Westminster Hall

Wednesday 26th March 2014 Westminster Hall

Wednesday 26 March 2014

[Sir Roger Gale in the Chair]

Energy Markets (Competition)

Wednesday 26th March 2014 Westminster Hall

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

09:30

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

It is a pleasure to serve under your chairmanship, Sir Roger. I am delighted to have secured this debate, which is even more topical this morning than when I submitted my request last week.

The debate’s background is the rise in energy prices faced by domestic and business consumers over the past few years. Since 2010, energy bills for domestic consumers have risen on average by almost £300, and businesses say that energy bills are their second biggest cost. Many consumers find it difficult to pay their increasing bills and are concerned that they may face further rises. The issue’s importance was recognised by my right hon. Friend the leader of the Labour party when he announced that a Labour Government would freeze energy prices until 2017, thereby making an effort to help people facing today’s cost of living crisis. There is no doubt that that announcement struck a chord with the public, but the freeze was always envisaged as an interim measure to allow time for more fundamental questions to be addressed. It is important to have that discussion here today.

One fundamental question is how far there is effective competition in the energy market, or whether competition is, to a greater or lesser degree, ineffective and whether, as a consequence of any such weakness, lack of competition leads to higher prices for customers. Customers often feel there is lack of competition in the market’s operation. They see that when world prices go up, the price for the consumer goes up; but when world prices go down, the retail price does not appear to go down as far or as fast. That can be seen by comparing the movement of wholesale energy prices over the three years up to the winter of 2013. Wholesale energy prices were relatively stable from the winter of 2011, rising by an average of 1% a year, but during that period large energy companies increased their retail prices by an average of more than 10% a year. That is not just a recent phenomenon, and it is not just a phenomenon under this Government. If we go back to 2008, there was a dramatic rise in wholesale prices for both gas and electricity followed by a substantial increase in retail prices that was roughly commensurate with the increase in wholesale prices, but when there was a dramatic drop in wholesale prices in 2009—a drop of about 45%—it was not followed by a big drop in retail prices, which went down by only 5%.

We have to ask why that is the case. What does it show, and what needs to be done? Various reasons have been suggested for the apparent lack of effective competition in the market. It has been suggested that one factor might be customers’ lack of willingness to move from their traditional regional supplier, and it is certainly true that in most parts of the country—although in some parts more than others, with Scotland being one such example—most customers still stick with their traditional regional supplier. The dominance of the big six has barely shifted. The figures from the Department of Energy and Climate Change show that, until the end of 2012, at least, SSE, E.ON UK and RWE npower held exactly the same market share in gas as they did five years previously. British Gas’s market share dropped from 44% to 40%, and EDF’s share rose from 7% to 9%. Similarly, there were no real changes in the share of the electricity market held by those companies over that five-year period.

Some suggest there is inherent weakness in a system dominated by vertically integrated companies—that is what we have for the most part—in which both the supply and generation businesses are closely linked. Others point to the unwillingness of consumers to move because of the complexity of tariffs. Until recent changes, by some counts there were more than 400 tariffs across the various companies.

Of course, the companies point to other factors as being the principal reason for the gap between wholesale and retail prices and for the system’s apparent difficulties and shortcomings. I accept that it is a complex world and that the market is influenced by many factors, but important questions need to be asked, and it is certainly not just the Labour party that is asking those questions. As hon. and right hon. Members know, the consumer organisation Which? recently published material estimating that the flaws in the market, as Which? describes them, have left consumers paying almost £3.9 billion more than they ought to have paid since 2010.

Businesses are also concerned. Along with Which?, the Federation of Small Businesses wrote to the competition authorities a few days ago saying:

“We all want to see a transparent market where consumers and businesses alike can understand their bills, compare prices and switch easily. We want to see the presence of strong competition right across the industry drive affordable pricing that gives everyone the confidence they are paying a fair price for their energy.”

Small businesses, consumers and the Labour party are raising those concerns and questions.

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

I congratulate the hon. Gentleman on securing this debate. Does he agree that, in addition to the lack of competition, there is widespread concern that millions of customers are making complaints, particularly against the big six?

[Mark Lazarowicz]

Indeed, and the figures have been rising, as the hon. Gentleman knows.

As I said at the start of my remarks, the Opposition see energy prices not just as the first step to reduce pressure on customers but as part of a much more fundamental reset of the energy market. In summary, we propose to get the energy companies to separate the generation and supply sides of their businesses, and we want to see all energy companies trading for energy in an open market by selling into a pool. We want a simplified tariff structure and a new, tough energy watchdog with new powers to police the market, including the power and remit to force energy companies to cut their prices when there is evidence of overcharging. All those proposals would make the market more transparent, and no doubt my hon. Friend the Member for Sunderland Central (Julie Elliott), our Front-Bench spokesperson, will refer to those proposals in more detail.

The proposals in the Labour party’s consultative document are welcome, and I note with interest the response to the consultation published today by SSE, although I have had only a brief opportunity to look at it this morning. I suspect that the Minister will say that, yes, there are weaknesses but they are being addressed. He will no doubt point to increased competition and to the new entrants into the market. Indeed, there has been an increase in the role and market share of new entrants, but they still represent a fairly small proportion of the market as a whole.

There is a long way to go, and we all know that many customers are reluctant to switch for all sorts of reasons. They might be uncertain about how to go about switching, for example. Some of my constituents switched and found that, after an apparently attractive offer, within a few months they were paying even more than they did under their previous supplier. The tariff simplification introduced by the Government, which on paper seemed a good idea, has in practice led to a number of difficult consequences. Many of us know of cases in which people have ended up paying substantially more following the tariff changes because those changes are in some cases biased against people who use little energy, either by choice or by lack of income or resources.

A much more fundamental change is needed, which is recognised across the industry. I also recognise that the weakness in the market is not the only reason for higher prices. World supply and demand is a major factor, and taxes and support for energy efficiency and renewables have an impact. There is certainly a need for changes there as well. Like many Members, I am concerned that the changes the Government have introduced so far will mainly result in the watering down of energy efficiency measures, which are the single biggest way of enabling consumers to cut energy waste and cost.

[Albert Owen (Ynys Môn) (Lab)]

Another factor in the increase in prices and the high prices is distribution cost. In the distribution areas, there is no competition at all. That monopoly contributes somewhere between 19% and 24% of a bill. Does my hon. Friend agree that we should look for greater competition in that area?

[Mark Lazarowicz]

Absolutely. That is one of the areas where a fundamental investigation is needed, with fundamental questions asked and fundamental changes made. I recognise that businesses have to make a profit for their shareholders and future investments. They are big businesses, so the profits will have big numbers in them. Nevertheless, there are fundamental questions. Today, SSE has made an announcement that promises an energy price freeze until at least 2016 and it is preparing to separate legally the retail and wholesale sides of its business. Those changes are in line with the policies announced by the Labour party last year.

[David Mowat (Warrington South) (Con)]

This debate is indeed timely, given the SSE announcement. The hon. Gentleman will also be aware that SSE announced this morning that of the four offshore wind farms it was planning, three will not now go ahead.

[Mark Lazarowicz]

I see that that is how it has been described by some in the media. I have not had a chance to look at the SSE comments in great detail, but I am not sure that the causal linkage that the hon. Gentleman suggests exists. It was interesting, given the various comments on the Labour party proposals, that SSE has welcomed the need for long-term stability in the framework for investment. Perhaps the single biggest problem for long-term investment in offshore wind has been the confused and mixed messages sent by the Government recently.

[David Mowat]

rose—

[Mark Lazarowicz]

I will draw to an end, because I know a lot of colleagues want to speak in the debate, including the hon. Gentleman. There is an increasing focus on price, the customer, the structure of industry, long-term prices and long-term investment, and that focus comes from many quarters. If it had not been for the intervention of my right hon. Friend the Leader of the Opposition and our policies last year, we would not have seen this welcome concentration of minds on the issues. That has encouraged many to bring forward their proposals for change. I hope that this debate will contribute to getting the changes in the industry’s structure that are so desperately and urgently needed.

[Several hon. Members]

rose—

[Sir Roger Gale (in the Chair)]

Order. At least seven Members have indicated a desire to speak, and we have an hour and a quarter for the debate. I will not impose a time limit at this stage, but I urge Members to exercise a degree of self-restraint. If everyone keeps their remarks to about six minutes, all Members should be accommodated.

09:43

[David Mowat (Warrington South) (Con)]

I did not rise to indicate that I wanted to speak, because I was with a colleague last night and I left my speech in the pub. I have been trying to rewrite it and I will happily now go ahead.

[Sir Roger Gale (in the Chair)]

Order. The hon. Gentleman did the courtesy of putting his name down to speak, which is why he was called. We try to call people, as a general rule, who bother to put their names in first. No doubt the circumstances he faces will lead to brevity.

[David Mowat]

Certainly the second part of my remarks will be brief, Sir Roger.

The issue before us is serious. Everyone at this debate is concerned about fuel poverty in their constituencies and high fuel prices. Most of us, I think, are concerned about energy intensive industries, particularly in the north-west and the north-east. Some 900,000 people work in industries where the price of energy is a significant determinant of profitability, and it behoves us all to take the issue seriously. We are where we are because issues have been raised on the market fairness and market effectiveness of the energy industry in the UK, and it is right that we look at that. The Secretary of State has talked about referring the industry to the competition authorities, and I support that.

It is important—the opening remarks did not do this—to distinguish between gas and electricity, because they are different markets. I want to talk a little bit differently about each of them. There are suggestions that the industry is some kind of cartel and “the big six” is, frankly, often used in this House almost like a swear word. We hear that the big six do this and do that. I have heard the shadow Secretary of State use the phrases “price fixing” and “secret deals”. If the Opposition have evidence of cartels or price fixing, that is extremely serious. If it exists, directors of public companies will go to prison. Fines can be levied that are several times the turnover of those companies. It is important that the Opposition bring that evidence forward, if it exists.

When words like “cartel” and phrases like “secret deals” and “price fixing” are being used, be aware of what is being suggested and be willing to take that forward and give that evidence to the competition authorities in the European Union and the UK and to the police. If such evidence does not exist, it might behove the Opposition to use more moderate language, which they were doing in their opening remarks in this debate, at least.

I want to make some comments on how the UK market compares with the EU market. One way to find out whether there is price fixing, cartels or other problems is to see how our market compares in structure and outcome with the rest of the EU. I have done a little analysis on that, under three headings. The first is out-turn prices for gas and electricity in the UK compared with other EU countries. The second is market structure. People say that we broadly have the big six in gas and electricity, and other countries in Europe do not have that structure. The third is the profitability of those energy retailers in the UK versus other places. I report that the answer is different for gas and electricity.

On gas, we have to distinguish between taxed and untaxed prices. In this country, we tax gas very little, while the EU taxes it much more heavily. It can appear that prices are higher there, so it is only fair to look at untaxed prices; on that basis, our gas prices are the second lowest in the EU, although it is true that they are significantly more than in some other countries. They are triple the prices in the United States of America, but we know that that is to do with shale gas and all that goes around that. Our gas prices are the second lowest in the EU, yet broadly speaking we have an EU energy market for gas, and some comparability would be expected. If a cartel is operating in the gas market, it is hard to see that it is being very effective.

On electricity, our retail prices are among the lowest in the EU. When we look at the position without tax, it is a little more nuanced. According to the EU portal, our untaxed electricity prices are slightly higher than those in Germany, Holland and France, although not by very much—5% or 6% higher. That is a lot of money, however, by the time that all works through. On the face of it, there might be a more significant issue with electricity than there is with gas. I would be interested to know whether Opposition Members are talking about the need for a price freeze for both industries or just for electricity.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Does the hon. Gentleman accept that the production of electricity using gas means that there is a substantial link between gas and electricity? Investors in new gas-fired power stations claim that the relationship between gas and electricity prices means that they are currently not particularly willing to invest. The hon. Gentleman’s decoupling of the two markets is a bit over-precise and ought to bear that fact in mind.

[David Mowat]

That is a fair point. It is true that no gas power stations are currently being built in this country, but the principal reason is that shale gas in the United States has meant that coal has become cheap on the world market. We will therefore be burning coal in this country at a great rate—even more so in Europe—until we are stopped.

I accept the hon. Gentleman’s point that the markets are not entirely distinct, but my point was simpler than that. I have looked at what we are paying in this country for gas, which is a separate market, and it is the second lowest price in the EU. Members should bear that in mind when making comments later in the debate.

I was about to come on to market structure. I have always thought it a little odd that having six participants was regarded as a monopoly. Looking elsewhere in EU, Germany has two retailers in electricity and three in gas, Holland has three in each and Italy has five in gas and two in electricity. France is a little different because of nuclear power. In terms of market concentration, the report I used for this is the—I do not have it here—

[Chris Ruane (Vale of Clwyd) (Lab)]

Is it down the pub?

[David Mowat]

It’s in the pub. It was the “Energy Retail Markets Comparability Study” report completed for the Department of Energy and Climate Change, which stated that we have the least concentrated energy market in the EU, with the possible exemption of Austria. Opposition Members may want to reflect on that as well.

The next thing is profitability. Are companies making massive profits? The report states that there are two ways of looking at profits. They can be earnings before interest and tax, known as EBIT, or the return on capital employed or ROCE. On both measures, profitability in the UK market is similar to that in the rest of Europe. It is of course perfectly possible that I have missed the point—that every country in Europe has a cartel, of which the UK market is just one part, and that we are luckily going to fix that in the UK. That may well be the case, but all I am saying is that, by many measures, we seem to be no worse off, and often much better off, than some of our competitors.

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

Listening to the hon. Gentleman, it is as if our constituents were getting a real bargain for gas and electricity, but I assure him that that is not what my constituents are telling me. They are facing a choice between heating and eating and do not believe that they are getting a bargain.

[David Mowat]

I thank the hon. Gentleman for that intervention. I have not said that people are getting a real bargain. I am trying to compare prices here with those in the rest of Europe, including the Republic of Ireland, and to examine whether there is evidence of exploitative behaviour. That is my point.

I wish we had less fuel poverty—I will come on to how we need to vote on measures to reduce it—and would like to see lower prices, which more competition can achieve. The Government’s work on making switching easier and price comparability is important, but switching is still too difficult and leads to stickiness in the market. If it was easier to switch, the market would work better and prices would be lower, so we need more work on that.

I agree that it would be better if there were more new entrants in the market. Having more game-changing new guys coming into the retail market would be beneficial. All I am saying, however, is that there is nothing in the structure of our market that implies that it is worse than elsewhere in the EU. Indeed, it would appear to be slightly better.

We need to be careful about what we wish for on energy policy, because security will be a significant issue over the next three or four years. In my earlier intervention, I mentioned SSE’s decision, announced this morning, to pull out of offshore wind, which I very much regret. I hope that there will be no trend of similar announcements from other players in response to the slow-motion car crash that is Opposition energy policy. We need energy stations to be built to replace ageing nuclear and coal power stations, and they need to be built pretty quickly or we will have a problem.

Finally, I have voted four times against the Opposition on matters of energy prices. Three years ago, there was a Government motion to reduce the solar subsidy from six times grid parity to four times grid parity, but the Opposition voted against the Government on what was a moderate reform to the market. They also voted against the Government on a Lords amendment regarding the accelerated replacement of coal. How we vote on green issues matters. Many of our constituents are in fuel poverty, and we need to be thoughtful as to how we vote.

[Several hon. Members]

rose—

[Sir Roger Gale (in the Chair)]

Order. I intend to call the Opposition Front-Bench spokesperson at 10.35 am, so I am imposing a six-minute limit on speeches.

09:56

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Why are we having a debate on the energy market when, with the Energy Act 2013 having passed through the House, energy has apparently been done to death? The simple answer is that, although all the material that went into the Energy Act mentioned electricity market reform, the electricity market was the one thing that was not reformed as a result.

As my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz), whom I congratulate on securing the debate, outlined, the market in the UK is not working well, in particular because the present structure—I take issue with the suggestion that markets elsewhere in Europe are more concentrated than the UK’s—is concentrated and vertically integrated on both sides. The big six have 95% of the retail market and some 70% of the wholesale generation market. The hon. Member for Warrington South (David Mowat) mentioned Germany, where nearly 50% of generating capacity is in the hands of independents, communities or local agencies, which is a different landscape from the UK’s. Switching is only part of the solution to competition and to market dysfunction.

Indeed, what we need to understand about switching is that small suppliers, which have recently seen their miniscule share of the retail market marginally increase, are subject to a reduction in energy company obligation fees when they have fewer than 250,000 customers. When Mrs Miggins of 7 Acacia avenue switches and becomes a small supplier’s 250,001st customer, that costs the supplier £7 million in the changeover from non-obligation to obligation—[Interruption.] The Minister shakes his head, but I am afraid that that is how that works.

How one fixes and deals with market competition is about looking at the whole question—how the market works together. The Opposition proposals on the separation of retail and wholesale businesses and the development of a pool—essentially an exchange to secure transparency and access to the market for all, including independents—start to tackle that overall market issue. The Government will pray in aid an Ofgem report—I believe the final report is out tomorrow—about wholesale power market liquidity, and the “secure and promote” licensing conditions. It will, clearly—certainly in relation to what has been proposed so far—deal only with the day-ahead market, one end of the trading arrangements, and not with the arrangements whereby companies trade with themselves.

That is an essential question in dealing with how to get the market working better. In bilateral deals, companies trade with themselves. They not only buy extended amounts in advance and then whittle amounts down to balance, but, at gate-closure time, they trade with themselves so as to balance their own arrangements much better, to avoid being fined in relation to balancing arrangements. That provides, among other things, a particular advantage compared with independent suppliers or, indeed, retailers, who have to buy from the spot market or the day-ahead market to balance their own supplies. It is a completely integrated arrangement as far as self-supply is concerned.

It is no coincidence, therefore, that SSE announced this morning a price freeze until 2016 and possibly beyond, and a separation of supply from retail. I think that what we should read into that is that SSE anticipates a Labour Government making the changes and getting ahead of the game. That change is greatly to be welcomed, and we need to put that on the table in discussions on competition.

10:02

[Damian Hinds (East Hampshire) (Con)]

I congratulate the hon. Member for Edinburgh North and Leith (Mark Lazarowicz) on securing the debate. As the hon. Member for South Antrim (Dr McCrea), who has just left the Chamber, said, the issue is very important to many of our constituents. They are at the sharp end and they feel the effect of the high price of heating their homes. It is also a big issue, of course, for firms and for the competitiveness of the UK economy.

There are several elements to the price we pay for energy: the wholesale cost, which accounts for about 44% of a typical dual fuel bill; the cost of supply; the policy costs; taxes, of course; and, finally, profits. Today we are focusing on competition and competitiveness in the market. That will flow through; it will be seen in companies’ profits, of course, and to an extent in the cost base—the part of the operating cost that is retail distribution in particular. Of course there is also the question of the allocation of costs, where there is vertical integration in the market. In 2012, the big six made an average margin on domestic energy of about 4.3%, which is not the sort of level to raise alarm bells. However, the question that many people want to ask is whether the vertically integrated companies are making super-normal profits elsewhere in the chain, and in particular in generation. That is a question that even the collective wisdom of all the hon. Members in Westminster Hall today will probably not be able to solve. It needs a full-on economic analysis by the competition authorities, and I hope that that will come soon.

For today, we are focusing on retail distribution. I do not want to get all theoretical about it, because, as the hon. Member for Edinburgh North and Leith said, the issue is a practical one that people feel in their pockets and in the heat or cold in their homes. Perhaps not the stupidest place to start a discussion about competitiveness in any market is the conditions for perfect competition. The things that are needed are a commodity product; many buyers; many sellers; no barriers to entry; perfect information; and no switching costs. In the market that we are concerned with, the first two are given: there is a commodity product, whether it is gas or electricity; and clearly lots of people need to buy it. Everything else in the list does not come naturally. There are not, naturally, many sellers. There would not naturally be perfect information or an absence of switching costs and barriers to entry. Those are the things that public policy should be concerned with, for competitiveness.

It is worth dwelling for a moment on history. There is a rumour, although I do not think that the hon. Gentleman perpetuates it, that there began to be a problem with high energy prices in about May 2010, and that it is all the fault of the present Government. That is of course absolutely and wholly untrue. According to the Office for National Statistics, in 2002, 2003 and 2004 the average monthly household energy bill was £70. That rose to £108 by 2009 at otherwise constant prices—a massive rise of 50%. The rise was even worse as a proportion of income for the poorest fifth of customers. The price came down, but only slightly, I am afraid, after 2009-10. If I had more time, I would talk more about the international comparisons, although my hon. Friend the Member for Warrington South (David Mowat) did that extremely well. We should remember that, of course, the biggest factors in the price of energy are, sadly, things that we cannot control, to do with wholesale energy prices. However, a lot could be said another day in another debate about how those markets might work more in this country’s favour.

Whatever the other main factors may be, we always want a more competitive market, and that always has an impact on price. There are two areas where that is particularly relevant: the number of sellers in the market and the barriers to new ones coming in. There are many markets in this country with high concentration ratios, including confectionery, soap powder and grocery retail. However, we would all agree that they are competitive markets in which companies compete hard with each other. A problem arises, particularly, when products are less comparable, at higher value, and harder to switch between; so in a market such as banks, where there are high concentration ratios, there are concerns about the way competitiveness works. Challenges therefore become important, and I greatly welcome what the Government have done to encourage more companies into the market, but we need more trusted brand names in the market, to which people would feel more comfortable about switching. I should be interested to hear what the Minister thinks could be done to encourage more of those in.

A bigger issue is comparability and ease of switching. I acknowledge that we are part way through a process. Much has already been done through the regulator and in legislation, and the full effects have not yet been felt. It would be wrong to prejudge things. Tariff complexity reached almost comic proportions when there were hundreds of tariffs, including one that came with a free football shirt, for some reason. That, combined with the intangible nature of the product, and the fact that none of us really understood the dynamics of consumption and volumes, made the market a hard one for any consumer to master.

There is more that I should like to say, but I will not be saying it this morning. Suffice it to say, we obviously have high energy prices, and we all care about that and want to bring the price down. Several issues are relevant, but we cannot say that lack of competitiveness is the largest, or even a very large, single factor. However, we know that factors in competitiveness need more attention, and I hope that the competition authorities will deal with that, and that the Government will continue their push for diversity and competitiveness in the market.

10:08

[Barry Gardiner (Brent North) (Lab)]

It is a pleasure to speak in the debate, and I congratulate my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) on securing it.

“The party’s over for the big six.” Those are not my words, but those of Evan Davis on the “Today” programme this morning. I was delighted to hear that, but was even more delighted to hear the comments of Alistair Phillips-Davies, the chief executive of SSE. He made them quite calmly, given all the furore when a few months ago my right hon. Friend the Leader of the Opposition announced that we would impose a price freeze and break up the vertical integration of the big six.

Alistair Phillips-Davies said, “If that’s what the customer wants, we are very happy to participate in that agenda.” Labour party policy, it seems, has moved from the unimaginable and unacceptable to the mainstream in just a few short months, and that has to be welcomed. If the second largest company in the UK is saying that it is happy to participate in that agenda, it seems that it has seen the writing on the wall.

Energy bills have risen by almost £300 for families and businesses. More importantly than simply that, however—this should be of specific concern to the Minister, whether he is listening or not—the employers’ federation, EEF, in its “Executive Survey 2014”, highlighted rising input costs as the primary risk to growth: I repeat, the primary risk. In 2014, 61% of companies surveyed by EEF cited input costs as a risk to their growth plans. That figure was up four percentage points on the 57% of just one year earlier. That is fundamental for business. Bills are going up because when the price of energy increases, energy companies pass that on, although they are reluctant to see the change passed on when prices go down, or at least they are not nearly so quick about it.

Why has that been possible? Why has it been allowed to happen? The answer is limited competition and weak regulation by Ofgem. Evidence presented to the Select Committee on Energy and Climate Change showed that the big six were engaged in inconsistent accounting. The hon. Member for Warrington South (David Mowat) asked for evidence—thank God he left his speech at the pub, because he managed to take twice as long as your recommended time limit without the speech, Sir Roger; goodness knows what would have happened had he brought it with him. He said that if anyone knows about such things, they should report it, so let us look at what evidence there is and at what has been presented.

BDO found that the vertically integrated companies were using four different accounting standards. The improving reporting transparency review conducted by BDO for Ofgem recommended that Ofgem

“Require the reporting of trading function results, including disclosure of the risk each trading function assumes”,

as part of companies’ segmented accounts. Ofgem, however, will not act on the proposal, because, it stated, that would have meant the need to change company structures and Ofgem does not have the powers to require such a change. That is, in part, because four of the big six are not UK companies, but it also shows that Ofgem is far too weak to effect the changes needed to our energy market.

It is worth noting that EDF opposed recommendation 2 of the improving reporting transparency inquiry—that would require an independent auditor to provide an opinion on segmental statements—and that the trading arms of the vertically integrated energy companies were implicated in the fixing of the benchmark price for gas. The hon. Member for Warrington South said, “Where’s the evidence?”, and asked us to produce it. Well, with the fixing of that benchmark price for gas, unusual trading activity reduced the price of gas just before the end of the financial year, and that was reported to the Financial Services Authority by a company responsible for setting so-called benchmark prices, ICIS Heren. The practice was indeed reported to the FSA at the time. That type of activity enables the big six to reduce the cost of gas relative to the price paid by independents, creating further barriers to market entry and ensuring that the big six retain their unhealthy monopoly.

I know what the Minister will say about competition in the market, because he has said it on a number of occasions in the House. It is the Government’s prepared agenda. They say, “Oh, but there were 14 players in the market before it was reduced to the big six by the Labour Government through the new electricity trading arrangements, or NETA.” There were 14 regional monopolies, not six national players; I wanted to nail that one before the Minister had the chance to say it.

My hon. Friend the Member for Edinburgh North and Leith has already said what Labour will do differently and that is clear. I am running out of time, but I must add that the decision of my right hon. Friend the Leader of the Opposition has proved prophetic, and it will prove right.

10:14

[Mr Mike Weir (Angus) (SNP)]

I am pleased to be able to make a contribution to the debate under your chairmanship, Sir Roger.

I congratulate the hon. Member for Edinburgh North and Leith (Mark Lazarowicz) on securing the debate on such a momentous day, when SSE has announced a price freeze until January 2016, which neatly takes us past the next general election. I should declare an interest: I am a customer of SSE and pay by direct debit, so I will benefit from the freeze, with the added advantage of avoiding the annual argument when the company tries to put up the amount of the direct debit, even though use might have fallen.

SSE also announced that it is to split its generation and retail arms. The Labour party is, of course, seeking to take the credit—as good politicians, that is not surprising—but given what the chief executive said on the “Today” programme this morning, the decision is clearly a commercial one, driven by the fact that Ofgem is due tomorrow to announce possible further action against energy companies.

Ofgem has already taken action to force generators to trade fairly with independent suppliers or face financial penalties, and to post the prices at which they will trade wholesale power up to two years in advance, as well as ensuring that more information is given in annual statements. I have not always been the greatest fan of Ofgem, but in this case its actions appear to have borne some fruit. It will be interesting to see how things develop after the SSE announcement and whether others of the big six energy companies will follow suit.

Another competition problem arises, however, in how a price freeze will affect the smaller players in the market—especially in the gas market, where many buy gas on the spot market using the day-to-day price. At a time of international uncertainty, that price can fluctuate wildly. A freeze by the big six may cause problems for the smaller companies.

It has long been a major frustration that we find it difficult to discover the true costs of energy and have to wade through the opaque ways in which it is traded within companies. The Ofgem decision should at least give us some greater information. We have to take care and keep a close eye on how things work.

Last year, the “Dispatches” programme on Channel 4 investigated energy prices and described how E.ON, another of the big six, internally deals with its existing split between retail and wholesale markets. Apparently, its retail arm makes no money, because it pays huge rates of interest on money borrowed entirely from associated companies within the group. Although E.ON is already in theory split between generation and retail, it is far from clear what real profit is being made, because of the accountancy practices employed. Will the Minister assure us that the new Ofgem rules will tackle such abuses and make it clear what is actually being earned by both sides of the company?

We can all welcome a freeze on energy bills, but we should not get too carried away because far from everyone will benefit from such an action. Again on the radio this morning, it was pointed out that SSE has higher charges with some tariffs than other companies, and that it is possible to get a better deal by shopping around even among others of the big six companies. That illustrates another problem with a simple freeze, which is that many customers are on less than great tariffs, especially those on prepayment meters. A freeze will lock in those inequalities within the system. We need to look closely at the inequalities among the different tariffs and ensure that those with the most need get lower energy prices.

It is also worth noting that a simple freeze will produce regional anomalies, because the proportion of people paying by direct debit fluctuates wildly. For example, in the south-east of England it is 63% and in my own area of the north of Scotland it is 56%—curiously, the very two areas in which SSE is the dominant player—while in London it is only 41%, possibly because of the much more transient population and the many houses of multiple occupation in the city. The effect of the freeze will therefore vary greatly.

It is also worth noting in passing that a price freeze comes with a cost. SSE also announced today that it is shedding 500 jobs and pulling out of three of its proposed offshore wind farm developments. It has said previously that it is pulling out of some wind farm developments, but I remind the hon. Member for Warrington South (David Mowat) that although SSE is pulling out, several parties are involved in most of the developments, so that does not mean a development will not go ahead.

Many of us warned that a simple price freeze would have the effect of endangering the investment urgently required to ensure that we have an energy infrastructure that meets our future needs. SSE’s announcement is an indication that that could indeed be a problem. Both Ofgem and the Government need to address that to ensure the correct balance between prices and investment. If SSE’s decision to withdraw from the wind farm development is replicated by other companies, that will pose a real threat to future renewables development. The future is in renewables, and if we are to get prices down and keep them down we must ensure that such development goes ahead.

10:20

[Albert Owen (Ynys Môn) (Lab)]

It is always a pleasure to serve under your chairmanship, Sir Roger.

I speak today as a member of the Select Committee on Energy and Climate Change—we have already heard from another member, my hon. Friend the Member for Southampton, Test (Dr Whitehead). Over the past few years, the Committee has looked seriously at and conducted some in-depth inquiries into electricity market reform, profit, prices and poverty. We have been looking at the energy market in great depth, and I welcome its being raised on the political agenda, as that has focused attention on some of those big issues. For too long we were seen as not really addressing the big issues, but the subject has now become one, for a number of reasons. Prices have been hiked in recent years at a time when many households have seen their incomes frozen or cut. The cost of energy and the impact of energy prices have become a profound problem.

I want to talk about an area that has not yet been discussed this morning, but I will begin by talking about how we have got to this position, and why I and many others believe that the UK energy market is not working. There are historical reasons. In the 1980s and 1990s, there was an ideological privatisation of the energy market, and in the first instance monopolies were set up. British Gas became a vertically integrated monopoly in 1986, and liberalisation came in much later. Electricity monopolies were also set up. My hon. Friend the Member for Brent North (Barry Gardiner) was absolutely correct to say that privatisation created regional monopolies. Those monopolies still exist in transmission and distribution.

That is the issue that I shall concentrate on. The Energy and Climate Change Committee will hold an inquiry into the issue, because, as I said in an intervention earlier, it contributes to some 19% to 24% of the bills that all households and businesses in this country pay. There is a lack of competition within transmission and distribution. Companies pass on the costs of distribution and transmission to customers and we end up paying that bill. That is something we need to take seriously and look into.

At the moment, many of those companies are foreign-owned and have a profit motive, so their first priority is the shareholder. During the passage of the Energy Bill and the reform of the electricity market brought forward by the Government—whoever had been in government would have had to bring in such measures—there was discussion of the fact that National Grid is an American-owned monopoly that controls the high velocity distribution of electricity in this country, with its shareholders as its first priority. It will be the system operator of any new-build system in the future. We have a monopoly, then, that will have a big say in the development of new technologies and the different projects that go forward. There is a worrying lack of competition that impacts on prices.

The Minister is a generous person who tries to give an answer either on his feet in the debate or else in writing. Will he comment on the distribution and transmission systems in this country, in which there is no competition whatever at the moment? As I said, that contributes to the prices that businesses and other customers pay.

I want now to deal with the announcement made this morning by SSE. The hon. Member for Warrington South (David Mowat) spoke about the language used when we talk about the big six. I have been careful in my choice of language today, but I have not held back in any shape or form when the big six have been giving evidence to our Committee. They have been hiking prices considerably and are their own worst enemies, because of the lack of transparency within the system.

To be fair, the hon. Member for Angus (Mr Weir) was right: Ofgem has tried—a little late, to many people’s minds—to open up tariffs and make companies more transparent, so that we have a greater understanding of the market. But my right hon. Friend the Leader of the Opposition was absolutely right, and ahead of the game, when he suggested that we should have a price freeze—for two reasons.

First, as I said, energy price hikes have caused real hardship to families and businesses throughout the country. Secondly, the aim is to have a deliberate pause to look at the regulatory system itself, because it is not working as many who supported privatisation in the 1980s and 1990s thought it would, as it is not bringing down prices for businesses and domestic customers.

I would like the Minister and the Government to comment on distribution and transmission. When the Energy and Climate Change Committee has a thorough inquiry into that matter, I am certain that he and the Government will respond to our findings. The monopolies that exist in many areas are contributing to hardship throughout the business community and the United Kingdom. Transmission and distribution should be treated in the same way as retail and wholesale. I welcome SSE’s announcement today as a first step to common sense. We should have a freeze so that we can address those big issues.

10:26

[Mr Iain McKenzie (Inverclyde) (Lab)]

It is a pleasure to serve under your chairmanship this morning, Sir Roger. I congratulate my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) on securing this important and timely debate.

We are all agreed that the energy market is not working for families or businesses. Energy bills have risen by almost £300 for families, and businesses say it is the second biggest cost they face. With that in mind, businesses have focused on reducing their energy consumption, to the point that people in Inverclyde see that as almost an attraction to set up business there—by going back to the future. Previously, industry energy costs were subsidised by hydropower, and we still have that infrastructure. We are investigating that and hope we will be allowed to approach industries and businesses to offer them a subsidy on their energy costs if they set up in our area. We hope that transpires, because energy prices are a big issue.

It is not only we politicians who are saying that. In a recent survey, almost 80% of the people who responded said that energy costs were the biggest worry for them. More tellingly, in that survey only one in five people said that they trust their energy provider to act in their best interests. That stems from the days when we witnessed something that I am glad to say we do not witness as much—indeed, I hope it has ended—door-to-door selling to encourage people to switch energy supplier. That has unfortunately had a knock-on effect on those who are genuinely trying to assist people with energy costs, as the distrust is still there when they knock on the door. We have seen that in my own area.

In Inverclyde, we are trying an exciting new project called iHeat, which is not about reducing energy prices but assisting people in reducing consumption. We have been reasonably successful in installing insulation in most of the housing in Inverclyde, and so have gone beyond advice on insulation. We are also giving advice to families. It is traditionally thought that pensioners are the ones whom we have to advise on energy consumption, but that advice is now being targeted more at families who are struggling with their energy costs.

People are advised to look at switching tariffs. The hon. Member for Warrington South (David Mowat) touched upon that, saying that it is still not as easy as it should be, and indeed it is not. When I visited the iHeat project, I spoke to many of the staff who were assisting people in switching tariffs. They sometimes spent upwards of an hour on the phone, waiting to get through to an energy company for help with tariff switching.

The issue is not only about assistance with reducing energy consumption; it is about changing the marketplace and separating generation from supply. The current market structure may provide consumers with a reliable supply of energy, but there is no evidence to suggest that costs are fair and efficient. An incident across the water from me highlighted that. Scottish Power was making quite a bit of profit, but its maintenance was low and it plunged many rural communities into a situation of no energy supply not for days but for weeks. It was noted that fairness and efficiency, and its profit margin, did not extend to simple, basic, regular maintenance.

What should be done? We have three suggestions: separating the parts of the business that generate energy from those that sell to customers; selling energy in an open pool; and introducing a new, simple tariff structure. We also suggest that Ofgem should be abolished because it has failed to stand up for customers. Until those reforms kick in, we will put a stop to unfair price rises by freezing energy bills up to January 2017 for people having to cope with increasing energy costs and the cost-of-living crisis.

In future weeks, months and years, people will fall into fuel poverty, which is why we must introduce projects such as those suggested by iHeat. The number of families falling into fuel poverty is rocketing, and if we do not try to help them, their choice will be between heating and eating.

10:32

[Julie Elliott (Sunderland Central) (Lab)]

As ever, Sir Roger, it is a pleasure to serve under your chairmanship. I congratulate my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) on securing this important debate. No one could have predicted the news this morning, which has turned this debate on an important matter of concern on both sides of the House into one on the topical issue of the day. That is almost unprecedented.

I will start by responding to SSE’s announcement, which the Labour party welcomes. It shows that energy companies can and should freeze their prices to reset the energy market. We also welcome their decision to separate their generation and supply businesses. That is a vital reform necessary to improve transparency and competition in the energy market. SSE should go further and commit to freezing their prices until 2017, but they have said they will review the situation.

In a recent press article, the Minister said that the decision of my right hon. Friend the Member for Doncaster North (Edward Miliband) to freeze energy bills is extremely dangerous. Will he comment on that in the light of SSE’s announcement? He also said that most voters will see that as a gimmick, but companies of the size and complexity of SSE do not employ gimmicks in the energy market. Perhaps he will comment on that.

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

The hon. Lady has tempted me. When she clarifies her party’s policy, perhaps she will confirm that the price freeze will apply to all companies, not just the big six? Does she intend to catch all the smaller companies, or just the big six?

[Julie Elliott]

I will outline our policy, but it is not for me to answer questions about it today; it is for the Minister to respond to the debate.

Before coming to the bulk of what I want to talk about, I want to comment on some of the issues raised by the hon. Members for Warrington South (David Mowat) and for East Hampshire (Damian Hinds). The hon. Member for Warrington South referred to SSE’s announcement on wind farms. We need to look at the detail of that, but while energy company profits have been rising during the last few years, renewable energy investment has been falling, and only about half of such investment is coming from the big six. Despite huge annual price increases since 2010, investment in clean energy has halved under the Government’s watch, costing jobs and threatening our energy security. Furthermore, there is no correlation between profits and investment. The energy companies with the biggest profits do not make the biggest investment in clean energy.

The Minister has commented on energy costs. Electricity prices in the UK, excluding tax, are the fourth highest in the EU15 and second highest in the G7. They are not what the hon. Gentleman quoted: they are among the highest in Europe. Gas prices are not as high, and are at the European average.

[Barry Gardiner]

I am listening carefully to my hon. Friend’s comments. She is doing very well. Will she comment on the fact that in the UK the profit margin for shareholders has been between 5% and 7%, whereas on the continent it is between 2% and 3%? The hon. Member for Warrington South did not mention those figures when he compared the UK with the continent.

[Julie Elliott]

My hon. Friend is absolutely correct.

[David Mowat]

I am glad that my remarks have at least made this into a debate. On gas, it is impossible for us to get to the bottom of these numbers in a debate, particularly those given in the intervention from the hon. Member for Brent North (Barry Gardiner). Does the hon. Lady think that our gas prices are not among the lowest in the EU?

[Julie Elliott]

My understanding is that our gas prices are at the EU average, according to the Department of Energy and Climate Change.

[David Mowat]

I want to put on the record the fact that our gas prices are the second lowest in the EU, according to the EU energy portal and the International Energy Agency. I realise that we cannot spend our time bandying this around.

[Sir Roger Gale (in the Chair)]

No, we cannot.

[Julie Elliott]

I will go with the Government’s stats.

What would a genuinely competitive energy market look like? It would provide good customer service, competitive pricing, pressure on supplier costs and profit margins, high levels of consumer engagement, and a wide range of retailers and rivalry between suppliers, with changing market shares and new entrants. That is what our energy market would look like, but it is not what it looks like today. It provides consistently poor levels of customer service. Complaints to the energy ombudsman are up 71% compared with last year. There are uncompetitive prices. Energy companies often say that prices here are lower than in the rest of Europe, but that is true only when tax is included. There is evidence of what is known as “rockets and feathers”. If pricing is competitive, falls in the wholesale cost should be passed on as quickly as when it increases. However, in 2011 Ofgem found evidence that energy bills respond more rapidly to rising supplier costs compared with falling costs.

There is mixed evidence on supplier costs. In a competitive market, operational costs should converge, but the Institute for Public Policy Research found that operational costs for energy suppliers had in fact diverged.

On high and rising profits, given the complex ways in which energy companies organise their affairs, it is not clear exactly how much money they are making. That is not completely straightforward. The segmental accounts, which they file with Ofgem, usually have gaps and provide a snapshot of earnings. They show collective profits up by about £1 billion a year compared with 2010, at a time when sales are down and there have not been any significant reductions in fuel or operating costs. Most companies publicly aspire to a 5% margin on supply, but that is significantly higher than any other comparable industry and is obviously on top of their profits from generation.

Levels of consumer engagement are low. Notwithstanding what seems to be a one-off spike in switching following the last round of price increases in November 2013, the number of people switching supplier has fallen by about half since 2008, and switching levels are the lowest on record. That was clearly outlined by my hon. Friend the Member for Inverclyde (Mr McKenzie). The situation is exacerbated by very low levels of trust in the industry. A recent report by Edelman showed that energy companies are less trusted in the UK than in nearly every other country in the world. That is a frightening state of affairs.

There is a static market, which is dominated by the big six firms, which hold 97% of the domestic market and 82% of the smaller business market. The domination of those six firms does not in itself indicate that competition in the market is ineffective, but the fact that no new entrant has achieved anything like the scale of operations to challenge the big six suggests significant barriers for newcomers. There has been little change in companies’ market shares in the past six years, and much evidence suggests that “sticky” customers—those who have stayed with the companies they were with before privatisation—pay a premium compared with those who switch, as my hon. Friend the Member for Ynys Môn (Albert Owen) highlighted.

What are Labour’s plans to promote competition in the energy market? We will make companies buy and sell all their electricity via a pool or open exchange. Currently, most energy is traded bilaterally or even within vertically integrated companies. Other European markets have much more exchange-based trading, such as in Nord Pool, which is one reason why those markets are more liquid, more transparent and more competitive.

We will ring-fence supply and generation businesses within vertically integrated companies. If companies can supply most of their own generating capacity, they have much less incentive to trade on the open market. That again makes it more difficult for independent generators and suppliers to find a market to trade in, and prevents any proper scrutiny of the prices companies pay for electricity from their own power stations. We will therefore put a ring fence between companies’ generation arms and their retail businesses.

In the retail market, we will make it much easier for consumers to find the best deal by introducing a simplified tariff structure. I accept that Ofgem has taken some steps to reduce the number of tariffs, but to drive real consumer engagement we need to create a consistent pricing system and standardise the tariff structure. We propose to create a simple structure with a daily standing charge and cost per unit.

To sustain the benefits that those structural reforms will bring, we will create a new regulator. Our green paper proposes additional powers to penalise anti-competitive behaviour to ensure that consumers get what would be expected from a functioning, competitive market. Therefore, if wholesale prices fall and that reduction is not passed on fairly by suppliers to consumers, the regulator would have the power to require suppliers to do that. We also propose additional protections for non-domestic customers in bringing the off-grid market under the regulatory framework. A Labour Government would, until our reforms kick in, put a stop to unfair price rises by freezing energy bills until 2017.

I end with a few questions for the Minister. I outlined the comments he made about Labour’s proposed price freeze being “extremely dangerous”, but does SSE’s announcement today prove that he was completely wrong? Does he now welcome SSE’s move and agree that it should go further and commit to freezing its prices until 2017? The Minister and his colleagues have argued against Labour’s plans to ring-fence generation and supply in separate businesses within energy companies. Given SSE’s announcement today, does he now admit that they were wrong on that as well?

According to Which?, only one in five people trust their energy provider to act in their best interests. If the Minister believes that the energy market is working so well, what does he put that statistic down to? Does he also accept that the 5% profit margin that the big six energy companies aspire to is greater than in comparable industries and utilities in Europe?

10:44

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

I, too, congratulate the hon. Member for Edinburgh North and Leith (Mark Lazarowicz) on securing the debate and on his immaculate timing in fitting it between SSE’s announcement this morning and the forthcoming publication of Ofgem’s assessment. We have had a good debate on some of the major issues.

My hon. Friend the Member for Warrington South (David Mowat) made an excellent speech, which was all the more impressive for him not being able to stick to his prepared text. He made some important points of comparison with the European Union and the key point that all of us need to have regard to the need to ensure that energy companies are able and willing to invest in the new energy capacity the country requires. He also made the point that, in the end—this answers a question from the shadow Minister, the hon. Member for Sunderland Central (Julie Elliott)—it is not for politicians to decide on profit margins or the merits or disadvantages of vertical integration. Such matters need to be weighed up on the basis of evidence and investigated by regulators that are independent of Government.

The hon. Member for Southampton, Test (Dr Whitehead) is usually knowledgeable on these matters, but he was not right about the effect of the threshold on the smaller suppliers. Three suppliers now have more than 250,000 customers and a taper is in place to deal with what I think he called the £7 million problem.

My hon. Friend the Member for East Hampshire (Damian Hinds) emphasised the importance of switching. I will later give him the latest statistics on that, which are encouraging.

The hon. Member for Brent North (Barry Gardiner) was a little out of date in his reference to the Engineering Employers Federation. It was concerned about energy costs, but I do not think that he has picked up its latest release, which followed my right hon. Friend the Chancellor’s excellent Budget last week, in which it welcomed the new support package being given to the most energy intensive industries. He was also not quite right about the regional monopoly among the suppliers. After 2000, the 14 suppliers were free to compete nationally, not just in their regions, but after 10 years, we discovered that there was still a regional concentration and that obviously needs to be looked at.

The hon. Member for Angus (Mr Weir) spoke about the importance of transparency. I confirm that that is one issue that Ofgem has been looking at and a great deal needs to be investigated. The hon. Member for Ynys Môn (Albert Owen) asked me about distribution and transmission. Perhaps he will allow me to write to him on some of the detail. It is difficult to get more competition into the major transmission network, but he makes a point about distribution companies. They are monopolies at the moment, although they are rigorously regulated. Perhaps he will allow me to write to him on that particular point.

The hon. Member for Inverclyde (Mr McKenzie) wants to see simpler tariffs. We certainly do, too. That power has been taken and Ofgem has managed to simplify the tariff structure, which will apply from next week. He also said that supply should be separated from generation. I make the point again that integration has advantages and disadvantages. The best way to weigh those up is independently on the basis of evidence so that we can understand whether change is needed.

The hon. Member for Sunderland Central was not able to clarify whether Labour’s proposed price freeze will apply to the very smallest companies outside the big six. There still seems to be some confusion about that. She asked me specifically whether I welcomed SSE’s announcement this morning. The answer is yes, I do. I strongly welcome that and I am sure that customers of other suppliers will be asking whether they will follow suit. She asked me whether that was evidence that the market is not working well. That is exactly why we have referred the market to Ofgem for the annual competition assessment.

Competition is at the heart of our energy policy. Consumers get the best deal when suppliers face tough competition. Competition also helps to deliver innovation, and ensures that prices are kept as low as possible. Investors will only have confidence in a market that they see as fair and in which all participants compete on equal terms. That is what—

[Barry Gardiner]

Will the Minister give way?

[Michael Fallon]

I hope that the hon. Gentleman will allow me to proceed, because I have a number of points to cover.

That is what both Government and Ofgem are working to achieve. Through the Energy Act 2013, supported by all the major parties in the House, we have introduced far-reaching reforms to the electricity market and supported Ofgem’s reforms to the retail market and the improvements that it is seeking in liquidity in the wholesale market.

Poor liquidity in the wholesale market is cited by small suppliers and independent generators as a key barrier to entry and growth. Since 2010, trading in the day-ahead market has grown rapidly. The amount of power traded on the day-ahead exchanges has increased from just 6% in 2010 to more than 50% last year.

However, we also need to strengthen liquidity in the forward market. That is one of the key concerns. From next week, Ofgem will be introducing tougher licence conditions that further strengthen forward market liquidity. Those conditions will require the big six suppliers and the largest independent generators to trade fairly with small suppliers or face financial penalties. They will also impose a market-making obligation on the big six, meaning that they will have to post the prices at which they will buy and sell power up to two years in advance. That will make it easier for independent suppliers to buy power for their customers. Knowing that the big six will buy power at the prices that they post will also help independent generators to sell their output in the forward market. The new licence conditions will be supported by Ofgem’s powers to fine companies if they are in breach of them. We have underpinned those reforms by taking powers in the Energy Act to act if Ofgem’s reforms are delayed or frustrated.

[Dr Whitehead]

Will the Minister give way?

[Michael Fallon]

I hope that the hon. Gentleman will forgive me if I do not.

Our work to break down barriers to entry into the retail energy market is already bearing fruit. The supplier base that we inherited had shrunk, as I have said, from 15 majors in 2000 to just six in 2010. In 2011, we raised the customer threshold for participation in the key energy programmes from 50,000 to 250,000. Since 2010, 11 new companies have entered the domestic supply market—they include one that now has more than 800,000 customers—and we see more companies preparing to enter. There are now 18 independent suppliers, which are increasingly penetrating the market share of the larger, more established players. Their market share, although small, has doubled since 2010, and we will continue to work to remove barriers to entry and growth.

According to industry figures—this is the answer to the point made by my hon. Friend the Member for East Hampshire—between October and February alone, about 1.5 million customers switched their electricity supplier and, of those, nearly 500,000 switched their account to one of the smaller suppliers. The smaller suppliers are of course the ones that would be most exposed by Labour’s price freeze. They are less able to absorb any increased costs arising from network charges or increases in the price of wholesale energy and would struggle to compete with the big six in those conditions, so we do need an answer to the question that I put to the shadow Minister.

I was also asked about consumer engagement. An engaged consumer base is a key component of a competitive market, which is why we are reforming the retail energy market and making it easier for consumers to navigate. In 2010, we inherited a market that was not working in the best interests of consumers. There was a profusion of more than 350 complex tariffs, no doubt supported by Opposition Members, but that complexity made it very difficult for people to work out how to get on to the right tariff for their circumstances. Bills were complicated and unclear, making it difficult for consumers to compare their existing tariffs against others on offer.

The retail market review that Ofgem has already carried out has simplified tariffs and limited suppliers to offering just four simply structured tariffs per fuel. New rules, introduced next week, will make bills clearer and simpler. Suppliers will be required to tell their customers about the cheapest tariff that is available to them and the savings that they could make by moving to it. That information will now be provided on bills and annual statements. By June, all customers on poor-value dead tariffs will be moved to the cheapest variable tariff.

The measures that I have outlined demonstrate our determination to drive greater competition in the energy market, but those measures are not, of course, all that we are doing. My right hon. Friend the Prime Minister announced last autumn that the competition authorities would carry out an annual competition assessment. The first assessment is being carried out by Ofgem, the Office of Fair Trading and the Competition and Markets Authority. We expect it to be published very soon.

[Barry Gardiner]

I am grateful to the Minister for eventually giving way. He has spoken about competition a great deal. Does he accept that the whole purpose of vertical integration by a company is precisely to be a bulwark against competition and, although what he has said about introducing greater liquidity into the long-term market is absolutely right, does he not accept that that would be achieved by breaking up that vertical integration?

[Michael Fallon]

That is something, as I have said, that we require independent investigation to establish on the basis of evidence. There are arguments in favour of vertical integration. I am not putting them forward today, but there are those who argue that vertical integration can lower the cost of capital and lead to more efficient risk management. These are issues on which the evidence needs to be properly weighed—with the greatest respect, neither by the hon. Gentleman nor by me, but by independent investigators who are detached from the political process. I am very disappointed to see that the regulator would be abolished if Labour ever came to power. The evidence needs to be weighed independently, and we need to have a proper judgment. The first competition assessment is being completed—

[Albert Owen]

Will the Minister give way?

[Michael Fallon]

If the hon. Gentleman will allow me, I will not, because I am running out of time. The first competition assessment is now being carried out by the three competition authorities and will be published very, very soon. The independent authorities set out the scope of the assessment in December. They are looking at all aspects of competition in the energy markets, including market share and how easy it is for innovative new entrants to enter the market and compete. They have also been examining, as I have said to the hon. Member for Brent North, the impact of vertical integration, the degree of consumer engagement in the market and, indeed, the levels of profitability, to which a number of hon. Members have referred.

Real progress has already been made to incentivise the driving forces of competition: greater consumer choice and increased participation in the energy markets. However, we are not complacent. By commissioning an annual competition assessment, we are creating a formal process for the independent regulatory authorities to test the effectiveness of our reforms and to test annually whether the market is working in the interests of consumers.

I do not want to speculate on the outcome, but it is essential that we respect the independence of the process and any decisions that the regulatory authorities may take to strengthen competition and to protect the consumer. Independent regulation is fundamental to investor confidence. I hope that hon. Members on both sides of the House will therefore be able to support the independent regulator and the competition authorities when they publish their assessment very shortly.

Minimum Practice Income Guarantee

Wednesday 26th March 2014 Westminster Hall

11:00

[Tim Farron (Westmorland and Lonsdale) (LD)]

It is a huge pleasure to serve under your chairmanship, Sir Roger. I am extremely grateful for the opportunity to raise the problems caused by the removal of the minimum practice income guarantee. The removal of the minimum practice income guarantee is not the sole cause of the crisis facing some of England’s rural surgeries, but it has unveiled the failure over several decades to provide a sustainable basis for funding GP surgeries in rural communities. The coming crisis, which could have the unintended consequence of closing dozens of rural surgeries, will be immensely costly to our communities and to the taxpayer. Taking intelligent, targeted and swift action to prevent those closures will be extraordinarily cheap by comparison.

Over the past few months, I have been working with our communities in and around Hawkshead and Coniston in my constituency, whose surgeries are undoubtedly at risk. Last August, 500 local people filled the school hall at John Ruskin school in Coniston at a public meeting. Five hundred people is an impressive turnout in any community, but when we realise that the total number of patients listed at Coniston is just 900, we see how important the issue is. Those 500 people turned up because they know that it would be impossible for them reasonably to access another surgery, given how remote and isolated they are. My job today is to convince the Minister—I hope it will not take much doing—that my constituents are right and he should take action to help them. Let us be clear: unless a specific decision is taken to provide new and additional support for small rural surgeries, there will be a series of surgery closures that will be hugely damaging to our communities, harmful to patient safety, costly to the taxpayer and utterly embarrassing for Government.

In my constituency, two practices stand out as being in need of immediate aid from NHS England and the Department of Health: Coniston and Hawkshead, two communities in the central Lake district, which are about as remote as one can get in England. Both communities have a GP surgery, and both surgeries are at risk because of unsustainable funding. If you would care to have a look at your Ordnance Survey map of the Lake district, Sir Roger, you will see that if either of those surgeries were to close, the next nearest surgery would be on the other side of at least one lake, not to mention a couple of mountain ranges.

Across the country, there will, of course, be some small practices that should amalgamate with others, predominantly in urban areas where access and sparsity are not such an issue. The number of small rural GP surgeries, such as Coniston and Hawkshead, which are facing up to falling off the funding cliff is relatively small. At the last count, there were 36 in the whole country. Therefore, although intervention is vital, it is manageable and affordable. It is not a big problem to solve if we do it now, but it will become an enormous problem if it is not tackled. The evidence is clear that for that to happen, there will need to be strong and unmistakeable political leadership. In other words, Ministers must state unequivocally that they want NHS England to protect small, strategically vital GP surgeries, and that they expect a formal fund to be set up to make that happen—a small strategic surgeries fund—just as our Government have successfully done to protect small, strategically important schools in rural areas. It will cost little, but it will save a lot.

A couple of weeks ago, controversially, our Government fought to permit the Secretary of State to have the right to intervene in local trust matters when there is a patient safety issue. They were right to do so, because elected Governments should involve themselves to ensure that strategic priorities are met. Here is one such example. It is strategically vital that people in rural areas across the country, including Coniston and Hawkshead, have the same rights to access health care as anyone else.

[Dr Sarah Wollaston (Totnes) (Con)]

As somebody who has worked in a small rural community, where there are high levels of deprivation in an area of relative affluence, the difficulty is that many people cannot access transport to get to services in other locations. I agree with my hon. Friend that we must prioritise access in small rural communities and recognise the problems of rural poverty.

[Tim Farron]

I am grateful to my hon. Friend for making that strong and good point. What counts as poverty in rural areas is often very different from what counts as poverty in urban areas. It is poverty in terms not only of income but of access to services. The average age of my constituents is 10 years higher than the average age of the UK population, so isolation and lack of access to private transport, never mind public transport, make it physically impossible to access another service. That is why we need to intervene.

I have had many conversations with NHS England, our local area teams and the clinical commissioning group. In the nicest possible way, there is a sense that they are all seeking a lead from the top. They are all good people, but they seek direction from the top. To be fair, NHS England has identified some 90 GP surgeries as outliers—practices that will lose more than £3 a patient—and a further 200 or so that will lose more than £2 a patient. However, that process of identifying outliers does not tell us which practices will be sustainable and which will not. Crucially, although outliers have been identified, no resource has been identified to help to protect them. That is why the Government must take a lead and make it clear that surgeries such as Hawkshead and Coniston must be protected, and that funding must be set aside to ensure that they not only survive but thrive. I am concerned that many of the discussions and the media attention have focused around the minimum practice income guarantee when we should focus more directly on funding sustainable general practice in remote rural areas.

In south Lakeland there are vast differences in minimum practice income guarantee payments per patient. Coniston gets approximately £25 a patient, Hawkshead gets less than £1 a patient and Ambleside gets around £15 a patient. By comparison, Slaidburn in Lancashire receives £110 a patient, even though the Slaidburn practice is the same size as the one in Hawkshead. The proposed changes from April will begin to remove those differences. Arguably it is correct to do so, but it is not correct simply to leave it at that.

The process of removing the minimum practice income guarantee and redistributing the funds per capita is a staggeringly blunt instrument. It is the ultimate one-size-fits-all policy, which treats small rural practices the same as large urban ones. It is on a par with making the casual assumption that the local village shop will have the same business model as Tesco. Smaller practices do not have the economies of scale that larger practices do; for example, the core practice management costs are the same whether the practice has 1,000 patients or 5,000.

NHS England’s argument is that, because smaller surgeries are inefficient, they should merge with neighbouring practices to increase efficiency. That works in urban areas, where there are often multiple GP practices operating close together. In that case, it is safe and sensible to consider sharing resources more efficiently. In remote rural areas, however, it is not possible to achieve those savings without sacrificing patient safety. It is not possible physically to merge with a neighbouring practice if it is on the other side of a lake. Merging, say, Coniston and Hawkshead with a larger, more distant surgery in Ambleside or Ulverston will not change the fact that health care still needs to be provided in the heart of those communities.

The only way to get savings is by closing a surgery or downgrading the service significantly in one or more of the villages and asking the patients to travel to another one for their main GP service. That would, in fact, result in no savings at all. Consider the increased cost to the ambulance service, to the A and E units nearby—not that they are particularly nearby, by the way—and to social care that would be triggered by the removal of GP services from the heart of our community. The human costs of closure are immeasurable, but the financial costs are measurable. It would be extreme foolishness to let our surgeries close by accident.

NHS England suggests that the policy does not impact on large numbers of rural practices, and that a greater number of urban practices will lose out. It is correct: there are not a large number of rural surgeries at risk. However, the analysis ignores the fact that, for the rural surgeries, an alternative to the current service provision is simply not available. Patients cannot simply move to the neighbouring practice down the road, because there is no “down the road”.

The changes come on the back of an already diminishing level of income in general practice for small rural surgeries. Hawkshead’s 2013-14 income from the GP contract is down 5% on 2012-13, and that has absolutely nothing to do with the removal of the minimum practice income guarantee. We should therefore be careful not to allow the removal of the minimum practice income guarantee to mask the much wider problem of a lack of sustainable funding streams for a relatively small and very manageable number of rural surgeries.

NHS England states that the removal of the minimum practice income guarantee will be phased gradually over seven years, but only so much can be squeezed out of an ever-reducing funding stream. The core running costs of the premises cannot be cut, so all that is left to cut is staff. If the staff consists of barely a handful of committed professionals, all that is left to do is close.

Hawkshead is already at 50% of the national staffing average, which reflects its historical low level minimum practice income guarantee funding compared with similar practices. At the same time, the surgery has the highest patient satisfaction levels in the country. It is officially the best surgery in England, but, as things stand, its only options are to reduce service provision to a level that would never be tolerated in an urban area, or to close. I am sure that the Minister will agree that such unacceptable choices mean that we must intervene.

Unlike Coniston practice, Hawkshead will gain by a small amount through the proposed changes. However, it will be by only about £1,000 a year, when the historical funding shortfall is about £35,000 to £40,000. Coniston’s income will decline significantly—by around £25,000 to £30,000 a year—and, to put it mildly, both surgeries will be at severe risk.

The minimum practice income guarantee should be removed or phased out. That is not challenged by those of us in rural communities. The wide disparities between surgeries with significant minimum practice income guarantee grants and those that, like Hawkshead, get pretty much nothing, makes the case for us. Nevertheless, the removal of the minimum practice income guarantee provides an opportunity to ensure that, in the wider context of a fairer and more efficient funding model, there should also be an element in the formula that does what the minimum practice income guarantee was originally intended to do, only more efficiently, more effectively and less expensively.

A small strategic surgeries fund could cover the additional cost per patient of keeping the core expenses covered. As a basic need, Coniston must keep its current funding, and Hawkshead must rise to a similar level in order to sustain service provision. NHS England will argue that it has reverted responsibility for the decision-making process to local area teams. However, there is no ring-fenced funding to deal with the problem, so local area teams are limited in what they can do. Our local area team has given its support to ongoing service provision in Hawkshead and Coniston, and I am extremely grateful for that, but so far no additional funding has been identified to support the practices.

The Minister will know that strategic small surgery funds have been established in Scotland and Wales. They are ring-fenced at the centre to ensure that no surgery that needs to remain open is closed by accident. Rural communities in England suffer from poor funding in social care, secondary care and primary care. Far too often, people in areas such as Cumbria are forced to put up with services funded at a fraction of what is required in order to provide care equivalent to that on offer in urban areas.

It is understandable that civil servants in Whitehall and officials in NHS England should come up with funding mechanisms that, in the first instance, overlook the fact that it simply costs more money to provide equivalent care to rural communities. It may even be understandable that officials might be ignorant of the desperate social needs in rural communities caused by poverty, ageing populations and isolation. However, once those problems are made clear, it is not acceptable to shrug them off. Once we have brought them to national attention, it is imperative that we see action.

In summary, I want to make five quick points. First, a small number of small, rural surgeries in England are at risk, partly as a result of the removal of the minimum practice income guarantee. Secondly, Coniston and Hawkshead are two such surgeries, and there is no alternative to having a surgery in either of those communities that is either sensible or safe. Thirdly, rural communities have as much right to decent health care as anyone else. Fourthly, it will cost relatively little to come up with a strategic fund to protect those few dozen surgeries. Fifthly, such a fund will be created only if the Department of Health and NHS England agree that it must be, and then make it so.

My constituents deserve access to good local GP services as much as anyone in London, Birmingham or Manchester. Unless we tackle the problem I have outlined, my constituents will be put at unacceptable risk. On behalf of the people of south Lakeland, and all other rural communities, I ask for the Minister’s help in setting up a small strategic surgeries fund so that we can remove that risk.

11:14

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

It is a pleasure to serve under your chairmanship again, Sir Roger. I congratulate my hon. Friend the Member for Westmorland and Lonsdale (Tim Farron) on securing this debate, which is pertinent to many constituencies in England. Indeed, it is pertinent to my own constituency in Suffolk. Later in the debate, I hope to reassure him by giving good local examples from Suffolk of how the joint working he has described can be very effective. The issue is not just money, but improving the quality and availability of care for patients.

We all recognise the importance of local GP practices, particularly in rural communities such as those in my hon. Friend’s constituency. I would like to reassure him that the Government believe that high-quality local services can be maintained. I will not rehearse all the background to the 2004 GP contract negotiations, which we know changed the way that GP practices were funded, but it is worth drawing out a couple of points. Rather than receiving a series of fees and allowances, since 2004, GP practices have been paid based on a formula to take account of need and work load. Practices can also earn money by participating in the quality and outcomes framework—commonly known as QOF—or offering enhanced services.

To smooth the transition to the new system, a minimum practice income guarantee was introduced and used to top up practices’ core funding to match their basic income levels before the 2004 contract was introduced. We must also remember that many GP practices are of course small businesses in their own right. They value and enjoy the flexibility that the GP contract implicitly recognises, and that can bring great benefits to patients. In a moment I will talk a little more about the minimum practice income guarantee and the changes under the recent GP contracts, which from now on will be negotiated by NHS England, as my hon. Friend outlined.

It is worth talking a little about rural practices and highlighting some of the measures in place to support them—it is important to get that on the record. We recognise the fact that rural practices, in areas such as Hawkshead and Coniston in my hon. Friend’s constituency, play a vital role for their local communities. We also recognise the rurality and the often sparsely scattered populations that such GP practices look after. Both the Government and NHS England intend high-quality local services to be supported and maintained.

My hon. Friend will be aware that the funding formula for general practice already includes an allowance for rurality, and there is also provision for the costs of temporary residents. That can be a particular issue during the summer months with the arrival of tourists in the Lake district. The funding formula already includes additional support for rural areas and places with a more transient population because of tourism, or for the seasonal population fluctuations in more agricultural constituencies where there is a high reliance on temporary, summertime or seasonal labour.

Rural GPs may also be able to increase their income in other ways. For example, dispensing practices tend to be in rural areas, although not exclusively. That is potentially another way to provide additional income for a practice, as well as important support for the community, which can have closer-to-home access to prescribed medications and drugs.

I understand that NHS England is working with local GPs through the Cumbria clinical commissioning group to decide how to maintain accessible, responsive, high-quality primary medical services—my hon. Friend alluded to that in his speech. For example, NHS England can help practices to work more closely together. It is looking at doing that by sharing IT and other back-office support in order to improve care and practice efficiency. NHS England is also ensuring that, through practice patient participation groups and local healthwatch services, patients are being kept fully informed and are able to contribute to discussions.

I would like to talk briefly about the phasing out of the minimum practice income guarantee, which last year we announced would begin this April. As my hon. Friend outlined—I was pleased that he supported this—we consider that the payments are no longer equitable, because under the system, two surgeries in the same area serving similar populations could be paid different amounts per patient they serve. That is inequitable and does not make sense.

The payments of the MPIG will be phased out not simply overnight, but over seven years. The overall intention is for the funding for GP practices to be properly matched to the number of patients they serve and the health service needs of those patients.

Funding will also continue to take into account the unavoidable costs of providing services in rural areas. The issue is not one that affects only rural practices, as both rural and non-rural practices receive MPIG payments.

[Dr Wollaston]

Regarding the point about funding following the number of patients, the Minister will be aware that there is now greater flexibility for patients to register. Relatively young, mobile patients may choose to be registered near their place of work; indeed, they should have that flexibility. However, that is an additional income drain on small and sparsely located practices. Is the Minister aware of that?

[Dr Poulter]

Absolutely. I alluded to that point in some of my earlier comments. We know that there is the tourist trade, which is an important part of the local economy in the constituency of my hon. Friend the Member for Westmorland and Lonsdale. Recognition of that factor is built into the funding formula for GP practices. People moving locally to work somewhere is already taken into account as part of the formula, which will benefit the funding of some of the local practices in my hon. Friend’s constituency. I hope that is a helpful clarification of the point about people moving from one location to another.

[Dr Wollaston]

Does the Minister accept that not all sparsely populated areas will see that offset by incoming tourists? Many areas of the country will not see that offset benefit.

[Dr Poulter]

Absolutely. As I have outlined, other parts of the formula recognises rural areas; they are already recognised in GP funding allocation. Therefore, on both counts, additional support is available for areas such as those described by my hon. Friend the Member for Westmorland and Lonsdale in his constituency, and indeed those in Totnes and in my own constituency. Rurality is already factored into GP contracts and funding for GP practices and health care.

What will happen with the money that is recycled and released from the MPIG is an important point. The money released by phasing out the MPIG will be reinvested into the basic payments made to all general medical services practices, which are based on the number of patients and key determinants of practice work load, such as the age and health needs of patients and the unavoidable costs of rurality.

Another factor that we all recognise—I know it is a factor in Totnes and, I believe, in Westmorland and Lonsdale—is that many older people choose to live in rural areas. Older people once used to retire to seaside towns, but they are increasingly retiring to predominantly rural areas. The changes and the freeing up of cash from the MPIG will benefit all practices. In the health care funding formula—not necessarily the GP funding formula, but how clinical commissioning groups allocations are allocated—there is a strong weighting for age which will bring broad benefit to rural areas, particularly those that have a high proportion of older people.

NHS England has been undertaking specific analysis of the withdrawal of the MPIG. Inevitably, a small number of practices will find themselves in more difficult circumstances. NHS England has been considering the small number of significant outlier practices, as my hon. Friend the Member for Westmorland and Lonsdale mentioned, for which alternative arrangements may need to be made to ensure that appropriate services are maintained for local patients. We appreciate that that is a matter of concern for some practices, and my hon. Friend has outlined concerns in his own constituency. That is why we have decided to take seven years to implement the change to the MPIG funding. Phasing in the changes over that period will allow the minority of practices that lose funding to adjust gradually to the reduction in payments.

NHS England has been looking carefully at how its area teams can support the practices that are most affected. It has invited practices that believe they will have problems as a result of the phasing out of the MPIG to raise that concern with their area team. In a small number of cases where there are exceptional underlying factors that necessitate additional funding, NHS England has asked its area teams to agree different arrangements to ensure that appropriate services for patients continue to be available. That includes looking at how services are funded.

Importantly, NHS England has suggested that practices with small list sizes could look at collaborating with other practices, for example through federating, networking or merging with nearby practices, to provide more cost-effective and better services for patients, a point I will come to in a moment. Practices can also identify other ways they could improve cost-efficiency, such as reviewing staffing structures, and they can review commissioning or contracting options.

[Tim Farron]

I am grateful to the Minister for that explanation. I simply want to point out that neither Hawkshead nor Coniston, despite both being put in an unsustainable financial situation in the future, technically count as outliers. Will he guarantee that NHS England will look at the sustainability of all surgeries, not just those that have lost the most from the withdrawal of the MPIG?

[Dr Poulter]

The answer is in exactly the point made by my hon. Friend in his speech: it is about local area teams working effectively with practices.

Let me provide my hon. Friend with an example of how collaboration between services and GP practices can work well, from not just a financial perspective but a patient care perspective. In Debenham, Otley and Grundisburgh in my constituency, all of which have important rural communities, there is a practice that works collaboratively and a practice that serves and looks after populations across a number of sites. That works well for local populations, because they have an accessible local GP service.

That practice model has also produced considerable economies of scale. It has allowed the practices to invest in additional services for the benefit of local patients. Where there are pressures caused by an ageing population and the complex needs of older patients, that has allowed more money to be freed up to focus resources appropriately. In some cases, it has also allowed greater flexibility in the use of the infrastructure—certainly, surgery buildings —to provide greater community benefits.

The model can work, and it is important that practices, even though they are small businesses, consider that they need to collaborate and work with neighbours, where possible—not to lose their independence or identity, but to make efficiencies where they can, so that more money can be directed into front-line patient care. That is part of the answer.

Providing a sustainable solution is about practices working well with their neighbours. Sometimes it might mean rebuilding relationships that have broken down in the past. We know that, with the best will in the world, we do not always get on well with our colleagues, although we all do our best to look after patients. Sometimes it is about practices setting aside past disagreements, working collaboratively for the benefit of patients and making efficiencies where possible.

[Tim Farron]

Of course, many surgeries will be able to find ways of surviving and thriving through different working arrangements. There will be some, however, that are essential and strategically vital for rural communities such as mine, which will have done everything they possibly can but cannot make ends meet. Will the Minister confirm that funding will be available through NHS England to support those surgeries?

[Dr Poulter]

That is a matter for area teams to look at. The first approach that area teams will take is to ask, “Where can we make efficiency savings that will mean there is more money for front-line patient care, such as IT, back-office services and administration costs?” Hospital providers have been doing well in reducing administration and freeing up money for patient care. Are there economies that can be gleaned through better procurement practices and surgeries working together?

That has got to be the first thing: surgeries looking to help themselves. Later on down the line, if everything else has been exhausted, the area team will have to make a decision about whether other mechanisms are in place to provide additional support.

I am confident that, with a funding formula that recognises rurality, and a funding formula for CCGs that particularly identifies the importance of an ageing population, we have a formula that will support rural practices into the future.

11:30

Sitting suspended.

Stillbirths and Infant Mortality

Wednesday 26th March 2014 Westminster Hall

[Philip Davies in the Chair]

14:30

[Tracey Crouch (Chatham and Aylesford) (Con)]

It is a pleasure to serve under your chairmanship this afternoon, Mr Davies, although there is certainly no pleasure in the subject matter of this debate. The issue of stillbirth and infant mortality is a complete and utter tragedy for parents who lose their child. I have met a number of my constituents who have experienced the loss of a baby. Mothers, fathers and siblings have been devastated, left bereft and unable to comprehend what has happened and why. It was heartbreaking to meet them. However, what is equally heartbreaking is that here in the UK, which has arguably one of the best health services in the world, we have one of the highest rates of infant mortality in Europe and other parts of the developed world. It is shocking that we have higher infant mortality rates than countries such as Croatia, Lithuania, Estonia and Slovenia.

Sadly, unlike other countries we have barely seen any reduction in infant mortality rates in the last 20 years. Almost three quarters of child deaths under the age of 15 in the UK happen during the first year of a child’s life; more than half in the child’s first 28 days; and almost 40% in the child’s first week. These statistics do not include the one in 200 pregnancies in the UK that end in stillbirth. Stillbirths account for the death of a further 4,000 babies a year.

There are many reasons for perinatal, early neonatal and neonatal deaths, but I will concentrate today only on stillbirths and on sudden infant death syndrome or, as it is perhaps more commonly known, cot death. That is not because I have no interest in other forms of infant mortality, but so I can focus the Minister’s mind on a few actions that might make the difference sooner rather than later. That said, I wanted to give a wide title to the debate today because I am aware that colleagues have other issues they may wish to raise.

The figure of 4,000 stillbirths per annum is far too high. I cannot imagine the horror of having to go through labour knowing that your baby is already dead. I met one lady who gave birth to her son, Henry, at 38 weeks, but he had not grown for 16 weeks. In the intervening weeks, she had forged a bond with her unborn son, named him and planned a life ahead, but it was one that would never be fulfilled.

Our NHS is brilliant and our midwives are fantastic, but I have yet to meet a woman who has gone through pregnancy without seeing more than one midwife. One lady told me that she had seen 12 different midwives during her pregnancy, which sadly ended in stillbirth. She felt that all 12 of them had different ways of measuring her. I am not going to criticise the midwives—they do not deserve criticism—but we need to ensure continuity of care throughout gestation, to give mothers some peace of mind.

Research that the National Childbirth Trust carried out with the Women’s Institute last year into women’s experiences of maternity services highlighted the shocking statistic that 34% of women were not given the name and phone number of a midwife to contact with any concerns. We must do more to encourage people to go into midwifery, and I hope the Government’s pledge to increase the number of health visitors will help in that regard.

However, we also need to improve our standard monitoring and measuring systems, making the most of modern technology. In the case of poor Henry, who had not grown for 16 weeks, it was clear that the measuring was not as good as it could have been. I accept that not everyone agrees with me on this, but I believe that we should be looking to increase the number of scans expectant mothers receive. Having a scan at 12 weeks and again at 20 weeks is fine, but unless a mother is anticipating complications, those are the only scans she will receive.

There are examples of the successful use of increased measuring and monitoring. The Rainbow clinic at St Mary’s hospital in Manchester, which is funded by Tommy’s baby charity, has taken huge and groundbreaking steps forward in understanding the risk profiling of mothers, and it has a great success rate because of its extra monitoring and measurement. I would like to see its work rolled out. The clinic’s test on those who are deemed to be at risk—possibly due to previous multiple stillbirths or miscarriages, which we know increase the risk of future stillbirths or miscarriages—allows those in the “at risk” category to receive further monitoring and measuring in the third trimester, when placenta problems usually occur, to allow earlier delivery if necessary to prevent stillbirth.

These preventive measures involve awareness raising and risk profiling, followed by improved measuring, with new techniques and monitoring through an increased number of scans. They have led to a significant increase in healthy babies being born to women in the “at risk” group. Although the study at the Rainbow clinic is on a small scale, it has a very high success rate. However, the clinic does not have the funding to expand its work and I urge the Minister to examine its work and give it her full support.

I am not an expert on placenta. However, given that we know it starts to break down at 38 weeks but we do not induce mothers until 42 weeks—a point when we know women carrying later are more at risk of losing their baby—we need extra research into this process and to determine whether this delivery time frame is still viable. I will not dwell on that now, but it would be helpful if the Department examined both the risks and the benefits of reconsidering induction as late as 42 weeks. I have spoken to women who have had stillbirths and many of them raised this issue with me. There is genuine concern about the length of time that women are carrying babies for, particularly those at the higher risk end of the spectrum.

This issue is not all the responsibility of the NHS and it is important that we raise awareness of reduced foetal movements, so that expectant mothers can spot early signs of distress. The Count the Kicks charity has fabulous self-monitoring support, empowering mums-to-be with knowledge and confidence, including a mobile phone app and tips for dads. This understanding should be universal.

If a stillbirth does occur, it is important that the parents receive all the support they need. The third sector does an amazing job of providing advice and bereavement support for parents who lose a child before, during or shortly after birth. However, we need to ensure that parents receive good care from the health service, whether that is by ensuring the appropriate equipment is available—such as cameras and other equipment to take handprints and footprints, with staff available who know how to use it—or by providing access to all the literature and available support and advice, including bereavement services. We must also ensure that parents receive correctly handled treatment; we must remember to treat them as parents even if they do not have a baby.

[Dr Phillip Lee (Bracknell) (Con)]

I congratulate my hon. Friend on securing this debate. As someone who has professional first-hand experience of dealing with parents who have had a stillbirth, I know that it is an emotive topic but it is essential that we discuss it. Recently, Scotland produced a report outlining that its infant mortality rates are improving and it appears that it has a different approach to education, assessment and analysis of at-risk groups.

[Tracey Crouch]

I am grateful to my hon. Friend for his intervention. It was a coincidence that the Scottish Government released their statistics on infant mortality yesterday, which showed that Scotland now has the lowest infant mortality rates in the United Kingdom. It has managed to do that by introducing some of the measures I have already proposed in this debate, such as extra monitoring, extra targeted intervention and support for those at highest risk. That work should be rolled out across the United Kingdom.

We must be very clear about the bereavement services and support that people receive. A local charity in Kent, Abigail’s Footsteps, is working with the Royal College of Nursing to establish a national standard of bereavement training that it would like to see universally implemented. That is absolutely fantastic. On top of that, however, one of the best ways to accomplish good care in all the areas I have mentioned is to create the job specification of bereavement midwives within the NHS. This suggestion is supported by Sands, the leading stillbirth and neonatal deaths charity. I fully support this proposal and urge the Minister to consider introducing a nationally recognised job specification for bereavement midwives, which I believe would ensure the best possible mental health of, and support for, parents whose babies die before, during or shortly after birth.

I am aware that people have suggested that this will be an additional cost to the NHS, but we need to remember that the cost to the NHS of supporting people with mental health concerns, as well as loss of productivity because they have lost a child, is significant—some £1.5 billion to £2.5 billion. Therefore, an early investment in such support services will make a massive difference.

A bereavement midwife would be familiar with all relevant policies and procedures. They could ensure that all protocols are up to date and that relevant paperwork and equipment is always available; ensure that there are high standards in bereavement care in every relevant hospital department; and liaise with others within the hospital, such as chaplains, neonatal and paediatric pathologists and mortuary staff. They would also be able to promote good communication and building relationships with primary care providers such as GPs, as well as external bodies, including the registrar of births and deaths, and to ensure that patients have access to all appropriate available support and literature.

We are lagging behind on stillbirths, and I think the Minister will agree that we need to do more. I have outlined just a few suggestions that would help, as proposed by those who work in maternity care and who have suffered the loss of their own baby during pregnancy.

As tragic as a stillbirth is, the sudden death of a baby who was born, named, taken home and then fell asleep never to wake again is something I cannot even begin to imagine. Sudden infant death syndrome, or cot death, was dramatically reduced due to the outstanding success of the “Back to Sleep” campaign that the Government launched in the mid-1990s. The campaign, reminding parents that babies should sleep on their back, not side or front, was highly successful and led to an outstanding drop in the number of cases of babies who died of sudden infant death syndrome. As a result of that campaign, the number dropped from five babies a day in the mid-1980s to five babies a week, where it has stubbornly remained ever since, even 20 years later.

Access to information is vital. The first thing we need to do is reinstate the literature that new mothers used to receive when they left hospital with healthy babies. Unfortunately, the helpful “Safer sleep” guide was caught up in the Cabinet Office’s bonfire of public sector communications, and now new mothers are expected to rely on other organisations providing information. The Bounty pack is brilliant, although it is not necessarily immediately available or universal; however, the information provided in it could be life-saving. Risk profiling is essential if we are to reduce SIDS. Mothers need to understand the dangers of alcohol, smoking, vitamin deficiency and obesity, both during and after pregnancy, as a matter of course and not just as an optional extra, because those are the biggest causes of preventable perinatal death.

The Lullaby Trust and Bliss do wonderful work together and are helping my own local authority in Medway, which has multiple areas of deprivation, to identify risk and support professionals targeting intervention. This is essential. The statistics speak for themselves. The cross-party report published recently by colleagues, entitled “1001 Critical Days”, found that 26% of babies in the UK are estimated to be living within complex family situations, which can heighten the risks for a baby’s well-being, and that drug and alcohol problems affect more than 109,000 babies. Targeting resources at higher-risk families, parents and babies will help to reduce SIDS. It is essential to ensure that support and information are there for those who have premature babies, have babies young, or who are living in complex situations.

Furthermore, if we are really going to tackle infant mortality and reduce our embarrassingly high rates, we need to support, encourage and promote breastfeeding and improve access to “Healthy Start” vitamins, which are currently only accessible via named chemists. These should be available at all chemists. Investment should be made in both universal and targeted services, as recommended by the Healthy Child Programme. Where targeting has not made an impact—for example, vitamin D supplementation—universal approaches should be considered if they are also cost-effective. We need to highlight the message that this is not an optional extra, but is vital to ensuring foetal welfare.

We must improve awareness of smoking cessation services and the harm caused to unborn children by smoking. Similarly, we need to ensure that people understand the dangers of smoking for those who have been born. We must also do more to discourage binge drinking during pregnancy. I was shocked to learn that 18% of women still binge drink—that is, drink more than six units in one session—while pregnant, often leading to foetal alcohol syndrome.

I know I have not covered everything in this debate, but I hope it is a useful start. I thank the Royal College of Paediatrics and Child Health, Tommy’s, Sands, Kent Sands, Bliss, the Lullaby Trust, Abigail’s Footsteps, Together for Short Lives, the National Childbirth Trust, the Women’s Institutes and Bounty for their briefing materials in advance of this debate. I thank, in particular, the mothers and fathers I have met who have spoken movingly about their own personal tragic experience.

The Prime Minister said he wants to make sure that Britain is the best place to end life. Today, I am calling for us to work together to make Britain the best place to start life and give every expectant mother all the support they deserve. I look forward to the Minister’s response and the contributions of other Members, and thank them for taking the time to be here this afternoon to discuss this important issue.

14:45

[Tim Loughton (East Worthing and Shoreham) (Con)]

It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) on an excellent speech and on raising the profile of this much neglected but hugely important subject for many of our constituents who have been through the pain of stillbirth, infant mortality or perinatal mortality.

I am, slightly shamelessly, going to use this debate as a further opportunity to plug the ten-minute rule Bill that I put before the House on 14 January, with the support of my hon. Friend and other hon. Members. I am pleased to see the Under-Secretary of State for Health, my hon. Friend the Member for Battersea (Jane Ellison) here, as she sat in on that ten-minute rule Bill. I am glad that her colleague at the Department of Health has now, I hope, agreed on a meeting to take that forward; some of us can take constituents affected by stillbirth to that meeting and see whether we can bring about the change in the law that I will come back to in a minute.

I echo the accolades that my hon. Friend the Member for Chatham and Aylesford bestowed on all the organisations that have an interest in this matter and have for many years, quietly but assiduously, been campaigning for better care for people bereaved by stillbirths or who lose their children at an early age, giving support and advice, and campaigning for improvements and changes in the law.

This is quite a complicated area. Although the debate is entitled “Stillbirths and Infant Mortality”, we talk about neonatal deaths, perinatal deaths and post-neonatal deaths—those deaths between 28 days and a year after birth—as well as infant and stillbirth mortality rates. However, across all those fields the record of the United Kingdom is not good. My hon. Friend contrasted the UK’s record with the great progress made on sudden infant deaths, particularly on cot deaths, during the “Back to Sleep” campaign. A concerted, focused and well promoted campaign led to a decrease of more than two thirds in the horrific spate of cot deaths that afflicted so many families. It is perplexing and worrying that, although there has been some progress in reducing mortality rates across the board, pre and post-birth, they still remain alarmingly and unacceptably high, certainly compared with European partners.

Total perinatal mortality rates now stand at some 7.4 per 1,000 live births in this country. In comparison, the figure for Finland, which has the best record on this front, is 3.2 per 1,000 live births, and even Portugal, which has challenging questions to face about infant health, has a rate of 3.8 per 1,000 live births. We are still way behind. An awful lot of those perinatal mortalities, particularly the stillbirths among them, remain completely unexplained.

We also have to add miscarriages to the figures, which apply only to the official recognition of stillbirths as embryos born dead after 24 weeks. Those figures, of course, do not include miscarriages, yet more than one in five pregnancies in this country ends in miscarriage, which means that more than a quarter of a million of our constituents are affected by miscarriages each year. The problem is huge.

Most miscarriages happen in the first three months of pregnancy. Some women may hardly know that they have had a miscarriage, and some may have miscarriages without knowing they were pregnant in the first place, but many women, including some constituents who have come to me since I presented my ten-minute rule Bill, have miscarriages well into their pregnancy, when the grief, trauma and distress of losing a hoped-for child is that much greater.

The way in which we support women who have been through such experiences is also worrying. Research by the Miscarriage Association found that 45% of women who have experienced a miscarriage did not feel well informed about what was happening to them. Only 29% feel that they were cared for emotionally, and nearly four out of five, 79%, received no aftercare. We know that at least one in six women—a very large number—experience some form of perinatal mental health problems. That has a great cost, socially and emotionally to those women and financially to our national health service. It is a false economy not to ensure that we support those women, whether they have suffered a miscarriage early or late, or whether they have suffered a perinatal mortality either before or after birth.

[Dr Lee]

On the subject of false economies in the national health service, historically we have spent significant sums on antenatal care without a lot of evidence to support that expenditure. Does my hon. Friend agree that we need to concentrate resources in the appropriate hands? We need appropriately staffed maternity units—there are worrying statistics about midwifery-led versus obstetric-led maternity services—and by doing that we can address our infant mortality rates, which compare poorly with those of our European neighbours. As politicians, we must also accept that doing that would involve reconfiguring services. There would be fewer maternity units and perhaps more obstetricians.

[Tim Loughton]

My hon. Friend has great hands-on experience, and he knows a lot more about this subject than I do. He opens a far greater debate on the accessibility of maternity services. I am sure I am not alone in having marched and campaigned for the retention of midwifery-led maternity services at a local hospital. Interestingly, the biggest growth in mothers giving birth at that hospital has been among those who live outside the Worthing catchment area. Those mothers choose to go to the hospital.

[Dr Lee]

I want my hon. Friend to know that I campaigned to close my local midwifery-led unit because it was not delivering many babies—it was delivering less than one baby a day. I have real concerns about the potential for increased infant mortality in such midwifery-led units.

[Tim Loughton]

It is horses for courses. I am glad to say that my maternity unit delivers well in excess of 3,000 babies a year. It is a centre of excellence, and the customer votes with her feet by choosing to go there from outside the area. My hon. Friend is absolutely right that the assessment of units must be primarily based on the quality and safety of care for mothers, but I fear we are straying slightly beyond stillbirths and infant mortality rates into the availability of maternity services and hospitals. You would not want us to go there, Mr Davies.

My hon. Friend also raises an interesting point about delivering services in the most appropriate way. There are certain constituencies of women and certain parts of the country where the problem is that much greater. To take one of the classifications, the infant mortality rate in the UK overall is 4.4 deaths per 1,000 live births, but the variations for mothers born outside the United Kingdom are worrying. For babies of mothers born in the Caribbean, the figure more than doubles to 9.6 deaths per 1,000 live births. For babies of mothers born in Pakistan, the rate is 7.6 deaths per 1,000 live births, and so on.

There are also regional variations, particularly for perinatal mortality overall. In the south-west, the figure is 4.7 deaths per 1,000 live births, but in the north-east it is 5.8 deaths per 1,000 live births—a 23% difference. Why are there those differences? We simply do not have enough research; we have not commissioned and are not doing enough research to find out why certain types of women and certain geographical locations are faring worse. Such research would enable us to focus, say, additional scans or support services, or whatever is required, to ensure that we make the best use of our NHS resources. My first call is for there to be rather better research across perinatal mortality.

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

On geographical differences, we heard earlier about the improvement recently reported in Scotland. Does the hon. Gentleman agree that when Ministers from across the United Kingdom and beyond meet either at a joint ministerial council or at other levels, best practice, where it has been established, should be carefully researched and, where possible, implemented immediately?

[Tim Loughton]

I agree. My hon. Friend the Member for Bracknell (Dr Lee) gave the example of Scotland, where people have clearly examined the matter a bit further; they appear to be achieving more than people in other parts of the United Kingdom. We should be sharing that best practice, rather than being parochial and not sharing it beyond the United Kingdom, with or without Scotland after 18 September. That goes beyond sharing ministerial best practice on health issues; I would guess that not just health considerations but deprivation, housing and other local environmental factors are involved, too. More than just the Health Ministers of the respective parts of the United Kingdom need to be involved. If we compare deprivation with infant mortality rates, some signs certainly start to emerge.

Last year there were 3,558 stillbirths; in 2011 there were 3,811 and in 2003 there were 3,612. The stillbirth level has remained persistently high for a long time. One in 200 pregnancies ends in stillbirth, but stillbirths are currently defined in law as being after 24 weeks of gestation, which still means that there are 15 times more stillbirths than cot deaths—the progress on cot deaths was alluded to earlier. The problem with the definition is that it masks the higher number of stillbirths that happen before the 24-week gestation qualification currently in legislation. If a woman gives birth to a stillborn child at 23 weeks and six days or earlier, the child counts not as a stillbirth but as another “miscarriage.”

That was the case for my constituent Hayley, who came to see me and was present when I presented my ten-minute rule Bill in January. She had been through the dual tragic experience of giving birth to a stillborn son at about 19-and-a-half weeks. She had to have her pregnancy induced, and she went through labour. She experienced all the pains and anguish of labour in a hospital for more than 24 hours before giving birth to her son. She and her partner, Frazer, held their son and took handprints and photographs. To all intents and purposes, their son had been born, but sadly born dead. In the eyes of the law, their son did not exist, because he had been born after less than 24 weeks. That child had no recognition in the eyes of the law. Some months afterwards, Hayley tragically went on to have a miscarriage after five or six weeks. Those two experiences were different—that is in no way to belittle the pain, anger and trauma of going through a miscarriage—but in the eyes of the law, they were identical: neither of those children was recognised as having been born.

That is what my Bill is all about. Since introducing it, I have been swamped by the experiences of women and families up and down the country. To take one example, a woman gave birth at about 21 weeks to twins. It might have been slightly more than 20 weeks—I forget now—but it was less than 24 weeks. One of the children was born just alive and lasted for a few hours. The other twin was born dead. As the first was born alive, albeit at less than 24 weeks, that child was recognised. The other twin, born dead, did not exist. How traumatic and cruel is that on the part of the state? Someone gave birth and had two dead children, but only one existed in the eyes of the law. That is why the law needs to change.

I will persist with the Bill well beyond the confines of this Session, when it will expire because of the constraints of this place, until I persuade the Government to take the issue on. It is about fairness and recognition for people who have had to go through trauma, anguish and pain unimaginable to those of us lucky enough to have had healthy, albeit slightly annoying, children. It is not acceptable for those who have lost a child before that child was ever able to breathe then to have the second blow of the state not recognising that child.

My Bill would amend the Births and Deaths Registration Act 1953, but not in a way that says that we should redefine the 24-week limit. I do not want to make it 23 weeks or 22 weeks; this has absolutely nothing to do with abortion thresholds and things like that. I want to make a differentiation between what are clearly miscarriages and instances of when women, to all intents and purposes, go through all the pains and experiences of giving birth to a child. The definition in my Bill of a “stillborn child” does not mean a child born dead from 24 weeks’ gestation onwards, but

“a child which has issued forth from its mother and which did not at any time breathe or show any other signs of life, following the recognised processes of labour including regular, painful uterine contractions resulting in progressive cervical effacement and dilation; and the expression ‘still-birth’ shall be construed accordingly.”

It is a bit technical and a bit physical, but it is a way of giving some comfort to mothers: if they gave birth to a stillborn child, it would be a birth. The Bill would say that they had had a child, that there had not been a miscarriage and that the state should recognise that.

We have not introduced the Bill to meddle with the abortion laws—it has nothing to do with that—and it is not intended to meddle with bereavement leave entitlements or benefit entitlements. The more enlightened employers of someone who has been through such an experience would give the employee some allowance on the time they need to get over the death. For them to receive some sort of closure and to give them the support and relief that they desperately need to be able to move on, the state needs to recognise what they have been through in giving birth to a stillborn child.

At the moment, a hospital or clinical practitioner can issue a certificate of birth. It has no status in law. It is of some comfort to some people, but it is certainly not sufficient comfort for many of our constituents. That is why I am putting forward the changes to the law. They are simple and do not involve a lot of cost, but they would offer huge support, relief and comfort for mothers and their partners who have been through these sorts of experience.

As well as wanting to change the law and calling for better research into why we appear to be so vulnerable to perinatal mortality and stillbirths, we need greater research and better guidance. I do, however, pay tribute to the existing guidance, particularly that issued by the Royal College of Obstetricians and Gynaecologists on recurrent first and second trimester miscarriage, and some of the best practice.

I echo the points that my hon. Friend the Member for Chatham and Aylesford made about foetal alcohol syndrome, which strays slightly beyond the confines of the debate. When I was a shadow Health Minister, I considered the issue. I visited children’s homes in Copenhagen that specialised in children born with foetal alcohol syndrome. In many cases, the child was born to parents from Greenland’s Inuit community, which has high alcoholism rates. A lot of research has been done on that in Denmark.

It is undeniable that a lot of our children are being damaged due to excessive drinking through pregnancy and that an awful lot of that is not being properly diagnosed. In my simple layman’s view, a lot of the symptoms have parallels with autism and the autism spectrum, and there may be links between autism and foetal alcohol syndrome.

The issue is very little researched in this country, but it potentially affects an awful lot of our children, and we need to do much more to identify it. More importantly, we need to give clear, stark, but accessible warnings to women about the practical perils of drinking irresponsibly at all stages during pregnancy. That is not to say that pregnant women must not drink at all, but we need to set out clearly what is and is not tolerable, just as we should for women who smoke during pregnancy.

To make a side point—a point I made during a debate on the Children and Families Bill—I cannot understand why the Government have set criminalising smoking in cars with children in them as a priority, yet have done nothing to criminalise, if that is the principle they want to follow, smoking for pregnant women whose foetuses are in rather more confined spaces than the back of a car. Smoking and drinking are highly damaging to children before and after they are born. People are irresponsible if they do that, and we need a much clearer and more pungent health message to mothers. We need to disseminate best practice better than we do now, whether that is from Scotland or other parts of the country that appear to have achieved some success in reducing some of these mortality rates.

This is a bigger public health crisis than we have given it credit for. I have met constituents and heard some tragic stories from around the country of families who have been through stillbirths and other perinatal mortalities. We need to take this issue much more seriously.

[Jim Shannon (Strangford) (DUP)]

I apologise for not being here on time; I had a Committee to go to. This issue is important to all of us here, as well as to those outside the Chamber. In Northern Ireland, there are four infant fatalities a week. The UK mainland has 17 to 19 infant fatalities a day. Obviously, the populations are different, but that figure tells its own story. Does the hon. Gentleman feel—perhaps it will be in the Minister’s response—that those in the health service should consider why the infant mortality rate is so low in Northern Ireland?

[Tim Loughton]

I agree with my hon. Friend, who is a co-sponsor of my Bill. The hon. Member for East Londonderry (Mr Campbell) made references to Northern Ireland, and earlier in my speech—I think before my hon. Friend entered the room—I did flag up the regional differences between parts of the United Kingdom. Far more research must be done to discover why certain parts of the United Kingdom are affected more or less than others and why women of certain ethnic backgrounds are affected more. We simply do not have the level of research to discover why such things are happening so we cannot better target our resources, as my hon. Friend the Member for Chatham and Aylesford mentioned earlier.

Finally, we need more work on mental health support for women before and after giving birth. There have been too many tragic stories of women self-harming or, in extreme cases, taking their own life and those of their children. We need better targeting of resources and better diagnosis of mental health problems. We need health visitors—I hope we will get the phalanx of new health visitors that the Government have rightly committed to provide—who can work with new parents and get into homes, where there is a much better chance of spotting problems. They can refer on to mental health services or parenting skills classes through children’s centres. That will form an important part of dealing with the epidemic of perinatal mental illness, in particular for first-time mothers.

This is an important subject for constituents across the country. The Minister is sympathetic to the problem and the Government would like to do more. Working with the royal colleges and some of the excellent charities, which have worked tirelessly over many years, we can get a better solution for better support for families who suffer from the pain of infant or perinatal mortality and hopefully do more to prevent the problem from occurring in the first place.

15:11

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

It is a pleasure to serve under your chairmanship, Mr Davies. I pay tribute to the hon. Member for Chatham and Aylesford (Tracey Crouch) for securing this important and sensitive debate. There are few more pressing issues than protecting the health of small babies and reducing the deaths of babies under one.

I want to put on record my appreciation of the Rainbow clinic at St Mary’s hospital in Manchester. Mancunians—I am proud to be one—are incredibly proud of the work not only of the Rainbow clinic, but of St Mary’s in general. It is a centre of excellence for Greater Manchester and the north-west, and I am not just saying that because I was born there as a premature baby almost 40 years ago. It genuinely is a superb facility not only for babies, but for mums, and I commend its work, just as the hon. Lady has done.

Members on both sides of the House will know from their experiences and as constituency MPs the heartbreak and pain that the death of an infant can cause a family. I was particularly touched by the powerful speech by the hon. Member for East Worthing and Shoreham (Tim Loughton) about stillbirth. From a recent tragic occurrence in my family where stillborn twins were induced, I sadly know just how painful such an experience can be not only for parents, but for family members and how upsetting losing a child before birth can be. I know how unfair the law is; those children are not legally recognised by the state. The hon. Gentleman is absolutely right that it is important that the law be changed to reflect the realities, so that parents and grandparents can get closure, support and relief during such dreadful occasions.

We have seen some significant advances over the decades. It is easy to forget where we have come from, but we should recognise the work of health professionals and scientists to reduce the infant mortality rate in England and Wales to its lowest levels. In 1981, there were 11.1 infant deaths per 1,000 live births. In 2011, that had dropped to 4.2 per 1,000, equating to a 62% decrease over 30 years. It is worth reminding ourselves that, in 1911, before the introduction of the social security system and the NHS, the rate was 130 deaths per 1,000 live births.

One result of the major improvements in public health over the 20th century, such as slum clearances, the provision of fresh water, mass inoculation, health screening and the NHS, has been a huge reduction in the tragedy of infant mortality. I am proud that the previous Labour Government reduced infant mortality by 27% between 1997 and 2010, which equates to more than a 1,000 fewer baby deaths a year. As we have heard today, however, there is no room for complacency. Hundreds of babies still die each year from perinatal respiratory problems, bowel failure or infection. Such deaths are not evenly distributed across our society, which raises critical questions as to how we tackle health inequalities. In his groundbreaking report on these matters, Sir Michael Marmot said that

“one quarter of all deaths under the age of one would potentially be avoided if all births had the same level of risk as those to women with the lowest level of deprivation”.

Things are getting better, however. We achieved our ambition to narrow the gap of infant mortality by at least 10% between routine and manual socio-economic groups and the England average, but there is still far more work to do.

Office for National Statistics infant mortality statistics for 2011 show that infant mortality rates were highest for babies with fathers employed in semi-routine occupations, such as shop assistants or care assistants. One of the Minister’s predecessors as Minister responsible for public health, the hon. Member for Guildford (Anne Milton), has said that disadvantaged groups and areas have higher infant mortality rates and that poor health outcomes such as that are often linked to social factors, including education, work, income and the environment. I welcome the Government’s recognition of the link between poverty, housing, diet, neighbourhood and health, a point which was made powerfully by the hon. Members for East Worthing and Shoreham and for Chatham and Aylesford. We must continue to tackle the conditions that cause health inequalities and the unfair distribution of infant mortality across society. There is no good reason why, in the seventh richest country on this planet, the likelihood of a family’s baby surviving its first year of life should depend on their socio-economic background. Will the Minister address directly the inequalities around infant mortality and still birth?

We should also note that women over 40 are at greater risk of having a baby who dies before it is one year old. Women under 20 are at greater risk, too. Will the Minister’s speech address how health services can be specifically targeted to support pregnant women over 40 and under 20?

There is a growing understanding that early intervention is the key to preventing infant mortality. The Royal College of Paediatrics and Child Health states:

“The evidence quite clearly states that early intervention is the best form of prevention. Early intervention will not only lead to significant financial savings in the medium to long term, it is underpinned by sound science.”

A healthy pregnancy begins before conception. Action on health issues before pregnancy can prevent many problems for the mother and baby.

The hon. Member for East Worthing and Shoreham made a powerful point about understanding risk factors such as exposure to smoke and prenatal drug or alcohol use by mothers, but there are also positive steps that pregnant women can take to improve their and their unborn baby’s health, such as maintaining a healthy diet and weight, getting the right vitamins, taking folic acid and regularly being physically active. Women need proper advice, information and support to help them to understand the risk factors and make informed, healthy choices. What is the Department of Health doing to promote early intervention, and what resources is the Minister making available for that?

Of course, appropriate information continues to be important during pregnancy and after the child is born. Midwives and health visitors are our most crucial resource in ensuring that women have the information they need at every stage, and in supporting the development of confident, effective parenting. Forming trusting relationships with the women they care for is a critical part of the process, but many women do not have one midwife or health visitor whom they see regularly and with whom they can build a relationship. I hope that the Minister will explain what steps the Government are taking to deal with the problem and improve the consistency of care that women receive in pregnancy and after the birth of their child.

Two hundred babies a year die of sudden infant death syndrome and I welcome the work of the Lullaby Trust and the charity Bliss, which do an important job in advising and supporting parents in that connection. Tragically, five babies a week die without any explanation. Thanks to the “Back to Sleep” campaign, which advised parents to encourage their children to sleep on their backs, the figure is down from five babies a day in the mid-1980s; but five babies a week is still five too many, and I should like to know what the Minister and the Department are doing to try to reduce the figure further.

We have come a long way, but we still have some way to go. Advances in medical science must be matched by provision of NHS services and other social services in every part of the country. No one should be significantly disadvantaged by where they live. For pregnant women and young mothers to take responsibility for their health and that of their babies, they need the warm embrace of a strong system of health care, advice and support. If we want the coming decades to be characterised by further falls in infant mortality, and if we want many fewer families to suffer the terrible tragedy of a baby’s death, we need a continued, concerted and co-ordinated effort throughout Government.

I congratulate the hon. Member for Chatham and Aylesford on securing the debate, because it is important to discuss the matters in question. It was perhaps remiss of me not to convey the apologies of my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger), the shadow Minister who leads on these issues. Sadly, just before the debate, she dislocated her shoulder and hopefully she is now receiving excellent NHS treatment at accident and emergency. I know she would want to pass on her thanks and appreciation to the hon. Member for Chatham and Aylesford for securing the debate and raising an important matter.

15:23

Sitting suspended for a Division in the House.

On resuming—

15:34

[The Parliamentary Under-Secretary of State for Health (Jane Ellison)]

It is a pleasure to serve under your chairmanship, Mr Davies. Like others who have spoken today, I congratulate my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) on securing a debate on a sensitive issue that it is incredibly vital that our nation makes more progress on. I apologise that the Under-Secretary of State for Health, my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter), whose portfolio covers this policy, is not here to respond, but I undertake to report back to him and to refer him to colleagues if I am unable to respond to anything today.

The death of a baby, whether during pregnancy or following birth, is of course a tragedy. Colleagues have eloquently described the devastating impact on families of losing a baby to stillbirth or during the first year of life. Although stillbirth is now at its lowest recorded rate in England since the definition changed in 1993, a study published in The Lancet in 2011 ranked the UK 33rd worldwide on stillbirths, below a great many other high-income countries. As has been said, being in that place in the league table is not a record we can be proud of. We are making progress, which I will describe, but as everyone accepts we clearly need to do more and to be in a better place. Similarly, infant mortality rates are at historic low levels, but still higher than the European Union average.

Although the stillbirth rate has decreased dramatically over the past 50 years, until recently it had not declined significantly since the 1990s. My hon. Friend referred to that sense of stalled progress. Thus, the rate for England and Wales in 1993, when the current definition was introduced, was 5.7 stillbirths per 1,000 total births. By 1999 the rate had fallen to 5.3, but 12 years later, in 2011, it had not really changed, at 5.2. It is encouraging that the rate has now started to fall. The rate for 2012 was 4.8 stillbirths per 1,000 total births, which is the lowest rate recorded in England since the definition changed. Although that is a statistically significant fall, which we all welcome, we recognise that the decline in stillbirths in the UK has not kept pace with that in other comparable countries. My hon. Friend also demonstrated that across the UK we do not necessarily have even rates of progress. The decline in the infant mortality rate has been more encouraging, that in England falling from 5.2 to four deaths per 1,000 live births between 2002 and 2012, although that remains higher than the EU average, as I said.

Such reductions are welcome, but the rates in England are still high and there is considerable scope for future reduction. That is why we have a wide range of initiatives in place that will help to reduce stillbirth and infant mortality rates, and tackle health inequalities. The shadow Minister, the hon. Member for Denton and Reddish (Andrew Gwynne), and others, were right to refer to the relevance of this issue. It remains a source of concern that we sit where we do in international league tables.

What can be done to reduce the number of stillbirths? As colleagues have said, stillbirth has many causes, some of which are known and some not. That is one of the challenges: we are so used to identifying exactly what a problem is, what we need to do and the resources necessary to tackle it; but here we are in slightly strange terrain, in that we know some things but not enough. The known causes include lifestyle issues such as smoking and obesity; medical causes affecting the woman, baby or placenta; demographics; and the safety and effectiveness of the maternity care given.

On reducing the risk of stillbirth, an important first step is to raise the issue’s profile, so that people are aware that it needs to be dealt with and is not simply one of those things to be accepted and about which little can be done. It is not acceptable to have one of the worst stillbirth rates in comparison with similar countries. We have therefore included stillbirth and neonatal mortality as an area of improvement for the NHS in its outcomes framework. We have identified it as an area in which we need to do much better.

A range of research has been conducted that demonstrates that women who access antenatal care late have poorer outcomes. Early access to antenatal care is therefore pivotal to improving health and well-being outcomes for women and their babies. In line with the guidelines of the National Institute for Health and Care Excellence, women should have an assessment of their health and social care needs, risks and choices as early as possible in pregnancy. That enables midwives to provide pregnant women with important lifestyle messages —for example, about diet, exercise, smoking and drinking —and to identify any pre-existing conditions that might require additional support. I will say more about public health later, but I can only share in the alarm expressed by Members at some rates of drinking—quite heavy drinking—during pregnancy, for example. According to the national statistics on that, there is great variation between local authorities. I will touch later on one of the reasons why we think public health sits so well within local authorities, which are in a position to tackle that regional variation.

The Department and NHS England are working with a number of key partners, including the stillbirth charity Sands, Public Health England, the Royal College of Midwives and the Royal College of Obstetricians and Gynaecologists, to take forward a stillbirth prevention work programme. The programme covers a range of initiatives, including raising awareness of the known risk factors among pregnant women and health professionals. That will ensure that women receive consistent advice on how to minimise the risk of stillbirth—including the importance of healthy eating and the other lifestyle issues that have been raised—are aware of foetal movement and what is normal for their baby, and know where to go for help if they suspect there is a problem. It is important that each stillbirth is investigated and lessons are learned. We are therefore working with NHS England to explore how standardised perinatal death reviews could be introduced.

Growth-restricted babies are up to eight times more likely to be stillborn than non-growth-restricted babies. My hon. Friend the Member for Chatham and Aylesford is aware of the encouraging results we have achieved in reducing the stillbirth rate in the three regions where uptake of the Perinatal Institute’s growth assessment protocol training package—the GAP programme—was most prevalent. Following discussions with the Perinatal Institute, NHS England is encouraging uptake of the programme across the NHS in England. More than 75% of trusts in England have already signed up for that training.

[Tracey Crouch]

Will the Minister elaborate slightly on that training? Given the example of my constituent whose son, Henry, was stillborn at 38 weeks but had not grown for 16 weeks, the measurement tools currently available to midwives are clearly simplistic and some more sophisticated technology for measurement could well be of use. Will she elaborate on whether the new system is using more sophisticated technology? That is one reason why having an extra scan could help with early intervention, by identifying any growth problems sooner.

[Jane Ellison]

My hon. Friend has asked an extremely good question. I hope she will allow me to reply after the debate—I do not have an answer readily to hand, as the subject is not in my policy portfolio. I will come back to her on that, because it is a good question.

Although we know some of the risk factors for stillbirths, other causes are unknown, and it is important that we gain a greater understanding of those. The NHS National Institute for Health Research funds a range of research relating to causes, risk factors and prevention of stillbirth and neonatal death. Both the NIHR Cambridge and the NIHR Imperial biomedical research centres have ongoing research programmes on women’s health, including research relevant to the prevention of stillbirth and neonatal death.

In addition, the NIHR health technology assessment is funding three significant trials. The first is a £6 million trial of an intelligent system to support decision making in the management of labour using the cardiotocogram, or CTG. The second is a £1.4 million trial of nicotine replacement therapy in pregnancy, led by the university of Nottingham. The third is a £1.2 million trial of physical activity as an aid to smoking cessation during pregnancy, led by St George’s, university of London.

My hon. Friend referred to the Tommy’s stillbirth research centre at the university of Manchester, which is conducting innovative research that focuses on the unborn baby’s life support machine—the placenta. It has opened the Manchester placenta clinic, which combines specialised antenatal care for pregnancies affected by foetal growth restriction with front-line research into why the condition occurs and how it might be treated. The Government also fund MBRRACE-UK, or Mothers and Babies: Reducing Risk through Audits and Confidential Enquiries across the United Kingdom, which is continuing the national Confidential Enquiry into Maternal Deaths and national surveillance of late foetal losses, stillbirths and infant deaths.

I turn now to bereavement support and counselling, which were quite rightly raised during the debate. It is obviously important that women who have suffered a miscarriage, stillbirth or neonatal death receive evidence-based care, in an appropriate location, which supports both their physical health and their emotional well-being. In December 2012, NICE published clinical guidance that offers evidence-based advice on the diagnosis and management of ectopic pregnancy and miscarriage in early pregnancy—that is, up to 13 completed weeks of pregnancy.

We expect maternity care providers and commissioners to give due regard to NICE guidance and to ensure that there are comprehensive, culturally sensitive services and facilities for the management and support of families who have experienced a miscarriage, stillbirth or neonatal death. Skilled staff should of course be available to support parents. I take on board entirely the point that that picture might sometimes be inconsistent. Clearly, we have to work towards greater consistency. As I often say when we have debates such as this, it can only be a good thing that Parliament continues to demonstrate its great interest in this area, as we can demonstrate to those who provide and plan our health services in which Parliament has shown a particular interest. Today’s debate provides another opportunity for us to do that.

In May 2012, the then Secretary of State, my right hon. Friend the Member for South Cambridgeshire (Mr Lansley), pledged that women who have suffered a miscarriage would get more support from the NHS. Over the past two years, the Department has awarded £35 million in capital funding to improve NHS birthing environments, including facilities for bereaved parents.

My hon. Friend the Member for Chatham and Aylesford raised the issue of scans. There are currently no plans to introduce routine scans in the third trimester of pregnancy to monitor foetal growth and development. I recognise that there is a challenge to that policy. The UK national screening committee advises Ministers and the NHS in all four countries of the UK about all aspects of screening policy, and supports implementation. It uses evidence based on research, pilot programmes and economic evaluation, and assesses the evidence for programmes against a set of internationally recognised criteria. If stakeholder organisations, individuals or Members feel that there is enough evidence published in peer-reviewed journals to consider screening for a condition in the third trimester of pregnancy, they can submit a policy proposal to the national screening committee. That might well be something that my hon. Friend wishes to consider.

I turn briefly to the subject of the registration of stillbirths. I say briefly, because I know that the Under-Secretary of State for Health, my hon. Friend the Member for Central Suffolk and North Ipswich, is meeting my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton) in early April to discuss his ten-minute rule Bill on the registration of stillbirth. That Bill aims to amend the Births and Deaths Registration Act 1953 to provide that parents may register the death of a child stillborn before the threshold of 24 weeks’ gestation. That Act, as amended by the Still-birth (Definition) Act 1992, provides for the registration of all babies stillborn after 24 weeks’ gestation. When a baby is stillborn, the doctor or midwife who attended the delivery or who examined the baby’s body after birth gives the parents a medical certificate certifying the stillbirth.

Although some parents are very distressed that they cannot legally register the birth of a baby born before 24 weeks who did not breathe or show any signs of life, others would be distressed at the possibility of having to do so. Getting the right balance between those conflicting wishes is challenging, but the existing system, whereby hospitals can issue local commemorative certificates—my hon. Friend the Member for East Worthing and Shoreham alluded to those in his remarks—for those parents who want them goes some way to addressing the issue. I know that he will have more questions and challenges for my hon. Friend the Member for Central Suffolk and North Ipswich, and will want to discuss those at that meeting in April. I recognise that he has signalled his intention to take the matter forward.

Although infant mortality rates are at an historically low level, health inequalities remain and often reflect inequalities by socio-economic group, ethnicity, geographical area and age. There is a threefold difference in infant deaths rates between professional groups and manual groups. Mothers born in the Caribbean, west Africa, Pakistan and Bangladesh have rates between one and a half times and twice the national average. The greatest numbers of infant deaths and the highest rates are to be found in the most deprived parts of big cities such as Birmingham and Bradford. Young mothers under 20 have the highest risk of infant mortality—almost 60% higher than that for mothers aged 20 to 39, with young lone mothers at even greater risk. That is a terrible catalogue of loss, for the families concerned, for their communities and for the nation as a whole.

There has, however, been some progress in reducing those inequalities in recent years. The difference in the infant mortality rate between the routine and manual group, for example, and the population as a whole has narrowed from 18% in 2002-04 to 9% in 2009-11. We are looking to build on that progress, and that is why we have made reducing these inequalities a priority for the whole of the new health system, working with PHE and NHS England, and backed that up with new legal duties on access to and outcomes from services.

Professor Sir Michael Marmot has been referred to during the debate. He said in his post-2010 health inequalities review that there is a social gradient in health, whereby the lower a person’s social position is, the worse his or her health will be. He recommended that action should be proportionate to the level of disadvantage, including on his first priority of giving every child the best start in life, with which none of us would disagree.

On a practical note, we are strengthening the health visitor service, which Members were right to highlight. We are conscious that it is an important pledge and crucial to infant health and early child development. We are increasing the number of health visitors by 50%—4,200—by 2015. We are also doubling—by 1,600—the number of places on the family nurse partnership programme, which supports vulnerable young mothers over the same time scale. Sure Start children’s services also have a role to play.

The family nurse partnership has an exceptional record of successful intervention, particularly in the lives of young and vulnerable mothers. It has supported many thousands of them throughout the country through pregnancy and birth, and sustained the life chances of the child and the mother. I will quote a nice comment from one of the young women who were helped by this service. She said of her family nurse:

“Margaret doesn’t tell me what to do but helps me make good decisions about my baby, my life and how to be a great mum. I’m excited about my future and seeing my baby grow up. My partner and I became engaged last October and next year I start university”.

That is typical of a young life that has been turned round by effective intervention at a critical moment—not just the mother’s life but, critically, the life of her child also. We are delighted to support the family nurse partnership and to see it grow.

As expected, reference was made to midwives. It is vital to have the appropriate number of trained midwives available in the NHS. Since May 2010, the number has increased at twice the rate of the number of births. There are now 1,500 more midwives than in May 2010, and more than 5,000 in training who are due to qualify in the next three years. Obviously, Health Education England has been given a mandate by the Government in this area, but I completely accept the point about consistency of midwife care and support. That very good point was well made, and I will ensure that it is made to the NHS.

[Tracey Crouch]

I am delighted to hear that there are 5,000 midwives in the training programme. Are they receiving dedicated bereavement training?

[Jane Ellison]

Again, if my hon. Friend will forgive me, I will respond to that question after the debate. I would not want to get the answer wrong.

We have touched throughout the debate on public health, which sits within my portfolio. National action must be complemented by local action. I mentioned the extraordinary range of indicators that I see regularly on issues such as drinking in pregnancy. It makes the case for why the transfer of responsibility for public health from the NHS to local government is sensible. We have backed that with £5.4 billion over two years, and a public health outcomes framework that focuses on health inequalities and key indicators in infant mortality such as low birth weight, which is associated with prematurity and is a significant cause of infant mortality and poor infant and child health.

Some of that local action is already being taken. My home city of Bradford has an excellent record in addressing infant mortality, despite having some of the worst outcomes. It established the Born in Bradford project, a long-term cohort study of 14,000 pregnant women and their children to improve understanding of health and sickness in babies and children, tracking their health throughout pregnancy and childhood into adult life.

In Salford, which is closer to home for the shadow Minister, the city council’s health improvement service offers activities to support new mums and children, including breastfeeding, weaning, exercise and socialising, and it is working to improve MMR vaccine uptake among black and minority ethnic and other groups, where uptake remains low despite our good national statistics.

In Birmingham, pregnancy outreach workers employed by the social enterprise, Gateway family services, tackle health inequalities in infant mortality by bridging the gap between women who need support and the agencies that provide it. Those are three illustrations of some of the imaginative projects that are under way. I hope we will see more and more local government adopting best national practice and responding to the particular challenges in their areas. Some of the contrasts are stark, and local government, which knows its communities well, is well placed to respond to them.

My hon. Friend the Member for Chatham and Aylesford referred to cot deaths. We have made reducing infant mortality an area of improvement for the NHS. Comprehensive advice to parents about reducing the risk of cot death is available on the NHS Choices website, which includes a wealth of other advice. In 2012, the NHS launched the Start4Life information service for parents. They can receive regular e-mails, videos and texts about pregnancy and the first eight months of their baby’s life. It is a free digital service to provide quality-assured advice at the right moments for parents, who can sign up online for it.

The Department has also included advice about the risk of sudden infant death in the Healthy Child Programme, which is the universal programme for all children from the start of life and includes preventive services for children with additional risks. Obviously, anything more we can do to highlight the available advice and support would be valuable, and Parliament has a great role to play in that regard, as do MPs in their constituencies, and local government. The advice is there, but the challenge is always to ensure that it gets to vulnerable groups, and accessing advice across a whole range of health information is difficult.

I thank my hon. Friend for securing this debate, and other Members for their contributions. It further raises the profile of this vital issue of stillbirth and infant death. I assure the House that the Department is working collaboratively with partners, including charities such as Sands and Bliss, the royal colleges and others on a range of initiatives to help to reduce the number of tragic deaths. The Department is always open to new ideas and to working with partners throughout the health sector. We welcome these debates and the opportunity to engage further in any way that Members believe will help us to move forward in this vital area of policy for all our constituents.

15:56

Sitting suspended.

US Extraterritorial Jurisdiction (British Foreign & Commercial Policy)

Wednesday 26th March 2014 Westminster Hall

16:08

[Mr Jack Straw (Blackburn) (Lab)]

I draw to the House’s attention that the hon. Member for Wyre and Preston North (Mr Wallace) and I are co-chairmen of the all-party group on Iran and that, in January, we were members of a parliamentary delegation to Iran.

This debate is not about the sanctions against Iran themselves, which the UK Government and Parliament have agreed to on an all-party basis; it is about the impact of US extraterritorial jurisdiction on British foreign and commercial policy. Its aim is to highlight the way in which US sanctions on Iran are in practice freezing out many services of UK-based banks and financial institutions, to prevent them and others from participating in commercial and trading activities with Iran that remain entirely lawful under the sanctions regimes of the UK, the EU, the UN and indeed the United States.

Here is the heart of the problem:

“humanitarian trade with Iran has always been permitted under both US and EU sanctions”.

I quote directly from a letter of 6 March to me from the Foreign Secretary. Such trade includes food and agricultural products, pharmaceuticals, medical devices and services. As the Foreign Secretary said in the same letter, however:

“many banks have been wary of processing the payments required. This has been driven in large part because of risk aversion to US banking sanctions”.

That risk aversion by banks based in the UK is entirely understandable. It is compounded by the fact that those banks cannot obtain greater certainty about the reaction of the US Government by looking at the black-letter text of the US sanctions regime. Nor, because they are non-US entities, do they enjoy any of the close connections that Washington DC offers big US corporations to obtain “comfort”, formal or informal, from the US Congress or Government. Rather, our financial institutions are subject to “guidance”, sometimes of an oral and confidential kind, from the US that, if they offer any banking services for any trades with Iran, they could find themselves in difficulties with the US authorities.

The pressure on our banks is intense. Most are so scared and so scarred that they will not provide banking services even where the trades are manifestly within the sanctions regime.

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

I congratulate the right hon. Gentleman on securing the debate. The problem is illustrated by the fact that the Iranian chargé d’affaires, up to last month, could not even open a British bank account. May I suggest to the right hon. Gentleman, while he is talking about commercial issues, that what is clearly wrong is when humanitarian aid itself is being stopped because of the inability to get bank facilities? Is he going to develop and explore that point?

[Mr Straw]

I am indeed and I am grateful to the hon. Gentleman. I will show that, in practice, the impact of sanctions is much worse against British trading of all kinds and banks than against any other banking operations.

The impact of this unilateral extraterritorial jurisdiction of the US is especially discriminatory against UK-based financial institutions, because of their multinational nature. In contrast, for example, some German companies have banking services for their trade with Iran from a local Landesbank, which has no activity in the US. The US corporation Coca-Cola is able lawfully to sell its product in Iran and to use banking services for remittances by the Iranian franchise. A UK corporation in a similar situation would almost certainly find it far harder, if not impossible, to obtain such banking services here.

There is another example. For reasons of which the Minister is aware, I will not go into further details in public, but an Iranian entity in this country has seen all its banking services stopped, while an exactly similar Iranian entity operating in the United States has full access to the services of US banks.

The stark fact highlighted by the trade statistics is that the United Kingdom’s trade with Iran has been the hardest hit by far of any major European Union member, while, irony of ironies, US exports to Iran have scarcely been hit at all. As sanctions tightened, all EU countries saw their exports to Iran decline in the four years 2009 to 2012—in the EU as a whole, by 33.8%. But the United Kingdom’s exports in that period slumped by 73%, from $584 million to $159 million—the biggest fall by far. The US had the smallest fall, of just 11.3%, from $282 million to $250 million.

Let us go back to 2000. In contrast with the European Union as a whole and with Germany, France, Italy and the United States individually, the United Kingdom is the only nation whose exports to Iran were lower in 2012 than they were at the beginning of this century. In the United States’ case, a man from Mars might be forgiven for thinking that the United States had been on a modest export drive with Iran. Its exports in 2000 were worth $17 million; in 2012 they were worth $250 million; and they rose last year to $313 million.

The joint plan of action agreed between the E3 plus 3 and Iran, which came into force on 20 January, allows for some relaxation of the sanctions regime, but there is precious little evidence that that is making any significant difference for UK traders or banks, because of the threat, whether real or perceived, from the United States. This unacceptable situation is a direct challenge, I say to the Minister, to the sovereignty of the United Kingdom. It is one that the United States Congress and Government would not tolerate for a moment were the situation reversed, yet the British Government preside over a catastrophic decline in our exports that is not required by sanctions and has not been suffered by any other nation, and then retreat into claiming that they cannot interfere in the “commercial decisions” of UK-based banks.

However, the circumstances that our banks face have been created not by the banks’ own “commercial decisions”, but by the actions of the United States Government. I say, with respect, to the Minister that it is time for the British Government to make it crystal clear to the US that, although we are four-square behind sanctions that they and we have agreed, we will not tolerate any longer the US preventing trading that is lawful under those sanctions and that it is itself carrying out. Effectively, it is preventing our traders from carrying it out.

The Government already have on the statute book clear powers to take counter-action against the United States if they cannot negotiate a satisfactory way through by getting the United States Government and their agencies to change their behaviour. I am referring to the Protection of Trading Interests Act 1980, passed, as I recall, with all-party support by the Government of Margaret Thatcher. Introducing the Bill, the then Secretary of State for Trade, John Nott, told the Commons that its purpose was

“to reassert and reinforce the defences of the United Kingdom”

against attempts by the United States

“to enforce their economic and commercial policies unilaterally on us”

by

“the most objectionable method”

of

“the extra-territorial application of domestic law.”—[Official Report, 15 November 1979; Vol. 973, c. 1533.]

The Bill was prompted by decisions of US anti-trust regulators against UK shipping firms. The British and all European Governments took exception to that gratuitous interference. By the Act, the British Secretary of State is given power to prohibit any United Kingdom entity from complying with any extraterritorial sanction by the United States. Indeed, the power under section 2 makes it a criminal offence here to comply with what the US is trying to impose on our banks. The Act worked. It was used again in 1992 in respect of Cuba. It was followed in 1996 by similar, EU-wide regulations, which I think the hon. Member for Wyre and Preston North will explain in more detail in a moment.

Ministers do not have to be frozen, blinking in the headlights of this unacceptable practice by the United States Government, which is inhibiting the lawful activity of British banks and hindering the step-by-step restoration of bilateral relations with Iran. The Government have strong powers, bequeathed to them by Margaret Thatcher, to deal with this situation. If Ministers make it clear that Her Majesty’s Government will be ready to use those powers if needed, their hand in negotiations will be strengthened, and with luck their use will not be necessary and we should be able to restore our trade at least to the trend set by the United States itself.

16:18

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

I congratulate the right hon. Member for Blackburn (Mr Straw), my neighbour in Lancashire, on securing the debate. I am delighted to focus on the issue of extraterritorial sanctions. I recognise that this behaviour is a growing trend. It often emanates not from the US Executive, but from Congress, whose members would say in their defence, “It’s not our business how our laws and sanctions impact on other people. This is what I, as a US law maker, have a responsibility to my constituents to do.” However, we live in a globalised world; we live in a world of international trade; and we live in a world in which we are supposed to respect the international rule of law and trade deals.

I want briefly to take this back. It is not just about Iran. I want to take it back to Cuban cigars. I like a Cuban cigar from time to time, and many hon. Members may remember that in 1992 the United States passed the Cuban Democracy Act, which was followed closely by the Cuban Liberty and Democratic Solidarity Act. One might think that came from the Greater London council and Ken Livingstone, judging by its title. The effect of that legislation was to make anybody—US citizen, EU citizen or anyone else—who was involved in the trafficking of Cuban products guilty of an offence and prosecutable in the United States, or even to bar them from going to the United States. That was quite a formidable threat. It meant that an individual selling Cuban cigars in London who had a shop or an entity in the United States might be liable to prosecution. Even if they did not but they took a trip to America, they would be a trafficker of Cuban goods.

The European Union said that that was simply unacceptable and that a British citizen carrying out trade that was lawful under British and European law should not be a victim of such extraterritorial reach. In 1996, the EU passed a directive with the catchy title of Council regulation 2271/96 protecting against the effects of the extraterritorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom. In effect, we are still obliged by the conditions of that regulation. It basically told European Union citizens and member states that, if they complied with an extraterritorial threat from a third country, they would be vulnerable to civil claims from people affected. For example, British banks could be sued by European citizens who were prevented from using their facilities in Iran, Cuba or anywhere else, and the banks would be liable to pay damages.

The regulation covered a number of Acts and it is still in existence today. Funnily enough, it worked. The United States adapted its legislation so that it covered only US citizens. If we were to put it in law, we would be saying, “We, as British law makers, do not really care about what American law makers think; our duty is to our constituents and to the sovereignty of this country, so we will make the decision, thank you very much.” That was in 1996, which was a long time ago. The annex to the regulation contains a list of Acts, and I am sure that, if the European Parliament were so minded, it could add more to that list. One that still resonates today is the Iran and Libya Sanctions Act 1996, which was recently modified to become the Iran Sanctions Act.

Some of those provisions are still in existence and we are still bound by the regulation. Will the Minister tell us why the United Kingdom Government are not enforcing the regulation as they are obliged to? Why are they not saying—perhaps they are—to the US and to third parties, “We are obliged to comply with the regulation, otherwise British banks, businesses and entities will be vulnerable to handing over sums of money to injured parties”?

We need to find a way through. We must speak to the United States and others engaged in such extraterritorial legislation to see whether we can drive a way forward. As far as I am concerned, I will soon be ringing up British banks and saying to them, “By the way, you are covered by this regulation.” I will recommend that anyone who comes to my surgeries invoke the regulation, if relevant legislation is listed in the annex, and seek damages. It is simply not good enough that we should be increasingly prohibited, even when we are doing things that are legal under British and European law and within a sanctions regime, for the sake of some far-off idea of protectionism elsewhere.

16:23

[The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mark Simmonds)]

It is a pleasure to serve under your guidance this afternoon, Mr Davies. I congratulate the right hon. Member for Blackburn (Mr Straw) on securing this important debate and, as always, on the detailed, measured and articulate way in which he set out his case.

Before I get into the granularity of some of the issues that he raises, I want to set out Her Majesty’s Government’s wider approach to tackling extraterritoriality, because it is an important issue. The impacts of extraterritorial application of another country’s domestic laws on UK businesses can be significant and are not always easy to measure or to cost. British Governments of all colours—both the current Government and their predecessor—have maintained their opposition to over-broad assertions of extraterritorial civil jurisdiction, including when the right hon. Gentleman was Foreign Secretary.

It is not that the UK is averse to legislating to regulate extraterritorial activity; we have done so ourselves in certain cases that concerned the actions of British nationals abroad, the most obvious example of which is the Bribery Act 2010. However, the UK has always opposed the exertion of jurisdiction by a foreign country over British nationals or businesses that have little or no connection to that country. In such cases, we consider that the UK or the state on whose territory the activity occurred should rightfully exercise jurisdiction. As the right hon. Gentleman rightly said, that has principally been an issue with regard to the United States. He will be aware, I hope, that the United States Supreme Court is not immune to such arguments, and has stated that

“even where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application.”

Successive British Governments have taken an interest in seeking to ensure that US courts do not try to exert jurisdiction over cases that have no substantial links to the United States. Indeed, we have submitted amicus briefs in a number of cases to the US Supreme Court under the so-called alien tort statute, and the right hon. Gentleman may well be aware of the most recent cases involving Rio Tinto and Shell.

It is important to reiterate the importance that the UK Government attach to sanctions. I know that there is cross-party support from Members, including the right hon. Gentleman, for those sanctions. They are an essential tool of foreign policy and provide a means of coercing changes in behaviour, constraining ability to continue to behave in a particular way and signalling collective opposition to the actions of certain states or individuals. It is still Her Majesty’s Government’s view that that is the case, as has been evidenced by the reaction to the events recently in Ukraine.

I turn to Iran, which was the main focus of the right hon. Gentleman’s remarks. The international community has applied significant pressure to the Iranian economy through sanctions, because of the international concerns surrounding Iran’s nuclear programme. International sanctions, particularly the stringent measures put in place in recent years by the US and the EU, have brought Iran back to the negotiating table. I believe that sanctions have, therefore, been proven to be a vital tool in our attempts to resolve the Iranian nuclear question through peaceful means. I will drill down into what that means with specific relation to Iran in a moment.

My hon. Friend the Member for Wyre and Preston North (Mr Wallace) rightly raised the example of Cuba. In the case of Cuba, we and our EU partners have a very different view from the US on how best to engage. The US continues to impose a trade embargo and apply sanctions, but we do not feel that the US approach regarding sanctions is right and we have raised our objections with them. Clearly, however, US policy towards Cuba is a matter for the US authorities and not for the UK Government. Whereas British businesses and banks can trade freely with Cuba, the US has a sanctions regime. Companies must be fully aware of how their business is being transacted. Banks often use the US clearing systems—this goes right to the heart of the point my hon. Friend made—in which case they are subject to US laws. That is not extraterritorial application of the US-Cuban sanctions regime. We have made it clear for some time to British businesses that operate in Cuba that that is a risk that they should look to mitigate.

On the points the right hon. Member for Blackburn made about the impact of sanctions, it is important that the House understands the distinction between what is and what is not extraterritorial in nature. US sanctions impact on all businesses that operate through the US. Companies, including UK companies, that conduct business with sanctioned regimes must therefore ensure that, if their business goes through the US or there is a US link within the transactions, they comply with US law. That applies to Iran, Cuba and other regimes against which the US applies sanctions but the EU does not—for example, Sudan.

[Mr Straw]

I would like to make it clear that the principle of sanctions is not an issue; my concern is about their application. Does the Minister accept that, whichever way we look at the data, one cannot but come to the conclusion that United States practice and the way they pressure British banks is operating more harshly on our banks than on US banks and entities? That is the heart of the matter on which we want to see some action taken by the British Government.

[Mark Simmonds]

I am grateful for the right hon. Gentleman’s intervention, because it leads me on quite neatly to my next remarks. Before I move on, however, I must say that I do not think he can conflate the challenges that some UK banks have—we can come on to the specifics—with the whole range of issues that affect the bilateral trade relationship between the United Kingdom and Iran. For example, banks must consider other aspects in order to comply with regulatory authorities in the UK and the European Union, as well as in the US. Such considerations include anti-money laundering, concerns about counter-terrorism and all the other aspects that banks must consider when assessing risk and ensuring that they comply with the whole package of important regulatory regimes, US or otherwise.

The right hon. Gentleman referred to banks that have fallen foul of the US regime, but those cases concerned not extraterritorial sanctions but transactions that had a connection to US territory. The allegations were that the banks had directly violated US law by conducting business with Iran from the United States, and it is correct that those banks should respond to allegations that they have broken US regulations within US territory.

I want to move on to secondary or extraterritorial US sanctions, which are at the heart of the thrust of the right hon. Gentleman’s remarks. Along with the European Union, we have taken steps to protect UK companies from such extraterritorial jurisdiction. The key to our approach to Iran is that our sanctions are so closely aligned with those of the US that the scope for such jurisdictional conflict is small. As I mentioned, we recognise the importance of US and EU sanctions in bringing Iran to negotiations.

[Mr Richard Bacon (South Norfolk) (Con)]

I must say that I am rather disappointed with my hon. Friend the Minister’s response—I was hoping it would be rather more Thatcherite, if I can put it that way. It seems that the right hon. Member for Blackburn has a valid point: US trade with Iran is going up and British trade with Iran is being adversely affected. If that is happening, it is possible that the US intends that to happen. Will the Minister address that point?

[Mark Simmonds]

As I said in response to the right hon. Member for Blackburn, I do not think we can conflate the issues relating to the complexity of a bilateral trade relationship with alleged extraterritorial US sanctions. Many other issues are at stake—for example, the fact that the UK Government currently do not encourage or provide support for UK companies to trade with Iran. However, where trade is allowed under the existing sanctions regime—for example, within the scope of the humanitarian issues raised earlier, such as medicines and pharmaceuticals—the UK’s trade with Iran has increased by 80% since 2012. Where it is allowed within the sanctions regime, therefore, there is a significant uplift in UK trade.

I want to assure my hon. Friend the Member for Wyre and Preston North that we are implementing the EU regulation. The right hon. Member for Blackburn rightly mentioned the Protection of Trading Interests Act 1980, but that cannot stop the US applying its laws to the US arm of a British multinational company. It stops the enforcement of US sanctions here in the UK, but cannot stop British businesses making commercial decisions on the basis of perceived risks in the United States.

[Mr Wallace]

I am grateful to my hon. Friend the Minister for his clarification. Is he saying that a British bank choosing to trade in euros, and therefore not clearing through the United States, in order to carry out a transaction in correspondence function for an Iranian, Cuban or any other type of entity, based in London, should not fear any US sanctions? Does he also not recognise that, if they do business in euros and there is no transaction that touches the United States, it would be grossly wrong for the United States Administration to have a go at the US entity of the British parent company, because they have not broken any law in the United Kingdom or Europe?

[Mark Simmonds]

The Act to which reference was made—as well as the subsequent statutory orders, most recently updated in 1997—provides measures to protect British companies from the impact of, and prevent them from complying with, US sanctions. Judgments against UK companies that result from such sanctions, in the way that has been described, cannot be enforced in the UK. That sends a signal to the US that the EU is opposed to such an approach to sanctions.

What both the right hon. Gentleman and my hon. Friend the Member for Wyre and Preston North have described is a result as much of perception as of legal issues. It is true that all UK banks must ensure that they are taking a risk-based approach to transactions, and that they comply with relevant anti-money laundering and sanctions legislation. EU sanctions law does permit avenues through which certain types of key transactions with Iran can be made legitimately. Her Majesty’s Treasury works very closely with the financial sector to ensure that it is clear about applying for licences and authorisations that allow legitimate financial transactions involving Iran, particularly in the sphere of humanitarian trade, where the limit has recently been increased tenfold, since the agreement on the joint plan of action.

I am coming towards the end the time allotted for the debate, so I want to reiterate that our best approach must be to work with the US and others in seeking to minimise conflicting approaches. Although our objectives on particular policy issues vary on occasion, in most cases any difficulties arise from different regulatory approaches—we have similar objectives. That does not imply any loss of sovereignty: it is a clear UK foreign policy position.

Rail Services (Eccles)

Wednesday 26th March 2014 Westminster Hall

16:38

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

It is a pleasure to serve under your chairmanship, Mr Davies. I am very pleased to have secured this debate—I am sure that my constituents will be happy—and it is good to see the Minister present.

Trains in Eccles have a long and proud history. When we opened the very first passenger railway, the Liverpool and Manchester railway, on 15 September 1830, Eccles played a part. It was actually a sad part, because tragically, on the day that the railway was launched, the Member of Parliament for Liverpool was struck by Stephenson’s Rocket. Stephenson managed to evacuate the injured MP, Mr Huskisson, to Eccles on a train, but sadly he did not recover from his injuries and died. Eccles therefore has a proud role in the history of the railways. However, that is the past, and my constituents are very concerned about the future of railway services in Eccles.

We have an amazing campaign group called Freccles, which I hope the Minister is aware of, because the Secretary of State, when he visited us recently to mark the beginning of the electrification of the Liverpool-Manchester line, met members of Freccles. The Secretary of State, in his subsequent correspondence to me, has been very complimentary about them. They are entirely a group of volunteers—Mr Stephen Clapham, Professor David Yates, Mr Sean Dunne, Mr Eoan Edwards and Ms Nina Keshishian—and they have been campaigning since 2005 to get an improved railway service at Eccles. They first came to see me in 2009, and together we have been campaigning for the past five years to get some progress.

We have a simple request. At the moment, Eccles station has an hourly service into Manchester. We are just a few miles outside Manchester and a thriving town in our own right. My hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) has Patricroft station in her constituency, where there are equally good campaign groups. We have an hourly service, and we are campaigning for two trains an hour—a half-hourly service. I would not have thought that, after five years of campaigning and bringing all our powers to bear, it was too much to ask. Unfortunately, we have made little progress over that period.

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

The town of Eccles is split between my right hon. Friend’s constituency and mine—even though Eccles station is in her constituency—which is why I am here to support her debate.

Groups such as Freccles do a wonderful job in maintaining the fabric and look of that building. Nevertheless, does my right hon. Friend agree that, beyond their excellent work in making those improvements, what they want more than anything is the half-hourly service? They already do brilliant volunteering, but the issue is not just about how the station looks, but about how the train service runs.

[Hazel Blears]

My hon. Friend makes an important point. The group has regenerated the whole station. We have flowers on the platforms, a lovely entrance way and a mural; in fact, our station is better than the service. What we now need to do is ensure that the service lives up to the efforts of Freccles, which has done such a wonderful job.

We started in 2009. I wrote to Arriva Trains, which was operating the service between Manchester Piccadilly and Chester, asking for two trains an hour. It wrote back to me, saying, “The line is fairly congested. There is insufficient track capacity for additional stops without creating delay to other services. In addition, many of our trains are already very crowded on this route, and we would need to agree a strategy with the Department for Transport to secure sufficient rolling stock.” So, in 2009, we had little track capacity and overcrowded rolling stock, and Arriva Trains was not able to help us out.

Arriva directed me to Northern Rail, so we took the case up with that company. We had correspondence back and forth, culminating in a letter on 28 January 2011. Northern Rail gave me a much more detailed response, including the times of trains at key junctions and saying that it needed clearances of a specified number of minutes to be maintained. It said that it would not be technically feasible to insert an additional stop at Eccles station. It also talked about track capacity being limited at the Liverpool end of the route; apparently, if the train were to stop at Eccles station, it would result in the service passing Huyton junction around two minutes later, clashing with the eight minutes past the hour Wigan-Liverpool local service.

There were clearly a number of obstacles in our way, preventing a change to the system, and Northern Rail was also unable to help us. It said, “I am sorry that I cannot meet your aspiration to change the timetable on this occasion.” However, it told me that it was going to do new signage and some refurbishment. We therefore have new signage and refurbishment, but we do not have any trains.

Nevertheless, we persevered and had a number of meetings with the Greater Manchester transport executive. We also met with Salford city council, which has been supportive, and Transport for Greater Manchester. I have also been in correspondence with the Secretary of State to raise the issues.

I honestly believe that there is a good case for having two trains stopping at Eccles every hour. Over the past few years, the Eccles area has changed quite dramatically. MediaCity has now come to Salford, with the relocation of BBC and ITV. There is a lot of regeneration going on; we are about to have the regeneration of Port Salford in the constituency of my hon. Friend the Member for Worsley and Eccles South. Eccles station is now becoming much more of an interchange, signposting people to the Metrolink, which stops in Eccles and which has been able to open up the whole west side of Salford for regeneration.

Transport for Greater Manchester has a matrix on how many passengers a station must have to justify having two trains an hour. Over the past three years, the average number of passengers at Eccles station was 139,583. On TFGM’s analysis, if there are between 50,000 and 500,000 trips a year, the station is entitled to two trains an hour. The lower limit is 50,000, but we are at 140,000, so we more than meet that criterion.

TFGM said that, because Eccles station is an interchange with both Metrolink and bus services, it could justify a three-trains-an-hour, or even a four-trains-an-hour, service. It says that it has conveyed that view a number of times in its reports to the train operators, and it has met Freccles on a number of occasions.

We have been told time and again that the matter will be addressed in the new franchises that are being considered for train services in Greater Manchester and the north-west. We were hopeful that, when the line was electrified, journey times would be considerably shortened, enabling us to overcome the difficulties that Northern Rail set out—the tight time scales of trains passing one another, and there not being the minutes available in the timetable to do essential maintenance, or to manoeuvre rolling off to another siding before the train came back on. When we got electrification, we thought, “Well, at least this is a chance to achieve our aspirations.” However, we still do not have an agreement that we can have two trains an hour. The reason why I have secured this debate is that I am beginning to worry that the time scale is going on and on, and it is unacceptable.

We have now been told that a direct franchise for 22 months has been awarded, which runs from April 2014 to February 2016, after which there will be a completely new franchise. As I understand it, in that new franchise—I want the Minister to address this—there is a possibility to have more flexible commissioning in addition to the basic service. There is therefore a possibility in that new franchise to commission for two trains an hour to stop at Eccles station.

The consultation will begin this summer, as the Secretary of State has written to me to confirm. He also said that Freccles—and indeed I and my hon. Friend the Member for Worsley and Eccles South, as Members of Parliament—may make representations, which will be taken into account in drawing up the new franchise. He said, “I am pleased to note that Freccles are already working closely with Northern, a current operator,” and suggested that Freccles puts its views in for the 2016 franchise. He said, “This is because our specification for the full franchise may well give bidders flexibility to propose additional services over and above those we specify as requirements for the franchise.” Therefore, I can see just a glimmer of hope that, after nearly 10 years of campaigning to get a half-hourly service at Eccles, we might have the prospect of success.

[Barbara Keeley]

My right hon. Friend is making a powerful case. Taking into account her important point about passenger numbers and the access to employment that could be enabled by better train capacity, does she agree that the bigger reason why the Minister might want to consider is reduced traffic congestion? We have some of the most congested sections of motorway anywhere in the country, particularly the M60 ring road. The Highways Agency has been prevented from running its motorway widening scheme in those sections of the M60 as the air quality is too bad to tolerate any additional traffic. Motor traffic has nowhere to go, which adds to the powerful case she is making.

[Hazel Blears]

I am grateful to my hon. Friend for raising the wider economic issues for Eccles and the surrounding areas, which are extremely important. As the Minister knows, rail connectivity can often be a driver of regeneration. We have a particular problem with housing shortage in this part of the Salford area. We have many applications for new housing but without proper transport links, including a rail link into the centre of Manchester, it is very difficult to satisfy those demands for housing development. I said that we have a number of big regeneration schemes coming on board and there are many applications for planning permissions to our local authority. Therefore, the economic case for having a decent rail service for commuters to get from Eccles into the centre of Manchester and home again in the evening is absolutely essential.

My hon. Friend mentioned reducing congestion and emissions. Rail is a much more climate-friendly way to travel, as we all know. In fact, there has been a big push by Governments of all political opinions to get people off the roads and on to the rail service, which has been very successful. I think that there has been a 30% increase in the number of people travelling by rail in Greater Manchester, which has helped both the economy and in terms of emissions and the atmosphere.

There is an overwhelming case for the increase from an hourly service to a half-hourly service; as I have said, it is not too much to ask for. When the Minister responds, I hope that he can give me some hope that in the consultation for the 2016 franchise we will at last be able to get that service for local people. It meets the criteria that have been set out in TFGM’s assessment and it can now happen in a practical way, because of electrification and the changes to the timetable. If we are to achieve the economic benefits as well as improve the convenience of local people, it is absolutely essential that we put the half-hourly service into place. It is very rare that there is a situation where virtually every part of the system—the operators, TFGM, the local MPs and the local people—is saying that a change should happen, and therefore it cannot be beyond our wit to put that plan into practice.

I started this debate by saying that trains in Eccles have a proud history, as they do. The members of the Freccles campaign group have been working away on this issue for many years now and I want them to have some assurance that their campaigning, their commitment and the fact that they have given their own personal time to make this change happen and to improve the station in the way that they have will be rewarded with a decent service that they can rely on.

It is simple for the Minister. What do we want? We want two trains an hour. When do we want it? Before 2018. I hope that he is able to give us some assurance on that.

16:52

[The Parliamentary Under-Secretary of State for Transport (Mr Robert Goodwill)]

Thank you, Mr Davies, for calling me to speak. I also thank the right hon. Member for Salford and Eccles (Hazel Blears) for securing this afternoon’s debate. My goodness, she is persuasive, isn’t she? She has raised a subject of interest to many of her constituents and others. I hope to address some of the points that she has raised.

The people of Eccles are served by a station that opened on the Liverpool and Manchester railway in September 1830—the world’s first major inter-city passenger railway. They have considerable pride in their local station, although we heard from the right hon. Lady about the tragic circumstances of the opening of the line. That local pride is demonstrated by the passion of the Friends of Eccles Station, which she has spoken about today.

By the way, I wonder whether George Stephenson had the same problems building his railway line as we are having building the High Speed 2 line. In Stephenson’s time, the major argument deployed against rail was, “Why do we need a railway when we have got the canals to use?”

[Hazel Blears]

I can help the Minister with that query. Apparently, Robert Stephenson had the same problems. He brought a Bill forward in the House of Commons; it was rejected; there was a revised Bill for a new alignment; and the revised alignment had a problem crossing Chat Moss, which was apparently a bottomless peat bog. I have no doubt that Stephenson faced exactly the same difficulties that the Minister might face in the future, but he persevered, had determination and got there in the end. I am sure that the Minister will want to do the same.

[Mr Goodwill]

“Plus ça change,” as I am tempted to say. I am told that only one thing is more difficult than building a new railway line: closing an existing one.

I welcome the investment made at Eccles station during 2013, which included a brand new ticket office building. That £235,000 project was funded by the national station improvement scheme, with contributions from TFGM and Salford City council. It provides a waiting area that offers much-improved facilities for passengers, and a raised section of platform—I am told it is called a “Harrington Hump”—has been provided on the eastbound platform. That will reduce the stepping distance from the platform to trains at Eccles, making it easier for people with reduced mobility or those with baggage or pushchairs to board trains to Manchester.

Northern Rail is installing a cycle hub at Eccles, which is due for completion next month. Having said all that, I understand that having a waiting room is no good if people have to wait too long for their train.

In July 2013, the Secretary of State for Transport unveiled a plaque at Eccles to commemorate the substantial completion of the first phase of electrification of the Liverpool and Manchester Chat Moss route. I commend the efforts of the volunteers who form the Friends of Eccles Station group, which has made such a contribution to improving the environment at Eccles station and promoting the benefits offered by the local railway, working with Northern Rail’s client and stakeholder manager and others.

Freccles, as we have to call the group, is just one of the groups of friends, station adopters and community rail partnerships made up of local people who volunteer their time and energy to improve their local stations and promote train services in the north of England.

[Barbara Keeley]

I did not want to let the Minister mention Freccles, an excellent group that does great work, without also mentioning Friends of Patricroft Station, a station near Eccles. That group is also campaigning for two trains an hour, as well as for the implementation of Sunday services. For some of these stations, a Sunday service would mean everything. It seems crazy to build up the numbers of passengers and the footfall during the week without having a Sunday service.

[Mr Goodwill]

It seems that there is not a friendless station in Lancashire. These volunteers who we have heard about make a considerable contribution at Eccles, other stations in the north and right across the Northern Rail network.

I am aware that Freccles wishes to see additional train services calling at both Eccles and Patricroft. The hon. Member for Worsley and Eccles South (Barbara Keeley), who also mentioned air quality issues in a brief intervention, wrote to the Secretary of State on this subject on 7 March.

I appreciate the view of Freccles that additional trains at Eccles could provide local people with a broader range of direct journey opportunities to Liverpool, Chester, north Wales and Manchester airport for work and leisure. That would make it easier for people to travel to work opportunities by train, including the opportunities at Manchester airport and the growing Media City in Salford.

Local train services at Eccles and Patricroft are sponsored and specified by TFGM, which is a co-signatory to the Northern Rail franchise agreement. The Government believe that TFGM, as the local transport authority, is well placed to decide how best to deliver local transport to serve new employment opportunities such as those at Media City, and to offer sustainable and convenient journeys that bring economic benefits and access to jobs and leisure, while helping to reduce carbon emissions from transport.

The railway industry has to develop services that best balance the competing needs and aspirations of all passengers within the capacity of the infrastructure and the funding available. A balance has to be struck between people making local journeys, who wish for trains to call at a number of stations, and other passengers making longer journeys, who are attracted to the train because it can offer a quick journey between main city centres. It is for train operators to decide, in partnership with TFGM, whether there is an appropriate business case for their existing train services to make additional calls at Patricroft and Eccles stations.

Although there may be little obvious cost in an existing express train stopping at those stations, operators have to consider whether the additional fare revenue from new passengers is likely to cover the increased use of fuel and other industry costs. There would also be an impact for existing passengers from extending journey times. By offering quick journey times, express trains offer people a competitive alternative to other modes of transport.

An additional station call would require changes to the timetable, as a station call typically adds two or three minutes to a train’s journey. At busy junctions around Manchester, slowing a train by only a few minutes could mean that it arrives at the same time as a train that is currently running behind it or one that crosses the junction in a conflicting move. The railway infrastructure around Manchester Piccadilly is used to full capacity at peak times. Additionally, train operators need to consider how busy their existing trains are. For example, would a greater number of passengers making short journeys on an existing train lead to those making longer journeys having to stand?

[Hazel Blears]

I am listening carefully to the Minister, and I am afraid he is not giving me a great deal of hope—my heart is not fluttering and I do not feel that, after 10 years, we might be making some progress. These are exactly the same arguments that I have been pursuing for the past few years with Arriva and Northern, and they would not change the situation because of financial reasons. Then there were issues about the time scale, and about the two minutes here and there. I understand that those are all genuine matters, but TFGM said in its letter to me that it shares our frustration and wants to get two trains per hour at “the earliest opportunity” possible. It also says that the Department for Transport is launching the consultation.

I am afraid I am asking the Minister for more than his simply saying that the issue has nothing to do with the Department and it is all a local matter, because, clearly, he has overarching responsibility. I should like to hear from him that he agrees that we have an excellent business case for making sure that we get these trains.

[Mr Goodwill]

I am merely outlining the problems, although they are not insurmountable. A balance needs to be struck between the needs of the express passengers, who want a quick journey, and passengers who may wish to stop at intermediate stations.

Passenger demand on Northern services has increased by more than 40% since 2004 and its trains are now used by some 85 million passengers per year. In the same period, passenger numbers at Eccles have doubled, as they have on TransPennine Express services. Such increases in demand for trains and track capacity are among the reasons why the Government are investing more than £500 million in the northern hub scheme over the next few years. That will increase capacity on the railway network serving Manchester and the cities of the north of England, enabling more trains to be operated in 2014, with further capacity improvement and more electrification due to come into use in 2016.

The right hon. Lady knows that Government investment in the railways of the north-west includes electrification of the lines between Liverpool and Manchester via Newton-le-Willows and Eccles, and from Liverpool to Wigan and Manchester to Preston and Blackpool North via Bolton. The first phase saw TransPennine Express introduce a fleet of 10 brand new four-coach electric trains between Manchester and Scotland, running via Wigan North Western. These entered service from 30 December 2013, with the full fleet now delivered.

From May 2014, TransPennine Express will provide additional carriages across its network, increasing overall capacity by 30%. That will include non-stop expresses between Liverpool and Manchester for the first time in several decades. These new train services will offer probably the fastest and most frequent express trains ever to run along the original Liverpool and Manchester railway.

Network Rail is nearing completion of the work for the next phase of electrification from Newton-le-Willows to Liverpool. Electric trains will be able to operate along the Chat Moss line from December. Some two years later, in late 2016, electric trains will be able to use the route from Manchester to Blackpool North via Bolton, too. That is all part of the Government’s massive electrification and investment project, providing more than 850 miles of electrification, which I probably do not need to remind the right hon. Lady is 842 miles more than delivered by the previous Labour Government in respect of improving our railways.

Although subject to reaching agreement, it is expected that a small number of train services between Liverpool and Manchester via the Chat Moss route will be provided using cascaded electric trains from the start of the December 2014 timetable. The planned phased introduction of four-coach electric trains will enable the operator to provide electric trains offering additional capacity for passengers travelling to Eccles and Patricroft during 2015.

[Hazel Blears]

I trust that the Minister will conduct the rest of this debate in the consensual way that has prevailed so far, otherwise I might be tempted to offer a different tone. Transport for Greater Manchester said:

“In the immediate short term, the major concern within TfGM is that the Department for Transport…has not confirmed when and how many electric units will come north to operate services over the newly electrified…line from this December.”

Will the Minister say how many are coming, to enable us to have that capacity?

[Mr Goodwill]

I will have to write to the right hon. Lady with precise details. I would not want to mislead the Chamber by giving the incorrect figure.

If agreed, it is hoped that the introduction of electric trains will enable a small number of the diesel trains used today to move to other routes. It is hoped that that will enable additional places to be provided for passengers travelling from Bolton and local stations on that line to Manchester at peak times, from the December 2014 timetable change.

Investment is being made on the Chat Moss route, to reinstate two tracks between Roby and Huyton that were removed in the 1970s. Initially, there will be a third track, but in a few years’ time, a new section of four-track railway will enable express trains to overtake local services, increasing capacity and reducing journey times.

In conclusion, we welcome the popularity of the railway in the north of England. Although I recognise that that has led to some services becoming very busy, the Government are investing to provide more, longer trains and to introduce electric trains and reduce journey times. I have outlined how the Government are working with operators and stakeholders to deliver increased capacity to the railway network, so that operators are able to provide passengers with more carriages and new, improved train services over the next few years. I hope to see electric trains calling at Eccles before the end of 2015, with operators working with TFGM and other local stakeholders to offer a more frequent service where there is a business case for doing so.

[Hazel Blears]

My heart fluttered a little when the Minister said “before the end of 2015”. Does that mean that he foresees the possibility, by the end of 2015, of two trains an hour—a half-hourly service—rather than the hourly service that we have now?

[Mr Goodwill]

The right hon. Lady mentioned this summer’s consultation and the opportunity that the new franchise may present. Let us hope that I have also seen that glimmer of hope, too, and let us hope that, in this case, it is not a false dawn.

I thank the right hon. Lady again for bringing this matter to my attention. If enthusiasm was a way of getting this matter pushed through, she would certainly have the train already. I appreciate that it is difficult for people to plan their lives around a train service that runs only on the hour. I have a similar problem with the Northern Rail service to Whitby in my constituency, where there is also a campaign for a second train, to give us an early morning service. The problems faced in Eccles are not confined to the western side of the country; they are also encountered in my constituency.

I appreciate the opportunity to make the case and to respond to the right hon. Lady’s points, and I look forward to seeing what developments come in future.

Question put and agreed to.

17:07

Sitting adjourned.