Westminster Hall

Tuesday 17th November 2015 Westminster Hall

Tuesday 17 November 2015

[Sir Roger Gale in the Chair]

Reserve Forces

Tuesday 17th November 2015 Westminster Hall

09:30

[Mr Philip Hollobone (Kettering) (Con)]

I beg to move,

That this House has considered the future of the reserve forces.

May I say what a pleasure it is to see you in the Chair, Sir Roger? May I also thank the Backbench Business Committee for granting time for the debate? I have called it because the defence of the realm is the most important duty of Her Majesty’s Government, and the reserve forces are an ever more important part of that. The recruitment and retention of reserves is an important issue for the House, and this is a good opportunity to hold the Minister to account for the way in which the Ministry of Defence is tackling it. Progress has been made, but I am sure the Minister will admit that more can and must be made. What better way to hold any Minister of the Crown to account than on the Floor of the House?

My understanding is that Her Majesty’s Government intend the armed forces to comprise the following numbers of servicemen and women by 2020: 29,000 in the Royal Navy, 31,500 in the RAF and 82,000 in the Army. They are to be supported by 30,000 Army reservists and 5,000 Royal Navy and RAF reservists. As of 1 October, the trained strength of the tri-service volunteer reserve stood at 25,970—an 11% increase on the year before. However, the target of Her Majesty’s Government is for the tri-service reserve to total 35,060 by 1 April 2019. Maths was never my strong point, but I reckon we have 9,000 reservists to go to get to that target—a 35% increase on where we are now. Broken down by force, the target would be 30,100 reservists in the Army, 3,100 in the Royal Navy and 1,860 in the RAF. That would seem to be a tough challenge for Her Majesty’s Government to meet, and I look forward to the Minister giving us the confidence that they are on track to do so.

The reserves are an important part of our defence. I know a little about the subject because in a previous life I served, in a humble capacity, as a member of the Territorial Army for eight and a half years. During the cold war, Trooper Hollobone was prepared to stand in a trench to hold back the Russian hordes advancing over the north German plain. I am pleased that that never came to pass, because I am not sure that I and my few pals would have been able to do very much in the face of the Russian onslaught, although we would have done our best.

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

I should point out that my long-standing friendship with Trooper Hollobone goes back to my university days. However, my only military experience with him on the front line consisted of the very nice lunches we had at the Honourable Artillery Company—which, I should point out, he paid for.

[Mr Hollobone]

I was delighted to be able to entertain my long-standing friend for lunch at the Honourable Artillery Company—the oldest serving regiment in the British Army.

In my brief military career, I had three cap badges. Whatever colour beret I wore, I was always proud to serve. However, there are those present who are far more qualified than me to talk about military matters, because of their Regular Army experience or their experience in the Government, and I look forward to hearing their contributions.

It is important to remember that the Territorial Army, as it was called—the reserve, as it is now—is not a Dad’s Army. Now, there is nothing wrong with a Dad’s Army, and we have all enjoyed the television series. Of course, many reservists are in their 50s, and they provide valuable service to the Crown. However, there are also lots of very young men and women in our reserves, and we should remember that the make-up of our reserve forces is very different from that portrayed in the television programme.

[Mrs Madeleine Moon (Bridgend) (Lab)]

Is not one of the areas where reservists can particularly excel, no matter what their age, the specialist services dealing with cyber-defence? Given that the Chancellor announced yesterday that £2 billion will be going to extend our cyber-capability, should we not be looking to recruit into the reserves from our IT and technology companies?

[Mr Hollobone]

I welcome that helpful contribution. The hon. Lady is known throughout the House for her experience in military affairs. She is in charge of the all-party group on reserve forces and cadets, and she is a distinguished serving member of the armed forces parliamentary scheme. In other words, she is a lady who knows what she is talking about, and she gives the Chamber very wise counsel. There are many very good things about Her Majesty’s armed forces, but one of the bad things is that they can be too rigid in applying themselves to future challenges. The threat of cyber-warfare is a big unknown, and we have to be flexible and adaptable, and to think outside the box in meeting that challenge. The hon. Lady is absolutely right: we need to get people on board who understand cyber and IT. If we have to change our recruitment and retention processes to make sure that such people are contributing to Britain’s defence, we should do that, and we should do it quickly. The announcement of the extra expenditure suggests that the door of Her Majesty’s Government is open to such thinking. I very much hope the Minister will pass the hon. Lady’s wise words on to the Treasury, No. 10 and all the others who make these big, important decisions.

[Mark Field]

I would like to echo the words of the hon. Member for Bridgend (Mrs Moon).It is very positive that the Government have recognised the great danger of cyber-attacks not only in the military sphere, but in the commercial sphere. Given that the Bank of England has been so robust about the importance of resilience and the potential gaps in that respect in the commercial sphere, does my hon. Friend agree that Ministers should look again at having a reinsurance package in the cyber area, rather like what Pool Re provides in the terrorism area?

[Mr Hollobone]

My right hon. Friend makes an extremely good point. He represents the City of London, and we need to tap into the pool of talent that exists in our capital city in insurance and IT. We need to do whatever it takes to get the computer experts from the big international banks in the City of London, if necessary, to work in the interests of Britain’s defence. I know my right hon. Friend will be leading the charge to make sure that the Government are aware not only of the threat of cyber-warfare, but of the opportunities offered by the pool of talent in our great city to meet that challenge.

Some 330 reservists are currently mobilised around the world. They can be found in Afghanistan and Cyprus and in global counter-terrorism and counter-piracy operations. Reservists formed the core of the infantry training team recently sent to Ukraine. We also have reservists deployed in Jordan, Iraq, Kuwait and Qatar, as part of the counter-ISIS effort.

I am pleased that many reservists also serve as part of formed bodies and teams, not just as individuals. A platoon from 6 SCOTS, which is based in Glasgow, is in Afghanistan. The 2nd Battalion the Royal Irish Regiment, based in Lisburn, has two platoons deployed to Cyprus. I understand that a reserve unit will be the Cyprus lead from April 2018, that formed reserve bodies will also be deploying in some 23 overseas exercises this year and that the 4th Battalion Parachute Regiment will mobilise and deploy as a formed sub-unit to the Falklands in June next year.

When I was involved, in a humble way, during the cold war, my understanding was that we could not be deployed under Queen’s regulations. There would have to be an extreme national emergency for that to happen. I understand that Queen’s regulations were changed in the mid-1980s, and there is now more flexibility about how reservists can be deployed, and I think that is a good thing. Of course, reservists engaged in hot contact with the enemy are serving with distinction. A serving reservist in the Artists Rifles was recently awarded the Conspicuous Gallantry Cross for his endeavours on the front line. Reservists are serving with distinction and doing the country proud. Everyone present for the debate would, I think, agree that Her Majesty’s armed forces represent Britain at its best. They are the best individuals, serving with the best of motives in the very best way.

As well as the front-line soldiers who have been awarded gallantry decorations, I want to mention youngsters in cadet forces. I was proud to see at Remembrance Day services in the borough of Kettering how smart and proud the Army, RAF and Royal Navy cadets were on parade. A lot of effort had gone into displaying the pride of their units and representing their areas. If we can instil such a sense of loyalty to the Crown, self-respect, discipline and motivation into youngsters in the cadet forces, that must be a good thing.

I have drawn for inspiration for my brief remarks from an interesting document entitled “The United Kingdom Reserve Forces External Scrutiny Team Annual Report”. The team is looking at the way in which Her Majesty’s Government are developing the concept of Future Reserves 2020. I am sure that the Minister will have gone through all its recommendations and that it is required reading for anyone with an interest in how our reserve forces are to develop. It is worth emphasising some of the key recommendations, one of which is:

“The success of FR20 depends first…upon increasing the size of the Reserve. Each Service has challenging manning targets to meet, with heavy emphasis on recruiting and initial training. This year the Services appear to have turned the corner on growing numbers, after poor achievement over the first two years.”

However:

“Notwithstanding some excellent workarounds on in-flow, we are not convinced that they are sustainable into the medium term, suggesting that systemic problems with the recruitment process still need to be rooted out. Medical screening sits prominently as an area of concern.”

The report goes on:

“The sustained health of the Reserves is highly dependent upon the quality and quantity of officers available at unit level, in order to plan and lead the challenging training on which the Reserves thrive. Progress in attracting and recruiting young volunteer Reserve officers needs attention.”

The Minister will be acutely aware of those recommendations and will have been working hard to address those concerns. The good news is that the current recruitment marketing campaign has resulted in higher levels of advertising recall than UK recognition norms, and that resonance is increasing among 18 to 35-year-olds. However, understanding of the Army Reserve especially remains low and messaging needs to be adjusted to reinforce some key things: adventure, excitement and personal development. Potential recruits are worried about the possible extent of the commitment, and there is also fear of injury.

[Martin John Docherty (West Dunbartonshire) (SNP)]

This is an important debate. Since the last strategic defence and security review, there have been personnel reductions of 5,000 in the Royal Navy, 5,000 in the RAF and 7,000 in the Army, followed by an additional 12,000 reduction to the Army. What is proposed for the forces 2020 vision is that part of the recruitment process will involve those leaving the services—regulars who are leaving. Given that they have been made redundant, does the hon. Gentleman agree that it will be extremely problematic to fill that gap?

[Mr Hollobone]

I am grateful to the hon. Gentleman, who has identified a real issue, and hope that the Minister will respond to those figures. We want to ensure that ex-regulars join the reserves. We also need to retain the reservists who are recruited. Retention is a key issue. All too often we focus on how well recruitment is going, and do not spend enough time on retaining reservists.

I am pleased that the Government have an employer recognition scheme. It was launched by the Prime Minister in July 2014 and is intended to recognise employers through a scheme with bronze, silver and gold tiers. I understand that 10 employers received gold awards last year.

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

Does my hon. Friend agree that part of the problem is that the original plan was to hold the regular forces and not let sizeable numbers go until there was clear evidence that the plans for the reserves were working? That original plan changed because of financial considerations, which is the reason for the present large capability gaps. Perhaps it is also the reason for the problem with recruitment.

[Mr Hollobone]

It would not be a proper debate on Her Majesty’s reserve forces without a contribution from my hon. Friend, and I am glad that he has highlighted his concern, which I know many other hon. Members share, about the gap between the growth in size of the reserve forces and the decline in the number of regular personnel. I started my speech by quoting the fact that the Government wanted the Army to be 82,000-strong by 2020. My understanding is that it has fewer personnel than that now, so there appears to be a gap. That is why we must get the reservist part of the plan right. I am not sure that we are there yet, as the external scrutiny report said.

On the matter of retention, the report explains:

“The Reserves’ age profile is currently too heavily skewed towards older reservists who are closer to the end, rather than the start, of their service and therefore outflow will be relatively high for the next few years as they leave due to natural factors. Consequently equal attention needs to be paid to retention during earlier stages of the Reserve service spectrum. In the main retention should be significantly enhanced by the provision of challenging individual and collective training, at every phase of service. Such provision cannot rely solely on opportunities structured around the Regular ecosystem; bespoke, Reservist-friendly development and training needs also to be available.”

As an example, many reservists who want to improve their reservist career are sent on regulars’ courses during the week, but many cannot do that sort of training during the week. We need more flexibility about providing it at the weekend. Also, there is a lot of interest in weekend sport among regulars, but reservists who give up their weekends do not want to play sport; they want to fire weapons. However, a lot of the weapons training is not available at weekends. We need to think more flexibly and adaptably about what reservists want to do. A reservist who feels bored and fed up, and that they are not being challenged enough, will leave. Then all the effort that has been put into recruitment is wasted.

[Mrs Moon]

A further £2 billion for the special forces was announced yesterday by the Prime Minister. We have had tragic incidents in Brecon, where reservists were seeking to join the special forces. I would not want people to be put off joining the special forces because of those incidents. Does the hon. Gentleman agree we need to be very clear that reservists are welcome in our special forces, though we have to accept that the training is arduous and the commitment heavy?

[Mr Hollobone]

Having completed that course myself, I know that it is a very challenging experience. The deaths of the applicants were tragic. The publicity around the horrendous circumstances of that incident will, funnily enough, encourage others to come forward, in a perverse way, because they will have seen how difficult it is to get into the special forces. My understanding is that the exercise in question was not actually run by the special forces, and I would imagine there is quite a lot of concern among the special forces that the tragedy has been branded as their responsibility. My clear understanding is that it was not run by the special forces. Part of the challenge and the attractiveness of the special forces to potential recruits is the very difficult nature of the task presented to them, and we must not dilute that in any way.

One thing I am sure we can all agree on is that pro rata, we have the best armed forces in the world and the best special forces in the world. We have centuries of experience in developing our military capability; we know what makes people tick and we know how hard we can push people. Sometimes, tragically, it goes wrong, but those are a minority of occasions. The bulk of the training that both regular forces and special forces receive is some of the very best in the world, and we should be very proud of that.

Like the hon. Lady, I welcome the announcement of extra spending on special forces, as well as extra spending on cyber-warfare. In providing the capability for both, the reserve has a golden opportunity to contribute. We will not tackle these issues just through regular personnel; we have to attract reservists with specialist skills.

[Mark Field]

On a budgetary point, while the commitment to additional spending within what we might call the defence budget is obviously welcome, does my hon. Friend share my view that we need to be a little cannier about the way in which we utilise the soft power that comes with the 0.7% in the Department for International Development budget for a range of areas, such as community cohesion in foreign lands? We can utilise elements of that budget for precisely this sort of element of the reservist side. Even if we cannot commit ourselves, as many of us would like to, to a 2% or even higher percentage of GDP for defence, at least elements of what would traditionally be the defence budget can come through the important soft power of DFID.

[Mr Hollobone]

My right hon. Friend makes an extremely good point. I am all for maximising the military component—that is a clumsy phrase—of our defence spending. Using our soft power budget legitimately to enhance our hard power capability is fine. I am all for, for example, sending armed forces personnel on aid programmes in other countries to become familiar with the language, culture and how those countries work, because that will help our hard power defence effort.

I am pleased that the Government are committed to spending 2% of our GDP on defence. I cannot for the life of me understand why the Government will not enshrine that in law, because if we have enshrined the defence spending into law, enshrining the 2% commitment in law should be no issue. I am confident that a majority of this House would support doing just that, if the Minister were so minded.

As I understand it—the Minister can correct me if I am wrong—there is an issue regarding medical reservists, who will make up about 50% of Defence Medical Services by 2020, with some specialties such as neurology and urology being provided entirely by the reserve forces. There is, understandably, concern about the approach some NHS trusts are taking on medical reservists—the NHS is hard pressed, and we need all the doctors we can get—but there are benefits for crossover expertise between doctors working in the NHS and doctors working with our reservists. Some years ago, I had the privilege of visiting our front-line A&E facility in Afghanistan, which I think is the most advanced A&E facility in the world. It is manned by NHS doctors, who can bring their expertise back to the UK. There are lots of crossover benefits, but there is considerable range of practice within the NHS regarding the ease with which reserve doctors are allowed to leave their NHS posts to fulfil their reserve training commitments.

[The Parliamentary Under-Secretary of State for Defence (Mr Julian Brazier)]

On that specific point, my hon. Friend will be aware that in the past few years the reserves have provided the framework unit for half of all the rotations in Helmand. There is indeed a range of practice, but we are working hard with the NHS, and many of the award-winning employers are in fact NHS trusts.

[Mr Hollobone]

I am pleased that my hon. Friend is on the case; I can think of no better man for the job. My understanding is that there is a range of different practices in the way different trusts handle their medical reservists. It strikes me that there is an opportunity for the Government to streamline the process for the benefit of the reservists, the reserve and the NHS trusts themselves.

[Kevin Foster (Torbay) (Con)]

My hon. Friend is being very generous in allowing interventions. He talked about the reserves having specialist skills. In areas such as the cyber-sphere, there are people who perhaps would not be attracted to joining the full-time military but who have just the sort of capabilities and skills the military needs. Does he agree that the reserves could be a great opportunity to allow a mix between being a civilian in the day and also being in the military.

[Mr Hollobone]

I am most grateful for that intervention, which is extremely helpful. My hon. Friend is spot on: to meet the cyber threat, we will have to be more flexible and more adaptable in how we attract such skills for the benefit of the defence of the realm. I hope the Minister heard what my hon. Friend said and will feed that back.

I am going to sit down because I have spoken for far too long and there are people far more qualified than me who want to contribute to this debate, but I want to highlight the last paragraph of the external scrutiny report, which says:

“Our assessment is that FR20 remains on or near track for delivery. The main 2014/15 objectives have been met and Reserve manning levels appear to have turned the corner. That said, it is a long corner before the home straight and successive annual inflow targets are typically far more challenging. Although not within the reporting period we feel obliged to point to an emergent potential risk to the programme. We are acutely aware of the current tautness the Defence budget, with significant risk in many programmes. Any further budgetary pressure resulting from the 2015 Comprehensive Spending Review, if realised, is likely to have a direct bearing on the Services’ ability to deliver FR20—whether as a consequence of direct cuts to the programme or indirectly though reductions in activity which exacerbate recruiting and retention risk.”

It is my contention that a key element of the extra money announced for cyber-warfare and special forces needs to be directed towards the reserves, because that is where the skills and capability can be best provided to meet the challenges this country faces in future.

[Several hon. Members rose—]

[Sir Roger Gale (in the Chair)]

Order. Before we proceed, I have two things to say. First, I should have placed it on the record that the hon. Member for Bridgend (Mrs Moon) has indicated to me that she has to be elsewhere in the House, as is sadly so often the case when we try to do two things at once. That is a matter of record, as is her presence. Secondly, I was asked earlier whether I would have to impose a time limit. At that time, I said no, but the hon. Member for Kettering (Mr Hollobone) has been very generous in giving way; I imply no criticism whatever, but that does mean that we now face the need for a time limit. If hon. Members confine their remarks to seven minutes, we shall be able to accommodate all those seeking to speak.

09:59

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

It is a pleasure to serve under your chairmanship, Sir Roger. I thank the hon. Member for Kettering (Mr Hollobone) for bringing this important debate to the House.

I will start with how we recruit to, and encourage people to remain in, the reserves. Deployment and the value that we place on people who join the reserves are of crucial importance. The ability to allow people to put into practice what they have been trained for, whether at home or abroad, is a really important aspect of maintaining a professional reserve force.

My first question to the Minister is, how strong is the link between the regular forces and the reserves? I know there has been a lot of work recently to strengthen that link, but surely the reserve force can never be treated exactly the same as the regulars. Some roles may be interchangeable, and there may be an element of flexibility, but reserve training, which takes place primarily on evenings or at weekends, can never really reach the same standard as what we would expect for a full-time soldier, airwoman or seaman.

Does the Minister agree that we need more specialism for the reserves—the hon. Member for Kettering touched on this point—so that they can bring their professional expertise to bear? For example, in the recent tragic events in Paris, security, policing and intelligence skills were to the fore; it would supplement the work that goes on 24/7 in those areas, and support the greater good, if reserves used the talents that they already have from their professional lives. Likewise, the hon. Member for Bridgend (Mrs Moon) made a good point about cybercrime. The hon. Member for Kettering raised the issue of the NHS, and some of the gaps in specialist medical skills and nursing. I ask the Minister, is there anything further that the Government can do to extend the number of reserves we can take from our NHS?

A common complaint that I often hear concerns reserve officers. The average age for a reservist is 37; for an officer it is 44. It has been related to me that people serving in the reserves feel that is too high. Reserve officers are still on civvy street, obviously; the careers of many may be peaking at that age, and their families are probably at their most complex and busiest. Do they have the time and energy to take on a demanding reservist role as well as their normal day-to-day career? My question for the Minister, then, is, how do we encourage younger people, from all backgrounds and all sections of society, into the reserves and give them increased opportunities to access officer training much earlier?

On recruitment, the 35,000 figure is a tall order in anyone’s book. The Secretary of State suggested that the target was “stretching away”; that was in The Daily Telegraph, which is a fairly pro-Government newspaper, if I can put it that way, and not at all critical. The Major Projects Authority described the target as “unachievable”, and the project was downgraded from amber/red to red. We are currently 10,000 shy of the target, so at what stage will that become red and flashing? Reservist capability and numbers are crucial to forward planning for the military as a whole.

The hon. Member for Kettering also mentioned retention. Over recent years the Government have spent millions on recruiting reserves, but there is no point in recruiting all these people and training them to a very high standard only to see them haemorrhage out the other end. Many reservist units see that as a major problem, and many who lead those units see retention as far more important than recruitment, in many respects. As Members have suggested, many regulars have been made redundant in recent years; we might have thought that more effort would be made to ensure that people who leave the services get the chance to take up a reserve post if they want to—they would jump at it. Transfer from the regulars to the reserves is pathetically low. The Minister should have another look at that.

In Scotland, the activities of the Ministry of Defence can be summed up in one word: cuts. In 2012, there were 12,200 full-time regular service people in Scotland; we were promised that that number would be roughly maintained, or would rise to 12,500, in future years. The Minister will be more than well aware that that figure is now around 9,300. In Scotland, there is a big gap to fill in mainstream activity. Not a single Royal Navy surface ship is based in Scotland. Our coastline is equivalent to that of India, and we have assets such as fisheries, oil, gas and renewables to protect. Where is the Royal Navy in Scotland? Under this Government, in Scotland the Royal Navy surface fleet could be said to be absent without leave. There are 28 Air Force bases in the UK, but following the closure of Leuchars, Scotland is down to one. That barely rated a mention in any of the MOD literature put out before the referendum last year.

Recruitment rates for the reserves are appallingly low in Scotland, with barely 50% of the target figure met. That lack of take-up among reservists is because of a lack of confidence in the MOD to defend our shores and airspace in an increasingly dangerous and unpredictable world. The target will not be met in Scotland against a background of cuts and a reducing MOD footprint.

10:07

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to serve under your chairmanship, Sir Roger. I apologise to the shadow Minister and the Minister; two of us have another meeting at half-past 10, which we are duty-bound to go to, so I will have to leave. I mean no disrespect to either hon. Gentleman; it is simply that business presses in other places.

I congratulate the hon. Member for Kettering (Mr Hollobone) on bringing this important issue to the House and setting the scene well and in great detail. I declare an interest as a member of the Defence Committee—as are others here—and as a former part-time soldier, with three years in the Ulster Defence Regiment and 11 and a half years as a Territorial Army soldier in the Royal Artillery. I never achieved officer status; I drove a 4-tonne lorry—someone had to drive the lorries—and I achieved the very high rank of lance bombardier. I was an ordinary soldier, and so bring some knowledge to the debate.

We have a proud history as a military nation, and are always at the forefront of defending justice, democracy and the vulnerable. That has never been more important, in the light of the attacks on Paris last weekend. We are living in tough economic times, but must ensure that we do not retreat from the world stage. We cannot become isolationist. We are Great Britain—the United Kingdom of Great Britain and Northern Ireland—and are bigger and better than that. Our role is on the global stage, as a strong extrovert international voice. We have been a force for good in the past, and can be in the future. We cannot put that at risk by making huge decisions about our armed forces and our reserve forces without taking into account the changing global environment.

The tragic events of Friday are a stark reminder of the global nature of the threats that we, as a civilisation, face today, so we must think more carefully than ever about the implications of cuts to any aspect of our armed services. I know times are tough and we are being asked to tighten our belts, but the goalposts have moved. The global security environment has changed. The world has changed, and is changing again, and we need to be aware of that. Our armed forces and reserve forces are there if we need them, and we do not want to have depleted armed forces when they are most needed.

I understand that we have to have 82,000 full-time service personnel; on the present figures, we have about 79,500, so we have not even met the figures for full-time personnel. If we are having problems filling the uniforms in our full-time Navy, Air Force and Army, the issues for reserve forces are even more acute. Perhaps the Minister can tell us that the figures have changed and that, in the last few months, we have recruited about 2,500. That would be marvellous news, but let us make sure that when we talk about reserve forces, we do not unknowingly disregard our full-time forces.

I welcome the recruitment drive to increase the reserve forces to 35,000 in strength by 2018, but I reiterate that it is imperative that our armed forces’ effectiveness as a whole is not adversely affected as a result. The Minister and the hon. Member for Kettering, in his introduction, have set the scene relating to our reserve force capacity. It is obvious that we are not yet achieving our aim, but we cannot keep depleting our full-time forces if the reserve forces do not fill the gap—and, to be fair to our reserve forces, they should do so in a way that allows them to compete, and to add to what is already there. With proper training and the appropriate services and amenities, I am sure that we can have the future reserves that we are talking about, whom we can depend on when needed, but we have to make sure that that happens. We cannot replace lost service personnel with reservists who need to be fully trained, because the ultimate consequences of that would be simply too much to bear.

Many of the people who sign up to reserve forces, and are first in line for call-up, work in small businesses; that is probably more the case in Northern Ireland than on the mainland. Perhaps the Minister can tell us how to make sure that there is an employer-employee relationship that ensures that the reservist can give their commitment, and the small business employing 10 or a dozen people can operate. That small business might even employ fewer people than that. If it employs five people and one is taken out, it has a 20% reduction in its workforce. We need to address those issues for the employer as well.

[Mr Brazier]

I am avoiding making interventions because time is so short and so many people want to speak, but I shall, given that the hon. Gentleman has to leave. We have not only expanded the provision for employers in general when people are mobilised, but have introduced a supplementary £500 per month per individual mobilised for small and medium-sized enterprises. However, I welcome his point.

[Jim Shannon]

It is obvious that the Government are responding to the situation, but I am conscious of the mechanics of how that works in a small business. I appreciate the Minister’s response, however.

In Northern Ireland, we are already almost at our capacity for reserve forces. Our numbers are very clear. I have said in the past, and I say it again for the record, that if there is room to take more reservists, and I believe there is, it is important to make up at least some of those numbers in Northern Ireland. We can expand recruitment capacity in the Province to help meet the required number of reserves, as the Province has a long history of serving. Indeed, it provides more service personnel proportionally than any other British region.

The British Medical Association is concerned about undermanning in the Defence Medical Services and the effect that will have on morale, motivation and retention. The 253 (North Irish) Medical Regiment has an important role to play in the future of any Army action, wherever that may be in the world. The reservists’ role in that is so important. DMS says that although many who are willing to serve Queen and country get the very best, which is no less than they deserve, there are concerns about how the numbers will be made up, so there needs to be a strong recruitment drive. Constituents of mine who are doctors, and other personnel and staff from hospitals, are involved in that. Some specialities, such as neurology or urology, will be provided entirely by the reserve forces, as I understand it, and perhaps the Minister will comment on that. According to the BMA, there is a shortfall of approximately 68% in DMS. We need to deal with some of those issues.

Time is going by, so I will finish. We need to focus on where the shortfalls are in DMS, and to ensure that employers have a role and can let their personnel be part of that. We should offer our strongest condolences to those affected by the Paris attacks. I urge Members to learn from those events, and to be mindful, when deciding the future of our armed forces, that evil forces such as Daesh or ISIS are exactly why we must maintain strong, influential and quality armed services. Our reserves are very much part of that.

10:15

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

I thank my hon. Friend the Member for Kettering (Mr Hollobone) for securing the debate. When he was serving in his trench in Germany in the 1980s, I was even further east during the cold war, in Berlin, surrounded by the enemy. We were always told that quality would see us through, but some of us also knew that quantity has a quality all of its own, and that we stood very little chance. Our job was just to slow the progress of the advancing forces in time for when they met my hon. Friend, who would obviously put a stop to them.

I start by making the obvious point: the plan to replace 20,000 regulars with 30,000 reservists was born out of financial pressures, not strategic logic—let us be absolutely clear about that. As was described to me and others by the then Secretary of State for Defence, the financial logic was very simple. In peacetime, reservists cost a fraction of regular forces; they are easier to maintain on the Ministry of Defence budget, but when the balloon goes up and they need to be deployed, the cost of deployment, which is far higher for reservists than it is for regulars, gets transferred to the Treasury. It was an accounting exercise designed to save money. There were no strategic grand designs with this plan. That is not to say that there are not advantages from having a more flexible reservist force available to hand, or that one does not have a deep regard for the Territorial, now reservist, forces—I served with them myself in Berlin, Germany, Cyprus and Northern Ireland back in the 1980s—but the bottom line is that the plan was born out of financial pressure, not strategic design.

The plan was criticised by some of us at the time. The criticism manifested itself most starkly when we tabled amendments to the Defence Reform Bill, later the 2014 Act, in the last Parliament. I managed to secure the support of the official Opposition and the Scottish National party for an amendment, but unfortunately I could not carry quite enough Members from my side, although I am very thankful to those who did support me in that amendment, including my hon. Friend the Member for Kettering.

For us, the problem was that replacing 20,000 regulars with 30,000 reservists would create capability gaps and false economies in the longer term. The original plan was to hold those 20,000 regulars in situ until we had clear evidence that the reservist plan would work—in other words, until we had geared up on the reservists’ recruitment. There were clear indications that we could plug that gap—that, by the way, was confirmed by the previous Defence Secretary, who stood up during the debate on the amendment to the Defence Reform Bill and said that that was the case and that was the original plan. However, in addition to the cack-handed plan of replacing 20,000 regulars with 30,000 reserves, simply on the grounds of financial pressure, we then compounded the problem by saying, “We’ll let the regulars walk out the door, and no doubt we won’t have any problem with reserve recruitment.” What madness that turned out to be. We let the regulars out the door and the Army is now, I think—no doubt the Minister will correct me if I am wrong—below 82,000 on our regular strength, and meanwhile we are struggling to recruit the reservists, as my hon. Friend has clearly outlined.

The problem is not just numbers. My hon. Friend rightly pointed out that we are perhaps 9,000 or 10,000 reservists short, but, as has been alluded to in this debate, it is not just the numbers that are the problem; it is the age profile of the existing reservists. Answers to written questions more than a year ago highlighted that the average age of an infantryman in the reserve forces was in the mid-30s, and that going up the ranks, whether senior NCOs or officers, it was heading into the 40s.

We all loved “Dad’s Army”—great series—and there is a place for a home reserve, but Dad’s Army was not on the Normandy beaches. In addition to the numbers being recruited into the reserve, we need to look at the age profile of the existing reservists. The figures I quoted are for infantrymen, not the other arms of the reserve. Infantrymen have to be of a certain age to be at their peak capability on deployment.

[Mr Brazier]

My hon. and gallant Friend is generous in giving way. Dad’s Army was not on the Normandy beaches as it was a home defence force, but the Territorial Army most certainly was there. A division helped to hold the line at Dunkirk and, indeed, a national guard division on its own took Omaha beach.

[Mr Baron]

I do not deny all that, and the Minister will not be able to deny that the Government have made it clear that they intend to deploy reservists much more frequently in overseas operations. He gives us only half the truth. If the plan is to deploy reservists much more regularly, not only will that be more costly than deploying regular forces, but we will have to address the demographic issue within existing reservists and the TA.

In the time remaining, let me return to false economies. No one can deny that capability gaps have occurred as a result of the change in plan, but the Minister must address the false economies resulting from that. Letting regulars go prematurely and the problems with reservist recruitment highlighted by my hon. Friend the Member for Kettering have resulted in extra spending. It is not just the IT fiasco, which cost £10 million, but the extra spending on incentives for both employers and employees —£500—pension equalisation and advertising.

I have asked parliamentary questions about whether the Government can quantify those extra expenses, which were not foreseen when the original plans were put in place. We have not had answers. We keep being told that there is £1.8 billion, which should cover those expenses, but that £1.8 billion is over 10 years. We need detailed answers from the Government on what those unforeseen extra costs have been. When will we have those answers? Either the Government do not know the answers, which would be worrying, or they do know and will not disclose them. That would be equally worrying and may suggest to some that they are trying to hide something.

I look forward to answers from the Minister, and if he does not have time to provide them today, perhaps he will write to me and others who have raised the issue and say what the extra costs are. Our two central concerns are capability gaps in the short term and false economies in the longer term. At the moment, the reservist plans seem to have both problems.

10:23

[Steven Paterson (Stirling) (SNP)]

First, I thank the hon. Member for Kettering (Mr Hollobone) for securing this debate. I am delighted to speak in it as the Member for Stirling, which has a long and proud tradition of association with the armed forces.

During the 1990s, when I was at university in Aberdeen, I was a member of the Royal Naval Reserve. The unit was part of the university and was designed to expand and increase understanding of the armed forces generally and the Navy in particular. I am pleased that I had that experience, which has carried me forward to today. It is probably fair to say that the word “humble” is relative in the light of some hon. Members’ contributions, but I mention it to show that I have a little experience of the Royal Naval Reserve which has stood me in good stead.

I will make a rather obvious statement: our armed forces reserve plays a crucial part in its contribution to the armed forces as a whole. The White Paper published by the Ministry of Defence in 2013 proposed significant changes, many of which have been discussed, but this is a good opportunity to consider one or two. Many of the proposals made sense in terms of modernising how the reserves operate—for example, updating and expanding the range of tasks the reserve can be called on to do, and reconfiguring the way reservists operate and complement regular forces. The strategic defence and security review will include a lot on that and I hope that the Minister will say a little about it today. I hope that more flexibility and broadened opportunities will help to increase the number of people in the reserve forces; many hon. Members have called for that this morning and I agree with them.

I have been told anecdotally of reservists hiding their military service from their employers, and that some use their annual leave for exercises. If there is any truth in that, we have work more closely with employers and reservists to solve that problem, because that should not be happening. People are entitled to make a contribution and to enjoy their work with breaks and holidays. Reservists develop a range of skills through their military service and bring a huge benefit to employers, but we must recognise that their commitment may have a serious impact on businesses. I welcome the Minister’s comments about contributions to employers. Perhaps we should investigate that avenue further as a way of expanding the numbers and reaching the targets.

Hon. Members mentioned enabling additional payments and the necessity of the reserve being more flexible and adaptable, which in many respects they are compared with the regular forces. That is an advantage. The reserve is more affordable, which may be partly why we are moving in this direction. It is good if it allows our forces to become more flexible.

Stirling is home to an assault pioneer platoon, part of Delta company of 7 SCOTS, whose job includes a range of things, including the construction of tools for infantry soldiers to cross natural and man-made obstacles, breaching enemy fortifications, supervising the construction of field defensive works, such as bunkers, support weapon firing positions and so on. Those are important skills and they make an important contribution. I am pleased to have the platoon in my constituency. I take this opportunity to recognise each and every reservist in the Stirling area and thank them for their dedicated service and hard work. As we have discussed, those reservists, due to the Future Force 2020 plan that the Government have set out, are becoming vital to our armed forces.

Looking to the future, the Government have set out an ambitious target of 35,000 trained reservists, 30,000 of whom are in the Army, by 2018. However, the National Audit Office has warned that that target is unlikely to be met before 2025. The point has been made previously and I know that the Minister will address it.

The external security team annual report suggests that, although there has been a significant increase in recruiting reservists, there is likely to be a high outflow due to the age profile being heavily skewed towards older reservists. That is a real problem and one that we must tackle. Working closer with employers to generate flexibility may be a way of creating the opportunities we seek to solve the problem.

The problems of recruitment in my constituency have been mentioned. Stirling has a long association with the Argyll and Sutherland Highlanders, which was, sadly, subsumed into the Royal Regiment of Scotland before being downgraded to a ceremonial battalion. That, combined with the closure of the Army recruitment office in Stirling, has caused problems for recruitment. Perhaps we should think again about how we approach that to ensure that people have the chance to benefit from the real opportunities and advantages in reserve service.

10:29

[Kirsten Oswald (East Renfrewshire) (SNP)]

It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate the hon. Member for Kettering (Mr Hollobone) on securing the debate; it is vital that we have these discussions. I found today’s speeches, particularly from those who have served in the forces, very interesting. It is clear that there is a commitment in this Chamber to our reserve forces, and many vital points have been made about that, but we must ensure that our forces and our reserves are fit for purpose, that we are willing to stand up for them, and that these are not just words.

People who serve in our reserve forces deserve our commitment and support. It is vital that we understand the impact that their service has on their day-to-day lives. As we have heard, the conclusion of an independent commission was that previously our reserve forces were neglected, under-exploited and in decline. We welcome that being acknowledged and the commitment to a new relationship with reservists, families, employers and society, but it was interesting to hear the concern raised by the hon. Member for Basildon and Billericay (Mr Baron) that the current plan for our regular and reserve force numbers was an accounting exercise, not a strategic decision. I echo his request for answers on the costs that that bad planning has led to.

We heard from the hon. Member for Kettering about the deployment of reservists who are currently on patrol, and the importance of deploying troops while recognising the threats that we face. The hon. Member for Strangford (Jim Shannon) said that the world has changed and the goalposts have moved—and clearly they have. He noted that in that context, we have problems filling our full-time forces, and the issues that face our reserves are even more acute.

Our need to fill the reserve posts is clearly a key issue for our national security—I have noted that Trooper Hollobone agrees with me. It is vital to consider the impact on the lives of the people who serve in our reserve forces, because that has a direct impact on people deciding to enter the forces. We also need to consider the impact on their families and the longer-term impact on them, which we have not discussed much today.

We need to think about the interrelationship between our veterans and our regular forces, as my hon. Friend the Member for Dunfermline and West Fife (Douglas Chapman) stated. There is no doubt about the great work that both groups do, and they do it with huge determination and courage. That is appreciated hugely by all of us, I am sure, but as my hon. Friend said, in Scotland we see cuts and we have serious concerns regarding numbers. In September 2015, the number of military personnel in Scotland stood at a historic low. It is down 9.5% from the previous year. That is serious cause for concern. Undoubtedly, Scotland has served proudly. We were told clearly last year, during the independence referendum campaign, that our defence capabilities would be delivered by a force that included 35,000 reservists. That will now be a stretch, and the figure will not be reached until 2020, if indeed at all. As the hon. Member for Kettering said, we have 9,000 to go and it is a tough challenge.

In June this year, the Major Projects Authority in Whitehall rated the Future Reserves 2020 project as red. As my hon. Friend the Member for West Dunbartonshire (Martin John Docherty) said, that means that it is unlikely to be achievable. The Defence Secretary himself has admitted that it is a challenge, and I certainly agree. As my hon. Friend the Member for Dunfermline and West Fife highlighted, it would be particularly good to hear more from the Minister on that to get some clarity. We are clear that we need to prioritise having the air and naval capability to monitor and secure our country. We need to ensure that our oil and gas, fisheries and coastal waters are safeguarded. That needs resource in the shape of equipment, but also personnel, yet the UK Government persist in planning to spend £167 billion on nuclear weapons of mass destruction, which deter no one. Those vital funds could be spent better on our forces, including our reserves, and on ensuring that we are appropriately resourced to meet both regular and reserve requirements. The hon. Member for Kettering quoted the report as saying that budgetary issues cause a real risk to delivery. I agree and I question those spending priorities.

We heard from a number of hon. Members about the age profile, particularly of officers. This issue is crucial. We must take action to diversify the officer age profile and better to link service leavers with reserve opportunities. I echo the sentiment that the reserves forces are not a Dad’s Army. We must recognise the huge and diverse contribution that they make, and the increasing contribution that they could make if we recruit wisely. The hon. Member for Bridgend (Mrs Moon) made very important points about the vital and diverse skills that our reserves bring to the table. Having worked for many years in recruitment and retention, I urge the Minister to be cognisant of the issues in that respect, because as we go forward they will become more pressing and could cause difficulties in terms of our overall military footprint.

My hon. Friend the Member for Stirling (Steven Paterson) made important points about the reserve forces and the relationship between them and employers. I welcome the fact that funds are available for employers, and I urge the Minister to consider how we go further down the road of making it possible for people to live the double life that reserves must live.

It is important that we consider the welfare of our reserve forces. It is a difficult line that we expect them to tread, and we must ensure that proper support mechanisms are available for them. Clearly, reservists who require medical treatment must be able to expect that process to work in all the different NHS board areas, and all the different countries of the United Kingdom. In Scotland, our NHS meets the health needs of our reserve forces. It is vital that that can be relied on. Our Scottish Government and NHS have worked together very well to ensure that proper support is provided to our veterans.

I am very pleased that in Scotland we have raised the profile of the needs of our service personnel and veterans. We have NHS armed forces champions in every NHS board area in Scotland. That has allowed a real joined-up approach to effective joint working. Similarly, in our local authorities, our armed forces champions are making a real difference; they include two reservists. In my area, Jane Duncan, the East Renfrewshire Council veterans champion, is, with her team, making a significant difference to people’s lives in practical ways. Our reservists, service personnel and veterans deserve that kind of back-up from all of us.

To conclude, it is vital that we recognise our defence responsibilities, the interrelationship between reserve forces and regular forces, and our responsibilities to veterans—to people while they serve and after their service. We rely on them to do the hardest and most dangerous job there is, and we must support them in doing it.

10:37

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

It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate the hon. Member for Kettering (Mr Hollobone) on securing the debate. I start by paying tribute to the contribution of both our regular forces and our reserve forces. As a former Defence Minister, I have seen at first hand the contribution of both, and in Iraq and Afghanistan, the contribution that reservists made, not just in medical services but on the frontline, was sometimes overlooked. We ought to pay tribute to them.

The hon. Gentleman raised the important issue of ensuring that we monitor the Army 2020 process. He welcomed the Chancellor’s announcement yesterday of an extra £2 billion for special forces, but I ask him to look closely at the details, because as usual what the Treasury announces is not what it seems. If it includes the £1.5 billion that was already announced in the Budget, and if the extra equipment for the SAS is coming out of the 1% that has already been announced, it does not appear that there is any new money at all, so I ask that the hon. Gentleman look more carefully at that.

Importantly, the hon. Member for Strangford (Jim Shannon) highlighted, as he always does, the contribution made not only to the regular forces but to the reserve forces by people from his part of the world—Northern Ireland. We also had contributions from the hon. Members for Dunfermline and West Fife (Douglas Chapman), and for Stirling (Steven Paterson); the latter highlighted the important role of the reserves and the contribution that his constituency makes to recruitment to the reserve forces.

I was sad to see the Scottish National party then revert to its usual victim mentality; it argued that Scotland was not getting a fair share of its resources. As for the idea that the Royal Navy is not present in Scotland, I was the Minister who oversaw the relocation of the submarine force to Scotland, and I think that it has a large footprint in, and makes a large contribution to, Scotland.

The hon. Member for East Renfrewshire (Kirsten Oswald) argued that the non-replacement of the nuclear deterrent would free up resources. That is a myth, and she needs to explain to her constituents and voters in Scotland the economic black hole that would occur in the defence budget and the economic contribution to Scotland if that decision was taken. [Interruption.] The hon. Member for Stirling is chuntering from a sedentary position, but unfortunately the Scottish National party does not want to address the real issue of the contribution that defence already makes, not only to Scotland but to the entire UK.

The hon. Member for Basildon and Billericay (Mr Baron) has been consistent in his criticism of Army 2020. He put his finger on the problem with Army 2020, which is that it was not conceived from strategic need and thought; budgetary considerations and the Treasury were in the driving seat. In 2010, the strategic defence review argued for a reduction in the Army from 102,000 to 95,000. To meet budgetary restrictions, it was announced in July 2011 that the Army would be reduced to 82,000, with an increase in the number of reservists from 19,000 to 30,000. As the hon. Gentleman highlighted, the then Defence Secretary, the right hon. Member for Runnymede and Weybridge (Mr Hammond), said that the reduction in the regular Army would take place only if reservists filled that gap, but that has not been the case.

It is clear from the National Audit Office report of 2014 that the future size of the Army was determined not by strategic needs but by financial savings. The comments by General Sir Peter Wall, the former Chief of the General Staff, were quite revealing:

“I remember the genesis very clearly. It was a financially driven plan. We had to design a new structure that included the run-down of the 102,000 Regular Army to 82,000, which is pretty well advanced now, to follow a funding line that was driven by the austerity with which everybody is very familiar...It triggered the complete redesign of the Army”.

As he has told the Defence Committee on several occasions, the head of the Army was informed by the permanent secretary at the MOD what the future size of the Army would be. The former Defence Secretary made the point that the cost envelope was the driving force behind the proposal, not any strategic needs, and I believe that is the problem.

I do not in any way criticise the Minister for his determination or his enthusiasm for reservists, but we come back to the fundamental question of where the 82,000 figure came from. Unfortunately, it is being reinforced in the present defence and security review, and the fact that the Royal Navy and the Royal Air Force will have to take the bulk of the cuts seems to have been overlooked. There is an opportunity now to review not only Army 2020 but the entire strategic defence review process. Unfortunately, the Conservative party, having nailed the figure of 82,000 to the mast with its other electoral colours during the general election, will find it difficult to withdraw from that, but that fundamental review needs to take place.

Despite the valiant efforts of the Minister and those who are working hard in the MOD, there are still serious problems, as highlighted by the NAO. One of the most damning points highlighted in the report is the fact that recruitment targets are not underpinned by robust planning. Likewise, the IT fiasco has wasted some £70 million. I accept that some of those problems have been resolved, but it does not fill people with a great deal of confidence that the process will result in the targets outlined in today’s debate being met.

Another telling point comes from the MOD’s continuous attitude survey, which shows that among personnel who have been made redundant or left the forces, there is little appetite for joining the reserves; the figure was less than 17%. The hon. Members for Kettering and for Basildon and Billericay both made the point that the important thing is not numbers, but what we have in our reserve. If this is simply made into a numbers game, it will not necessarily translate into the capabilities that we need in the infantry, or tackle the severe shortages in Defence Medical Services that have been mentioned. I know from my time in the Ministry of Defence that those skills were vital to our deployment in Afghanistan. We need to think about not just numbers but the kinds of individual that we are recruiting.

An important point was made about the retention of reservists once they have been recruited. The hon. Members for Basildon and Billericay, and for Kettering, made the good point that if people do not feel challenged and do not feel as though they are making a contribution, they will not necessarily stay in and continue to contribute to the reserves. It is a waste of the resources put into the training and recruitment of those individuals if we retain them for only a short time, which is not cost-effective for the taxpayer.

There is an opportunity in the security and defence review to look at the 82,000 figure and ask whether the reserve recruitment targets—realistically, they are not going to be achieved—should be revisited. The Navy and RAF numbers will come under pressure, because for some unexplained reason the Conservative party in its election manifesto set the figure of 82,000 on a tablet of stone, not to be changed. That needs revisiting. Events over the weekend show that the threats we face change quickly, and that some of the skills that we need—in cyber, intelligence and other capabilities—must be procured in the regular forces, but the reserve forces can also make a contribution.

10:47

[The Parliamentary Under-Secretary of State for Defence (Mr Julian Brazier)]

What a pleasure it is to respond to the debate under your chairmanship, Sir Roger. I congratulate my hon. Friend the Member for Kettering (Mr Hollobone) on securing the debate and on his remarkable, predictably thoroughly researched and self-effacing speech. The debate takes place as we remember the first world war, in which the then Territorial Force won 71 Victoria Crosses, and the Battle of Britain, in which two of the three highest-scoring squadrons were from the Royal Auxiliary Air Force.

I will try to pick up as many points as I can in the short time available. My hon. Friend and the hon. Member for Bridgend (Mrs Moon), who had to leave to attend the Defence Committee, know that I am not allowed to respond to the points they made about special forces, beyond saying that my heart goes out, as I know theirs do, to the families of the three young men. I share my hon. Friend’s pride in the Conspicuous Gallantry Cross he referred to, which is the latest in a series of decorations won by the unit we both served in.

The expansion of the reserve forces is critical to our ability to deliver defence on a sustainable financial basis and to maintain the Clausewitzian trinity of the armed forces, the Government and the people. It will enable us to ensure that the armed forces are structured and resourced to meet the challenges of the 21st century. After many years of neglect, the Government are restructuring and revitalising our reserve forces and investing in new equipment and support.

The programme is not—my hon. Friend the Member for Basildon and Billericay (Mr Baron) and I have debated this many times—about swapping regular personnel for reserves. In 2010 we did, indeed, make some very painful decisions right across Government. After that, the commission on which I served looked at the issue of the balance and recommended changing the way that we delivered defence to make the best use of our resources, better to harness the talents of the wider UK society and, above all, to help to restore links and understanding between the armed forces and the communities that they serve. The sombre events in Paris remind us of the importance of those close links. We should be in no doubt at all that, whatever the size of our armed forces, we must always have reserves.

Now, the hon. Member for North Durham (Mr Jones) knows that he is not going to tempt me into anticipating the strategic defence and security review, but I can say that I am pleased to be part of a Government who are genuinely committed to 2% for defence spending, although I know I will not satisfy my hon. Friend the Member for Kettering on the legal point. Nevertheless, we are committed to it.

Our programme to grow the reserves is making good progress but, as my hon. Friend said, there is no room for complacency. In the year to 1 October, more than 8,500 people joined the volunteer reserves, an increase of more than 65% on the previous 12 months, taking their strength to more than 33,000. Most notably, 6,500 people joined the Army Reserve, an increase of 73% on the previous period. All three services are ahead of their trained strength targets, but that certainly does not mean that we can relax. We must continue to make further progress to meet our commitment of creating a force of around 35,000 trained volunteer reserves by April 2019, and to deliver the usable, motivated and capable reserve forces that the country needs. My hon. Friend is right that that means another 9,000 trained personnel in three and a half years’ time. Given that we have grown by 1,300 trained personnel in just the past six months, that seems challenging but not unattainable.

My hon. Friend is absolutely right—a number of other Members referred to this—that the biggest challenge is building the officer base. The internal study set up by the Chief of the General Staff and headed by a reserve brigadier has recommended considerable restructuring, including a marketing post manned by a volunteer reserve officer with huge marketing experience, who is now installed in Sandhurst. The numbers are going up. For example, just outside the constituency of the hon. Member for Stirling (Steven Paterson) is 71 Engineer Regiment, which I visited recently. It now has six young officers under 30—a transformation from even a couple of years ago. The same thing has happened with my local reserve unit.

A number of Members made a point about the need to get the age structure down. In fact, the largest concentration in the age structure of the Army Reserve is in the 25 to 29 category. We are working hard on it, but the averages are pulled up by the fact that we want older people—those in their 40s and even 50s—in areas such as intelligence and for some of the medical skills. A number of Members, including my hon. Friend the Member for Kettering, mentioned transfers from the regulars. Those are running above our target. In fact, that is the one part of reserve recruiting that has been consistently above target, and we are offering substantial financial incentives to those who transfer.

We are offering reservists today more challenging opportunities than before. New call-out powers enshrined in the Defence Reform Act 2014 have allowed us to use reservists in the same way as regulars, and reservists have taken up the challenge. We would only have compulsory call-out only in an emergency, but people join the reserves because they want to be used. In the past 12 months, they have been deployed, as my hon. Friend the Member for Kettering said, in formed groups to Afghanistan and Cyprus. They have provided specialist help to deal with the Ebola crisis in west Africa, and maritime reserves have taken part in counter-terrorist and counter-piracy operations alongside their regular counterparts. As my hon. Friend said, next summer a company from 4 Para will provide the framework company for the Falkland Islands.

We are offering reserves more and better training opportunities. In the current training year, the services have planned more than 50 overseas exercises involving reserves, including a series of Army exercises in Kenya with integrated companies of regulars and reserves. A number of Members referred to the crucial importance of the specialist courses in what we call phase 2 and 3 training and to the difficulties of tailoring those to reservists in civilian employment. The fact that Chatham has managed that for an area such as bomb disposal shows that this is possible more widely across the Army.

Several people, including the hon. Member for Bridgend and my hon. Friend the Member for Kettering, referred to the importance of cyber. For quite a long time, the only cyber-unit in the armed forces was a reservist one in the then Territorial Army. Today, reserves play an important role in cyber in all three services.

We have invested in new equipment. We have given reservists access to the regular pension scheme and a paid annual leave entitlement. We are giving them full access to Defence-provided medical care and physiotherapy, which, as my hon. Friend the Member for Kettering will remember, was an issue when he and I served. We have improved civilian accreditation for training. Employers are vital and we are immensely grateful for the commitment some of them make.

[Mr Baron]

No one in this Chamber doubts the dedication, hard work and enthusiasm that the Minister is putting into the task of increasing the reserve forces, but he must also accept that key questions remain unresolved, including the age profile of the infantry. We all accept the age profile when it comes to reservists and specialisms such as cyber, but the age profile of the infantry is still far too high—mid-30s and early 40s. May I return the Minister to the central issue of extra costs? There have been extra unforeseen costs with these plans, which, despite frequent requests to the Government, he and the Government are unable or unwilling to disclose. Does he intend—if not here today, then perhaps in the immediate future—to put that right?

[Mr Brazier]

I have written to my hon. Friend and I will write to him again. The ongoing costs of the recruiting process have shown some significant savings, but it is difficult to separate regulars and reserves because they are in the same contract. If he is referring to the contingency costs of deploying reserves on operations, there is a cost associated, but it is a cost that is paid for only when there are large-scale operations. The point about reservists—as the hon. Member for East Renfrewshire (Kirsten Oswald) said, if I heard her correctly—is that it is very much cheaper most of the time to have part of the forces in reserves.

We have established the defence relationship management service, to which 42 of the 100 FTSE companies are now signed up. I have already mentioned the extra benefits for small and medium-sized enterprises. Crucially, we have set up an annual employer notification process, so that employers know a long way in advance when reservists are being called. That is crucial for retention, which so many Members referred to.

My hon. Friend the Member for Kettering set out the progress we have already made on the employer recognition scheme, which includes many NHS trusts. We are not in a position to dictate this, although I pay tribute to the Scottish Government, who run a more unified system and are able to dictate. Many hospital trusts have won employer awards. The Cabinet Secretary has the 1% challenge; we now have 1,250 civil servants serving in the reserves. These are at the heart of the retention issues. I cannot give the exact figures for medical reserve recruiting at the moment, but I can say that over the past 12 months the Army medical services, which are the bulk, have seen a considerable surge in numbers. I will write to my hon. Friend and to the other Members who raised that issue with some more detailed figures.

We have overcome a number of challenges that were affecting Army Reserve recruitment. We are making more imaginative use of advertising media, and we have hugely reduced the delays in the pipeline under the new system and provided better mentoring and support in units for those enlisting.

I thank all Members who took part in the debate and the many other Members who support their local units. Our reserves are stronger and better equipped than they have been for years. Despite the neglect, over the past 10 years, 70 reservists won decorations for gallantry in Afghanistan and Iraq, and 31 gave their lives. There is a great deal that we can be proud of in our reserve forces. We are making the reserves proposition that we set out in the 2013 White Paper a reality.

10:59

[Mr Hollobone]

All of us who have taken part in the debate want the Government’s reforms to our reserves to work. All of us recognise that this is a huge challenge. I am confident that the Minister is the right man in the right place at the right time, and I look forward to him fulfilling the challenging task that he faces.

Motion lapsed (Standing Order No. 10(6)).

M56 (Junctions 12 to 14)

Tuesday 17th November 2015 Westminster Hall

[Sir Roger Gale (in the Chair)]

Before we begin, I notice that hon. Members are present who, geography suggests, might have a constituency interest. I have received no notice of any other speakers having been agreed with the Minister or the Chair, but if hon. Members wish to intervene, they may do so with the consent of the hon. Member in charge of the debate.

11:00

[Graham Evans (Weaver Vale) (Con)]

I beg to move,

That this House has considered Junctions 12 to 14 of the M56 motorway.

It is a pleasure to serve under your chairmanship, Sir Roger. I have secured this debate because I have serious concerns about the stretch of motorway between junctions 12 and 14 of the M56, which is a major motorway in its own right that links three other motorways—the M6, the M60 and the M53—connecting Cheshire, north Wales and Greater Manchester. The M56 eventually becomes the A55, which continues to Holyhead, providing the single most important transport link for moving freight into and out of north Wales.

Accidents happen all too often on the M56, particularly between junctions 12 and 14, which is the stretch that runs alongside the important communities of Helsby, Frodsham, Sutton Weaver, Preston Brook, Norton and Beechwood in my constituency of Weaver Vale. There is a long, straight stretch of motorway between junctions 12 and 14, running east-west from Runcorn to Chester. There are services at Hapsford, but there is very little technology or electronic signage alerting drivers to potential hazards ahead. The purpose of this debate is to try to get technology on that stretch of motorway.

This is a busy stretch of motorway, with more than 120,000 motorists using the M56 each day and just short of 10,000 vehicles passing through junctions 12 and 14 in both directions during the 5 pm to 6 pm evening rush hour, with even more using the same stretch between 7 am and 8 am during the morning commute. I routinely use the M56 when attending engagements around Weaver Vale, and my constituency office is located off junction 11 at Sci-Tech Daresbury. I therefore have first-hand experience of the challenges that motorists face along the M56.

The section of motorway between junctions 12 and 14 is predominantly east-west, and the setting sun can have knock-on safety implications, particularly at this time of year, or when inclement weather makes it difficult for drivers to see. There have been a number of incidents in the past 12 to 18 months. Sadly, some of those incidents have been extremely serious and have had a devastating effect on the local community. Last month, the police declared a major incident and shut the motorway in both directions from junction 14 to junction 11 after a chemical tanker overturned on the eastbound carriageway near Helsby, just past junction 14.

[Justin Madders (Ellesmere Port and Neston) (Lab)]

I am grateful to the hon. Gentleman for securing this debate on an important issue that affects not only his constituency but mine. Junction 14, of course, is just within the boundary of Ellesmere Port and Neston, and we have Members here from other constituencies in the wider area that are also affected. He has clearly set out some of the issues. Statistics reveal that the number of incidents on this stretch of motorway has doubled in the past four years. Does he have any thoughts or theories as to why we have seen such an increase in serious incidents on this stretch in recent years?

[Graham Evans]

I welcome the help and support of the hon. Members for Ellesmere Port and Neston (Justin Madders), for City of Chester (Christian Matheson), and for Halton (Derek Twigg), and I look forward to working with them. There have been issues on this stretch of the M56 for many, many years. Indeed, as the hon. Member for Halton will know, junction 12 is currently under pressure from severe roadworks. As I will say later in my speech, the Mersey Gateway bridge is also adding pressure, so there are factors that may be regarded as temporary, but that does not detract from the purpose of this debate, which is to get smart technology installed on the whole stretch between junctions 12 and 14. I will explore the short-term measures that could alleviate the problems, but I am looking for significant investment in the whole area for a long-term solution.

There were eight casualties in the recent accident, and five were treated by the North West ambulance service, which does a fantastic job, at Hapsford services off junction 14. Three casualties were taken to the Countess of Chester hospital, but they have all since been released. A secondary collision on the eastbound carriageway occurred at 8.31 pm that evening involving a car transporter and a car, which resulted in a 24-year-old man, a 26-year-old man and a one-year-old baby boy suffering serious injuries.

The motorway was closed for several hours following the tanker crash last month as an investigation was conducted to ascertain the nature of the chemical carried by the tanker. In the meantime, a 1,500-metre cordon was established that also shut down the Holyhead to Manchester railway line. Mid-Cheshire was brought to a complete standstill, and commuters were left stranded, unable to travel by car or rail. I understand why there are very strict safety protocols that must be followed in the event of a chemical spillage, but for some reason the investigators were not able to contact the chemical company to ascertain the contents of the tanker. I am looking into how that came about.

Last year, an empty bus collided with a car and two heavy goods vehicles near junction 12. Police and fire and rescue teams attended the scene and tried to cut a man and a woman out of two different vehicles. Sadly, both the man and the woman were declared dead at the scene. These are not isolated incidents. Accident rates have worsened since 2013, as the hon. Member for Ellesmere Port and Neston highlighted, with accidents clustered around the junction 12 exit slip road and the chevron-marked area between Runcorn and Frodsham all the way through Hapsford services at junction 14. There have been more than 160 road traffic collisions on this stretch of motorway since 2011, more than 50 of which have caused either injury or death.

Unhappily, there was a significant tanker fire in August in the vicinity of junction 14, which prompted me to organise and facilitate a multi-agency meeting in October in response to the increasing frequency and seriousness of the incidents. Present at the meeting were senior representatives from Highways England, Cheshire constabulary, the Mersey Gateway company, Halton Borough Council and Cheshire West and Chester Council, and I made it clear that the meeting was the start of an ongoing process to ensure that we address all the concerns of constituents across the area affected. A number of issues and potential initiatives were explored, such as the introduction of smart motorway technology, enhanced cameras, improved advance notice of incidents and electronic signposting. We also discussed how the various agencies respond to incidents, both in the immediate aftermath and as a situation unfolds, such as the use of carriageway gates to release trapped drivers. Our principal objective was to identify key issues; consider solutions and seek to introduce them in an effective and timely manner to minimise the possibility of accidents recurring; and reduce disruption when accidents occur. At the meeting, a Highways England representative informed me that, two years ago, it considered an alternative traffic management plan for when this section of the M56 is seriously gridlocked, but that plan has not yet come to fruition. I urge the Minister to ensure that the plan is revisited as a priority.

[Derek Twigg (Halton) (Lab)]

As the hon. Gentleman knows, this is a serious issue of concern in Halton. What evaluation has there been of these accidents? At what time of day do they happen? In what weather do they happen? Were mobile phones being used? Has there been a road safety audit of this stretch of motorway? If so, what was the result and what was done about it? There have been cuts to incident support units, which is an added factor in being able to get to such incidents quickly.

[Graham Evans]

The hon. Gentleman raises serious and important points, some of which I raised with Cheshire constabulary. I was somewhat disappointed with the response. Cheshire constabulary looks at every accident; it says that there is no connection, and that they are individual accidents with no linked contributing factors. I agree with his underlying point, because I think there is a connection: the east-west aspect of the motorway and the timing of these accidents when the sun is setting at rush hour.

A further point raised at the meeting was the use of carriageway gates, which I touched on briefly earlier. Several reservations along the M56 have carriageway gates that can be opened to release trapped drivers. They are located roughly every 2 km, and the keys are kept centrally and delivered to the relevant personnel when needed. Keys are now kept on all Highways England vehicles, which is a definitive step in the right direction, although the challenge in using the carriageway gates remains in getting the appropriate personnel in place to close and monitor a lane on the opposite carriageway so that traffic can be released from the affected carriageway. I was interested to note that the keys were not carried in the vehicles; I found it quite amazing. Apparently they are now. I look forward to working with the relevant agencies and the Minister over the coming months to discuss how we can achieve that more readily on that stretch of motorway.

There is little digital signposting along this stretch of motorway to alert motorists to incidents or danger ahead. I have made it clear that I fully support the introduction of smart motorway technology to improve safety and traffic flow. The introduction of smart motorway technology is planned for junctions 6 to 8 of the M56 and junctions 5 to 11 of the M53, and I have been campaigning for similar technology along the stretch between junctions 12 and 14 of the M56.

The key to preventing the build-up of tailbacks following an incident is moving vehicles away from the area as quickly and safely as possible. The M56 between junctions 12 to 14 is unfortunate in that it has few trunk roads that can handle overspill traffic when an incident occurs. The main route at present is the A56, which goes through the residential areas of Frodsham and Helsby and has numerous pedestrian crossings, making it unsuitable to cope with the volume of motorway traffic following a severe accident on the M56. I would be interested to know whether it is possible to bias the timing of pedestrian crossings in favour of traffic flow when an incident occurs, to help relieve tailbacks faster.

The Government have already invested heavily in the area. Work has been undertaken to improve safety and traffic flow on the motorway; £2.3 million in improvements have been made to access roads on junction 11. The works include installing signals on the roundabout, widening the carriageway at key locations on the roundabout, constructing an additional lane on the M56 westbound exit slip and constructing an additional lane on the A56 approach to the roundabout, as well as resurfacing and road marking. The scheme was opened fully in September. As part of the Government’s road investment strategy for my area, work was announced last December on junction 11A to connect the M56 with the A533 at Runcorn to create a new, improved link with the M56 to the new Mersey Gateway bridge, which is under construction.

Likewise, improvement works are being undertaken on junction 12 to link up the Mersey Gateway bridge, which might or might not contribute to some of the accidents around junction 12. Part of the knock-on effect of the improvement works has been an increase in use of roads through Beechwood, including Halton Station road. Very big HGVs and coaches are using that small, residential one-way street, and my constituents are concerned to know what can be done to alleviate the problem.

The works at junction 12 finished yesterday, on time. I am not criticising the workers and their work; they work hard, and they are doing a good job. When complete, the Mersey Gateway bridge and the improved access to the M56 will undoubtedly ease congestion in the area. Likewise, I was delighted when my right hon. Friend the Chancellor confirmed that the Halton curve scheme will be part of a joined-up transport strategy for Weaver Vale, mid-Cheshire and beyond. I have worked closely with the Chancellor, the Department for Transport, Merseytravel, Cheshire West and Chester Council, Halton Council, the North Cheshire Rail Users Group and north Cheshire rail users to ensure that funding for this important transport link is delivered. The Halton curve is a game-changer for the area, providing a direct link for Frodsham, Helsby and Runcorn—areas running alongside the M56. It provides essential potential to ease traffic congestion in those areas by taking commuters off the M56 altogether.

[Justin Madders]

What the hon. Gentleman says about the Halton curve is important. Obviously, increased rail services will be needed to reduce the pressure. An issue raised with me by constituents is the convergence of different sets of traffic from Wales, Merseyside, Chester and Cheshire Oaks, as well as the heavy industrial traffic entering at junction 14 from Elton, Stanlow and Quinn Glass. Does he think that there is an opportunity for some of that industrial traffic to go by rail as well?

[Graham Evans]

The hon. Gentleman raises some good points; perhaps that is a subject for another debate in the House. I totally agree. Electrification of north-western rail, and electrification generally, are part of the northern powerhouse, as is a deep-water port in Liverpool connected to a railhead. We have an opportunity to get a lot of the products of the valued heavy industries in our constituencies on the railway. It is a massive infrastructure project, but perhaps we can work together to get freight off the M56.

The hon. Gentleman highlights an important point: in order to import and export from Holyhead along the A55 from north Wales into Manchester and the north-west generally, we must improve not just the M56 but transport infrastructure generally, creating a linked-up service. Commuters are important. Disruptions and road closures on the M56 sometimes include closure of the railways, which has a far larger knock-on effect on constituents across Cheshire and north Wales.

Each incident is an incident too many. Injuries and fatalities cause untold devastation to the families of loved ones affected; they have long been calling for action on this stretch of the road. Something can and should be done about this. We cannot leave things as they are and allow more families to suffer. I firmly believe that the increasing frequency and serious nature of incidents warrant close inspection and action.

Although my main priority in calling this debate was to bring to light and discuss ways to make this section of the road safer, the other aspect is the huge delays and disruptions in surrounding areas caused by incidents on the motorway. If the motorway snarls up, many people hop off and go down the A56, causing huge traffic jams, as I highlighted earlier, through residential areas such as Sutton Weaver, Frodsham and Helsby. It makes everyday life difficult for residents near the motorway.

In the two years between 2012 and 2014, the average incident length on the eastbound carriageway increased by 10 minutes to 32 minutes. However, over the same period, on average, the incident length on the westbound carriageway has doubled from 30 minutes to 60 minutes. The M56, like the new Mersey Gateway bridge and the Halton curve, are integral to the delivery of the northern powerhouse. I am committed to securing the best possible infrastructure facilities for Weaver Vale and the surrounding area.

I look forward to continuing to work with the Minister and the agencies that I mentioned earlier, and to working cross-party with my parliamentary colleagues throughout Cheshire, north Wales and Greater Liverpool to discuss how progress can best be achieved in a timely manner, and how we can improve safety and reduce disruption along this important stretch of the motorway.

11:17

[The Parliamentary Under-Secretary of State for Transport (Andrew Jones)]

It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate my hon. Friend the Member for Weaver Vale (Graham Evans) on securing this debate on road safety, an issue I know he champions consistently. I am grateful for the opportunity to update the House on current and planned action between junctions 12 and 14 of the M56.

I know that my hon. Friend is concerned about the number of incidents on this stretch of the strategic road network. He has made his case eloquently and I want to reassure him and the House that I take safety seriously. I share his concern that some of the incidents have resulted in serious injuries and, sadly, fatalities. Highways England is already investigating the reasons for that worrying trend, examining the data in depth to see whether any trends emerge in terms of causation factors. It is too early to say at this point what final measures the review might identify or the time scales for implementing them, but I will ensure that that is given priority and that Highways England is aware of the concern in the House, which is shared by colleagues on both sides.

[Derek Twigg]

Has the Highways Agency carried out a road safety audit? If not, why not? If it has, what were the results?

[Andrew Jones]

I thank the hon. Gentleman for that intervention. He has been assiduous in asking about safety on the M56 and he will recall that I wrote to him about it in September. I assure him that safety is a top priority for the Department and for Highways England. The investigatory work is ongoing and I will make sure that the results of that work are shared openly and given appropriate priority by Highways England. I will also make sure that a report of this debate is sent to Highways England with immediate effect.

I will say a little about the long-term investment in the road network. We are taking a strategic and long-term approach to planning our network and we are providing stability of funding for Highways England, so that it is better able to plan its investment in the network. My hon. Friend the Member for Weaver Vale will recall that the first road investment strategy, which Highways England is now delivering, includes a commitment to invest in stretches of the M56, including the new junction 11a to link the M56 to the A533 at Runcorn, creating an improved link to the new Mersey Gateway bridge from the south.

The first RIS was informed by a comprehensive review of the entire strategic road network through a series of route strategies, prepared at that time by the Highways Agency. The pressures and needs of the M56 were assessed as part of the broader south Pennines route strategy. Such route strategies marked the first time that the needs of the strategic road network had been comprehensively assessed, link by link and junction by junction. I am pleased to advise my hon. Friend and indeed the House that such an assessment of the M56 and other parts of the network is not a one-off.

We are developing the process for preparing a second RIS, which will cover the period after 2020. A key part of the evidence base will be Highways England’s next iteration of these route strategies, which it will use to identify the current and future constraints that the performance of the strategic road network places on economic growth. It will then use this information to identify how future delivery and investment plans might address and remove those constraints. As we take the local route strategies forward, I think we will see greater collaboration with local authorities, local enterprise partnerships and other local stakeholders to determine the nature, need and timing of the future investment that the network requires.

To inform the second RIS, Highways England will begin to develop the next round of route strategies with a view to publishing them at the end of 2016-17. I want to change the process a little bit for our second RIS, to make it far more open and to ensure that colleagues here in the House are able to contribute to it with their suggestions. There is no shortage of ideas about the improvements that are required across our network and I want to make sure that colleagues get a chance to contribute to, inform and shape the strategy.

[Justin Madders]

I think we will all be grateful for the opportunity to make an input to this process for investing in the network. Will the investment plan also consider the day-to-day operational costs and expenses of running the network? The hon. Member for Weaver Vale (Graham Evans) highlighted the increase in the time taken to deal with incidents, and my hon. Friend the Member for Halton (Derek Twigg) mentioned the reduction in the number of incident support unit officers. Will some consideration be given to reinvesting in incident support units, to alleviate the impact of collisions on the whole network?

[Andrew Jones]

Road investment strategies are focused upon capital, but I am acutely aware that in certain cases capital brings with it revenue implications, and we consistently hear arguments about that. Today, however, I am talking specifically about capital investment.

I expect to make announcements about RIS2 and the process for it within the next few weeks. I expect that the assessment of the M56, as part of the route strategy work, will include consideration of any further safety-related measures, as well as consideration of whether or not to upgrade this section of the motorway to a smart motorway. I noted the support of my hon. Friend the Member for Weaver Vale for smart motorways. They work by using technology to control traffic and to vary speed limits, with detectors in the carriageway that monitor the flow of traffic. I have seen these smart motorways being introduced up and down the country, and they have been highly successful. I have also noted that colleagues have expressed support for them on many occasions in other debates. These solutions are very much long-term solutions, and if a decision is made to upgrade this section of the M56 to a smart motorway, it may be that the construction work could commence after 2020, but I assure the House once again that as we develop RIS2, safety will be central. It is one of the key requirements in the first RIS and it will continue to be a priority as we develop our plans.

In the meantime, I recognise the importance of minimising the disruption to road users when incidents occur. Highways England is considering, subject to final funding decisions, improving technology around the junction of the M56 and M53, known as Stoak interchange, or junction 15 of the M56. There are plans to install portable variable message signs at this junction. When an incident occurs on the M56 that results in severe congestion or even a closure, Highways England’s north-west regional control centre would be able to activate these signs, which would highlight the problems ahead and advise motorists to look for alternative routes, for example a signed diversionary route.

On a different issue, I notice that my hon. Friend has an online campaign to support quieter road surfacing on the M56. I fully understand his concern, and he has spoken powerfully on behalf of his constituents. Like all colleagues, I recognise how distressing traffic noise can be. It can be extremely loud, even if it is a clear fact that road surfaces have improved significantly in recent years. As a Minister with responsibility for roads, I am taking a great interest in asphalt technology and bitumen. I am keen to impress on my officials the importance of working with the sector, particularly contractors, on bitumen research and development to deliver better surfaces and quieter roads. Such work is a part of improving our road network, including its durability and safety. I have also received a very interesting presentation on this subject from Shell, which then kindly presented me with “The Shell Bitumen Handbook”—a surprisingly large tome.

I understand that my hon. Friend has been out with Highways England to see some of the resurfacing work on the network, and I commend him for that. Of course, road surfaces can help to reduce noise levels, but it is not just the road surface that highway authorities should consider to mitigate the noise for residents living close to a busy road. There are other measures that can be taken, such as erecting noise barriers, walls or noise embankments.

I will quickly mention the local road network. The Government are providing local authorities with £6 billion between 2015 and 2021 to improve local roads. This certainty of funding will ensure that local authorities can plan ahead and use cost-effective and sustainable materials for their roads to mitigate excessive road noise. I am pleased that local residents close to the M56 will benefit from the resurfacing of the westbound carriageway with a material that makes less noise than the material used in 2014. I think they will be reassured to know that Highways England will consider resurfacing the eastbound carriageway within the next two to three years.

Finally, my hon. Friend and the House will recognise the benefits for the region that will result from the plan to relieve build-up in and around Runcorn, and the new junction 11A, which forms part of the Government’s commitment to the northern powerhouse. Rebalancing the economy by creating a northern powerhouse is part of our long-term economic plan. Our objective is simple: it is to allow the north to pool its strengths and to become greater than the sum of its parts. That plan puts transport right at the heart of the agenda. We are making huge progress. By committing £13 billion to transport across the north in this Parliament, we aim to capitalise on the success of transport investment in London to create the northern powerhouse, which will be a second powerhouse region in the UK.

Rail investment has been mentioned, but I think that is a subject for another day.

I thank my hon. Friend the Member for Weaver Vale for all he does in championing his constituency, and I hope that he is reassured that the Government are listening. A fantastic level of investment is going into our transport infrastructure, now and in the future. Safety is at the heart of that investment and it will remain so. My hon. Friend made some specific points and I will write to him with detailed responses, but I assure him that road safety is at the heart of our plans. In fact, the first piece of work that I commissioned as a Minister was on road safety, which I hope indicates my personal commitment to the subject. I thank all Members for their contributions to this debate.

Question put and agreed to.

11:29

Sitting suspended.

Guaranteed Income for Retirees

Tuesday 17th November 2015 Westminster Hall

[Mr Clive Betts in the Chair]

14:30

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

I beg to move,

That this House has considered Government policy on guaranteed income for retirees.

It is a pleasure to serve under your chairmanship, Mr Betts. It is also a pleasure to see the Economic Secretary here to respond to the debate, given the popularity of pensioners to the Government and to the rest of us. I know there is always some conflict between the Department for Work and Pensions and the Treasury regarding who has responsibility for such matters.

I am delighted that we are having this debate. We in the Scottish National party believe that the Government have a duty of care to ensure that our elderly population has security of income in retirement, and healthy and fulfilling lives. The Government should also ensure that they carry on as much as possible of the progress made in the last few years in ending pensioner poverty. I want to focus specifically on the pension freedoms that were introduced in April of this year, and the responsibilities that we in the SNP believe the Government should have for pensioner protection.

We in the SNP support many of the measures introduced over the last few years to encourage and enhance the growth of pension saving, while recognising that there is still some way to go before we reach a level of saving that matches the desire of many of our citizens to have an adequate level of income in retirement. To that extent, we support auto-enrolment and look forward to taking part in the debate over the coming months and years about how it can be strengthened, based on the three pillars of individual, employer and Government incentives to engage in pension saving.

It is in that regard of encouraging pension provision that we should take stock of the pension freedoms introduced in April and, in particular, consider what steps might be appropriate to ensure that the principle of securing an income in retirement is supported and fostered. When pension freedoms were introduced, the Chancellor of the Exchequer said that people

“should be trusted with their own finances”.—[Official Report, 19 March 2014; Vol. 577, c. 793.]

Although that is an admirable aspiration, it must come with the recognition that there has to be protection from pensioners aggressively running down pension pots to the extent that pensioner poverty could creep back on to the agenda. We should be mindful of the fact that a pension is a deferred income. It is not a cash machine, but is there to deliver security in retirement.

The untested nature of the pension reforms poses a potential risk to individuals and to the state. It is essential that the Government closely monitor consumer outcomes and identify risks to the state and to individuals over the longer term.

In the context of this debate, the Strategic Society Centre published a paper in July year entitled “Income, Security and Wellbeing”. The report was commissioned to explore the potential impact on people’s retirements of lower private pension incomes that might result from the freedom of choice changes. The Strategic Society Centre undertook quantitative research, looking at how the level of guaranteed income affects people’s experience of retirement. It found that, regardless of the level of someone’s financial wealth, the level of guaranteed income is significantly associated with various aspects of wellbeing and leisure, including going to the cinema, reading a daily newspaper, taking a holiday and participating in community groups and other activities. The study also found that income is associated with how people feel about their life and whether they report, “The conditions of my life are excellent,” and “I have got the important things in life that I want.”

In the light of the research findings, the Strategic Society Centre set out a number of policy recommendations, including the need for the Government to actively

“promote receipt of a guaranteed income in pension policy to improve the wellbeing of retirees. Educate savers before retirement about the role of guaranteed income for a good retirement. Include information about the importance of guaranteed income to wellbeing in retirement in Pension Wise guidance and information. Ensure receipt of a decent, guaranteed retirement income is the default option for DC”—

defined contribution—

“pension savers. Undertake regular research into the effect of the April 2015 changes on older people’s wellbeing.”

The Strategic Society Centre study has been followed up by a study into pension flexibilities by the Social Market Foundation, which has left me increasingly concerned that the Government have not yet put in place adequate safeguards for older people opting to free up pension assets.

With life expectancy increasing and savers gaining unprecedented access to their pension savings, the Government have an obligation to oversee individuals planning ahead and to support society to plan for the future by making the public aware of the importance of securing a guaranteed income for life. As I have said, pensions are a deferred income and should not be seen as a cash machine. We in the SNP are not against people having an element of choice, but there must be a guaranteed income before funds can be drawn down, to protect individuals in later life.

Before April 2015, 75% of people with defined-contribution pension schemes used them to purchase an annuity. We should also recall that the opportunity existed for pensioners to take up to 25% of their pension pot as a tax-free lump sum. That mixed ability to draw down cash and to secure a regular income is still, to us, far and away the most attractive option for most pensioners. A key advantage of annuities is that they provide a guaranteed income throughout retirement, protecting individuals from longevity insurance and investment risk. However, annuities have become unpopular with some consumers, partly because annuity rates have fallen, but also because of reports by important bodies such as the Financial Conduct Authority, which have highlighted ways in which the market has not always worked well for consumers. Also, many prospective pensioners did not shop around, and whether consumers were getting value for money was therefore a cause for concern. We acknowledge all those things. There was, and is, a case for reform, but in our opinion the challenge was to enhance the market for annuities.

Many people welcomed the principle of increased choice introduced by the Government, but there were also concerns that that would bring with it a significant burden of responsibility on individuals to understand the complexities of the choices they were making, leaving them to bear the risk that the value of their savings might fall and that they might even exhaust them prematurely, leaving them dependent on the state pension later in retirement.

There is also the potential for scamming. The report of the Select Committee on Work and Pensions, entitled “Pension freedom guidance and advice”, states:

“Readier access to pension pots combined with the difficulties consumers have in making decisions regarding retirement finances mean that the pension freedom reforms have increased the potential for scamming.”

Regulators are also working to raise awareness. The FCA has launched the ScamSmart campaign and has taken enforcement action in a number of cases.

I acknowledge that the Government’s establishment of Pension Wise is an important step, but take-up of the service has been limited. The Work and Pensions Committee recommended that the Government urgently redouble their publicity efforts about pension scams and that the FCA tighten its scam awareness and reporting requirements for regulated firms.

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

I congratulate the hon. Gentleman on securing this timely debate. He mentioned that there have been abuses since the new pensions regulations came into effect, and it is right that the matter should be looked at. He is also right that there should be some guarantees and better policing. In the past people took out annuities for mortgages, and I am sure we all remember the mortgage scandal. Does the hon. Gentleman agree that there is a real danger that the same thing could happen in this case unless there is proper policing and regulation?

[Ian Blackford]

I thank the hon. Gentleman for his contribution. I agree that all of us in this House have a responsibility to ensure that an adequate level of protection is in place for consumers. We must learn from the large number of mis-selling scandals that have happened over many years. I am concerned that, as things stand, there are not yet adequate safeguards in place to protect consumers from the changes.

The Work and Pensions Committee described the scarcity of information about Pension Wise as being

“not conducive to effective scrutiny”

and asked the Government to publish statistics on a quarterly basis, including on the take-up of the different channels of guidance and advice, and on the reasons for not taking them up. The FCA claims that eight out of 10 savers would have got a better deal if they had shopped around when choosing the best product for retirement. That illustrates another reason for clear, understandable, accessible guidance for consumers. The untested nature of the reform demands close monitoring and data collection.

[George Kerevan (East Lothian) (SNP)]

I, too, congratulate my hon. Friend on securing this debate. To add to what he has said, when I questioned the FCA in the Select Committee on the Treasury, they said they were worried that not enough time had been given for new products to emerge for savers drawing down their pension pot. The Chancellor announced the change rather precipitously, and a longer timescale might have allowed those new products to emerge.

[Ian Blackford]

I agree with my hon. Friend, although I come back to the fundamental point that what we need is reform of the annuity market. I am not sure that the products that may come to the market over the coming period will do what we need them to do, in allowing the level of consumer protection and choice that we are talking about.

Witnesses to the inquiry by the Work and Pensions Committee, such as the Financial Services Consumer Panel and the Pensions Policy Institute, said that it was essential to enable the policy to develop in the light of experience. The Committee recommended that the Government publish regularly data encompassing

“customer characteristics including pension pot size and other sources of retirement income…take-up of each channel of guidance and advice…reasons given for not taking up guidance and advice…subsequent decisions taken; and…reasons given for those decisions.”

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

I congratulate my hon. Friend on securing this debate, which is extraordinarily timely. Does he agree that there is a particular challenge with the gender divide? Women in particular are exposed to difficulties, largely because their pension pots tend to be smaller. Added to that, the Women Against State Pension Inequality campaign pointed out that after the Pensions Act 2011, some women born in the 1950s were given little notice and utterly inadequate guidance in preparation for the sudden extension of the retirement age. Does my hon. Friend agree that, because of that and the inadequate information on pension freedom, women are exposed to particular risks?

[Ian Blackford]

Yes, I do, and I was going to come to the issues of gender, because they are important in the context of this debate. My hon. Friend makes some reasonable points. When we talk about the risk of pensioners exhausting their pension pot, we know that that is particularly true for women, given two factors. He alluded to the first, which is that women in general tend to have smaller pension pots. They also tend to have longer life expectancy, and there are particular issues in that regard. The second factor relates to the reforms to the state pension, which I argue have not allowed for a significant length of transition, thus yet again exposing women to a much greater extent than men to the negative side of the changes. I would like to see the House come back to that debate.

The Financial Services Consumer Panel and the Pensions Policy Institute called for a rolling research programme to tackle the longer-term consequences of pension freedom decisions. Some organisations have called for action to require providers to offer default options for people who do not make a decision. The Pensions Policy Institute has argued that that would mean people being offered something with an element of life expectancy insurance that would kick in at some point when they get older.

We must learn from experience elsewhere. The Social Market Foundation has looked at overseas experience to see whether there are lessons for the UK. The SMF report, “Golden Years? What freedom and choice will mean for UK pensioners”, modelled the potential long-term outcomes for UK retirees based on outcomes in Australia and the USA. It looked at three scenarios: a “cautious Australian” who decumulates their pension wealth by less than 1% a year; a “quick-spending Australian” who decumulates very quickly and exhausts their pot by the age of 75; and a “typical American” who draws down his pension pot by 8% a year. The report’s key findings include the conclusion that:

“UK retirees are at risk of pension pot exhaustion.”

Those who follow the “typical American” path or the “quick-spending Australian” path would on average exhaust their pot by retirement year 17 and year 10 respectively.

Retirees are at risk of low replacement rates. Retirees who over-consume in early years of retirement may enjoy a rate of income closer to their working income for some time, but will then face much lower rates later in life. Retirees are at risk of low incomes. The new state pension and pension credit mean that retirees are at a low risk of falling into poverty, but retirees are at substantial risk of falling below the 70% median low-income threshold in later life if they spend their pensions quickly.

Preservation of pension wealth is possible through under-consumption, but has big drawbacks. The “cautious Australian” path results in a very low risk of running out of pension wealth, but means that people would receive very low levels of income as a consequence. That can mean a reduced income and lower replacement rate, as well as subdued demand across the broader economy. Retirees face variation in investment returns and uncertain incomes. Investment returns can result in huge variations in incomes in retirement and in the age at which pension savings run out. There are significant risks to the state as a consequence. Decumulation paths could also mean fiscal risks to the state associated with the costs of increased claims for means-tested benefits.

[Mr Jim Cunningham]

The hon. Gentleman is being generous in giving way. What he is saying prompted a thought in my mind: if pensions are mishandled by individuals, we get a problem later in life with the need to pay for care, which adds to pensioner poverty. People are struggling to pay for care, but pensions freedom could make that worse if it is not regulated properly.

[Ian Blackford]

The hon. Gentleman is absolutely spot on. One of the examples given in the SMF report is of an individual with a pension pot of £184,000. Many people would consider that to be a reasonable sized pension pot. However, based on the behaviours I have described, it would not be unexceptional for them to exhaust such a pension pot and have to rely on the state in later life for support, particularly with council tax and care costs. That is why, for two reasons, this is such an important issue for us to discuss: first, because we are exposing the consumers of this country to risk; and, secondly, because we run the risk of placing an additional burden on the state as a consequence.

Specific sub-groups are also exposed to enhanced levels of risk. Those sub-groups include women and early retirees who are likely to face a longer period of retirement; those without other savings or assets to fall back on, particularly non-homeowners; and those with defined-contribution pension savings only, who will not have other private income to top up their budgets. The report recommends that the Government develop an early warning system to monitor closely what retirees do with their pension savings and identify risks to groups of individuals and to the state. That would involve the creation of a retirement risk dashboard to help the Government to monitor retirement decisions and to provide a view on long-term outcomes for consumers and the state. By establishing personal pension alerts, it would also allow for policy makers to intervene where appropriate with the sub-groups the Government have identified as being at particularly high risk.

The level of uncertainty about the impact on savers is concerning. The Office for Budget Responsibility said that there was a high level of uncertainty about the Exchequer impact of the reforms and that the impact depended on take-up and other behavioural responses, which were uncertain. The OBR said:

“Some people will temporarily increase pension saving in order to benefit from tax-free lump sum withdrawals. It is possible that funds will be redirected from annuities and into other assets, such as other financial products or housing. It is also possible that such funds could be used to finance consumer spending”.

Would we consider that to be desirable?

The available data for the first quarter of 2015 show sales of drawdown products increasing and those of annuities reducing. The number of income drawdown contracts sold by Association of British Insurers members during quarter one of 2015 increased by 64% over the past year, from 6,700 to 11,500. The number of annuities sold continued to fall, with 20,600 annuities sold in quarter one, compared with 28,700 in the previous quarter and 74,100 in quarter one of 2014. The volume of interest is indicated by the 80% increase in provider call volumes during the first six months compared with the same period in 2014. A consequence of the changes is the massive £2.5 billion paid out as cash to customers in the first six months. To put that into context, £2.5 billion has been invested in other pension products over the same period. In other words, 50% of the value of pension pots accessed has been cashed in over the past six months.

We do not know what the long-term developments will be, but that must surely raise concern that such a high percentage of cash has been withdrawn. If we put that in the wider context of defined-contribution pension pots, there is today approximately £175 billion held in those pots by more than 2.2 million consumers. Do we as a society want to see pensioners draw down their pension pots at such an aggressive pace? Frankly, I believe we should not. There will be a price paid both in terms of pension pots running out and, ultimately, as has been said by various hon. Members, the state will have to pick up the pieces and support those whose income has gone.

To reflect again on some of the numbers, 60% of all cash lump sums have been paid out to people younger than 60 and 80% to those younger than 65. In 95% of cases where cash lump sums have been accessed, the entire fund has been withdrawn, and fewer than one in 10 of those accessing their pension pots are using the Pension Wise service. The Government need to take on board the evidence of what has been happening and explore other options. Reinstating a requirement to annuitise would help to address some of the concerns.

The UK Government must learn the lessons from abroad. Concerns over the rates of exhaustion of pension savings and the subsequent impact on retirement income led the Australian Government to commission an independent review of their retirement system.

The Murray inquiry published a range of recommendations for the Australian financial system in December 2014, including a recommendation for schemes to put in place a default comprehensive income product for retirement to address longevity risk. In October, the Australian Government announced their intention to implement the inquiry’s retirement income default recommendation, and a consultation is expected later this year.

We also need to look at affordability—for example, by introducing measures to keep costs down; introducing products such as a NEST-style decumulation option to act as a beacon of good value; enabling the state to play a bigger role in providing a low-risk, good value alternative or capping charges in drawdown products; allowing Pension Wise to provide a personalised service or recommend specific products or options to consumers; or strengthening the disclosure and governance requirements relating to complex retirement income products.

I want to engage positively with the Government on how we in Parliament can together discharge our obligations to those who will be accessing their pension pots not just in the years, but the decades to come. Although it is understandable that we want to create opportunities for those with spending pots to make their own decisions about their plans for accessing cash, it must be done from the premise that we give clear guidance that securing a regular income in retirement should be the default position.

14:53

[Neil Gray (Airdrie and Shotts) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Betts, although, following this morning’s footballing activities, perhaps it is more appropriate to say “captainship”. I congratulate my hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford) on securing this important debate, although I think it was remiss of him not to declare an interest earlier in his speech, given how much closer to retirement age he is than others in this debate.

All joking aside, the debate is important as we all have an interest in ensuring pensions are accessible, affordable and abiding, not just on a personal basis for all retirees, but for society in general. In recent times, pensioner poverty has declined considerably compared with other age groups as there has been a focus on pensioner income and supporting households in matters such as energy efficiency and central heating systems—indeed, the Scottish Government have supported a series of very successful programmes on this front—but income is the primary factor in poverty, regardless of what the Government plan to do on how we measure poverty. It is therefore critical that we guarantee that income levels remain consistent for retirees for the duration of their well earned retirement.

I certainly welcome the Government’s roll-out of auto-enrolment for workplace pensions. Ensuring that people save over and above what they should receive from the state pension is clearly very important. In the National Audit Office report on this subject released earlier this month, it appears there has been a very good uptake from workers and employers so far. That is to be welcomed.

I can understand why it is desirable to have pension freedom in the way the Government legislated for. Indeed, I am dealing with a case now where a constituent is looking to access his flexibility earlier than is currently available. It is certainly desirable for the Government to see people spending their pensions earlier. As the Government withdraw billions of pounds from the economy with their wholesale public sector and social security cuts, their growth target is under serious threat. I am sure they would be delighted to see people spending heavily from their savings upon their retirement to keep the economy ticking over, but there are great risks of unintended consequences.

There are many reasons why we are all paid salaries monthly or at regular intervals rather than in an annual lump sum. One of those reasons is our own budgeting convenience: it is far easier to plan in smaller monthly chunks than on an annual basis. So imagine the challenge facing retirees who are looking at taking their pension in one lump sum and not paying for an annuity. How can they plan what they can spend each week, month or year when they do not know how long it will need to support them for? There is no reason to believe that all pensioners will be rash or profligate when they are given access to their savings, but we must ensure that protections are in place so that they have a sustainable income for the duration of their retirement. I absolutely and wholeheartedly agree with my hon. Friend the Member for Ross, Skye and Lochaber.

A recent Social Market Foundation report highlighted several areas of concern for us. We do not believe that the Government have put in place the necessary safeguards to protect those approaching or in retirement. With life expectancy increasing and savers gaining unprecedented access to their pension savings, the Government have an obligation to assist individuals to plan ahead and to support society to plan for the future by making the public aware of the importance of securing a guaranteed income for life. If the Government get this wrong, they are storing up a massive future liability not only for pensioners, but for the state. I am not just worried about pensioners being able to manage their finances—the vast majority will have no problem at all—but I am worried about these big savings pots being incredibly attractive to scammers. We have all heard stories of perfectly plausible sales calls, door-to-door inquiries and fliers resulting in pensioners and vulnerable people being duped out of their savings. Having a pension in an annuity may not always give us the best deal, but it guarantees a lifelong income that the scammers cannot touch.

I welcome this opportunity to speak to such an important debate, and I thank my hon. Friend again for securing it. I hope the Minister will advise what steps her Government are taking to ensure we are not storing up major trouble for the future.

14:58

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Betts. I, too, congratulate my hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford) on securing this debate. Although I have grey hair, I want to put it on the record that I am quite a way from pension age.

When I first heard of the Government’s pension freedom scheme, I thought it was a political gimmick. I hope that when the Minister sums up she will be able answer all the important questions raised and prove that it is a well thought out and evidenced policy. Otherwise, it is actually short-term isolated thinking.

If we take a step back, we see that when the original annuity system was introduced in the UK, life expectancy was considerably lower than it is today. Back then the state still felt a responsibility to try to ensure that people had a guaranteed income to look after themselves for the rest of their lives in some form of comfort. Just because the annuity system was not always maximised to the benefit of the saver—as we heard, 80% of people could have got a better deal if they had shopped around—does not mean we should scrap the system altogether. Instead, we should look at ways to improve it.

The recent message from the Government has been that people should save responsibly, and I agree. They have helped to force the issue with auto-enrolment. They have also said that people need to work or wait longer until they get their state pension. We are told that that is justified because life expectancy is much higher. There are contradictory messages: the left hand says, “Save. Be responsible. Understand that you might well have a nice long retirement to look forward to, consider and plan for,” but the right hand is saying, “Well done guys—you’ve worked hard. It’s your money—do what you want with it.” The Government should take cognisance of the fact that those are competing messages.

We have heard about the hidden unintended consequences of the pension freedom policy, one of which relates to the recent increases to the state pension age, which particularly affect women. Members will have been lobbied by Women Against State Pension Inequality. These women feel particularly hard done by: they planned to retire at a certain age, they worked all their lives with that plan in mind, but now they feel the opportunity has been taken away by the Government. Some women are now considering whether to access their pension pot early and effectively burn through it until they reach the increased state pension age. I am concerned for the women who stay on in work and, once they reach state pension age, retire and access their pension pot, who might feel that they have missed out by having to work longer and so be tempted to make best use of the money they have put by in a short time. That will not benefit them in the long run.

This is speculative, but another scenario I have considered is the fact that we currently have a housing shortage, combined with a Government who reinforce the message that home ownership is everything and is something to which families should aspire. If retirees have access to lump sums, they might want to access their pension pots to help their family out by getting them on the housing ladder. In the short term, helping their family looks like a good thing, but it will lock their money up for the future, so might not be right in terms of the long-term financial planning for retirees and their dependents. They are not, though, going to get that financial advice otherwise.

We have heard that the fundamental idea behind pension freedom is that we should trust people, but on balance that is not what the evidence suggests. The Government should look at the evidence from Australia and the United States, which suggests that a large percentage of pension savers spend all their money in a relatively short time. As we heard from my hon. Friend the Member for Ross, Skye and Lochaber, in Australia there are polar opposites in play: 40% of people use all their savings in just 11 years, while at the other extremity is a group of people who are too cautious and do not access their money to give themselves the high quality of life that they should have after saving responsibly. Reflecting that reality, Australia is now moving towards an annuity scheme. That is the red flag that the Government should be paying attention to. The Australian report was published before the Chancellor introduced the changes, so there is no excuse for not taking that evidence on board sooner.

There is more evidence of how people behave when given pension freedom from the United States, where half of retirees have spent their entire pension pot within 17 years of retirement—in real terms that is a really short amount of time. Overall, I fail to see the wider benefit of people having complete freedom when the evidence shows that pension contributions tend to be exhausted rather quickly. Aside from it giving a short-term feelgood factor for some people and a low-level cash injection to the economy because of the additional spend, I do not think complete freedom is the way to go.

I understand that populist policies are almost a necessary evil for Governments. As politicians, we all want to do things that make us popular, and Governments want to ensure that they are re-elected, but Governments should never forget that they have responsibilities. A default pension income for retirees would fall into the category of responsible governance; otherwise, there is a risk that future Governments will end up paying out more money in pensioner welfare. In all probability there will be a higher burden on the NHS because of the higher healthcare costs associated with retirees who have exhausted their funds—they are out and about less and they are stuck in homes that they might not be able to afford to heat. Those knock-on healthcare effects will have financial implications for the state in the long run. We know that the Government are hellbent on reducing the size of the state for the future, so that is counterintuitive. Again, the messages are contradictory.

There is very limited evidence in the public domain on how the new arrangements are working, but what evidence there is suggests that currently the majority of cash sums paid out go to people under 60 years old, and 80% goes to those under 65—so in many cases people well below state retirement age—yet only one in 10 people are accessing the Pension Wise service. At the very least, the Minister should consider the following. People should be given targeted financial guidance and advice before they access their pension funds. They should be made to think twice about making large cash withdrawals, especially when in some cases people are penalised by having to pay a higher tax rate, which again, is not beneficial in the long run. There should be mid-retirement health checks, although to be honest that might be too late for some, which is why we need reform sooner rather than later.

The Government must look again at what is happening now and come up with a compromise to ensure some form of guaranteed income for the future. They should consider the Australian Murray report and at least try to arrive at a mix of flexibility, which can be good for some people, and security for all retirees, so that they benefit from working hard and putting money by.

15:06

[Mhairi Black (Paisley and Renfrewshire South) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate my hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford) on securing a debate on such an important issue. It is fair to say that I am a fair bit further away from this issue than most of my colleagues; nevertheless, I appreciate this opportunity to speak.

I am sure that most Members present will agree that the current Government—any Government, for that matter—have a responsibility to ensure that all members of our elderly population have a secure form of income upon retirement to enable them to live comfortable, healthy and fulfilling lives, as well as a responsibility to continue efforts to end pensioner poverty. Any move by the Government to encourage and enhance the prospects of people saving for retirement and to ensure that all our citizens maintain a decent standard of income must be welcomed. It is for that reason that, in the context of pension freedoms, the Scottish National party supports auto-enrolment. We look forward to taking part in the debate on how it can be strengthened, based on the inclusion of the individual and the employer and Government incentives to engage in pension saving.

With that in mind, we must pay close attention to the scrutiny and constructive criticisms that have been made of the pension freedom reforms. First, there clearly needs to be an increase in data collection. The Work and Pensions Committee inquiry into the changes asked whether people are adequately supported in making good and informed decisions, and concluded that appropriate information and monitoring arrangements are not in place to provide the answers. Criticising the Government’s failure to publish adequate statistics on the pension freedom policy, the report said:

“The Government’s reticence in publishing statistics on the effects of its pension freedom policy, a full six months after the reforms, is unacceptable. The scarcity of information regarding Pension Wise in particular is not conducive to effective scrutiny. It is also not conducive to effective policy: it would be fortunate in the extreme if such radical change operated as hoped without any need for adjustment.”

Many bodies in the pensions policy area have made similar observations. If we are to be able to make informed decisions and adequately respond to the changes the reforms are making to people’s lives and the decisions they make, we must be watching closely and at least attempting to collate in-depth and satisfactory data. That way, we will be able to form a real-life picture and idea of what is going on and to respond appropriately.

Secondly, more effort needs to be put into educating people so that they are equipped with the information and knowledge to make informed decisions. The potential for negative consumer outcomes arising from disengagement, low awareness of retirement risks and poor financial capability is likely to be compounded by supply-side failures. The FCA thematic review and retirement income market study identified continued failures: 60% of defined-contribution pension customers did not switch providers when they bought an annuity, despite the fact that 80% could get a higher—in many cases, significantly higher—income on the open market. The FCA found that 91% of those purchasing enhanced annuities could have got a better deal by shopping around. It also found that consumers are highly sensitive to how options are presented to them. Savers reaching retirement face a much more complex landscape than previous generations, and they will need support to make sense of their options and to make sensible choices that match their needs and preferences.

Even before the announcement of the pension reforms, the pensions industry was still working through many issues, despite seven years of heightened scrutiny and regulatory oversight. As many will know, lack of information has been a problem for some time. Given the lack of data on how pensions are being affected now, it is important to look at some of the few statistics that we do have.

[Ian Blackford]

Does my hon. Friend agree that one issue consumers face in the landscape of choices she eloquently describes is that they often do not consider their own life expectancy—that they might live for another 30 or 40 years or even longer? When people look at their experience of annuities, that is often part of the problem: they might consider they are getting a poor deal from their annuity, but that is because they are not taking into account how long they might live and how long they might have to fund their lifestyle for.

[Mhairi Black]

I thank my hon. Friend for that intervention—I was actually about to get on to that point.

In terms of the few statistics we do have, the Social Market Foundation has looked at the lessons the UK can learn from overseas experiences. My hon. Friend spoke about the different stereotypes in terms of how people engage with their pensions—the cautious Australian, the quick-spending Australian and the typical American. One of the report’s key findings was that UK retirees are at risk of pension pot exhaustion specifically because they underestimate how long they will live. In fact, those who follow the typical American path or the quick-spending Australian path would, on average, exhaust their entire pot by retirement years 17 and 10 respectively.

Retirees are at risk of low replacement rates. Retirees who over-consume in the early years of retirement might well enjoy a decent income for a good few years, but if they live a lot longer than they predicted, they find themselves on much lower rates later on in life and may completely exhaust their pension, putting the responsibility on to the state to fill the gap.

We should also consider the fact that the number of income drawdown contracts sold by ABI members during 2015 increased by 64% over the previous year, from 6,700 to 11,500. The number of annuities sold has continued to fall, with 20,600 sold during that quarter, compared with 28,700 the previous quarter and 74,100 in the same quarter in 2014. There was an 80% increase in provider call volumes during the first six months, compared with the same period in 2014. As has been mentioned, £2.5 billion was paid out as cash to customers in that period. Some 60% of all cash lump sums have been paid out to people younger than 60—those who have a considerable time left to live, given that life expectancy is now 80-plus. In 80% of cases, those who have taken out cash lump sums were under 65. In 95% of cases where cash lump sums have been accessed, the entire fund was withdrawn. As for evidence that people have engaged with Pension Wise, whether face to face, over the phone or by email, the reality is that fewer than one in 10 of those accessing their pension pots have used the service. It is clear that more can be done to educate people adequately.

My last point relates to the Government’s position. Concerns about rates of exhaustion of pension savings and the subsequent impact on retirement income led the Australian Government, which we look to for at least some idea of where pensions are going, to commission an independent review of their retirement system. The resulting Murray inquiry published a range of recommendations for the Australian financial system, including that schemes set in place a default comprehensive income product for retirement. On 20 October, the Australian Government announced their intention to implement the inquiry’s retirement income default recommendation, and a consultation is expected later this year.

It seems only reasonable and responsible, therefore, for the Government to tell people, “Look, the choices are there for you. It is not for us to tell you how to spend your money, but we recommend that you use your pension for the exact purpose it was created for and that you consider how long you will live for and how much money you will have, so that you engage with your pension appropriately.”

I welcome the debate, and I hope the Government take heed of some of the concerns that have been raised by myself, my colleagues and the relevant independent bodies.

15:16

[Nick Thomas-Symonds (Torfaen) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Betts. It is also a pleasure to appear before the Economic Secretary to the Treasury for the first time.

I congratulate the hon. Member for Ross, Skye and Lochaber (Ian Blackford) on securing this timely debate. I agree with much of what he said. This is the time to take stock of the pension freedom reforms. The idea of monitoring and identifying risks is important, and I will return to that in a moment. The concepts of supporting society and planning for the future are also vital.

My hon. Friend the Member for Coventry South (Mr Cunningham) and the hon. Member for East Lothian (George Kerevan) made good points about choice and protection. My hon. Friend also made a crucial intervention about pensioner poverty, and it is important that we monitor that issue.

The hon. Members for Kirkcaldy and Cowdenbeath (Roger Mullin), and for Kilmarnock and Loudoun (Alan Brown), raised the issues faced by women born in the 1950s due to the increase brought in by the Pensions Act 2011 in the state pension age. In that respect, I have a question for the Minister about transitional provision. On 20 June 2011, the Secretary of State for Work and Pensions said:

“Let me simply repeat what I said earlier—it is a bit like a recording, but I shall do it none the less: we have no plans to change equalisation in 2018, or the age of 66 for both men and women in 2020, but we will consider transitional arrangements.”—[Official Report, 20 June 2011; Vol. 530, c. 52.]

What has happened on transitional arrangements since 2011? What meetings have been held on them? What proposals do the Government have to put such arrangements in place to assist women who lost out by virtue of the date on which they were born in the 1950s? I sincerely hope the Minister can deal with that issue today.

I congratulate the hon. Member for Airdrie and Shotts (Neil Gray) on his contribution. He made a good point about the problems that will arise in the future if the Government do not deal with these issues now. I also congratulate the hon. Member for Paisley and Renfrewshire South (Mhairi Black)—we can safely say that every Member of the House is closer to retirement than she is. She made a good point at the start of her speech, and the scrutiny and constructive criticism she mentioned throughout her contribution are precisely what needs to be brought to bear on these reforms in the months and years ahead.

The debate has been extremely useful in highlighting a number of issues that the Government need to deal with. The issue of scams came up, and it is crucial. In that respect, I quote the recent Work and Pensions Committee report:

“The pension freedom reforms have increased the prospects of people being conned out of their life savings.”

That should be a warning to the Government. The report also treats the promotion of awareness as a crucial weapon against those scams, and the Government should seriously consider paying more attention to that.

The hon. Member for Paisley and Renfrewshire South brought up the issue of Pension Wise. To deal first with take-up, the first set of statistics we have had seem to suggest that only about 18,000 people—fewer than one in 10—have accessed the guidance. Clearly, more needs to be done to flag up the availability of Pension Wise. Other criticisms in the Work and Pensions Committee report also need to be dealt with. The website has been described as not fit for purpose; the Government should attend to that damning criticism. The guidance has also been criticised for being too general on the one hand, in that it pays insufficient attention to people’s individual circumstances, and too narrow on the other, in that it deals with pensions but not the other things that people need to cope with in retirement. Pension provision is a crucial part of that, but people will have varying interests, such as property that they own, or their care needs. Those other things need to be taken into account in the guidance provided by Pension Wise.

Another issue is the advice gap. Someone whose pension pot is enormous will have access to expensive financial advice on it, and that would be proportionate. However, there is an enormous gap in the middle between people who have access to the free guidance, and those who obtain specialist advice at the top. Many people with pension pots will be in the middle, where such advice is not available. This is a two-way street: we want to increase demand from people who want advice, but on the supply side, we need a regulatory framework in which advisers feel comfortable and confident in giving advice, and about the liabilities to which they open themselves. In that regard I look forward to the results of the financial advice market review, but there is action that can be taken now, certainly as far as improvements to Pension Wise are concerned.

The hon. Member for Ross, Skye and Lochaber mentioned the Social Market Foundation’s recent “Golden Years?” report. That, too, should warn the Government about what can happen in these situations when policy is not managed appropriately in the short and medium term. He mentioned, of course, the cautious Australian, the quick-spending Australian and the typical American, but the statistics from Australia make sobering reading. It seems that about 25% of people exhaust their pension pots by age 70, and the figure is about 40% by age 75. Those numbers are highly significant, particularly in an age of increasing life expectancy. Our cautious Australian would decumulate by less than about 1% a year, which would be a more optimistic statistic; but we might compare that with the decumulation rate of about 8% a year for the typical American. That would be a far more worrying statistic to deal with.

There is a broader point to make. Advice and guidance are obviously important at the age of 55, but we must move away from the view that this is exclusively about making sure that people have the appropriate information at the start of their retirement. The reality is that people’s needs between the ages of, say, 55 and 65 are different from their needs between 65 and 75, or 75 and 85. Life expectancy is of course rising, and their needs would be different between 85 and 95 as well. I suppose that that point goes to the heart of what the debate is about: a guaranteed income—that is the phrase used in the title of the debate—throughout retirement. We must look beyond what happens at age 55, although that is highly important, at structured ways through retirement, in which people have access to the advice and guidance they need to make informed decisions. It is vital that the Government do that.

Overall, we can see today’s debate as a marker for the need for action. No one wants people to exhaust their pension pots at age 75. We want action now, to ensure that people will be protected from scams, and that they can get the advice and guidance they need.

15:25

[The Economic Secretary to the Treasury (Harriett Baldwin)]

It is a pleasure to serve under your chairmanship, Mr Betts. I am not quite sure what the sporting achievements mentioned earlier are, but I look forward to hearing about them.

[Mr Clive Betts (in the Chair)]

I think the word “achievements” might be stretching it a little bit, but we will pass over that for the time being. [Laughter.]

[Harriett Baldwin]

I congratulate the hon. Member for Ross, Skye and Lochaber (Ian Blackford) on securing the debate and making a thoughtful, constructive contribution to our national debate on securing a guaranteed income for retirees. Perhaps I should not confess this, but if Wikipedia is correct, I am the one who should declare an interest as being closest to retirement age of all those speaking in the debate—but perhaps Wikipedia may not be accurate. That has happened before.

[Roger Mullin]

I should thank the Minister very much for her comment.

[Harriett Baldwin]

The hon. Gentleman wears it well.

The debate is timely, because we are just over six months into the pension freedoms, and are beginning to get data on what pensioners or retirees have been doing with those freedoms, and about use of the free and impartial guidance from Pension Wise, which was set up by the Government. As we speak, life expectancy is growing by about five hours a day in this country, which makes it all the more important that we have this debate and agree on the aspiration to ensure that hard-working people are in a position to fund a comfortable and, we hope, increasingly lengthy retirement.

Against the background that I have set out, the Government introduced radical reforms giving people freedom and choice in how they access their own hard-earned retirement savings, replacing an effective obligation on pensioners to purchase an annuity—a product that often they did not shop around for and that may not have been right for their circumstances.

[Julian Knight (Solihull) (Con)]

The hon. Member for Ross, Skye and Lochaber (Ian Blackford), whom I congratulate on securing this important debate, mentioned at one point reinstating the requirement to annuitise. The old open market system failed many vulnerable consumers, as my hon. Friend the Minister mentioned, and many with impaired life expectancy were shunted by providers into poorly paying and inappropriate annuity contracts. Will she comment on that?

[Harriett Baldwin]

My hon. Friend is right; the world where we obliged people to buy an annuity income with their retirement savings was not perfect. Often they did not shop around—the data from the Financial Conduct Authority suggest that about eight out of 10 consumers could have got a better deal by shopping around—so I cannot agree with what I believe was SNP policy. That seems to be to end the current situation where there is more flexibility, and once again to require people to buy an annuity. However, I recognise that Members across the House have concerns about customers and how they are supported as they make perhaps their most important long-term financial decision, other than purchasing a home.

[Ian Blackford]

I just want to clarify something. I absolutely share the concern that the annuity market was not working properly. Where there is a difference of opinion is that we believe that the market should be reformed. We need greater choice in the annuity market: for example, we need to think about how we explain index-linked products in the annuity market, and circumstances such as lower life expectancy must be reflected. We must consider those things in the light of experience of what has happened with pension freedom.

[Harriett Baldwin]

I thank the hon. Gentleman for that clarification. I agree that we need to evaluate the measures, which is why this is such a timely debate. It is extremely important that, as people take advantage of the new pension freedoms, they have the right information and the tools they need to make an informed and confident decision about their financial future. I recognise that there is a range of different circumstances and that one size does not fit all.

It might be helpful if I summarise some of the changes made over the past five years to the pension landscape to strengthen the finances of people in retirement. They include ensuring that there is no enforced retirement age at 65, and strengthening the first pillar of retirement income, the basic state pension, which now rises with a triple-lock—increasing by the greater of 2.5%, earnings or inflation every year. That has been very important cumulatively over the past five years—the income replacement of the state pension is now at its highest level since 1992—and we have pledged to continue that throughout this Parliament.

[Nick Thomas-Symonds]

I refer back to the Hansard quotation from 20 June 2011 that I cited about the transitional provisions for women born in the 1950s who have lost out under the new state pension provisions. Can the Minister update the House about what has happened with that policy and how the transitional provisions will be introduced?

[Harriett Baldwin]

I assure the hon. Gentleman that I am just setting out the background. I will address the points that colleagues raised later in my speech.

The changes we are making to simplify the state pension are also important, because they are going to set a new level for the state pension that is higher than the means-tested threshold that we have had in this country historically. That is very important, because we do not want those who draw down their retirement savings to be thrown on to means-tested benefits. I believe I am right in saying that that is a crucial difference from the situation in Australia. We have also safeguarded support for older people in other ways, such as providing free bus passes, eye tests, television licences and so on.

The changes we made in April are an integral part of the whole landscape. I will describe for the benefit of all hon. Members what we think success for the reforms looks like: a vibrant and competitive retirement income market with a range of different products that give people the flexibility and security that is right for them, and well informed, engaged consumers who can access the guidance and advice they need. As more people are automatically enrolled in employer schemes, more people engage with the process. More than 5 million more people are now saving for a retirement income than were in 2010, and by the full roll-out in a couple of years’ time, we will have almost 9 million additional new savers through automatic enrolment, saving £15 billion a year more in aggregate.

[Ian Blackford]

I am grateful to the Minister for giving way; she is being very gracious with her time. As I said, we fully support auto-enrolment. It is fantastic that there has been an increase in saving and that both employers and employees are contributing, but will she reflect on the situation that could develop? People will have a greater ability to access the pension pot that they are saving into and take out cash at 55, but I am concerned that employers may be disincentivised from contributing to the pension scheme if they see that those who benefit from it can walk away with a cash pot at 55.

[Harriett Baldwin]

Methinks the hon. Gentleman is worrying too much. At this point, I think we will just welcome the fact that £15 billion a year more is going into pension saving in this country. The hon. Member for Paisley and Renfrewshire South (Mhairi Black) can say to her generation that the earlier they start, the better, given the cumulative impact of the wonders of compound interest. Nevertheless, I take on board the point the hon. Gentleman made.

The hon. Gentleman said that providers may not have time to get ready and may not have the right kinds of products. In fact, providers have stepped up to the challenge: the systems requirements were admittedly very challenging, but more than 90% of people are now being offered flexibility within their existing scheme and something like a quarter of the largest firms are planning to launch new products in the next six months, so there has been real innovation and engagement with what customers want. We have moved away from the inflexibility of the old annuity market.

The hon. Gentleman highlighted the recent data from the ABI stating that £4.7 billion was paid out in the first six months. The first six months will not necessarily be representative of the settled state of the market, because obviously there has been a lot of pent-up demand, but it is fair to say that in that six-month period £2.5 billion has been invested in income drawdown products and £2.2 billion in annuities. That does not suggest that people are shying away from the annuity market, which we hope continues to be successful and an important part of people’s retirement planning. I am delighted that so many people have already taken advantage of the freedoms and that many providers have stepped up to deliver for their members.

Many hon. Members asked about Pension Wise, the Government’s free and impartial guidance service. It, too, is playing an important role. There have been more than 30,000 guidance appointments and 1.7 million hits on its website so far. Hon. Members alleged that only one in 10 people are making use of Pension Wise, but we dispute that in the sense that people will be getting financial advice, sometimes from a regulated adviser, or they may get information, guidance or advice through their provider. There is a range of different ways in which people can inform themselves; Pension Wise is one of them. It is free, impartial and backed by the Government.

Pension Wise prompts users to consider their life expectancy and any health issues and lifestyle factors they have, and it links to the Office for National Statistics life expectancy calculator, which I am sure everyone in the room has visited. All in all, that is excellent news, but we are always on the lookout for ways to make the service more useful. Last month’s report from the Work and Pensions Committee, of which the hon. Member for Paisley and Renfrewshire South is a member, was welcome. It noted the progress we have already made in ensuring that the reforms deliver for consumers, but made it clear that the job is not yet done.

In line with the Committee’s recommendations, we are considering a number of developments to make Pension Wise even more useful. For example, we are looking at how appointments can be tailored to individuals. In the summer Budget, we opened it up to people from the age of 50 onwards, and we are developing more online tools for the website and calculators that people can use to see how the new pension freedoms relate to their particular circumstances. We are trying to make the website more interactive, and the team has done a fantastic job in delivering that to such a tight timeframe. We are looking to amend the content of Pension Wise appointments to ensure they are more tailored to people in the 50 to 55 age bracket, who are not yet able to take advantage of the pension freedoms but want to start thinking about the options available to them.

The hon. Member for Torfaen (Nick Thomas-Symonds) rightly mentioned the financial advice market review. I am delighted to hear that he supports the initiative. The Treasury and the Financial Conduct Authority are reviewing what he called the advice gap—the fact that between guidance and paid-for financial advice, there is a gap for ordinary people who do not want to pay for a financial adviser or are not able to afford one at their stage in life. The aim of the review is to come up with a package of reforms, along the lines of those that the hon. Gentleman outlined, to ensure the financial advice market works for everybody. I hope he will write to the review with his recommendations.

Advice, in and of itself, is not enough. It is important that we supplement our guidance provision and review it on an ongoing basis. We must ensure that we make the most of Pension Wise, which focuses on pension freedoms, the Money Advice Service, which focuses on some of the other aspects of financial markets, and the Pensions Advisory Service, which is run out of the Department for Work and Pensions. We must make those services more effective for consumers. Alongside the financial advice market review, we are also looking at the guidance and hope to have some findings ahead of next year’s Budget, so that people get the help they need to take such important long-term decisions.

Several hon. Members mentioned scams, and the Work and Pensions Committee report also flagged that risk, which we recognise is not new. Pension scammers were previously trying to get people to take money out of their pensions before the age of 55, causing a lot of harm in the marketplace, but I agree that it is an important matter. Given that consumers have been given unprecedented freedom and choice in how they access their retirement savings, we appreciate that fraudsters will use that as an opportunity to try and exploit people. An effective strategy to target scams must bring together all the relevant parts of Government and work with providers to focus on both the prevention and the disruption of scams. That is what we are doing and will continue to do. We have set up Project Bloom, a multi-agency taskforce led by the National Crime Agency, which is joining up the various Departments involved, the regulators, anti-fraud groups and police forces to tackle scams. It is worth reiterating here how important it is that we remind consumers that they should never engage with anyone who telephones them out of the blue offering help with their pension. I encourage all hon. Members to get that message out widely in their communities. I emphasise that Pension Wise will never call without a consumer having previously asked them to.

The pensions regulators have their own pension scam campaigns to raise awareness of the issue. The FCA runs ScamSmart and the Pensions Regulator runs Scorpion. Warnings are sent out with paperwork from pension providers and both of them give advice to businesses and consumers on how to protect against scams. Pension Wise also alerts customers to the risk of scams during guidance sessions and on its website, and firms have a duty to flag the risk of investment scams, when appropriate, to their members as part of the FCA’s retirement risk warning rules. The hon. Member for Paisley and Renfrewshire South, who asked me about this during a Work and Pensions Committee hearing, wanted to know about some of the numbers. So far this year, since the pension freedoms were launched, incidents reported to Action Fraud are lower than the year before, but I completely agree with her that we must remain on top of this. To be frank, we have to be tough, because one scam succeeding is one too many.

Moving on to women who have been affected by the change in pension age, I am probably one of the few women affected who actually welcomes the fact that I will be able to do this wonderful job for longer, but I realise that not everyone feels that way. To respond to the questions from the hon. Member for Torfaen about the number of meetings that have been held, the number of updates and the transition protection and his Hansard reference, which shows what an effective researcher he is—he is a published biographer—I will defer to my colleague Baroness Altman, who will write to him with the details.

The hon. Member for Paisley and Renfrewshire South also asked about the Pension Wise data and when it will be published. In ministerial speak, I believe that the word is “shortly” so it should be up on the website soon. We will write to the Chair of the Work and Pensions Committee as soon as that happens so that he is the first to know.

I have responded to most hon. Members’ points, but I will remain on my feet in case anyone feels that they have not had a chance to ask their question or to get one answered.

[Roger Mullin]

I thank the Minister for giving way at this late stage. Does she agree that, as I mentioned earlier, women face particular risks and therefore require particular additional support and guidance to ensure that they make the most of their futures?

[Harriett Baldwin]

I am sure that, like me, the hon. Gentleman is a passionate feminist and thinks it important that men and women have the same pension age. I appreciate, however, that the process of transition from the much earlier age at which women were retiring will, depending on people’s circumstances, have posed a range of challenges, of which the Government are well aware. As a constituency MP, I am also well aware of such issues. I will write to the hon. Member for Torfaen and the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) with more specific points from my noble colleague.

Shall I conclude with my impassioned concluding remarks, Mr Betts, or is everyone happy to stop there?

[Mr Clive Betts (in the Chair)]

It is up to you, Minister. You have time if you wish to impassion us.

[Harriett Baldwin]

I will say something in conclusion as we have time.

I thank all hon. Members who have participated in the debate. How people access an income in retirement is an incredibly important question. It is also an issue of huge international importance. I have summarised a range of changes that have been made over the past five years. The more recent pension freedoms are major changes and it is important that we get them right, which is why the Government and the regulator will continue actively to monitor the post-reform retirement landscape closely.

[Mr Clive Betts (in the Chair)]

I was only too pleased earlier that, as I was in the Chair, I was not able to join in the competition about who was nearest to retirement age. We will move on to Mr Ian Blackford winding up briefly.

15:46

[Ian Blackford]

I thank all hon. Members who have participated this afternoon. We have had a good debate on the issues as we see them. I thank all who have contributed and expressed legitimate concerns about the consequences of the pension freedoms.

We all share the view that we need to architect a pension structure conducive to people having the best outcomes possible in their elderly years. I encourage the Government to look at the evidence of the first six months. I accept that some of the pension drawdown of the first six months was pent-up demand. None the less, as the Minister has conceded, £2.5 billion is a considerable sum to be drawn out of pension pots—50% of all the cash that was exorcised from them over that period. We have to look at that closely.

I remain concerned that pensioners will be put in a position of some financial hardship if they expose themselves fully to running down their pension pots. We accept that over the past few decades considerable moves have taken place to eradicate pensioner poverty, which we are all delighted about, and that there is little likelihood of pensioners falling below the threshold of 60% of median income, which we used to use to define relative poverty, but none the less, on the evidence from the Social Market Foundation, we can see that pensioners would fall below the 80% and perhaps even 70% income thresholds. That should concern us. It is right to continue to debate such matters and we should see if we can work together to provide more certainty and security for pensioners.

Question put and agreed to.

Resolved,

That this House has considered Government policy on guaranteed income for retirees.

15:47

Sitting suspended.

Court Charges (Access to Justice)

Tuesday 17th November 2015 Westminster Hall

[Mr James Gray in the Chair]

16:00

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

I beg to move,

That this House has considered court charges and access to justice.

I want to consider the effect that the criminal courts charge has had on access to justice. In the past five years, whether in criminal or civil law, access to justice—the ability to secure legal representation or to maintain one’s innocence—has come under repeated attack. While the Conservative party is apparently so adamant about imposing British values through the Ministry of Justice’s output, I can think of no other British Government who have attacked the principles of Magna Carta in such a manner.

The debate focuses on the criminal courts charge. While I am relatively new to the House, other Members—[Interruption.]

16:01

Sitting suspended for a Division in the House.

16:15

On resuming—

[Mr James Gray (in the Chair)]

As a result of the Division, the debate will run until a quarter to 5. The Member in charge might perhaps wish to leave a quarter of an hour or thereabouts for the Minister to respond.

[Tulip Siddiq]

To pick up where I left off, the Government are attacking the principles of Magna Carta. I am relatively new to the House, but other Members will have been concerned about previous legal reforms by this Government. The focus of the debate is criminal court charges, which have attracted widespread criticism from all parts of the legal world, from magistrates to the Lord Chief Justice.

[Wayne David (Caerphilly) (Lab)]

My hon. Friend has mentioned magistrates; does she share my concern about the fact that at least 50 magistrates have resigned since the implementation of the charges?

[Tulip Siddiq]

My hon. Friend has anticipated a point I will come on to. As he said, 50 magistrates have resigned, and in one case highlighted by the Howard League, a magistrate felt inclined to pay the court fee from his own pocket because of his sense of injustice.

[Nick Thomas-Symonds (Torfaen) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Gray, and I congratulate my hon. Friend on securing this debate at a very timely moment. Does she agree that a major risk of the charges is that they will have a disproportionate effect on the poorest defendants, which is unfair?

[Tulip Siddiq]

Absolutely. I secured the debate because I am worried about access to justice for people from poor socioeconomic backgrounds. I will touch on that later.

The court charges were introduced by the Legal Aid, Sentencing and Punishment of Offenders Act 2012. They have had a dramatic impact on the number of cases going to court. I am particularly worried about tribunal numbers, which have plummeted, and the number of discrimination and unfair dismissal cases, which seems to be going down. I am concerned that the charges are in effect an attack on the most vulnerable in our society. I say the most vulnerable, because statistics show that sex discrimination cases brought by women have gone down by 80%. Similarly, if we compare the first few months of 2014 with the same period in 2013, the number of race discrimination cases has gone down by 60%.

Access to the court system is not, as the Government have put it, part of the welfare state. I prefer to agree with the Law Society, which said that the court system should be seen as

“part of the…rights and duties that give…resilience”

to the society that we live in. I do not doubt that our centuries-old court system needs some reform, but we need to think carefully before proposing those reforms. The Government would do well to remember their responsibility to enable every citizen to be treated equally before the law, whether they are a defendant, a victim or another party.

It is important to consider the effect that the criminal courts charge is having on poor defendants, as my hon. Friend the Member for Torfaen (Nick Thomas-Symonds) mentioned. Despite the lack of quantitative data at my disposal, a lot of anecdotal evidence has been brought to light, especially by organisations such as the Howard League, revealing that this charge is not only intolerable in its consequences but will in no way recover the money that the Government talk about.

[Keir Starmer (Holborn and St Pancras) (Lab)]

In the light of the failure to consult before the criminal charge scheme was introduced; the clear concerns of judges, magistrates and the whole legal profession; and the likelihood that this will add to the problem, rather than solve it, does my hon. Friend agree that this scheme should be reviewed this autumn, as the Howard League argues, rather than in three years?

[Tulip Siddiq]

I absolutely agree with my hon. and learned Friend, who has a lot of experience in this field. That is something I raised with the Justice Secretary when I asked him in the Chamber a few weeks ago why this absurd policy had been signed off in the first place, and he said that it was under review. We should not wait three years, while the reform has dramatic effects on the most vulnerable in our society. We should move the review forward; if the scheme is under review, that should be done immediately, and we should not procrastinate.

Let me highlight what I find most concerning about this charge and what has struck me. This charge will put pressure on people to plead guilty because they are worried about financial costs. If someone pleads guilty early on, they are less likely to incur costs than if they say and then maintain that they are innocent, and are found guilty later down the line. That will inevitably put pressure on people to plead guilty. I want to read out some of the figures, to hammer this home. The charge rises from £150 for a guilty plea for a summary offence in a magistrates court to £520 for a conviction after a not-guilty plea. The charge at Crown court is £900 for a guilty plea and £1,200 for a conviction after a not-guilty plea. Think about the constituents who live on the estates of Hampstead and Kilburn, the constituency I am so proud to represent in this House. They would not be able to afford those fines.

[Christina Rees (Neath) (Lab)]

Does my hon. Friend agree that one aspect of this issue is the fact that courts are given no discretion to take account of an individual’s ability to pay?

[Tulip Siddiq]

I will touch on that later, but there is a lot of anecdotal evidence, as I have said. The Howard League and other organisations have highlighted that people on benefits or people who rely on social security are being expected to pay fines that we know they will not be able to pay. It is unrealistic to expect those people to pay these charges, and administratively, it probably costs taxpayers more.

[Wayne David]

The figures I have seen underline the point my hon. Friend just made. My understanding is that some £5 million in court charges has been issued, but less than £300,000 has been collected. Does that huge gap not show how ridiculous this policy is?

[Tulip Siddiq]

Absolutely. If we look at the money we have managed to claw back, it shows why this policy should be scrapped. It should not take three years to review it, because we have the evidence, as my hon. and learned Friend the Member for Holborn and St Pancras (Keir Starmer) said.

I rarely agree with Conservative Members of the House, but I agree with the Chair of the Select Committee on Justice, the hon. Member for Bromley and Chislehurst (Robert Neill), who said on Radio 4 that the charge

“does seem to be distorting the way in which people behave in court…defendants might plead guilty to save the cost of the charge when otherwise they would not have done”.

That is from a member of the Conservative party. I could not agree more with him.

In 21st-century Britain, we should be appalled by the miscarriage of justice, especially when defendants are foregoing their freedom due to financial constraints. To pick up on a point made by my hon. Friend the Member for Torfaen, in some magistrates courts about 80% of defendants are dependent on state support to meet basic living costs, which makes this issue even more pressing. The charge means that poorer defendants are likely to make a different decision from the one they would have ordinarily made. That means we risk their voice being at best constrained, and at worst shut out from our justice system.

[Keir Starmer]

Does my hon. Friend agree that this cuts across the principle we have had in our criminal justice system for many years of being willing to reduce a sentence for an early guilty plea, because we are setting our face against increasing the consequences for not pleading guilty?

[Tulip Siddiq]

Again, I draw on my hon. and learned Friend’s experience in the legal world. I absolutely agree with him, and I hope the Government will listen to his interventions today, because I do not think anyone could be better equipped to help the Government at this point than him.

What is even more frustrating is that we are unable to place a specific figure on the increase in the proportion of guilty pleas at first hearing at the magistrates court. Until recently, quarterly criminal court statistics routinely included that figure. While the Government may be reticent about taking on board demands for revision, they must strive to make those figures available so that the extent of the recent phenomenon can be made public. I urge the Minister to be transparent about the impact this reform is having.

My hon. Friend the Member for Caerphilly (Wayne David) mentioned that 50 magistrates have resigned since the implementation of this policy. Let us listen to the experts and judge them by their actions. The Magistrates Association claimed in written evidence to the Justice Committee that

“the lack of judicial discretion means that the charge…is not in accordance with the principles of justice.”

My second concern is that the charge is producing fines that are disproportionate to the minor offences for which defendants are often charged. For generations, magistrates imposed financial penalties in accordance with how severe the crime was and the defendant’s ability to pay, which my hon. Friend the Member for Neath (Christina Rees) mentioned. The mandatory charge can account for 50% or more of the total, placing enormous anxiety and stress on individuals who sometimes have been driven, in despair, to commit crimes. I am not saying we should not punish criminals, but the importance of judicial discretion cannot be underestimated.

I would like to give one example from Highbury Corner magistrates court, where a lot of Hampstead and Kilburn’s constituents are tried. The defendant in question had no savings, no income and a drug addiction. He was put in the docks of Highbury for stealing a couple of steaks and 70p lollipops. He was told he should plead guilty, because the charge would be £150, whereas if he was found guilty further down the line, it would rise to £1,000. Of course, he pled guilty. The reporters at the case wrote that he sat there with “sunken cheekbones”, his shirt falling off his back, and he knew that he would in no way be able to pay the court fees imposed on him. The charge was £150, with a £65 victim surcharge and further costs of £85, which came to £295 for a man who the judge said needed 12 months of rehabilitation and community service. There is no way he will be able to pay that back. Is this a system that works for people? Should we not be looking at these vulnerable people who cannot afford to pay the fees we are imposing on them? Is this the future we want for our criminal justice system? It is surely time the Government realised that this policy is not fit for purpose and needs to be reviewed.

I want to ask the Minister a few questions. First, we have been told that the Government are listening, which is a good sign, but can we ensure the review is brought forward? May I have an answer to my original question to the Justice Secretary: how did this absurd policy get signed off in the first place? Secondly, in the medium term, will the Government disaggregate the statistics that are due in December, so that we can see exactly how little is being paid back and how much the policy is costing taxpayers in administrative costs?

A lot of Members in this House and in this Chamber today came into politics because they believed in the values of equality, fairness and social justice. If we carry on in this way, we will create a legal system in which people with money will have access to justice and those without will be shut out. That is not the kind of society we want to live in; we want to live in a society that has equal access to justice, and we need to be very careful, because we are in danger of hitting the most vulnerable people in our society with the legal reforms that are being proposed. I ask the Minister to respond to my questions, and I urge him, once again, to listen to all the Opposition Members who have made points.

16:30

[The Parliamentary Under-Secretary of State for Justice (Mr Shailesh Vara)]

May I say what a pleasure it is to serve under your chairmanship this afternoon, Mr Gray? I congratulate the hon. Member for Hampstead and Kilburn (Tulip Siddiq) on securing the debate and on so eloquently and passionately putting forward her views. I also commend all the other colleagues who have joined the debate, which shows the importance that colleagues attach to this very important subject.

The Government believe that convicted adult offenders should take responsibility and contribute towards the costs that they impose in the criminal courts. The criminal courts charge has made it possible to recover some of those costs from offenders, which in turn is reducing the burden on law-abiding taxpayers.

Broadly, the levels of the charge cannot be more than the relevant costs reasonably attributable to a particular type of case, in line with the limits of the primary legislation. This means that when the costs of running the courts change, such as when efficiencies are made and running costs decrease, we will need to be able to change the levels of the charge to reflect that. As we have specified the levels of the charge in secondary legislation, we can review the charge levels and will change them when necessary.

The criminal courts charge framework means that it is imperative that offenders are given a fair and realistic opportunity to pay the charge. It is important to remember that, in setting payment terms, the court has the discretion to consider the offender’s means—a point that the hon. Lady considerably expanded on. The court may make sure that payment terms are set at an affordable rate. Offenders can also contact a fines officer at any point to request variations in payment rates if their circumstances change and they are no longer able to pay at the rate initially set. At those points, the court and fines officer will have an opportunity to take existing debts into account, making sure that repayment is reasonable and affordable, given the offender’s individual circumstances.

[Mr James Gray (in the Chair)]

I call Lisa Nandy.

[Melanie Onn (Great Grimsby) (Lab)]

It is Melanie Onn.

[Mr James Gray (in the Chair)]

I beg your pardon; I blame my hon. friend.

[Melanie Onn]

Thank you, Mr Gray; the Minister referred to me as Liz Saville Roberts yesterday, so I am not doing very well.

On the point about people who are unable to pay the costs, for some, a financial penalty is utterly meaningless. Those without the means to pay are without the means to pay, and reducing the cost will not make a difference if they are already severely indebted. If they are not in a position to earn any additional funds, does it not add to the burden of an administrative system to seek to reclaim costs from somebody who clearly is never going to be able to pay them?

[Mr Vara]

I am grateful to the hon. Lady for intervening; she gives me the opportunity to explain an important issue. The criminal courts charge is payable only after, first, the compensation has been paid; secondly, the victim surcharge has been paid; thirdly, the prosecution costs have been paid; and, fourthly, fines have been paid. A judge imposes those, and only when all four have been paid does the criminal courts charge come along; and, although set at a specific rate, it is nevertheless assessed by the court’s officers on the basis of ability to pay. That means that the other debts, income and all other such financial factors are taken into account; and then, based on what the officer feels is an acceptable way for the charge to be paid, the money is paid, after the other four impositions have been dealt with. I might add that if an individual has made all reasonable efforts to make the payment and they have not reoffended, then after two years whatever is left is scrapped.

[Keir Starmer]

Does the Minister agree that it is highly unusual for a number of magistrates to resign over an issue such as this? When they do so, what is the level of concern in the Department, ranked between one and 10?

[Mr Vara]

We have some 20,000 magistrates. At any given point, there are always some who are resigning. It is regrettable that some have felt it necessary to resign on that basis, but I will say that magistrates do hugely beneficial work. It is an important role in society and they give up valuable time of their own to do a good service. Of course, it would be wrong for me to comment on individual circumstances, but it is regrettable that some have felt it necessary to resign on that basis.

[Carolyn Harris (Swansea East) (Lab)]

Does the Minister not agree that the fact that only a fraction of the imposed costs has been recovered indicates that those charged with repayment are unable to repay, and that this therefore makes the whole court charge untenable?

[Mr Vara]

It is not yet known how much has been recovered, because those statistics will be forthcoming in the December quarterly statistics. Just to explain, they were not in the September quarterly publication because, although initial data from the first three months of operation—the change having taken place in April—were included in the regular September quarterly statistics, it was not possible to provide separate figures on the charge in time for that publication which met the data quality standards required for published management information. Detailed figures will, however, be published on 17 December.

I note the comments made about the effects on the offender’s plea decision and the issue of access to justice. The Government are committed to ensuring a fair and effective criminal justice system that is accessible to all, and we are assured in the knowledge that the coalition Government carefully considered the compatibility of the criminal courts charge provisions with the European convention on human rights, on article 6 “access to the court” grounds. Article 6 of the European convention on human rights has an implicit right of access to the courts, and the charge does not interfere with that right in any way. In particular, it should be remembered that the charge is imposed at the end of proceedings. Defendants facing trial are not required to pay the criminal courts charge and the charge is not a condition of an offender being able to access the courts. A person will be subject to the charge only if convicted following a court hearing that will have taken into consideration all the available evidence. Therefore, those who are innocent and should be found not guilty by the courts will not be required to pay the charge.

We should also remember that our justice system already creates a number of incentives for those who enter early guilty pleas to ensure that the wheels of justice run more smoothly. For example, if defendants who are guilty enter a guilty plea as early as possible, the courts recognise the benefit to victims, witnesses and the criminal justice system as a whole by means of a reduction in sentence. I recognise, however, the need to ensure that any incentives are proportionate and I note the concerns expressed about the matter.

[Keir Starmer]

I spent many years working on proposals for early guilty pleas and I support them, but the underlying principle was always that the sentence or consequences were reduced for an early guilty plea, not increased for not pleading guilty. Does the charge not offend that principle, and was the Sentencing Council consulted before the charge was brought forth?

[Mr Vara]

I am not sure I follow what the hon. and learned Gentleman is saying. It seems pretty straightforward that at the moment we have a system whereby if somebody pleads guilty, it assists the criminal justice system, the witnesses, the victim and so on, and proper due regard is taken of that. In this instance, if a person pleads guilty, due regard is taken, but they should not plead guilty if they are not guilty. They should allow the court process to take its course.

[Keir Starmer]

Will the Minister give way?

[Mr Vara]

I will happily give way, but I hope the hon. and learned Gentleman is mindful that this is a time- limited debate and I will have less time to respond.

[Keir Starmer]

I will be brief, and I accept that the debate is time limited. The point I am making—it is a point of principle—is that the courts have always fixed the penalty and then reduced it for an early guilty plea. The penalty has never gone up because someone did not plead guilty in the first place. That is the fundamental principle that is being offended.

[Mr Vara]

The charge is not part of the sentencing process, and that has been made abundantly clear to magistrates and the judiciary. It is a contribution to court costs and is not intended to be taken into account for sentencing purposes. There has been confusion, and I want to put on the record the fact that it is not intended to be a means of sentencing.

Given the financial imperative to bring down public spending, the Government must ensure that the courts are adequately funded in the long term in a way that allows the budgetary challenges ahead to be met. There is a high level of consensus across the justice system that the current system is unsustainable.

[Christina Rees]

Can the Minister say whether the revenue collected from the court charges goes towards the legal aid fund?

[Mr Vara]

The legal aid fund is one of the most generous in the world, after the reductions, at some £1.6 billion. It was previously over £2 billion. We have made reductions and we still rank among the top countries in legal aid provision. It is important to remember that point, which also addresses some of the comments of the hon. Member for Hampstead and Kilburn about access to justice. Let me remind her that, notwithstanding the reductions made by the Government in the past five years, we remain one of the most generous countries in the world for legal aid payments.

There is a high level of consensus across the justice system that the current system is unsustainable. This means that the court system must undergo fundamental reform. Our justice system must work better to deliver swifter, fairer and more efficient access to justice for everyone.

[Tulip Siddiq]

Will the Minister give way?

[Mr Vara]

I will give way, but I will not be able to conclude my comments. Only one and a half minutes remain.

[Tulip Siddiq]

I would like to know whether the review will be brought forward or whether it will take three years.

[Mr Vara]

As my right hon. Friend the Lord Chancellor has said, the matter is under review.

Our justice system must work better to deliver swifter, fairer and more efficient access to justice for everyone. It must uphold the rule of law, the most precious asset of any civilised society. Changes to fees have occurred on the civil side, and bearing the burden of running the criminal courts cannot continue to be purely the responsibility of the taxpayer. Offenders must take responsibility for their actions, and the criminal courts charge is an important part of this. In reforming the courts and bearing down on the costs of running them, the Government are determined to make the justice system more efficient and to transform it into a modern public service.

I want to make it clear to the hon. Lady and to all other hon. Members present that I am aware of the concerns and various issues that have been raised, and I will certainly take on board all that has been said by her and other hon. Members. However, it is important to stress—I hope the hon. Lady will appreciate this—that in reviewing the charge, we must consider all the evidence to allow us to form an appropriate view and to help us to make sure that the criminal courts are run efficiently and fairly. I congratulate the hon. Lady again on securing this important debate.

Question put and agreed to.

Resolved,

That this House has considered court charges and access to justice.

Groceries Code Adjudicator

Tuesday 17th November 2015 Westminster Hall

16:44

[Julian Sturdy (York Outer) (Con)]

I beg to move,

That this House has considered the role and powers of the Groceries Code Adjudicator.

It is a pleasure to serve under your chairmanship, Mr Gray, while discussing a topic that has not yet been debated in depth this Parliament. Before doing so, I must draw hon. Members’ attention to my declaration of interest. Having been a Yorkshire farmer before becoming an MP, I have farming interests, but I do not have any commercial relationship that would be affected by the role of the Groceries Code Adjudicator.

I would like to place on the record my thanks to all the industry bodies and trade associations that have been in contact with my office to feed their views into this important debate. In kicking it off, I would like to voice the concerns that many in the food and farming industries share regarding certain aspects of the Groceries Code Adjudicator. The organisation has been broadly welcomed by many in the sector, but there has been some disquiet about issues concerning the adjudicator’s resources, powers, performance and overall remit, which I will discuss in turn.

As many hon. Members know, the adjudicator was established back in June 2013 to ensure that the largest supermarkets treat their direct suppliers lawfully and fairly. The adjudicator’s primary role is to ensure compliance with the groceries supply code of practice. It is worth mentioning that before the code was introduced in 2010, many farmers reported widespread unfair practices such as last-minute price cuts, being asked to guarantee the supermarket a minimum profit margin, and growers being expected to pay as a condition of being a supplier. Those unfair practices would all now be illegal under the code, but the impact of the code has been to force many food producers out of business. As a nation we have become increasingly reliant on imported food—a theme I will touch on later.

[Mr Mark Williams (Ceredigion) (LD)]

I congratulate the hon. Gentleman on securing this important debate. I do not have the pedigree of a farming background, but I represent many farmers. An increasing feature of the market has been the development of voluntary codes, such as those in the dairy and beef sectors. When he goes on to talk about remit, will he be mindful of the need to encourage the adjudicator to have the power to look at where voluntary agreements are and are not working?

[Julian Sturdy]

The hon. Gentleman makes a good point. He is absolutely right that some of the voluntary codes are working well and are successful, while others need much more work. I would welcome the codes falling under the remit of the Groceries Code Adjudicator. As I will set out, there needs to be a much wider remit for the adjudicator, especially given that the Minister will review the remit in March 2016.

To go back to the history, the Groceries Code Adjudicator oversees a sector that is worth £177 billion and employs 3.8 million people—14% of the UK workforce or one in every seven jobs in the country. It is also our largest manufacturing sector, worth almost a fifth of our manufacturing output, which is more than our car and aerospace manufacturing sectors combined.

Supermarkets are huge wealth creators in this country, and I am sure that many hon. Members present will have first-hand experience of the community work that supermarkets do in their constituencies, so this is not about being anti-supermarket, as they play a huge role in our economy and society. However, in the light of the sheer scale of the grocery industry, it is about fairness. Given the scale of the industry, it might come as a surprise that the adjudicator is employed for only three days each week and is assisted by a team of just five people. I have always been a champion of lean and efficient public bodies, but the current resources do not appear appropriate for the challenges at hand.

[Chris Davies (Brecon and Radnorshire) (Con)]

May I echo the words of my friend the hon. Member for Ceredigion (Mr Williams)? I am delighted that my hon. Friend the Member for York Outer (Julian Sturdy)has brought this debate to Westminster Hall and highlighted this very important issue. While he is on the history, can we go back a little further? He will remember, as I am sure all hon. Members do, the great anticipation that there was for a Groceries Code Adjudicator. Various Governments had promised to create that role, but it never came about. When we brought it forward, there was great anticipation among the farmers and producers in my constituency of Brecon and Radnorshire that this organisation would have real teeth to deal with the situation with the supermarkets. As my hon. Friend rightly says, supermarkets are a very important part of—

[Mr James Gray (in the Chair)]

Order. Interventions must be brief.

[Chris Davies]

Yes, Mr Gray. The supermarkets are very important, but so is this adjudicator and so indeed are suppliers. When we look at the history, we see that we need to strengthen—

[Mr James Gray (in the Chair)]

Order. Interventions must be brief.

[Julian Sturdy]

I thank my hon. Friend for his intervention. He is absolutely right about looking back at the history. I remember, before the 2010 general election, attending many hustings and talking about a Groceries Code Adjudicator and how it was so important that we brought that forward. I remember, as I am sure a number of hon. Members here will, speaking in the debate on Second Reading of the Groceries Code Adjudicator Bill, and warning then that, while we had to bring that forward, we had to ensure that it had real teeth to act. I feel that it has been a good step forward, but there is much more work to do, and I want to touch on that.

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

I congratulate the hon. Gentleman on initiating the debate. A number of us, including the Chair of the Select Committee on Environment, Food and Rural Affairs, the hon. Member for Tiverton and Honiton (Neil Parish), have already discussed some of these issues, but does the hon. Member for York Outer (Julian Sturdy) agree that the Groceries Code Adjudicator’s remit should be expanded in legislation to include fair and reasonable prices for producers? Many people—not solely in the dairy sector, which has a voluntary code—have been asking for that.

[Julian Sturdy]

The hon. Lady is absolutely correct. I will go on to pay tribute to the EFRA Committee and the work that it has done on this subject. I know that it has forthcoming inquiries on the topic as well. I entirely agree with her. I want to touch on the dairy sector later in my speech, but this issue goes right across the fresh produce sector, and we have to get fairness there.

I was making the point about the sheer scale of the industry and whether the Groceries Code Adjudicator has enough resources to do its job. Why does the adjudicator have a team of only five, and why is the adjudicator employed for only three days a week? Is that because there is not a real problem of the supermarkets using their massive size and resources to abuse their dominant market position? Or is the problem simply not being taken seriously enough, with the result that those are the resources available to the adjudicator?

The powers of the GCA have also been called into question. My hon. Friend the Member for Brecon and Radnorshire (Chris Davies) has touched on this. I remember making a contribution on Second Reading of the Groceries Code Adjudicator Bill, when it was not envisaged that the adjudicator would be able to fine companies from day one. I warned then that, without adequate teeth, the GCA would be like a referee without a whistle. I think that another Member in that debate said that it would be like a referee without a red card in his top pocket. The fear with all new regulatory bodies is that they are set up too cautiously and they become ineffective talking shops, unable to gain influence or authority in the sector. It was therefore a welcome development when, before the Bill’s Committee stage, the Government accepted the argument about giving the adjudicator the ability to fine retailers. Secondary legislation was introduced to give effect to the power to impose penalties on the large supermarkets of up to 1% of their annual UK turnover. That was another positive step forward—a step in the right direction—as the adjudicator requires teeth to send a strong message to the supermarkets that treating suppliers fairly is not optional.

It is deeply unfortunate, however, that the adjudicator’s ability to impose robust fines will come in after the GCA’s investigation into allegations that Tesco overstated its profits by £250 million. Should a breach of the code be found to have occurred, the only possible sanctions will be to name and shame the retailer, which is redundant at best, as the matter has already been widely reported in the media. In the light of the GCA’s limited resources and the late arrival of its powers, it is fair to ask what the adjudicator has achieved in the two years since it was established.

[Rebecca Pow (Taunton Deane) (Con)]

I, too, congratulate my hon. Friend on securing the debate. We have discussed this issue at length during the EFRA Committee’s farm prices inquiry, and it is very pertinent. I wonder whether the adjudicator is working three days a week because she does not have enough powers to fill the other days. She is legally prevented from looking for evidence, and her remit extends only to direct suppliers, which leaves out the majority of farmer suppliers, which in turn does not encourage them to bring evidence forward.

[Julian Sturdy]

I thank my hon. Friend for that intervention. She has hit the nail on the head: the Groceries Code Adjudicator does not have the powers to fill the whole week. But let us be serious about this. Ultimately, we must have a Groceries Code Adjudicator that has the powers to act on behalf of primary producers right across the sector. I am sure that if we deliver those powers, the Groceries Code Adjudicator will be able to fill her time right the way through the week.

To date, the adjudicator has not completed a single investigation, has not made any final decisions in arbitration cases and, as we have discussed, has not imposed any enforcement measures, financial or otherwise. The GCA is, however, to be commended for the transparent way in which it measures its own performance through the use of surveys. The key findings were that eight out of 10 suppliers said that they had experienced a potential breach of the code in the past 12 months. Unfortunately, only 38% of direct suppliers said that they would consider raising the issue with the adjudicator. Something has gone seriously wrong when the majority of suppliers have suffered problems with the code but most would not even consider raising the matter with the body in charge of protecting their welfare.

This year, the surveys show some positive developments, with a drop in the number of suppliers reporting potential breaches and a rise in the number of suppliers who would consider raising the issue with the GCA. However, serious weaknesses remain. Despite an increase in confidence in the GCA, the majority of direct suppliers still would not have confidence in the adjudicator helping them when they are in need. The reasons for the lack of confidence are, sadly, all too clear: 68% of suppliers fear retribution by the retailer should they be identified, and 45% are not confident that the GCA will maintain their confidentiality, despite being bound to do so.

The surveys ultimately raise more questions than answers. How can we make sure that the majority of suppliers have confidence in the GCA to handle their complaint appropriately? What can we do about the apparent climate of fear that surrounds the reporting of potential breaches of the groceries code? I will be inviting the GCA to discuss those matters with my colleagues at a special meeting of the all-party group for rural business next year, which I hope the Minister might attend. I hope that she will at least address those concerns today. I know that she is very experienced in this matter and I look forward to her response.

Perhaps most important is the question of extending the remit of the GCA. That has been widely supported by many in the food industry, especially in the light of the plight of our dairy farmers. Although I appreciate that the Minister will review the role and powers of the adjudicator in March next year, the truth is that many of our dairy farmers cannot wait that long. It is to be welcomed that the EU support payments to help hard-pressed dairy farmers manage their cash-flow problems started arriving in farmers’ bank accounts yesterday, two weeks ahead of schedule. I am also pleased that the Government have secured from the European Commission more than £26 million—the third largest support package among member states—to help dairy farmers affected by the global volatility in milk prices. As the Tenant Farmers Association has argued for some time, however, the GCA could play a hugely positive role in helping dairy farmers by ensuring fairness throughout the supply chain.

In January this year, I was greatly encouraged by the Prime Minister’s response to a question asked by my hon. Friend the Member for Montgomeryshire (Glyn Davies), who is here today. He enquired whether the powers of the GCA should be extended and strengthened to support the dairy industry. The Prime Minister agreed with him, saying, of the GCA:

“I also think it is time to look at whether there are ways in which its remit can be extended to make sure it looks at more of this vital industry.”—[Official Report, 21 January 2015; Vol. 591, c. 217.]

Sadly, nine months later its remit remains the same, and the plight of dairy farmers continues.

There are three crucial ways in which the remit of the adjudicator could be extended to help dairy farmers and those most in need in the fresh produce sector. First, as the British Poultry Council, the National Farmers Union and the Country Land and Business Association have made clear, the adjudicator must have the power to initiate its own investigations. Currently, it can act only on complaints. It has been suggested that in much the same way as Ofsted has the powers to investigate the performance of schools on its own initiative and at very short notice, the GCA should be able to investigate potential breaches of the code among the larger supermarkets at any time. At the moment, it appears that the adjudicator needs to be handed all the evidence and have a conclusive case against a retailer before an investigation can commence. Perhaps it would be better if the GCA could say, “I have heard enough from this area of the industry, and there is clearly a problem. I will open an investigation to make sure that the supermarkets are not abusing their dominant market position.”

Secondly, trade associations such as the Federation of Small Businesses and the Royal Association of British Dairy Farmers argue that the adjudicator needs to be able to examine the whole supply chain from the farm to the checkout. Currently, only direct supply contracts can be investigated. Although the vast majority of farm produce passes through a processor before ending up on the supermarket shelves, as the law stands the GCA cannot consider the impact of retailer activity on farmers, even though that is at the centre of the dairy industry debate.

Thirdly, although we do not want to give the adjudicator the power to fix prices, the GCA should have the power to investigate and report on the balance of pricing throughout the supply chain. That would ensure that all suppliers in the chain—the primary producers as well as the direct suppliers—were getting a fair deal. The information would also provide much-needed transparency, which would assist farmers and food producers in negotiating fair and sustainable contracts with the processors and, ultimately, the supermarkets that they serve.

I have briefly touched on the fact that there is widespread concern about the huge volatility in milk prices and the impact that that has had on the British dairy industry. As few dairy farmers sell direct to supermarkets, there have been calls, most notably from the Environment, Food and Rural Affairs Committee, for the scope of the GCA’s powers to be extended. I am sure that my hon. Friend the Member for Tiverton and Honiton (Neil Parish) will be able to update us on the Committee’s excellent work on the dairy industry and farm-gate prices.

It is not only dairy farmers who come under the remit of the GCA. As the NFU “Catalyst for Change” report makes clear, fruit and vegetable growers up and down the country describe the current environment as a battlefield. There are concerns that because of the price wars among the largest supermarkets, driven by the increasing competition from discount retailers, supermarkets are up to their old tricks. Feeling the pinch from their new discount competitors, the temptation to attempt to claw back profitability from further down the supply chain is, sadly, all too real. That will have dangerous consequences, but the GCA cannot intervene because the vast majority of farmers sell their produce through processors. The impact of that poor practice, as in the past, has been to force producers out of business, increasing our reliance on imported food. The value of British fruit and vegetable production has fallen by 14% since 2010, and imports have never been higher.

[Mr Mark Williams]

I have been listening carefully to the hon. Gentleman’s excellent speech. Does he agree that we are talking about not only an economic argument, but confidence in the industry? The theme in my constituency has been the confidence of young people whom we desperately need—the age demographic of farming is going up—to join the industry. If they do not see fair play at its most basic, they will be less inclined to join the industry.

[Julian Sturdy]

The hon. Gentleman makes a good point. We are absolutely talking about confidence in the industry—confidence for primary producers to invest in the sector and move their businesses forward, and confidence for the younger generation to get involved in the industry. He is absolutely right that the age of people running the industry is getting higher and higher, and we desperately need younger people to get in.

Food security, which I have touched on, is so important to our country. Imports of fruit and vegetables have increased by more than 650,000 tonnes in the past four years, and further decline in British food production will have serious consequences for food security and the farming sector. The GCA could have an important role in preventing supermarkets from exacerbating the problem.

Although the introduction of the GCA is to be welcomed, two years on it is clear that there is potential for the adjudicator to do so much more. The Government review will take place in only four months’ time. Will the Minister assure me and other Members here that details of the review will be published as early as possible? As I am sure she will agree, it is essential that the entire food sector has the opportunity to feed into the review, and the trade associations need time to present a strong submission. Will she assure me that submissions will be accepted from indirect suppliers, not just from direct suppliers who are currently under the GCA’s remit? Will she assure me, as the Prime Minister indicated to the House at the start of the year, that she will look at extending the adjudicator’s remit to help those right across the supply chain, including dairy farmers and fruit and vegetable producers?

A properly resourced GCA that has the right powers and acts proactively in the market has the potential to be a powerful source of fairness in a cut-throat industry. Anything less would be a missed opportunity, and British food producers and, ultimately, the end consumer would be all the poorer for it.

[Mr James Gray (in the Chair)]

Mr Shannon has inquired whether there is a time limit in this debate. There is no such time limit. None the less, I am keen to bring in the Chair of the Select Committee on Environment, Food and Rural Affairs in good time before the first of the three wind-ups. He might like to time his comments to allow that to occur.

17:09

[Jim Shannon (Strangford) (DUP)]

Thank you, Mr Gray; that is very helpful.

It is good to speak in this debate, and I thank the hon. Member for York Outer (Julian Sturdy) for giving us a chance to contribute. This is an issue for us in Northern Ireland, which is why—although my hon. Friend the Member for Upper Bann (David Simpson) is absent just now—we have three Members from Northern Ireland present. My hon. Friend and the hon. Member for South Down (Ms Ritchie) are members of the Environment, Food and Rural Affairs Committee so they have input to this issue as something that concerns them. I declare an interest as I chair the all-party parliamentary group for eggs, pigs and poultry. The APPG may dwell more on the issues of the laws that come from Europe, but one of the issues that came up at our launch just two weeks ago was that of fair prices. Although Members have referred to the dairy industry, many other sectors of agriculture and farming have problems with that as well.

It is nice to see the shadow Minister and the Minister in their places. We have been here together in debates on at least two different subjects—health and defence. We are now debating agriculture and the Groceries Code Adjudicator; the Minister has a wide interest.

Competition is a healthy part of society, contributing to economic growth, ensuring competitive prices and driving innovation, but sometimes the system that ensures competition is broken. Sometimes competition is not working as it should. That is a clear issue for us. With just four retailers taking 85% of the market, it is clear that competition in the groceries sector is not working. Farmers say that they are not getting their prices, they are working long hours and they are the ones getting squeezed. All the evidence indicates that that is the case. To break the domination and get competition working again, action is needed. Today is a welcome opportunity to discuss that potential action, and to ensure that we take action that works and does not have negative unintended consequences.

Recently across the country and across my largely rural constituency of Strangford, we have seen the impact of the abuse of purchasing power by major supermarkets. The major supermarkets are very important as they push out the product matter, but it is also important that they have local people to supply them. Many of those supermarkets claim, “We buy so much of our products locally.” It is okay to buy it locally, but they have to give the producer a fair price. Farmers are on the brink, with some even contemplating suicide—these are hard times—over the position they had been forced into by abusive monopolies. Unfair trading practices are referred to in the background notes. That is one of the issues.

[Ms Ritchie]

My constituency neighbour will know, as I do, that agricultural produce is critical to our local economy. In that vein, does he agree with me, and with the conclusion of the Ulster Farmers Union, that the Groceries Code Adjudicator should have more power to tackle unfair trading practices, particularly in the dairy sector but also in the red meat and vegetable sectors? That would have an impact on his constituency.

[Jim Shannon]

As always, I am pleased to have accepted an intervention. I note the hon. Lady’s wise words, which outline clearly the issues for my constituency and her constituency, in referring to the unfair trading practices.

We have to value the benefits of supermarkets, as I said earlier. The Competition Commission views the country’s supermarkets as delivering

“a good deal for consumers”.

However, the commission did warn about the impact on suppliers if current practices were to continue—that continuing to produce a quality product at a cheaper than cheap price is unsustainable. It said that

“the transfer of excessive risk and unexpected costs by grocery retailers to their suppliers through various supply chain practices if unchecked will have an adverse effect on investment and innovation in the supply chain, and ultimately on consumers.”

In the background information sent to us by the National Farmers Union, there are three examples. Just last week on the TV—I think it was early on Tuesday morning last week—there was a clear illustration of this. A farmer, who I think was from Norfolk, was producing parsnips for Morrisons and had been doing so for years, but he was not getting his price and the company was continuously squeezing him. The problem for him was that it had got to a stage where it was unsustainable. Last week a TV programme carried the story. Morrisons had not replied over a six-week period. Ultimately, he was saying, “I cannot continue after years of the product being purchased at low profit.” This had an impact on him, as he had young sons. He needed to ensure that everything for him was beneficial and cost-effective, but it was not. Whether it is Morrisons, the Co-op or Tesco, those issues need to be addressed. Action must be taken. Relevant powers need to be given to the new ombudsman or eventually to a body that takes responsibility for this issue.

The Competition Commission’s proposed ombudsman would enforce compliance with the groceries supply code of practice. Perhaps the Minister will tell us what extra powers the ombudsman will have to bring supermarkets into line and ensure that they do what they should do. We have to strike the right balance between addressing the abuses of purchasing power by monopolies and allowing legitimate businesses to operate with as little Government interference as possible. That is appropriate, given the serious detrimental impact to suppliers. As I have already outlined, the grocery retailers will be prohibited from making retrospective adjustments to terms and conditions of supply, which are issues that have a direct impact on them.

It is my understanding that the Groceries Code Adjudicator would not have to have, or seek to have, any role beyond what is necessary to monitor and enforce the code of practice. However, with the right approach, and with the teeth that Government can give it, we can, as the hon. Member for South Down and others have said, make the change, make farmers more profitable and help them, as they produce a quality product that in many cases leads the world. They need that profit and that money to continue to be producers.

17:16

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

It is great to serve under your chairmanship, Mr Gray. I thank my hon. Friend the Member for York Outer (Julian Sturdy) for securing the debate—in fact, he could be considered a young farmer in this day and age. It is great to see him here fighting the corner for agriculture as well as for his constituency. It is good to follow the hon. Member for Strangford (Jim Shannon). Northern Ireland has particular problems because it needs to export much of its food. All products—dairy, beef, lamb and poultry—are under pressure, so this debate is timely. I will not go into the history of the adjudicator as my hon. Friend the Member for York Outer did that very well.

I am unashamedly going to make a speech that is pro-farming and pro-food production. We produce some of the best food in the world with some of the highest welfare standards, but that often adds cost to the food we produce. We have massive retailers, which are good for consumers. They can have a good war with each other and drive prices down, but as they drive the prices down, the suspicion is—it is not always the case—that the farmer and the processor pay for those low prices in the shop. If Tesco has a price war, the price comes down; I just wonder, for Wiseman or whoever supplies Tesco, whether the farmers are getting a good price from the Tesco direct milk contract. Are the processors then being squeezed? Are the other parts of that milk contract—cheese, butter and yoghurt—then being affected? All those things are appropriate and we need to look into them.

We want to produce more and more food in this country. We are becoming less self-sufficient every year, but we should be more self-sufficient every year. I have every faith in the Minister to ensure that we are more self-sufficient in food. The only way that will happen is if the farmer and the producer are paid a full price. The Groceries Code Adjudicator needs to be able to go into a retailer, whoever it might be—a bit like a spot check—and check that it is not using unfair practices to keep the commodity price or the price that is paid to the producer down. It could be milk, beef, lamb or perishable products. With perishable vegetables, the farmer or the grower is even more vulnerable because there is no way of storing much of that produce. Often the large retailers know that and they will drive the price down until it is uneconomic to produce.

The Groceries Code Adjudicator has powers. She appears before the Select Committee next month, so we will be able to put these questions to her directly. Five members of the Select Committee are here this afternoon, which shows the importance we attach to this subject. Is the Groceries Code Adjudicator using her powers sufficiently? Is she resourced enough? I echo my hon. Friend the Member for York Outer in saying that I do not usually come to Westminster Hall to demand more bureaucracy and more money, but if we are to take on these massive retailers, which have billions of pounds-worth of trade, we need someone who is resourced enough to be able to go in and stand up to them.

Few processors are feeding milk, beef, lamb and poultry into Tesco, Sainsbury’s and Morrisons, or whoever it might be, so if there is a complaint, the retailer knows very well where it has come from. Suppliers are therefore not likely to make a complaint. Whistleblowers and people with a real complaint must be able to come forward and must be protected. If the big retailers are using their muscle unfairly, the Groceries Code Adjudicator should have the power to come down on them in an even heavier fashion, because 1% of the turnover of Tesco or Sainsbury’s is quite a fine. Such a fine would send a message to the rest of the retailers that they need to behave properly.

[Rebecca Pow]

Will my hon. Friend give way?

[Mr James Gray (in the Chair)]

Order. I am keen for the wind-ups to start, so the intervention should be very brief.

[Rebecca Pow]

We have heard much about the 25-year plan for the future of great British food and farming, not just for Taunton Deane, where I come from, but for the whole of Britain. Is it not important that we give the Groceries Code Adjudicator teeth, so that she can be part of that 25-year plan and help to enable everything that we want for our home-grown food?

[Neil Parish]

I could not agree more. Greater production in this country would mean that we did not have to import so much food. That would be good for our balance of payments, and it would be good not only for farmers but for our processing industry—all this can help to build the industry. We are therefore looking forward to the Minister proposing greater powers and more resources for the Groceries Code Adjudicator so that she can look into more of these large retailers to ensure that the farmer, the grower and the processor get a fair deal.

17:22

[Stuart Blair Donaldson (West Aberdeenshire and Kincardine) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate the hon. Member for York Outer (Julian Sturdy) on securing this debate on an issue that is important to many of my constituents and to the constituents of Members on both sides of the House.

I am sure all Members would agree that the Groceries Code Adjudicator is well intentioned but its powers do not go far enough. In particular, it is insufficiently responsive to a failing supply chain. Earlier this year, the Scottish Government’s Cabinet Secretary for Rural Affairs, Food and Environment, Richard Lochhead, wrote to the Secretary of State for Environment, Food and Rural Affairs, stating:

“I have long been pressing the UK Government to widen the Groceries Code Adjudicator’s remit and powers so that she can shine a spotlight on contracts between primary producers and processors, as well as processors and retailers.”

In conjunction with that, Mr Lochhead has continued to press the milk prices crisis with the adjudicator. There has been huge volatility in dairy prices over the past two years, and no fewer than 19 Scottish dairy farmers have gone out of business this year. Dairy is the most visible area in which the GCA’s remit does not go far enough. The GCA has no remit to investigate prices; it may investigate only the relationship between the largest supermarkets and their direct suppliers. The fact that the code extends only to retailers with a turnover of more than £1 billion and deals only with direct suppliers is unacceptably restrictive, as the vast majority of farmers supply the market through processors.

As few dairy farmers sell direct to supermarkets, consideration should be given to extending the scope of the GCA’s powers to provide a mechanism to tackle the problem. Dairy farmers who deal with large retailers often receive substantially less than the cost of production for their milk. Dairy producers cannot be expected to subsidise retailers in that way. It is not in the long-term interests of either our food security or our consumers to push dairy farmers out of business. That is why I echo the recommendation of the Environment, Food and Rural Affairs Committee’s report on dairy prices that the Government should give urgent consideration to how the GCA’s remit could be amended.

Expanding the role of the GCA would give it the powers that it should have, and indeed that many people already think it has. That is reinforced by the words of the adjudicator, Christine Tacon:

“I think very many farmers thought I was going to be there to get involved with price. I have been asked to get involved in the price of beef and milk and fleece. None of these can I get involved with: first, because I cannot get involved on price, and secondly they are very rarely direct suppliers themselves.”

That restrictive remit seems to be hampering the work of the GCA. Ms Tacon has also said:

“I continue to spend a great deal of my time explaining the remit of the GCA. This has hampered my ability to pursue important work that is within my remit…. The continued misrepresentation of my role is of great concern to me and I am keen to resolve this issue swiftly.”

I suggest that expanding the GCA’s remit would help to resolve that issue.

As has been mentioned, the GCA must have the power to initiate her own investigations, rather than only being able to act on complaints, as is currently the case, and she should be able to do so at any time. The GCA also needs to be given a role to look at the whole supply chain, rather than only being able to investigate direct supply contracts. That would finally bring the vast majority of farm produce into her remit. Finally, she should be able to investigate and report on the balance of pricing throughout the supply chain. That would bring transparency and help farmers and others in their negotiations with the retailers. Farmers across the UK are vital contributors to the rural economy and to the sustainability of our nation. They deserve a better deal and fairer pricing. I urge the Government to consider the points raised in this debate and broaden the remit of the Groceries Code Adjudicator.

17:26

[Bill Esterson (Sefton Central) (Lab)]

I add my congratulations to the hon. Member for York Outer (Julian Sturdy) on securing this debate, which has been remarkable because we have had unanimity across multiple parties. I am fascinated to hear how the Minister will deal with the overwhelming demand for improvement in the remit of the Groceries Code Adjudicator that has been clearly expressed by all Members who have spoken today. I can only agree with many of their comments.

The Groceries Code Adjudicator was set up by Act of Parliament in 2013 following complaints by suppliers, smaller retailers and commentators about unfairness in retailing. A code of practice was introduced in 2001 and in 2008 the then Competition Commission recommended the creation of a statutory body to oversee and enforce a strengthened code. The Labour Government launched a consultation in February 2010, and the coalition Government responded by announcing plans for an adjudicator to enforce the groceries supply code of practice.

Many people raised concerns at the time about the watering-down of the role from the recommended ombudsman to an adjudicator, and those comments have been echoed by a number of Members today. It is perhaps no surprise that we have returned to that point because, as the hon. Gentleman said, an adjudicator working three days a week with a team of five will struggle to look after 300,000-plus suppliers in the retail supply chain. The expectations go way beyond the adjudicator’s ability to deliver.

Major retailers operate in a competitive market. To gain market share, the supermarkets loss-lead milk, bread and other products and they have promotions on many individual lines. When retailers cut prices, the question can arise of who pays and what the knock-on effect will be—a point made well by the Chair of the Select Committee, the hon. Member for Tiverton and Honiton (Neil Parish). Retailing runs on tight margins, so the pressure to cut costs in the supply chain is understandable. Ensuring that such pressure does not unfairly affect suppliers is a key responsibility of the adjudicator. There is a voluntary code of conduct in the dairy industry, and the Competition and Markets Authority also has responsibility to help smaller suppliers.

To be fair, since the Groceries Code Adjudicator was set up the number of suppliers saying that they have problems with retailers has fallen. The adjudicator says that she believes that being in post has on its own acted as a deterrent, and that the existence of the office has alone made a difference. However, many suppliers still say that they are unfairly treated by large retailers.

We have heard about anonymous complaints and suppliers’ concerns about retribution if they are identified. Again, the Chair of the Select Committee made the strong point that it is all too easy to identify who a complainant might be. The adjudicator has said that a lack of trust is a barrier to suppliers who might have complaints. Suppliers all want the ability to raise concerns free from the fear of reprisals. I am sure that the Minister would agree that minimising the danger of retaliation by retailers is essential if the adjudicator is to be effective. Will she comment on the adjudicator’s inability to investigate where there is a possibility that a complainant’s identity might become known to the retailer, and how she might improve how that aspect of the adjudicator’s role is carried out? The way the adjudicator is set up acknowledges that particular problem without solving it.

According to the Department for Business, Innovation and Skills, there are 7,000 direct suppliers, all of which are covered by the adjudicator, and a further 300,000-plus indirect suppliers, which are not. That issue has arisen again and again in this debate, and Members want it to be addressed, as those smaller suppliers are excluded from the remit of the Groceries Code Adjudicator. The adjudicator has made it clear that she has a small office and spends much of her time explaining what she can and cannot do. She has also made it clear that she cannot possibly cover the 300,000 suppliers in the supply chain, unless of course the scale of operations is dramatically altered, as is being demanded in this debate.

The Government said in their response to the previous Government’s consultation that they wanted to act in consumers’ long-term interest. I am sure that all of us agree with that now, when the adjudicator has been in post for some years, but the reality is that a system where there is quarterly reporting to the stock market and a very short-term approach, and where management are judged on short-term results, either quarterly or annually, leads to actions that can have drastic effects on suppliers throughout the supply chain. Short-term actions can also have long-term consequences. If producers are unable to stay in business due to unfair business practices by major retailers, main suppliers or both, we may lose good producers. If we lose good producers of quality goods, consumers will ultimately lose out.

The Chair of the Select Committee made the point that we have some of the finest food and standards in the world, and we want to retain those, but if our short-term actions threaten them, consumers will lose out in the end, which is no good to anyone. If the actions of retailers lead through the supply chain to that end, retailers will lose choice as well, thus losing out themselves. It is in nobody’s interest for such things not to be sorted out.

I will not go into the issue of dairy pricing in too much depth, other than to say that it is a particularly important issue. Only 3% of dairy suppliers supply direct to supermarkets, so there is a special case to be made. There is also a special case to be made for supporting the dairy industry in the longer term. In fact, the Secretary of State spoke in January of doing all that she could to ensure resilience in the dairy sector. If only the same vote of confidence and support had been given to the steel industry, I am sure that steelworkers would feel much better. [Interruption.] The Minister waves me away with that dismissive air she does so badly.

[Glyn Davies (Montgomeryshire) (Con)]

You should have a response to that.

[Bill Esterson]

I am sure that the Minister will have a response.

What is needed in the sector is a level playing field that benefits consumers, suppliers and retailers in the long term. The Minister should ensure that the adjudicator and others, including Ministers, intervene in the short term to ensure long-term success. The adjudicator review is due in March. I hope, as I am sure do all Members who have spoken, that when the review is concluded, changes will be made that address the concerns raised here and by those in the supply chain on behalf of business and consumers. I look forward to hearing her response.

17:35

[The Minister for Small Business, Industry and Enterprise (Anna Soubry)]

It is, as ever, a pleasure to serve under your chairmanship, Mr Gray. I sat through some of the previous debate and was looking forward to this one on the basis that my job would not be as difficult as that of the Minister in that one. I fear that I was mistaken. As you have heard, Mr Gray, everybody has ganged up on me. [Hon. Members: “Aww.”] I am not complaining particularly, because I think I have robust rebuttals to some of what has been said.

Given that, as ever, I have 10 minutes, the usual rules will apply. My hon. Friend—he is my hon. Friend—the Member for Strangford (Jim Shannon) will know my rules, which are that if I do not answer any questions or points raised by hon. Members from whatever party, they will of course receive an answer in a letter. It is always good to say that, because I can simply put off the more difficult ones to another time by putting the answers in a letter.

Being serious, and with great respect to everyone who has spoken—particularly my hon. Friend the Member for York Outer (Julian Sturdy), whom I congratulate on securing this debate—I think that there are some fundamental misunderstandings about the Groceries Code Adjudicator. I will be even more controversial, and a little churlish, by saying that I am sure that the adjudicator is looking forward to appearing before my hon. Friend the Member for Tiverton and Honiton (Neil Parish) and his Committee. Clearly, nobody else here has met Christine Tacon. I have had the great pleasure of meeting her. She is a lady who takes no prisoners, and she is forthright not only in her views but in defence of the great work that she does. She is a formidable player, and in her we have an excellent first adjudicator.

I point out the following facts. The Groceries Code Adjudicator and her team are funded wholly by a levy on the 10 designated retailers, as outlined by my hon. Friend the Member for York Outer. The levy for 2015-16 has been set at £1.1 million, but the important point is this: the adjudicator decides for herself what her resource requirements will be for each year, based on her assessment of forthcoming work. They are approved by the Department for Business, Innovation and Skills, and then the amount is levied on the retailers. She is very much in charge.

I was looking at the Groceries Code Adjudicator website only today. I noted that in her report published today on her work over the last three months, she says, for example, that she has just appointed a new compliance officer. I urge hon. Members to read her three-monthly report to see the great advances that she is making. There is also scope to bring in additional resource if required, for example to help with investigation work. The adjudicator is satisfied that she has adequate resources and with the process for agreeing those resources with BIS. She has made that clear. It is up to her: if she is not satisfied, or thinks that she does not have enough, she can say so. If we agree, and there is no reason why we would not, she can increase the levy on those supermarkets. She has those powers.

The adjudicator also has powers to initiate her own investigations where she has reasonable grounds to suspect a breach of the code. That can be based on, but is not restricted to, information from direct and indirect suppliers, whistleblowers and the public domain. I argue that despite the complaints made by some, she has the ability to take complaints from other sources. In addition, it is clear from the Groceries Code Adjudicator Act 2013 and the guidance that the investigation threshold is determined by the adjudicator herself, which means she can be proactive in her approach.

[Neil Parish]

The point I was making was not so much about whether the adjudicator is able to take these complaints but that those who are making the complaints are too identifiable by the big retailers and therefore are not prepared to come forward.

[Anna Soubry]

I have a rebuttal for that somewhere, because I am told that regarding whistleblowers—the clue is in the title, I suggest—the adjudicator has a statutory duty to protect confidentiality. That addresses the fear factor among suppliers. Also, the National Farmers Union has a scheme that allows suppliers to make anonymous reports of code breaches via an online form on its own website. The NFU is exactly the type of third party that can take up a complaint on behalf of somebody in the manner that my hon. Friend would like. I thank my officials for that information.

[Several hon. Members rose—]

[Anna Soubry]

I will get a barrage now, having shot a few foxes.

[Chris Davies]

I thank the Minister for giving way. May I say, very briefly, that the collective discussion we have had and the collective request we have made are not about making a complaint against the adjudicator? It is just that her powers do not go far enough.

[Anna Soubry]

I will deal with that one as well, if I may, because I am reliably informed that the problem for the adjudicator is that, as has been identified, she has no power to address matters falling outside the code, for the following reasons. First, the Government cannot change the code. As hon. Members have made clear in their speeches about the history of the establishment of the Groceries Code Adjudicator, the code came about from the work of the Competition and Markets Authority, arising from an investigation that it conducted into competition. Forgive me for saying so, but once again the clue is in the name and the history: it was all about unfair competition. I must say to the hon. Member for West Aberdeenshire and Kincardine (Stuart Blair Donaldson) that it was never about pricing. If there are to be changes to the code, they can be made only by the CMA.

Also, with great respect to everybody, the 2013 Act was passed by a previous Parliament; it was what Parliament decided. The Government could give the adjudicator additional statutory duties outside the code, but that would involve amending primary legislation and it would have to be debated in Parliament. There is nothing wrong with that, but just so everybody understands: new legislation would be needed.

[Ms Ritchie]

As part of such a review, would the Minister consider allowing the adjudicator more freedom within legislation to launch investigations on her own initiative?

[Anna Soubry]

The adjudicator already does that, as I have said, but it must be within the terms of the code, and those terms do not include pricing. I have huge sympathy for the dairy industry—in fact, I think it is important that I say that my mother’s family were dairy farmers and my partner is a non-executive director of Morrisons. I just want to put all my background on the table, so to speak, in case anyone listening to or reading this debate queries my own background. As everyone here knows, I am my own woman; nobody influences me—and some would complain about that. Of course, I always listen to hon. Members and the good arguments that they make, but I am my own woman, whatever my family’s interests may be. Although I am sympathetic to the plight of the dairy farmers, the Groceries Code Adjudicator is not the way to fix the problem.

Steel has been mentioned, but the problem with the steel industry is much the same as the problem with the milk industry at the moment: there is a flood of cheap steel and a flood of cheap milk, which is why prices have fallen. And of course, as everybody knows, when we make the case in whatever part of the agriculture sector it might be and we complain about tumbling prices and the problems that they create for our wonderful British farmers and their excellent products, the problem is that it means we go against the interests of many of our constituents and the other people who buy food at low prices. Of course, if prices were to rise for the farmer, the person who would pay the extra money is the consumer. And full credit to those supermarkets that have said, “We are going to put more money on, because we want to support our dairy farmers.”

Sadly the clock is against me, but it is really important that everybody realises that the Groceries Code Adjudicator’s remit cannot be extended without primary legislation, which would mean going into a different area. It was certainly thought at the time the adjudicator was established that this was the right route to go down.

I apologise that I have not been able to deal with all the excellent points that have been made, but I assure you, Mr Gray, that, as has been asked of me, we will publish details of the review. I look forward to Christine Tacon, who is excellent, giving evidence to the Environment, Food and Rural Affairs Committee, which can make a full inquiry into her work.

Question put and agreed to.

Resolved,

That this House has considered the role and powers of the Groceries Code Adjudicator.

17:45

Sitting adjourned.