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.