddenly, engineering and manufacturing are being discussed much more generally and much more positively. The skills shortage facing employers is becoming more generally understood, and the particular scandal of low participation of women in engineering is much more widely acknowledged, as the Perkins review shows.

[Meg Munn (Sheffield, Heeley) (Lab/Co-op)]

Perhaps one of the hon. Gentleman’s engineering heroines ought to be Isambard Kingdom Brunel’s sister, whose engineering prowess is by no means as well known.

[Peter Luff]

Or the daughter of Lord Byron, Ada Lovelace, who has a day named after her, and rightly so. I entirely agree that we need more heroes and heroines to inspire the younger generation.

The challenge is urgent. Engineering UK’s recent assessment also states:

“It is concerning that these challenges seem most intense in sectors that should be key drivers of the economic recovery… Responses from firms in the engineering, high-tech/IT and science areas show the highest proportion of both current and future problems in recruiting STEM-skilled employees, with more than one in four reporting current challenges in recruiting technicians (29%) and STEM graduates (26%).”

But still, engineering faces a crisis of misunderstanding. The excitement and challenge of modern engineering is still not properly understood outside engineering. The word “engineering” itself is a problem—“applied science” might be a better description of what engineering means—but we are stuck with the word and we must make it work. Engineering needs to be as highly regarded in this country as it is in countries as diverse as Germany, Jordan and India.

[Andrew Miller (Ellesmere Port and Neston) (Lab)]

It is not the word but the interpretation of the word that is the problem. A doctor of engineering is an honourable profession in Germany. We must get away from the class-based assumption that engineers have dirty fingernails. Engineering is a high-skilled profession, and we must reflect that in this debate.

[Peter Luff]

The hon. Gentleman explains the purpose of my remark better than I did, and I am grateful for his intervention.

Engineers cannot tell us what they do, at least not consistently. Ask an engineer what engineering is, and they will often give compelling answers that are brilliantly insightful, but engineers are all different. I think it was the Prime Minister who recently described engineers as

“the poets of the practical world.”

He is right, and it is that sense of wonder at what engineering can achieve that will help us to achieve our objective of getting more young people into engineering.

I like the description on the bottom of a Women’s Engineering Society poster:

“Engineering is all around us. It’s in the phone in your hand and the shoes on you feet. It’s in sub-sea pipelines and supersonic planes, towering skyscrapers and nanotechnologies. It’s even in the perfectly-baked cupcake (ovens don’t heat themselves). And it’s engineers who make all this possible—just try imagining a world without them.”

We must make engineering more diverse, not for the sake of political correctness but because members of ethnic minorities and women who are not engineers but could be are missing out on one of life’s great opportunities. Engineering skills shortages would be considerably less acute if we could make engineering more diverse.

I am grateful to the Women’s Engineering Society for drawing my attention to an article in this month’s Top Gear magazine containing 40 images of a Formula 1 team. All the people are white men except the press officer and the six hospitality staff, who are in short skirts, of course. Intriguingly, the head of electronics looks rather like Doc Brown from “Back to the Future.” Perhaps Top Gear wants to take us back to the future of a world in which engineering is dominated entirely by men. Even Jeremy Clarkson might be a little embarrassed by the stereotypes portrayed in the article. The girls at Silverstone university technical college, whom the article purports to be about, are very cross that they are being so badly misrepresented by the magazine. I think Top Gear will be correcting the record, but the article is an example of the kind of problems we face.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

I thank the hon. Gentleman for giving way. I apologise for being late and because I cannot stay for this important debate due to other engagements. I congratulate him on bringing forward this critical debate. Does he agree that that Top Gear illustration shows not only how engineering is often portrayed in the media, but also the challenge for young girls seeking to go into engineering—as I did, as a chartered engineer? It is a negative portrayal of what can actually be a most inspiring, engaging and fulfilling career.

[Peter Luff]

I absolutely agree. Having come from an engineering background, the hon. Lady says that with much more effect than I can—politics’ gain is engineering’s loss. I am most grateful for her helpful and entirely correct remarks.

In a ten-minute rule Bill in February, I tried to be simple and focused. I wanted to increase demand from young people and to make them more enthusiastic about pursuing STEM subjects—science, technology, engineering and maths—and careers, whether as apprentices or graduates; to inspire them about the possibilities in engineering, science and technology; to show them by practical example and experience while at school that engineering and technology are exciting and important careers; and then to sustain that interest throughout their time at school.

Some things have changed for the better since February. A new design and technology curriculum provides the opportunity for schools to work with businesses to deepen understanding of the realities of engineering, which was my first objective. I want to pay real tribute to my hon. Friend the Member for South West Norfolk (Elizabeth Truss), the Minister with responsibility for schools, for working with all groups involved to transform the Government’s original proposals. Sadly, I see fewer signs than I would like that the Department for Education really understands its role in helping young people to prepare for the world of work. Employers still sense reluctance at the Department for Education to regard schools, in the memorable phrase of my hon. Friend the Member for Gosport (Caroline Dinenage), who hoped to be here but is sadly indisposed, as part of the supply chain for industry.

I suspended my campaign on the policy suggestions in my Bill and said that I would wait for the Perkins review. It was due in July and sadly delayed to November, but it proved well worth waiting for. As I waited, I concentrated on two issues. The first was the need to do much, much more to inspire young people about the opportunities in engineering, and second was the need to counter the appalling gender stereotyping already discussed. I was therefore delighted to see those two issues considered so thoughtfully in John Perkins’s review, but the response of the engineering community now needs to be clear and convincing and needs above all to take on the challenge of marketing engineering to young people, starting at primary school age.

I should step back a moment and offer categorical congratulations to Professor Perkins. Indeed, the Royal Academy of Engineering has encouraged me to offer a bouquet to Professor Perkins and the wider Department for Business, Innovation and Skills team

“for conducting an exemplification of open policy making. John actively sought out the views of the engineering profession and created the conditions where institutions large and small could get their voices heard. It was brilliant work.”

It also offers a bouquet to the Department for Education, by the way, which, despite my earlier reservations, I do endorse,

“for their reforms to Computing, D&T and vocational education and their willingness to take detailed advice from the engineering profession. The engagement on both sides has been excellent.”

Steve Holliday, chief executive officer of National Grid described the Perkins review to me as

“one of the best reports I have seen in quite some time”.

I agree with all that, but I want to examine one or two details with a critical eye. The royal academy offers the correct cautionary note:

“None of this is easy—particularly the things around diversity—and so on-going collaboration between Government and the engineering profession is key. We’ve had that during the periods of review and reform [good] and now the challenge is to find a mechanism to keep that going in the long term steady-state.”

We need an implementation plan from the Government and from the engineering community.

Against that background, I offer eight observations on areas of the report. The first is a particular bête noire of mine: the lack of attention to defence. The report is strangely silent on the wider security and national resilience issues caused by a shortage of British engineering talent. Defence and security face the greatest threats, as they often cannot use non-British labour on national security grounds. It is true that the bigger companies, such as BAE Systems and Rolls-Royce, have no problem recruiting as they are so well-known. They are now over-recruiting to their apprenticeship programmes to feed apprentices into their supply chains, which is welcome and good of them. Smaller companies, however, face huge challenges in finding the right skills. Organisations such as GCHQ are also challenged and need all the home-grown cyber-expertise they can find. I am delighted to be a member of the skills group of the defence growth partnership, and I hope to be able to play my part and to address some of the issues.

My second concern, at which I have already hinted, is that the age group recommended by Perkins is too old. We need to go younger. The National Foundation for Educational Research looked at features of the activities and interventions in schools that were most successful at improving young people’s engagement in STEM. It found that of the five most beneficial activities they identified, the first was to engage pupils at an early age and at key transition points. Indeed, the Perkins review actually says:

“If we are going to secure the flow of talent into engineering, we need to start at the very beginning…Starting to inspire people at 16 years old is too late; choices are made, and options are closed off well before then. So we need purposeful and effective early intervention to enthuse tomorrow’s engineers.”

It is no accident that the “inspiring women” campaign, organised by Inspiring the Future and recently launched by Miriam Gonzalez, aims to start talking to girls at the age of 8, not 11 as Perkins recommends. A recent report from King’s College London on young people’s science and career aspirations said:

“Efforts to broaden students’ aspirations, particularly in relation to STEM, need to begin at primary school. The current focus of most activities and interventions—at secondary school—is likely to be too little too late.”

Steve Holliday told me of his company:

“National Grid’s current strategy is to ‘get in early’ by presenting engineering as a vibrant and viable career choice to a mixed culture and cross gender audience from the age of 8 years upwards.”

If hon. Members want to see a good video for encouraging people to get into STEM careers, I recommend the film produced by Nigel Whitehead of BAE Systems. I have the YouTube address here, but if hon. Members google “engineering careers and BAE Systems”, they will find it. I will happily share the link with anyone afterwards. Perkins’s fifth recommendation to reach out

“particularly to girls aged 11 to 14”

should be rethought. Eight is a much better age to begin.

My third concern is about female participation; the report contains insufficient detail on what we can do to address that problem.The Women’s Business Council’s report, “Maximising Women’s Contribution to Future Economic Growth”, makes the point that while women need work, work also needs women. Ford of Britain said to me:

“Above all there is a need for stronger and more systematic collaboration between educators, industry, BIS and the Department for Education to improve both the reputation and the uptake of STEM subjects and engineering amongst girls.”

I agree with that and worry that, despite the damning evidence produced by Perkins, his recommendations fall well short of a credible path to do something about it. I am working with Science Grrl, a creative group of young professional women working in STEM, to produce specific recommendations to address the issue. We aim to produce a report in March. The Select Committee on Science and Technology, which is chaired by the hon. Member for Ellesmere Port and Neston (Andrew Miller), is holding its own inquiry and will hopefully produce its report in the not-to-distant future. The Women’s Engineering Society has some pretty clear and compelling advice to employers and schools, which I commend. We certainly need a clearer plan of action than that offered in Perkins.

The report fails to address the failure to engage local enterprise partnerships, whose potential contribution could and should have been addressed. As the Minister of State at BIS said in a recent written answer:

“At local level, Local Enterprise Partnerships (LEPs) have the lead role in setting strategies for skills within their overall Strategic Economic Plans”—[Official Report, 8 October 2013; Vol. 568, c. 268W.]

[Mr Robin Walker (Worcester) (Con)]

I congratulate my hon. Friend on the excellent points he is making, and on the enormous impact he has already had on turning round the design and technology curriculum. Does he welcome the work going on in the Worcestershire local enterprise partnership to get local business, such as Worcester Bosch and Mazak, working with local schools to promote engineering at both primary and secondary level?

[Peter Luff]

I welcome the intervention from my hon. Friend, who is my own Member of Parliament. He is absolutely right that the Worcester LEP is doing all the right things, but I doubt whether that is necessarily the case in every LEP area. The Government need to do more to ensure that best practice is shared, even if they do not go down my preferred route of LEPs having a statutory responsibility to share it.

There is also the question of careers advice. Engineering fits into a bigger picture of careers advice in schools. Some interesting research from the Education and Employers Taskforce on NEETs—those not in education, employment or training—was recently drawn to my attention. It is actually two years old, but I only found out about it last week. It was published in February 2012 and asked young adults aged 19 to 24 about their current employment status, and to reflect on their experiences of the world of work while they were at school. The findings were striking. Of the young people who could recall no contact with employers while at school, 26.1% went on to become NEETs. That reduced significantly to 4.3% for those who had taken part in four or more activities involving employers such as career insights, mentoring, work tasters, work experience and so on. As Steve Holliday of National Grid puts it:

“Beyond the Perkins report, the final point I would make is that for the engineering sector to land its messages well, there needs to be a solid foundation of general careers advice/awareness in schools…This will require a joined up strategy between DfE and BIS, with schools and business then having their part to play in making this a reality. I fear that without it, interventions will be too fragmented to make a real impact.”

That would be very serious.

On a slightly more positive note, the report’s recommendations 12 and 13 on vocational education are valuable. The Royal Academy of Engineering offers this perspective:

“In all of John’s work, probably the bit with the greatest potential for long term impact relates to apprenticeships. All critiques of ‘modern apprenticeships’”—

those under this Government and the previous one—

“show that not all have matched the generally accepted benchmark of the advanced engineering apprenticeship. And government’s response to the Richards’ review promises to make even the engineering apprenticeship better. But the potential significance of those reforms is not obvious to most readers of the Perkins review. With cross-party consensus on apprenticeship, this is the time for a drive to quality outcomes and not just growth in apprenticeship starts”—

as welcome as those are.

“Britain could close the gap on the German dual system if she put her mind to it”.

That is an important point for the Minister. I know he is working hard for this and I congratulate him on and thank him for all his work, but it is encouraging to see the Perkins review so welcomed by the engineering community in that respect. I would labour the point, but I want to make progress and leave time for others to speak.

Moving on to my final two related points, for something to happen, someone has to own the issue, and what is needed is a proper marketing campaign devised by experts, not the engineering of ever more elegant solutions by engineers. I am afraid that the Perkins team clearly did not speak to any marketing experts as they prepared their report. The recommendations under the heading “Inspiration” are helpful but, to be blunt, inadequate. Recommendations 3, 4 and 5 are well intentioned, but not informed by proper understanding of communications. They are recommendations by engineers to engineers. Recommendation 3, on core messages, is okay, and the fourth one, on support for the Tomorrow’s Engineers programme, is correct but limited. Recommendation 5, however, desperately needs to be strengthened.

Rightly directed at the Government and the engineering community, recommendation 5 is for a:

“High profile campaign reaching out to young people, particularly girls aged 11-14 years, with inspirational messages about engineering and diverse role models, to inspire them to become ‘Tomorrow’s Engineers’. The engineering community should take this forward as an annual event.”

For me, this recommendation is groping towards a definition of the central task, but it does not address the right age group and is too limited in its understanding of what is involved. Furthermore, remember that reference to an “annual event”. I repeat my profound concern that starting at 11 is simply too old. Girls in particular are being told at primary school that they do not do science, engineering and technology. We must address that problem. Rightly, the report states that

“we need purposeful and effective early intervention to enthuse tomorrow’s engineers”,

and that there are

“widespread misconceptions and lack of visibility that deter young people”.

The logic of those compelling points, however, has been pursued rigorously. A full, year-round marketing campaign is needed to address not only young people—primarily eight to 14-year-olds—but their parents and teachers; all the other valuable initiatives can sit under that campaign, from which they will all benefit. There are literally thousands of such initiatives. The better known include Big Bang, Tomorrow’s Engineers, STEMNET, Primary Engineer, the 5% Club and Bloodhound SSC, as well as the programmes of individual companies, voluntary bodies, public sector organisations, trade associations and professional institutions. Much work has been done by Engineering UK to bring all those initiatives together under the Tomorrow’s Engineers banner, but we need to do much more to explain the overall message of engineering.

I am indebted to George Edwards—he is sitting not a million miles away from us in the Public Gallery—an 18-year-old A-level engineering student from Kent who told me just how bad things are. He had some suggestions to make:

“As a student who has been on the receiving end of almost all of the engineering propaganda aimed at schools, 1 genuinely couldn’t describe what I am supposed to think about a career in engineering. Other than the need for more engineers, there are no clear or pragmatic messages being put across and as the problem becomes of a higher agenda for the media, the response is just to shout louder about the need for engineers.

Outreach must have substance and peer-led inspirational marketing, targeted at appropriate age groups”.

He is absolutely right.

Professor Perkins correctly speaks of the need to inspire, which requires not engineering skills but marketing and communications professionalism. He says in his report’s introduction that he has

“spoken to…industrialists, professional bodies, and educators.”

Although he rightly concludes that inspiration is essential, he appears not to have spoken to people with the appropriate marketing skills to inspire eight to 14-year-olds. This leads him to a limited understanding of what is needed to address the problems he identifies.

The UK marketing sector, similar to engineering, is world class and noted as such by many leading global brands. It is time for engineers to stop engineering solutions to the skills issue and to turn to professional marketing, just as any other organisation, product or brand would. Perkins rightly says:

“We should ensure that…messages are carefully crafted, based on the best available evidence about how to influence and communicate effectively with young people.”

I underline the point that this means working with marketing experts with proven expertise and success, not engineers. What engineers think is important might have no resonance at all with their audience.

The Government and the engineering community are both good at patting themselves on the back for all that they are doing. For example—I tread on dangerous ground here—Professor Perkins praises the Royal Academy of Engineering’s STEPS at Work initiative because it reaches 1,300 teachers and enables them to spend a day with a local engineering employer. I bow to none in my admiration for the royal academy and the outstanding work of Matthew Harrison on such issues, but with respect to them and to Professor Perkins, that scheme is a well-intentioned failure, not a success. There are more than 400,000 teachers in the state sector alone—can engineering really boast that only a little more than 1,000 of them have been persuaded to spend just one day finding out more about local jobs for their students?

The report tells us that the majority of boys and girls have had no encouragement from anyone at all—parents, teachers or friends—even to consider engineering as a career.

[Andrew Miller]

The hon. Gentleman is making a powerful point. Does he agree with me and my Committee that part of the problem is the failure of the Department for Education to provide the space for continual professional development among our teachers?

[Peter Luff]

I agree that CPD is clearly an important component of what is needed to achieve the sea change, but it is not the sole answer. There is no one silver bullet; what is needed is a coherent, organised communication and marketing campaign encouraging teachers, parents and the young people they inspire to do the right thing. I agree with the hon. Gentleman, but that is only part of the solution. The exciting and stimulating story of UK engineering needs to be told to the wider public, and it simply is not being told. This is a massive marketing failure, and not an easy one for engineers to resolve. Indeed, it will not be easy even for marketing professionals, but at least they are used to dealing with hard-to-sell products.

As the report underlines, the action taken by engineers to remedy that market failure has been to create “a wealth of initiatives” and therefore a “complex” and “confusing landscape”. The engineering community’s lack of engagement with marketing professionals to develop a targeted marketing programme has inevitably led to this ineffective but well-intentioned, if costly, muddle. In the report, we read that we need a “high profile media campaign”. Intriguingly, the word “media” is dropped in the summary of recommendations, and rightly so. What is needed is not a media campaign but a well-considered marketing programme, which will include as only one part of it an engagement with all types of media that reach eight to 14-year-olds, speaking to them in their language and not the language of engineers. Such a programme must emphatically not rely on only one “annual event”. Many events can be part of such a campaign, including Tomorrow’s Engineers week and the excellent Big Bang fair. A campaign is not an event or even a collection of events; it is a disciplined programme of communications activity that goes on all year.

A recent report drawing on discussions at a meeting jointly hosted by the Institution of Mechanical Engineers and the Institution of Engineering and Technology in February, with key players from some 30 organisations representing industry, academia, sector skills councils and Government, concluded:

“It is therefore crucial that all the sector skills councils, trade associations, third-sector enhancement and enrichment organisations as well as existing engineering professionals, work in unison rather than isolation. Passionate urging and fragmented campaigning at best confuse prospective interest and at worst turn it away. It is only through a co-ordinated system and consistent messaging from all involved that growth through a rebalanced economy can occur.”

I agree with those wise words from the engineering community.

The Royal Academy of Engineering, working with Engineering UK, is well placed to achieve that. I hope they will rise to the opportunity—with, of course, the active encouragement of the Government.

[Andrew Miller]

rose—

[Meg Munn]

rose—

[Mr Dai Havard (in the Chair)]

I will take you in alphabetical order. I call Mr Miller.

14:49

[Andrew Miller (Ellesmere Port and Neston) (Lab)]

The hon. Member for Mid Worcestershire (Peter Luff) and I go back a long way. We sailed under Sir George Zambellas, now the First Sea Lord, on HMS Argyle many years ago—

[Peter Luff]

In 1996.

[Andrew Miller]

In 1996 or thereabouts. The hon. Gentleman has gone a long way since then. He and I remain humble Back Benchers in this debate, but we both have a passionate interest in the subject.

The hon. Gentleman made observations about how UK engineering is presented. I was infuriated by the failure of the “Top Gear” programme, when it held that fantastic event in the Mall, to present Vauxhall Motors as one of the great British engineering success stories. The griffin motor corporation started just down the road over in Vauxhall, but is now making cars in my constituency and vans in Luton. According to Jeremy Clarkson, however, Vauxhall Motors was not good enough to be exposed to the British media. People creating such a bias is part of the problem.

I make my second point to both the Front-Bench spokesmen: this is not about the party political game, but about the future of a critical part of British infrastructure. We could all talk about a number of good news stories, but we must be mature and also reflect on some of the problems that we are facing.

The hon. Member for Mid Worcestershire reflected on the work of LEPs. We could have a long ideological debate on LEPs versus regional development agencies, but that would not be constructive. Some LEPs are starting to move positively in the right direction, including my own one in Cheshire, which is chaired by Christine Gaskell from Bentley. More importantly, a number of the major companies in the broader north-west are starting to pull together a solid science and engineering policy for the region, reflecting the collaboration by LEPs across boundaries. Some might say that that is reinventing the RDA, but I do not want to go down that track today. Those companies are presenting a coherent, joined-up policy in the way that we need.

Following on the heels of my Select Committee’s report on engineering skills, the Perkins review came to a similar set of conclusions. On continuing professional development—the issue on which I intervened on the hon. Member for Mid Worcestershire—we recommended that engagement with industry be a core requirement of teachers’ continuing professional development. The Perkins report says:

“The engineering community should provide continuing professional development for teachers, giving them experience of working in industry”.

Here is a message that can be sent out from both Front Benches to industry: facilitate that. Coming from both Front Benches, that message would be hugely powerful.

Both reports agreed that the vocational training route into engineering was under-appreciated. The Committee was critical of Government changes to the engineering diploma following the Wolf review. The Perkins review did not comment on the reasons for the changes, but stated that

“the Royal Academy of Engineering has already led work to develop a suite of successors to the Level 1 and 2 Diploma Principal Learning qualifications in engineering.”

The review went on to say that those have been

“accredited by Ofqual and submitted for approval for the 2016 Key Stage 4 performance tables.”

Those are important steps.

The Minister has been working closely with his colleague the Under-Secretary of State for Education, the hon. Member for South West Norfolk (Elizabeth Truss), on some important matters that will help this process, but I have to say this bluntly: it is vital that we break down the ridiculous barrier that still exists in the minds of the many people who think there is a brick wall between skills that are traditionally called vocational and skills that are traditionally called academic. Personally, I do not like the word “vocational”—it seems reflective of training to be a priest or the like. Nor do I like using the word “practical” for such skills, because chartered engineers such as my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah), who has just left the Chamber, need to learn how to use the tools of the trade.

There needs to be a continuum across engineering, so that people who join the profession, perhaps as technician apprentices, have the opportunity to move forward through higher level apprenticeships to develop to their maximum potential. We need to open that door. The failure at the moment is that we have a structure that does not allow that flexibility and is too segmented, based as it is on the roles of the sector skills councils, the further education colleges and the universities as three separate groups of organisations instead of as a continuum providing for the needs of each trainee.

[Peter Luff]

I agree with the hon. Gentleman, but I am sure he would wish to remind hon. Members that in companies such as BAE Systems and Rolls-Royce apprentices flow through to very senior management levels—in fact, it is extraordinary how successful engineering apprentices are in those big organisations.

[Andrew Miller]

I absolutely agree. My point is that that happens despite the system. Companies recognise that apprenticeships are the way to develop the skills that they need.

That point leads me neatly to my third observation about the comparison between my Select Committee’s report and the Perkins review. We talked about the university technical colleges. The Committee welcomed UTCs, although it cautioned that

“the network of UTCs will not provide nationwide coverage and the Government must also focus on good engineering education in schools and colleges.”

Perkins says:

“Government should build on the UTC experience and seek to develop elite vocational provision for adults”.

All that is enormously important. As part of our inquiry, one of my senior advisers, Xameerah Malik, and I went to see the JCB academy. I recommend the visit to everyone in this room: it is an exemplar of what can happen if the mix is right. I left there saying to Xameerah, “I want to go back to school.” It really is an exciting place to learn. Very cleverly, the academy has created an environment where people get inside problems—address technical education as well as other more academic and broader subjects by getting inside them, in a way that neither traditional secondary schools nor traditional grammar schools ever did. It is an exciting place to visit and I commend it to everyone.

How we develop in this sector requires a different approach. In my own area, we are starting to put together a proposition, which I hope will go before the Minister in the not too distant future, on creating such a vehicle inside the community which provides the skills necessary for the automotive, aerospace and chemical sectors in my constituency. It is hugely important to try to make that happen.

The difference between us is not in the content of my Select Committee’s report—my staff, Xameerah Malik and Myfanwy Borland, have done a fabulous job in pulling together some comparisons between the Perkins review and that report. We need to try to move to action on behalf of the Government—with, I hope, the support of my hon. Friend the Member for Hartlepool (Mr Wright), who speaks for the Opposition, as I would like to see a genuinely joined-up approach.

My plea is that, rather than trying to identify where minor differences might exist between the political parties, Members on both Front Benches get together to create a long-term solution to take us through a generation. This issue cannot be solved within one Parliament; it needs to be addressed in the long term, so it is vital that we get that joined-up response. It is also vital that we hear from the Minister that the Government will approach this issue in a collegiate manner and provide a solution that helps us to solve the problems that the hon. Gentleman cogently set out.

I call on Members in all parts of the House to find a way forward to address the proposals that John Perkins has cleverly put together and to ensure that our engineers, like German engineers, as I mentioned in an intervention, are referred to as doctors of engineering and held in high esteem. They should be, given that they make an enormously valuable contribution to the society in which we live.

15:18

[David Mowat (Warrington South) (Con)]

I congratulate my hon. Friend the Member for Mid Worcestershire (Peter Luff) on securing the debate. I want to make two or three quick points.

I stand before Members as a lapsed engineer. Thirty years ago, I set off for Imperial college, determined to become an engineer. I finished my degree, and I then became a chartered accountant, although I did go back to work in technology. I have followed many debates about engineering over the past 30 years, and it might be useful to isolate the reasons why so many people in our country, uniquely, follow such a career path and what the Government, educators and society more generally can do to make it less prevalent. I think we all agree it is not a good thing.

As I said, I am a lapsed engineer. Latterly, I have also failed to get my daughter to do A-level physics. She is doing maths and chemistry, which is a bridge too far. I realise, therefore, that my credentials for speaking in this debate are not as strong as they might be.

I have three points. First, on status and culture, there has been something unique about the status of engineering in Britain, although that is perhaps truer of England than of Britain. The hon. Member for Ellesmere Port and Neston (Andrew Miller) talked about engineers in Germany; I used to work in Norway a lot, where, again, people referred to engineers in the same way as they would to doctors. We do not do that in this country, and we have never really got close to doing it. Clearly, it does not matter that much, but it is an indicator of the way society regards the profession.

Another indicator—I have often reflected on this—is when an engineer was last on “Desert Island Discs” or “Woman’s Hour” talking about what they do and how they have made a difference. One of this country’s big success stories over the past few years has been Range Rover. It cannot make enough of its new aluminium cars, given how many it sells all over the world, but how many people in our country could even come close to naming the cars’ chief designer? Would that be the same in Germany, France and Holland? I suggest not, and we need to be cognisant of that. Things have got better recently—and they need to, given the shortage of engineers.

I would depart slightly from some of the remarks made by the two previous speakers. There can be a danger of confusing technicians with engineers. I do not say that in a snobby way, but there can be an assumption that people have to be practical to study engineering—that those who would study engineering at Oxford, Cambridge or Imperial would be the sort of people who enjoy stripping down a car. That is not true, and having such an assumption at the heart of the discipline of engineering can be a problem. That is not to say that places such as the JCB academy are not brilliant—we absolutely need more of them, and they have a role to play—but we must be careful about our language.

At organisations such as the Royal Dutch Shell group, the top half-dozen people will almost always have an engineering background. In Royal Dutch Shell’s case, that is partly because of its Dutch heritage, rather than its British heritage—[Interruption.] Yes, it is. In so far as there are disciplines and professions in the Royal Dutch Shell group, the people with an engineering background tend to be based in Holland, not the UK, which is stronger on marketing.

Aside from status and culture, we also have salary and prospects. When I finished my engineering degree, I became a chartered accountant. One of the guys who started on the same day had come top in engineering at Cambridge, but he became a chartered accountant and then went into the City—I do not know what happened to him after that. That would happen in no other country in the world; nobody in the United States who left the Massachusetts Institute of Technology having come high up the list of graduates would go on to become a certified public accountant.

However, at the time I became a chartered accountant—it was 30 years ago, although I suspect this is still happening—we saw fit to incentivise people in a certain way. The guy who joined with me was making a commercial decision about his career, and he thought, rightly or wrongly, that he could do better and progress more quickly by taking the route he did. As a result, however, there was a penalty to be paid by society, and I contend that we have been paying it for the past 20 or 30 years.

There is also an issue about salary. I gently point out that, while the Government hire many engineers and people from other professions, such as barristers, we would have to go a long way to find engineers we chose to pay £200,000 or £300,000 purely from Government money, in the same way as we choose—again, uniquely in this country—to remunerate advocates.

[Peter Luff]

My hon. Friend is making a powerful speech. Just for the record, I should say that the median annual salary by degree subject six months and three and a half years after graduation is higher for engineering and technology than it is for law.

[David Mowat]

I am delighted to hear that. However, I repeat my question: how many engineers do the Government pay £200,000 or £300,000 a year, in the same way as they apparently pay advocates—a subset of them are about to go on strike over their pay—out of public, as opposed to private, money? We think that is normal. That is to do with cultural norms and with an assumption we make in this country about the relative value of careers, which is wrong.

Finally, we have made a lot of progress—even in this Parliament—on education. I welcome a lot of the noise coming out of the Government about the need to promote technical education, maths and physics—the STEM subjects—and all that goes with that. I have been of the view that a liberal arts-biased education system is deeply ingrained in our country. I very much hope that the progress that has been made in the past few years towards emphasising STEM—particularly for women—continues. Fixing the issue is a prerequisite for achieving the sort of economy we will need to have in the next two or three decades.

[Meg Munn]

rose—

[Mr Dai Havard (in the Chair)]

Order. Before I call Meg Munn, I should point out that I have been informed that we may have a Division fairly soon. If we do, I will have to suspend proceedings for 15 minutes. In the meantime, however, we will carry on.

15:18

[Meg Munn (Sheffield, Heeley) (Lab/Co-op)]

I congratulate the hon. Member for Mid Worcestershire (Peter Luff) on securing the debate and on his excellent contribution.

The Perkins review is an important publication. It clearly shows that the Government and others need to do much more to ensure we are not disadvantaged more than we are by the lack of people with engineering skills or by people not using the engineering skills they have. The review highlights the low proportion of women working in engineering and states:

“One of the main reasons…is girls’ subject choices in school.”

Few girls study mathematics, and even fewer physics, through to A-level. In 2011, 49% of state-funded schools had no girls taking A-level physics at all. Much has been written on the issue, including by me. Many initiatives have been tried, but the proportion of women engineers remains stubbornly small. Recommendation 7 of the Perkins review states:

“Government should continue to support schools to increase progression to A-level physics, especially among female students.”

That is to be welcomed.

An important development is the latest report by the Institute of Physics, which was launched only yesterday. It contains important information on subject choices in secondary schools. Entitled “Closing Doors,” it shows the individual consequences to young people of choosing particular subjects for A-level—in particular, the decision not to study physics closes doors to a wide range of engineering roles. Importantly, the research is undertaken on a wide range of subjects: three that are predominantly studied by girls at A-level and identified as such, and three predominantly studied by boys and identified as boys’ subjects. The research shows that is not just in physics that there is a significant failure to challenge gender stereotyping.

Simply cajoling girls to study physics, however, is not an answer; there are wider issues of gender stereotyping in schools. The gender equality duty, introduced by the Equality Act 2006, requires public bodies to have due regard to the need

“to promote equality of opportunity between men and women.”

That also means between girls and boys. Some schools do challenge stereotyping, and we need more research to understand how they do that and what works for students. Schools across the country that have poor results have been analysed by the Institute of Physics, and they need support and help to change and improve.

Professor Perkins argues in recommendation 5 that we should be aiming to inspire 11 to 14-year-olds to become tomorrow’s engineers. However, like the hon. Member for Mid Worcestershire, I contend that our efforts to broaden young people’s views of where science can take them must begin at the very least at primary school, if not earlier. Most children form an early view about the kind of careers that are open to them, so focusing on secondary school children is likely to be too little, too late.

We should ensure that all nursery, primary and secondary education is free from gender bias in the roles presented to children. A previous report by the Institute of Physics, “It’s Different for Girls,” outlined how single-sex schools are significantly better than co-educational schools at getting girls into non-traditional subjects. That confirms the vital importance of role models to the young when they are considering careers, as well as the real benefit of someone not feeling like the odd one out if they decide to study a particular subject. At a co-educational school, a girl choosing physics is likely to be in a minority; in a single-sex school that is clearly not a problem. I do not advocate single-sex schools at all, but we must learn why they are getting more girls to study physics than co-educational schools.

Role models are very important, and in Sheffield we have an inspiring one. Ruth Amos is 24 years old and already running her own company.

15:23

Sitting suspended for a Division in the House.

15:33

On resuming—

[Meg Munn]

Before the suspension, I was about to talk about Ruth Amos, aged 24, who is already running her own company. She designed a product, the StairSteady, for her GCSE resistant materials course, to help people who have difficulty using stairs but do not have the money or space for a stairlift. We should champion stories such as Ruth’s in our schools.

As hon. Members have said today, the Department for Education has a crucial role in ensuring that young people have the necessary skills to pursue a career in engineering. I was concerned to learn that many local schools offer only a generic GCSE, so students are prevented from even considering physics at A-level. The state-funded secondary education sector, including academies and free schools, should not seek league table success by opting for so-called easier subjects at GCSE. All must offer and promote the three individual sciences and maths. That should be coupled with an embedded model of careers education in which curriculum learning is linked to a wide range of real-life careers. I do not have time today to cover the woeful state of our careers advice service, but it must be tackled if we are to have any chance of achieving the outcomes to which Perkins rightly aspires.

Of course, a traditional academic approach is not the only way to develop tomorrow’s engineers. Recommendation 10 of the Perkins review rightly stresses the importance of providing élite vocational provision. We have seen the success of that in Sheffield. The university of Sheffield advanced manufacturing research centre with Boeing is focusing on recruiting more female apprentices, with a new cohort joining in April. Sheffield Hallam university’s women in science, engineering and technology team is providing advice and support on how to make that ambition a reality. Furthermore, our brand new university technical college boasts 14% female students in its first year, and deserves credit for that when, on average, only 2% of engineering apprentices are female.

Skills shortages in engineering are a national issue, requiring leadership and co-ordination, and Perkins was right to call for a more joined-up approach. Having worked on the issue for a long time, I am familiar with the plethora of institutes involved in this work and the need to co-ordinate better, but I think it was a mistake for the Government to withdraw all funding from the UK Resource Centre for Women in Science, Engineering and Technology, which was an excellent co-ordinating organisation for all initiatives involving gender. I suggest to the Minister that it is not only important to work across the engineering institutions, but that joining up initiatives in geographical areas might lead to better outcomes.

[Andrew Miller]

I want to bring to my hon. Friend’s attention work that we are doing in the north-west that emulates the work that she has been involved in with our mutual friend, Dick Caborn, at the advanced manufacturing research centre in Sheffield. Now that we have acquired for the university of Chester the Thornton research centre, previously owned by Shell, the vision is not only to turn that into a new faculty of chemistry and chemical engineering, but to have an industry-focused training and innovation environment that helps address problems in the same way as is happening at Sheffield. It is built on the Catapult model, which we need to grow in this country.

[Meg Munn]

I thank my hon. Friend for his example of the importance of working across organisations in one geographical area.

In 2011, I edited a pamphlet on women in science, engineering and technology, and following on from that we have developed in Sheffield a STEM strategy group. One initiative has been to give young people the chance to try some hands-on activities with teachers, having the opportunity to talk to university experts about what they can do to support girls into STEM subjects post-16.

Over the last few years, engagement with employers has improved enormously and they have been integral in developing the apprenticeship programme at the advanced manufacturing research centre. Many employers are active supporters of our new university technical college.

Encouraging girls and women into these areas is not enough if the culture in the workplace does not change. The Perkins review rightly contends that employers must do much more to support people returning to engineering following a career break. Adopting measures such as flexible working and better managed career breaks for maternity leave also benefits employers. For example, Mott MacDonald, an engineering firm in Sheffield, benefited when it allowed Cathy Travers, its most senior female engineer, to work during term time only when her children were young. That adaptability rewarded the firm with loyalty, and it retained a talented and experienced employee.

The best performing companies are often those with diversity high on their agenda. Organisations with a strong diversity and inclusion culture reduce average employee turnover by half, quadruple work force innovation and double customer engagement. The Perkins review tells us that to fuel the long-term pipeline for skilled engineers, we must ensure that all state-funded schools actively promote engineering as a career option for women, but we should not stop there. We need an environment in the engineering sector that welcomes women. Only when all our young people have the opportunity to realise their potential can we ensure that Britain develops the very best of tomorrow’s engineers.

[Mr Dai Havard (in the Chair)]

Thank you for your forbearance with the interruptions. If no other Members wish to speak, I call Mr Iain Wright.

15:40

[Mr Iain Wright (Hartlepool) (Lab)]

May I begin by saying what a pleasure it is to serve under your chairmanship, Mr Havard? It has been an excellent debate. I thank my hon. Friends the Members for Ellesmere Port and Neston (Andrew Miller) and for Sheffield, Heeley (Meg Munn) and the hon. Member for Warrington South (David Mowat), who, like me, is a chartered accountant—there is nothing wrong with being a chartered accountant.

I particularly want to thank the hon. Member for Mid Worcestershire (Peter Luff) for securing the debate and advancing his argument in a knowledgeable and refreshingly non-partisan way. I, for one, will be sorry to see him go. He will be missed in the House, and there is much more that he could do in this place to advance the need for more engineers in this country. He was an excellent Select Committee Chair and an excellent Minister. He will be sadly missed.

I also thank Professor John Perkins for his review. What is clear from today’s debate and from the review is the enormous opportunity that we have in this country. From an economic point of view, Britain will create wealth and raise its standards of living by concentrating on high skills and innovation, centred on science, technology, engineering and manufacturing. We have world-beating sectors in areas such as automotives and, as the hon. Member for Mid Worcestershire said to me during the Division, we have the second biggest aerospace industry in the world and the biggest in Europe.

We have fantastic companies such as Rolls-Royce, Boeing and GKN Aerospace. I am particularly pleased that last week it was announced that Boeing will be using GKN as a supplier for its 737 winglet, which is displayed at the moment in the forecourt of the Department for Business, Innovation and Skills. It is an excellent reiteration of how valuable that supply chain is.

[Peter Luff]

I am grateful to the hon. Gentleman for giving way, and for his generous personal remarks. We also must not forget Airbus, which has given me so much encouragement in pursuing this agenda and which is one of the major contributors to making Britain the second biggest aerospace country in the world.

[Mr Iain Wright]

Absolutely. I was about to mention how important Airbus was as well. However, there are other sectors; we are not just wings and wheels. We have food and drink manufacturing—the biggest manufacturing sector in the country—as well as construction, life sciences, chemicals and great engineering in the energy sector. There is also a real ambition to have 10% of the global space industry by 2030. Those are all things that we will be using for our competitive advantage in the future.

[Jeremy Lefroy (Stafford) (Con)]

In JCB, there is also one of the major construction equipment manufacturers in the world. Just last week, it announced 2,500 extra new jobs in Staffordshire, bringing some of its supply chain back to the UK. It is a privately owned company —a world-beating one at that—investing right here in the UK.

[Mr Iain Wright]

That is certainly something to be encouraged. I want to see how the supply chain of manufacturing can be enhanced to ensure that we can have that reshoring back to the UK as much as possible. We have the need for an economic, competitive edge, but we will also be trying to solve big social issues in the 21st century such as climate change, the transition to a low carbon economy, an ageing population and tackling resource scarcity for food, clean water and energy. All that requires engineering skills, so the ambition must be nothing short of making 21st-century Britain an engineering nation.

However, that enormous opportunity is not being matched with a commensurate supply of engineers coming on stream. As the hon. Member for Mid Worcestershire said—I want to reiterate the figures, because they are striking—EngineeringUK states that the UK will need 87,000 people a year at level 4 over the next decade to meet demand, let alone to make sure that we can have expansion. However, the country has seen only about 51,000 and the number of level 3 engineering-related apprenticeships has actually dropped. We have an annual demand of about 69,000 but, as the hon. Gentleman said, the numbers are about a third of that and are falling.

Research by Matchtech in the past couple of weeks showed that three quarters of engineers lacked confidence in the Government’s action to encourage innovation in the UK—that is up from last year—and more than half said that they were willing to leave the UK and find work abroad. Despite the welcome news about economic statistics, 54% of engineers believe that the state of the British economy is negatively affecting the industry—up a full 10 percentage points on the previous year. There is an immediate and urgent need to do something about the issue.

There have been four broad themes today and I want to touch on those. Every speaker has mentioned the perception, image and culture of engineering, and they have been right to do so. Britain is the nation of James Watt, Richard Arkwright, Isambard Kingdom Brunel and Frank Whittle, but I fear that this country does not value the status of engineers. It is deeply dispiriting that, when people are asked to name an engineer, the most recognisable in our country is Kevin Webster from “Coronation Street”. That sort of view reinforces stereotypes and prejudices that engineering and manufacturing are often literally backstreet, low skilled and low paid, rather than highly skilled, well paid and innovative.

[Andrew Miller]

Will my hon. Friend give way?

[Mr Iain Wright]

I will—as a north-west MP, I think my hon. Friend might have something to say about that.

[Andrew Miller]

As somebody from Granadaland, I ask who the heck is Kevin Webster?

[Mr Iain Wright]

In another context, I would be tempted to say, “He’s a popular beat combo, M’lud”, but I will not. In terms of the culture, perception and status of engineers, the issue is not the fault of this or previous Governments. Having said that, I absolutely agree with Sir John Parker, president of the Royal Academy of Engineering, who said:

“I have travelled around in business and seen how other nations organise themselves and tilt policy in favour of their industrial base. At the highest level, an industrial strategy in my view is about giving the right signals to society that industrial activity is very important.”

What is the Minister going to do to help to change perceptions?

I acknowledge, as we have heard this afternoon, that such things as The Big Bang, Tomorrow’s Engineers, See Inside Manufacturing and the Bloodhound supersonic car are valuable initiatives to help change perceptions of engineering and inspire a new generation. However, there is more that can be done and it must be, as the hon. Member for Mid Worcestershire said, high profile and sustained to overturn those long-held cultural perceptions. Will the Minister confirm that those initiatives will continue? What other plans does he have to alter the perception of engineering?

[Andrew Miller]

On a slightly more serious note, I was proud, with the parliamentary and scientific committee, to work with EngineeringUK to bring The Big Bang into Parliament this year. We intend that to be a continuing event to help improve the understanding of our parliamentary colleagues of the importance of engineering. Will both Front-Bench Members commit themselves to engage with that programme in future years?

[Mr Iain Wright]

I certainly would like to. My hon. Friend mentioned an important point. It should not be about this Government or this Parliament; it should be about looking at how Britain will make its money in the next 30 or 40 years. How can we transcend Parliament and Governments and work together for the long-term economic interests of the country to ensure that engineering has a proportionate status in our country?

Key to that, I would suggest, is ensuring that industrial strategy is at the heart of business policy. A moment ago, I mentioned Sir John’s comments that industrial strategy should give the right signals to society. I also suggest that a successful industrial strategy should give the right signals across Government. Business policy and engineering policy should not only reside in the Department for Business, Innovation and Skills, but be aligned right across Whitehall for the purposes of advancing our country’s long-term economic interests.

However, I have to say—it has been hinted at strongly during today’s debate—that there is a lack of joined-up thinking between industrial strategy and education and skills policy. Schools are not encouraged to prioritise engineering and science, and there is a failure to ensure that engineering is considered at a sufficiently early stage in a child’s education. As a result, as we have heard, many pupils are disillusioned by the time they get to the age of 14 and do not continue science-based subjects that could lead to a career in engineering. Science GCSE has dropped from third place in 2012 to fourth this year; design and technology has slipped from sixth place to ninth.

This is a particular priority of mine. In many cases, teachers have had no experience of the modern engineering plant or factory and are therefore not in a position to encourage pupils to think about a career in engineering. I asked a parliamentary question a couple of weeks ago about the Government’s policy on encouraging industrial placements for teachers and I have to say that I received a woefully complacent answer from the Minister for Schools.

What will this Minister do to ensure that more teachers are made aware of the exciting opportunities available in industry and engineering, so that they can pass on information about those fantastic opportunities to their pupils and, importantly, to their pupils’ parents? Will the Minister ensure that time is made available in the school timetable to allow those industrial placements to take place?

[Peter Luff]

The hon. Gentleman is making a very important point. Quite often, it is a matter of cost. Schools cannot release teachers for this kind of activity, because they cannot afford the cover required in the classroom. Sometimes it is a resource issue—particularly for schools in the poorest areas, which most need this kind of help.

[Mr Iain Wright]

I can agree with the hon. Gentleman in many respects, but this is such an important priority that I think that resources have to be made available. The question is how Government, industry and academia work together to do that. Perkins touches on it, but more needs to be done.

Everyone in the debate has mentioned careers guidance. It is woeful. The Select Committee on Education said in its recent report that what the Government have done with careers guidance is regrettable. I am not suggesting that before 2010 it was perfect—I speak as the Minister with responsibility for it before 2010—but the Government’s reforms to end face-to-face and impartial information, advice and guidance have seen investment in careers advice plummet and the service to many young people more or less evaporate.

The chances of people receiving good impartial advice about engineering at a sufficiently young age to make informed choices about what subjects to take next and how they can advance are as remote as ever. Will the Minister acknowledge that the Government have made a mistake on this one? What will he do to ensure that all pupils receive high-quality information, advice and guidance that includes, specifically, appropriate information on a career in engineering? Will he put in place an initiative to encourage work experience in industry—in engineering—and more effective collaboration between schools and businesses? That happens haphazardly. It does not happen in a consistent manner, but for the long-term economic interests of this country, it has to.

[Andrew Miller]

This, of course, is where Professor Perkins agrees with my Select Committee’s recommendations about continuing professional development. The simple reality is that people cannot teach about things or advise about careers that they do not have any knowledge of. We must create that space in the curriculum. If we do not, we will be failing these young people and failing British industry.

[Mr Iain Wright]

I agree. I think that that is incredibly important for our long-term economic interests.

I also want to touch on what the Government have done with their education reforms. Notwithstanding the welcome changes to the design and technology curriculum, which the hon. Member for Mid Worcestershire had a hand in influencing, a lot of what the Government have done has reinforced the perception that engineering, particularly at vocational level, is somehow second rate.

The downgrading of the engineering diploma by the Secretary of State for Education was a colossal mistake. I hope that the Minister will acknowledge that. The downgrading consolidates the perception that somehow engineering is second rate. The Royal Academy of Engineering has expressed concern that the attainment and accountability systems that schools are judged on favour a narrow set of academic qualifications over vocational and practical-based ones. Again, what will the Minister do to alter accountability systems to provide incentives for schools to prioritise engineering? They need to prioritise engineering.

The third point that I want to mention is gender. This has rightly been raised as a key issue in the debate. The lack of female engineers is a very important issue. Perkins stated that the UK has the lowest proportion of female engineers in the EU—barely one third of the number that Latvia has. Fewer than 10% of engineering professionals are women, and fewer than one in 30 of those starting an engineering apprenticeship are female.

There are great initiatives in place, such as ScienceGrrl, but the culture that my hon. Friend the Member for Sheffield, Heeley mentioned is important. I was speaking at a round table of industrialists recently. I said, “You’re cutting off half your potential work force by not encouraging women into engineering. What are you doing about that?” They said, “Well, we provide them with their own toilets.” That is the sort of cultural issue on which we need to work together so as to advance, so what else can be done? We need to work together across Government, industry and education to enhance opportunities for all the population, not just half.

My fourth point is about deliverability. Perkins has 22 recommendations. The hon. Member for Mid Worcestershire said that there is an urgent need to have a marketing campaign. I think that we need to go further than that—we need delivery mechanisms. I would be very interested to hear how the Minister will ensure that every one of those recommendations can be implemented.

I will finish by reiterating my very warm thanks to the hon. Members who have contributed to the debate today and to Professor Perkins. The final words of his review are both telling and ambitious:

“There have been dozens of Government reports, select committees and independent reviews into the future of engineering skills over the past 150 years. I would go further. It is time for concerted action by the profession, industry and Government, to achieve the goals for engineering which we all share.”

The House has demonstrated today that it thinks that a key priority. I hope that we can transcend party politics and work together to make Britain an engineering nation.

15:56

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

It is a great pleasure to serve under your chairmanship, Mr Havard, and to respond to an extremely important debate. I congratulate my hon. Friend the Member for Mid Worcestershire (Peter Luff) and pay tribute to him, not only for bringing this matter to the attention of the House today and the excellent debate that we have had, but for his work over the last year or so in this area, which has been conducted at an impressive pace and with impressive vivacity. His tenacity in sticking to this agenda and driving it forward has been extremely valuable to me as a Minister, to the Government as a whole and, no doubt, to the future of engineering.

We have had a very positive debate, broadly speaking. I will come specifically in a moment to the implementation of all 22 recommendations in the Perkins review. I join other Members in paying tribute to John Perkins for the excellent work he has done and the considered and reasonable way in which he took forward the review, consulting extremely widely. The review has gone down very well in the engineering profession and beyond, and in the education establishment, which is important too. However, one of the most important things about the implementation of the review is that it is a review to be implemented by all, not just by Government. The Government have a very big role to play in doing that, and we will take forward all those recommendations that refer to the Government, but it is not a matter only for them. It is also necessary for the engineering profession to come together, and I will set out a couple of ways in which we plan to ensure that that happens.

Let me respond to a couple of specific questions that were raised. John Perkins did base his report on discussions with marketing and communication experts. He consulted people in the marketing world. Indeed, the argument that a marketing programme is needed and the recommendations that my hon. Friend the Member for Mid Worcestershire pointed to, which he thinks need strengthening, were based on discussions with marketing and communication professionals. I just wanted to put that on the record. On the point my hon. Friend made about the defence industries, the report chose to be cross-sector rather than sector-specific, so that is probably why there is not as much focus on the defence industries as he might have liked.

Let me deal with a couple of other specific points that were made. The hon. Member for Sheffield, Heeley (Meg Munn) referred to the “Closing Doors” report, which is also an extremely important report. The Institute of Physics has produced a very good piece of work. The figures are stark. There are a record number of applications for and entries to GCSE physics by girls in 2013. There has been a 32% increase in GCSE entries for physics over the last three years, and there are a record 73,000 entries by girls. However, of those who get an A*, 49% of boys go on to study physics at A-level but only 19% of girls do so. There is a huge missed opportunity, which can be realised by changing the culture, as the hon. Lady has said, so that physics A-level is seen as a qualification for everybody. The record number taking GCSE is good news, but we must keep driving that progress up the age range so that we get a commensurate increase in A-levels and university applications from girls. We must ensure that the work done to increase applications at GCSE does not tail off.

The hon. Member for Ellesmere Port and Neston (Andrew Miller) made a strong argument about cross-party agreement, which is rife, and the importance of the new 14 to 16-year-old engineering qualifications. I was at the Unilever headquarters in the hon. Gentleman’s constituency—

[Andrew Miller]

It is not in mine.

[Matthew Hancock]

It must be next to the hon. Gentleman’s constituency. I join him in paying tribute to Matthew Harrison at the Royal Academy of Engineering for his excellent work in the area. My hon. Friend the Member for Warrington South (David Mowat) argued in favour of improving the status and cultural position of engineers in our society. We should articulate as often as possible the point that pay for engineers is rising and that engineering is one of the most lucrative career options. To those who are considering what career to go into and who read Hansard—as I am sure they will—the message should go out loud and clear that engineering pays extremely well. If that is what they are after, why not look towards it?

The positive, cross-party approach taken by the hon. Member for Hartlepool (Mr Wright) was exactly the right one. We are dealing with a long-standing problem, which has improved in the past few years but needs a long-term and cross-party solution. He listed all the sectors and areas in which engineering can do someone proud, and I will not repeat what he has said. I would, however, add computer science and the high-tech end, which is extremely exciting. Developments in that area are moving apace. I am not surprised that the hon. Gentleman took a cross-party approach, because he came slightly unstuck when he tried to score a couple of political points. He said that there had been a decline in GCSE science, but that is because there has been a sharp rise in the number of people taking three sciences as separate subjects, which is a more rigorous approach to science. I would not use that statistic in future, if I were him.

I agree with the hon. Gentleman and the hon. Member for Sheffield, Heeley on the need for more inspirational careers advice from people who are passionate about their career. That is exactly the way we want to go. We all agree that Connexions did not fulfil that role particularly effectively, and the Government are passionate about getting inspirational people to motivate young people to take up careers in which they can do well.

[Andrew Miller]

I totally agree with the Minister on the importance of inspirational teachers. To help him avoid slipping into partisan language, does he agree that his comments about GCSE physics versus A-level physics underline the point that I have made several times during the debate about continuing professional development? Far too many young women who may be interested in science are encouraged to pursue medicine rather than focusing on physics and mathematics as the logical way forward, which will help them even if they do subsequently want to go into medicine.

[Matthew Hancock]

There is a lot in what the hon. Gentleman says. The example of medicine is important for engineering, because 30 years ago medicine was almost entirely male dominated, but the culture was changed and the majority of those who go into medicine are now women. We need to have the same sort of cultural change in engineering, so medicine is a valid example. Not least as a result of the success of Tomorrow’s Engineers week, which the Government sponsor, the proportion of young people who say they would consider a career in engineering has risen by about 10%, and there has also been an increase in the proportion of parents who say they would like their children to consider a career in engineering.

[Meg Munn]

I know that the Minister is not responsible for education, but he has mentioned parents, whose views on the matter are influential. What is being done to ensure that in schools primarily led by parents, such as free schools and academies, enough of this work is going on? Although my hon. Friend the Member for Ellesmere Port and Neston is correct about career development for teachers, we need parents to be on board too.

[Matthew Hancock]

That is an important point, which is part of a wider culture change. As a Minister in the Department for Education I am also responsible for the education end of the subject, along with the other Ministers in that Department. On the question of having an impact on the need for engineers, applications to study engineering at university have increased by 20% over the past three years, and in the past year the number of people in engineering apprenticeships has increased by 10%. Things are moving in the right direction, but I do not deny that there is much more to do, hence the Perkins report.

We accept the Perkins report, and we will take forward all the Government actions within it. It is important to set it in a wider context, however. That starts at an early age with stronger computing in the national curriculum from the age of eight and more of an emphasis on maths, inspirational careers advice from 12 years old onwards, new engineering qualifications for those aged 14 to 16, the introduction of tech levels and the tech bacc for 16 to 19-year-olds, the increase in take-up of A-level physics that we have talked about—we need to do more work on that to improve the gender balance—and the increase in engineering degrees and apprenticeships, not only at level 2 and the technician end but all the way up through higher apprenticeships. Members will have heard the announcement in the autumn statement of an additional 20,000 higher apprenticeships focused on engineering and technology. Within the lifespan of education from primary school onwards there is a focus at every level on improving rigour, improving responsiveness to the needs of employers and increasing the proportion of students who go into science, technology, engineering and maths. It is in that context that the Perkins report sits.

I agree wholeheartedly on the need for better communication, and the engineering profession has come together in the realisation of the importance of communication during the past couple of years. I have had many discussions with the leaders of various engineering industries on the implementation of Perkins. There is enthusiasm for it and there are mechanisms for it, but we need to make sure that those continue. The Big Bang Fair, which came to Parliament, is funded by Government. That funding has helped it to inspire thousands, but there is undoubtedly much more that we can do.

Given the shortage of time, I will write to my hon. Friend the Member for Mid Worcestershire setting out in detail the Government response to all 22 of the recommendations, and I will make public a copy of the letter. I want to ensure that we drive the recommendations forward. I have no doubt that we will continue to debate the subject so that we can maintain the cross-party, cross-Government national campaign to ensure that the shortage of engineers is dealt with and the supply chain is wide open.

[Jim Dowd (Lewisham West and Penge) (Lab)]

I applaud the Minister’s effort and his enthusiasm. When does he imagine that a Minister with responsibility for this area, from whichever party, will be from an engineering background?

[Matthew Hancock]

As a former economist, I apologise for not fitting the criteria myself. But no doubt, with more engineers coming through, there will one day be the opportunity for that to happen.

[Mr Dai Havard (in the Chair)]

I am not sure whether economics is social engineering, but thank you for the debate, Minister. Do you, Mr Luff, wish to say anything for 30 seconds?

[Peter Luff]

I was not expecting the opportunity.

[Mr Dai Havard (in the Chair)]

I am giving you the opportunity; you can grab it or not.

16:10

[Peter Luff]

I repeat my gratitude to all colleagues who took part in this important debate and to the Minister for his capable summing up. I look forward to the implementation plan with particular enthusiasm, because it is important, but I must emphasise that it is not something for simply the Government to implement; the engineering community has a responsibility as well, particularly with the marketing campaign, about which I spoke. The task is not just for the Government but the whole community.

UK Relations with Ukraine

Tuesday 10th December 2013 Westminster Hall

[Mr Dai Havard (in the Chair)]

I will not start the clock at the moment, because I would like to say something before we begin. I have the Minister and the hon. Gentleman in place. May I appeal to anyone with any electronic gadgets who entered the Chamber since I started to please ensure that they are on silent, because I do not want any interruptions from those devices? May I also make how we will conduct the debate and how I will chair it very clear? The debate is between a Member and the Minister in a very short space of time. There is great interest in the discussion from the public. I am determined to protect the Minister’s time and the Member’s time, to ensure that we have the debate properly and without interference from the Public Gallery or elsewhere. I have agreed that Ms Latham can take part of Mr Whittingdale’s time and speak in the debate. I appeal to other Members to make interventions cogent and short, should you wish to make them. I intend to give the Minister at least 10 minutes to reply.

16:12

[Mr John Whittingdale (Maldon) (Con)]

Thank you, Mr Havard, for your guidance on the debate. I am extremely grateful for the opportunity to speak about UK relations with Ukraine. I requested the debate in the aftermath of a decision by the Ukrainian Government not to proceed with the signing of the association agreement, but the topic has become much more urgent in the past few days. A large number of Ukrainians are in Parliament square as I speak, but they are small in number compared with the thousands taking part in the Euromaidan demonstration in Independence square. At the weekend, something approaching 1 million people in Ukraine demonstrated their unhappiness at the turn of events most recently. We have watched the events with growing concern.

Yesterday, there were reports that the Ukrainian Government had taken a decision to use force to disperse the protesters; happily, that has not happened. However, there have been raids on the offices of the opposition and there is no doubt that the situation remains tense and unstable. I hope that the Minister in his response will be able to say something about the latest information we have; I understand that talks have now started between opposition groups, civil society and the Ukrainian Government, which must be welcome, but we are by no means away from the danger that force might be used. I want to return to that later in my remarks.

I had hoped that the debate would take place in happier circumstances. I declare an interest: I am the chairman of the British-Ukraine all-party group; I am a director of the British Ukrainian Society; I was an observer in Kiev for the elections to the Verkhovna Rada earlier last year; and in September I attended the European strategy conference in Yalta.

At the conference, which took place only 12 weeks ago, representatives of all major parties in Ukraine were present. I heard both President Yanukovych and Prime Minister Azarov speak and state very clearly the absolute determination of Ukraine to go down the European path and to sign an association agreement at Vilnius. That strategy had the support of all the parties of Ukraine with the exception of the Communist party.

Of course there were always going to be obstacles. We are aware that Yulia Tymoshenko is still in prison, which was a serious issue that needed to be resolved. There were concerns about the way in which the judicial process had operated in imprisoning her and the claim that it was “selective justice”. There were wider concerns about the level of corruption that still exists in Ukraine and the abuse of monopoly power. But there appeared to be a real determination to make necessary changes. Measures were being tabled in the Rada to meet the requirements of signing that association agreement. It appeared that there might be a way forward whereby Mrs Tymoshenko could perhaps go for medical treatment abroad, and she herself had said that she did not want her situation to prevent the signature of the association agreement.

We always knew that the one obstacle, the biggest opponent, would be Russia. I was in Yerevan, a little while before Yalta, just after the decision had been taken by Armenia not to proceed with the signature of an association agreement. Without question, that decision was taken because of the enormous pressure that was put on the Armenian Government by Russia, in particular over the security problems that the Armenians face and the threat to withdraw security guarantees. But it appeared that Ukraine would stand up to the pressure, despite the economic measures being taken by Russia—import controls and tariff barriers. At Yalta, Ukraine expressed an absolute determination that it would proceed with the agreement. It was therefore a real surprise and a great sadness when the President came back and announced that instead of signing the association agreement in Vilnius, Ukraine would seek closer relations with Russia. I suspect that he cannot have anticipated the reaction to that announcement.

We saw the protests begin in Independence square, and instead of diminishing, they have, if anything, strengthened. Anybody who has seen the film footage of the violence committed about 10 days ago by riot police against innocent, peaceful protesters will have been deeply shocked by it.

[Helen Goodman (Bishop Auckland) (Lab)]

I congratulate the hon. Gentleman on securing this important debate on human rights day. Does he agree that we would be interested to hear from the Minister what pressure the British Government can bring to bear on Ukraine to secure a strong human rights record in future, with a free press and the end of the holding of political prisoners, when the leverage of the EU association agreement is no longer a card to be played?

[Mr Whittingdale]

I shall return to both issues; I agree with the hon. Lady that those are desirable objectives, but there is a more immediate, pressing concern about how the protesters are treated. Their human rights are important at this time. We must not see a repetition of the kind of violence that has been committed by special forces against people. The scenes of people lying on the ground being beaten with batons by 50 or more riot policemen as they ran past were wholly unacceptable. Concerns have been expressed that provocateurs have been placed among the protesters, and that that may precipitate a decision to declare some kind of state of emergency. All of that would mean that Ukraine would slip backwards. I want to hear from the Minister a strong message from the British Government that human rights and peaceful protest must be respected, and that we cannot see any kind of repetition of the violence that has taken place in the past few days.

[Stephen Pound (Ealing North) (Lab)]

As someone who was with the hon. Gentleman in Yerevan when we heard the news, I know exactly where he is coming from. Does he agree that the UK Government have persistently and consistently supported Ukrainian EU accession, so we have a moral obligation to those suffering in Ukraine at the moment? Just as the sound of the crowds of protesters outside this building can be heard in the Chamber, the sounds arising from Independence square must be heard across the world, especially in Europe.

[Mr Whittingdale]

I agree with the hon. Gentleman. It is right that representatives of the EU and the United States Administration are in Kiev and will do what they can to calm the situation and find a way forward.

I understand that through the intervention of former Presidents Kravchuk, Kuchma and Yushchenko, talks are taking place with civil society groups and the opposition. That is certainly a much more promising way forward than the reported decision to use force, but the crisis is by no means past. It is important that clear messages go out from European Governments. In particular, I look to my right hon. Friend the Minister to make it clear that we cannot tolerate any violent activity of that kind.

[Jim Dowd (Lewisham West and Penge) (Lab)]

As a fellow member of the all-party parliamentary group on Ukraine, does the hon. Gentleman agree that although the Ukrainian Government are under a huge amount of pressure, particularly from Russia, they will never make progress through repression and the suppression of human rights and democratic values?

[Mr Whittingdale]

I agree entirely. I believe that Ukraine wishes for a free society and a democratic future. I regret the actions of the last few days, which are horribly reminiscent of the dark past, but I am still optimistic for the future of Ukraine, as I will mention at the end of my remarks.

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

I, too, congratulate the hon. Gentleman on this timely debate. Last year, on a NATO Parliamentary Assembly visit to Kiev, some members of our delegation had the opportunity to visit former Prime Minister Yulia Tymoshenko. Does the hon. Gentleman not agree that her continuing imprisonment means that Ukraine cannot move forward? If political repression involves imprisoning political opponents, that is a major impediment to Ukraine’s moving forward.

[Mr Whittingdale]

There is not time, nor would it be helpful, to discuss whether Mrs Tymoshenko is guilty of the offences of which she is accused, but the right hon. Gentleman is right that her imprisonment was unquestionably seen by the European Union as an obstacle, and efforts were made to find a way through it. I was optimistic that a solution could be found, and it might still be, but Mrs Tymoshenko has made it clear that in her view, the important priority is to sign the association agreement.

I turn to the longer-term challenges. The immediate challenge is to ensure that there is no more violence, but in the longer term, we must look towards helping Ukraine. There is an immediate economic crisis. The country is massively in debt, and economic threats from Russia have undoubtedly played a part in the decision. We must offer Ukraine some prospect of assistance if it decides to resume the European path.

There is also the political challenge. Elections will be held in due course. It is essential that they should be free and fair, and that all the leading candidates should have the opportunity to take part. Most importantly, the reforms that were under way, including reforms to the judicial process and reforms to root out corruption, must be continued. If those things happen, we can eventually look forward to what the Ukrainian Government tell us is still their ambition: a closer relationship with Europe.

These are exceedingly perilous days, but we have cause to be optimistic, most of all because of the bravery of the Ukrainian people, which they are displaying as we speak, in bitterly cold weather and under the threat and gaze of riot police with their batons and shields. They have not been intimidated. They are still there.

[Jason McCartney (Colne Valley) (Con)]

There is a vibrant Ukrainian community in Huddersfield, next to my constituency. I look forward to celebrating Ukrainian Christmas with them yet again in the first weekend of January. Recently, we have been campaigning for recognition of the Holodomor as a genocide. Does my hon. Friend agree that we must continue to urge the Foreign Office to do everything that it can to stop the immediate violence and find a long-term solution? So many Ukrainians in the United Kingdom are deeply concerned about the situation there at the moment.

[Mr Whittingdale]

I agree entirely. That is demonstrated by the large number of Ukrainians who have come to listen to this debate.

I hope that the Ukrainian Government will stand by their assurance and assertion that they still see their future in closer relations with Europe. It is for the Ukrainian people to decide their future, but that is what the Government say. Particularly given what has happened and the bravery being shown by the Ukrainian people, now is the time when we must support them. We must not turn our back on them.

16:24

[Pauline Latham (Mid Derbyshire) (Con)]

I am pleased to serve under your chairmanship, Mr Havard; thank you for allowing me to speak. I thank my hon. Friend the Member for Maldon (Mr Whittingdale) for allowing me to take part in this important debate and for securing it.

Some Members may know that I have tried to raise awareness of the Ukrainian Holodomor and spoken on several occasions on behalf of the Ukrainian people in this country, who also asked me to speak in this debate. Given my friendship with the local community, it goes without saying that I was shocked by the unfolding of the current social and political situation in Ukraine. Like many others, I was optimistic when it was announced that the Yanukovych Administration was to sign the association and deep and comprehensive free trade agreements with the EU. I thought that it might herald a new era of greater respect for human rights in the country. Although I do not presume to pre-empt the Ukrainian Government’s rationale for their U-turn in signing the agreements, I cannot ignore the Yanukovych Administration’s draconian response to the peaceful protests in Kiev.

On 24 November, British television news was full of images of peaceful protesters on Independence square, holding aloft the Ukrainian flag alongside that of the European Union. Those people were out not to cause trouble but gently to persuade their Government to change their mind about signing the agreement. Western media outlets have shown in their coverage of events that the Government’s response to those peaceful demonstrators was to deploy tear gas and truncheons against them. In clashes between protesters and the police on 1 December, an estimated seven were hospitalised.

Coupled with the 35 arrests that took place that day, it indicates a Government who are prepared when threatened to use inhumane and draconian forms of repression to quell dissent. That response seems to have exacerbated the situation. The protesters, who were initially keen to resolve their differences with the Government peacefully, have now resorted to acts of violence, including the felling of a statue of Lenin in the capital. It is clear from such actions that a section of the population in Ukraine is keen to turn away from the influence of Moscow and towards a future in the European Union.

Last night’s events have also made it plain that relations between the police, the Government and the demonstrators have continued to deteriorate. The headquarters of the country’s Fatherland party, the opposition party of ousted and imprisoned former Prime Minister Tymoshenko, were reportedly stormed by riot police, and protesters in Kiev were encircled by police.

With that in mind, I hope that Members here will join me in condemning the violence against the Ukrainian people in Kiev and lend their support to the EU’s efforts to promote communication between Ukraine’s people, the Ukrainian Government and the EU High Representative of the Union for Foreign Affairs and Security Policy for the European Union, who is visiting the country today.

16:28

[The Minister of State, Foreign and Commonwealth Office (Mr Hugo Swire)]

I am grateful to you for chairing this important debate, Mr Havard. I am particularly grateful to my hon. Friend the Member for Maldon (Mr Whittingdale) for securing this debate and for his continued engagement and interest in Ukraine and his support for democratic reform there. Given the fast-changing events on the ground, this is a timely and necessary debate.

Ukraine is an important friend and partner to the UK. We work closely together across a broad range of international issues and multilateral forums, and more so in the light of Ukraine’s chairmanship in office of the Organisation for Security and Co-operation in Europe. In fact, my right hon. Friend the Minister for Europe was in Kiev only last week to attend the OSCE ministerial council. We therefore welcome the latest news that President Yanukovych today agreed to round-table talks with three former Presidents, among others.

This Government have championed Ukraine’s closer integration with the EU, where it has the potential to make a significant contribution to stability, prosperity and competitiveness, and we will continue to support Ukraine’s European aspirations, including eventual membership of the EU, provided that the appropriate criteria are met and provided that it is what the Ukrainian people themselves want.

However, we have been watching recent developments in Ukraine with deep and genuine concern. Several hundred thousand Ukrainian citizens—perhaps more—have taken to the streets to express their views on Ukraine’s future. Also, troubling reports have emerged: of police violence in response to peaceful demonstrations; of journalists being beaten and possibly being deliberately targeted by security forces; and of disproportionate force being used. These things are completely unacceptable.

My right hon. Friend the Minister for Europe raised his strong concerns at these developments in Kiev last week. On 3 December, my right hon. Friend the Foreign Secretary, together with his NATO counterparts, issued a statement condemning the excessive use of force in Ukraine, and he called on all parties to refrain from provocations and violence. NATO members also stressed that a sovereign, independent and stable Ukraine, which is firmly committed to democracy and the rule of law, is a key to Euro-Atlantic security.

We have made it clear that, particularly as the chairman-in-office of the OSCE is Ukrainian, it is essential that the Ukrainian Government demonstrate—through actions as well as words—their deep commitment to OSCE norms and values. We welcome the Ukrainian authorities’ commitment to a thorough investigation of police violence. Those responsible for such violence must be held to account.

We firmly believe that the way forward is through constructive engagement and dialogue, and we continue to encourage the Ukrainian Government and opposition to enter into early discussions. When my right hon. Friend the Minister for Europe visited Kiev on 5 December, he visited Maidan, or Independence square, and saw for himself the peaceful nature of the protests. He also met opposition leaders and encouraged them to engage seriously with ideas to identify ways to defuse the situation and map out a peaceful route forward.

This House is aware that the protests in Ukraine were triggered by the decision of the Ukrainian Government to put preparations for signature of the EU-Ukraine association agreement on hold. As my right hon. Friend the Foreign Secretary has made clear to this House and in public statements, this Government’s view is that the Ukrainian Government’s decision represents a missed opportunity.

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

Have the Government had any opportunity to make an assessment of what measures the Russians may have brought into play to pressurise the Ukrainian Government to change their approach to this important matter?

[Mr Swire]

Not to date, but we—together with our EU partners—had hoped that the EU-Ukraine relationship would enter a new and fundamentally different phase following signature of the association agreement, which includes a deep and comprehensive free trade area, at the Eastern Partnership summit in Vilnius on 28 and 29 November. What we have made a study of is the benefit that the agreement would bring to Ukraine and Ukrainian companies. It would give Ukrainian companies access to a market of 500 million consumers. Reliable studies have shown that GDP and wages would rise, and closer economic integration through the deep and comprehensive free trade area would be a powerful stimulant to Ukraine’s economic growth.

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

I am fully supportive both of the people in the Ukraine and their democratic rights, and of the policy of Her Majesty’s Government here. However, does the Minister accept that there is some understandable nervousness—I can see it in the Government of Ukraine—that to suddenly change the relationship with the EU to one where there are much more open trading agreements could force tariffs in relation to the trade with Russia, and that therefore the right way forward, given where we are now, is to encourage negotiation between all the parties so that there is an agreed policy, with Russia, Ukraine and the EU growing together in the future?

[Mr Swire]

My hon. Friend the Member for Maldon mentioned the economic troubles in Ukraine at the moment and it is our assessment that an early benefit would be brought about by Ukraine signing this agreement, which would far outweigh any negative impact in resulting loss of trade—as he sees it—with Russia. Approximation to EU legislation, standards and norms will result in higher-quality products and improved services for citizens, and will improve Ukraine’s ability to compete in international markets.

As I say, my hon. Friend mentioned the economic challenges that Ukraine faces at the moment. I hope that the Ukrainian authorities can reach an agreement with the International Monetary Fund on a new stand-by arrangement. That is in Ukraine’s hands, and it is in Ukraine’s interests to entrench fiscal and financial stability by advancing structural reforms. Doing so will increase Ukraine’s ability to withstand external pressures.

The Government and, I am sure, Members from all parties in this House look to the Ukrainian Government—working collaboratively with opposition parties, civil society and business—to show the necessary political will and commitment to enable signature of the association agreement to go ahead in the near future. That means continuing with the reforms that are already under way, and ensuring that the parliamentary elections that will be rerun on 15 December are conducted in accordance with international standards.

When Ukraine is ready to sign, under this Government or a future Government, it will find the UK to be a willing partner that is ready to lend support and assistance on the road to a closer relationship with the EU. As the Prime Minister and other EU leaders made clear to President Yanukovych at Vilnius, the EU’s door remains open; it is Ukraine’s choice whether to walk through it.

Before I close, let me touch on Russia’s role. We have all seen and read reports about the pressure that Russia has been bringing to bear on Ukraine and many of its businesses. Any such pressure is unacceptable. In the modern world, every country should respect the sovereignty of others and their right to enter into the agreements that they consider appropriate. And I hope that Russia can understand that this is not a zero-sum game. The association agreement will help Ukraine to modernise and transform its institutions and economy. Ukraine will become more prosperous. That is in everyone’s interests, including Russia’s.

We continue to follow developments in Ukraine very closely, and we are in touch with the EU institutions and with other member states. As my hon. Friend the Member for Maldon will be aware, Baroness Ashton, Vice-President of the European Commission and EU High Representative for Foreign Affairs, has travelled to Kiev and will encourage all parties to engage in constructive dialogue. And as my right hon. Friend the Minister for Europe set out in his written ministerial statement earlier today, the Government continue to urge all parties to remain calm and to avoid actions that could lead to an escalation of the situation or the restriction of personal freedoms.

[Mr Whittingdale]

I very much welcome the assurances that the Minister has given. I hope that it will be unnecessary for him to do so, but should the situation deteriorate, I hope he will make it clear that if violence were to be used, those responsible will be held personally responsible for it. In addition, there are already some concerns about the fate of some of the people who were arrested in the original protests about 10 days ago and who seem to have disappeared. There is obviously concern about their well-being and I hope that we will apply pressure to try to ensure that they are safe.

[Mr Swire]

My hon. Friend is absolutely right—anyone who has orchestrated any sort of violence in contravention of the basic norms and human rights should be held to account publicly, with the full weight of the law holding them to account for their actions.

Once again, I thank my hon. Friend for his continued interest in Ukraine and the surrounding region, and other Members of the House for their contributions today.

[Mr Dai Havard (in the Chair)]

Before we finish, may I say thank you very much for the way in which the debate has been conducted? It is being broadcast and webcast, and the fact that it was conducted with dignity and quality gives it an additional power. So thank you very much for your co-operation. With all the disruption, I intend to allow the next debate to run until 5.10 pm. We will see how the discourse takes us.

Mindfulness in Education

Tuesday 10th December 2013 Westminster Hall

16:39

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

Mindfulness is a form of meditation. I first came across meditation in 1987, when I was a schoolteacher. The school was about to be examined and the staff were highly stressed, so the head teacher called in the school nurse and she gave meditation lessons to the whole staff, including the support staff. It worked wonders. I then took the lessons I had learned from meditation to my classroom in a primary school and taught it to children in classes of up to 39. In fact, on occasions, I would use it in front of 300 children in the school assembly. I have maintained my interest over the years. More recently, I came across the mindfulness form of meditation.

I have tabled hundreds of questions on this subject—the Minister herself will have answered some—and the answers are quite disturbing. One stated that 32.3% of 16 to 25-year-olds have one or more psychological conditions. Another, answered last week, on the incidence of attention deficit hyperactivity disorder, stated that 2% of the population under 16 have severe ADHD and 9% are mild to moderate.

In 1991, there were 7 million prescriptions for antidepressants, but by 2011 that had increased to 49 million—a 500% increase in the use of antidepressants. Studies in the United States show that 8% of children who use games consoles are clinically addicted to them. The World Health Organisation predicts that, by 2030, the biggest health burden on the planet, ahead of cancer and heart disease, will be mental health. Our children are in health crisis.

WH Auden described the age we live in as the age of anxiety. What are the causes of this pressure, anxiety and stress? There are many contenders, advertising being one. Oliver James, the UK journalist and psychologist, maintains that mental health is undermined by advertising. A parliamentary question answered last week stated that a child will, in their 18 years of childhood, look at 180,000 adverts. The purpose of an advert is to make people unhappy with what they have, so that they will buy what is being presented to them.

Other people say that information overload is the problem. When I was growing up we had three TV channels, but now there are 3,000. We also have texts, Facebook, adverts and digital media. Others say it is digital distraction: computers, the iPad and iPod, the iPhone and the iMac, TV, video and games consoles. Taking people away from face-to-face engagements and putting them in front of screens results in two things: first, they do not pick up the verbal cues from conversation and contact with another human; and, secondly, they do not pick up on the non-verbal cues from facial expressions. That is interfering with neural pathways and relaying those neural pathways.

The speed of modern life needs to be considered. We are running ever faster, but we still seem to be in the same place, as the Red Queen said to Alice. We live in a 24/7 society.

Is the problem the testing? We test children at four, seven, 11 and 14 in standard assessment tests, at 16 for their GCSEs, 17 for AS-levels, 18 for A-levels and at 21 for their degree. We are the most tested nation on earth. Is the problem peer pressure, which has amplified? In my day, people had a ring of 10 mates and we compared ourselves to them. If there were fights or a bullying incident, they were forgotten the next day. However, peer pressure is now amplified by the digital media, with Twitter and Facebook.

Some say the problem might be chemicals in the food or pollution. However, whether it is advertising, information overload, digital distraction, testing, peer pressure or chemicals, we have a crisis in attention in this country. Heidegger predicted this in the 1950s, saying that the

“tide of technological revolution”

might

“so captivate, bewitch, dazzle, and beguile man that calculative thinking may someday come to be...the only way of thinking.”

That would come at the loss of

“meditative thinking”.

There are different ways of thinking. Calculative thinking has over-dominated meditative thinking and is having an adverse effect in our schools. There is a crisis in mental health and education, and a crisis in society.

Educational attainment is key. It is what the Minister will be judged on, with regard to her portfolio, and what her Department and the Government will be judged on. Educational attainment has dipped. In the programme for international student assessment results, last week or the week before, all nations and regions of the UK dipped, some more than others. The PISA tests, which are done at age 15, are one of the key tests, which I have mentioned, the others being GCSE, A-levels, degree and postgraduate. A third of our young people are in crisis.

Educational attainment comes down to attention and focus. If people can pay attention and focus, they can learn. William James, one of America’s foremost philosophers and the father of American psychology, said:

“The faculty of voluntarily bringing back a wandering attention over and over again, is the very root of judgement, character and will. No one is compos sui—

I think that means “a master of himself”—

“if he have it not. An education which should improve this faculty would be the education par excellence. But it is easier to define this ideal than to give practical instructions for bringing it about.”

Mindfulness could provide the practical instructions for bringing about that excellence in education.

The crisis of attention could be improved by mindfulness. Mindfulness is training in concentration and self-awareness that has been shown to support top performance and good mental health. Mindfulness is a form of mental training that develops sustained attention. Mindfulness training involves cultivating the capacity to attend to whatever is happening in ways that are purposeful and well balanced. It is the ability to be in the present moment, not being chased by our past or worried by our future so that we cannot concentrate on the present.

Mindfulness is about living in the present moment and releasing the mind from the habitual ruminative patterns that lead to worry, depression and burn-out and it enables more intuitive and creative responses to new challenges. Given the centrality of attention in all mental functioning, such training has significant implications for mental and physical health, for self-regulation and for education. These gifts are there for the taking. I do not think these gifts have been fully explored by my Government—the previous Labour Government—or this Government, but they are worthy of investigation.

Mindfulness can bring about excellence—not just in education, but in sport. It is used across the world, for example, by the best sports teams in the Olympics, in basketball, swimming and diving. It is used by the most creative industries the world has ever known, Google and Apple, which provide mindfulness training for their top creatives in America.

Ariana Huffington, of “The Huffington Post”, is a big advocate of mindfulness in business; she calls it the third matrix. She will address Parliament on the subject in May next year. Mindfulness has been used by British companies, such as Transport for London, and by local authorities, including Gwynedd authority in north Wales. It is used by the American military—this is not fluffy nonsense—which has given $159 million to develop mindfulness in the training of its armed forces, because it realises that a soldier who is not aware of the present moment can cause catastrophe, diplomatic incidents and further bloodshed by a reaction instead of a response.

Mindfulness is also being used here in Parliament. There is a mindfulness group of parliamentarians, with 50 Members of Parliament and Lords who have had training in mindfulness—hopefully, another 50 next year. It is being introduced into the Welsh Assembly Government by a Conservative Assembly Member, Darren Millar.

Mindfulness has broad support, broad appeal and broad usage. The roots of mindfulness are in the eastern traditions, but it has been meticulously tested by the rigour of western science over the past 30 years by people such as Jon Kabat-Zinn, who has pioneered mindfulness for the past 40 years. He visited London in March 2013 and spoke to No. 10 advisers about mindfulness, creativity and enterprise. He addressed shadow Ministers for Health and Education. I am pushing that agenda, and I hope that other Labour colleagues and shadow Ministers will be taking up mindfulness. Jon Kabat-Zinn addressed civil servants, and mindfulness is now being introduced for civil servants in the Department of Health. There is also Professor Richard Davidson, who is a top neuroscientist who maps and measures the brain and the impact that stress and depression have on it.

It is not only American researchers and scientists who are exploring mindfulness; a wealth of home-grown scientists are doing so, too. I particularly praise Professor Mark Williams, who is watching the debate from the Public Gallery. In 2004, along with Zindel Segal and John Teasdale, he was the scientist who convinced the National Institute for Health and Care Excellence to accept mindfulness in the Department of Health. That decision has brought tremendous benefits to patients and people suffering mental illness. Mark will retire in the next one or two years—he has had more retirements than Frank Sinatra—but, before he fully retires, he wants to pass on the benefits experienced in the Department of Health to the Department for Education. I join him on that crusade.

There are centres of excellence in the UK. At the university of Exeter, Professor Willem Kuyken is developing mindfulness in schools. Bangor university in Wales is the training ground for mindfulness—not just for the whole of the UK, but for the whole of Europe. It has trained 4,000 professionals, 700 of them to master’s degree level. There is also the Oxford Mindfulness Centre at the university of Oxford. Felicia Huppert is a well-being expert at the university of Cambridge. The benefits that accrue from mindfulness include improved attention and focus, and less impulsive and risky behaviour.

I was a teacher for 15 years, and I was the deputy head of a large Catholic primary school with 550 pupils. When I went down to the infants department and asked the teachers the biggest thing that they expected from a child coming in at the age of three or four, they did not say the ability to read, write or do numbers; what they wanted is for that child to be able to sit still, be curious and be willing to learn. To do that, the child needs attention and focus, which mindfulness can supply.

I have some materials for the Minister to look at, including material on the .b programme, which is being implemented in secondary schools across the UK. There is also material on the paws .b programme, which is being introduced in primary schools across the UK and beyond. The programmes have been developed by academics, neuroscientists, practising teachers and psychologists, and they are being piloted as we speak. The .b programme is the most widely used mindfulness curriculum in the UK. The science adopted by NICE for the national health service has been used to inform the debate in the education sector.

I pay tribute to the Prime Minister’s work on well-being. He took some big, bold steps back in 2010 when he instructed the Office for National Statistics to develop a well-being index to measure well-being, including the well-being of children. He has taken a principled stand on advertising to children and the sexualisation of young children through advertising. I pay tribute to the work of the previous Labour Government in introducing social and emotional education. Indeed, the NICE breakthrough in 2004 was under a Labour Government and followed funding by the Wales Office in the 1990s.

The well-being of our children is non-party political; it is one of those issues such as national security and care for the elderly on which we should come together across the political divide, especially when we are faced with a crisis in which every third young person is experiencing poor mental health.

I have a few questions for the Minister, as well as the homework that I am setting her. Will she please consider making mindfulness training available in all teacher training colleges in England? I will be asking the other nations of the UK to do the same in their teacher training institutions. Such a measure would help individual teachers in their personal practice, but, more importantly, a primary school teacher will teach 1,000 children over the course of their 30 or 40-year career. The knowledge that each teacher passes on will help those children for the rest of their life.

Mindfulness is a life skill, and if we can teach it from the age of four to the age of 18, those young people will be well prepared for life. I also ask that mindfulness be made available to the 440,000 teachers who are currently teaching—I think there are an extra 460,000 teaching assistants and ancillary staff. Let them have access to mindfulness training for themselves and for the pupils they look after.

Will the Minister meet the experts I mentioned from the UK’s world-class universities? Perhaps she could be joined by two or three MPs from both sides of the House who are keen to promote mindfulness in education. I thank her for listening.

16:49

[The Parliamentary Under-Secretary of State for Education (Elizabeth Truss)]

I congratulate the hon. Member for Vale of Clwyd (Chris Ruane) on securing this debate. His speech, drawing on his experience as a teacher, was interesting and informative and he highlighted some worrying facts about the mental health of our children and young people. He painted a vivid picture of the age of anxiety in which we live, whether that is as a result of the constant pummelling of modern media such as Twitter and Facebook and advertising, or the sheer pace of modern life that we all experience. He talked about the Red Queen from “Alice’s Adventures in Wonderland,” and I think many of us often feel like the White Rabbit, rushing around from one thing to another. I recognise the issues he raised and the picture he painted of the way life is now.

The Department for Education certainly agrees that children learn better and achieve more when they are thinking clearly, and the ability to focus on the matter in hand and to ignore potential distractions is an important factor in being able to learn and focus. The hon. Gentleman talked about the ability to sit still, be curious and be willing to learn, which we need at every stage of our education system. I absolutely agree with that.

I also agree with the hon. Gentleman’s comments on the number of exams, particularly external exams, that students are sitting. We have moved to a linear course for A-level to remove the necessity for students to sit another exam at 17. We have moved to linear exams for GCSEs, too, because children were taking external exams every term. We want young people to have an opportunity to learn in depth, to think about what they are studying and to enjoy it. Rather than the end always being the exam, the end should be learning in school.

I challenge what the hon. Gentleman said about the PISA results, which varied between the countries of the United Kingdom. Wales did significantly worse than England. England’s results have stagnated over the past 15 years. We do not think that is good, which is why the Government are reforming the education system and considering examples such as Poland and Germany, where results have successfully been improved. I agree with him about the importance of young people being exposed to entrepreneurship in schools, which could help to build character resilience and all the other characteristics we want to see in our young people.

It is worth briefly discussing the new curriculum, which is being introduced in September 2014. It is a lot slimmer than its predecessor, which means more time for teachers to teach in different ways and to introduce concepts such as mindfulness to their students if that is the best way of getting messages across. I like to say that the Government have put the trellises and pathways in the garden, but it is for the teachers to plant the seeds and grow the plants. That is not something we can do from Whitehall.

Students’ mental health and well-being is of course an important part of their learning process in order to ensure that they are doing well. Mindfulness has been used in schools and is often taught in combination with other relaxation and self-management techniques. Some early indications suggest that such approaches can help pupils to control stress and anxiety, pay attention and develop social skills, and can improve teacher-pupil interactions and enhance academic performance. I support the sharing of good practice and ideas that help pupils to achieve more. I also believe that the best way for schools to find out about what works is from the successes of other schools in similar circumstances. I would like to hear from the hon. Gentleman and interested colleagues about positive examples of schools that are using mindfulness and finding it a successful approach.

[Chris Ruane]

Would the Minister accept an invitation to see mindfulness in action in a school in her constituency, if one is available, or perhaps here in London?

[Elizabeth Truss]

The hon. Gentleman makes an interesting proposal, which I will consider along with the meeting request, but I certainly am interested in understanding more about how mindfulness works in practice. I would therefore like to accept the offer.

As I mentioned, we have given schools the freedom to decide which external programmes they use to deliver their curriculum. I am keen to get across the point that, while the curriculum is being implemented by schools over the next six months, they do have the freedom to try new approaches and to do things differently, in a way that they feel is beneficial for their students.

Ofsted has made it clear that it expects schools to look at the whole child, and will focus inspections on outcomes. Together with a slimmed-down curriculum, that gives schools more freedom to add skill and character-building activities, promoting children’s wider well-being. If a school thinks that the mindfulness programme is suitable, it has the ability to make that choice.

Many schools commission their own pastoral and counselling support for their students, and school counselling to support young people is already widespread. A recent survey estimated that between 60% and 85% of English secondary schools provide access to counselling, which equates to between 50,000 and 70,000 sessions a year. The hon. Gentleman mentioned the Department of Health, which issued in July 2012 a document entitled, “No health without mental health: implementation framework”, which described the role of schools and FE colleges as understanding the link between emotional well-being and achieving good educational and life outcomes. Teachers are not expected to stand in for mental health professionals, but schools should have a whole-school approach to developing pupils’ well-being and resilience.

I am doing much work with the Department of Health to ensure that our programmes are more joined up in all areas, including schoolchildren’s mental health and our early years programme. The hon. Gentleman referred to the fact that the abilities to sit still, be curious and be willing to learn are often developed at an early age. We need better co-operation between the Department for Education and the Department of Health. Children’s centres, where health and education professionals are on the same site providing guidance to parents and helping young children, work well to help to develop such skills.

The hon. Gentleman mentioned teacher training. Although initial teacher training is important, so is professional development while teachers are in schools. We are keen to see greater professional development and to see head teachers take on more responsibility over time for that development in a school-led system.

I am interested in discussing the matter further with the hon. Gentleman and his colleagues to see how we can ensure that schools understand the opportunities and the examples of best practice, and how they can fit in to the new national curriculum and the new approach on qualifications.

Question put and agreed to.

17:05

Sitting adjourned.

Written Statements

Tuesday 10th December 2013 Written Statements

Tuesday 10 December 2013

Banking Act 2009

Tuesday 10th December 2013 Written Statements

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

The Treasury has laid before the House of Commons a report required under section 231 of the Banking Act 2009 covering the period from 1 April 2013 to 30 September 2013. Copies of the document are available in the Vote Office and the Printed Paper Office.

Finance Bill 2014 (Draft Legislation)

Tuesday 10th December 2013 Written Statements

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

The Government consulted on a number of tax policies, following their announcement at Budget 2013. Today, the Government are publishing responses to these consultations alongside draft legislation to be included in Finance Bill 2014. This fulfils our objective to confirm the majority of intended tax changes at least three months ahead of publication. Draft legislation will be open for technical consultation until 4 February 2014.

Details of the clauses published today are set out in the overview of legislation in draft document, which also includes tax information and impact notes for each measure. All publications will be available on the gov.uk website.

The Government are publishing draft legislation on policies announced at Budget 2013 and earlier, including:

Completing the merger of the main corporation tax and small profits rates recommended by the Office of Tax Simplification.

An increase in the level of the income tax personal allowance to £10,000 from April 2014.

A package of measures to support employee ownership, including a capital gains tax relief and an annual exemption from income tax on bonus or equivalent payments paid to employees of those companies.

A remote gambling reform to move the taxation of remote gambling onto a place of consumption basis.

A social investment tax relief to encourage individuals to invest in social enterprises.

Changes to make film tax relief available at a rate of 25% on the first £20 million of qualifying production expenditure, and 20% thereafter, for small and large budget films.

Countering the disguising of employment relationships through the use of limited liability partnerships and the tax-motivated allocations of business profits where partners include both individuals and companies—mixed membership partnerships.

Abolishing the stamp duty reserve tax charge on unit trusts and open-ended investment companies in schedule 19 to the Finance Act 1999, with effect from 30 March 2014.

The Government will also publish draft legislation on policies announced in the 2013 autumn statement. This includes draft legislation to:

Introduce a transferable tax allowance for married couples.

Ensure that the reliefs introduced to support employee ownership work in the way that is intended. The corporate tax legislation will be amended to ensure that the exemption from income tax does not disqualify companies from claiming corporation tax relief on payments which would otherwise have qualified. Transfers of shares and other assets to an employee ownership trust will also be exempt from inheritance tax providing certain conditions are met.

Increase the maximum annual value of shares that an employee can acquire with tax advantages under the share incentive plans to £3,600 a year for “free” shares and to £1,800 a year for “partnership” shares.

Increase the rate of the bank levy set for 1 January 2014 to 0.156%, and make a number of changes to the bank levy’s detailed design following a 2013 review.

Prevent employment intermediaries being used to avoid employment taxes by disguising employment as self-employment.

Reduce the capital gains tax private residence relief final period exemption from 36 months to 18 months.

ECOFIN

Tuesday 10th December 2013 Written Statements

[The Chancellor of the Exchequer (Mr George Osborne)]

A meeting of the Economic and Financial Affairs Council will be held in Brussels on 10 December 2013. The following items are on the agenda to be discussed.

Savings taxation

Council will be asked to reach political agreement on a proposal on taxation of savings income in the form of interest payments. The compromise text which Ministers will be asked to agree is identical to that discussed at ECOFIN in November. The Government support an agreement of the amending proposal to the EU savings directive and an adoption of the mandate as soon as possible.

Bank Recovery and Resolution

Council will consider the European Parliament’s amendments to a proposal for a directive establishing a framework for the recovery and resolution of credit institutions and investment firms, in preparation for potential political agreement.

Deposit Guarantee Schemes

Council will consider the European Parliament’s amendments to a proposal for a directive on deposit guarantee schemes, in preparation for potential political agreement.

Macro-economic Imbalance Procedure—Commission Alert Mechanism Report

Council will hold an initial exchange of views on the alert mechanism report, the first stage in the macro-economic imbalance procedure.

Annual Growth Survey 2014

Council will hold an initial exchange of views on the annual growth survey 2014. The Government broadly welcome the annual growth survey 2014 and its continued focus on jobs and growth.

Assessment of Economic Partnership Programmes

Council will be invited to adopt draft Council opinions on the economic partnership programmes of Spain, France, Malta, the Netherlands and Slovenia, describing the policy measures and structural reforms that are needed to ensure an effective and lasting correction of their excessive deficits.

Implementation of the Stability and Growth Pact

Council will seek to adopt a Council decision and Council recommendation relating to Poland’s excessive deficit procedure.

Annual report of the Court of Auditors on the implementation of the budget for the financial year 2012

The President of the European Court of Auditors, Mr Vitor Caldeira, will present to Council the annual report of the Court of Auditors on the implementation of the budget for the financial year 2012. The Government take the report and its findings seriously and strongly support the need to improve financial management of the EU budget.

Proposal for a Council Regulation establishing a facility for providing financial assistance for Member States whose currency is not the euro

The presidency will hold a state of play discussion on a proposal to amend the current EU balance of payments regulation.

Single Resolution Mechanism

Council will examine the proposal, establishing uniform rules and a uniform procedure for the resolution of credit institutions and credit investment firms in the framework of a single resolution mechanism and a single bank resolution fund. The presidency is looking to reach a general approach.

Written Ministerial Question (Correction)

Tuesday 10th December 2013 Written Statements

[The Minister of State, Department of Energy and Climate Change (Gregory Barker)]

An error has been identified in the written answer given to the hon. Member for Nottingham East (Chris Leslie)—[Official Report, 18 November 2013; Vol. 570, c. 726W]. The figures provided for 2010-11 and 2011-12 were understated and the figures for 2012-13 were overstated.

The full answer given was as follows:

Chris Leslie: To ask the Secretary of State for Energy and Climate Change how many overseas trips, and at what total cost, his Department has made in each year since 2010; and what the costs of (a) flights, (b) internal travel, (c) hotel accommodation and (d) subsistence were of each trip. [175476]

Gregory Barker: Cost information is available for all years but it is not possible to establish the number of overseas trips for every year since 2010. The following table shows the data centrally held:

Agriculture and Fisheries Council

Tuesday 10th December 2013 Written Statements

[The Secretary of State for Environment, Food and Rural Affairs (Mr Owen Paterson)]

The next Agriculture and Fisheries Council will be on 16 and 17 December in Brussels. I will be representing the UK to cover the agricultural items while the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Camborne and Redruth (George Eustice) who is responsible for farming, food and marine environment, will cover the fisheries items. Richard Lochhead MSP, Michelle O’Neil MLA and Alun Davies AM will also attend.

This Council will largely deal with the fixing of the 2014 fishing opportunities in EU waters and the Black sea.

On agriculture the Commission will present their proposal for a regulation on information provision and promotion measures for agricultural products on the internal market and third countries. There will also be a proposal for a Council regulation related to the common organisation of the markets in agricultural products (sCMO).

This Council is also notable because the four regulations of the new common agricultural policy (CAP) and the CAP transitional regulation will pass through their final stage of approval. The Council plan to agree them as an “A point” on the agenda. This will allow the regulations to be finally published in the Official Journal of the European Union.

There are currently seven any other business items;

European maritime and fisheries fund (EMFF);

Amendment of an EU directive on national emission ceilings for certain atmospheric pollutants (“NEC directive”);

Conference on “The EU dairy sector: developing beyond 2015” (Brussels, 24 September 2013);

Public consultation results (organic farming);

Animal health/plant health/seeds/control/expenditure;

“Hybrid” nutrition labelling system recommended in some member states;

Market access to the Russian Federation concerning EU exports of plants and plant products.

Coastal Flooding

Tuesday 10th December 2013 Written Statements

[The Secretary of State for Environment, Food and Rural Affairs (Mr Owen Paterson)]

On Thursday and Friday last week, we experienced an exceptional coastal surge along the east and parts of the west coast of the UK. This caused flooding to around 1,400 properties and damage to infrastructure.

Our thoughts are with all those who have been affected by high winds and whose homes and businesses have been damaged during these powerful storms. However, through investment by Government and improvements to the way we manage this type of flooding, we were able to protect up to 800,000 properties which would otherwise have been flooded.

The extremely severe conditions were caused by a rare combination of factors. Very low atmospheric pressure over the North sea caused the sea level to rise. This, combined with the high astronomic tides and gale force winds, resulted in a tidal surge of unprecedented sea levels on some parts of the coast.

It is worthwhile comparing the events of last week with the storm surge of January 1953. The latter claimed the lives of over 300 people; 24,500 homes were damaged or destroyed and there was considerable damage to national infrastructure.

Two people lost their lives as a result of last week’s high winds and I offer my sincere condolences to their families. However no lives were lost as a result of flooding, and the numbers of homes, businesses and infrastructure affected were small in comparison to 1953. This serves to reinforce the importance of the recent and continuing investment that we have made in flood defence schemes and forecasting capability.

Response and impacts

The Government are grateful for the excellent response from our front-line emergency services. I pay tribute to the community spirit of ordinary people who have rallied round to help their neighbours in difficult times. I want to particularly praise the work of the Environment Agency, Met Office and Flood Forecasting Centre. There were also many local authorities which worked tirelessly to prepare for and respond to the surge as it happened.

We were organised and prepared. From the earliest signs of a possible surge threat, Government Departments and agencies, local resilience fora and local authorities were making preparations. I myself chaired three meetings of COBR on Thursday and a further COBR meeting on Friday. We were able to plan and co-ordinate the response to ensure the focus was on protecting communities at risk and the key infrastructure that supports them.

Over 160,000 homes and businesses received a flood warning and advice in advance to enable them to put their flood plans into action. Approximately 18,000 properties were evacuated in the afternoon and evening of Thursday 5 December along the coast from towns and villages including Great Yarmouth, Boston, Clacton-on-Sea and Sandwich.

Over 100 specialist flood rescue teams and their equipment were on standby across the country as part of the national asset register managed by the fire and rescue service national co-ordination centre. A number of strategic holding areas for these flood rescue teams and equipment were established in Essex, Suffolk and Norfolk, utilising vital equipment which had been mobilised from across the country.

The extreme conditions of last week put sea defences to their greatest test in 60 years. Record tidal surge levels were experienced at many locations, including at North Shields, Whitby, Hull, Immingham and Dover. In Wales, Rhyl was badly hit with 250 properties affected. Some parts of the east coast experience such circumstances only once every 500 years.

Numerous assets and barriers were deployed along the coast, including at Goole, Great Yarmouth and Colne in Essex. Tidal barriers were operated at several locations including at Hull, which I have seen for myself and I understand worked well. Over £200 billion worth of property was safeguarded in London by the Thames barrier which was raised against the highest level it had faced since it started operating in October 1982.

Impacts were not confined to the east coast however, with the £23 million Warrington flood defence scheme being operated for the first time to reduce the flood risk to 1,500 properties from the River Mersey.

In addition to the coastal flooding, extremely high winds—primarily across northern England and Scotland—resulted in 370,000 homes being disconnected from power supplies on Thursday. Almost all of these had power restored before the weekend.

As well as damaging homes, businesses and infrastructure, these storms also resulted in the flooding of agricultural land and sites of special scientific interest. A full assessment of these impacts will take place over the coming weeks.

Recovery

The multi-agency response to the surge event is now focusing on recovery. The Secretary of State for Communities and Local Government has set up the Bellwin scheme to reimburse local authorities for their immediate costs caused by the storm surge.

In the next few days, the Government will be discussing with every local authority area affected by the flooding what further help they need to ensure places can quickly get back on their feet.

People who have had their home damaged or destroyed should contact their local authority for help with emergency re-housing. We have also asked the Association of British Insurers (ABI) to ensure its member firms stand ready to settle insurance claims promptly.

Flood management is a top priority for Government. It has a vital role to play in protecting people and property from the damage caused by flooding and delivering economic growth and supporting a strong economy.

That is why we are making record levels of investment in improvement projects. Between 2015-16 and 2020-21 we are on track to spend £2.3 billion on protecting people and property from flooding and coastal erosion. This long-term settlement will enable the Environment Agency and other risk management authorities to reduce the risk of flooding to a further 300,000 households between April 2015 and March 2021, on top of the 165,000 protected during the current spending period.

Our continued commitment to improving flood defences will help us to manage effectively any future incidents of this magnitude.

European Environment Council

Tuesday 10th December 2013 Written Statements

[The Secretary of State for Environment, Food and Rural Affairs (Mr Owen Paterson)]

I will represent the UK at the European Environment Council meeting in Brussels on 13 December. Paul Wheelhouse, Minister for Environment and Climate Change in the Scottish Government, and Alun Davies, Minister for Natural Resources and Food in the Welsh Government, will also attend.

Following the adoption of the agenda and approval of the list of “A” items, the Council will hold an exchange of views on a proposal for a regulation on monitoring, reporting and verification of CO₂ emissions from ships. Presented by the Commission in July, the proposed regulation would apply to all ships above 5,000 gross tonnage calling at EU member states’ ports. It would require CO₂ emissions of these ships to be monitored on a “per voyage” and an annual basis, and to be reported and verified on an annual basis. The presidency has suggested two questions to be discussed relating to the scope and balance of the proposal.

After a series of AOB points relating to climate, the Council will then hold an orientation debate on a proposal for a regulation on the prevention and management of the introduction and spread of invasive alien species. Published in September, the Commission’s proposal is intended to require member states to prevent, manage or eradicate such species. The debate is designed to assist and focus negotiations. It will seek views on whether the list of species to be subject to the regulation should be limited in number, whether they should only comprise species that are not native to the EU, how they should be selected and prioritised, and whether and how action at the biogeographic regional level should be provided for.

After further AOB points relating to the environment, Ministers will break for a working lunch. This will provide Ministers with the opportunity for a discussion on the post-2015 development framework.

Over the course of the day, the following topics will be covered under any other business:

Information from the presidency on the promotion of the use of energy from renewable sources and the quality of petrol and diesel fuels.

Information from the C0P 19 presidency, the presidency of the Council of the EU and the Commission on the 19th session of the conference of the parties to the UN framework convention on climate change.

Information from the presidency and the Commission on EU ETS/aviation.

Information from the Commission on a proposal to reduce the consumption of lightweight plastic carrier bags.

Information from the Greek delegation on the work programme for the incoming presidency.

EU-Georgia Framework Agreement

Tuesday 10th December 2013 Written Statements

[The Minister for Europe (Mr David Lidington)]

I wish to inform the House that the Government have opted in to the following measures:

Council decision on the signing and provisional application, on behalf of the Union, of a protocol to the partnership and co-operation agreement between the European communities and their member states, of the one part, and Georgia, of the other part, on a framework agreement between the European Union and Georgia, on the general principles for the participation of Georgia in Union programmes.

Council decision on the conclusion of a protocol to the partnership and co-operation agreement between the European communities and their member states, of the one part, and Georgia of the other part, on a framework agreement between the European Union and Georgia on the general principles for the participation of Georgia in Union programmes.

The stability, security and prosperity of the south Caucasus region, of which Georgia forms a part, is of strategic importance to the EU. Continued stability in the region helps to deliver the UK’s prosperity and energy security goals. Progress towards EU standards and norms contributes to Georgia’s prospects of becoming a peaceful and prosperous neighbour to the EU. As Georgia adopts the reforms necessary, it becomes an increasingly viable trading partner which shares European values. We therefore support Georgian progress and welcome the fact that Georgia has just initialled its association agreement with deep and comprehensive free trade area with the EU. This is an important landmark.

The Council decisions allow Georgia to participate in European Union programmes and agencies, through its participation in the European neighbourhood policy. This will support Georgia’s integration into EU networks, and will pave the way for further Georgian progress.

OSCE Ministerial Council (Kiev)

Tuesday 10th December 2013 Written Statements

[The Minister for Europe (Mr David Lidington)]

I represented the United Kingdom at the 20th ministerial Council meeting of the Organisation for Security and Co-operation in Europe (OSCE) held in Kiev on 5 and 6 December 2013, hosted by Ukrainian Foreign Minister Leonid Kozhara. The Council is the key decision-making body of the OSCE and was attended by Ministers from across its 57 participating states.

The Council welcomed two ministerial decisions in the human dimension, after two years without agreement. The decision on freedom of thought, conscience, religion or belief is particularly welcome as a human rights priority for the United Kingdom and the first ever self-standing OSCE decision on a fundamental freedom. We also joined consensus on a decision to update the OSCE’s existing Roma and Sinti action plan. It was, however, disappointing that a decision on the safety of journalists was not able to gain consensus, despite our and like-minded partners’ strong support. The events unfolding in Ukraine serve as a vivid reminder that journalists’ safety and freedom to do their job remains a concern in a number of OSCE countries. It is also disappointing that some states remain unwilling to acknowledge that freedom of expression and media freedom protections should apply equally online as they do offline.

I also strongly welcome the adoption at Kiev of the first internationally recognised confidence-building measures on cyber security, a long standing UK priority. Further agreements were reached across the OSCE’s three dimensions, including on combating the proliferation of illicit small arms and light weapons, and on combating trafficking in human beings. I regret it was not possible to reach consensus on a ministerial declaration on Afghanistan and we will continue to look for ways to underscore the OSCE’s capacity to act on issues such as border security in the central Asian region. A further declaration was agreed on the Helsinki +40 process, continuing the initiative launched last year in Dublin to reinvigorate the OSCE as we approach the 40th anniversary of the Helsinki Final Act in 2015.

I look forward to supporting the incoming Swiss and Serbian chairmanships on both this and their wider agenda for the OSCE when they take the reins in 2014-15.

As I recalled in my intervention at the Ministerial Council (www.osce.org/mc/109248), the OSCE remains the world’s largest security organisation, and the United Kingdom remains committed to working with all its participating states to strengthen security across our region. The notion of security goes far beyond the absence of war, but extends to creating a framework for peace and stability with democracy and human rights at its core. To ensure that all its participating states live up to and fully implement the commitments they have all agreed to, they must demonstrate the political will to make this happen. No country is perfect, but some participating states appear determined not just to ignore these commitments, but to allow narrow national interest to undermine and weaken them.

The Council took place in Kiev at a time of heightened tensions in Ukraine following the Ukraine’s decision to postpone signature of the EU-Ukraine association agreement. My right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs and I have taken every opportunity to express concern at the reports of violence being used to break up a peaceful demonstration and I underlined this again at the OSCE Council, drawing particular attention to the number of practising journalists who had been injured by law enforcement officers. I welcomed the Ukrainian authorities’ commitment to a thorough investigation, making it clear that the investigation must be rigorous, transparent and fair. I urged all parties to remain calm and avoid actions that could lead to an escalation of the situation or the restriction of personal freedoms.

In addition to attending the Ministerial Council, I had a lively discussion with Ukrainian thinkers and activists some of whom had just come from the protests. I was also able to talk to Yulia Tymoshenko’s daughter Yevhenia. I took the chance to visit the Maidan, or Independence Square, and observe for myself the genuine and peaceful nature of the protests. In my meeting with the opposition leaders, I described our efforts, including through clear and public statements in the context of the OSCE ministerial, to insist on the scrupulous adherence to fundamental civil and human rights and that those responsible for police brutality are held to account through rigorous, fair and transparent trials. I encouraged the opposition leaders to engage seriously with ideas to identify ways to help defuse the situation and map out a peaceful route forward.

I will place a copy of my statement to the plenary Session and all ministerial decisions agreed in Kiev in the Library of the House.

Special Tribunal for Lebanon

Tuesday 10th December 2013 Written Statements

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

I am pleased to announce that the UK intends to make a voluntary contribution of £1 million to the Special Tribunal for Lebanon (STL).

The UK is committed to supporting security, stability and justice for the people of Lebanon. This contribution to the Special Tribunal for Lebanon is a signal of our steadfast support for its work to end the climate of impunity for political assassinations in Lebanon. The Minister of State with responsibility for the middle east, Foreign and Commonwealth Office, my right hon. Friend the Member for Faversham and Mid Kent (Hugh Robertson) is in Lebanon this week to reinforce these points.

International justice is central to foreign policy. It is essential for securing the rights of individuals and states, and for securing peace and reconciliation. Through the International Criminal Court, and the separate international tribunals, we are working to make clear that those responsible for the most serious crimes will be held to account. Our support to the institutions of international justice is an important part of our efforts to reduce conflict and promote stability worldwide.

Victims of Crime (Code of Practice)

Tuesday 10th December 2013 Written Statements

[The Minister for Policing, Criminal Justice and Victims (Damian Green)]

Today the new code of practice for victims of crime (“the victims’ code”) has come into force.

This new code governs the information and services criminal justice agencies must provide to victims of criminal conduct in England and Wales. The new victims’ code is written in plain English with victims of crime as the target audience, providing information on what they can expect to receive from the criminal justice system at every step of the process. The code forms a key part of the Government’s strategy to reorient the criminal justice system in favour of the victim to help make the system more responsive and attuned to their needs.

To ensure that victims, criminal justice practitioners and victims’ organisations are fully aware of the services and support that victims of crime are entitled to, the Government have developed a range of products to help communicate the code as widely as possible. This includes a YouTube video, short leaflet guides to the code for adults and children and young people and an EasyRead guide for people with communication difficulties. All of the written materials and the full code can be found at: https://www.gov.uk/government/publications/the-code-of-practice-for-victims-of-crime.

More information on the new victims’ code and the documents arising from the public consultation held from 29 March to 10 May can be found on the Ministry of Justice website at: https://consult.justice.gov.uk/digital- communications/code-victims-crime.

House of Lords

Tuesday 10th December 2013 Lords Chamber

Tuesday, 10 December 2013.

14:30

Prayers—read by the Lord Bishop of Truro.

Afghanistan: Interpreters

Tuesday 10th December 2013 Lords Chamber

Question

14:37

Asked by

[Baroness Coussins]

To ask Her Majesty’s Government, further to the Written Answer by Lord Astor of Hever on 4 November (WA 1), how they will implement the “intimidation policy route” in respect of locally employed interpreters and translators who have worked with British armed forces in Afghanistan but are not eligible for the ex-gratia redundancy scheme; and what is the per capita cost of the intimidation policy compared to the redundancy scheme.

[The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever) (Con)]

My Lords, we take reports of threats and intimidation towards our staff very seriously. There is a robust process in place for the thorough investigation and assessment of intimidation claims. Depending on the threat severity, different mitigating actions can be taken, including relocation within Afghanistan or, in exceptional cases, to the United Kingdom. It is not possible to compare the cost of the schemes at this time, as a redundancy scheme is still being implemented.

[Baroness Coussins (CB)]

My Lords, over 2,000 Afghan interpreters are ineligible for the redundancy scheme. It is insulting to trust them to risk their lives for us but not trust them enough to rely on their own assessment of the dangers they face. Will the Government set aside the redundancy scheme and the intimidation policy and instead offer all the interpreters the same targeted assistance package that was available to the Iraqi interpreters? Will the Minister also agree to arrange a meeting with all relevant departments and a cross-party group of Peers to discuss progress? If ever there were a special case for acting outside the Immigration Rules, surely this is it.

[Lord Astor of Hever]

My Lords, we absolutely recognise our clear commitment to take all reasonable steps to ensure the safety and the security of our locally engaged staff during and beyond the term of their employment with Her Majesty’s Government. The threat environment is different from Iraq. We have a very thorough anti-intimidation policy which applies to all staff employed since 2001 and, in extremis, that includes relocation to the United Kingdom. The noble Baroness asked if I could organise a meeting with a cross-party group of Peers. I am happy to do that. It would be across government, with members from the Foreign Office, the Home Office and DfID.

[Lord Palmer of Childs Hill (LD)]

My Lords, the Times reported an MoD report showing that UK translators had died and evidence that one US translator had been killed. Given this, will the Minister assess the threats? Is he aware of any death threats to UK translators who have served British forces?

[Lord Astor of Hever]

My Lords, since June 2013, 116 cases of intimidation have been reported to the intimidation investigation unit. The IIU investigates claims of intimidation, and an in-theatre decision panel assesses the claim and appropriate response level, depending on the risk to the LEC. The MoD’s labour support unit can confirm that, so far as it is aware, in Afghanistan there have been no deaths of serving LE staff that can be directly linked to intimidation.

[Lord West of Spithead (Lab)]

My Lords, why have the Government been so on the back foot over this issue? The numbers of people involved are minuscule compared with the immigration figures that we have to look at. Other countries are treating people who act as interpreters far better than we do, so I cannot understand why we are so on the back foot. Where is our generosity of spirit? This will affect us in future operations around the world. It is difficult to understand who in government is stopping this happening.

[Lord Astor of Hever]

My Lords, we are not on the back foot. The intimidation policy has been reviewed, and will be kept under review as appropriate, to ensure that it provides a robust and responsive means for addressing concerns appropriately. This will take account of the current security threat and the lessons learnt from handling cases and consultations with local staff. I have a list of what other countries—our allies—do, and it is very much along the same lines as what we do. I am very happy to write to the noble Lord with information on that.

[Lord Stirrup (CB)]

My Lords, the media today are reporting the case of an Afghan interpreter who worked for the UK being given asylum by Germany, having been refused it by the United Kingdom. Is this really the sort of comparison that we wish to draw to ourselves in the international community, and how does that square with the Minister’s assertion that our policies are broadly the same as those of our partner nations?

[Lord Astor of Hever]

My Lords, I have seen the article in the Times today. As I said to the noble Lord earlier, we go about this in a very similar way to other countries. So far only a very small number have been offered relocation in Germany.

[Lord Clark of Windermere (Lab)]

My Lords, many fair-minded people in this House and outside are completely perplexed by the Government’s response in this respect. We do not seem to be treating our interpreters fairly, and many of us feel that the Government have taken a strange decision. Can the Minister explain in words of one syllable why we are not treating our interpreters in Afghanistan in the way that our colleague countries are doing, and as we did in Iraq?

[Lord Astor of Hever]

My Lords, staff who have trod the ground with us, such as patrol interpreters and their FCO and DfID equivalents, have endured a level of danger over a sustained period, shoulder to shoulder with us in Helmand province. Their contribution to what we have been able to achieve there was made in a uniquely difficult and dangerous environment. We will not abandon them.

[Lord Cormack (Con)]

My Lords, will my noble friend place in the Library a detailed analysis of the comparative treatment by various countries? He says that it is broadly similar; many of us would like to see the details and the facts.

[Lord Astor of Hever]

My Lords, I am very happy to write to the noble Lord, Lord West, and put a copy of my letter in the Library.

[Lord Campbell-Savours (Lab)]

My Lords, the noble Lord referred to a review. What factors will influence that review?

[Lord Astor of Hever]

My Lords, we review the situation every six months. Obviously the level of intimidation, which is relatively low at the moment, is an important factor that would be considered.

[Lord Craig of Radley (CB)]

My Lords, in considering whether to grant asylum to an Afghan interpreter, does the fact that he has a family or is not married come into the equation?

[Lord Astor of Hever]

My Lords, I can assure the noble and gallant Lord that it does not. Eligible staff will be allowed to bring their immediate family: that is their spouse—one only—or partner, their minor dependent children under 18 years-old and that spouse. There is no limit on the size of a single family provided that the criteria are met.

NHS: Walk-in Centres

Tuesday 10th December 2013 Lords Chamber

Question

14:45

Asked by

[Baroness Wheeler]

To ask Her Majesty’s Government what plans they have in respect of the closures of NHS walk-in centres over the past three years, in the light of the preliminary report made by Monitor.

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)]

My Lords, since 2007, the local NHS has been responsible for NHS walk-in centres. It is for local commissioners to decide on the availability of these services. It is also for local commissioners to determine how walk-in centres fit into plans locally, rather than being governed by a top-down imposition of services. They make such decisions by involving patients and by using their clinical expertise to determine the pattern of local services and where walk-in centres fit in with this.

[Baroness Wheeler (Lab)]

I thank the Minister for his response. However, 76 NHS walk-in centres have been closed over the past three years and the Monitor report makes clear that this is often without proper consultation locally on alternative provision, leading to increased pressure on A&E and urgent care services. In Monitor’s survey, one in five patients using the centres said that they would have visited the nearest A&E department had the centre not been there. Monitor also finds in a number of cases that the closure decision has been made by CCGs, with member GP practices themselves having a financial interest in whether or not the service continues. What action will the Government take to ensure that, if future closures of walk-in centres are considered, the public will be properly consulted and patients will have access to an equivalent level of service?

[Earl Howe]

My Lords, when any service change is proposed, we expect that the four tests which the Government laid down early on in their term of office should be followed. One of those is a patient and public consultation or involvement in the decision. Another is clinical buy-in. I can give the noble Baroness the assurance that this is what local area teams of NHS England would expect to see in any proposals involving the closure of a walk-in centre.

[Baroness Brinton (LD)]

My Lords, does my noble friend share my concern that the NHS is paying twice for patients who regularly use walk-in centres due to the capitation payment to GPs and activity payment to other care systems? Could part of the alternative provision to closed walk-in centres be that all GP practices follow the good practice of those who already extend opening hours for early and late sessions and Saturdays?

[Earl Howe]

The noble Baroness makes an extremely good point. One of the findings of the Monitor review was that, when responsibility for walk-in centres was handed down to local commissioners in 2007, many of them were decommissioned because they were duplicating services locally and GPs felt that they were paying twice for the same thing. I am sure that the ideas the noble Baroness has put forward will have a resonance in many areas.

[Baroness Masham of Ilton (CB)]

My Lords, is it true that doctors are being paid not to send patients to hospital? Does the Minister agree that when patients are ill they have no alternative but to go to A&E departments?

[Earl Howe]

I agree with the noble Baroness that A&E often presents the easiest and most convenient route into the NHS. That is why Sir Bruce Keogh is currently conducting his system-wide review and looking at pressures on the system. I am not aware of any doctors who are being paid not to refer patients to hospital. Indeed, as the noble Baroness may be aware, the BMA has been steadfast in its opposition to any such scheme.

[Baroness Wall of New Barnet (Lab)]

My Lords, the noble Earl suggested in his response earlier that part of the problem might be that the commissioners felt that they were paying twice. Obviously, GPs are paid for the people on their lists; those same people could use the call centre and they would have to be paid again. How does this fit with the view—certainly the view on the policy—that you can belong to any GP throughout the country, which is exactly what should happen and, if it did, we would not have this dilemma? Walk-in centres are hugely important. I assure the House that, from the point of view of the provider trust, they are absolutely vital to stop people coming into A&E and possibly being admitted.

[Earl Howe]

My Lords, I would not deny for a second that walk-in centres had a role in many places, and indeed the fact that so many are still open is proof of that. However, it is a mixed picture. Those centres that have closed are in many cases ones where doctors locally have perceived that, in one form or another, there is adequate provision for patients, whether through pharmacies, GP surgeries or community services of a different kind.

[Lord Mawhinney (Con)]

My Lords, how many proposals for walk-in centre closures have been advanced to public consultation over the past three years and then have not been proceeded with as a consequence of the consultation?

[Earl Howe]

My Lords, I cannot give my noble friend the answer because that is not information that we collect in the department but, as I said earlier to the noble Baroness, Lady Wheeler, we expect consultation to take place in local areas so that patients and the public at least have a chance to voice their views.

[Lord Turnberg (Lab)]

My Lords, when these centres were introduced, most people believed that they were a very good thing; I think they still think that. They help to take the load off A&E departments and GPs. Does the noble Earl agree that one of the problems is that there is no overarching co-ordination between A&E departments, GPs and these centres? Furthermore, there are no overarching similar funding arrangements. Should we not do something about that?

[Earl Howe]

Yes, my Lords, and that is exactly why Sir Bruce Keogh has been tasked to look system-wide not simply at walk-in centres but at the entire community and urgent and emergency care network to make sure that patients go where is most appropriate for them, that there is not undue pressure on any single part of the system, and that tariffs reflect the right balance of patient flows.

[Lord Brooke of Alverthorpe (Lab)]

My Lords, if there is an expectation that there should be consultation with patients and it does not take place, who is accountable for that failure?

[Earl Howe]

In some cases, a change of services will be so minor that formal consultation with patients is not required under the existing rules if, for example, a service moves a few yards down the road or something of that kind. However, it is the responsibility of the commissioner—either NHS England or a clinical commissioning group—to make sure that consultation where appropriate does take place.

Rana Plaza: Fashion Industry

Tuesday 10th December 2013 Lords Chamber

Question

14:52

Asked by

[Baroness Young of Hornsey]

To ask Her Majesty’s Government what progress they have made in their discussions with fashion retailers with regard to the implications for the fashion industry of the Rana Plaza disaster in April.

[Baroness Northover (LD)]

My Lords, we want the fashion industry to remain engaged in Bangladesh. It is important for jobs and growth. DfID, with the International Labour Organisation, is working with the Government and fashion brands to seek real improvements to working conditions in Bangladesh’s garment factories, and many UK brands have now joined the Accord on Fire and Building Safety, which has over 100 members.

[Baroness Young of Hornsey (CB)]

I thank the noble Baroness for her reply. She will be aware, as will other noble Lords, that 1,130 people died in the Rana Plaza tragedy earlier this year. Seven months on, there are still employees in garment factories in Bangladesh who lose their lives, their health or their employment. Fatal building collapses and fires are not the only problem that the fashion industry has to face, and in spite of companies signing up to accords and agreements on factory safety, there is still a long way to go. Does the noble Baroness agree that the objective to maximise good rather than minimise harm is the right one, and that the Government should support and encourage fashion retailers to take full responsibility for monitoring what happens throughout the supply chain and to change their business models so as to move away from their dependency on cheap, throwaway fashion? Also—I know that this is not her department—while BIS’s aim to produce a framework for action on corporate responsibility is welcome, is she able to tell the House the extent to which DfID will be co-operating with BIS, as clearly the fashion trade operates globally?

[Baroness Northover]

My Lords, this was a major disaster. We want to do everything we can to make sure that such disasters do not happen in future. Both the noble Baroness, Lady Young, and I made reference to the fact that the United Kingdom is doing a lot in Bangladesh, not least through the accord, which is legally binding and to which a number of UK and European companies have signed up. In the United Kingdom, we are working with British companies for the very reasons that the noble Baroness outlines. In September, the United Kingdom launched its action plan on business and human rights to give effect to the UN guiding principles on business and human rights. Its purpose is to see the changes that the noble Baroness identifies right the way through the chain of operations. Next spring, there will be an event focusing on this.

[Lord Sugar (Lab)]

The general retail industry, and importers in general, have reacted very well in embargoing factories that employ children. This was relatively easy for them, because they sent their inspectors to the factory and the position was clear. In the case of possible structural damage to buildings, the ability to appraise this is beyond the expertise of most commercial enterprises. After all—to take, for example, one of Britain’s leading retailers—Sir Philip Green is many things but he is not a structural engineer. Is it not the responsibility of Governments in those countries to ensure that building regulations are complied with and that safety certificates are issued which will assure importers that the manufacture of their goods in those factories is done in a correct and proper fashion? Will the Minister send a strong message to those countries, warning them that if those certificates are not forthcoming, it could result in the banning of importation of goods from factories that do not comply?

[Baroness Northover]

The noble Lord is right to identify responsibilities here. There are responsibilities, as the noble Baroness indicated in her original Question, in terms of the brands themselves and the work that they do. Clearly there are responsibilities in the countries concerned. In the case of Bangladesh, there is a legally binding accord that includes the unions representing garment workers, and independent structural and fire safety inspections are being undertaken of the factories from which these companies are sourcing. It is very important to make sure that regulation is in place and that it is properly implemented,

[Lord Chidgey (LD)]

My Lords, the Rana Plaza and Tazreen disasters would have been avoided if statutory building codes and fire regulations had been observed. As DfID staff in Dhaka have noted, non-compliance poses a real threat to workers across the country. What were the outcomes of the UKTI-led discussions in Dhaka this May about the availability of British services to improve the quality of construction in Bangladesh? Does my noble friend agree that with Bangladesh lying at 136th out of 175 in Transparency International’s list of perceived most corrupt countries, some progress in DfID’s initiatives on fighting corruption there is imperative?

[Baroness Northover]

My noble friend is quite right in his final point. DfID sent three UK experts to Bangladesh in September. They are assessing needs and helping to inform work on supporting the enforcement of regulations. It is also extremely important to support the Bangladeshi Government’s financial management and make sure that is more transparent, including on budgeting, accounting, auditing and scrutiny. We are supporting NGOs to bring corruption to light, because that is the way that these regulations will be properly enforced.

[Lord Young of Norwood Green (Lab)]

My Lords, I declare an interest as the vice chair of the Ethical Trading Initiative, an organisation supported by DfID that has had a continuing and leading involvement in trying to improve the conditions of workers in supply chains. Does the Minister agree that audits and safety inspections cannot offer a complete solution, and that the best protection of workers’ safety is the right to belong to and be represented by a free and independent trade union? What efforts are the Government making to ensure that this takes place?

[Baroness Northover]

The Ethical Trading Initiative played a part in getting companies to sign up to the accord and in drawing up its scope. As I mentioned in my previous answer, there is trade union involvement in that, because it is extremely important in trying to ensure that people are informed of their rights.

Ukraine: Demonstrations

Tuesday 10th December 2013 Lords Chamber

Question

15:00

Asked by

[Lord Fowler]

To ask Her Majesty’s Government what representations they have made to the Government of Ukraine following the demonstrations in that country.

[The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con)]

My Lords, at the OSCE ministerial council in Kiev on 5 December, chaired by Ukrainian Foreign Minister Kozhara, the Minister for Europe, Mr Lidington, reiterated his concerns about violence being used against peaceful protestors and journalists. He stressed the importance of Ukraine, particularly as an OSCE chair in office, upholding OSCE values, including freedom of assembly and expression. While welcoming the Ukrainian authorities’ commitment to a thorough investigation, he emphasised that the investigation must be rigorous and fair.

[Lord Fowler (Con)]

My Lords, I was in Independence Square in Kiev on the night that the demonstrators were attacked. I confirm to my noble friend that the demonstrators, who had been democratically calling for closer trade links with the European Union, had been both peaceful and good humoured and that the violence came entirely from the Government’s security police. I am not sure what will be served by an investigation to further establish that. Is it not a political fact that the Ukrainian Government have caved in to the financial blackmail of Russia while the demonstrators have rejected the bribes, are acting out of principle and very much deserve our support?

[Baroness Warsi]

I agree, of course, with my noble friend’s comments. The demonstrators are acting within their right to freedom of expression and are expressing their views about the direction that the country is going in. I was at the Vilnius summit at the end of the November, where it was anticipated that Ukraine would sign the association agreement, which it had initialled in 2012. We were disappointed that that progress was not made. However, I stress that the door remains open and it is for the Ukrainians to walk through it.

[Lord Bach (Lab)]

My Lords, today, on the 65th anniversary of the Universal Declaration of Human Rights, the EU high representative, my noble friend Lady Ashton, arrives in Ukraine to assist the country to resolve its current difficulties. The House will wish our colleague all good fortune in that task. The Minister has just confirmed that the EU’s door remains open as far as the EU-UK association agreement is concerned. Beyond that, can she tell the House what steps our Government will take to try to make sure that it gets back on the table as quickly as possible?

[Baroness Warsi]

The noble Lord will be aware that we have been acting through the Eastern Partnership, which includes the European Union as a whole and six countries of eastern Europe. I, too, pay tribute of course to our noble friend Lady Ashton, who is on her way to Kiev as we speak. There is a meeting today between President Yanukovych and three former presidents to try to find a way through the current protests. We of course wish the noble Baroness well, on behalf of the European Union, in trying to find a solution to this matter. I repeat that the door is open for Ukraine and it is for Ukrainians to decide in what direction they want to take their country.

[Lord Hannay of Chiswick (CB)]

My Lords, will the Minister confirm that should—heaven forbid—force be used again against these peaceful protectors, the British Government will press the European Union to impose targeted sanctions on all those, up to the highest level, who bear responsibility for using such force?

[Baroness Warsi]

Along with our European Union partners, we will of course keep all measures before us as to how we respond to this. We understand that at the moment there are still many thousands of protestors on the streets. It is important at this stage that the Government establish a positive dialogue to find a way through this without an escalation of violence.

[Baroness Falkner of Margravine (LD)]

My Lords, does my noble friend accept that while Russia’s intervention just before the association agreement was mostly unhelpful—clearly, pressure was applied—the European Union was also at some fault for pressing Ukraine so firmly to be ready to sign in Vilnius, rather than giving Ukraine more time to prepare itself in terms of its economic engagements when it signs up to the association agreement? In light of the specific question about what the UK Government might do, have we contemplated working with the opposition groups? The opposition in Ukraine is still fairly divided and, looking forward to the 2015 elections—or any change of Government before then—it is vital that we get a united opposition to Mr Yanukovych’s Government.

[Baroness Warsi]

My noble friend makes an important point. We are engaged with both the Government and the opposition. I stress that with regard to the association agreement, and in terms of a potential IMF programme that may happen in Ukraine in 2014, conditionality is important. Those conditions are not placed upon Ukraine—and, indeed, Georgia and Moldova, which did make progress in Vilnius—because we are trying to be awkward but because we feel that these are fundamental reforms which are in their interest and set them on the path to much more constructive engagement and a more balanced economy.

[The Earl of Sandwich (CB)]

My Lords, does the noble Baroness agree that the media oligarchs have an enormous influence on the way things go? Does she think that they are becoming more sympathetic to the opposition?

[Baroness Warsi]

I have not been following the media inside Ukraine but I am aware that journalists have been targeted as part of the government crackdown on some of the protests. As we can see from the hundreds of thousands of people who have taken to the streets in Kiev and elsewhere, opinion in Ukraine is divided. The views of its leadership are not the views of the street.

Pensions Bill

Tuesday 10th December 2013 Lords Chamber

Order of Consideration Motion

15:06

Moved by

[Lord Freud]

That it be an instruction to the Grand Committee to which the Pensions Bill has been committed that they consider the bill in the following order:

Clauses 1 to 5, Schedules 1 and 2, Clauses 6 and 7, Schedules 3 and 4, Clauses 8 and 9, Schedule 5, Clauses 10 and 11, Schedule 6, Clause 12, Schedule 7, Clause 13, Schedules 8 and 9, Clause 14, Schedule 10, Clause 15, Schedule 11, Clauses 16 to 23, Schedule 12, Clause 24, Schedules 13 and 14, Clauses 25 to 30, Schedule 15, Clauses 31 and 32, Schedule 16, Clauses 33 to 41, Schedule 17, Clauses 42 and 43, Schedule 18, Clauses 44 to 47, Schedule 19, Clauses 48 to 52.

Motion agreed.

Unsolicited Telephone Communications Bill [HL]

Tuesday 10th December 2013 Lords Chamber

Order of Commitment Discharged

15:06

Moved by

[Lord Selsdon]

That the order of commitment be discharged.

[Lord Selsdon (Con)]

My Lords, I understand that no amendments have been set down to this Bill, and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Unless, therefore, any noble Lord objects, I beg to move that the order of commitment be discharged.

Motion agreed.

Universal Credit

Tuesday 10th December 2013 Lords Chamber

Statement

15:07

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer given by my right honourable friend the Secretary of State for Work and Pensions to an Urgent Question in another place on universal credit. The Statement is as follows:

“Universal credit is a major and challenging reform which will transform the welfare state in Britain for the better, ultimately accounting for £70 billion of benefit spending each year, with 3 million people better off. Rightly, for a programme of this scale, the Government’s priority has been, and continues to be, its safe and secure delivery. This has been demonstrated throughout our approach to date, which started with the successful launch of the pathfinder in April 2013 and has continued with the controlled expansion of universal credit, starting as planned in October 2013 and running through to spring 2014.

What is more, we are already pushing ahead with the cultural and business change required as part of universal credit, retraining 25,000 Jobcentre Plus advisers, implementing digital jobcentres and rolling out the new claimant commitment, which is now on track to be in place in half of all jobcentres by the end of this year and across the country by the spring.

Yesterday, I announced and discussed at length with the Work and Pensions Select Committee our plans for the next stage of implementing universal credit, following my department’s work over recent months with the Government Digital Service to assess delivery options. That work has explored the use of the latest digital technologies, and assessed the utility of the work we have done to date, through the universal credit pathfinder, going forward. The conclusions of this work were set out yesterday.

First, as part of the wider transformation in developing digital services, the department will further develop the work started by GDS to test and implement an enhanced digital service. This will be capable of delivering the full scope of universal credit and will make provision for all claimant types. Meanwhile, we will expand our current service and develop functionality so that, from next summer, we progressively start to take claims for universal credit from couples and, in the autumn, from families.

Once the service is safely tested in the 10 live universal credit areas, we will expand the rollout to cover the north-west of England. This will enable us to learn from the live running of universal credit at scale and for more claimant types, including the more vulnerable and complex, while extending to more people the positive benefits of universal credit.

Ninety per cent of people in the pathfinder are claiming universal credit online and 78% are confident about their ability to budget with monthly payments. It pays to work, with 65% of claimants reporting that UC offers better work incentives than JSA, and it is less complex, upheld by the 65% who agreed that it was easier to understand their obligations.

As we progress with the future delivery of this flagship programme, we will continue the same careful approach—test, learn and implement—rolling out through the regions. On this basis, our current planning assumption is that the universal credit service will be fully available in each part of Great Britain during 2016, with our having closed down new claims to the legacy benefits that it replaced and the vast majority of the remaining legacy caseload moving to universal credit during 2016 and 2017. Final decisions on these elements of the programme will be informed by the development of the enhanced digital solution”.

15:11

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for that very reassuring Statement, which certainly goes with the reassurances that we often heard here that universal credit is on time and on budget. Perhaps I may clarify two small points. First, is it true that, far from all new claims for today’s benefits disappearing next year, that will not happen until 2016 and that, in 2017, more than 700,000 people will still not be on universal credit?

Secondly, if it is true that £40 million has already been written off on an IT system, does the Minister stand by the statement in the 2010 UC policy paper which said that UC,

“would involve an IT development of moderate scale, which the Department for Work and Pensions and its suppliers are confident of handling within budget and timescale”.

Is it still on time and on budget?

15:12

[Lord Freud]

My Lords, as I said in the Statement, we are planning to have all new claims for the six legacy benefits that UC replaces moved on in 2016. By 2017, we will take the remainder. An exception in the group is those currently on ESA, and the OBR estimates that 600,000 to 700,000 of them will be left on it. We think that it is much safer to deal with that group very carefully later; it is the most vulnerable group. I know that noble Lords in this Chamber have been extraordinarily concerned about this group and some of this reflects that concern.

On development, I remind noble Lords that we have reset this programme. We moved in early. The National Audit Office made the point that there were very high levels of ministerial and senior departmental engagement here, which led to the reset that we announced. As I said, we have written off £40 million, which is much below the estimates of hundreds of millions of pounds that have been put around.

15:15

[Lord Forsyth of Drumlean (Con)]

My Lords, will my noble friend resist the bullying from the opposition Benches to move this programme at a speed that would result in difficulties? Will he gently remind them that the system he inherited was one where the poorest people in the land effectively paid marginal rates of tax of more than 95%? The Secretary of State is to be congratulated on taking this very complex system and making it worth while for people to be in work as opposed to being out of work and on benefits, and doing it with sensitivity that takes account of the needs of all groups. He should ignore the opposition, who considerably failed in government to tackle this appalling problem.

[Lord Freud]

My Lords, if you do these major cultural transformations, it is absolutely vital that you do them at the pace at which you can. One thing we are doing, which is a development from our thinking in 2010, is a huge programme of testing, learning and implementing. In particular, one thing we have introduced in the past two years—thanks, I must acknowledge, to help from this Chamber—is very substantial work with local authorities on the local support service framework. I think that will support the vulnerable in a way that they have never been supported in this country in the past.

[Lord Touhig (Lab)]

My Lords, on 6 November last year, in answer to a Question I put to him on the IT system for universal credit, the Minister confidently told the House that,

“the universal credit programme remains on schedule … to go live in October 2013”.—[Official Report, 6/11/12; col. 888.]

Having already admitted that the Government have written off £40 million in IT costs, what does he say now and how confident is he that it will go live in 2016?

[Lord Freud]

My Lords, I need to remind the noble Lord that the system went live, as he put it, earlier than October—it went live last April. We have a pathfinder which is learning extraordinary amounts. In particular, I remind noble Lords that we have established that the link between universal credit and the real-time information system works. The real-time information system that we were able to announce earlier is now fully up and running, with 99% of people on PAYE feeding through into it.

[Lord Martin of Springburn (CB)]

I do not rise to criticise universal credit but to put on record the great worry in the community-based housing associations that levels of arrears will rise. That is a worry for them. Could the Minister look into that?

[Lord Freud]

I thank the noble Lord for that. We have spent a lot of time bottoming out this issue. Clearly, incorporating housing benefit into universal credit is an absolutely central part of what we are trying to do, but it was essential that we did not get to a position that undermined the finances of the social housing industry. That is why we ran the demonstration housing projects. From those, we have created a system which means that we will have switchbacks after two months and an early alert after one month. There is a very effective underpinning for the finances of housing associations.

[Lord German (LD)]

My Lords, I share the disappointment that this programme has slipped. Quite frankly, I am sure all noble Lords would have liked it to be on time. However, there has been an appalling record in the introduction of very large-scale IT systems. In the past—I point to the record of the previous Government—they have hurt many people and cost many, many more millions of pounds than this. Surely my noble friend can identify now that this is something with which we need to take the greatest care. We must ensure that we move forward in a step-by-step way, being safe, not harming anybody and not putting anybody at risk. We must share the disappointment of it not being as quick as we wanted but in the end it must be the right service for the right people at the right time doing the right job.

[Lord Freud]

My Lords, as the Secretary of State mentioned in the other House, one thing that influenced us a lot was what happened with tax credits, which was why we took the decision to move in early and do this reset. Tax credits were announced in 2001 and rolled out from 2003. In the first three years of operations, £6 billion was overpaid and 400,000 claimants received their payments late, a third of cases monitored by Citizens Advice had their payments reduced below the poverty line, and IT systems were deemed unstable and not fit for purpose by the PAC. We have not done that. We have moved in early and made sure that we go safely and securely, and that when we introduce a system it is one that will not let people down.

[Baroness Hollis of Heigham (Lab)]

My Lords, I hope very much that the Minister is right; we will be cheering him on if he is. Most of us, I am sure, support universal credit but the House has made its views clear on utility bills when they are entirely online and people cannot have a paper back-up. The more we learn about the potential instability of the IT system that will handle universal credit, the more I would urge the Minister to ensure that there is a paper system as back-up for those whose entire income may come, or not, depending on the stability of the IT system. If the Minister is wrong on this, they will go hungry. Can he ensure that we have a paper trail, at least while the system is bedding down?

[Lord Freud]

My Lords, we already have an electronic payments system, so nothing is different or will change in the actual payments system. I think that the noble Baroness was asking: is there a proper back-up to the IT information systems? Clearly, in any IT system—and in today’s legacy systems, which are kept on computers, albeit somewhat older ones—we need to record that information and make sure that we have back-ups in case of loss. We will maintain that principle.

[Baroness Lister of Burtersett (Lab)]

My Lords, Howard Shipley told the Work and Pensions Committee that the next stage is couples. That will be a complicated issue as couples come together and divide, and may have children. Things happen. This sort of software is not something that you get on the back of a cigarette packet. Surely it was understood before we got this far that couples come together and separate. Does the Minister accept that the evidence from single people about budgeting monthly tells us nothing about what it will be like for mothers trying to budget on behalf of families monthly?

[Lord Freud]

Clearly, these groups behave differently and one thing that we are determined to understand is how each of those different groups will behave. It is a question not just of our operational management of the systems but of what the behavioural responses are. That is what “test and learn” is about. We have a system and we have built a long way into the couples. It is quite tough to do it—it is tougher and there are a lot more issues than with singles—but that system is rolling out from next summer and we will be looking very closely at the behavioural responses.

Defence Reform Bill

Tuesday 10th December 2013 Lords Chamber

Second Reading

15:23

Moved by

[Lord Astor of Hever]

That the Bill be read a second time.

[The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever) (Con)]

My Lords, our Armed Forces do an exceptional job and I am sure that all of us in this House will wish to pay tribute to their dedication and the sacrifices they make to keep this country safe. But the Armed Forces can defend the country and protect our national interests only if we provide them with the manpower, equipment and support that they need. In particular, making sure that our Armed Forces have the right equipment, delivered on time and to the right specification, is essential if we are to maintain our capabilities into the future. Making full use of the expertise and skills of our Reserve Forces is also crucial if we are to meet the security challenges that we face over the next decade and beyond.

Let me start this debate by addressing the issue of the reform of the Defence Equipment and Support organisation, which is covered in Part 1 of the Bill. My right honourable friend the Secretary of State for Defence made a Statement earlier today in the other place, and I would like to set out what that said.

The 2010 strategic defence and security review set out the Government’s vision of an agile Armed Forces designed to face the challenges of the 21st century. Central to delivering and sustaining that vision is the ability to procure and support the equipment that the Armed Forces need. There is widespread acceptance that the present defence acquisition process is not good enough. While there have been notable successes, there have also been many examples of poor performance and unsatisfactory outcomes for the Armed Forces and the taxpayer.

The significant reforms that we have already instituted to DE&S are only a start. A more radical reform of DE&S is necessary if it is to sustain the skills that it requires to support our Armed Forces effectively. That is why we developed the matériel strategy programme, which is designed to remove the obstacles to bringing in critical skills by exploring alternative models for DE&S. It was announced in April that the Government had concluded that a Government-owned, contractor-operated model, a GOCO, might well be best placed to deliver the changes required in DE&S, but that we needed, through a competition, to test the market’s appetite for that model and confirm that it would deliver value for money.

In parallel, it was announced that we would work up a public sector comparator, exploring the maximum extent of flexibility that could be achieved within the public sector—a model that we have called “DE&S-plus”. The Government have maintained an open mind as to which option would prove overall to deliver the best balance of risk and potential reward once bids were received.

On 19 November my right honourable friend the Secretary of State informed the other place that we had reached the detailed proposals stage of the competition, with only one bid being received from the two consortia remaining in the process. That bid was from Materiel Acquisition Partners, a Bechtel-led consortium. The Government made clear that we would consider carefully how best to proceed in the light of this development. It has now been confirmed that we have decided not to continue the present competition.

The heart of our approach was to test the market’s appetite for delivering a GOCO along the lines that we had set out, using the competitive process to drive innovation and value. We have always recognised that there are risks inherent in the GOCO approach. With only one bidder remaining in the competition at this intermediate stage, a judgment has had to be made about whether the public sector comparator alone would generate sufficient competitive tension to ensure an effective outcome for the Armed Forces and value for money for the taxpayer. Although the remaining consortia presented us with a credible and detailed bid, we do not have a competitive process. It has therefore been concluded that the risks of proceeding with a single bidder are too high to be acceptable.

We believe that a GOCO remains the best potential future solution to the challenge of transforming DE&S, but that further work is necessary to develop DE&S financial control and management information systems to provide a more robust baseline from which to contract with a risk-taking GOCO partner. We are clear that the only realistic prospect of resolving the delivery challenges facing DE&S in an acceptable timescale is with the injection of a significant element of private sector support. It has therefore been decided to build on the DE&S-plus proposition, transforming DE&S further within the public sector, bringing in that private sector support and ensuring that it becomes “match-fit” as the public sector comparator for a future market-testing of the GOCO proposition.

To do this, we will recognise the unique nature and characteristics of DE&S as a commercially facing organisation by setting it up as a bespoke central government trading entity from April 2014. The new entity will be at arm’s length from the rest of the MoD, with a separate governance and oversight structure—a strong board under an independent chairman, and a chief executive who will be an accounting officer, accountable to Parliament for the performance of the organisation. This will deliver another of the recommendations from the noble Lord, Lord Levene. Crucially, we will permit the new organisation significant freedoms and flexibilities, agreed with the Treasury, around how it recruits, rewards, retains and manages staff along more commercial lines to reflect its role in managing some of the most complex procurement activity in the world.

These changes will reinforce the relationship between the military command customers and DE&S, leading to a more business-like approach, allowing us to move earlier to a hard-charging regime and thus further addressing one of the weaknesses identified in the 2009 Gray report. They will allow DE&S to procure crucial private sector support through a series of contracts to deliver key changes to systems and processes and to support programme management while organic capabilities are built. They will permit the recruitment into DE&S of key commercial and technical staff at market rates and with minimum bureaucracy. Bernard Gray has agreed to become the first chief executive of the new trading entity, thus providing a vital thread of continuity to the continuing DE&S reform agenda from the original Gray report. Alongside the changes to DE&S, we will also continue with the reform of our wider acquisition system, which is focusing on making us a more intelligent customer—a key role for our military, alongside the important role it will continue to play within the DE&S.

These changes will drive significant incremental improvements in DE&S as well as delivering the mechanisms that will give the organisation a robust performance baseline. That will allow the MoD, at a future date, to retest the market’s appetite for continuing the DE&S evolution into a GOCO and its ability to deliver guaranteed value for money against a match-fit public sector comparator. On both counts, this course of action represents the best way forward for our Armed Forces and for the taxpayer.

Part 2 of the Bill sets out a statutory framework for defence contracts awarded in the absence of a competitive process. The White Paper on defence acquisition published in June this year included important changes to our single-source procurement regime. These changes follow the independent report on single-source procurement that was carried out by the noble Lord, Lord Currie of Marylebone, in 2011. Although competition is our preferred approach, the need to maintain critical national industrial capabilities or sovereign control of the intellectual property in equipment programmes sometimes requires us to place contracts without a competitive process. Single-source procurement typically accounts for about 45% of the total the MoD spends on defence equipment and support, or about £6 billion per year, and is likely to remain at those levels for the next decade or so.

Without competition, suppliers can price and perform without being constrained by the disciplines of the marketplace, putting value for money at risk. The absence of an alternative supplier also undermines our contractual negotiations because we have a duty to provide our Armed Forces with the equipment they need, and our suppliers know we cannot go elsewhere. These are serious shortcomings, and we need to address them with an approach to single-source procurement that ensures we get value for money, while still allowing our suppliers a fair and reasonable price, and where the safeguards we need are not regarded as voluntary and a matter for negotiation.

The MoD currently uses a framework for single-source procurement which has remained largely unchanged for the past 45 years. Under this system, which is voluntary, the profit contractors can earn is fixed and there are few incentives for them to reduce costs. The noble Lord, Lord Currie, recommended a new framework: one that is based on transparency, with much stronger supplier efficiency incentives, and which is underpinned by stronger governance arrangements. Based on his recommendations, and following extensive consultations with our major single-source suppliers, we have developed the framework provided for in Part 2.

The Reserve Forces make an essential contribution to delivering the nation’s security at home and overseas. They are an invaluable part of our Armed Forces, working alongside their regular counterparts to deliver military capability. On 3 July this year, we published a White Paper that set out a range of measures for revitalising the Reserve Forces, reversing the decline of the recent past, growing their numbers and investing an additional £1.8 billion over 10 years in their training and support. These measures include improved training and more opportunities for reservists to train overseas, enabling them to undertake the same range of military tasks as regulars, including overseas capacity building and responding to crises at home. The tax-free annual training bounty will be developed to recognise commitment, encourage retention and reward the appropriate level of capability. Reservists will also have improved access to healthcare and better access to welfare support. This will provide reservists with a challenging and rewarding experience. The Bill before us today includes the legislative changes needed to help modernise and make greater use of our reserves and to ensure that both they and their employers are treated fairly.

Part 3 of the Bill makes changes to the Reserve Forces. First, it extends the current powers to call out members of the Reserve Forces. This will allow reservists to be called out for any purpose for which regular forces may be used. Secondly, it allows the Secretary of State, by regulations, to provide for the making of payments to employers to incentivise the recruitment and retention of reservists. Thirdly, it provides improved employment protection for reservists by allowing a right of access, without a qualifying employment period, to the employment tribunal for unfair dismissal where dismissal relates to their reserve service. In addition, the Territorial Army will be renamed the “Army Reserve” and the Army’s ex-regular reserve force will be renamed the “Regular Reserve”.

The support of employers is crucial to delivering the future Reserve Forces and we seek to strengthen the Ministry of Defence’s relationships with employers. The White Paper set out how we will do this by making liability for call-up more predictable, making it easier for employers to claim the financial assistance that is already available and introducing a new employer recognition scheme building on the corporate covenant to ensure that reservist employers receive the recognition that they deserve. We acknowledge that reserve service can have a particular impact on SMEs. We understand these challenges and believe that our measures, particularly those around providing employers with greater predictability, greater transparency and financial support, will be especially important for SMEs, which is why we will increase financial support for small and medium-sized enterprises by introducing a financial award of up to £500 a month per reservist when any of their reservist employees are mobilised.

The House will be aware that on Report in the other place, my right honourable friend the Secretary of State signalled his intention to accept in principle a change to the Bill to provide for some form of annual external scrutiny and reporting on the arrangements for the Reserve Forces. This is an important change that will ensure that Parliament has access to independent advice about the Reserve Forces and the regular opportunity to review these matters. Given this, the Government intend to bring forward a suitable amendment to the Bill in Committee.

I very much look forward to our debate this afternoon. I believe this Bill strikes the right balance between ensuring we deliver the military capabilities that our Armed Forces need and making sure that value for money is provided to the taxpayer. I therefore commend the Bill to the House.

I beg to move that the Bill be committed—

[A noble Lord]

Nice try.

15:39

[Lord Rosser (Lab)]

We nearly had an entire afternoon and evening disappear.

We wish to associate ourselves with the comments made by the Minister on the commitment and dedication of our Armed Forces.

We are in a remarkable situation today, in that we have the Second Reading of a Bill that provides, among other things, for major changes in procurement and support of defence equipment, yet just over two hours or so before this debate started the Secretary of State was making a Statement in the other place on defence procurement that significantly altered the Government’s position. That is a sign not of bad luck but of bad judgment, and an indication of the extent to which procurement policy now appears to be being made on the hoof. However, despite the Statement by the Secretary of State earlier this afternoon, much of which the Minister has reiterated, this Bill still has three main parts, including Part 1 on defence procurement.

Part 1 sets out the arrangements for changing Defence Equipment and Support and making it into a government-owned, contractor-operated organisation. Part 2 establishes a statutory framework for the governance of Ministry of Defence single-source contracts—that is, contracts that are not subject to a legal obligation to be advertised and competed for. Part 3 makes several amendments to the regulations governing the Reserve Forces in the light of the enhanced role our reserves will play in future.

The Government have been considering two options for the future operating model for Defence Equipment and Support; namely, the GOCO entity or the public sector comparator under which DE&S would remain entirely within the public sector. Legislation is required to pursue the former option and, even though it had not been the Government’s intention to make a final decision on whether to pursue the GOCO option until next summer, the relevant enabling legislation was included as part of this Bill. The Secretary of State has now announced that he has decided not to continue the present commercial competition, which was no longer a competition because there was only one bidder. Instead, the Government have decided to do what the Secretary of State describes as building on the DE&S-plus proposal. But his last-minute proposal is, as yet, only in outline.

In respect of our Reserve Forces, the Bill contains four key measures. These are renaming the Territorial Army, expanding the powers to call out the Reserve Forces, introducing new financial incentives for the employers of reservists, and exempting reservists from the statutory two-year qualifying period required to bring an unfair dismissal case to an employment tribunal. These measures, which require legislation, are part of the Government’s policy for reconfiguration of the Army into two distinct elements, a high readiness reaction force and an adaptable force. This change is associated with the reduction in the size of the Regular Army by 20,000 personnel by 2020, and also involves a greater integration of the Territorial Army into the Army structure with an expansion in the roles that the reserves will undertake and an increase, by 2018, in the number of trained reservists to 30,000.

Single-source contracting accounts for approximately 45% of all Ministry of Defence contracts and equates to £6 billion per annum. At present, such contracts are placed under a non-legally binding framework, which can be amended only on the basis of consensus. A review of the current arrangements has been undertaken, which has led to the proposals in Part 2 of this Bill for a new statutory framework for single-source contracts. There is also provision for a civil penalty regime to ensure compliance, and the creation of a Single Source Regulations Office, which is intended to ensure the regime is kept up to date, monitor the application of the regulations, and provide binding determinations in the event of disputes between the Ministry of Defence and single-source suppliers in its role as an independent expert in single-source procurement.

On the face of it, one would not now expect this Bill to be the subject of great controversy, and particularly so in the light of the Secretary of State’s announcement earlier today. We also hold the view that defence procurement and support is in need of reform. Any difference of view will come over how that reform should now be achieved in the light of recent developments. We share the view, recently expressed by the noble Lord, Lord Levene of Portsoken, that the review of materiel strategy, which has been going on for some time, needs to be brought to a conclusion in view of the uncertainty for the future it creates and the amount of time and effort that is being expended on it, and that the quickest and most straightforward solution is via DE&S-plus, subject to that embracing appropriate employment and pay freedoms.

That solution is also not as far removed as the GOCO option from the proposal we made for reform of defence procurement. However, it appears that the Government intend to leave Part 1 in the Bill, which, as it stands, would provide the necessary legislative powers to set up a GOCO, with little further ado, at a later date. Doing that will simply perpetuate the uncertainty over the future arrangements for reform of defence procurement, which will be of benefit to nobody, least of all our Armed Forces. It means that the change could be made to a GOCO without proper scrutiny, and leaves the suspicion that the announcement today by the Secretary of State represents little more, as far as the Government are concerned, than a stop-gap solution.

The Secretary of State’s Statement earlier today said that the change in government policy on procurement that he was announcing would allow the Ministry of Defence, “at a future date”, to retest the market’s appetite for a GOCO—a statement that will simply continue the uncertainty to which the noble Lord, Lord Levene, referred in his recent report. Perhaps the Minister could make the situation worse, or, alternatively, improve the situation in relation to future uncertainty for the proposed new DE&S organisation and its staff, by telling us what the phrase “at a future date” is meant to mean. Is it intended to mean not before the next general election, or is it a longer timescale than that?

It was the day before Report stage in the House of Commons last month that the Government announced that one of the two remaining consortia bidding for the government-owned, contractor-operated organisation had withdrawn from the competition, and that work was under way to determine whether it was in the public interest for the Ministry of Defence to proceed with only one commercial bidder and the public sector comparator, DE&S-plus. It had already been made clear before then that the Government’s strong preference was for the GOCO, and that they would be testing this proposition through a commercial competition and against that public sector comparator. The impression was certainly given, and remains after today’s announcement, that the DE&S option was in essence being undertaken to provide a benchmark to justify the GOCO rather than it ever being the option the Government would take if they could avoid it.

Many concerns have been raised in a number of quarters about the proposal to transfer the whole of defence acquisition and support to a private contractor. Those concerns have related to potential conflicts of interest, the length of the contract, how ministerial and parliamentary oversight will be provided, what financial risks would actually transfer to the GOCO, how a GOCO would make money while also saving the Ministry of Defence money, what the implications would be for our international partners and what their reaction would be to the change.

A further key question, though, is why it has taken three weeks from the day before Report stage in the House of Commons to today for the Government to decide that their declared key objective for ensuring a rigorous evaluation process of the GOCO option—namely, a commercial competition—was no longer valid or achievable when the competition was somewhat diminished in rigour once the number of competitors had been reduced to one. The suspicion must be that the Government were in reality so wedded to the GOCO option as their vehicle for achieving the reform of defence procurement—a reform that we also agree is needed—that they were prepared to contemplate proceeding without a commercial competition; in other words, a form of single-source contract. That is a further reason why there are question marks over why Part 1 remains in the Bill despite today’s announcement, and a feeling that if the Government were prepared to contemplate proceeding with the GOCO option without any commercial competition, that is what they may be tempted to do at a later date if Part 1 remains in the Bill.

The position should be that if a Government decide that they want to achieve reform of defence procurement at some stage in the future through the GOCO route, they should be required to do so through means of a parliamentary Bill at the time to justify their stance and their new proposal, and not be able to do so without proper scrutiny using a parliamentary Bill that had been passed some time previously and during the course of which, before it had even been discussed in this House, the Government announced they no longer intended to proceed with the now non-existent competition and its single proposal or bid. We will certainly be pursuing the question of why Part 1 remains in this Bill, since no satisfactory explanation has been given as to why it should remain, rather than be brought back for full scrutiny in a further Bill if a Government decided to go down the GOCO route at a future date. I should like to ask the Minister how much public money has been spent on this competition exercise so far, and whether it is anticipated that there will be claims from any of the consortia—not least the one that was still left standing, which must also have invested a considerable amount of time and effort in preparing and submitting a proposal that the Government have said ran to more than 1,200 pages.

The other area where the Government have run up against problems is in relation to the increase in our Reserve Forces. I want to make it clear that we have previously expressed our support for the expansion of our Reserve Forces, and that remains our position. However, there needs to be transparency and openness about the progress being made on applications, recruitment and trained strength of our Reserve Forces. The UK Statistics Authority has said that some aspects of the Government’s figures are not robust enough. The Secretary of State has said that he will publish before the end of this year the targets to which the Government are working. On 20 November in the House of Commons the Secretary of State said that he was minded to accept in principle—as the Minister has said—a new clause that provided for an annual report by an external scrutiny group of Reserve Forces and cadets associations, and indicated that he would introduce an amendment in your Lordships’ House that reflected that new clause. We await it to see whether the new clause will provide for the transparency and openness needed in the Government’s plans for our Reserve Forces.

One aspect on which we have still not received an answer is over the apparent change of policy from that announced by the previous Secretary of State that the reduction in the number of regulars would not take place until we had seen the necessary improvements in training, equipping and numbers in the reserves. Is that still the Government’s policy, and if it has changed—and there may well be good reasons for a change—what are those reasons and what is the policy now? Can the Minister say whether it is the Government’s view that it would be consistent with the SDSR to proceed with a further tranche of redundancies for our Regular Forces irrespective of the progress made in the recruitment of additional Reserve Forces? If to do so is judged to be inconsistent with the SDSR, what part of the SDSR planning assumptions would be changed to keep the contraction in our forces in line with the SDSR?

In the light of the Secretary of State’s statement that he will publish before the end of this year the targets on reserves to which the Government are working, can the Minister say whether those targets will indicate not just overall numbers but the targets for the different types of skills and roles for which the additional members of our Reserve Forces are being recruited? Will any assessment be given of the overall quality of personnel being recruited?

Perhaps the Minister can also give us the latest update on progress on recruitment to our reserves. Is the recruitment being done by Capita or have others been called in to either supplement what it is doing on recruitment of reserves, take over from Capita, or advise and monitor it on what it is doing. As has been said, the attitude of employers is crucial. Employers in the fields of, for example, cybersecurity and the medical world may well be more enthusiastic than others in seeing their staff join the reserves as the knowledge and experience they will gain in those fields as members of the Reserve Forces may well be of direct benefit to their employers. On the other side of the coin, if such staff were called up due to a major military operation, it might just be the time when their companies or organisations also needed them most.

There will be much to discuss in Committee: why the need for Part 1 of the Bill to remain; how the just announced to be transformed DE&S-plus organisation within the public sector will function and operate; and why the Government are still willing to perpetuate uncertainty over future defence procurement in their apparent determination to try to introduce a GOCO at a future unspecified date. Part 2 of the Bill on single-source contracts will need close consideration. We support the concept and the intentions, but this part of the Bill received only limited consideration in the other place and, once again, this House will have to do what the other place was unable to do. The proposals on our Reserve Forces will, I am sure, be the subject of much detailed consideration and debate, and we wait with interest to see the amendment that the Secretary of State told the other place he would bring forward in this House.

Government policy on defence procurement is in a mess and now bears all the hallmarks of being made up as we go along—not least because the prospect that there might be only one commercial bidder apparently never occurred to the Government. What is needed now is a period of stability and certainty on defence procurement and, in the light of the breakdown of the commercial competition for a GOCO—for the new, just announced, but as yet unclear, variation of a DE&S-plus organisation in the public sector—to be given every chance and every encouragement to deliver the reform in defence procurement and support which nearly everyone believes is needed and necessary.

15:55

[Lord Palmer of Childs Hill (LD)]

My Lords, from these Benches we wish to associate ourselves with the tributes to our Armed Forces. The problem with this debate is that it is rolled up with a Statement from the other House. If we had had the Statement and a debate on it, we would have been able to concentrate on the GOCO arrangements, but we have a Bill with three definite parts, and I am delighted to see that both my noble friend the Minister and the noble Lord, Lord Rosser, have covered the whole Bill, not just the most contentious part of it.

My noble friend said that procurement was not good enough. In fact, I am afraid that procurement in the Ministry of Defence is not fit for purpose. There is a failure in the procurement process. The noble Lord, Lord Rosser, said that it should be brought to a speedy conclusion. Well, the Labour Government ignored it for 13 years, and they ignored it because it was a problem. It still is a problem. It was a problem then and it is a problem now. The coalition Government attempted to tackle it with innovative solutions that have not in fact worked out. Attempts were made to construct a system that worked, and we have concluded that the main thrust of that system will not work.

Mr Bernard Gray told us that, as director, he would solve the problem. I wonder whether the House is assured of the future when the Minister talks about continuity by having Mr Bernard Gray as the chief accounting official and chief executive of the DE&S-plus. Forgive me, but this is the man who told us that he would sort it all out and get it right. I just wonder, with due deference, whether we would not do better to have a completely fresh look at this and let Mr Bernard Gray reorganise something else. I hope that our Government will look at that again, because I certainly do not think that that would instil a feeling of confidence in the DE&S-plus system so ably enumerated by the Minister.

The problem in this area of the MoD is dealing with the major contractors. Our staff in the MoD are being outclassed by the major contractors, and by their lawyers, engineers and the like. My noble friend has indicated the efforts that will be made to bring our team up to a better standard, but the history of this has not been good. The other problem is making the wrong decisions about what is required, which was the problem for the 13 years of the previous Government and, sadly, to some degree the problem for this coalition Government.

The noble Lord, Lord Rosser, rightly spoke about costs to the bidders. Judging by the numerous pages of its bid, Bechtel clearly spent a lot of time on it, as did the other two unsuccessful bidders. I understand from the Minister’s comments that they will be involved in some way in the new DE&S-plus, but there must be some worries about that. The noble Lord talked about Part 1 not remaining in the Bill, but my plea is that it should stay in the Bill, with the proviso that we are not implementing part of the provisions that were made available on the GOCO arrangements in the Bill. When the Minister replies, I hope that he will explain what provisions there are to make sure that this will not go through on the nod at some future date but will be brought back to this House—because, if it happens, it will be a major effort.

I shall concentrate in the rest of my comments on the most unexciting part of the Bill—Part 2, on single-source contracts—but we need to ensure that the Bill does not produce unintended consequences for the UK’s attractiveness as a place to invest. The Bill appears to allow the MoD to challenge the price of a contract at any point up to two years after the end of the contract. It will reduce predictability over contract price, with possible adverse consequences for boardroom confidence to invest, and the international perception of the UK as a good place to do business. Is the unintended end point of the proposed reform to be that suppliers refer their own contracts to the Single Source Regulations Office at the start of the contract to gain greater confidence over the price and the profit? At the moment, the whole contract can be changed at any point up to two years after it has finished.

The Bill states that the SSRO may make provisions that limit the number of times and the period after a contract ends when the MoD may challenge the price. It may also specify the grounds for a challenge. This is a first step, but the industry will need to have greater confidence in a firmer commitment. As we debate the Bill during its passage through the House, we need in this section a provision that the contractor should not be able to increase its price, and that the MoD should not be able to decrease the price: they will make a contract and, provided the product is up to standard, that is what it should be.

On the universal application of the regulations in Part 2, which allows the Secretary of State to exempt any contract from the new regulations, there are times when exemptions will be necessary, but defining the criteria for awarding exemptions would improve certainty for suppliers—and they will need that certainty. The possible exemption of contracts placed with overseas suppliers may place the UK suppliers at a competitive disadvantage globally. The stringent compliance and monitoring regime will place an additional cost burden on UK suppliers and their supply chains. Will the Minister address the issue of the possible creation of complex contracting arrangements, in which contracts are placed offshore in order to avoid the compliance and monitoring regime? The MoD agrees that there will be circumstances in which an exemption will be required, but these will not be defined in the regulations. That seems to be a weakness.

As to independence and impartiality, the Bill appears to allow the customer—the MoD—a significant degree of control over the regulator, the SSRO. The Secretary of State appoints the chairman and board and has a broad power to repeal the regulations and even to abolish the SSRO. Lack of industry confidence in the SSRO as an independent arbiter between the MoD and the industry is a risk. The industry would like to see further steps taken to bolster the independence of the SSRO, as it will fund 50% of the costs of that organisation and yet has no control over the potential cost growth of that body.

The MoD recognises the problem—and that may be part of the solution. The SSRO is independent, as it will be allowed to decide its processes outside those defined in the Bill. An industry representative will sit on the selection panel for the chair of the SSRO. This part of the Bill certainly has more meat on it, and I hope that in Committee we will able develop it further.

I turn briefly to the question of reserves, in the hope that my noble friends Lady Garden and Lady Doocey will take it up in more detail. I will talk about the deployment and appeals processes, and what the Bill will do. Its provisions will place a greater burden on the employers of reservists by extending the circumstances in which reservists may be deployed. This will clearly have a business impact, particularly on SMEs employing reservists with unique skill sets. It is unclear to me—and it is not laid out in the Bill—how SMEs will be helped to replace such specifically talented employees.

The MoD intends to expand its cyber reserve. This may transfer expertise from the private sector to the public sector, as opposed to expanding overall expertise. Greater clarity is required on what steps will be taken to support the employers of reservists in these circumstances. The Ministry of Defence’s position appears to be what is set out in Section 78 of the Reserve Forces Act 1996, which allows the Secretary of State to enable a person liable to be called up to apply for a deferral or exemption. Again, when we deal in detail with the question of the reserves, we will need to make sure that employers feel confident that this is something that they can live with and that will not harm their businesses.

16:06

[Lord Levene of Portsoken (CB)]

My Lords, I welcome this opportunity to comment on the progress of defence reform in the Ministry of Defence. When the former Defence Secretary, Dr Liam Fox, took office, he asked me to chair a steering group to monitor the progress of that reform. Your Lordships may recall that at the time a very large shortfall had been revealed in the funding of the forward programme of the MoD, and so drastic action had to be taken. That group produced a report, which was published in June 2011, containing a large number of recommendations, several of which required substantial change in the working practices of both the department and the military. After the report was published and the present Defence Secretary, Philip Hammond, took office, he asked me to continue to monitor progress on those recommendations. The first such report was published in December 2012 and I undertook to produce a further update before the end of this year.

Your Lordships will be able to see from that second annual report, which was published last month, the detail of what had been concluded, which was that further significant progress had been made on putting into effect the earlier recommendations. These changes, which were welcomed within the department at all levels, both military and civilian, have become the norm for behaviour in the department and, in my opinion, are being carried out with real enthusiasm. I take this opportunity to congratulate those who have worked and who continue to work in this sphere on what they have achieved.

Today, the Defence Secretary has detailed his conclusions as to the way forward for the Defence Equipment and Support organisation, where an evaluation has been under way for some time as to whether that operation should become a GOCO, a government-owned contractor-operated organisation. This has generated considerable discussion. As someone who was responsible for managing defence procurement for six years, I have to say that I have never believed that a GOCO is the right solution.

I have no prejudice against GOCOs. At the time that I was working for Michael Heseltine, the then Defence Secretary—now, the noble Lord, Lord Heseltine—I introduced the first GOCOs into the Ministry of Defence to take on responsibility for the management of the Royal Navy dockyards at Rosyth and Devonport. These proved to be very successful and were then transformed from GOCOs into facilities managed totally within the private sector.

Defence procurement, however, is not an industrial operation. When procurement is undertaken on behalf of Her Majesty’s Government for the Armed Forces, there are many other factors which need careful attention. These factors include the need to bear in mind the likely effects on the wider economy, the need to consider the strategic implications of a procurement decision, and the need to take into account international implications. It is in the nature of a commercial bidder from the private sector that they will be just that, and therefore the need to demonstrate total impartiality is an extremely difficult task to manage.

I underline my concern at the way that some politicians continue to run down the abilities of civil servants throughout Whitehall. It has become far too common recently for both the military and civilian staff within the MoD who manage those procurement programmes to be depicted as poorly suited to run complex, large commercial contracts because they are insufficiently experienced in that domain. I can reference numerous instances where both civil servants and military officers have transferred into the private sector, where they are in great demand and prove to be a major asset. I should like to cite just one example for your Lordships.

After I left the Ministry of Defence, I was asked to take over as chairman of the Docklands Light Railway, the performance of which was woeful. I asked for permission to recruit two or three military officers and civil servants to sort out what had become an ever-growing shambles. They seized the problem and converted the railway into one of the most efficient operations in Europe. And whom did I select as the chief executive for this task? It was none other than a very modern major-general, who became the star of the show. Therefore, can we perhaps celebrate and exploit the talents of these remarkable people, and stop running them down?

Your Lordships may well ask why, if that is the case, there has been a problem in managing defence procurement successfully. In my view, the answer is straightforward. The one element of understanding which is in very short supply in the organisation is very top-level commercial experience. However, in order to acquire this, I do not believe it is necessary to create the type of revolution which the handing over of this function to a private sector business would undoubtedly create. I believe that once real commercial experience is made available to the department—and the number of people required to achieve that is no more than a handful—existing staff within the department will respond well and successfully to that leadership.

Those of your Lordships who may doubt that should look back to what has previously been achieved. I should like to refer to a report of the Public Accounts Committee on the Ministry of Defence major projects statement:

“The department has undertaken a review of a total of 37 projects, each valued in excess of £100 million started in the last five years ... the cost to date was just under one % less than the department estimated when the orders were first placed. And ... 28 of the 37 projects were expected to be completed on time, one was ahead of schedule and of the rest, only three had delays that were expected to exceed one year, the delays would not result in additional costs falling on the department”.

That report was dated October 1991.

For all those reasons, the Defence Secretary’s decision to drop the plan for a GOCO in favour of what has been termed DE&S-plus is undoubtedly the right one. I should be grateful if the Minister, when he responds to the debate, could explain the difference between DE&S as we have it today, DE&S-plus, its predecessor but two the Defence Procurement Agency, a GOCO and, if I may use the term, DE&S-plus-plus. That would help the House to understand this matter better. The essential thing, in my view, is to enable the Defence Secretary to employ the small number of people needed on competitive, commercial terms, thus removing the barrier that has stood in the way for so long.

The Statement speaks of the new organisation having a strong board and an independent chairman and chief executive, who, as I had strongly recommended, will be an accounting officer. Bearing in mind the Government’s total commitment to competition, where is the competition for the key post—that of the chief executive? We are told that the new chief executive has agreed to take up the post. Can we be sure that his track record qualifies him to be unquestionably the best head of this new organisation in the absence of any kind of competitive process? Somehow, that does not seem quite right to me.

I wish the Secretary of State and the department every success in their task. It will not be easy but it can be done and I believe that, once it has been done, our procurement function will once again be fit for purpose.

16:15

[Lord King of Bridgwater (Con)]

My Lords, I am particularly pleased to follow the noble Lord, Lord Levene, in this debate. I think your Lordships will recognise that nobody in the country can speak with more authority on the subjects that are part of the Bill than the noble Lord. He has had quite exceptional experience in this field, having headed up the procurement executive and having been recalled by successive Secretaries of State to overhaul and review the programme of reform for the Ministry of Defence. I particularly echo one point that he made very forcibly. It has been a feature of opening speeches from the Front Benches to pay tribute to our Armed Forces. I readily endorse that of course but also pay tribute to the civilian members in the MoD who back them up. I exempt the current Secretary of State and Defence Ministers from this, but there is a tendency in other parts of the Government to decry civil servants and say that all their present problems are problems with the civil servants rather than necessarily with policies or things they have inherited. The Minister ended on a cheerful note, saying that he looked forward to this debate. I am not sure it is the easiest debate he will ever have to reply to in his career and I admire his optimism.

The Bill has three main parts. I have no comment on Part 2, about which other noble Lords have spoken, but will say a word about Part 3. I have considerable concern whether it will be possible to reach the numbers planned for the new reserve. I am an old TA officer used to serving my time with drill nights, a few training weekends and a few fortnight camps but am all too conscious of the different demands that are now made of people serving in the reserves. I used to spend a lot of my time as Secretary of State going round an organisation called TAVRA—the Territorial, Auxiliary and Volunteer Reserve Association—and persuading employers to encourage their employees to serve in the TA.

However, of course I was trying to sell an entirely different sort of menu from what is now required. The challenges for companies and for employees are now very much greater. I was struck by the comments made by Tobias Ellwood in a debate in another place. He is a Member of Parliament who is a former soldier and a former PPS, I think, to the Secretary of State and who continues to be a member of the Reserve Forces. His last exercise was in Laikipia in Kenya:

“Halfway through the two-and-a-half week exercise, we came together to discuss the future of the TA and its impact on each of us. Round the table, we had to say what would happen if we were required to break away from our jobs for nine months. Not one person in my group was able to put up their hand and say that their employer would be able to grant them permission to be away from work for that period”.—[Official Report, Commons, 16/7/13; col. 1009.]

That very much sums up my concern about this proposal. The amendment that the Secretary of State has announced in another place, which will come forward on Report, is extremely welcome. It will be necessary to watch this very carefully as it is in nobody’s interest to find, at the end of this period, that we have a substantial shortfall.

I note the criticisms that were made about Regular Army recruiting, which suggested that part of the problem was that it was not very good at recruiting people for the TA. That may be a little unkind and is simply a measure of the difficulty that it would have doing so. It clearly has to be recognised that, by contrast to what used to be the position in the TA, it will be extremely difficult for small employers to agree to their employees going off and run the risk that they may disappear for six or nine months.

Turning to Part 1, I have reservations about the proposed GOCO but I was very interested to see what the outcome of the competition would be. As the various candidates fell by the wayside, finally leaving just one competitor, I entirely understand why the Secretary of State has decided, and announced today, that he will not proceed with the proposal. It is fair to say that there are rather better omens than there might be for making a success of DE&S-plus.

I do not want to embarrass the noble Lord, Lord Levene. He quoted a report from 1991. I rather enjoyed that because I was Secretary of State at that time and he was in charge of procurement, and he showed what a much better performance was being achieved then than sadly has been the case more recently.

Only last Thursday my noble friend published in this House a Written Statement by the Secretary of State in connection with the second annual review by the noble Lord, Lord Levene, which recognised that there had been substantial progress. The Secretary of State said that there was,

“clear evidence that the Ministry of Defence has become more businesslike”.—[Official Report, 5/12/13; col. WS 37.]

which was, “very encouraging”.

There are real difficulties about a GOCO taking over the DE&S function. Certainly, as the noble Lord, Lord Levene, has said, I have no objection to GOCOs, because we did them. We did them in Devonport and Portsmouth and they were a great success. They had limited, targeted objectives—putting a company in charge of something with its commercial expertise and defined objectives—and nobody would criticise them now.

However, if you take the wider considerations for total procurement in excess of £10 billion a year, the implications are not simply about what is the best commercial deal; there are economic implications for every part of our country. There may be regional aspects to that; the future of an industry may be at stake; international collaborative ventures may have to be taken into account. What could well become a real headache for a future Secretary of State are possible conflicts of interest and allegations of failure and lack of impartiality in the treatment of contracts. There are also the security implications of foreign companies that are applying to become the GOCO operator working for other Governments as well. There is a range of issues that goes much further.

I hope that the proposal in the Secretary of State’s Statement, DE&S-plus, can be made to work and that we can build on existing capabilities. Many will have noticed the key paragraph in the Statement, that,

“we will permit the new organisation significant freedoms and flexibilities, agreed with the Treasury and Cabinet Office, around how it recruits, rewards, retains and manages staff along more commercial lines”.

That is a crucial decision, which seems to meet the challenge. There are many very experienced and talented people in the procurement field within the Ministry of Defence, but some of them lack wider senior commercial experience. If we can reinforce that, I have every hope that that could work.

It is against that background that I hope that we will also tackle one of the besetting sins of the Ministry of Defence over the years, and get greater continuity. People continually changing jobs is a problem in many government departments. We must build up that field of expertise with maximum continuity of employment.

The more difficult issue that I have to raise is that, if this is the Secretary of State’s announced decision today—and it has been referred to already—there is the question of whether we are really going forward with Part 1. I am in favour of giving every possible encouragement to the Government’s now announced decision for DE&S-plus. I hope that he can recruit the very best people to work in that, to reinforce it and to make it an effective body. It does not seem the ideal start for them if you say, “By the way, we may chuck it all in a couple of years’ time and, by the way, we don’t actually have to go back to Parliament because we already have an Act of Parliament in place that enables us to do it”. There is a difficult constitutional point as to whether this should be proceeded with at this stage. I am talking of course only about Part 1.

This has all happened in a great rush. We have had the Secretary of State’s announcement only this afternoon and not had a chance to discuss it. Your Lordships’ House does not vote against Second Readings so the Bill will proceed, but, between now and Committee, we have seriously to consider what really should happen to Part 1. I hope that we will give our fullest backing to DE&S-plus and make that work, and really see the improvement in the performance in MoD procurement to which I know the Secretary of State and all the Ministers in the department attach such enormous importance.

00:00

[Lord West of Spithead (Lab)]

My Lords, 72 years ago today in the South China Sea, HMS “Prince of Wales” and HMS “Repulse” were sunk by the Japanese. They were the first British capital ships to be sunk by aircraft and the last battleship and battle cruiser lost in action by our nation. I mention this because our debate today does not take place in a vacuum. In the final analysis, procurement is of importance to future UK strategy and the lives of our people.

On the Defence Reform Bill, I have considerable sympathy with what has been said by previous speakers, although the noble Lord, Lord Palmer, was wrong about the previous Government not trying to solve procurement problems. They tried in many ways to do that, but, like many Governments before, were defeated. Indeed, they even went so far as to call in Bernard Gray to find a way forward.

I believe that Part 1 of the Bill is now redundant. The noble Lord, Lord King, has explained very clearly why it is a real problem. The Government should think carefully about leaving it within the Bill, not least because of the uncertainty caused to industry but there are other factors as well. I was surprised that the Secretary of State’s Statement should come less than two hours before our debate, which is a slightly strange procedure and has made it quite difficult to focus on the detail, but I am sure that Part 1 has to go.

There is no doubt that the GOCO option was very high-risk. Indeed, many of us, including the noble Lord, Lord Levene of Portsoken, whom we have just heard talk so persuasively about this issue, and the noble Lord, Lord Lee of Trafford, have been vociferous in our opposition to the proposal. It is of great interest to note that Bernard Gray, who is the champion of GOCO, put the same proposal to the previous Government in 2006, who after considerable deliberation dismissed the idea as risky and potentially damaging to the national interest.

What is beyond doubt is that we have to do something about our procurement organisation—all of us have said that and all of us are aware of that—not least because, since SDR 2010, the procurement organisation failure to let contracts has resulted in about £1 billion of underspend each year that is lost to the department, even allowing for some rollover.

In its 2011 report, Ideas for Future UK Defence Procurement, Labour highlighted the problematic issues of defence procurement which had existed for decades and which, despite attempts such as the defence industrial strategy, smart procurement and calling in Bernard Gray, had not really been resolved. The summary of the recommendations of that review would be worth the Government’s scrutiny—indeed, they seem to have copied some of the ideas because DE&S-plus is very similar in many ways as it is being put forward. In naval parlance, I say, “Bravo Zulu”—the flag hoist for “well done”—to them for having taken some of those ideas on board.

Indeed, I would be pleased if the Secretary of State really had made a U-turn on GOCO. I know how embarrassing U-turns can be. When I was a Minister, I was in the back of a cab and the cabbie said, “I am going to do an Admiral West”. It was at the time of the 42 days debacle, if I can call it that. I said, “What?” and he said, “I am doing a U-turn”. I know how embarrassing it can be: you can get known for these sorts of things.

We must ensure that the DE&S-plus option has that small number of really special people at the top who have that commercial knowledge touched on by the noble Lord, Lord Levene. I second what the noble Lord, Lord King, said. In the Statement by the Secretary of State, I love where it mentions that,

“crucially, we will permit the new organisation significant freedoms and flexibilities, agreed with the Treasury and Cabinet Office, around how it recruits, rewards, retains and manages staff along more commercial lines”.

That is really important, as the noble Lord, Lord King, touched on. However, it is not appropriate that Bernard Gray should be the chief executive of this, particularly if we leave Part 1 in the Bill. For 10 years or so, he has consistently pushed to have this and he will sit there while a Government will have the ability just to slot into the new system with no further real debate in this House. I do not think that that is appropriate. I find it quite surprising that Gray has been pushed forward for that.

On Part 2 of the Bill, relating to single-source contracts, I have concerns about the independence of the SSRO. That will need to be looked at very carefully in the debates over the next few weeks. There are some commercial sensibilities and difficulties here, as was touched on by the noble Lord, Lord Palmer. However, I am generally supportive of this and think it is going in the right direction.

On Part 3, I and many others have had concerns about recruiting reservists but it is important to put that in context. The reduction in the size of the Regular Army stemming from SDSR 2010 is on track. I have been very impressed by the effort that the Army has put into doing that, the way it has thought of things laterally and what has been done. That reduction calls for an Army in 2020 of 82,500 regulars. It is quite clear that the money to pay for more than those numbers will not be there post-2016 so things have to be done. It is quite right that the Army has done them.

Any talk of reversing this reduction and restructuring the Army is extremely foolhardy. For example, with the 8,500 men made redundant over the past 15 months, it would take about 15 years to grow those numbers again. Once you change the course of something like the Army, you cannot change it back again quickly. We must proceed with the next tranche of redundancies—I think it is about 1,500 but do not know—because we have to keep the course and momentum going. Recruiting of reservists is, strangely, a different issue. The Army apparently always knew that it would take five to six years to recruit up to the numbers required, so there is not a direct link to regular numbers by time. We need to be aware of that.

What is clear is that the removal of the serving soldiers from the recruiting service—about 800 of them—has had a devastating effect on recruitment, and Capita has not covered itself in glory. Shortfalls in IT have once again raised their ugly head and caused real problems. There are real problems in recruiting, to which I am sure the Government and the Secretary of State will apply themselves. We need to get this right, even allowing for the time-lag to do it. There are also problems with SMEs, for example, in allowing people to join. That has been touched on by a number of noble Lords, not least the noble Lords, Lord Palmer and Lord King. That will need to be resolved as well.

Lastly, we need to put down a marker that we cannot allow SDSR 2015 to be the disaster that SDSR 2010 was. Defence needs a budget that is a flat line plus 2%. We must not allow the SDSR, which will come two weeks after the general election, to knock off track such complex plans as, for example, Army 2020—just to pick on the Army one. It could do that if we get it wrong. The SDSR must be underpinned by an updated national security strategy, finished in plenty of time to allow SDSR 2015 to be conducted in a timely and not a rushed manner, as was done for SDSR 2010. We owe our people nothing less than that.

16:34

[Baroness Garden of Frognal (LD)]

My Lords, I thank my noble friend the Minister for updating us on the very recent developments in connection with the Bill, but I share the concerns around the Chamber that we have not had time to absorb the Statement. By the time we go into Committee, there will have been an opportunity for further clarity and reflection on the Government’s position.

I shall speak on Part 3, on the reserves, but will start with Part 1. The MoD has long had a reputation for poor management of equipment programmes, in which delays and overspends are not infrequent. The MoD is not alone among departments where budgets overrun initial estimates of time and cost but it does have to take into account factors which may not be present in other parts of government. For instance, the equipment that our Armed Forces need is at the cutting edge of technology. This will always bring uncertainties. It will have a long lifespan so it needs to be capable of repairs and upgrades, and flexible enough to be responsive to developments in weaponry in less friendly parts of the world.

Specifications would be complex enough without another factor outside the control of the MoD, namely the requirement to respond to political decisions. Ministers may wish to keep jobs in particular parts of the country to address employment needs or to ensure that skills are not lost. They may decide to commission equipment for a variety of reasons which are not first and foremost military. I concur with the noble Lord, Lord Levene, and my noble friend Lord King that those who serve in the MoD—military and civilian—are not only committed to public service but have a wealth of experience, expertise and knowledge which deserves to be given credit. There will be service men and women with first-hand experience of what does and does not work in conflict zones, working alongside military analysts, strategists and engineers. They may even be the same people. Why is it, then, that Governments have a tendency to look first to the private sector for guidance on the future for defence, with the assumption that the higher the fees and salaries paid, the better the quality of the advice? This may be a misplaced assumption.

As my noble friend the Minister set out, and as was said in today’s Statement:

“We have also started to address the business skills gap within DE&S ... by the recruitment of new senior finance and commercial staff from the private sector”.

I fully recognise that such enhanced skills may be available only in the private sector, but has there been any skills audit within the MoD to ensure that at least some of the business, financial, project management and HR skills might be met from within existing staff? After all, I remind your Lordships that it was highly paid private sector skills, brought in to address the undoubted problems of procurement, which led to a GOCO solution. There were reservations about the implication of such outsourcing, as noble Lords have already set out—and, as we now know, the model held little appeal for industry and has been put on hold. But neither GOCO nor DE&S-plus is proof against decisions taken at ministerial level for the broader good of the country. It is unreasonable to chastise the MoD when equipment is commissioned or adapted for non-operational reasons and to lay blame for mismanagement solely at its door.

I turn to Part 3 and the reserves. Two weeks ago this Chamber was filled with cadets in uniform from all around the UK who, along with veterans, were debating the legacy of the First World War. Their debating skills were immensely impressive; speaking thoughtfully and clearly, and keeping to time, they were a credit to your Lordships’ House. The contributions from the veterans were moving in demonstrating their personal struggles and achievements. We also heard of the inspiring work of military charities and volunteers. It was equally impressive in conversation to hear of these young people’s commitment to the Armed Forces, whether they were intending to join up or not. Among them are the service men and women, and the reserves, of the future. These are the people who can demonstrate to employers that they have personal and professional skills which are enhanced by military service, and which can be of immense benefit in civilian life, too.

The Royal Navy and the Royal Air Force face changes to their Reserve Forces but the main focus of the Bill is the effect on the Army, where, as we have heard, the reduction in the Regular Army from 102,000 to 82,000 is set to be balanced by an increase in the Army Reserve from 19,000 to 30,000. In managing this increase, a civilian contract company can do only so much. For these numbers to be achieved, champions are needed from within the services. Ex-regulars should be actively encouraged to engage. Cadets and veterans provide great role models for those considering joining the reserves. Their own enthusiasm encourages others to meet the challenges of service to their country. What support is being given to ensure that career advice and guidance sets out the very wide range of opportunities within regulars and reserves? I recognise there are sensitivities in this that must be observed with regard to recruitment, but we must face up to them if we are to achieve this timely change.

In the 21st century, warfare is seldom conventional. Reshaping our military will enable the services to operate more flexibly and cost-effectively. The additional demands on the Army Reserve Forces will require access to, and the use of, the same equipment and vehicles as regulars. As their training commitments increase to 40 days a year, so they will be paired with regulars for training and deployment purposes. This must be managed and monitored and I, too, welcome the amendment about the annual external scrutiny.

Employer engagement is key to the success of this initiative. Many larger employers need little convincing of the benefits that those with military training can bring to the business world. The military is trained to think around and through problems, to respond to fast-changing situations, to communicate with those around it, to work as a team and to show leadership. For large employers and, even more importantly, for small and medium-sized enterprises, it is important that the Government make clear the support on offer to ensure that business needs continue to be met, even when staff are called away for up to 12 months at a time. Noble Lords have already raised the concerns that this situation will bring.

For the reserves themselves, we shall seek assurances that their employment rights will be protected and that every consideration will be given to their physical and mental health. The Minister made reference to this in his opening remarks, but I note that a 2012 study from the King’s Centre for Military Health Research highlights the fact that reservists have more difficulty than regular soldiers with post-deployment social functioning, fitting back into family and civilian life and coping with stress, including post-traumatic stress disorder.

The Liberal Democrats have discussed this and propose that Army reserves should be regionalised to district areas, with regular commanders taking responsibility for all reservists in their area. Links to their families, to the Royal British Legion and to other military welfare organisations could play a role as a regular/reservist and veteran hub. Such an organisation could play a very welcome part in the community and help to alleviate some of the problems specific to reserves. Any increase in reserve numbers will call for comparable increases in medical and other support services to ensure that the duty of care, as set out in the military covenant, extends to both regulars and reserves.

The country quite rightly continues to express pride and admiration for our Armed Forces. With the right structures and safeguards in place, Part 3 will enable them to be reshaped in a way which fits them for service in the 21st century. We on these Benches look forward to scrutinising the Bill in Committee to ensure the best possible future for the indomitable men and women of the Navy, the Army and the Air Force. They deserve our attention to get this Bill right.

16:43

[Lord Stirrup (CB)]

My Lords, as other noble Lords have remarked, the uncertainty surrounding the Government’s intentions for defence acquisition and support have made it rather difficult to prepare for this debate. The first part of the Bill is designed to pave the way for a government-owned, contractor-operated solution and, as we have heard, that is no longer in prospect, at least in the short term. Nevertheless, there will be substantial changes to the way in which defence equipment is procured and supported, and it is important that we take the opportunity to reflect on the challenges involved, so my remarks will focus on this part of the Bill.

Over the past two decades we have seen major reviews and reforms of defence procurement every four or five years on average. Each one has aimed to resolve serious problems and each has achieved some improvement, but each has failed to address the central issue of cost and time overruns. Before proceeding with the latest of these reorganisations, it is perhaps worth asking why the problem has proved so intractable.

Some years ago, a major management consultancy firm conducted an independent assessment of defence procurement in nations with substantial armed forces. It concluded that the UK’s performance in this area was about average—not that it was good, but because the problems of time and cost overruns were fairly common across comparator nations. We should not be surprised by this. Some people might have the impression that the United States does better than we do, but the facts do not bear out that contention. The track record of complex projects, such as the F22 fighter, the F35 Lightning 2 Joint Strike Fighter, and the ill starred future combat system for the US Army, is unenviable.

One of our most successful acquisitions, in terms of cost and time, was the C17 transport aircraft, which has proved such a godsend in recent operations. We bought it, unmodified, off the shelf once it had been designed, developed and proved in service. It is worth noting that the C17’s development programme was so troubled that the United States Air Force would have cancelled it had there been any alternative.

These problems are not confined to defence. The London Olympics were rightly hailed as a great success story, but the final cost of the Games will be somewhere between four and 10 times the original estimate, depending on which figures one uses—and I probably need only mention the name “HS2”.

That is a description of the water, but, of course, the problem is how to avoid drowning in it. With this in mind, it is important to recognise that, in the case of defence acquisition, failure is not, unusually, an orphan, but has many parents. The first is the nature of the defence business itself. The efficacy and true value of defence equipment can be assessed accurately only once it has been employed tactically on operations, usually in competition with enemy systems and tactics. This problem becomes even more complex when we consider that the equipment being developed today will be tested in combat not tomorrow, but 10, 20 or even 30 years in the future. Judging the likely competition that far ahead, and thus the capabilities required, is no easy task.

The task is even more difficult when one considers the rate of change of some of the technologies involved. A great deal of military capability today relies on extensive computing power and information management systems. Our main attack aircraft, the Tornado, came into service some 30 years ago. Noble Lords may recall that in the early 1980s, the cutting-edge technocrats among us were playing around with the Commodore 64 computer, with its massive 64 kilobytes of memory, and not with iPads.

The second source of difficulty in defence acquisition is the wider political and industrial picture. If we bought everything off the shelf, as we did with the C17, we would have much greater predictability in our defence programme, but we would have no significant defence industry. Employment and order-book pressures may have no bearing on short-term military considerations, but they undoubtedly complicate the procurement of military capability.

The third problem is the annuality of the defence budget and the way this has been handled. In-year cost pressures have to be dealt with in-year, and the traditional way of approaching this has been to delay projects. This saves money in the short term but, of course, drives up the whole-life cost of the project considerably. The MoD’s institution of a contingency fund within the budget to help deal with such pressures is a sensible step, but the danger is that this will lead to persistent underspends, and the loss of funds back to the Treasury. A more sensible approach would surely be a long-term budget that had to be balanced over a period but not in each individual year.

The final problem I will touch on is the ability of defence acquisition personnel to negotiate and contract effectively with defence companies. I do not want to imply any criticism of the staff within defence equipment procurement and support. There seems to be a growing sense in the public sector that the way to improve the performance of personnel is to denigrate them. I do not consider this a wise policy, and I agree with the words of the noble Lord, Lord Levene of Portsoken, in this regard. However, there is considerable evidence to suggest that in some cases we are putting the wrong kind of people up to deal with defence companies. They find themselves overmatched, not by the intrinsic worth of their industry counterparts, but by their training and experience. The numbers may be small, but the malign effects can be very large.

This is not, in most cases, the fault of the people involved. It is the fault of the organisation that is exposing them in such a way. Defence equipment and support need negotiators and lawyers who can match those in industry, but to get them they will have to pay the going rate, which has not been possible under the present system. We certainly need to fix this, and I welcome the moves that the Minister has announced. However, I cannot believe that the GOCO route, which clearly remains an aspiration, is the only—or even the best—long-term way of going about this. Nor do I think that any solution will be a magic bullet, and I fear that there has been some sense of that in this afternoon’s debate. Staff skills levels and experience are a problem but, as I have tried to explain, there are many other challenges. The fundamental difficulty, to my mind, is how to combine cutting-edge technology with financial predictability.

Some have suggested that so-called “requirement creep” is the issue, and that if we define the requirement and leave it alone, we will solve many problems. This is probably true, but I doubt that it would represent value for money for the taxpayer in the long run. Equipment that from conception to out-of-service will be around for upwards of half a century must be kept up to date. The one thing worse than overspending on defence equipment is surely spending less on equipment that cannot do the job required of it.

I am reminded of the US defence company which, some years ago, tried to persuade us that it was better value to buy a fighter with 75% of the required capability but only 60% of the predicted cost. This demonstrated a total misunderstanding of the nature of value. The proposition might look attractive, but, when one understands that having 75% of the capability would mean losing 100% of the air combats, the picture changes. It is hard to think of a proposition that could offer worse value for money.

The problem, of course, is that changing the requirement does drive up the cost. To some extent, this is unavoidable, but I have long believed that we need a multitrack approach to our procurement processes. We can have the slow, majestic, leviathan process when it comes to large platforms. After all, the fundamental elements of an airframe or a ship do not change much or rapidly over its lifetime. However, we need capability spaces within those platforms. In these, we need plug in and play sensors, information systems and weapons to deliver cutting-edge capability. The acquisition of such systems needs to be much faster and more agile than the acquisition of the platforms themselves. This is one way in which we can square the circle of performance and financial predictability.

There are, of course, other possible approaches. What is important is that this latest attempt to reform defence acquisition and support should address the full range of underlying problems, not just one of them. If it does not, it will follow in the path of its many predecessor reforms; it will bring some improvement but make no substantial difference to the underlying issue—and in four or five years, we will be here again, discussing yet another set of proposals for reform.

16:53

[Baroness Dean of Thornton-le-Fylde (Lab)]

My Lords, in preparing for this debate, I was reminded that it was the first substantial defence debate that we will be having since the passing of the late Lord Gilbert. I have sure that had he been here today, he would have had some pretty direct remarks to make about the Defence Reform Bill.

The Bill received substantial cross-party support in the other place, certainly from the party of which I am a member, which substantially helped its process through Parliament. Yet we had today, just minutes before we started our debate, the Statement from the Secretary of State on what many regard as the key part of this Bill, the switch of our acquisitions to GOCO. In January 2011, Bernard Gray was appointed Chief of Defence Matériel. The following year, in July, the Secretary of State said in a Written Statement:

“I have decided that MoD should focus its effort on developing and testing the GOCO option further”.—[Official Report, Commons, 12/7/12; col. 124WS.]

A year later, in June this year, the White Paper, Better Defence Acquisition, said:

“The MoD intends to contract for the GOCO to act as its agent”—

with very little reference to the Defence Equipment and Support agency.

Therefore, it would appear from that time that GOCO was really the only show in town; there was no equal addressing of the alternative by the Government. Yet the impact assessment for Part 1 of the Bill says that there remains,

“substantial uncertainties over the level of costs and benefits”.

So, lots of questions are still to be answered.

The Acquisition Focus Group of the Royal United Services Institute questioned the GOCO, too, and concluded that it,

“suffers from an inherent weakness”.

As late as 28 November this year, in evidence to the House of Commons Defence Select Committee, Bernard Gray himself said:

“Initial estimates suggest a GOCO could deliver a net benefit of several hundred million pounds over 10 years”.

The House of Commons Defence Select Committee also raised issues on which it had concerns. The right honourable Member for North East Hampshire, the chairman of the committee, criticised the lack of detail on the DE&S-plus option. The letter of the noble Lord, Lord Levene, dated 13 November this year, on his second annual review, in section 5, referring to GOCO and DE&S-plus, said that this,

“needs to be brought quickly to a conclusion”.

I do not believe that we are at a conclusion, because today the Secretary of State issued a Statement saying that the Government are not proceeding at this stage with GOCO but that they wish to keep it in the Bill and see it go through the process in this House to become an Act, thereby creating a lot of confusion and insecurity as regards the alternative.

In another place, the shadow Defence Secretary at the time called for a “genuine comparison” between GOCO and DE&S-plus. I do not believe that that genuine comparison took place. Yet the Government seem to have suffered in the past three years from myopia in their full concentration on GOCO as the answer. Even when the number of bidders dropped from three to two and then to one, the Government did not change their mind. Yet in the Statement today the Secretary of State announced that they will change the DE&S to a new,

“bespoke central government trading entity”,

with effect from April next year. So there are lots of questions to be asked on that. I strongly question why the Bill has come to this place with Part 1 intact and with noble Lords being asked to agree, probably with amendments, that it should remain part of the Bill when the Government have announced that they are taking a different route at this stage.

I also question what the Statement in the other place claims—this has already been raised—about the transparency of governance of this new organisation. The Government announced, on the day when it was set up, the CEO who had been appointed. Where is the transparency there?

In the Statement, the Government also stated that,

“crucially, we will permit the new organisation significant freedoms and flexibilities, agreed with the Treasury and Cabinet Office”.

This may seem a facile question, but is that agreement in place, is it as broad as the Government could wish, or is it yet to be agreed? It does not say that it has been agreed; it could imply that it has yet to be agreed.

I move on to Part 2. It is generally agreed that the single-source contracts are a good and right way to go. Anyone who has been involved in a public procurement process, as I have, can regard it as a nightmare, and this certainly will improve matters. It establishes the Single Source Regulations Office as a non-departmental public body with effect from October 2014. Schedule 4 provides for the appointment of the membership of the SSRO by the Secretary of State. Some would question whether that guarantees the underlying independence. Will the Minister confirm that the process will be an open one, that we will not have another press release saying that the CEO has been appointed, and that the process of recruitment will be open and fair, and in accordance with public appointment requirements?

The schedule refers to the,

“‘non-executive members’ of the SSRO”.

However, it then goes on to say that the arrangements for those non-executive members can cover such things as pension and gratuity provision. My interpretation of practice in a normal plc is that non-executive directors do not get either of those benefits; they get a fee as a non-executive director and that is it. Therefore, the measure is most unusual and we will need to probe it in Committee.

Part 3 of the Bill concerns the Reserve Forces, and this issue has been covered substantially in discussion. However, will the Minister say how the recruitment drive is going? I am aware that the Government have twice promised dates on which they would report on the numbers recruited, but have now said that they will do so during 2014. What proportion of the personnel already recruited are recent members of the Armed Forces—perhaps some of those who are being made redundant? Who is carrying out the recruitment drive now that half the recruitment offices have been closed? Have the necessary resources been made available?

For the Government to say that they are satisfied is insufficient; we need to be confident that the switch from using full-time personnel to creating an expanded role for the reserves, which I think we are all generally in favour of, is not only going well but will fulfil the function that we intend it to fulfil, given that the redundancies among the full-time personnel in the Armed Forces will take place. Will the next set of redundancies that I believe the Army faces be held over until the Government are assured that the recruitment drive for the Reserve Forces is working well and will meet the targets that have been set for it?

The Bill raises many questions, and I hope that between now and Committee the Government will review their wish to retain Part 1 of the Bill. I think that it is defunct and no longer needed, and that the other parts of the Bill could become an effective Act without it.

17:02

[Lord Lee of Trafford (LD)]

My Lords, I want to focus my remarks on Part 1—the procurement aspects of the Bill. I could almost second the speech of the noble Lord, Lord Levene, on this subject. Let us be quite clear what has happened here. The GOCO horse, carrying the colours of Bernard Gray, has been pulled up. There was, frankly, little backing for this nag within either the civilian or the service sides of the MoD. Unfortunately, the Secretary of State decided to place his bet on GOCO and, frankly, faces some embarrassment today. I refer the House—this was mentioned earlier—to the ministerial Statement of 17 July 2012, which says:

“In the meantime, as resources and commercial appetite constrain our ability to pursue these two options simultaneously to the next stage, we have decided that the Department should focus its effort on further developing and testing the GOCO option”.—[Official Report, Commons, 17/7/12; col. 845.]

So, clearly, the GOCO option was the department’s favourite.

GOCOs are fine in certain circumstances. The noble Lord, Lord Levene, and others referred to the contractorisation of the dockyards. I was involved in that process, and supported it, when I was a Minister at the MoD. However, no other country and, to my knowledge, no other major plc, has effectively thrown in the towel and said, “We cannot handle our buying ourselves”. Huge amounts of civilian, ministerial and service time and at least £12 million have been wasted on this GOCO option. However, in my judgment it is the Treasury that historically carries the prime responsibility for this procurement fiasco through its bone-headed, penny-wise, pound-foolish approach, which over the years has prevented DE&S recruiting top talent from the private sector. It has effectively been emasculated and has proved no match for hard-nosed defence contractors, as was referred to earlier. We were told this afternoon that at present DE&S has 800—I repeat, 800—vacancies. In recent years, it has had to employ very expensive consultants. Perhaps when my noble friend sums up he can indicate just how much the MoD is spending on consultants.

Thankfully the Treasury, under pressure, has now got real and has given certain new freedoms to DE&S-plus. I am sure that we all wish it well. Excellent personnel are already there, as a number of noble Lords mentioned —in fact, all noble Lords who have spoken referred to that aspect. It will be strengthened and augmented, we hope, by top-drawer recruitment from the private sector. However, I must ask, first, whether we are giving DE&S-plus a chance. As the noble Baroness, Lady Dean, said, is it sensible or fair to retain the GOCO option in the Bill, almost as a sword of Damocles hanging over the future DE&S-plus? Is it going to encourage top personnel to give up their careers in the private sector and join this organisation if some future Government in a few years’ time are going to go back to the GOCO option and argument? Secondly, does it really make sense for the morale of this new organisation to have its new chief executive in Bernard Gray, the person who drove the alternative option that clearly has failed and fallen?

I should like to ask my noble friend three or four specific questions to which I should like him to refer in his wind-up speech, or, if not, perhaps he can write to me. First, can we have more details of the freedoms that the Treasury is going to give DE&S-plus? Will there be an additional block of money available to it or is there going to be some sort of limitation on the numbers employed? Is there going to be any maximum salary level? Secondly, what is the duration, if any, of Bernard Gray’s contract with the new organisation? What is his salary going to be? Will it increase or, bluntly, will it be a reward for failure? Thirdly, is the new chairman being brought in going to be an executive or non-executive chairman? Finally, on the question of the GOCO competition, what is the position regarding compensation for the remaining Bechtel-led consortium? Is there any likelihood of significant compensation having to be paid out?

17:08

[Lord Craig of Radley (CB)]

My Lords, I do not have much sympathy for GOCO defence procurement. My doubts have been strengthened by the lack of genuine competition and therefore interest from the private sector. The Government are right to pause this approach, but I remain sceptical that the pause and the changed approach announced by Ministers will resolve the fundamental problems affecting advanced platform and weapons systems procurement.

Those of your Lordships who have been involved with defence issues over the past 50 years and more will recall that this is but the latest of numerous attempts to solve difficulties in defence procurement. When the Ministry of Supply was abolished in 1959, defence procurement passed initially to the three single-service ministries until the Ministry of Defence took overall responsibility in 1964. Before that there had been some serious overspends on equipment.

In 1961, the Gibb-Zuckerman report recommended a common, improved process of milestones past which every major project would have to proceed. By the mid-1960s further spectacular cost overruns triggered the establishment of a development cost steering group, chaired by a Mr Downey. The group made further changes but few of these efforts were any more successful. At a time when the Warsaw Pact seemed at its most dangerous, the MoD was inevitably ambitious in its requirements. The three services, the research establishments and industry erroneously felt that technical and integration problems, only revealed during full development, could be resolved—maybe so, but at much increased cost and timescales; and occasionally never, leading to cancellation of a major programme after much time, effort and money had been spent. That is all too similar to experiences 50 years later in 2010, I fear. Cost-plus was much in vogue.

By the early 1980s, exasperated by what he felt was a too-close relationship between the services and their industrial suppliers, the then Defence Secretary, Michael Heseltine, now the noble Lord, Lord Heseltine, decreed that there must be no more fraternisation between the two sides. He also invited Peter Levene, now the noble Lord, Lord Levene, from private industry to fill a new appointment of Chief of Defence Procurement in 1985, as we know. Improvements came: cost-plus was out, competition was in, but initial better outcomes were not sustained after about 1991. More recently, we have seen and forgotten the smart procurement of 1998, which collapsed due to inadequate funding of defence, and was later renamed smart acquisition, but I fear was no better funded.

Concurrently, overambitious, rushed and disruptive reorganisation of procurement and logistics responsibilities and downsizing caused distortion, much frustration and dismay among staff involved. Mr Bernard Gray’s 2009 study of this generic problem recommended that 10-year rolling defence budgets and 20-year equipment budgets published to Parliament should be adopted—no signs of that. The nearest—and minimalist—has been the Prime Minister’s assurance that the equipment budget would increase by 1% after the next election. This is the basis for the affordable equipment programme announced last year for the period 2015-16 through to 2020-21 but, as the NAO has commented, this does not and will not offer a definitive view of the affordability of the equipment plan, as more time and experience will be required to assess its worth. Moreover, it is far from clear whether this raise for equipment is additional to the whole defence budget or will have to be offset by reductions elsewhere in MoD spending, as the Chancellor proposed only last week. Of course, there is a general election in 18 months so nothing can be definitive.

I have only briefly itemised some of the attempts to do better in procurement over the past 50 years. Much more could be said. Of course, it is right to try to do better, but sometimes the MoD seems to be the whipping boy of Whitehall over poor procurement, and cost and timescale overruns. Other departments with much less challenging requirements seem to suffer major cost and timescale overruns without being subject to such excoriating criticism—for example, the NHS’s repeated nationwide computing failures; the National Offender Management Service’s information system being 400% over budget; the tenfold rise in the cost of the Scottish Parliament; Transport for London modernisation, with billions of pounds underestimated; the numerous PFI schemes that have left the taxpayer billions of pounds worse off than before these wheezes were introduced. The successful Olympics bid, which has already been mentioned, started off at £2.9 billion, only to finish close on £9 billion—and the hard-pressed Armed Forces saved the day for the whole enterprise when G4S messed up. Until—and do not hold your breath—Governments of the day, with opposition support, are prepared to approve the sort of decade-long, rolling budgets recommended by Bernard Gray, and to stick to them, I fear that budget aspiration rather than reality will remain the quicksand basis of government procurement planning and costing.

A further and often overlooked issue is the political, and sometimes party-political, pressures on Ministers to adjust programmes to sustain industrial capacity or employment. Should such additional costs be totally met from within the defence budget? Some form of Treasury contingency funding might be made available when such adjustments to programmes are not for military or technical reasons. Further costs, which are hard to quantify in advance, will arise within multilateral programmes and be beyond the control of the Ministry of Defence. In over 50 years the right answer has evaded all; no silver bullet has been found. It should be no surprise, unless the Government and Treasury adopt a totally different approach, if it were to remain unresolved in the next 50 years. Meanwhile, I shall watch with interest how the latest scheme matures.

There is much in the Bill about the Single Source Regulations Office, enough to emphasise its importance for obtaining value for money. It is said to be free of government but where does it stand with the Treasury, which also has authority and interest in value for money? Will the SSRO be free from Treasury second-guessing, or will it merely be a further bureaucratic stage when dealing with single-source contractors?

Turning to concerns expressed in your Lordships’ House and elsewhere about the legal erosion of our national fighting power, I fear that this may extend further than the battlefield and into the field of procurement and technical support. When I was flying Vulcan and Victor bombers, only the two pilots had ejection seats. The rear crew members had to rely on parachutes if their aircraft had to be abandoned in flight. Fitting ejection seats for all at the design stage was deemed technically very complex, with unacceptable time delays into service, and costly. At various times, following tragic fatal air accidents of these aircraft on training flights, the possibility of fitting ejection seats for all crew members was re-examined. Once again, cost, complexity and the loss of airframes from the front line while modifications were installed were deemed excessive in any attempt to reduce the relatively low-frequency risk of a similar future air disaster. Indeed, I am not aware that any claims by relatives were made in those days—probably Crown immunity then would have ruled them out—although the additional life insurance premium to cover flying risk was largely met by the ministry.

Today, when coroners and courts are keen to investigate the background to individual service deaths, there is a growing tendency to question why particular modifications or kit which could have been made available and might have averted the individual’s death were not available. Such an approach cannot take full and proper informed account of the complexities of the design or later modification, the downtime to carry out the necessary work and the remaining in-service life of the aircraft fleet or other equipment involved. Additional cost, too, of course arises. Is it better to pay that much to ameliorate one risk of catastrophe over, say, a few years of remaining in-service life, and not be able to afford to do more for other potentially higher and longer-lasting risks?

My fear is that this legal probing, basking in the certainty of 20:20 hindsight, will extend to questioning why original designs or modifications which subsequently proved unable to match the opposition’s capability were allowed to persist or be deployed or, alternatively, why additional steps had not been approved though the technical capability existed. Such concerns should be borne in mind in any changes to responsibility for defence procurement. Indeed, they should add further stimulus to taking positive action to reinstate immunities in a field of activity where acceptance of risk to life has to be the norm if our forces are not to be gravely neutered by legal hindsight.

I turn to the reserves. There is nothing in the Bill that would expedite the call-out of individual or small cadres of reservists, whose earliest possible availability is essential to the preparation and mounting of an intended operation. With greater reliance on ready Reserve Forces, the current statutory requirement that ministerial approval has to be obtained before the call-out of any reservists needs to be reviewed. Delegated ministerial authority to service chiefs for small and key critical reserve elements would ensure that those individuals who are already at high readiness would be immediately on task when required. What assurance can the Minister give that such delegation is covered by current legislation, and perhaps by Clause 45, or should it be a matter for amendment? With a policy to rely more than ever on the employment of reservists alongside Regular Forces, their early availability is a key requirement and must be assured in all circumstances.

17:20

[Baroness Cohen of Pimlico (Lab)]

My Lords, I shall speak on Part 1 of the Bill since that is where my experience of the MoD rests. I also speak as what seems to be a highly unpopular advocate of continuing to seek out a GOCO option. My qualifications for speaking on procurement rest on part-time involvement with the MoD in general and with the then newly formed Defence Logistics Organisation, in particular from 1998 to 2005. I was drafted in by the then Secretary of State for Defence, George Robertson, now my noble friend Lord Robertson of Port Ellen, to be one of the group of 12 wise men and only three wise women to critique the emerging conclusions of the strategic defence review. I went straight for the logistics and procurement end, using my experience of advising Unipart for many years, and having worked with Alan Rudge at BT and Richard Lapthorne of BAE. When we concluded our review, it was decided to put together the logistics for all three services under one newly formed organisation, the Defence Logistics Organisation, but not to try to put the new organisation together with the major procurement organisation on the grounds that it was a bridge too far. At all events, I ended up the following year as the only non-executive director of the Defence Logistics Organisation under General Sir Sam Cowan. I stayed in the same role at the request of his successor, Air Chief Marshal Sir Malcolm Pledger, and refused to stay with his successor only because I felt, after six years, that I had shot my bolt.

I read the White Paper, Better Defence Acquisition, of June 2013—which, after all, is terribly recent—with real pleasure. The writing is clear and elegant, and it makes an absolutely uncompromising analysis of the root causes of underperformance in defence acquisition. I know that it had the admirable report by Bernard Gray in 2009, and the equally admirable report published in June 2011 from the committee chaired by the noble Lord, Lord Levene, to draw on. Those reports brought back painful memories of what I and my fellow non-executive directors had failed to achieve.

The first root cause of failure identified was a not quite steady and overly ambitious equipment programme. Back in 1999, I encountered a forward programme which contained, at the end of it all, all sorts of projects and kits labelled “at risk”. I asked what “at risk” meant, and found out that they turned out to be projects for which there was no money and would not be any in the foreseeable future. Feeling rather like the customer in the famous dead parrot sketch, I pointed out that a project for which there were no funds was not at risk: it was dead, it was an ex-project. All agreed courteously that I was right, but the “at risk” list stayed on the books and in the planning. Military personnel are, in the main, intelligent and practical men, so I decided that they must know something that I did not. Indeed, as it turned out, they know as they have known since before Waterloo that if you have a favoured project and can keep it on the books, you might get it in the end—usually because a war comes along. Of course, the Treasury pays for war; the defence budget gets us a standing army but it does not, on the whole, pay for a war.

Worse, you can go on spending a bit of cash on this project and committing yourself to more so that, in the end, it becomes cheaper to go on than to stop. I need hardly say that the energy and politics devoted to all this took up a lot of valuable time. I know that the MoD and the current Secretary of State, to whom I give great credit, have tried to stamp out unrealistic budgeting, but the White Paper describes the present position as a “balanced, if taut” MoD budget. Experience suggests that “taut” is probably code for there being at least two projects for which there are not enough funds, but which are being held in there on the basis of hope.

The second root cause identified by the White Paper is an unstable interface between the requester and the deliverer. In three paragraphs, it says concisely and very graciously that the MoD is a terrible customer and cannot do anything without wanting extras or wanting to do it differently half way through the contract. Anyone who has done any contracting, even for home improvement, knows that that costs money and causes delay. It is difficult to know how to change that.

The third root cause is that there are insufficient skills and management freedom within DE&S. That is indisputably true. There are many excellent people in the MoD, but the project management stars needed are in the private sector, being paid twice as much as anyone in the MoD and, above all, being given freedom to do their jobs without interference.

I also agree with the White Paper’s conclusions. That is why I am so disappointed that the GOCO proposal has fallen. Indeed, I am prepared to put the White Paper’s conclusions more bluntly. The causes of underperformance are endemic and deeply rooted in MoD culture, which resists outside reform, and has done since Waterloo. The MoD has real strengths. It is manned by many excellent people, who feel that they know best. It has gracefully seen off many an outsider. I am sorry to find myself on the other side from my noble friend Lord Levene and the noble Lord, Lord King, since one of them ran defence procurement and the other was Secretary of State. However, radical reform involving giving cash and authority to a GOCO is the only thing that will work. I urge this Government, and I shall be urging a Labour Government when we have one again—soon I hope—to look again at the analysis in this White Paper.

Since I have already probably blown my chances of being appointed Chief of the Defence Staff, I shall go further and suggest that in continuing our search for a GOCO we may have to go about our contracting in a different way. To paraphrase Lady Bracknell, to lose two out of three of the essential private sector candidates suggests not carelessness, but that contract conditions—drawn up by the MoD—may have been too restrictive, and/or may have allowed for unfeasible and expensive interference by the department, or may have been unrealistic in their cost expectations. Indeed I remember that one of the bidders dropped out on the basis that they could not make a living on the contract. We might need to get an outside expert view on how the contract is drafted.

I am reminded of a story—no doubt apocryphal—about a meeting between Louis XIV, the Sun King, and a rebel peasant in the Fronde uprising. Louis XIV condemned the peasant to death but the man successfully pleaded for a year’s stay of execution on the promise that his life would be spared if by then he had taught the king’s horse to talk. His friends, and probably the horse, inquired of him what had possessed him to make so rash a promise. “Ah,” the peasant said, “In a year’s time, the horse may be dead, or I may be dead, or the king may be dead, or the horse may talk”. This of course is a parable about towing a problem along. That is what we are doing if we attempt to solve these deeply rooted problems within the same structure and with the same people that have perpetuated them. It is not the right use of scarce public resources now; nor is it the best future for the armed services.

17:29

[Baroness Doocey (LD)]

My Lords, I will speak to Part 3 of the Bill to highlight concerns about forces welfare, and in particular the welfare of those serving in the Army Reserve. The Bill includes important provisions to protect the employment rights of reservists, which is clearly right. However, we must consider how we can improve reservists’ welfare in other ways. After all, the real task is to attract large numbers of new recruits if the targets for reservists are to be met. In doing so, we should learn lessons from important welfare issues affecting the whole service.

Housing is among the most important of those welfare issues, not only for personnel currently serving but for those leaving the service. The Army Families Federation reports that the poor standard of maintenance and repair is the biggest problem for Army families. Although the current standard of accommodation is undoubtedly the result of decades of underinvestment, the fact that it persists to such a degree is, I am told, largely due to the way that prime contractors are incentivised. Service families whom I have met describe the situation as woeful, and maintenance and repair problems are the subject of endless complaints.

Last year, the Defence Select Committee investigated accommodation provided by the MoD. It reported that less than 50% of the single living accommodation units in the UK are in the top two grades of quality, even though the target set by the MoD is 90%. Indeed, more than a third of this accommodation is in the bottom grade. I welcome the substantial investment in accommodation for service families in recent years, which has seen more than 90% of the homes for service families brought into the top two quality grades, but the same approach is needed for the rest of the accommodation estate.

Forces personnel also face issues trying to find a home when they leave the service. The homelessness charity Homeless Link conducts the annual Survey Of Needs and Provision, which shows that the problem of ex-forces personnel sleeping rough, in hostels or in supported accommodation, is widespread. It reports that half the day centres in England say that they work with ex-service personnel and that those personnel face a high risk of falling into patterns of rough sleeping. We must acknowledge our responsibilities to the welfare of service personnel—regulars and reservists.

The Bill before us tackles job security for our reserves, opens the door to longer periods of deployment and promises to improve the incentives and compensation arrangements for employers. These are very good steps forward. However, if we are to attract the broad range of skills and people to greatly expand our Reserve Forces, we must have an answer for them on welfare issues such as their healthcare, their mental state and their family-life balance. Ensuring decent accommodation which is properly and regularly maintained for our regular forces should be seen as part and parcel of this approach.

17:33

[Lord Davies of Stamford (Lab)]

My Lords, I do not want to take up too much time, so will address only Part 1 and reserve my comments on Parts 2 and 3 for later stages in the Bill’s progress.

If anything can be said about the Government and defence—quite modestly and unexceptionably, because the points are so blatantly obvious—it is that this Government do not care much about defence and that their judgment in defence matters is pretty poor. In the course of three and a half years, they are well on their way to running the Army down from 100,000 to 82,000, they have abolished our carrier strike capability, they have abolished entirely our long-range maritime surveillance capability and they have reduced our capability in helicopters, in naval escorts— I think we are now down to 13 naval escorts from 22 when the previous Government left office—and in many other areas.

We are told all the time that that is due to a shortage of funds, but in fact the Government had a surplus in 2011-12, which was then entirely lost to the Treasury. There was then an extraordinary surplus of £2 billion, more or less, in the last financial year, ending in April 2013, some of which has been lost to the Treasury. The Government complacently say that a lot of it has been rolled over, but even this Government must realise that if you do that, at the very best you are delivering equipment a year later than it should have been delivered, and because of the time value of money, your money does not buy as much as it otherwise would do. That has been a disaster for defence—a completely self-made disaster.

On top of all that, we have had this extraordinary, monumental shambles today—something that in future years we will look back on as a memorable shambles—in which the Government, on the very day that they are introducing an important Bill at Second Reading, make a Statement a couple of hours beforehand saying that the first part of the Bill is inoperable and that they do not intend to take it forward in the foreseeable future. The Government have ended up with the worst of all possible worlds. That is the absolute obverse of good leadership and good management.

The Government are keeping both their feet on both sides of the fence. They are not taking a clear decision. Of course that will be damaging to the morale and momentum of DE&S-plus and of course it will be damaging to recruitment, particularly at higher levels. People going in at the higher level are precisely the sort of people who will be displaced in the event that, a few years down the line, the Government switch to the GOCO course and Bechtel or Boeing or Serco or someone comes in and puts its own staff in these senior decision-making posts. It is utterly naive not to suppose that there will be real damage from this continued indecision by the Government. We have had too much indecision already; we might at least have expected and been entitled to a clear decision at this stage.

The decision should be quite clear: we should junk the idea of the GOCO altogether. I totally agree with the points that have been made about GOCO by a lot of people whom I know well and who know an awful lot about defence: the noble Lord, Lord Levene, and the noble and gallant Lords, Lord Stirrup and Lord Craig, and others who have spoken in this debate.

Of course, the Government have run into a lot of problems with industry over the GOCO proposal, mostly about conflicts of interest and treatment of intellectual property. However, there are two much more fundamental reasons why the whole idea was completely misconceived from the beginning. The first is that defence procurement is and ought to be and ought always to be core business for the Ministry of Defence. It is exactly like recruitment or training; what we are talking about is producing the essential inputs into defence capability. The MoD must be in charge of that and must understand that.

What is more, if the Government give up that capability and that knowledge, they will not get it back. There are all sorts of people now in the MoD and DE&S—I know them well—who can negotiate a contract with a GOCO partner if you want one. But if you actually sign that contract and give up your role running defence procurement to some private sector partner, in five years’ time or whenever you renew the contract, you will be at a very considerable disadvantage, and in 10 years’ time you will not be able at all to have an intelligent or effective negotiation or to monitor intelligently what is going on. It is very important that this should remain a core function and a core expertise of any Ministry of Defence worthy of the name. That is true in this country and elsewhere; it always has been and I believe it always should be.

The second fundamental reason why the GOCO proposal was misconceived and a mistake in principle from the beginning is that an essential part of defence procurement is flexibility. The enemy has a vote in this. You have to take the enemy into account. The enemy may change; the enemy may change his tactics and you have to change your procurement policy accordingly.

When I was defence procurement Minister, I held a meeting in my office every month on counter-IED policy. I had the experts there from DE&S and of course our own capability people and people from PJHQ, and the absolute experts from the various research institutes that we have at Fort Halstead and so forth. They are brilliant; I want to pay tribute to them now. I am full of admiration, and always will be for the rest of my life, for their expertise and dedication. They get no public recognition at all for their role.

We also had the Americans there. I had negotiated an open-eyes agreement with my American counterpart, Ash Carter, on counter-IED. We had an American colonel and she always contributed very usefully to our meetings. In those meetings we quite frequently decided then and there, that afternoon, to change our procurement of some particular technology or item of equipment and switch it to something else, usually in the UOR programme but it sometimes involved adjusting a core programme as well. You needed to do that because the enemy was changing and the enemy’s tactics were changing, and we wanted to save lives and win operations. Those are the fundamental obligations of any Defence Minister, which must override any other consideration.

It is quite wrong to give up that flexibility. You need flexibility for other reasons. I made it a principle—I have no idea whether the Government continue with it, but I hope that they do—that before I authorised any major programme, I always investigated whether we could do it in collaboration with an ally. If you do that, not only do you share the research and development costs and the risks but you get longer production runs, and the very considerable fixed overheads then spread over a greater production run, which is highly desirable. I had a lot of successes in that, particularly with the French, where we did a lot of things. One example was in underwater programmes. I invited them into the Mantis UAV programme. We did the new turret for the Warrior and the Scout vehicle together. These were successful examples of international collaboration requiring great flexibility.

If you had an annual, biannual or five-year contract with a GOCO to procure things on your behalf, you would have to hold up the whole process. You would have to talk to them; you would have to negotiate with them; and it would take time. What is more, it would take money. Money is what motivates the private sector—quite rightly and understandably so—and it knows perfectly well that the way in which it makes the real money out of government is when the Government change their mind, change their specification and want to do something differently. That is always the great moment, when you get penalties and you can increase your prices. That is exactly the situation which we must not find ourselves in and why we must not go down the GOCO route. I hope that we hear no more about the GOCO. However, I am extremely disappointed: it is a fundamental failure of government not to reach a clear decision and to let the country and everybody involved in defence procurement, in industry and within the MoD, know exactly where we stand, and to maintain this uncertainty which they have created, quite gratuitously, in the coming months and years.

What is the solution? I do not want ever to be accused in this House of criticising without saying what I would like to do and what I believe is the right solution. I think that we should proceed with the DE&S as it currently is and make steady, incremental improvements to it. Any human institution, of course, can be improved, and that is true of the DE&S. The DE&S contains wonderful people of enormous ability and enormous dedication, enthusiasm and commitment. When I was putting together the Scout programme, I remember there being a big time factor there. We succeeded in getting the whole process, which would normally take about two years, done in about 13 weeks. People were working through the night and through the weekends. They are superb people. Of course, they do not have quite enough of certain types of expertise—some in the financial area and some in the project engineering area—and that must be remedied, as Kevin O’Donoghue and I were trying to do. We did so often by secondments from the private sector. You cannot bring in people to deal with contracts of their own companies, of course, but you can put them in other parts of the DE&S and they will learn a lot about government procurement and you will learn a lot from their particular expertise during those secondments.

You can also do something which I did not have the occasion to do but thought of doing on several occasions. Where you have a particularly complicated and difficult project, you could perhaps bring in a private sector partner to be alongside you in the negotiations. I would have done that on the future tanker programme, which had gone on for eight or nine years when I took over. Luckily, the people concerned came to a conclusion rather rapidly after I came on board and avoided that particular fate. That is something that we should look at.

Above all, I do not believe that the DE&S needs a new corporate structure. That creates barriers, inflexibilities and some of the problems to which I have already referred. I totally agree with the noble and gallant Lord, Lord Stirrup. He was quite right in what he just said about the international position. Of course, we have had big problems with cost and time overruns—you always have those in defence procurement if you are at the cutting edge of technology. By definition, nobody can predict exactly the time and costs involved in solving technical problems at the cutting edge—at the coal face. That is absolutely inevitable. If you look at how the French and the Americans do it—those are the only comparisons really worth making because other people are not normally at the cutting edge of technology—you will see that the position is very similar there. The Americans have far worse cost overruns. Their time overruns are not quite so bad because they throw enormous amounts of money at something when they run into a problem.

However, that is not a reason for complacency. There is enormous scope for improving the DE&S, and it should be steadily improved in the way that I have described, but we should in no circumstances destroy any of its enormous qualities. We should in no circumstances throw over this particular institution lightly and set up something else which we would live to regret.

Finally, I want to ask some specific questions of the Minister. If he does not have answers for me now, I ask him to write to me and place a copy of the letter in the House. First, was it by accident or design that the approximately £2 billion surplus was accumulated in the MoD in the last financial year? Secondly, are the Government providing for or expecting to make compensation to Bechtel for withdrawing the competition in which it was engaged and on which it would have spent a lot of money? Thirdly, what is the total cost of this GOCO exercise, including any compensation to contractors if that arises? Fourthly, what is the pay or total remuneration package for Bernard Gray in his new role? Fifthly—the matter has been raised this afternoon but nobody seems to have any clue to the answer—why was it that, extraordinarily in this case, the normal processes for open, public recruitment were overridden and a special deal was done with one particular nominated individual?

17:45

[Lord Tunnicliffe (Lab)]

My Lords, this has been a very interesting debate. One realised as one listened the extent of the knowledge of, and involvement in, defence over many years represented in the Chamber today. My credentials are somewhat modest. My noble friend Lady Cohen set out hers, but did not mention the role she handed on to me. I spent two very interesting years as a non-executive director of DLO, the defence procurement agency, and was involved in the merger that created DE&S.

I expected to be in the somewhat minority view, arguing for some respect and admiration for the quality of the people in DE&S, but I find that I follow the noble Lords, Lord Levene, Lord King and Lord Lee, the noble and gallant Lord, Lord Stirrup, and my noble friend Lord Davies in saying that these are good people doing a good job. As the noble Baroness, Lady Garden, pointed out, it is tremendously complex—a very big procurement job and one, as my noble friend Lord Davies said, in a constantly changing field. They are much underrated and I would certainly like to set down my name as one who admires them, as I admire the Armed Forces in general.

There has obviously been an ongoing challenge in defence procurement. We on this side accepted that general challenge and much of the direction the Government were going in. We were willing to see a GOCO option if, through a process of competition, it could be refined into something credible that would do substantially more than DE&S being developed in a favourable environment. However, that competition went away. Only one bidder was left. Reluctantly, I welcome the decision—someone has to welcome the Government at some point—to abandon the competition and concentrate on DE&S. DE&S has the fundamental talent, provided it is supplemented. The noble Lord, Lord Levene, made the point that it would take a relatively modest number of additional people in focused roles to rise to the DE&S-plus challenge and meet the objectives that we all have in mind, and the needs of the taxpayer and front-line people.

We have a little bit of a mix-up today, with a debate on a Statement and a debate on a Bill. I have a few questions about the Statement. I will repeat some of the questions put by my noble friend Lord Davies because I informed the Minister about mine and expect him to answer them today. First, does the new entity require any legislation? As far as I can see, it does not. This can be done administratively within the present law. There is mention in the Statement about the accounting officer’s budget. Will that budget be merely for the operation of DE&S, or is this the procurement budget of £8 billion or £10 billion, depending on how you look at it? That is very important because if the accounting officer holds the budget he can, in a sense, insist on that firmer line between the front-line commands and the DE&S providers. Could the Minister also set out in more detail the new freedoms when it comes to pay? In other appointments over the past months, there has been talk that no appointment should be made at a rate that exceeds the Prime Minister’s salary. That will clearly be too limiting in this case. Are the freedoms such that that sort of arbitrary limit is not there?

We also have the very important issue of how appointments to these roles will be made. I think that the Secretary of State referred in the Commons to something like an accelerated system. We have spent a lot of time in this country worrying about public appointments. We have a Commissioner for Public Appointments, so at least some regard has to be taken for the work of that commission and how the new appointment process may give us better, faster results yet still meet the tests of fairness and opportunity that the public appointments commission represents.

To be very specific: how was Bernard Gray appointed? The Government have to be responsible for that appointment, but can we at least know how the decision was made and what public appointments criteria were checked off before it was made? We should know what Bernard Gray is to be paid because that will illustrate whether the Government are serious about breaking free from constraints in payments. It was perfectly reasonable at the time of the appointment of the Governor of the Bank of England that his salary and conditions were openly presented, and it should happen now.

Finally, in the Statement, which I will come back to, there is the concept that we might go for a GOCO at some time. Can the Minister offer some clarity on that? Are we talking about it being before the next election, immediately after it or further in the future?

Turning to the Bill, first, I join with other noble Lords in asking the Government most sincerely to withdraw Part 1. The intention of legislation must be to deliver a tangible outcome. You have to have a concept when you are working on creating it: what is it going to deliver? The legislation to create the GOCO is quite complicated—I will come to that—but at least there was something there. We had a White Paper about it and there had been some description and discussion of it. There was some background about the tangible thing that we were debating. We will not now be debating something that is going to happen in a near timescale. It will be a debate in a vacuum. It will almost be a philosophy seminar, as we will have to carry notions of “What if this?” and “What if that?”, and of how it fits together.

Finally, it will have the most undesirable effects on DE&S because it will be like a sword of Damocles. At the whim of a Minister, with no scrutiny from this House or the House of Commons, the whole issue relating to defence procurement can be transferred to a GOCO if we pass Part 1 of the Bill. I implore the Government to withdraw Part 1 and to let us spend our time concentrating on Parts 2 and 3. In the mean time, let us encourage DE&S to continue with its improvement programme, using its new freedoms. If the new freedoms need any legislation, of course that can be wound into it, but we should not have to contemplate or discuss a theoretical concept of such magnitude that it will have no impact within a near timescale.

Sadly, the Government will perhaps not listen to me and we will have to discuss the GOCO. As the noble and gallant Lord, Lord Stirrup, said, superficially it is not a magic bullet. We will have to work through a lot of questions. There are issues of conflicts of interest, the retention of sovereignty and the protection and supply of intellectual property. How will Chinese walls work within the various parts of the consortium that are also parts of larger firms? How will the civil and criminal penalties work in order to make these protections credible to the outside world? The concept was that it might go for nine years and then end. What will be done to require the GOCO company to protect skills, so that if those things are taken back into the public sector, the skills base will be retained?

We will need to look at the essence of why a GOCO is a good idea. When talking about GOCOs, the Government are tangentially talking about risk transfer; I believe that the Minister actually referred to it in the remarks that he made in opening the debate. Among my credentials is that I have been a client of Bechtel. I have to tell noble Lords that Riley Bechtel has never transferred one iota of risk. He is brilliant at running a firm that adds value—let us not get too upset about that—but the only thing that Riley Bechtel puts at risk is the size of his profit. He does not put Bechtel’s basic assets at risk. There will be no risk transfer if the Government’s target is someone like Bechtel. I am willing to be proved wrong on that, but if we must discuss Part 1 then we will be testing the Government on risk transfer.

We now come back to the question of added value. Sometimes when the Government talk about this, the added value seems to be solely about the ability to employ people. Suddenly, at a stroke, the Government seem to have solved the problem of employing people by getting new freedoms. But discussing the issue is very complicated without a tangible action in front of us.

I turn to Part 2 of the Bill. Superficially, single-source contracting is going to be pretty boring. However, anyone who has been involved in this area—not just the military but any area where de facto single-sourcing comes about—will know the value of getting this right. I will be interested in probing this and perhaps trying to get the Government to go somewhat further. At the moment the Bill seems to be written around a price mechanism, which will be a cost, an overhead and a profit. The mechanisms that are being brought forward to improve this are, principally—I think that this was in the Minister’s speech—transparency. The objective is to improve the balance between value for money for the taxpayer and reasonable profits for the supplier. We entirely accept that; we are not against suppliers making profits, as suppliers that do not do so do not continue to exist. There has to be that balance.

The process is to have the force of law in many areas. This is good. Indeed, the gains claimed for it are modest; they could be significantly higher. However, there will be questions about what transparency means and how confidentiality and IP are going to be protected. There is a real issue about information that flows about between groups, where one group is deemed to be a single-source supplier while another is perhaps trading in the international civil world.

We need to look carefully at the SSRO, and particularly at its independence. Creating independent bodies is a very difficult thing to do, as is actually creating some way of being sure that government influence is not there all the time. We will have to look at its independence, its balance and the reward structure for its directors—and, more importantly, at how we bring in the right talent. What is the appointment process going to be? What will be the quality of the people? What will its powers boil down to? I know that they are in the Bill, but they need to be picked over. Is it effectively an available arbitrator?

Should we go further? In my experience, people who have not been involved have a very silly idea about competition: they think that if you have real competition leading to a contract award, somehow you have solved the problem. Usually, 80% of the problem comes after the contract award. Things go wrong. Circumstances happen and change things. I have dealt with contracts for multiple hundreds of millions, and we have had so-called competition at the beginning; sometimes you are pushed to get two suppliers that are vaguely compliant in your bidding process, but you have your competition. However, you are then locked into a single-supplier situation. Can we think about how defence contracts that run on with a single-supplier situation can be brought into this area? What we need in this difficult area is more innovation so that we can go for more cost savings and can incentivise suppliers to improve—and they will feel that they are getting a fair deal and being properly rewarded.

Finally, on the reserves, we, of course, support a greater and more integrated role for the reserves, and the change of name. We note the logic that my noble friend touched on earlier: there will be a 20,000 reduction in full-time Army personnel. We hear that this is now planned and cannot be changed. We accept it, but bringing up the total number of Reserve Forces to 30,000 does not appear, initially at least, to be going well. We need regular reports. We look forward to the amendment that the Minister will be bringing forward in this area, but these reports have to go quite a long way further. We need to know not just about gross numbers but about where the skills are, how the training is going and what reduction in planning assumptions will result if we fail to recruit. What is the realistic capability of the Army if this recruitment does not take place, or if some of the problems, referred to by noble Lords, that reservists have when faced with the onerous burden of being in the reserve come to pass and we have difficulties?

Parts 2 and 3 are sensible pieces of legislation. We will have to pick them over, but they have lots of potential. The Government have wisely stepped back from the GOCO competition. They should now step back from trying to prosecute Part 1.

18:01

[Lord Astor of Hever]

My Lords, we have had a constructive and well informed debate on the Bill. I share the generous thoughts of the noble Baroness, Lady Dean, about Lord Gilbert. The debate has shown that there is a large degree of consensus on the need to reform the way in which we manage and deliver our defence capabilities. It is important that we provide our Armed Forces with the equipment and support they need and that we take the appropriate measures to ensure that the Reserve Forces can be used as part of the integrated Future Force structure with individual reserves appropriately protected in their role and their employers better rewarded for the contribution they make in supporting the Reserve Forces.

The measures set out in the Bill represent a real change to how the Ministry of Defence will conduct its business in future. They will allow us to ensure that equipment and capabilities are delivered on time, on budget and to the right specification.

At this point, I am going to cut short my speech as I have been bombarded with questions, and I will try to answer as many as I can tonight. There is no way I will be able to answer all of them, so I will write to all noble Lords who asked questions and copy in other speakers.

The noble Lord, Lord Rosser, and other noble Lords asked why Part 1 should remain if we are no longer proceeding with the GOCO. I am well aware of the mood of the House on this issue. We believe that a GOCO remains a potential future solution for transforming DE&S once we have put in place a more robust baseline from which to contract with a GOCO partner. It would therefore be prudent to have Part 1 in place should a future Administration decide to go the GOCO route. We very much hope that the new DE&S-plus organisation will be robust and successful. We should not be afraid of the competition that potentially testing the market for a GOCO in three to five years’ time would provide. Keeping the possibility of a GOCO would provide an incentive for a new organisation to maximise its performance.

The noble Lord also asked what “at a future date” means in relation to a possible future GOCO. We do not envisage reopening the GOCO option for at least two to three years, certainly not before the next election.

The noble Lord asked how much money has been spent on the GOCO commercial process and whether the Bechtel consortium will now make a claim against the MoD for the money it has spent on the bid. This was also asked by the noble Lord, Lord Davies. We have spent £7.4 million on supporting our work on the GOCO option. The money is not wasted. We have gained valuable insights from this work that have not only helped us understand the commercial landscape but will stand us in good stead for the new organisation. On Bechtel, we have always made it clear that we will not pay bid costs.

The noble Lord asked about the draw-down of regulars prior to build-up of reserves. We have had no choice but to reduce regulars to stay within the budget. The cost of 20,000 regulars is £1 billion a year. In line with the SDSR, there is a drawing down in some areas to build up in others, such as cyber, as the noble Lord knows. This is about doing defence differently.

[Lord Lee of Trafford]

My noble friend has just given an indication of the cost of the GOCO option so far. I draw his attention to a reply to a Written Question I had tabled:

“The Materiel Strategy programme is currently in the Assessment Phase and is considering two options … The Concept Phase of the programme started in May 2011 and analysed a number of different operating models. It concluded with the approval of the Initial Gate Business Case in April 2013 and cost £12 million. The Assessment Phase is currently developing both DE&S+ and GOCO options”.—[Official Report, 18/11/13; col. WA135.]

Perhaps my noble friend might like to look at that.

[Lord Astor of Hever]

My Lords, when I come to answer my noble friend’s questions, I will touch on the assessment phase and come up with some figures which may be helpful to him.

The noble Lord, Lord Rosser, asked for the latest update on recruiting. The quarterly personnel report of 14 November had trained and untrained strength of reserves, inflow and outflow. The Secretary of State will publish recruitment targets before the end of the year. The noble Lord asked about Capita recruitment. We have been very open about the fact that there have been teething problems. The Army and Capita are fixing these. The new website will be up and running in January, and there will be a faster recruitment pipeline. Temporary adjustments have been made to applications to ensure that we continue to progress new recruits. We want to cut out any blockages there.

The noble Lord, Lord Levene, suggested that we stop running down the abilities of civil servants. I agree with the noble Lord and pay tribute to those civil servants in the MoD, who certainly give me excellent advice. The noble Lord asked for a definition of the difference between DE&S and DE&S-plus. This is quite complicated, and I will write to the noble Lord and make sure that all other speakers get a copy of that.

The noble Lord and my noble friend Lord Lee asked why there was no competition for the chief executive post. The simple fact is that the CDM has an extant contract that takes us past 1 April, when the new trading entity will stand up. His post as CDM will morph into the chief executive role. Furthermore, realistically, there would have been no chance of selecting and appointing anyone else in time for them to stand up the new organisation on 1 April. He will also provide a vital thread of continuity from the Gray report into the continuing reform agenda.

Going back to the note that I said that I would write to the noble Lord, I will undertake to do that before the Bill moves into Committee. The note will set out the different models.

The DE&S civilian staff will remain civil servants—a point that the noble Lord raised. Their status will not change. Members of the Armed Forces will continue to make a valuable contribution in DE&S as they do today. We will be able to create a more businesslike organisation which is better able to recruit, reward, retain and manage its staff. In terms of recruiting, we will be using private sector expertise to help DE&S-plus get match-fit, including in terms of its HR transformation.

My noble friend Lord King mentioned the deferral of mobilisation. It is already possible for a reservist or their employer to ask for mobilisation to be deferred. For an employer, one of the criteria for deferral is the impact that mobilisation would have on the business.

I am glad that my noble friend Lady Garden mentioned the cadet debate of a couple of weeks ago. I listened to some of the speeches in this Chamber and was most impressed. I will write to my noble friend about careers advice for cadets. She asked whether there was any skills audit of current DE&S staff. The answer is no, but we undertook a detailed assessment of DE&S business capabilities in the early part of the materiel strategy, which looked at the issue of skills.

The noble and gallant Lord, Lord Stirrup, pointed out that we must focus not just on a single factor as we reform DE&S. We recognise the complexity of defence acquisition, and will continue to do so.

The noble Baroness, Lady Dean, asked about the proportion of regulars recruited to reserves. There are incentives for ex-regulars to join reserves. Those who leave the Army through redundancy are being encouraged to consider a part-time military career in the reserves. For the Army, ex-regulars who enlist into the Army Reserve within three years of leaving regular service can enjoy a number of incentives and benefits, such as reduced Army Reserve commitment and training requirements or, alternatively, a commitment bonus worth £5,000 paid over four years. There is a comprehensive information campaign to ensure that all service leavers, not just redundees, are aware of the opportunities and benefits of joining the reserves.

The noble Baroness asked who is running recruitment; it is Capita, which is working closely with the Army to fix the teething problems. She asked whether tranche 4 redundancies were to be paused. No final decision has been taken on that. Also on the regular to reserve transfer, 459 applications have been made to the commitment bonus scheme, of which 316 were from ex-regular other ranks, 35 from ex-regular junior officers and 108 from direct entry—that is, not ex-regular—junior officers. I understand that this is quite complicated, and I shall write to the noble Baroness and set it all out, copying in other noble Lords.

The noble Baroness asked whether having the legislation in Part 1 would not be a sword of Damocles over the DE&S-plus option. No, we do not see it like that at all. We are constantly striving to improve performance. The innovative structure will move us forward, but the underpinning rationale for a GOCO remains in place and could represent a further evolutionary step. Part 1 being in place will not mean that we have to proceed with a GOCO in future, but it will keep the option open.

My noble friend Lord Lee asked a number of questions. He asked whether a GOCO was the department’s favoured option. When the Secretary of State announced the materiel strategy proposals in June, he was explicit in saying,

“we have not yet accepted the GoCo concept as the chosen outcome; we are conducting an assessment”.—[Official Report, Commons, 10/6/13; col. 54.]

My noble friend asked, as did the noble Lord, Lord West, whether Bernard Gray would resign. No, there is no need for that; what matters is that we drive forward the reform of DE&S. Bernard Gray will do that as chief executive of the new organisation.

My noble friend asked whether the chairman of the new organisation’s board would be executive or non-executive. The answer is non-executive; we will have strong oversight of the new organisation. We were asked how we would recruit the new people. We will use the private sector expertise that we plan to bring in through business partner contracts to help us to deliver a transformed HR. This will include getting the best out of freedoms that we have agreed with Her Majesty’s Treasury and the Cabinet Office, which are necessary for the new DE&S.

My noble friend mentioned Her Majesty’s Treasury. We have agreed with the Treasury and, indeed, the Cabinet Office that we must have freedom to be able to operate effectively. We are confident that we will get these. It is one of the reasons that we are setting this up as a bespoke entity. How much have we spent so far on this? I gave the figure of £7.4 million to the noble Lord, Lord Rosser. We have spent some £17.8 million on the assessment phase of this complex change programme to determine the best way to deliver what we need. This investment, which excludes the cost of MoD staff, has included work on the GOCO, the DE&S-plus option, and on the necessary changes to the customer.

My noble friend asked how much we have spent on consultants. The MoD spent £68 million on consultants in 2012-13. Going back to the freedoms, we do not yet know details of these, but they will be significant. Her Majesty’s Treasury recognises the need for significant freedoms around salary for DE&S-plus. I will write to my noble friend when I have more information. This is obviously a very important issue and I will copy in other noble Lords on it.

My noble friend asked about Bernard Gray’s salary, as did the noble Lord, Lord Davies. I understand that Bernard Gray will continue on his existing terms, but I cannot confirm that today. His current salary is around £220,000 per annum. My noble friend asked whether the potential GOCO competition would make it harder to recruit from the private sector. This is simply not the case. Those we are trying to recruit would see GOCO as an opportunity, not a threat.

The noble and gallant Lord, Lord Craig, asked about ministerial notification and early availability. It is important that Ministers oversee a call-out. We will seek to provide employers with as much notice as possible and arrangements already exist for high-readiness reserves who can be mobilised at short notice. I will write to the noble and gallant Lord on this issue.

My noble friend Lady Doocey asked about mental health and housing. I have very detailed answers but, rather than test the patience of the House tonight, I will write to my noble friend on those matters. I have a very full answer that I think she will be happy with.

The noble Lord, Lord Davies, made a very political speech and asked whether the potential GOCO contract would make it hard to recruit from the private sector, as did my noble friend Lord Lee. We do not believe that is the case. The people we are trying to recruit would see GOCO as an opportunity, not a threat. The noble Lord asked whether there was a special deal for Bernard Gray. His role will continue beyond 1 April on his existing terms and conditions. He provides a vital link between the work done so far and the new organisation.

The noble Lord, Lord Tunnicliffe, gave me sight of his questions. I can confirm that legislation is not required to establish the bespoke entity that we announced today. However, legislation is required to establish an effective GOCO and that remains a possible future option. If we do not have the legislation in place then, that could inhibit a future competition.

We still have to work out the detail of specific freedoms and authorities. However, as I said, the Treasury and the Cabinet Office have been working with us to ensure that this innovative structure will be permitted significant freedoms and flexibilities. I have already undertaken to write to noble Lords on this very important issue.

DE&S civilian staff will remain civil servants—their status will not change—and members of the Armed Forces will continue to make a contribution to DE&S, as they do today. We will be able to create a more businesslike organisation which is better able to recruit, reward, retain and manage its staff.

The Bill provides the legislation we need to make far-reaching changes to the way in which we deliver our defence capabilities. The changes set out will not only improve the support we give to our Armed Forces but make specific improvements for reservists and their employers, who are an integral partner in enabling the Reserve Forces. The measures in the Bill will also help to ensure that the taxpayer gets value for money. We must not miss this opportunity to make essential changes to the way we manage and deliver defence in the future. I therefore commend the Bill to the House.

Bill read a second time and committed to a Grand Committee.

House adjourned at 6.20 pm.