Westminster Hall

Wednesday 3rd May 2023 Westminster Hall

Wednesday 3 May 2023

[Mr Philip Hollobone in the Chair]

Child Poverty in the North

Wednesday 3rd May 2023 Westminster Hall

09:30

[Mrs Emma Lewell-Buck (South Shields) (Lab)]

I beg to move,

That this House has considered child poverty in the north of England.

It is a pleasure to serve under your chairmanship, Mr Hollobone, and I give particular thanks to the hon. Member for Cheadle (Mary Robinson), with whom I co-chair the child of the north all-party parliamentary group. I know that she cares deeply about our children in the north and works daily to try to make a difference. I also thank all the academics who worked on our report on child poverty and the cost of living crisis, alongside the Northern Health Science Alliance and N8 Research Partnership. The report led to today’s debate.

I want to say a special thank you to those parents and children who were brave enough to share their pain with us. Despite the challenges they face, they took time to use their experiences to try to make a difference, and their daily struggle should be at the forefront of our minds during today’s debate. It should be their struggles that we are determined to change. However, after 13 years of Conservative government, more than 4 million children are living in poverty, and the children of the north are suffering disproportionately.

Poverty is sadly not a new experience for many children in the north, but the scale and the severity of their deprivation are unprecedented, and poverty is the lead driver of inequalities between children in the north and children in the rest of England. The gulf between children in the north and their peers is not only growing, but growing rapidly. The north-east has the highest rate of child poverty in the UK, with 38% of our children living in poverty. In my constituency of South Shields, the figure rises to more than 42%—a 12 point increase in child poverty over the past six years. It is becoming very clear that levelling up, just like the northern powerhouse before it, is a vacuous, empty phrase that was never intended to, and never will, do anything to improve the life chances of children in my area.

The impacts of poverty are well documented. Numerous studies have shown the links between nutrition and cognitive development. Hungry and disadvantaged children suffer developmental impairment, language delays and motor skills delays, as well as psychological and emotional impacts that can range from withdrawn and depressive behaviours to irritable and aggressive behaviours.

Pre-pandemic, we even saw rising numbers of hospital admissions of children owing to malnutrition and a resurgence of Victorian diseases such as scurvy and rickets. If it were not for the nearly 2,000 food banks in the UK—they are the ones we know of—and kind neighbours, faith groups and charities, many more children would have simply gone without.

When I was a child protection social worker, the children going without on such a scale were those suffering from severe neglect, but now we have a generation of children for whom hunger and grinding poverty have become the norm. As the cost of living crisis worsens, vulnerable children and families, especially in the north, are being pushed to the edge. Our report found that during the pandemic 34% were living in poverty compared with 28% in the rest of England, and that prior to the cost of living crisis about 1 million households in the north were fuel poor—that is, up to 15% in the north compared with 12% elsewhere.

In addition, we found that families in the north were more likely to be living in poor-quality, damp homes. Before living costs started to rise, nearly 100,000 homes in the north had some form of damp, and 1.1 million homes in the north had failed the decent homes criteria.

Our report was launched in January with a warning about what would happen without the Government introducing urgent measures:

“Rising living costs will lead to immediate and lifelong harms for children: worsening physical and mental health”,

as well as poorer education outcomes and lower productivity.

I despair at how many times we have been here. It was not that long ago that the United Nations special rapporteur on extreme poverty and human rights visited the UK and found that Conservative Governments had inflicted “great misery” with

“punitive, mean-spirited, and often callous”

austerity policies driven by a political desire to undertake “social re-engineering”, rather than by economic necessity. Just last year, his successor warned that further austerity could violate the UK’s international human rights obligations and increase hunger and malnutrition.

The free school meal support that the Government have put in place has been hard fought for by charities, faith groups, Opposition MPs and celebrities. The holiday activities and food programme was fought for from 2017, but it was not until 2021 that the Government decided to roll it out. My fully costed School Breakfast Bill would have seen nearly 2 million children start the day with full stomachs. Instead, the Government introduced a scheme that provides support to only 2,500 out of the 8,700 they identified as eligible. It took the tragic death of two-year-old Awaab Ishak from exposure to serious mould for the Government to commit to forcing landlords to fix damp and mouldy homes.

Struggling children have never been and never will be a priority for this Government. If the political will were there, they would listen to the myriad voices—including experts, charities, organisations, faith groups, MPs, including some on their own side, and Henry Dimbleby, their former food tsar—pleading with them to at least expand free school meal eligibility to all families receiving universal credit or equivalent benefits. That would mean that a further 1.3 million children living in poverty would at least get a free school meal and would be eligible for the holiday food programmes.

Poverty can be all-encompassing. Our expert witnesses told us stories of children coming to school hungry, exhausted and without shoes. They miss health appointments because travel is unaffordable. Such hardship not only impacts their health and development but stifles social mobility. Throughout the pandemic, children in the north missed more schooling than their peers across England, which will result in an estimated £24 billion in lost wages over their lifetimes. Children in the north are more likely to die before the age of one. Shockingly, one of our witnesses told us that expectant mothers have been forced to have abortions because they cannot afford another mouth to feed and another child to clothe.

Every single one of us on the APPG, including my hon. Friend the Member for Blaydon (Liz Twist), is committed to change. Our recommendations were that the Government should raise social security in line with inflation at the earliest opportunity, scrap the two-child benefit limit, pause universal credit sanctions for families with children, increase child benefits, extend free school meal eligibility, and take action to improve the energy efficiency of rented homes. That would be a good start in stemming child poverty levels, but those policies alone will not be enough. People should always have enough to live on, either through decent pay or, for those unable to work, a proper welfare safety net. But they do not, because work is no longer a route out of poverty. Sixty-seven per cent. of children and young people growing up in poverty in the north-east are from working families, and social security support continues to be inadequate.

I know the Minister is likely to tell us that the Government are spending billions on welfare, that they have uprated benefits, that they have increased the national living wage, that they are maintaining the energy price guarantee for a few more months, and that they are giving families cost of living payments, but I gently remind her that inflation reached 11% in October last year—a 41-year high—and benefits did not rise with inflation until last month. The cost of a weekly food shop is rising at its fastest annual rate since 1977, hitting 19%, and gas bills are 130% higher than they were in summer 2021.

The reality is that the Government’s support is all in the form of one-offs. Their policies are piecemeal—they are sticking plasters—and do little to address the root causes of child poverty. It should be to the Government’s utter shame that, in a country with as much wealth as ours, children are suffering in this way. History shows us that poverty is not inevitable; it is a result of choices made by Governments. Under the last Labour Government, policies such as the minimum wage, increased benefits for families with children, increased support for childcare and Sure Start lifted 1 million children out of poverty. The next Labour Government would pull families out of fuel poverty by insulating 19 million homes, stop children going to school hungry by establishing breakfast clubs in every primary school and introduce a genuine living wage to ensure that families are being paid enough to live on.

I know my party takes child poverty seriously and the Front-Bench spokesperson will be listening carefully to the points I raise here today. I am hopeful that, ahead of the next general election, we will adopt policies to expand free school meals, increase child benefits and fix problems with the Healthy Start scheme to ensure that every child, no matter where they grow up, has the best possible chance in life. Once someone has experienced poverty, it never leaves them, and enduring scars remain. The feelings of hopelessness and despair may fade over time but they never go away. They are a constant reminder of the injustice of deprivation in a country as wealthy as ours and that no one, especially children, should ever be left hungry, cold or without.

I simply ask the Minister: what is she going to do to remedy the dire situation that consecutive Tory Governments have left our children in the north in? Can she answer this powerful question from Sophie Balmer, our youth ambassador from the End Child Poverty coalition:

“Remember, these graphs are people. I’m a number on these statistics. Why does it feel like I don’t matter…my sisters don’t matter”?

09:41

[Mary Robinson (Cheadle) (Con)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. It is also a pleasure to follow the hon. Member for South Shields (Mrs Lewell-Buck), with whom I am pleased to co-chair the APPG for the child of the north. I congratulate her on securing this important debate. I also wish to join my co-chair in thanking all the members, expert witnesses and researchers for their work in producing the child of the north report.

Child poverty in the north is a problem that simply cannot be ignored. The report published by the APPG published earlier this year, “Child Poverty and the Cost of Living Crisis”, calls attention to the hardships and difficulties that are disproportionately felt by children in the north of England. Those existing hardships have been exacerbated by the increase in fuel, energy and food prices experienced across the country as a result of Putin’s invasion of Ukraine. However, as highlighted by the report:

“local authorities in the North East, the North West and Yorkshire and the Humber are regarded as the ‘most vulnerable’ to the cost of living crisis across the whole of England”.

There are a number of reasons that poorer households are more susceptible to the cost of living crisis, including the reality that they must spend more of their total budget on things such as food, gas and electricity and therefore feel the impact of inflation more. Recent analysis has indicated that inflation is actually about 2.3% higher in northern towns and cities than in wealthier southern counterparts such as London and Cambridge. In the north, there are proportionally more people living in poverty or unable to cope with sudden price increases.

In response to the cost of living, the Government have taken action, providing financial support for households and a cap on domestic gas and electricity rates, which was extended into this spring. Further support has been rolled out for pensioners and people in receipt of benefits, and those benefits have been increased in line with inflation. However, important though it is, that support is designed to help with a short-term problem and we know that regional inequalities are a chronic, long-term problem. The Government acknowledge that, which is why they rolled out their levelling-up policy, describing the situation as follows:

“While talent is spread equally across our country, opportunity is not. Levelling up is a mission to challenge, and change, that unfairness. Levelling up means giving everyone the opportunity to flourish. It means people everywhere living longer and more fulfilling lives, and benefitting from sustained rises in living standards and well-being.”

There is much discussion about what levelling up means. To my mind, when we speak of levelling up, we are not talking in a narrow way about left-behind communities. Rather, we are talking about addressing generational social and economic disparities that have resulted in regions—particularly the north—being left behind. In my view, the key to levelling up is ensuring that children are given the same opportunities in every part of the country and that our future generations are provided with the best start possible.

We want to bring new industry, tech and high-skilled jobs to our region to create employment and support research and higher education. However, the skills for the jobs of the future must be learned by the children of today, so we need to ensure that children in the north have all the tools for a successful future, and addressing educational disparity is key to levelling up in the long term. Education is an acknowledged route out of poverty, and a healthy child can walk that path more easily.

Poverty has a broad impact on a child’s education. Beyond the effects that hunger and food insecurity have on their ability to focus and learn, the APPG also heard how children are left unable to access learning resources such as books and stationery, as well as the internet and technology, which became necessary during the pandemic, making the existing disparities worse. They often have to miss out on extracurricular activities and school trips and then experience further exclusion and stigmatisation as a result of poverty.

The APPG has made a number of recommendations to Government, which include changes to benefits and social security reform, expansion of free school meals, energy support for households and using existing data for auto-enrolment on the Healthy Start scheme and free school meals. It is clear that we must close the education attainment gap and set up future generations for success.

I am pleased that a good number of MPs are here today supporting this debate when there are probably other things going on at the moment. I am also pleased that other groups of colleagues are pursuing this with Government. The Northern Research Group of MPs, of which I am a member, collaborated with the Centre for Progressive Policy in 2021 to produce a research paper that outlined a number of policy suggestions to deliver levelling up. We are not short of potential solutions to our regional disparities, and I am pleased that the child of the north APPG has produced so many strong recommendations. I know that the Government have the will to bring about change, and I urge the Minister to consider the measures to improve health and support families that are recommended in the APPG’s report.

Education, health, work and prosperity can link together in a spiral of either ascent or decline. For too long, the north lived with decline. I welcome the Government’s commitment to a levelling-up agenda, but we must reset the dial and ensure that families with children can live in warm homes, with the money and security of income to meet their basic needs, and can access the education that will lead them to good jobs and a better future. I urge the Government to consider the child of the north APPG’s report.

09:48

[Liz Twist (Blaydon) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank my hon. Friend the Member for South Shields (Mrs Lewell-Buck) for securing this important debate. I also thank her co-chair of the APPG, the hon. Member for Cheadle (Mary Robinson), for her contribution to the debate and for the work of the APPG. It is incredibly important that we look at this issue.

Just over a year ago, I held a similar debate on the relationship between regional inequalities and child poverty, following the publication of the “Child of the North” report, which clearly illustrated all the factors involved in child poverty and the whole range of issues that build in disadvantage for children right across the north, such as education and health, which the hon. Member for Cheadle mentioned. I am pleased that work has continued following that debate, through the child of the north all-party parliamentary group, to make sure that we do not just have a one-off debate but actually continue to identify, and follow up on, the issues identified in the report.

The report was called “Child of the North”, but I want to concentrate on the region I know best, which is the north-east. Sadly, my region has the highest rates of poverty anywhere in England. That is not a claim I am pleased to make. It is shocking that children in my region are suffering poverty and deprivation and are being held back by that as they develop through the years. That is not something I am proud of, and it is something I would dearly like to change. Almost two in five children in the north-east are living in poverty. In my constituency, the number of children growing up in poverty increased by 13% between 2015 and 2021. That is absolutely shocking.

The numbers alone are difficult to think about, but it is even harder to think about what they represent—the struggling families and the children being held back. At an APPG evidence session, the North East Child Poverty Commission presented truly harrowing accounts from the people and families it works with, which brought home the true impact of this scandal on people’s lives. One account came from parents in my local authority of Gateshead who were using watered-down evaporated milk in their baby’s bottles because of the soaring price of baby formula and putting off weaning because of fears about the cost of solid food. That is absolutely shocking. It does not need saying—I hope—that that is simply unacceptable in the world’s fifth or sixth richest country. The report produced by the APPG following its evidence sessions—“Child Poverty and the Cost of Living Crisis”—illustrated clearly, as the hon. Member for Cheadle said, how the problem is compounded by the increases in the cost of living and the challenges people face. There has been a real deterioration there.

I am proud of our local community in Blaydon, and indeed of the many communities across Blaydon, for stepping in where the Government have fallen short. That includes the Gateshead food bank depots at Blaydon and Birtley, and we had the report from the Trussell Trust last week showing the huge increase in the use of food banks. There is also the Blaydon Community Larder, which helps people with food, the Gateshead West pre-loved uniform scheme and Feeding Families, which works across the north-east—I could mention many more organisations.

These organisations do all they can to support people with the basic necessities they need to keep their children safe, happy and fed, but they are struggling more and more to meet the growing demand for their help. According to the Trussell Trust, in the last 12 months the number of emergency food parcels distributed in the north-east rose by more than 50% compared with the previous year. That is the highest year-on-year increase anywhere in the UK. Sadly, Feeding Families, which has a huge depot in my constituency, has had to move premises, because over the last year its usage has increased by 100% as well. That is not an isolated example, and I know that people across the country and the north are also affected.

Families all over the UK and the north are struggling, and I do not want to play poverty Top Trumps—it is not a game I am interested in—but the trends in the north-east are particularly staggering. Last year, The Guardian reported on the 11 local authorities that had seen the highest percentage point increases in child poverty since 2015. All of them, sadly, were in the north-east. Alongside our neighbours across the Tyne, my local authority of Gateshead topped the list. That is not a list that I want us to be top of; I do not want us to be anywhere in that list, frankly, and I want action to put that right. This is a place-based crisis warranting a place-based explanation.

What is particularly striking about the rise in child poverty in the north-east is how it has affected families with working parents. We hear time and again from the Government how the best way to tackle child poverty is to get parents into work. But the number of children in in-work poverty in the north-east rose by 91% between 2015 and 2021, compared with a 27% rise across the rest of the UK, and that is before the cost of living really started to bite. It is clear that what we are seeing is the impact of a longer-term structural issue.

At 14.8% the north-east has the second highest rate of employee jobs paid below the Living Wage Foundation’s real living wage. Two in five of all children in key worker households in our region live below the poverty line—the highest proportion anywhere in the country. Do the Government really want to tell the children of those key workers— children who saw their parents celebrated for all the work they did during the pandemic—that their parents should get yet another job?

With large numbers of our local population relying on low and insecure pay, it should not come as a surprise that many families in our region rely on the universal credit system. Universal credit keeps many of our families going, but it is too often too flimsy a raft and a punitive one. According to figures from the North East Child Poverty Commission, 58% of children in families in Blaydon who receive universal credit collectively lose out on £111,000 per month in deductions from universal credit. That is an average of £73 per household that could have been used to purchase essentials that families scrape together every last penny to buy. Just last month we marked the sixth anniversary of the two-child limit, which has been recognised as one of the leading drivers of rising poverty for families with children. That limit affects 860 children in my constituency alone. It is clear that the system requires an urgent review.

Our social security system was meant to provide for people from cradle to grave, but it seems the Government cannot fulfil even the first part of that obligation. There must be action to ensure that the impact of the current crisis falls on those with the broadest shoulders and not on families who are already struggling to make ends meet. In the world’s fifth richest nation, that should be well within our capabilities.

I want to turn to some of the recommendations in the APPG’s report and the asks that have been touched on by my colleagues. I will keep it simple because the report has been published and can be seen—we are happy to share it with the Minister if she does not have it already. We need to ensure that families have enough money to live on and security of income; that children have enough healthy food to eat; that they have those healthy breakfasts that my hon. Friend the Member for South Shields talked about; and that they have access to the school meals they are entitled to—they should not lose out on free school meals when they are already entitled to them. Children also need to be brought up in warm, heated homes for the best start in life, and we need to use data to identify the families who need additional support and help. Finally, we need a joined-up approach across Government to look at the intersections between poverty, poor health, poor educational outcomes and poorer life expectancy. All of the data needs to be brought together to ensure that policies address all those issues. Our children deserve the best start in life, the chance to thrive and the best opportunities.

Before finishing, I would like to thank the North East Child Poverty Commission, with which I have worked over a number of years, for its work to ensure that we do not forget these issues and these children. I would also like to thank the co-chairs of the APPG, the NHSA and others who wrote the original “Child of the North” report. I hope that we can improve the chances of people in the worst situations and give every child the chance to develop, grow and thrive.

10:00

[Ms Karen Buck (Westminster North) (Lab)]

It is a pleasure to reply to this debate under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for South Shields (Mrs Lewell-Buck) on introducing it in a rigorous and well-argued speech in which she drew out the commission’s work. I welcome the important contribution of the hon. Member for Cheadle (Mary Robinson) to the debate, and we also heard a strong speech from my hon. Friend the Member for Blaydon (Liz Twist). Welcome as it is to have this important debate today, it would have been marvellous if we had been able to hold it on a day when other representatives from the north could have been here to give the topic the full range of contributions it deserves.

The speeches we heard drew heavily on the work of the child of the north all-party parliamentary group and the North East Child Poverty Commission—I was heavily involved in the earlier London Child Poverty Commission, so I know how much work goes into such inquiries. What is important about them is that they draw on the lived experienced of people in poverty, the range of factors that drive poverty, including ill health and disability—sadly, correlated with poverty—and the growing significance of in-work poverty, as my hon. Friend the Member for Blaydon drew out. That is something that we have always had, but it has, sadly, developed into a strong driver of poverty these days.

All the speeches we have heard this morning have made it clear that there are long-term consequences and harms if a child grows up in poverty. When we talk of poverty, we should always reflect on the moral dimension. It is morally critical for us to recognise and commit to dealing with child poverty. We should also reflect on the sheer inefficiency and waste that comes from trapping families and children in poverty. Growing up in poverty will have an impact on health status, leading people into poorer physical and mental health. It is also so closely correlated with educational underachievement that our schools must make extra efforts to support, educate and help children in poverty. In addition, my hon. Friend the Member for South Shields drew out the fact that, tragically, there are consequences for some of our poorest children and families in terms of interventions by children’s services. There is simply a strong economic as well as a moral case for ensuring that we deal with and invest in child poverty.

The Government have made a lot of their levelling-up agenda over the past few years, but if we do not do more to tackle the stark disparities in income poverty between regions, it will continue to be a slogan rather than something that makes a difference on the ground. We can see what remains to be done simply from the Department for Work and Pensions’ own statistics. In the three years leading up to the pandemic, 37% of children in the north-east were living in poverty after housing costs; in the north-west and Yorkshire and the Humber, about a third of children were in poverty. That is the last three-year period for which we have full income data, as the pandemic prevented the production of regional figures for 2020-21, so later figures need to be treated with a degree of caution, but there is little reason to believe that things have got better. Indeed, there are strong reasons for believing that they have, in fact, got worse.

Child poverty is a major problem in every region and every country of the UK. Even in the south-east, nearly one in four children are living in poverty after housing costs. But the north-east has seen a major worsening of its position: child poverty increased by a remarkable 11 percentage points in the five years leading up to the pandemic. The Institute for Fiscal Studies states:

“On a wide variety of measures, regional disparities in the UK are greater than in most comparable countries.”

Tackling those economic disparities requires concerted, long-term action across the full range of Government functions, at central and local levels—from economic development to skills, housing, employment services and infrastructure. It certainly requires more than a pot of levelling-up funding that delivers the equivalent of £80 per capita to the north-east and north-west and just £60 to Yorkshire and the Humber. What the Conservative Mayor of the West Midlands describes as Whitehall’s “broken begging bowl culture” cannot be the basis for addressing entrenched economic inequalities between areas.

The issue of regional child poverty also brings out the centrality of social security policy, because bad social security policy choices will exacerbate underlying economic inequalities between regions. The Government are simply not addressing that problem; indeed, for the last 13 years they have pursued policies that lead to a sharpening of regional disparities, and no amount of levelling-up rhetoric can disguise the fact that those policies remain in place and continue to have their inevitable effect.

[Mrs Lewell-Buck]

If the Government are committed to the levelling-up rhetoric, why is child poverty not mentioned once in the levelling-up White Paper or the Levelling-up and Regeneration Bill? Is my hon. Friend concerned about that, as I am?

[Ms Buck]

My hon. Friend is absolutely right. Frankly, it is bizarre that child poverty is not seen as a critical issue in its own right in the levelling-up agenda.

At the root of the problem is the fact that the Government have long ceased to bother with one of the most basic tasks of any social security system, which is matching resources to needs. Not bothering with that task is, of course, the explicit aim of the two-child limit, whereby the DWP is forbidden by statute from taking third and subsequent children into account in setting universal credit and tax credit entitlements, but it is also the effect of a host of other policies that override entitlements based on assessed needs. Those policies include the failure to uprate benefits by inflation and, from 2016 to 2020, the failure to uprate them at all. The four-year benefit freeze has permanently reduced the value of benefits, including in-work benefits. Ministers seem to have difficulty getting their heads around that point; they seem to think that, because benefits were uprated with inflation this year, everything is now all right. They seem not to be aware of the permanent damage that has been done.

Failing to set the local housing allowance in line with real-world rents is another issue. The local housing allowance remains frozen at 2019 levels. Across the north, two thirds of universal credit households receiving rent support in the private sector have rents above the local housing allowance maximum for their area. The shortfall between rent and the local housing allowance has to be made up out of whatever other income households have. At a national level, the average shortfall is £100 a month. Have a Government ever come up with a more elementary design flaw than building debt into universal credit by making people wait five weeks for their first payment? The examples can be multiplied.

In all cases, we see the Government breaking the link between benefit entitlements and needs as a matter of deliberate policy. Families can wind up falling foul of more than one of those policies simultaneously, which can lead to cumulative impacts—needing to make up the rent out of the rest of the UC payment, which has already been reduced to pay back an advance and which takes no account, for example, of their third child. This has been going on for years. Is it any wonder, then, that we see evidence of destitution throughout the country, or that regions that have historically done worse have faced a disproportionate impact? Consider that 49% of children in the north-east are in families receiving universal credit or an equivalent legacy benefit, compared to 24% in the south-east. Of course these policies impact some regions more than others. One of the more shocking results of the latest poverty statistics from the Department for Work and Pensions is that one in 10 children in the north-east are in families that used a food bank in the last 12 months—nearly twice the national figure.

Tackling economic disparities between areas requires a functioning social security system that takes account of all relevant needs and costs. As long as we do not have that, the rhetoric of levelling up will remain just that—rhetoric.

10:09

[The Parliamentary Under-Secretary of State for Work and Pensions (Mims Davies)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank the hon. Member for South Shields (Mrs Lewell-Buck) for securing this debate. I absolutely agree with the early sentiments and spirit of unity in her speech and speeches from across this Chamber. It is right that we come together to do the best for our youngsters, and it is vital that they are at the heart of our actions and outcomes. The way the debate has been held is critical to getting under the skin of what is happening in communities in the north and, in fact, any community where people are struggling. I thank everyone who has contributed and who helps support the most vulnerable daily. I also thank the all-party group for its work and all those who gave evidence and insight to the APPG report, which I will refer to shortly.

I will pick up on several issues later in the debate, but I want to assure the House about the quality of homes issue, which is something that consistently comes up. Since I took on this brief, having been asked to return to DWP to cover social mobility, the issue is something I am focused on and am working on with the Department for Levelling Up, Housing and Communities and across Government. This is very much something in my line of sight, and I thank hon. Members for raising those issues.

I reassure the House that we are strongly committed to a welfare system that supports those who are most in need. I understand the concerns around the phrase “levelling up”. It is not an empty phrase, and I will make some further remarks on that shortly. In 2023-24, we will spend around £276 billion through the welfare system in Great Britain, including £124 billion on people of working age and their children. As we have heard, our commitment is reflected in the 10.1% increase in benefit rates and state pensions for 2023-24, and we have increased the benefit cap by that same amount so that more people across the whole country can benefit from these new rates.

The decisive action we have seen because of the impact of the cost of living is there in how we made good on our commitment to protecting the most vulnerable. Overall, in 2022-23 and 2023-24, we are providing total support worth £94 billion to help people with rising bills. On average, that is £3,300 per household. Last year, we made cost of living payments of up to £650 to over 8 million low-income households, and I am proud to have been the Minister bringing through the recent Bill on that. This year, a similar number of eligible households will receive additional payments of up to £900. I am pleased to confirm today that 99% of households that were initially eligible for the first cost of living payment via DWP will have been paid £301 by the Government by the end of today, which basically means we will see 6.4 million households on an eligible DWP means-tested benefit getting that first cost of living payment.

That gives me the opportunity to remind anybody listening to speak to Citizens Advice and to use our Help to Claim service, the Help for Households website and the benefit calculator on gov.uk. I am mindful, however, that not everyone is able to do that, and it is absolutely right that they should turn to Citizens Advice or other help in the community, and I will go on to some of that shortly.

We have worked with Ofcom and the Department for Science, Innovation and Technology to ensure that we have a growing number of social tariffs for access to homework, applying for jobs and getting more training and support for those people on universal credit or means-tested benefits. We are working hard to promote that in our jobcentres and through partnerships, and we are working strongly with Ofcom.

[Mrs Lewell-Buck]

It is good to hear that the cost of living payments are going to be in people’s bank accounts, but does the Minister not agree that they are another sticking-plaster measure? If benefits and the welfare system were providing what they should, then we would not need to provide these payments because people would have enough to live on.

[Mims Davies]

I understand the hon. Lady’s point. I thank her for her passion and interest in this area, and for what she is doing for her constituents. There is no direct, objective way of clarifying what is an adequate level of benefit. Every person has a different level of requirements depending on their circumstances. Income-related benefits are not made up of separate amounts specific to beneficiaries’ expenditure, or food costs or whatever. The Government firmly believe that beneficiaries should be free to spend their benefits how they see fit in the light of their individual circumstances and needs.

The Government’s approach to welfare is to fully recognise the value and importance of work, which has been mentioned in this debate. Making it work for everybody is vital. We are determined not only to help people progress and be supported in work, but to protect and support the most vulnerable in society. Universal credit is adjusted monthly depending on a beneficiary’s circumstances. It is absolutely right that the people who need additional support, whether that is through the household support fund, hardship payments or an adjustment due to a change in circumstances, are able to come forward. I spent much of my childhood on benefits due to the impact of ill health and disablement, and we had to navigate through the same system. I personally understand it.

Whether people are on benefits for a short or a long time, it is important that they are supported, and know how to navigate the system to get the right support for their family. That is why I am always keen to reiterate the Help to Claim service, the Help for Households website and the work we have done on the household support fund. I thank our partners in particular for their work on delivering the household support fund for people, whether they receive benefits or not. We have heard today that because of the war in Ukraine and the changing impact of the pandemic, more people than ever have found things particularly tough. With the household support fund, I have made it clear that people on benefits, and those who are just above the threshold or just managing, or perhaps in a change of circumstances, will be looked for, found and reached out to so that that discretionary support can be given to those who need it most. Devolved Administrations will receive consequential funding to use at their discretion.

It is right that in our approach to tackling poverty, we are able to bring in different interventions and different changes. People can call it a sticking plaster, but for me it is a different intervention and a step change to support some of the people I have mentioned, who perhaps would not normally need to be supported by the benefits system. It is a firm belief that the best way to help families to improve their financial situation is through not only work but skills. My hon. Friend the Member for Cheadle (Mary Robinson) mentioned sectors and areas where people perhaps do not see a way into better-paid jobs and opportunities. It is vital that we engage and talk with them, and use Jobcentre Plus sits and local networks to help people see that there are opportunities just down the road from them. Their skill base, level of education or confidence—the word we hear continually at DWP—should not lock them out from the opportunities that are there. That is why those 1.1 million vacancies across the UK are our firm focus to help people to take further steps not just into work but to progress in work, and to be better off.

I will turn to some of the points that have been made today to hopefully underline that focus. On jobs interventions, there have been jobs fairs at the JCP in Birkenhead, and there are 16 employers with 400 roles available. In Sheffield, the NHS has very pleasingly streamlined the application process for universal credit claimants, ensuring that we actually attract the people who are down the road into the roles we need filling. In Doncaster, our local team has worked on jobs fairs particularly for those with health conditions and disabilities. In fact, there was recently a north-east jobs fair at the Stadium of Light with 50 employers and 1,800 people invited. It is absolutely vital that we use all different interventions to help people to be better off, including those additional interventions from Government as well as helping people to progress and be better off in work.

[Liz Twist]

I wonder if the Minister could comment on the figures I quoted on the number of people in the north-east who are actually working—many of them in different jobs—but still do not have enough to cope. What do the Government propose to resolve that issue? It is not just about work; it is about having good work.

[Mims Davies]

I completely agree with the hon. Lady. I believe just over £3.6 million has gone into the household support fund in Blaydon, and there have been nearly 11,000 cost of living payments in the hon. Lady’s constituency. We are making those interventions exactly as she describes, to support those people who may be working but whose circumstances have changed. We are in difficult times—let us not deny that—due to a combination of historical, generational problems, as hon. Members have pointed out today, but also off the back of the pandemic and a war on our continent. It is therefore absolutely right that Government are able to step forward. I am happy to write to the hon. Lady about the direct interventions we have made in her constituency to help those youngsters. That is what is at the heart of this matter: not statistics, but people like Sophie, who was mentioned earlier. These youngsters need to know and feel that the Government, and anybody from any political party or any intervention, are on their side and are helping to make things better. I hope that answers the hon. Lady’s question.

[Liz Twist]

I thank the Minister for letting me intervene again. I understand the amount of money that is put in through the household support fund. My question is: if we work on the basis that work should pay and getting into work is the best intervention to give children—as the Minister rightly says, children are individuals, not statistics—the best chance, what are we going to do outside the current cost of living crisis? This issue existed before the cost of living crisis and it will continue. It is, as I said, a structural issue.

[Mims Davies]

I think we are actually talking the same language here. It is about progression in work and being better off, as my hon. Friend the Member for Cheadle mentioned. How does someone go for those better-paid jobs, and how do they progress? Of course, it is also about ensuring that sectors are paying the right rates—good work, as the hon. Member for Blaydon (Liz Twist) mentioned. It is about ensuring that people are well remunerated and well supported in those roles, which is exactly why we have our in-work progression focus. We did a large report on that. It has been mentioned today that transport could be an issue for some people, and their educational base has been mentioned as well. It is about whether people are able to get to that next rung, where they are actually better off. That is what our in-work progression champions are doing in JCPs. Someone can be working all the hours God sends, but are they better off? That is something that answers that question. That is what we are determined to do.

Turning to the report, it is important to highlight what we are doing beyond the household support fund. We are investing £30 million to provide free breakfasts for children in up to 2,500 schools in disadvantaged areas; we have extended this programme through to July 2024. As we know, children continue to learn well if they receive a healthy breakfast. That is really important. Eligibility for free schools has changed several times as we have heard today, with more groups included and 1.9 million disadvantaged pupils being supported through the benefits-related criteria, while a further 1.25 million infant pupils are receiving free school meals through the universal infant free school meals policy.

I absolutely agree that the balance around doing well in education is vital, as we heard from my hon. Friend the Member for Cheadle. We are absolutely focused on these interventions, whether that is the breakfast clubs or the pupil premium, alongside the Department for Education. The schemes are there to help the most vulnerable children. There is also support for children under four and pregnant women through the Healthy Start scheme. We have heard about the holiday activities and food programme, or the HAF programme, which is an investment of £200 million a year. All those interventions are absolutely right. Both from the report and from comments, it has been clear throughout the debate that all our interventions need to change to make a generational shift for our communities. That includes those on in-work progression, our childcare offer and whatever is introduced from each part of the community or from Government.

The levelling-up agenda was mentioned. To unleash the full potential of every local economy, we must spread opportunity to every corner of the country to reverse decades of economic underperformance. As we heard, individuals can be locked out of their local economy if their education, confidence and network hampers them. We need strong local interventions, such as the jobs fairs that I mentioned.

The DWP has local teams that specialise in working in partnership with local authorities. They create the links with communities that are necessary to understand each local area’s needs and to tailor provision and support with the local labour market. Through those links, they regularly engage with local authorities and local leaders, some of whom have been mentioned, to ensure that all our interventions, including our restart programme for the long-term unemployed, work for them.

I will turn to food prices because I am mindful that they are particularly challenging. I am keenly looking at the issue and working on it with the Minister for Food, Farming and Fisheries, my right hon. Friend the Member for Sherwood (Mark Spencer). Rising food prices affect those on the lowest incomes. A combination of factors, including agrifood import prices, domestic agricultural prices, labour costs and manufacturing costs, have had a significant impact. That is why we focused on delivering the biggest support that we could in the spring Budget, including through our focus on childcare.

I am mindful that I have been speaking for some time. I am happy to respond in writing to hon. Members, and I will share those responses with the House. In conclusion, I will be very clear: this Government are fully committed to providing opportunities for parents. We have not heard a lot about parents, but theirs is a really difficult position to be in. They do absolutely everything and strive all they can, but must constantly ask themselves how they can make ends meet so that their children do better. We are determined. In my role as Minister for Social Mobility, I am determined to ensure that people will be able to prevail in every area of the UK. They will be sustained and supported. At the same time, we will ensure that the most vulnerable have the targeted support that they need in these very challenging times.

I thank all those at the coalface, supporting every child in need in every community. We all work diligently to reduce the number of children in need, so that we can see an end to this challenge across our communities—wherever those young people live.

10:28

[Mrs Lewell-Buck]

I thank all hon. Members for taking part in this debate and the members of the child of the north APPG. As the hon. Member for Cheadle (Mary Robinson) alluded to, some were unable to take part. I thank my hon. Friend the Member for Westminster North (Ms Buck) for her support from the Front Bench. I also thank the Minister for her comments and for her consistency. She has done what many Ministers have done before her in debates on these issues: she has defended indefensible aspects of this Government’s record and has blamed covid and Putin’s illegal invasion of Ukraine for the problems we face when we all know the Government crashed the economy last year. We all know we were uniquely exposed to the hike in energy prices because of a lack of investment in renewables and a failure to rein in the energy companies properly. We are the only country in the G7 that has not recovered from the pandemic because we came from such a low economic base.

To be fair, I did not expect the Minister to commit to getting rid of the five-week minimum wait for universal credit, suspending the two-child limit, and increasing free school meals and the Healthy Start scheme, but I assure everyone here—I am sure they know this already—that I will continue to push and argue for them. My disappointment is not really for me; it is for the children and families in the north who, yet again, in the absence of any promises of consistent and sustained support, will have to rely on their remarkable resilience and the charitable sector in our strong, close-knit communities right across the north. For them, the general election cannot come soon enough.

Question put and agreed to.

Resolved,

That this House has considered child poverty in the north of England.

10:30

Sitting suspended.

Environmental Land Management Scheme: Funding for Upland Areas

Wednesday 3rd May 2023 Westminster Hall

11:00

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

I beg to move,

That this House has considered environmental land management scheme funding for upland areas.

It is a great pleasure to serve under your chairmanship, Mr Hollobone, and great to see the Minister in his place to respond to what I am going to say.

Our uplands are precious beyond measure. They are on the frontline in the fight to restore nature and to tackle climate change. They provide us with water for drinking and with the opportunity to protect population centres from devastating flooding. They underpin our tourism economy and are home to our most stunning historic landscapes. They provide food and they enable the flourishing of communities that are as much a part of our heritage as the landscapes that they care for.

I support the transition to the environmental land management scheme. The principle of public money for public goods makes sense and is, in theory, a great improvement on the area-based payments of the common agricultural policy. I also welcome a move to a more sustainable payments scheme that supports environmental benefits alongside ensuring food security. In practice, however, the Government are sadly putting our uplands in peril, and they are doing so needlessly.

Farmers across the country are being put at risk by a failure to listen, but in the uplands that failure is worst of all and threatens to be catastrophic. In this debate, I aim to speak for upland communities in Westmorland, but also for communities elsewhere. While preparing for the debate, I visited many farms and listened to dozens of farmers, and my hope is that the Minister will acknowledge the Government’s failings and commit himself to putting them right.

The transition from the old farm payments scheme leaves upland farmers especially exposed as they typically rely on the basic payment for more than 50% of their income. As the basic payment scheme is phased out—every farm will have lost at least 35% of its BPS this year—upland farms will need alternative sources of funding to fill the gap. Those sources of alternative funding are, however, not forthcoming, and the consequences will be devastating.

It is my honour to represent more than 1,000 farms in Westmorland and Lonsdale, but the last time I checked fewer than 30 had registered for the new sustainable farming incentive. Those farms have lost a huge chunk of their BPS, and most of them so far have nothing to replace it. That is the Government’s fault. Department for Environment, Food and Rural Affairs rules dictate that farmers who are not already in the countryside stewardship or higher level stewardship schemes cannot maximise SFI benefits because the schemes do not fit together seamlessly. This means there is a guarantee that almost all upland farms will not be able to replace their lost income and that their financial viability will decline steeply.

If farmers are in a stewardship scheme and also received the basic payment, they can expect to get no more from their stewardship scheme. Meanwhile, they lose their basic payment. Therefore, in the transition, farmers can only lose income. That is the case for many farmers, including lowland farmers, but especially those who farm in the uplands. Why can we not permit those in stewardship schemes to provide additional environmental value by applying for an SFI that fits with stewardship?

The new schemes seem to have been written deliberately to disadvantage upland areas, in particular because Ministers chose to stick with income foregone plus costs as the principle underlying payments for SFI and stewardship schemes. That caps, or limits, income for delivering for nature, climate and water at the amount a farmer could have earned from beef and sheep in the uplands, which is an awful lot less than the famer could earn elsewhere. The lowland rate is £151 per hectare, but the upland rate is only £98 per hectare.

The former Secretary of State, the right hon. Member for Camborne and Redruth (George Eustice), is on the record saying that DEFRA must depart from

“the outdated income foregone methodology”

for payment rates. I wonder why DEFRA has chosen to ignore its former Secretary of State. Why, instead, do the Government not pay farmers a fair rate for the immense value of the environmental work they do, rather than giving them the equivalent of the poorly paid work they have given up? If we valued nature and valued farmers, that is what we would do. Why is there not equality of opportunity? Why are we not allowing all farmers who want to deliver for nature to do so? Why are upland farmers effectively being locked out?

The failure to pay upland farmers a fair rate is a major reason why most have been put off even applying. Another reason is the Government’s choice to reveal the SFI options in a drip, drip, drip fashion over time. Many farmers I have spoken to in the past few weeks, including two in the Eden valley, tell me that they have not applied for two reasons: first, the payment rates are pathetic and it is just not worth their while applying; and secondly, they are waiting to see whether something better comes along from future options that the Government may or may not reveal. All the while, those famers and others are seeing their incomes eroded by the phasing out of BPS and have no alternative sources of funding to replace it.

In particular, we desperately need more detail on the new moorland option. I am glad there is one, but can the Minister tell us when it will start, what it will be worth and when farmers will have the full details of what it will entail? Take-up of the option is slow, yet as the chair of the Uplands Alliance, Professor Julia Aglionby of the University of Cumbria, points out, DEFRA has refused to fund a digital app that would have enabled effective and efficient moorland surveys. Relatively small decisions such as that make a big negative difference, and reveal the Government’s apparent disinterest in the plight of our uplands. It will be a disincentive for our farmers to deliver more for nature and the climate.

The lack of clarity and the limited nature of the options available are particularly damaging for tenant farmers. How are they to make long-term decisions about their businesses when the Government are dribbling out incomplete information now and again and leaving them effectively in limbo? Meanwhile, as Baroness Rock revealed in her very welcome review of tenant farming, many tenants are being forced out so that their landlords can access ELM schemes for themselves.

I sincerely hope that it was not the Government’s intention to advantage wealthy absentee landlords at the expense of hard-working farmers, but whatever their motives, that is nevertheless happening. DEFRA has repeatedly said that the transition aims to stop big payments going to large landowners, yet we see asset-rich landowners embarking on 21st-century clearances, and scooping up big payments in the process. We are already seeing new money pouring into the uplands and being invested in land for its hope value—for carbon credits or offsetting. It is transparent greenwashing in exchange for wads of taxpayers’ money, while farming families are turfed out and cleared from the land for which they have cared for generations.

Many upland farms have the potential to get into the countryside stewardship higher tier, yet reports from throughout the country show that few of those who might qualify even begin the application journey, mostly because Natural England has had its staffing so badly cut that there is no one to help those farms or groups of farms to get through the process. Just the other week, farmers near Ullswater put it to me that the Government are missing out on a vast amount of nature restoration, water quality improvement, and carbon reduction and sequestration, all because of penny pinching in relation to Natural England and farms being locked out of the schemes that were supposedly designed for them.

Many farms have benefited from the Government’s shift towards more grant funding, and that is a good thing, but even then there is a failure to understand how farms really operate. Capital grants work on the basis of reclaiming outlay that farms have already made, but upland farmers’ cash flow is disappearing with BPS. The grants are often welcome, but they ignore the reality that farms need regular, reliable revenue funding for the good work that they do, not one-off chunks that they have already had to spend up front. The very fact that DEFRA is paying BPS in instalments—which is also welcome, by the way—is a clear admission that it realises that cash flow is vital and that the loss of BPS without replacement will cause huge damage to businesses in the uplands and elsewhere.

This litany of mistakes, incompetence, unfairness, penny pinching and broken promises is putting our vital uplands in a treacherous position. It is surely obvious that the Government will not spend the promised £2.4 billion on farm support. With so few farms entering the new schemes, while every farm is losing BPS, it is surely impossible for the Government to have kept that promise.

In the uplands, where BPS makes up such a large proportion of farm incomes, the betrayal is felt even more sharply. Will Cockbain, who farms near Keswick and is the chair of the Swaledale Sheep Breeders Association, tells me that he has written to the Prime Minister four times setting out very clearly that the BPS cuts for upland farms, even if they are in countryside stewardship schemes, means a loss in farm incomes of more than 50% in direct support. He pointed out that tinkering with countryside stewardship does not come close to compensating for the loss of BPS. Will the Minister clarify whether his Department has done an economic assessment of the impact of the transition from CAP to ELMS on upland farms? If such an assessment has been done, will he please commit today to publishing it? If one has not been done, why not? Will the Minister now commit to doing one?

The forecasts of the farm business income survey show that, in the most recent financial year, upland farms will have seen a 51% drop compared with average farm incomes over the previous three years. The average income for an upland farm is now £16,300. Farm business incomes for upland farms for 2028-29—the end of this process—are not predicted to improve beyond £16,500, even with the full introduction of ELMS. That equates to an average hourly rate for farmers of £4.20, which is much less than half the minimum wage. This catastrophic fall in incomes is a direct result of Government policy and choices, or at least of the incompetent application of those policies.

The consequences are stark. We will see farms fail. People whose families have farmed in our uplands for generations will find themselves in the crushing position of being the one who lost the family farm. We do not think enough about the mental health impact on farmers and their families of the uncertainty caused by this botching of the transition. What does it mean for our upland communities when families that have formed the backbone of village life for centuries get uprooted because the farm has failed because of the Government’s failures? What does it mean in children lost from our schools, jobs lost, lost demand in the economy and the loss of homes and human dignity?

We do not think enough about the damage to our environment caused as farms cease to farm and farmers decide that they cannot afford to farm with care for the environment. Without farmers, we will lose the essential partners we need to put environmental policies into action. Even the best environmental plans in the world are useless pieces of paper in a drawer without the expert hands of farmers to put them into practice.

Many upland farmers will go broke and many more will go backwards. Having spent time on farms in the lakes, dales and elsewhere in the last few weeks, I am struck by how many have looked at their falling incomes and the fact that the new ELM schemes are either impossible for them to enter or too unattractive or restrictive, and made the reluctant choice that the only thing they can do to make ends meet is to farm more intensively and get more livestock, and in doing so undo the good environmental work that they and their families have done for decades. It breaks their hearts, but it seems to them to be the only alternative to losing the farm. How stupid and irresponsible to design a scheme meant to protect and enhance our environment, but to deliver it so badly that it does the exact opposite.

Might I suggest that the Government could make one of two choices? First, they could pause the phase-out of BPS to give farmers breathing space to get into the new ELM schemes—and, indeed, to give the Government the breathing space to fix their mistakes and put them right. Or they could choose to turbocharge the introduction of ELMS and demonstrate a commitment to supporting upland farmers to address the nature and climate crises. Throughout covid, we learned that with political will Departments can, at great pace, introduce new schemes to address crises. I suggest that this is a crisis on multiple levels.

There are only 6,500 upland farms. It cannot be beyond the wit of DEFRA to bring in an effective scheme for early next year, 2024, that enables upland businesses to thrive, delivering for nature and climate and underpinning a tourism economy that in Cumbria alone is worth £3.5 billion every year. Surely now is the time to admit that if we want to ensure that we do not devastate our environment and our capacity for food production, £2.4 billion is a wholly inadequate sum of money. If we care about biodiversity, reducing greenhouse emissions, the production of good-quality British food, protecting water quality and maintaining our landscapes, we must surely add at least another £1 billion to the pot. Central to the Government’s failure is that they are trying to do a range of incredibly important things on the cheap.

It is our farmers in Longsleddale, Kentmere and other upland valleys who protect thousands of homes in Kendal, Staveley and Burneside from flooding. It is our upland farmers in the lakes who maintain water quality for the whole of the north-west of England. It is our upland farmers who produce food, and maintain, shape and protect our historic landscape—so much so that UNESCO awarded world heritage site status to the Lake district largely on the basis of how the national park is farmed. We remember that Liverpool recently lost its world heritage site status. That is a warning that if we fail to protect this awesome natural environment in the lakes, we could lose that status, too, causing damage to a tourism economy that employs 60,000 people across Cumbria.

Our upland farmers are at the forefront of the fight against climate change, as they restore peatland and woodland, including imaginatively managed woodland pasture. They are crucial to nature recovery and biodiversity: 53% of England’s sites of special scientific interest are in the uplands. All that is at risk because the Government are not listening to farmers, are failing to understand the impact of their actions, and lack the humility to accept where they have made grave mistakes.

We will not stand by while this Government, by accident or design, cause avoidable harm to our uplands and the people who are their faithful stewards. I am proud to represent and fight for such a breathtakingly beautiful and important part of our country. But I am prouder still to represent the people—the families at the heart of those communities—who take care of that landscape. I hope that I have done them justice today, and that the Minister will acknowledge the peril facing our uplands and act before it is too late.

[Mr Philip Hollobone (in the Chair)]

The debate can last until 11.30 am.

11:17

[The Minister for Food, Farming and Fisheries (Mark Spencer)]

Thank you for that guidance, Mr Hollobone. It is a pleasure to serve under your chairmanship. I pay tribute to the hon. Member for Westmorland and Lonsdale (Tim Farron) for calling this important debate.

Farming is the lifeblood of our communities. I know at first hand the invaluable work that farmers do. They keep food on our tables, nurture our natural environment, improve our biodiversity, and protect the environment for future generations. It is only right that we take time to consider how best we can support our farmers —our custodians of the countryside—to run sustainable, productive and profitable businesses, and to ensure that there is an offer for all types of farms with our environmental land management schemes.

We recently announced detailed plans for the nation’s farming sector. Our environmental land management schemes have something to offer for every type of farmer, and we plan to introduce further offers and are updating others so that they can be more focused on producing the great food that we consume, and the environmental gains and climate outcomes that we want to deliver.

Upland farmers can take advantage of 130 actions through a variety of schemes. That is more than 60% of the total actions available to all farmers. The level of coverage is similar for farmers grazing livestock on the lowlands, arable farmers, and those growing horticultural and multiannual crops. Those actions are designed to work alongside farming practices, and to protect and enhance our most environmentally important sites.

In order to ensure that upland farmers can take advantage of what our schemes have to offer, we are making it easier for farmers to apply for paid actions. This year we have improved the application process, increased the rates and broadened the scope of countryside stewardship. That includes allowing agreement holders of higher level stewardship to take up countryside stewardship revenue agreements alongside their HLS. That will benefit farmers who already have an HLS agreement but want to increase their income from schemes by doing more on their land. We have introduced a new, fully improved online service for countryside stewardship mid-tier applications. That service is closer to the application process used for the sustainable farming incentive, which we know farmers find straightforward to use.

In the uplands, a number of farms are on common land, and we have designed the sustainable farming incentive so that it works for those farmers. Eligible single entities can apply for an agreement on common land, and they will receive an additional payment to help with the cost of administering that agreement.

There is more to our offer than countryside stewardship and the SFI. Upland farms can also apply to the landscape recovery scheme, which funds large-scale projects to produce environmental and climate benefits through bespoke, long-term agreements. The uplands were well represented overall in round 1; a majority of landscape recovery projects involved groups of land managers and farmers, including tenants, working together to deliver a range of environmental benefits across farmland and rural landscapes. Applications for round 2 open this year, and projects in upland areas are likely to contribute to the focal areas for that round.

For farmers in areas of outstanding natural beauty or national parks, our farming in protected landscapes programme provides funding for one-off projects. We have funded more than 2,400 fantastic projects, and earlier this year we decided to extend the programme for a further year; it will now run until March 2025. Farmers who have livestock can also get funding for a vet, or a team chosen by a vet, to visit their farm and carry out health and welfare reviews for eligible livestock. That is part of the SFI offer.

Additionally, we are offering grants to support animal health and welfare. The first round is open, and grants will go towards the cost of a list of items designed to improve the health and welfare of livestock. We are also funding free business advice for farmers through the resilience fund. More than 10,000 farmers have taken up the offer so far. I encourage all upland farmers to take advantage of that free service and find out what might work for them and their businesses.

The hon. Member for Westmorland and Lonsdale said that he welcomed ELMS and that he wanted to see the schemes go forward. I therefore find it strange that his party chose to vote against our new environmental schemes only a few weeks ago. His party voted to retain the old EU common agricultural policy, which to my mind was a vote against food security.

[Tim Farron]

I am happy to clarify.

[Mark Spencer]

Let me just finish the point. In my head, that was a vote against food security, given that the old area-based payments were specifically de-linked from food production in 2005 and have inhibited productivity improvements. I am happy for the hon. Gentleman to clarify why he chose to stick with the old common agricultural policy.

[Tim Farron]

At the moment, the BPS is set to be reduced by 35% this year. As I set out in my speech, one of the options, which would get farmers out of the mess that the Government have put them in, is for the Government not to make that cut this year, given that they clearly have not spent all that money on the environmental schemes, as they promised. That would be a way of keeping farmers farming, which is the best thing for food production and the environment. That money could have kept many people focused on environmental delivery, rather than either moving out of business altogether or choosing to intensify their farming. Both those things are happening on the Minister’s watch.

[Mark Spencer]

So the motion put forward by the Liberal Democrats was misworded, because its effect would have been to take us right back to the beginning of the process. It would have scrapped countryside stewardship and the ELM schemes. It was basically a vote against river restoration, because it would have ended all the funding to our environmental schemes. That includes 32,000 countryside stewardship schemes already in existence and signed up to by farmers, which would have disappeared if the motion had passed. It feels like a gimmick. We are in the business of delivery—of trying to help farmers move forward and improve our environmental output and biodiversity. The hon. Gentleman wants to play games, and I think that is really disappointing.

Let us look at what we have actually done. We have set out all the details of our farming schemes, which are designed to make farms profitable, resilient and sustainable food producers while protecting nature and enhancing the environment; we have announced an additional £10 million of support through the water management grant to fund on-farm reservoirs and better irrigation equipment; we made 45,000 visas available for seasonal workers in 2023 to increase productivity in horticulture; we launched the £12.5 million fund for robotics and automation to help with innovation in agriculture; we announced plans to regulate pig contracts to ensure fairness in the pig supply chain; we doubled the money for slurry infrastructure for farmers to £34 million through the slurry infrastructure grant; we have registered New Forest pannage ham under the geographical indication scheme; we have increased payment rates for farmers under countryside stewardship and the sustainable farming incentive; and we passed the Genetic Technology (Precision Breeding) Act 2023, unlocking key technologies to improve UK agriculture.

That is a fantastic record of support for our farmers, but it is not the end of the process. We are very keen to engage with our farming communities and our farmers to support them. We will continue to listen to those farmers, engage with them and understand the challenges that they face. We will constantly review the process, and we will work with farmers to ensure that they continue to be profitable as well as to improve our environment and biodiversity.

[Tim Farron]

I asked a number of questions and I would be grateful if the Minister would answer them all, although he may not have to time do so verbally. One question I am really keen that he answers is whether his Department conducted an economic impact assessment on the transition from CAP to ELMS for upland farmers. Did that assessment take place?

[Mark Spencer]

We have consistently and constantly engaged with farmers through the development of the SFI. There have been a number of farmers on working groups, working directly with DEFRA to design the schemes to ensure that they work for farmers in a practical way. That is an ongoing process. Instead of saying, “At this moment in time, this is our assessment of this brilliant project,” we consistently and constantly engage with farmers in the real world to understand the challenges they face, to improve the schemes, to listen to their views and to support them.

We have had an interesting debate. We stand ready to help and support farmers on the uplands, the lowlands and the arable fields of the east of England wherever we can to continue to produce great food and look after our environment.

Question put and agreed to.

11:28

Sitting suspended.

Funding for Major Infrastructure Projects

Wednesday 3rd May 2023 Westminster Hall

[Mr Virendra Sharma in the Chair]

14:30

[Wera Hobhouse (Bath) (LD)]

I beg to move,

That this House has considered funding for major infrastructure projects.

It is a pleasure to serve with you in the Chair, Mr Sharma. Any Government should have a long-term strategic vision for the country beyond short-term election cycles. Infrastructure planning must be at the heart of any serious Government. However, such a long-term coherent infrastructure strategy is lacking and the Government are failing to capitalise on the long-term benefits of upgrading our infrastructure. We need an infrastructure strategy now to face the challenges of the future.

14:30

Sitting suspended for Divisions in the House.

15:04

On resuming—

[Wera Hobhouse]

Thank you, Mr Sharma—again, it is a pleasure to see you in the Chair. I think I had just got beyond my first sentence, so I will repeat what I finished with. Currently, a long-term, coherent infrastructure strategy is lacking, and the Government are failing to capitalise on the long-term benefits of upgrading our infrastructure. We need an infrastructure strategy now to face the challenges of the future, get to net zero, transform our energy and transport systems and solve our housing crisis. We need vision, not permanent crisis management.

Public investment levels in the UK are too low and too volatile. We have averaged 2.5% of GDP per year this century—well below the 3.7% average for industrialised countries. The UK’s frequent large changes in investment spending plans mean that it has the most volatile annual growth rate among all OECD advanced economies bar one, which makes it harder to deliver investments. The Government are failing to spend around £1 in every £6 they want to spend. The Chancellor of the Exchequer has said that infrastructure investment is one of the Government’s main growth priorities, but the National Infrastructure Commission has argued that they are not delivering fast enough.

Infrastructure enables trade, powers businesses and connects us all. It creates opportunities for struggling communities and protects us from an increasingly unpredictable natural environment. Weak investment in infrastructure makes all this harder. We need strong infrastructure commitments and the certainty that projects will go ahead on time and continue to be funded appropriately.

Government dither and delay over infrastructure investment is making us all poorer. Take transport: the Government have said that their decision to delay building the Birmingham to Crewe leg of High Speed 2 and the planned link into central London was made to balance the books.

[Sarah Green (Chesham and Amersham) (LD)]

I share my hon. Friend’s concerns that even the Government’s attempts to keep construction of HS2 in budget will, in practice, only add to the already spiralling costs. Surely this shows that spending on HS2 is completely out of control. Whatever our views on this particular project— I personally think it is no longer value for money and should be scrapped—does she agree that it demonstrates a clear need for the Government to more closely monitor the progress of such projects, particularly where the taxpayer is pouring in billions of pounds?

[Wera Hobhouse]

My hon. Friend’s intervention goes straight to the issue. What were the initial contracts the Government signed with contractors? We have to scrutinise the plans for delivery to make them viable for taxpayers. To pick up my hon. Friend’s point, the National Audit Office has said that the decision to delay will lead to additional costs and potentially a more expensive project overall. The Transport Secretary himself even admitted that the delay would not save money—I would be interested to hear how much it will cost the taxpayer. I agree with my hon. Friend that, whatever our views are on HS2, it is important to know what the overall delay will cost the taxpayer.

The Institution of Civil Engineers says that delaying HS2 could make the building process

“more difficult as construction firms shift their focus to other countries.”

Whether or not we agree with HS2, this incessant delay and further uncertainty benefits no one.

Another example of this Government’s short-sightedness is the M4 to Dorset coast strategic road network, which is due to undergo major upgrades. This is a matter of great importance to my Bath constituents. The present strategic route is a mixture of the A36 and A46 and goes right through the centre of Bath—a world heritage site. My local Liberal Democrat council has rightly argued that the route should not go through Bath. I recently met with the Under-Secretary of State for Transport, the hon. Member for North West Durham (Mr Holden), and National Highways to hear more about how the M4 to Dorset coast study is progressing.

National Highways said that the route through Bath has high accident rates, is heavily congested and has more cars passing through than it was designed for; it also said that the A350 route via Chippenham delivers greater benefits and has fewer challenges. However, it is still considering using the Bath route. I understand that money does not grow on trees, but why are the Government not giving enough attention to the long-term benefits to people, which include health? The A36-A46 route through Bath is not fit for purpose. The Government know this, but they are paralysed when it comes to promoting and delivering alternative routes.

The Government also fail to deliver for rail electrification. We need to electrify our railway to get to net zero. The Railway Industry Association notes that an electric railway is the cheapest to operate, saving £2 million to £3 million per vehicle. Electric trains are also up to 300% more reliable than diesel trains, and are three times more efficient than diesel or hydrogen trains. Electrifying our railway is a no-brainer. However, the Government cannot see past the short-term cost. Network Rail has said that 278 miles of track must be electrified every year to reach net zero. Last year, the Government added only 1.4 miles of newly electrified track.

[Stephen Hammond (Wimbledon) (Con)]

The hon. Member is making an interesting speech, and I agree with some of what she has said, but let us be clear: the reason so little track was built was because Network Rail failed to deliver it. That is not the Government’s fault; that is an implementation fault. Network Rail has actually underspent its investment budget in the last two control periods. It is not a question of money not arriving or the Government not doing their job; Network Rail is supposed to deliver the project but has failed to do so.

[Wera Hobhouse]

I thank the hon. Member for his intervention; I have already answered half the points he raises. The problem is that the Government need a scrutiny process to ensure that those contracts are delivered on time and on budget. There seems to be something wrong with the Government’s system to keep track of them, because in the end, big infrastructure projects are national projects, and the Government should have some interest in how they are delivered.

Bath has a big air pollution problem. The council has tried to address the issue by introducing a clean air zone, amid considerable opposition, but the electrification of the line through Bath has been on hold for years, and dirty diesel trains are still going through the city. How can I persuade my constituents that it is reasonable to stop them from driving their diesel cars through Bath when the public transport alternative is still operating on polluting diesel fuel? Air pollution kills. Not getting on with electrification is a complete dereliction of duty, not just to our net zero plans but to public health—and that costs a lot of money if we get it wrong.

Just over a year ago, the Treasury blocked a £30 billion plan to electrify Britain’s railways over the next 30 years. The Government said that Great British Railways would produce a 30-year plan to electrify the railways. However, that organisation is not expected to be fully up and running until 2024 at the earliest—more dither and delay. We have not even seen the Government’s plans for a transport Bill. I am interested to hear from the Minister whether the Treasury is kicking electrification into the long grass.

Sustainability should be woven into all aspects of transport infrastructure policy, not just for climate but for health reasons, as I have mentioned. The Government recently announced that overall funding for active travel in the current parliamentary term is being reduced by £800 million. That includes a cut of dedicated capital funding by two thirds over the next two years. It is a backwards move and will counteract the tremendous progress we have seen in recent years.

I am a keen cyclist, and I try to do most of my journeys within Bath on my bike. I am fully aware of the benefits of supporting active travel, which far outweigh the costs. People walking, wheeling and cycling in 2021 saved 2.5 million tonnes of greenhouse gas, prevented 138,000 serious long-term health conditions and avoided more than 29,000 early deaths. Active travel contributed £36.5 billion to the economy in 2021, and with continued investment, that would only increase. I urge the Government to reverse the cut to active travel infrastructure, and help more people to actively walk, wheel or cycle to the places they need to go to. Will the Government support the Liberal Democrat’s plan for a £20 billion community clean air fund that will create new walking and cycle routes, as well as expanding bus routes and creating new council-led clear air zones for congested towns and cities?

The Government might claim that all those decisions were made to protect the public finances, but that is ironic, given their record of wasting money. Network Rail has spent more than £25 million on the new station at Reading Green Park. Its response to my written question had me wondering whether the decimal point was in the wrong place. The National Infrastructure Commission and the Climate Change Committee wrote a joint letter to the Government last year urging them to produce better plans to improve the resilience of infrastructure to climate change. Record temperatures last summer forced the cancellation of hundreds of train services, and flights were stopped at London Luton airport after heat melted the runway.

The Secretary of State for Energy Security and Net Zero, in his former role as Transport Secretary, warned that it will take decades to make the UK transport system resilient to extreme heat, but we do not have decades to wait. If we do not prioritise climate adaptation now, we will pay for it later. A full national-scale economic review of resilience and adaptation, led by the Treasury, is needed to quantify the value of climate adaptation, and therefore to incentivise investment in resilience. Investment in renewables is vital to combat climate change and preserve our energy security. If the Government had supported renewables harder, faster and earlier, my constituents would not be paying the price for Putin’s war now.

China is currently the biggest investor in renewable energy. It accounts for just under half of global energy transition investment. Cumulative growth in Chinese wind power between 2021 and 2022 was more than three times greater than in the US and more than seven times greater than in Europe. If we fail to prioritise renewable investment now, we risk moving our energy dependence from one autocratic power to another. If we want to be a global competitor, we must get our act together now.

The US Inflation Reduction Act and the EU’s Net Zero Industry Act will be transformative and will incentivise huge investment in new renewable technologies and crucial net zero infrastructure, but our Government are not following them. There was no new funding on Energy Security Day, and the Chancellor has refused to go toe to toe with the Inflation Reduction Act. The UK’s investment in the energy transition fell by 10% from 2021 to 2022. In contrast, similar investment rose by nearly a quarter in the US and by 17% in countries such as Germany. When will we see a real response from the Government? Global competition over talent and resources is fierce, but the Government seem content to be left behind.

The UK has huge competitive advantages in renewables such as tidal, yet the Government have failed to give the industry the funding it needs to prosper. We still do not have enough detail about how net zero investment is being defined. I hope the Minister will provide some clarification today. If other countries provide greater certainty for green investment, we will see investors and engineers leave.

When he was Chancellor, the Prime Minister used Britishvolt as a success story. He said that the factory would produce enough batteries for more than 300,000 electric vehicles a year. The former Prime Minister, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), told the House that support for Britishvolt would be delivered, and that the Government remained 100% behind the project, yet within a month it had collapsed. It is clear that mistakes were made at the company, but is there really nothing that the Government could have done to prevent the loss of a strategic battery producer? It is emblematic of an erratic Government without a plan—a Government who change their mind with the wind. Why on earth would people invest in the UK when they cannot have any confidence in what the Government will do from one month to the next?

The Treasury should consider giving a statutory underpinning to the publication of a national infrastructure strategy every five years, as opposed to once every Parliament. That would provide greater long-term clarity to investors, supply chains and other stakeholders about the Government’s plans. It would provide developers with a clear, long-term timeframe to plan ahead with confidence when delivering projects. The Institution for Civil Engineers argues that that means that projects can be delivered quicker and at a lower cost. Will the Minister meet it to discuss the detail of how that change would work in practice?

After the 2019 election, the Government set out their intention to raise public investment to a level not sustained since the 1970s, but now that pledge is in tatters. The Resolution Foundation has said that an increase in public investment set at around 3% of GDP would not only improve our infrastructure but would boost economic growth by about 0.8% over five years. Its research found that that boost would still allow us to keep our debt-to-GDP ratio on a downward path. According to the same research, the UK’s public investment levels could have been a transformational £500 billion higher if they had kept up with the OECD average over the past two decades. I am interested to hear whether the Government think that we should be working to close the gap with OECD counterparts.

The quality of our national infrastructure will determine the quality of our lives. It impacts how we communicate, travel and power our homes. Infrastructure in the UK is now not fit for purpose. This Government have become so focused on the here and now that they are unable to consider the future. They are so used to short-term firefighting that they are unable to take the long-term decisions that would stop fires happening in the first place. They have failed to safeguard our public finances to ensure that we can afford the vital investments that our communities are crying out for.

We need an urgent overhaul of our infrastructure strategy and more focus on the long term. Only then can we fix our crumbling and outdated infrastructure and build a vibrant, sustainable country that is fit for the 21st century.

15:20

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

It is a pleasure to serve with you in the Chair, Mr Sharma. I congratulate my hon. Friend the Member for Bath (Wera Hobhouse) on securing today’s very timely debate. It strikes at many of the issues that we face in politics at the moment—issues that must be dealt with over something longer than the current electoral cycle. One of the failings of politics and the frustrations with Government that we have all experienced over the years is that we are all focused on the next four or five-yearly electoral event. For some infrastructure projects—we have touched on HS2, and I will speak about some that are closer to home for me than that will ever be—we need a more strategic approach.

When it is at its best, the Treasury is very good at doing the strategic, but often it becomes a bit hidebound by its own rules, and it lacks a little of the creativity that we require. For those of us in the northern isles, the most important infrastructure that we have is our transport infrastructure, in particular our ferries. We have the ferries that go between Orkney and Shetland and Scotland—or mainland Scotland, as some people like to call it—and the ferries that go between the different isles that make up Orkney and Shetland. What brings me to the Chamber today is the community discussion of those internal ferry services in recent years.

Earlier in the sitting, I was pleased to welcome the announcement of funding of £26 million for a replacement Fair Isle ferry—a significant amount of money, but that money is critical to preserving one of the smallest and most economically fragile communities to be found anywhere in these islands. The geography of Shetland is such that, apart from Fair Isle, Foula and others, the islands are pretty close together on a map. To our mind, it makes perfect sense for those islands to be joined not by ferry services, which are subject to weather delays, breakdowns and all the rest of it, but by a series of short tunnels—fixed links. In recent years, the debate on the islands has very much headed in that direction. We look with some envy at what our Nordic cousins in the Faroe Islands have done by linking their islands together and at the west of Norway, where parts of the mainland are linked by tunnel, as indeed are some of the smaller islands.

As a consequence of those discussions, which have been happening in the community for some time, my colleague Beatrice Wishart MSP and I set up a series of town hall meetings in the summer of last year. Obviously there are no towns, so they were not in town halls; they were in community halls and church halls in Fetlar, Unst, Yell, Whalsay, Out Skerries and Bressay. In an age in which we are always told that people are uninterested in politics and will not turn out for a public meeting, about 250 people from these small communities came out over the course of a week to offer their views on what fixed links could do for their communities.

A tiny number of people demurred, but the overwhelming consensus was that in our communities the construction of fixed links could be absolutely transformative for the design and delivery of public services. Keeping GPs based in an island community of a few hundred people is a big ask, for example. Then there is the creation and ongoing maintenance of schools in those communities, which are constantly shifting.

I was born and brought up in Islay; I grew up there in the ’60s, ’70s and early ’80s. In those days, one GP served our end of the island. If he went fishing for the day and someone had an accident, they had to wait until he came back from his fishing trip. In the 21st century, thankfully, that is not how the NHS works. We need a wider range of clinical practitioners, and people expect different standards from those practitioners. Maintaining public services of that sort in such communities becomes ever more difficult and challenging for us.

At every meeting we heard the same story. Overwhelmingly, the view was that young people wanted to stay in the outer isles in Shetland, but were forced to leave by the nature of the opportunities for employment, health and education for their family and were desperate to return. If these people stayed in our island communities, they would contribute to their economic growth. They would be able to found, run and grow businesses or maintain businesses that had been run by their family for generations, keeping children in the schools and keeping money going through local contractors into post offices, shops and all the rest of it.

For the bigger economic development projects, getting products from the outer isles to the market will always require at least one ferry service, but there is no reason it should need two. I think of businesses such as Cooke Aquaculture, which has a processing station in Mid Yell: it has to construct an entire staff rota on the availability of ferry services to get its product from Mid Yell down to Lerwick before it catches the ongoing ferry. That is how the infrastructure provided has a very direct impact on one of the most important food-producing businesses in my constituency.

[Wera Hobhouse]

I do not know too much about ferry services, but I think the point that my right hon. Friend is making is that we cannot just look at one product in isolation. The cost benefits are wider, in the round.

[Mr Carmichael]

Absolutely. I am horrified that, having been a colleague of mine, my hon. Friend says she does not know much about ferry services—she has clearly not been listening! However, the point she makes is a good one.

This is where Treasury rules and funding come into play. If we are looking at ferries, for example, we look for a pay-down over a 20-year or possibly 30-year period. A tunnel will be several times that, but Treasury rules constantly push people towards a like-for-like replacement. They seem to lack the flexibility and creativity necessary to provide the services that will maintain the economic and social viability of such communities in the longer term.

There is also a continuing role for EU—sorry, for Treasury—funding.

[Peter Grant (Glenrothes) (SNP)]

You were right the first time.

[Mr Carmichael]

Yes, I am always right the first time.

There is a continuing role for the Treasury in relation to funding, because a significant proportion of the ferries that we are now looking to replace were purchased and commissioned in the first place with a proportion of EU funding. That funding now sits with the Treasury, so although transport as a whole is devolved, there is still an obvious and strong role for the Treasury.

Following on from the Tunnel Vision roadshows that we ran in the summer of last year, as we suggested, communities set up tunnel action groups to decide how they could make the case. The case for a big infrastructure project like that, for a small community, is always that it should basically be designed by the community itself. I am happy to tell the House that the Unst and Yell tunnel action groups, working together, have already obtained pledges in the region of £100,000 towards the £200,000 that they think might be necessary to get the first stage of a feasibility study.

The project will have not just local strategic importance, but national significance. Unst will probably be the earliest and most effective—possibly the only—spaceport in the United Kingdom that is capable of doing vertical as opposed to horizontal launches. The people behind the SaxaVord spaceport in Unst tell me every week that that will be critical to their ability to exploit to the maximum the potential of the project in which they are investing.

There is also the question of the carbon cost. In the medium to long term, tunnels will always be much more carbon-efficient than ferries, with respect both to running costs and to ongoing replacements.

The Treasury has a pot of money that is currently set aside as a consequence of the wish of the last Prime Minister but one, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), to build a bridge from south-west Scotland to Northern Ireland. I can promise the Minister that there are none of the problems with unexploded ordnance that befell that particular project. The money still sits there in a ringfenced pot, so if the Minister wants to stand up and give me a commitment to fund tunnels for Shetland, I will be delighted to take it.

What we are looking for at the moment is a bit of willingness from the Treasury to engage with our community and allow us the opportunity to make the contribution to the rest of the United Kingdom that we have always made and that we know we can continue to make. Might the Minister agree to meet me and a delegation from the Shetland communities and the Shetland Islands Council to hear their intentions and hear what they want to do to make this happen? A small amount of Treasury money at this stage, to establish the case with scientific and technical rigour in a way that as a community we may be unable to do for ourselves, could be transformative in future.

[Several hon. Members rose—]

[Mr Virendra Sharma (in the Chair)]

Order. Before I call Stephen Hammond, I remind hon. Members who want to be called that they need to bob.

15:32

[Stephen Hammond (Wimbledon) (Con)]

It is a pleasure to see you in the Chair, Mr Sharma. I had not intended to make a speech this afternoon; I came to hear the hon. Member for Bath (Wera Hobhouse) and to intervene on her. Given the vast number of people here, however, I thought I might make a small contribution.

It is a pleasure to follow the hon. Lady. I agree with some of her speech; her closing point that quality of infrastructure determines quality of life is key and has been a fundamental tenet of what Governments of both colours have believed for a long time. I think her analysis of some of the problems was also pretty accurate, although she will not be surprised to hear that I do not agree with all of her solutions.

On the financing of infrastructure, the hon. Lady is right that the accountability bodies have not been as good at holding the institutions that are supposed to deliver the infrastructure to account. She is also right that for a long period the United Kingdom did not have a strategic vision. That is why seven or eight years ago the two bodies—the National Infrastructure Commission and the Infrastructure and Projects Authority—were set up. I think it is difficult to argue that the Government do not have a vision or that the National Infrastructure Commission has not provided the Government with one. The hon. Lady and I met Sir John Armitt at an afternoon meeting only recently; I think she was there when he talked about the launch of his new national infrastructure green solutions project.

There are two issues. First, the Infrastructure and Projects Authority was supposed to bring into Government the expertise that would allow the Government to be given scrutiny over projects. A major infrastructure project has at least four phases before it even starts implementation. A key part of that is the initial working with designers—the ability to design a project and to understand whether that project will fulfil the requirements that one might want.

Secondly, there is the whole issue of contracting and procuring the project, ensuring its longevity and providing certainty that it will deliver on the price. This must be a source of frustration for Transport Ministers, if not for Treasury Ministers. In setting the control period for the railways—I have to confess that in my short period as a Transport Minister this applied to the highways as well—the attempt was to provide some certainty about investment and therefore give certainty to the pipeline. If there is a pipeline of projects that developers and suppliers such as the Railway Industry Association see, the contract price will almost inevitably decline because there will be a certainty of project work.

One thing that this debate should therefore focus on is that if we want to get financing right—[Interruption.] You are probably waiting to hear how we are to get financing right, Mr Sharma, but that may have to wait until after the Division.

15:36

Sitting suspended for a Division in the House.

15:46

On resuming—

[Stephen Hammond]

I think I was just about to set out the key to getting the financing right. First, we must understand the long-term nature of the projects—a point to which the right hon. Member for Orkney and Shetland (Mr Carmichael) rightly referred. Secondly, if infrastructure is designed, contracted and procured in a way that is accountable but also looks at supply issues, a better contract is likely to be achieved. It seems clear to me that developing a long-term approach to infrastructure is the only way, at local, regional and national levels, because that will inevitably ensure good quality of life, and quality of economic performance.

In this country, major financing problems are often not about the money committed to a project at the beginning, but project creep. That results from an inability to go through those first three phases. I think in particular of the Great Western electrification upgrade, which the former Chancellor, George Osborne, signed off at £888 million. A huge number of unrealistic expectations were built into that quote. For instance, the infrastructure provider, Network Rail, suggested that it would be able to pile between 17 and 30 piles an hour. In fact, in the end, it was only achieving three, and unsurprisingly the whole cost of the project went up.

Equally, there were other institutional problems. An analysis of why there has been cost creep on several routes in this country is under way. One element is about understanding over-specification, as well as the right specification. There is a contractual professional liability issue, which, if solved, would help do away with some of the problems of cost creep. I could go into the technicalities of why we do not need to take out the complete specification for the possible movement of half an inch of earth over a 20-year period, which is costing a certain bridge project £20 million. That is really happening, because the contractor does not want to take out the liability. If the Government were to underwrite that liability, it would force that financing down. If we got technical matters right in the design, build and financing phases, it would affect a number of the issues that the hon. Member for Bath mentioned to do with the cost of projects increasing and pressure on the overall budget.

On the need for long-term certainty, I mentioned in my short intervention on the hon. Member for Bath that one reason that Network Rail gives for not being able to spend its budget is that it is not certain what projects it should be delivering. That is nonsense. Network Rail is the infrastructure deliverer for rail; it should be very clear about the projects, and it has timelines for them. We are talking about the financing of projects. The Minister would be well advised to talk to his colleagues in the Department for Transport about what we can do to make the successor body to Network Rail more responsive and more accountable for some of its cost.

The hon. Member for Bath quite rightly talked about decarbonisation and electrification. Rail accounts for about 10% of transport air pollution in this country. It seems to me, therefore, that getting the financing in place for the investment in decarbonisation projects and long-term electrification is key. She is right about the amount of electrification the country needs. A number of projects have been looked at, but that is simply not deliverable on a 10-year timescale. It may be deliverable on a 25-year timescale, so we need to plan for that.

We need to ensure that transport infrastructure makes interim investment in hybrids. There are plenty of dual-fuel opportunities for rail. There are battery alternatives for rail, which would reduce emissions immediately. If we focused on that, it would help drive down costs, because we would then consider not only interim rolling stock, but new electrified rolling stock.

My final point is this. We talk about financing infrastructure as if the only source of financing were the Government. There are plenty of ways of involving the private sector, and having it work alongside Government. I do not think anyone in this room would disagree that using private finance to help deliver the public good is sensible.

[Wera Hobhouse]

I completely agree, but there is also the issue of the long term. I go to meetings and listen. Private investors in green infrastructure or insulation projects, for example, ask time and again for longer-term planning, because that is the only way they can deliver. Does the hon. Gentleman not agree?

[Stephen Hammond]

Private investors ask for two things: certainty that the project they are involved in will be delivered; and the certainty of an operating licence for a period, so that they can get back their investment. Therein lies the second accountability problem. In the operational phase, one should ensure the operator’s accountability. Design, build and finance operational models are well known throughout the world, and have delivered major infrastructure projects across the world—and, at times, in this country.

We must not close our eyes to the fact that the UK is still an attractive place to invest for many people. It has legal and regulatory certainty, which other countries do not have. It has certainty of Government. The Government should look again at the opportunities for an electrification infrastructure bond. What are the opportunities for working with major institutions, such as Siemens, that produce the battery infrastructure that could be accelerated into the rail industry? There are many opportunities for the Government and the country to look beyond the Government’s providing all the finance.

The key issues coming out of this debate are these. There is not a lack of vision, but a lack of implementation. We need to ensure that the bodies are put in place, be it Highways England, Network Rail, Great British Railways or BT Openreach. We have talked today only about transport and hard, physical infrastructure, but the investment in digital infrastructure and human infrastructure is almost as important for quality of life, which is a debate in itself. Getting the design and implementation phases right will undoubtedly make the financing of major infrastructure projects easier.

15:54

[Peter Grant (Glenrothes) (SNP)]

I am pleased to begin summing up the debate, and it is good to see you in the Chair, Mr Sharma. I commend the hon. Member for Bath (Wera Hobhouse) on her very well informed introduction to the debate. I heard her say that she did not win the ballot for this debate, but was asked to hold it later. That may be a lesson for us all: losing one vote does not prevent you from having another go later.

The hon. Member for Wimbledon (Stephen Hammond) gave a very interesting examination of the technical and organisational factors needed to get a project right, and to make sure that future projects go well. One thing that has struck me in this place is that when a big project goes wrong, nothing gets learned. If the Department of Health and Social Care has a project, the Department for Transport does not learn anything from the mistakes, so it makes exactly the same mistakes. We could fill a library with the things that we could learn from problems with Ministry of Defence contracting, for example. There does not seem to be any process for making sure that lessons learned are remembered and transferred across the whole organisation.

The right hon. Member for Orkney and Shetland (Mr Carmichael) gave a very interesting speech. I know a bit about Orkney and Shetland. I have not been to Shetland yet, but I have been to Orkney and hope to go back. He reminded us that we often think that a lot of the public are not interested in politics, but when they understand the impact that an issue will have on their life, they are interested. If the public are not interested, it is maybe more of a comment on politicians, who manage to turn the public off. It is certainly not the public’s problem if the way we do politics causes people to turn off.

I like the right hon. Member’s comments about the GP service on Islay, because several years ago two of my best friends spent two summers on the neighbouring island of Jura, providing cover for the only GP on the island; he was not allowed off the island unless he got cover. The right hon. Member reminded us that for a number of very remote communities in these islands, and sometimes for communities that are not all that remote, the realities of life can be very different from how they appear in this place, and possibly from the way they appear to Ministers or civil servants ensconced in their fancy buildings in Whitehall and around Westminster.

The right hon. Member mentioned the inflexibility of Treasury rules. I do not understand how we can possibly run a 25 to 30-year contract on an annual and cash-limited budget; it just cannot be done. It produces incentives to do stupid things. We have seen that with HS2. He also mentioned the very strong part that the EU played in the previous round of procuring ferries for the islands in his constituency. Yes, the Scottish Government have attracted, and probably deserve, criticism for their record on some of the ferry procurement that we have done in the past. Nobody gets it right all the time. Interestingly, the right hon. Member’s comment seems to show that the people who we were told were remote, unelected bureaucrats in Brussels could sometimes get closer to delivering what people in our communities wanted than the decision makers down here. Perhaps that is because the EU knew that it was sometimes remote, so it did not think that it knew what was best. Most of the funding programmes that it ran had to be managed by the Scottish Government, mostly in partnership with local authorities or other local organisations. Although not everybody agreed with every project that was approved, people could at least point to strong evidence that the project was born in the community and funded from elsewhere, rather than having been invented to fit a set of criteria that were often not relevant to the community in which the project was delivered.

[Mr Carmichael]

I bridle slightly at the hon. Gentleman’s use of “remote”. I am always being told that I live in a remote community, which means that I have to define the place I call home in relation to somewhere else. Surely the point is not about the distance between Brussels and the place where the projects were delivered; it is about understanding that the European Union enabled communities to do something for themselves. That is a very different model from the one in Edinburgh and London these days. Viewed from Shetland, both those places are pretty remote.

[Peter Grant]

I take the right hon. Member’s point. Let me clarify that I do not measure remoteness by how far people are from this place or anywhere else. It is arguable that parts of the right hon. Member’s constituency are more remote from each other than they need to be, because the infrastructure is not there, so a journey of a few miles can be a lot more difficult than it needs to be. The important point is that far too much infrastructure spending in Scotland is not done according to the priorities of the Scottish Government, local authorities, or the Scottish people. The fairy-tale vision of the former Prime Minister, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), of a bridge to Ireland is a good example of that. I have not heard anybody in my constituency or elsewhere in Scotland say that that was a priority.

Too many funded schemes in Scotland are the priority of somebody in London who holds no mandate whatsoever in my constituency or anywhere else in Scotland. The criteria are set by somebody in London, sometimes having invited comments from the devolved nations or local authorities; most of the time, they ignore any comments that come in. The allocation of money does not have any rational basis, or follow any measure of need or priority. For example, the UK Government promised that the shared prosperity fund would fully replace the EU structural funding that Scotland lost after we were dragged out of the European Union against our will. Over three years, we expected to get about £549 million in structural funding; through the shared prosperity fund, we are getting £212 million. We are losing £337 million, more than half of what we would have had.

Other Government investment schemes, such as levelling up, were supposed to be based on a prioritisation of need, but somehow that prioritisation of need meant that the Prime Minister’s constituency got more than the whole of Glasgow. Of course, Glasgow got nothing. The Prime Minister’s constituency got exactly the same as mine, which is one of the most seriously deprived areas in the United Kingdom. The towns fund was the same. On the face of it, that fund was based on some kind of objective assessment of need, but everybody knows that it was more about who the sitting MP was, or which party hoped they might win the seat at the next election. The way that the criteria are set is not in the interests of the communities that the fund is supposed to serve. The funding allocation is not about need or what is right; it is about what suits the party of Government.

Almost 20 years ago, my very good friend and then fellow member of the council, Michael Woods, discovered that the then Labour administration in Fife Council had a secret plot to close the award-winning sports centre, the Fife sports institute in Glenrothes, and Kirkcaldy swimming pool. Thanks to Michael’s determination, that plan was abandoned. In 2007, Michael and I were both re-elected to the council, formed a joint administration with the Liberal Democrats, and immediately put in place plans to not demolish those two institutions, but replace them, and make them brand new. Six years after we were elected, we delivered a new sports centre in Glenrothes. Sadly, Michael did not live to see it happen, but the Michael Woods sports and leisure centre remembers that it would not be there had it not been for Michael. That is what can happen if we have the political leadership that knows what needs to be done, understands what communities need, and is prepared to deliver it. We had to devise a new delivery model to make the sports centre happen. I note the comment from the hon. Member for Wimbledon. If that delivery model had not worked, it would not have been the fault of the delivery model; it would have been our fault. It was our responsibility to set out a delivery mechanism that would work.

If we want to look at something on a bigger scale, in 2007, when the SNP was elected to the Scottish Government for the first time, it inherited a Forth Road bridge that was in danger of becoming unsafe and being closed. Some 10 years after, the SNP having inherited no plans whatsoever, the new Queensferry crossing was opened to the public. It was a £1.3 billion investment, let it be noted. The SNP did that without putting the albatross around their neck of a private finance initiative, and the crossing is toll-free, as are all the bridges, motorways and roads in Scotland.

Compare that with HS2. In 2009, the Government set their delivery company a budget of between £31 billion and £36 billion. By 2013, almost exactly 10 years ago, the National Audit Office was already warning about problems. We are now looking at a cost of somewhere between £72 billion and £98 billion. The cost of a single railway station at Euston has increased by £2.2 billion, and construction on that station has stopped for two years. How can one Government—or one series of Governments—get one project so catastrophically wrong so often, with no one being held to account?

Lack of accountability is a significant problem. We could ask what has happened to the 40 new hospitals; maybe some of them will happen, but there certainly will not be 40 of them. We seem to be living in a time when “a long-term investment strategy” means “to get us through the next election”. We are clearly living in a time when “priority areas of need” are marginal seats, and 40 new hospitals means, if we are lucky, half of that number—most of them will never be built. Partly due to covid and partly due to the self-inflicted damage of Brexit, construction project costs are rising, often faster than the official rate of inflation. Contractors and subcontractors are finding it harder and harder to recruit the skilled workers they need, because in that industry a lot of the skills are international. The market is global, and Britain is making itself a less attractive place for overseas workers to come to and work. That is not just because of Brexit, but because of how it has been seen to be implemented by the Government.

We need a complete change in the way that the Government allocate and manage the funding for their major infrastructure projects. The hon. Member for Bath was a fellow member of the Public Accounts Committee for a while; I have not seen any evidence, in the reports that come to the Committee, that lessons have been learned. I would love to be able to say that during my time on the Committee—or even in Parliament—I have seen evidence that this Government are becoming better at managing large-scale projects. I cannot say that; if anything, I would say that they are becoming worse.

We have a Government and a governing party that are becoming more inward looking, more concentrated on looking after their own interests, less willing to face up to the decisions that need to be taken, and, frankly, less caring about the impact on communities all over these islands of their failure to deliver the kind of infrastructure that a modern western democracy should be allowed to take for granted.

16:06

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

It is a pleasure to serve under your chairmanship, Mr Sharma. I congratulate the hon. Member for Bath (Wera Hobhouse) on securing this important debate. Some Members may be surprised to see me; I am covering for a colleague in the shadow Treasury team, but I always welcome the opportunity to hold the Government to account on their record on public and private funding for major infrastructure projects. There are three main areas that I will focus on: the Government’s underinvestment in energy, the Government’s record on transport and the dysfunctional planning system that means that infrastructure, especially housing, simply does not get built.

First, on energy, the UK is losing the global competition for green jobs. We are now investing five times less in green industries than Germany, and roughly half of what France and the USA invest. The Institute of Directors has warned that:

“the UK will find itself left behind in the accelerating race to lead the green economy.”

Only now, eight months after the passage of the Inflation Reduction Act, has the Chancellor finally confirmed that the UK will have to wait more than a year to respond. The Opposition think that is simply not good enough.

Ordinary families have paid the price for the Government’s dithering and delay. In 2015, the Government slashed solar subsidies, causing a huge crash in the market. That missing capacity has left household energy bills another £2.5 billion higher this winter in the midst of the worst cost of living crisis on record. We must remember that in 2013, the coalition cut energy efficiency programmes, which saw home insulation rates crash by 92%. If we had insulated 2 million homes every year since then, people’s bills would today be £1,000 a year lower.

On the offshore wind markets, as Scottish Power CEO Keith Anderson has said:

“The wind farms that are coming online today were approved when Gordon Brown was in power.”

Unfortunately, yards across the UK are closing and we are delivering three times fewer offshore wind jobs than Denmark, despite our being over 10 times their size. The Government said in December 2022 that they would introduce planning reform for onshore wind by April of this year. That deadline has been missed and no action has been taken. I hoe that the Minister will confirm whether the Government will end the ban on onshore wind, and, if so, when that will happen.

Let me turn to transport. A recent survey of global investors has seen the UK slip down the rail infrastructure rankings; we now sit between India and Kazakhstan at 30th in the global league table. That is a national scandal—how on earth did we get here? We know that transport projects need certainty, but time and again Ministers have mismanaged key projects. On the key trans-Pennine route, for example, we wasted hundreds of millions of pounds of taxpayers’ money before cancelling the project and starting again. That has meant that on one of the major rail routes in the country, which transports millions of passengers a year, upgrades are almost a decade late. That has hurt the taxpayer and has profound consequences for the UK, costing the northern economy £16 billion.

Finally, I come to our planning system. Planning applications for homes fell to a record low last year, while the number of local housing plans submitted in the last few years have plummeted. What are the Government doing about that? Planning changes snuck out by the Government three days before Christmas have already resulted in 55 local authorities withdrawing housebuilding plans. Experts are now saying that housebuilding is set to fall to the lowest level since the second world war.

Wherever we look, it is the same story—housebuilding is at a record low, inward investment in transport is in decline, and Britain is falling behind on green energy. But we do not need to continue down this path of managed decline, because Labour has a plan to get the economy growing and to drive the investment and infrastructure that we so desperately need. The Labour party is committed to overturning the senseless ban on onshore wind and to the radical reform of planning rules, to drive growth and build affordable homes.

Fixing our transport system is a prerequisite for growth in this country, and that is why we are working hand in hand with business leaders and pledging that a future Labour Government will deliver Northern Powerhouse Rail, including that vital new train line through Bradford. Meanwhile, our green prosperity plan will grow the UK economy by investing in the green industries that can power our economic future, cut the cost of living for British families, and make Britain a clean energy superpower.

The Minister has listened carefully to all the concerns voiced in the debate. I hope that he responds to them, including those that I have just outlined.

16:12

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is a great pleasure to see you in the Chair, Mr Sharma, particularly as this is my first outing as a Minister in Westminster Hall. What a great start!

There has been a really informed, detailed and, if I may say so, courteous display of speeches. The central core of every one of them was a deep care for our national infrastructure and a recognition of how important it is to all our constituencies. I congratulate the hon. Member for Bath (Wera Hobhouse) on securing the debate—at the last minute, I hear, although you would not know it—and thank hon. Members for all the other contributions. I will try to cover off some of the points raised in the time available.

Good infrastructure acts as a knot that ties our communities and our Union together. It is a vital part of how we protect our environment and helps us to unlock economic potential. The Government, right up to the Prime Minister and Chancellor, are absolutely committed to delivering the long-term economic benefits derived from capital investment and infrastructure schemes. We want to build infrastructure that is modern, efficient and accessible to everybody across our four nations.

During this Parliament there has been a step change in how we fund national infrastructure, underpinned by our national infrastructure strategy, which was referenced by my hon. Friend the Member for Wimbledon (Stephen Hammond). To achieve the aims of the strategy we are increasing funding; we have a strategy and we are matching it with funding. That was announced in the spending review of 2021. A multi-year settlement provided £100 billion of investment in economic infrastructure for this spending review period. That includes over £35 billion for rail investment—including, yes, HS2, which I will come to in a moment—and other rail enhancements to boost connectivity across our country. In the longer term, our integrated rail plan, published in November ’21, committed £96 billion for rail construction and upgrades, representing the biggest ever single investment into our rail network. It will deliver a modern network that will benefit small towns and big cities, boost productivity and bring our communities closer together.

The hon. Member for Bath referred to HS2, so let me address that head on. It is a key part of our rail strategy—a long-term investment that will improve connectivity across the country and provide a low-carbon alternative to cars and planes for many decades to come. It is already supporting tens of thousands of jobs. The Government remain absolutely committed to delivering HS2 from Euston to Manchester, and continue to push on with the sections in peak construction so that the first high-speed services—running from Old Oak Common in west London to Birmingham Curzon Street—can be delivered between 2029 and 2033.

[Wera Hobhouse]

I share the Minister’s wish for HS2, but it is just that because there are so many delays, we are losing the public. Is it not important that the Government really come clean and say, “We will deliver this, and it will be great for this, that and the other reason,” rather than putting doubt into people’s minds that it might not be delivered, might be only half-delivered, or whatever it is? Let us go out there and really sell this as a great improvement to our rail infrastructure. Does the Minister not agree?

[Gareth Davies]

I thank the hon. Lady, although I think we are selling it. She is absolutely right: it will boost productivity. It is creating jobs, as I have said, and it will boost connectivity. It is important that we all do go out and sell that. However, we have to be real: we have to balance the need for high-speed rail with sustainable public finances and respond to events as they happen around the globe. That is the reality of what we are doing with the recently announced rephasing. This is true for construction projects all over the country and, if I may say, in many parts of the world; we face significant inflation as a result of Putin’s war in Ukraine and supply shortages coming out of covid. We are reacting to that as hon. Members would expect any reasonable and responsible Government to do.

The hon. Member for Bath referenced the National Audit Office report—I can tell her that we are looking at that report very carefully and will respond in due course. However, the point I am trying to make is that on HS2 is that it is vital and we are committed to it, but we have had to make difficult decisions and choices in order to balance the need for both robust transport infrastructure and robust public finances, which we will always do for the British people.

More broadly, as has been mentioned by many speakers, we are improving rail connectivity and restoring our transport services across the country, but in particular to reverse the 1960 Beeching cuts. It is important that we expand the rail network as well as improving the existing rails.

In the interest of time, I will pick up some of the direct points raised by hon. Members. The hon. Member for Bath should be aware that I am briefed on the M4, which she mentioned—even though I am only a week in, I know about the M4 connection to Dorset. The hon. Lady will know that the DFT commissioned a study by National Highways on that route, and its outcomes are being carefully considered by the Government and wider stakeholders. It is a live discussion and we look to come back on that very soon.

The hon. Member for Bath and my hon. Friend the Member for Wimbledon also made some excellent points on rail electrification. The hon. Lady should be aware of the transport decarbonisation plan, which will deliver a net zero railway by 2050. She referenced some specific statistics, and I will respond with a couple of my own: since 2010, we have electrified 1,224 miles of track, of which 1,000 miles have been installed in the past five years alone—compared, by the way, with just 70 miles electrified in England and Wales between 1997 and 2010. I think we are doing a pretty good job, although there is more to do. I do not think anybody would deny that.

The right hon. Member for Orkney and Shetland (Mr Carmichael) made a very insightful and interesting speech about the challenges his constituents face. I will look into the issue he raised about Treasury responsibility for the pot and come back to him.

My hon. Friend the Member for Wimbledon said eloquently that these things do not all rest on Government finances; the Government cannot pick up the tab for all our infrastructure projects. The benefits of our national infrastructure strategy will be secured through Government and private funding, so we will win the prize by mobilising private capital investment. Almost half of the UK’s future infrastructure pipeline is forecast to be privately financed, and the Infrastructure and Projects Authority recently estimated that the total infrastructure investment for the next decade across the public and private sectors will be nearly £650 billion.

As my hon. Friend mentioned, we are building on a strong base. The UK is a great centre for private investment. We have a strong system of regulation, a strong legal framework that is replicated all around the world, and a leading financial and services sector that helps to mobilise private capital. He talked about the bond market, and as he knows we are one of the leading issuers of green gilts. We are doing a lot to help mobilise private capital, but critical to our financing will be the mechanisms and institutions that we have available to mobilise private capital. That is why, when I was a Back-Bench MP, I was delighted to join him in the debate on the UK Infrastructure Bank, which will play a massive role in funding the projects that people around the country rely on. It has been set one mission: to partner with the private sector and local government authorities to increase infrastructure investment in pursuit of two objectives. The first is to tackle climate change, and the second is to support regional and local economic growth through connectedness, opportunities for jobs and higher levels of productivity. As it stands, £22 billion of financial capability has been provided to the bank, and we expect it to crowd in private capital investment and support more than £40 billion of infrastructure investment. To date, it has already announced 15 deals worth more than £1.4 billion, covering clean energy, digital infrastructure and green transport. That will be transformational.

A lot of Members mentioned net zero, which is absolutely critical. What every party has in common is our commitment to the health of the planet. We are world leaders in fighting climate change and galvanising action on the global stage, as we saw at COP26, and we are right to do that at home with our net zero pledge. The UK already has a world-leading track record of delivering decarbonisation. We have reduced emissions faster than any G7 country since 1990. By the way, we have grown our economy by 75% over the same period.

The Government are committed to a total of £30 billion of domestic infrastructure for the green industrial strategy. Since March 2021, an additional £6 billion for energy efficiency was committed at the autumn statement, and £20 billion for carbon capture, utilisation and storage was announced at the spring Budget. We have in place a clear strategy to deliver on our net zero obligations, deliver energy security and drive economic growth.

To Members who question our ambition and ask whether it is achievable, I say look at what we have already done. Some 71% of all UK households have access to gigabit-capable broadband—an uplift of 8% since November 2021—and we are on track to reach a target of 85% coverage by 2025 and at least 99% by 2030. Some 92% of the UK has access to 4G mobile coverage, and we are on track to meet the Shared Rural Network target of 95%, which has a big impact on Scotland. We also had the opening of the Elizabeth line between Paddington and Abbey Wood. Those are all high-quality infrastructure priorities and projects, and other crucial projects will be announced for economic growth, boosting productivity and competitiveness.

We will go on. We will continue with our strategy, our funding and our prioritisation of national infrastructure. We will transform our railways, including HS2 to Manchester, East West Rail and the Northern Powerhouse Rail core network. We will secure the UK’s energy security through delivering new nuclear power, including Sizewell C, and the roll-out of cheap, clean renewables, including wind and solar.

Infrastructure offers us one of the most exciting and efficient direct ways of improving living standards, boosting our economy and supporting our communities, and I appreciate the opportunity to outline that today.

16:24

[Wera Hobhouse]

The debate has been interesting and I thank all colleagues for being here and sharing their considered thoughts. I think we all agree that long-term infrastructure projects are vital for our four nations. They are complex to deliver and see through; they require a well-resourced Treasury and a vision that survives from one Government to the next; and last but not least—we have not really talked about this—they require an engaged public who share that vision and are prepared to see it through with the Government of the day. If that is true of anything, it is true of getting to net zero. We agree on a lot of things, but I think we disagree about the pace of change, which for me is not fast enough. The Government will of course say, “Yes, we are getting there,” but that is the nature of these debates, and I am glad that we had such a considered debate today.

Question put and agreed to.

Resolved,

That this House has considered funding for major infrastructure projects.

Extended Producer Responsibility for Packaging

Wednesday 3rd May 2023 Westminster Hall

16:26

[Mr Virendra Sharma (in the Chair)]

I will call Dame Nia Griffith to move the motion and then the Minister to respond. There will not be an opportunity for the Member in charge to wind up, as is the convention for 30-minute debates.

[Dame Nia Griffith (Llanelli) (Lab)]

I beg to move,

That this House has considered extended producer responsibility for packaging.

It is a pleasure to serve under your chairmanship, Mr Sharma. I share with many, including the Minister, I am sure, a huge concern about the amount of plastic and packaging waste that is never collected or recycled and that ends up in landfill, in our seas or in incinerators, thus polluting our land, sea and air. We are all aware of the hierarchy of waste—reduce, reuse, recycle—and the challenges that it poses. It is vital that we tackle waste and increase recycling, including through legislation and the extended producer responsibility guidance, but the scheme must be well designed so that it incentivises appropriate behaviours. I have every sympathy with the Minister: that is not an easy task.

I can understand, too, if there is some criticism of, or perhaps cynicism about, the concerns voiced by industry, because of course industry is bound to be concerned by any new tax imposed on it. However, there is general support in industry for the “producer pays” principle. Industry wants a system that is fair, and I share its serious concerns about some of the unintended consequences of the scheme. The Food and Drink Federation says the industry has significant concerns that the proposed system will fail to achieve improvements in recycling rates, and is calling on the Department to be more ambitious in its proposals by adopting international best practice from the most successful schemes around the world.

Before addressing more general points, let me share my concerns about how the current proposals will affect Wiltshire Farm Foods, which provides ready-made meals in plastic trays that are covered with a thin polythene film. It delivers those meals to householders who can then put them in their freezers and heat them up when they need them. Customers receive regular deliveries from Wiltshire Farm Foods to their doorsteps. The company saw that as an opportunity for its delivery staff to collect the used trays when they arrive with a fresh delivery. For good measure, it also reuses the cardboard boxes that the trays are carried in.

Wiltshire Farm Foods’ customer base is made up predominantly of a generation who are used to washing and putting out the milk bottles on the doorstep. Their conscientious washing and storing of the used trays enables the company to make the collections. The company does not used a cardboard sleeve, although one is commonly found on similar products. The necessary information is put on the plastic film, which is the only thing left for the customer to dispose of. Wiltshire Farm Foods leaves behind 97% less packaging by weight than other ready meal brands because the customers return the trays.

In late 2021, the company went one step further. It made a significant investment in a world-leading packaging recycling initiative in its factory in Durham. Through its award-winning “boomerang” project, it now takes the used plastic CPET—crystalline polyethylene terephthalate —meal trays and genuinely recycles them by making them into new trays. The composition of the new trays is up to 85% recycled tray material. That should be recognised as a significant achievement because it is much more challenging to recycle plastics than metal and glass, which can be recycled through the use of well-established technologies.

In establishing the facility in Durham, Wiltshire Farm Foods has also onshored the process. It both keeps jobs here and reduces plastic miles. It is genuine closed-loop recycling and an exemplar approach to the recycling and reuse of packaging. It puts the company ahead of the legislation. Can we find a way to refine the proposed legislation to recognise that? We must give credit where credit is due.

[Robin Millar (Aberconwy) (Con)]

My constituent, Laura Fielding, is a community councillor in Llanfairfechan, and is behind the excellent plastic-free Llanfairfechan scheme. She highlighted my duty, as a consumer, in respect of wrapping and packaging after the point of consumption. Does the hon. Member agree that the same applies to manufacturers and producers? Their responsibility for packaging lies beyond the point of sale, and even beyond the point of use, and extends to its disposal and the consideration of what that means for the packaging afterwards.

[Dame Nia Griffith]

Absolutely. As I understand it, that is the aim of the extended producer responsibility legislation: it will ensure that producers have to take a real interest in that process. However, it must be done in partnership with the industry and in a way that the industry feels part of. The scheme must have buy-in, because it can work only with industry co-operation. We must ensure that it operates fairly and that those who invest extra money to improve their processes get some benefit from doing so.

Last month, in response to a written parliamentary question about whether the charges to be introduced by the extended producer responsibility for packaging will apply only to packaging that enters the consumer waste system, the Minister replied:

“Charges for the management of this waste will apply to all primary and shipment packaging except where producers can evidence that their packaging has been emptied and discarded by a business.”

In response to a different question from the hon. Member for Bath (Wera Hobhouse) regarding how the revised scheme would apply to closed-loop recycling schemes, the Minister replied:

“Packaging that is already commonly collected from households will not be eligible for this offset as this would reduce the efficiency of household collections”.

That is a major problem for a company like Wiltshire Farm Foods. We are effectively equating what it does with plastic trays with plastic waste that enters the waste system.

I am concerned about that statement because, unfortunately, what we know about recyclable waste items that should be collected by local authorities and recycled is not at all encouraging. First, there are all the packaging items that do not go into household recycling boxes or bags but are strewn about the place as litter or put into a non-recyclable street bin. That is hardly a surprise, given that the Environmental Audit Committee report on plastic bottles found that only about half of local authorities provide differentiated street litter bins in order to separate recyclables from black-bag rubbish. Secondly, a householder might wrongly put that packaging into their black-bag rubbish, or in the correct household recycling bag but with unwashed items that drip food content into the bag, so that the whole bag of recyclables is condemned by the local authority and put in with the black-bag rubbish.

Even if recyclable packaging items get into the recycling bag or box correctly, what happens then? We have myriad different regimes run by different local authorities, with varying end destinations for their recyclables. Some 47% of recyclables are sent abroad. What data do we have about the products that they are made into? Too little, it would seem. Too often, we have seen pictures of packaging on foreign shores that can be traced back to the UK, smouldering on the hillside in open landfill or clogging up waterways, as documented by the BBC, Greenpeace and Interpol, and highlighted by the National Audit Office, which reported, putting it mildly, that there is

“a particular risk that some of the material exported overseas is not fully recycled.”

What do we know about the rest? We know that glass is 100% recyclable and can be remelted endlessly without ever reducing its quality, so we would hope the glass collected is fully recycled and made into new items. Plastic packaging, however, is another matter. How much of what local authorities collect as recyclable is actually made into new products? What data does the Department for Environment, Food and Rural Affairs have, not just on what is collected and handed on by local authorities, but on what actually happens to it, the efficiencies of the processes that it undergoes, the end products that are produced, and the value for money and for energy use that are achieved through the schemes?

Official estimates show the UK’s plastic packaging waste recycling rate at 47% in 2020 and 44% in 2021. Those estimates have been questioned by various organisations, including the National Audit Office, which expressed concerns about undetected fraud, as well as the concern that I mentioned about what goes abroad. Anyway, the amount would appear to be less than 50%.

We now face a situation in which a company such as Wiltshire Farm Foods has invested in a closed-loop system, collecting plastic trays and using the whole plastic tray to manufacture new ones, yet it will be taxed as if its trays just went into the waste system where, as we have seen, potentially only 50% of the trays would be recycled. The Minister has repeated that in a letter to the company—the problem that the trays will be equated with household waste and cannot be considered as any form of exception or betterment, because technically they could have gone into householders’ recycling waste bags or boxes.

The packaging may be commonly collected from households but, as I have explained, its final destination will vary according to the regimes in place in individual local authorities, and it has a less than 50% chance of being recycled, whereas 100% of the trays collected by Wiltshire Farm Foods will be taken back to Durham and manufactured into new trays. The problem is that firms get no credit for trying to maximise the collection and recycling of their packaging. That is a massive disincentive to make any such investment, whereas they could help to improve our plastic packaging recycling rates, as well as the efficiency and quality of that recycling; otherwise, there is no reason for them to do so.

I do not pretend for one moment that to devise an extended producer responsibility scheme is easy. Such schemes will be dependent on co-operation from industry if they are to work effectively, and it is vital that there is proper consultation and a response to the concerns raised. I understand there is a plan for a blanket introduction of the scheme and then to deal with exceptions or modulated issues, as they are described, afterwards in 2025. Of course, that will penalise the firms that have already started.

Many in the food and drink industry support trying to improve the levels of recycling and understand the importance of the recyclability of packaging and the urge to reduce the use of plastic packaging altogether. In view of the concerns raised by the industry, will the Minister consider pausing the introduction of the EPR scheme and use the time to work productively with manufacturers on their concerns and, in particular, to derive and refine a fair payments regime? Will the EPR rates vary according to the costs of managing different materials, depending on how easily they can be recycled and the final market price they can attract? Will the Minister consider having reduced EPR rates for firms that have invested or are investing in innovative recycling methods? As I have mentioned, the scheme begins in 2024, but the modulated fees whereby the more recyclable a material is, the less the producer pays will not be introduced until 2025. Will the Minister consider introducing the modulated fees at the same time as the main scheme?

How much analysis has the Department done of schemes in operation in other countries? Belgium, Germany and the Canadian province of Ontario are often cited as interesting examples. Does the Minister plan to look further at schemes elsewhere? A number of countries have much greater industry involvement in the running of their schemes, whereas in the proposed UK scheme almost all the necessary tasks to run the scheme will be carried out by the Government. Will the Minister consider greater private sector and industry-body involvement in the schemes? Will she explain how EPR funds will be ringfenced to ensure they are used to improve our recycling infrastructure? Will she take into account the impact of all packaging reforms on producers, and weigh up whether they will have the desired impact without creating an undue burden on them?

On that note, I shall draw my remarks to a close. I thank Wiltshire Farm Foods for showing me its trays and how it recycles them—I was not quite as keen on the minus 20° freezer room that it showed me. I implore the Minister to take that example very seriously, because it has ramifications across the industry for incentivising—or disincentivising—firms so that they do the right thing.

16:43

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Rebecca Pow)]

It is a pleasure to have you in the Chair, Mr Sharma; I know this subject is of great interest to you, as is litter, which the House just had an Adjournment debate on. It all comes into the sphere we are dealing with. I thank the hon. Member for Llanelli (Dame Nia Griffith) for bringing this debate on extended producer responsibility to Westminster Hall. I am pleased to have the opportunity to outline our schemes in more detail. She asked a great raft of questions, so if I do not cover all the answers, we will write to her on some of the outstanding issues, although I know some of issues have been dealt with in answers to parliamentary questions.

The hon. Lady and I share some agreement about the need for the schemes we are introducing and the fact that they are complex. The schemes will definitely take us in the right direction on reducing our waste. We agree on the shared goal, which is to implement a successful UK-wide scheme that serves to improve recycling and the availability of recycled materials for reuse, to drive down pollution, and to ensure that the cost of packaging waste no longer relies so heavily on the public purse. After four years of extensive engagement across the packaging sectors, the policy framework to introduce an extended producer responsibility scheme for packaging across the United Kingdom was outlined in the Government response published in March 2022. Work is continuing to make progress in preparation for its implementation.

Although affected businesses have consistently expressed their support for high-level extended producer responsibility objectives and outcomes, some concerns have been raised about costs, implementation and timelines. I am well aware of that, as other colleagues in this Chamber have raised some of these matters with me. I reassure the hon. Member for Llanelli and others that my Department remains committed to continued intense engagement with affected businesses to ensure that we deliver our UK extended producer responsibility scheme in a way that delivers on the shared goals to transform a linear economic model of “take, make, use, throw away” to a circular economy. Our aim is for legislation to be in place in time to start the EPR in 2024-25, as the hon. Lady mentioned.

Before I go further, I will outline how we got to this point and the rationale for the delivery of the EPR programme. In December 2018, the Government published the resources and waste strategy, which set out how we will preserve our stock of material resources by minimising waste, promoting resource efficiency and moving towards the circular economy. Three significant commitments in the strategy form the collection and packaging reforms programme. Those are the extended producer responsibility scheme for packaging—the EPR—which we are discussing; the deposit return scheme for drinks containers, known as the DRS; and the consistency in recycling collection scheme, known simply as consistency. That is the consistency of collection at the doorstep by local authorities.

The idea is that they dovetail together. They will help us to deliver our goals on protecting the climate, driving green growth and driving down unnecessary waste—all goals set out by this Government and the devolved Administrations in their policy documents. As a result of our reforms, particularly in relation to the EPR, we expect the figure for recycling rigid plastics—excluding drinks bottles in the DRS—to reach 48% by 2025, broadly comparable with what Wiltshire Farm Foods are doing at the moment. By 2030, we expect that to rise significantly to about 62%. That is the direction in which we aim to drive all packaging producers.

The overall objective of the EPR scheme is to encourage businesses to consider how much packaging they use, and to design and use packaging that is much easier to recycle, and to encourage the use of reusables, refillables and so forth. We have committed to setting ambitious new packaging waste recycling targets for producers. The EPR measures will be key to achieving the targets. We propose minimum recycling target rates from 2024-30 for each of the six packaging materials: plastic, wood, aluminium, steel, paper and card, and glass. We will introduce targets for fibre-based composite packaging in 2026.

EPR will allow businesses to make their own arrangements to collect and recycle their packaging, where local authorities are not required to collect those packaging items for recycling. EPR will incentivise producers to recycle packaging that is reused multiple times, such as milk bottles, and to offset the packaging that they recycle against their obligated disposal costs. However, EPR will not allow for offsetting of packaging where it is collected by more than 75% of local authorities, except where it is part of a reuse system. That is primarily because we will take steps, through our consistency measures, to place requirements on local authorities to collect, for recycling, at least the common set of materials that I outlined.

If we incentivise producers to collect their own packaging, which we are also requiring local authorities to collect, that will reduce the efficiency of kerbside collections overall and therefore increase costs for producers. It will undermine that system, which will be a cornerstone of the whole triage.

[Dame Nia Griffith]

What plans does the Minister have to sort out where the recyclable rubbish ends up? One of the big concerns is that not every local authority takes it to a place where it is 100% reused.

[Rebecca Pow]

That is a really important part of the circle and of our engagement. It is a question of ensuring that we have industry capable of taking all that material. We are working together in a pipeline, because clearly the system will not work unless that is all joined up.

To go back to my previous point, if producers all start to do their own thing and the kerbside collection is undermined, that will increase costs for the producers that are going through that system, because it will mean that the costs are spread over a lower tonnage of packaging waste collected. If we look across industry as a whole, we see that that would not be in the interests of the development of our circular economy ethos. We will publish the Government response to the consistency in collections consultation shortly. That will give more clarity to the whole issue very soon.

Through payment of disposal costs, businesses will pay for the collection and management of their packaging from households. We want to increase kerbside recycling through consistency and the EPR measures, and to do so in a way that optimises efficient and high-performing services. When the payments are calculated, that will be based on the efficient services of local authorities. We do not want that to be based on a less efficient authority, so we will follow the best models and expect local authorities to do that. We have complete agreement on that with business. I think that that particular point was raised.

[Mark Pawsey (Rugby) (Con)]

I draw attention to my entry in the Register of Members’ Financial Interests. What did my hon. Friend the Minister make of the suggestion from the hon. Member for Llanelli (Dame Nia Griffith) that there should be more private sector involvement in the operation of our EPR system?

[Rebecca Pow]

I thank my hon. Friend, who has made valuable contributions to this discussion and debate. I cannot stress enough that we are working closely with industry and want to continue to do so. I have had a lot of conversations about this particular issue, and it is really important that we involve business as much as we can. I cannot say more now, but that has definitely been noted, because after all, businesses are the ones with the experience and the knowledge. We need them to get on board with us.

We want to incentivise reusable and refillable packaging. The hon. Member for Llanelli outlined in some detail the example of Wiltshire Farm Foods, which made really significant strides before all these schemes came on board, thinking outside the box and doing its own recycling, and so forth. There must be even more potential, one would have thought, for it to look at reusing its packaging and encouraging reuse takeaway-style. I would be happy to meet that company. It would be interesting to explore further what we might learn from it or how it could take on the model that I am suggesting to make it work. A next phase of policy development that we are looking at is to encourage the use of reusable packaging, because that is a really important part of this.

We appreciate that these reforms affect business operations. We have been listening to the feedback and have already amended the proposals, following the consultation. We will continue to work closely on the design of the scheme and the delivery. We have run some eight-week workshops, like speed dating, and lots of useful material has come out of that. We will be doing much more.

EPR is a longer-term endeavour in the continuous improvement and reform of our collection and packaging services and we are looking at other schemes around the world. I went with a whole team from DEFRA and others to Belgium to look at their system, as they are world leaders in this and have been running their scheme for a very long time. Ours is different because we are introducing it later, when lots of businesses have had their own thoughts and ideas. We cannot just completely copy what they are doing in Belgium, because we are a slightly different example, but we certainly learned some very good lessons from going there. We will continue to engage with business and industry.

[Robin Millar]

Will the Minister give way?

[Rebecca Pow]

I will very quickly before I wind up.

[Robin Millar]

The Minister has twice mentioned that she has been over to the continent to see exemplars and learn from those who are further down this path than us, which I think is a terrific step. Has she given consideration to her point about the reuse of recycled materials? I hear concerns that the availability of that material is becoming a key issue. Larger players are consuming or using up large amounts, making it less available for smaller manufacturers.

[Rebecca Pow]

My hon. Friend makes a very good point, which we are discussing with industry. It is critical that we have enough material to put back into the system and that our measures on exporting and so forth all play into that space, in terms of how much goes abroad, whether that is being constructively used, and cracking down on illegally exporting waste and keeping it in this country. All those points are part of the whole circular economy issue.

We will continue to focus on delivering our EPR scheme, and the overall ethos is to protect the environment, improve management of packaging waste and transition us towards implementing the scheme.

Question put and agreed to.

Branded Medicines Voluntary Scheme and the Life Sciences Vision

Wednesday 3rd May 2023 Westminster Hall

16:56

[Mr Virendra Sharma (in the Chair)]

Before we start, I remind hon. Members that the debate can last until 6.13 pm. There will be five minutes for the SNP to wind up, five minutes for the official Opposition and 10 minutes for the Minister.

[Anne Marie Morris (Newton Abbot) (Con)]

I beg to move,

That this House has considered the voluntary scheme for branded medicines and the Life Sciences Vision.

It is an honour to serve under your chairmanship, Mr Sharma. The “Life Sciences Vision”, which was agreed and published in 2021, was a very ambitious document of which the Government should be rightly proud. It looks at further investment and development in neurodegenerative disease, kick-starting diagnostics, treatments and novel vaccines, more investment in cardiovascular disease and obesity, morbidity or mortality from respiratory disease, the biology of ageing and mental health conditions. That is an ambitious and worthwhile list. However, its delivery can only be a joint endeavour; it has to be a partnership between Government and industry. Both parts need to do what they can to drive this forward.

If industry is to play its part, it needs from Government good research facilities, first-class universities and academics who are attracted to this country. It needs efficient an effective systems for clinical trials, phases 1 to 3. I am aware that the Government are currently looking at how that might be improved and that James O’Shaughnessy is spearheading a report that will hopefully be out shortly. I sincerely hope that its findings will be implemented.

Industry also needs a regulatory regime that is fit for purpose across both the Medicines and Healthcare products Regulatory Agency, which evaluates whether a medicine is fit for purpose and safe, and the National Institute for Health and Care Excellence, which looks at whether a medicine is value for money. Industry also needs to ensure that whatever medicines finally come through the regulatory system are used—that there is an uptake among patients and that they are prescribed. There is clearly a moral imperative for that, but there is also clearly a financial one.

From the Government’s perspective, if they are to invest in ensuring that we are most attractive and efficient place to launch a medicine, they need to ensure that UK patients have quick access to both old and new innovative medicines. They need to ensure that industry is there, ready and waiting, with the new initiatives and ideas absolutely raring to go. That said, the Government need to manage the overall cost of the medicines budget, and they need a commitment from industry to invest. Fundamentally, it is a contract—an agreement—and both benefit if the deal is right.

One of the mechanisms that sets out the terms of that arrangement in practice is the voluntary scheme for branded medicines pricing and access. Most of us refer to it in shorthand as VPAS, as I shall for the purposes of this debate. So what is VPAS? Effectively, in this agreement the Government set out what they will do for the industry. In the last iteration of VPAS, commitments were made about reforms to NICE, some of which have been met and some of which have not. At the same time, industry agrees that it will cap the growth of Government medicine spending. The consequence is that all over-prescribing beyond the agreed and expected rate of growth is at the risk of the pharmaceutical industry. It is a very complicated formula.

The current scheme was devised in 2019. It replaced the PPRS—the pharmaceutical price regulation scheme—and was originally conceived such that the medicines budget could grow by 1.7%. That figure is now 2%. Any prescribing over that figure would effectively be paid for by the pharmaceutical companies by way of a reimbursement to Government of a percentage of their turnover, but it is a very complex and uncertain calculation.

One of the reasons for that is that the figure is anchored at a 2013 growth point, and it is not re-based each year. The consequence is that there is great uncertainty for any investing company about what the rebate will be year on year, which makes it difficult to budget. The compounding effect of the lack of re-basing is that the effective rebate is currently 26%, and left unaltered it would go to 30% for the next iteration, which is currently being negotiated to start in 2024.

We need to get that pricing in context. Effectively, when pharmaceutical companies go to NHS England and the regulators, there is a process of price-gouging. The first gouge, effectively, is by NICE. It looks at the market price and discounts it by an average of 55% to 65% under the patient access scheme. After that, NHS England may require a further cut to meet the affordability criterion of £20 million. The VPAS slice is after that, and, as a consequence, many pharmaceutical companies are saying, “Frankly, the pips are being squeezed too hard, and we simply cannot afford to invest in the research and launch our medicines here.” The current rate is uncompetitive internationally, and unless we change our approach to rebasing and to the growth cap, I fear we will lose much-needed investment here.

Pharmaceutical companies have a choice, and they can research and launch anywhere in the world. We are now a single-country regulator, rather than part of a European system, and that makes us, from the start, much less attractive. Industry is already voting with its feet. Indeed, in this morning’s Science, Innovation and Technology questions, a number of questions were about disinvestment decisions by pharmaceutical giants in this country. It is clear that many are simply no longer investing in research here or in UK regulatory approvals. That is a loss not just to the economy but to patients, because every drug prescribed to patients has to go through that regulatory approval process. Indeed, the Association of the British Pharmaceutical Industry has done some analysis and believes, based on the evidence, that our global share of research and development declined from 4.9% in 2012 to 3.3% in 2020. It advises that the number of initiated industry clinical trials fell by 41% between 2017 and 2021. Across leading European countries, the UK saw the largest decline in new medicine launches between 2010 and 2021.

However, it does not have to be like that. The ABPI and PricewaterhouseCoopers confirmed in a report that the life sciences sector is one of the most valuable for the UK: it creates £36.9 billion in gross value added, 584,000 jobs and 18% of all the UK’s R&D. They say that if the life sciences strategy was implemented in full, there would be £68 billion of additional GDP over 30 years from R&D investment, 85,000 additional jobs and a 40% decrease in disease burden. So VPAS could and should be part of a solution, not a problem.

The approach needs fundamentally to change; it cannot continue to be a question of who blinks first on what the pricing figure and the size of the reimbursement will be. This has to be looked at holistically in the context of what is in the best interests of UK plc and our health outcomes. The approach needs to be a collaborative one in which risk is shared. The solution proposed by the ABPI is a cut in the rebate to 6.88% and the creation of a two-pot system under which one pot continues to go the Treasury while the other—a separate 1.5% premium, if you like—goes specifically towards clinical research, genomics and so on.

The challenge with the second pot is, first, that it is quite small in terms of making significant changes; secondly, that it is a bidding pot, so there will be winners and losers; and thirdly, that although the ambition is to use it to level up, that will create all sorts of problems in relation to the Barnett formula. So although the system is well intentioned, I am not sure it would actually work in practice. It has had much support from patient groups and others, and I understand why, because delivering a fairer relationship is the direction of travel.

However, we have to bear in mind the political and economic reality of where we are, and we must not lose the prize of providing a much stronger link to, and a driver of, the life sciences vision, which seems largely to have been orphaned. That agreement needs some tangible benefits and obligations. There need to be key performance indicators for both sides—industry and Government—and there need to be deliverables for both sides.

The all-party parliamentary group on access to medicines and medical devices, which I chair, set out an alternative proposal to try to find a more collaborative approach. I believe in the free market and that, ideally, there should be no cap; sheer market growth through investment would result in our growing the economy and the Government tax take funding new medicines and producing money for the NHS. However, I am clear that I have to be grounded in reality, and if we are to find a way forward, there needs to be a risk-sharing solution, because no cap is the inverse of where we are now—it puts all the risk on Government rather than on industry.

How can we find this risk-sharing solution? First, we can increase the cap. It is currently at 2%; 4% would allow quite a lot of headroom. We could ensure that, each year, the system is rebased, so that we do not end up with a complex way of compounding what the rebate figure will be year on year.

One of industry’s real concerns is that a big chunk of money goes straight into Treasury coffers, and there is no evidence of how it is recycled to benefit pharma or health. In its paper, the APPG suggests that we ringfence a large part of that rebate, though probably not all. Part of it would probably still have to go back to the Treasury, but a significant enough amount would enable those seven life science missions to be driven forward, and industry, academia and clinicians could look at what we can do to drive this vision forward with a sensible amount of money.

The current scheme could also be simplified by excluding some of the six categories of medicines included in the VPAS scheme. Biosimilars and branded generics, where the branding is mandated by the regulator rather than choice, could sensibly be excluded. I appreciate that that increases the cost, but given that those products represent such a large chunk of medicines used in the NHS, that must be a no-brainer. Some of those are older products that are of great benefit to the NHS.

There has also been concern that the negotiation needs to be across all Government Departments, whether the Department of Health and Social Care, NHS England, the Treasury, the Department for Business and Trade or the new Department for Science, Innovation and Technology. Similarly, although the Association of the British Pharmaceutical Industry represents all the sectors, some very specific interests groups, such as the Ethical Medicines Industry Group and the British Generic Manufacturers Association, believe they need the opportunity to put their case forward. What is the downside of listening? Surely, think-tanks, academia and those groups all have something to say. If we want the right answer, that is the right way forward. We need a two-way commitment and two-way investment.

What could the Government do to help themselves manage their medicine budget cost? First, they could streamline regulatory activity. Currently, we have the Medicines and Healthcare products Regulatory Agency and the National Institute for Health and Care Excellence. That is a sequential system, which means we have to go through different sets of appraisal to satisfy both regulators. Much of the data and many of the questions, while not the same, are similar. Other jurisdictions are looking at running the two processes in parallel. Why do we not steal a march on others and integrate them? We could do that and have a state-of-the-art regulatory body. To do that, we would need to take out the budget impact test and put it back into NHS England, where it started. That strikes me as the right place for it to sit.

How could we monetise that regulator? First, as the Government already recognised in the last Budget, we should look at mutual recognition of approvals in the USA, Japan and the EU. That will not be easy, and I suspect it will be possible only in some limited areas of medicine. None the less, that is the way to go. Many developing countries would be delighted to have a quality regulator such as the MHRA and NICE. Why can we not charge to be their regulator?

The real call from industry, however, is to make uptake real. Although the theory is that any drug approved by NICE will automatically be taken up in the integrated care system budgeting system, the reality is that that is not the case, because there is no enforcement mechanism. That is very important for financial and moral reasons, and uptake is an issue that the Government could sensibly agree to look at. It is about implementing many of the new suggestions coming forward and, hopefully, the clinical trials and recommendations from James O’Shaughnessy. Because we would have a large pot for life sciences, we could create a long-term working partnership through the VPAS to deliver the life sciences vision.

If this is going to work, the industry needs to identify, in principle, investments that it would make in the UK. I know that such discussions take place, but what can the industry bring to the table to generate growth in the economy, increase skilled jobs and attract research academics and practising physicians? How can it identify ways in which it can support the Government in other parts of the life sciences vision delivery pipeline? Ultimately, much of this is going to be based on trust and good will. Sadly, that is not there at the moment, so the most important thing is to get it back.

For the VPAS 2024 to work, we need something that is fair to the industry and the Government and that will deliver what we absolutely need: the most innovative medicines for individuals living in this country, which they want and deserve. It can be done, and I am absolutely confident the Minister and his team will do their level best to try to achieve that. I am conscious that he is limited in what he can say, because of ongoing consultations, but I would welcome some reassurance that he agrees we should move to something that is more of a partnership—where there is true commitment and collaboration, and where there is a true link between the VPAS payment by industry and its use for life sciences development—so that we can actually see the life sciences vision live.

17:17

[Daniel Zeichner (Cambridge) (Lab)]

It is a pleasure to serve with you in the Chair, Mr Sharma. I congratulate the hon. Member for Newton Abbot (Anne Marie Morris) not only on securing the debate, but on setting out in such detail and so effectively the complicated range of issues we face. I agree with much of her analysis of the problem, and although I am not sure I agree with all her proposed solutions, it is important that they are brought forward and discussed.

I represent an area of the country where life sciences, particularly research and innovation, are absolutely central to our economic prosperity. Thousands and thousands of jobs, and major investments, are at stake. Partly as a consequence of that, I have chaired the all-party parliamentary group for life sciences for a number of years, and I am grateful to a number of key players in the sector, including Steve Bates of the Bioindustry Association and Leslie Galloway of the Ethical Medicines Industry Group, for their advice in advance of the debate.

Over many months in my part of the world, I have been hearing from a range of people in the sector about their growing concern about the effect that the rebate level is having on a whole range of organisations and the threat that it poses to future investment and jobs. Indeed, the chief executive officer of the BIA has said that the clawback rate has

“gone down like a lead balloon in key global pharma boardrooms”,

and some have consequently withdrawn from the scheme.

I appreciate that this is a negotiation, but in my time talking to people in my part of the world, I have not heard this many concerns raised. Obviously, one always treats some of them with caution, but there are enough to make me think that this is a serious threat. We all agree that we want the NHS to have rapid access to, and the most consistent supply of, the most modern medicines it needs at affordable prices, and in achieving that, we can secure those vital jobs and investment. Frankly, in a complex world where medicines pricing is far from transparent and huge sums are now needed to develop new medicines, that is much easier said than done, not least because, as our knowledge and computational power and our understanding of genetics increase, making much more possible—particularly in terms of personalised treatments—the challenge of costs will only grow.

It is absolutely essential that any Government strike the right balance between securing taxpayer value and investing appropriately in our domestic life sciences industry. At the moment, many in the industry fear that this Government are cutting off their nose to spite their face. Yes, a hard bargain has been driven by the NHS—good—but there is a danger that it comes back to bite, especially at a time when we face shortages of supply. Put crudely, suppliers do not have to supply here if they are not getting the right deal.

As some see it, NHS England secures extra value by imposing commercial deals that take the prices of medicines below what NICE would consider cost-effective, even based on affordability thresholds that have not changed since they were introduced when NICE was established back in 1999. The risk is that the unintended consequence of the good deal that Governments have got drives industry away from the UK at a time when we need the life sciences sector to invest more.

This is not only about VPAS; there are other factors too. The bitter truth is that, despite the Government rightly identifying the life sciences sector as key for our future prosperity, the UK’s share of global R&D spend has decreased from 4.9% to 3.9% since 2012, and clinical trial numbers have fallen 41% since 2017. That has been a consistent message from industry over the last two years, and it has been raised consistently with Ministers.

Shockingly, the UK now has the highest rate of decline in new drug launches compared with Spain, Italy, Germany and France. If the UK ceases to be a first-launch market, patients will not have access to the latest drugs or clinical trials, we will lose the ability to compare future treatments against modern care standards and we will lose vital workforce skills that, once they are gone, will be difficult to replace. It is not just the newer patented drugs that are under threat, but generics and biosimilars too. An unintended consequence of the success of the VPAS scheme is the risk of reducing the availability of biosimilars and generics, as companies prioritise stock to higher-margin markets. A good price but no supply is not the outcome anyone is looking for.

What is to be done? I urge the Government not to dig in their heels and to at least have a sensible dialogue. I echo many of the points made by the hon. Member for Newton Abbot. Let the Government admit that there are problems: yes, our unified NHS is a remarkable resource for research, but the fragmented and complicated decision-making processes undermine that potential. It is a well-known problem. It is no good claiming that there are new regulatory opportunities post Brexit if regulators are then starved of the resources to make those opportunities real. We should recognise that the decline in clinical trials is not just an unfortunate by-product of an NHS in crisis; it is a real problem in itself, and it needs to be addressed.

The distance between how the discount levy is spent and those who make prescribing decisions just does not work. It does not incentivise behaviour, so it does not affect uptake, as the hon. Member for Newton Abbot said. Currently, there is no link between resources returned to Government and the wider life sciences vision. Addressing those points would make a difference, and I genuinely look forward to hearing the Minister’s response.

None of this is easy—it is complicated—but it is really important. Failure to deal with these problems is bad for my constituents, bad for the UK economy and bad for patients. The Government need to get out of denial mode and address the problem urgently.

17:25

[Martyn Day (Linlithgow and East Falkirk) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I am grateful to the hon. Member for Newton Abbot (Anne Marie Morris) for securing today’s debate on the voluntary scheme for branded medicines and the life sciences vision.

The UK Government’s current voluntary scheme for pharmaceutical companies has come under criticism for its unsustainable payment rates, which are well above both historical and international norms. As we have heard, companies are required to pay a revenue tax of 26.5% to the UK Government, in addition to all other taxes, which is significantly higher than that in other countries. That has led to two large US-based drug companies, AbbVie and Eli Lilly, exiting the VPAS, citing the punitive system of revenue clawbacks. Other companies, such as Bayer and Bristol-Myers Squibb, have also threatened to reduce their UK footprint in response to the increasing clawbacks.

The pharmaceutical trade body has called for the UK Government to scrap their plans to raise the repayment rates for drug makers, so as to avoid possible setbacks for the sector. The high payment rates are seen as a global outlier and are undermining the UK’s ability to attract investment and become a global leader post Brexit. I sincerely hope that the UK Government are successful in their efforts to address these concerns. Sir Hugh Taylor has been appointed as chief adviser for VPAS negotiations. He will oversee the negotiations for the Government and the NHS on a successor to the 2019 VPAS, which will expire at the end of 2023.

Medicines are crucial for healthcare and are the second largest expense for NHS Scotland. They prevent, control, palliate or cure many diseases. The Scottish Government are committed to improving patient access to safe and effective new medicines. The regulation of medicine pricing is the responsibility of the UK Government, but the Scottish Government are involved in the UK-wide voluntary VPAS agreement between the four UK nations and the pharmaceutical industry that caps NHS spending on branded medicines. Companies exceeding the VPAS revenue cap pay rebates to the Scottish Government and the three other UK Administrations. The cap grows by 2% annually and the sales above it are paid back to the Department of Health and Social Care via the levy. As we know, the scheme has been active since 2019 and will end later this year.

Scotland uses the VPAS receipts to fund the new medicines fund, which supports health boards with the cost of introducing new medicines, including orphan, ultra-orphan and end-of-life medicines. The fund covers medicines approved by the Scottish Medicines Consortium, and affordability should not prevent access to new medicines. Since 2014, £456.5 million has been made available to health boards. However, it is unclear if the new medicines fund will be sustained beyond December, as VPAS funding is not certain. Going forward, certainty is essential both for the NHS and for our life sciences sector.

Scotland’s life sciences community has distinctive capabilities, a strong business base and excellent research institutions that continue to create high-value jobs. We aim to make Scotland the preferred location for the life sciences community. Scotland’s life sciences sector provides economic benefits and improves healthcare. With over 700 businesses and institutions, it employs 41,700 people. It is identified as a growth sector and is part of Scotland’s national strategy for economic transformation. Scotland is known for drug discovery and advanced manufacturing, contributing to international exports and research and development investment. In 2018, £164 million was invested in pharmaceutical research and development. It is estimated that that will generate £1.5 billion in economic benefits over the next three decades. That puts its importance in scale.

In conclusion, there can be no doubt as to how important the sector is to Scotland’s economy, both now and in the future, nor is there any doubt as to the significance of the funding that VPAS provides to our NHS. Certainty of funding beyond the current scheme is now needed. We need to get the balance right, however, both to sustain the life sciences sector and to support our NHS.

17:28

[Karin Smyth (Bristol South) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I understand that Parliament is technically in recess, but here we are working hard to the last on this very important debate. I am grateful to the hon. Member for Newton Abbot (Anne Marie Morris) for securing it. I agree with my hon. Friend the Member for Cambridge (Daniel Zeichner) that she used her expert knowledge to provide a detailed outline of the issues.

As the hon. Lady said, the scheme has a number of objectives, including improving patient access to medicines, getting the best value and most effective medicines introduced more quickly, and supporting innovation in a successful life sciences industry here in the UK. It is a complex area, balancing what often seem to be competing priorities around keeping costs low and getting a fair return for the industry. Ultimately, we need to remember that this debate is about people: our constituents, ourselves and families. People expect to be treated with the best medication available and for the NHS to provide good value to the taxpayer.

Last week the Minister outlined that

“we are seeking a mutually beneficial voluntary scheme that supports patient outcomes, a strong life sciences industry and a financially sustainable NHS.”—[Official Report, 25 April 2023; Vol. 731, c. 584.]

I hope he will today update us on where that work has got to, and on whether the Government are any closer to a solution. That would be most welcome, as other Members have outlined.

I will take the objectives that the Minister outlined one by one. Supporting patient outcomes is vital; we all want the best for our constituents. There are a number of heartbreaking cases where people have not been able to get the drugs they need. Many colleagues have raised those cases in this place and have become experts on behalf of their constituents. It is a devastating issue for many people. I think that people do understand that this is complex and difficult, particularly for rare diseases. Although we recognise the need for commercial confidentiality, people need greater empowerment. The taxpayers who fund our system need to understand the transparency and accountability associated with those agreements.

The second issue that the Minister outlined is the life science industry, which is crucial to our economy. It is disappointing, as the hon. Member for Newton Abbot outlined, that there is a decrease in our share of global investment in R&D. It is worrying that companies are leaving the UK to seek other markets. We are all hugely grateful to the sector that got us through the pandemic. We all learned a lot more about the sector in that period, but it was able to do that because of previous, sustained, long-term investment. That is where we need to get back to.

We have consistently led in the field of life sciences research and development, an industry that employs more than 260,000 people across more than 6,000 businesses and generates a huge annual turnover. We need it to thrive. However, the Government are not serious about science. Due to their lack of investment and strategy, we are not converting our rich science base into the high-skill, high-wage, high-productivity economy that we all want to see. There is not a detailed plan to get us to where we need to be.

The Labour party is committed to harnessing the potential of the sector. Investment and reform of research and funding is key to improving outcomes. At the centre of our science policy is a target to raise total investment in R&D to 3% of GDP by 2030. Targeting that investment will help us to develop the treatments and innovations we need for the future. It will be part of our wider industrial strategy to build the high-wage, high-growth and more productive economy that we want to see.

The third point the Minister made was about a financially sustainable NHS. The current backlogs of care and the workforce shortages that have put the NHS under increasing operational and financial pressure are immense. Those pressures will only be exacerbated by maintaining an environment that fails to encourage much-needed innovation. Again, there are clear lessons to be learned from the pandemic, but in a stretched system that had over 4 million people waiting for treatment before the pandemic, research and clinical trials can become less of a focus. They are people-intense—I have been part of them in a previous role—and require focus. Support for the wider health sector is crucial in helping that move along.

Investment in health and futureproofing our system is good not only for patients, the public and the life science sector but the wider economy. The cost of ill health is substantial, and we have much evidence of the link between the health of the nation and societal wellbeing.

In conclusion, we are seeing growing concern about the current scheme. Over the past year, the supply of branded generics in particular has been dented by steep increases—linked to high price inflation—in VPAS payments. It is impacting on shortages—we look forward to hearing the Minister’s comments on that—and the supply of medications. Issues in the scheme are made evident when major companies leave it. It would be helpful to hear from the Minister what action he has taken to support the life sciences industry in this country, and to give clarity and support, which we would all like to see, to those undertaking research into potentially life-saving drugs. We want support to be given to the key industries, particularly in places such as Cambridge, as outlined by my hon. Friend the Member for Cambridge, but also in all our constituencies across the country. It is vital that the Government get that plan in place.

17:34

[The Minister for Health and Secondary Care (Will Quince)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I thank my hon. Friend the Member for Newton Abbot (Anne Marie Morris) for securing this important and timely debate—I will come on to why it is so timely in a moment. I thank Members from across the House who have contributed to what has been a highly informed discussion, especially as the House is now technically in recess, as the hon. Member for Bristol South (Karin Smyth) has said.

Members will know that the current VPAS scheme is the latest in a long line of such agreements, which date back to 1957. For many years, those agreements have been at the heart of a collaborative relationship between the Government and industry. As my hon. Friend the Member for Newton Abbot says, the partnership helps to manage the affordability of medicines while, vitally, supporting our life sciences sector to deliver for UK patients and provide them with access to the most innovative and cutting-edge medicines both now and in the future.

VPAS has proven to be a powerful tool in both improving patient outcomes and supporting economic growth. Hon. Members will be aware that a key goal of VPAS, as my hon. Friend pointed out, is to ensure the sustainability of NHS finances by limiting total growth in spending on medicines. Since its inception in 2019, VPAS has driven significant improvements in patient access to cost-effective medicines. It has also ensured predictable spending growth, which is key for the NHS during a period of economic uncertainty.

I can absolutely assure hon. Members that the Government remain firmly committed to the scheme and to continuing to work with the pharmaceutical industry to create a strong, innovation-friendly environment for the development of medicines here in the United Kingdom. We set that out in our life sciences vision, as my hon. Friend said. As she also pointed out, there is only so much I can say, because it is commercially sensitive and negotiations start tomorrow, which is why this debate is so timely.

As both my hon. Friend and the hon. Member for Bristol South said, and as I have set out previously, the idea is to create a four-way win—a win for UK plc, and I will come on to why that is important; a win for our NHS, and the hon. Lady eloquently set out why that is so important; a win for patients, so that we are getting the most cutting-edge and innovative medicines to patients here in the United Kingdom first; and, importantly, a win for industry because of its importance to UK plc. As my hon. Friend the Member for Newton Abbot pointed out, life sciences falls under multiple Government Departments, which makes it complex and not the easiest thing to navigate around Government.

As my hon. Friend rightly says, life sciences falls under the Departments for Business and Trade and for Science, Innovation and Technology, is covered by us at the Department of Health and Social Care and therefore also by NHS England, and is also covered by the Treasury —ultimately, everything comes back to the Treasury. But then we have the Office for Life Sciences, which sits partially in DSIT and partially in DHSC and co-ordinates life sciences across Government.

I understand what my hon. Friend says about the important link between medicine pricing and life sciences investment in the UK, but we are in danger of simplifying a very complex situation. If it were simply down to medicine pricing, that would be a far easier argument to make to Treasury. The reality is that it is not; when we look at the investment environment in the UK, we see that it comes down to a number of things.

Yes, medicine pricing is part of that investment environment, but it also comes down to regulation, as my hon. Friend said, with MHRA and NICE, and to adoption and take-up in the NHS. Each individual trust and GP practice is autonomous. GPs, surgeons and clinicians prescribe the drugs they wish to prescribe—that is not something we centrally mandate—which means that adoption and roll-out across the NHS are not always as easy or as simple as some of the pharmaceutical companies would like it to be, solely within the gift of the Department, Ministers and clinicians at NHS England.

Clinical trials, as the hon. Member for Bristol South rightly said, are hugely important, and I will come on to talk about that later. The hon. Member for Cambridge (Daniel Zeichner) set out eloquently the importance of academia and the role it plays in inward investment into UK plc by pharmaceutical companies because of the golden triangle between London, Cambridge and Oxford—and beyond. That work is spread far more widely around the United Kingdom, but those three places are hubs, and rightly so, and I have enjoyed many a visit to see the incredible work being done there.

There are other issues, such as access to finance, R&D tax credits and, vitally, the NHS as an innovation partner, which is often forgotten. We talk about Oxford, Cambridge and some of the big university and teaching hospitals in London. Actually, the key is every district general hospital—and, in fact, I would love this to be the case for every GP practice up and down the country—being part of clinical research, and encouraging its patients to take part, because we know the impact that that would have.

I recognise the link, but it is wider than that; it is about the environment here in the UK. That is important because when I speak to UK CEOs of pharma companies —the hon. Member for Cambridge set this out—they raise not only VPAS but lots of other issues. My role, and that of my counterparts in other Government Departments —in fact, of all those involved in life sciences—is to ensure that we are giving them the tools in the arsenal to go to their global boards and make the case, as I know they want to, for investment in the United Kingdom. As the hon. Gentleman set out, there is global competition, and to some extent we are falling behind. We need to address that.

Why do life sciences matter? Why is this so important? There are three reasons. First, it is important for UK plc, as has been set out already. It is an enormous investment and part of the UK economy. Of course, it could be so much bigger. That is why it is so important that we continue to encourage life sciences investment in the UK. The second reason is its importance to patients, as the hon. Member for Bristol South set out. This is about ensuring that patients across our NHS get access to the most innovative and cutting-edge medicines that exist globally, and that we are getting UK patients access to them as quickly as, or quicker than, anywhere else.

The third reason, which the hon. Lady also touched on, is that the NHS is under considerable pressure. Some of the challenges that it faces will be addressed by more funding, and some by workforce. Those things will be very important here and now, and in the medium term. However, if we want to address the challenges that the NHS faces in the long term, that depends on genomics and gene cell therapy, and on investment in innovation and transformation around pharma, med tech, systems and AI. Ensuring that the UK is an attractive market for investment is really important to the future of the NHS, and we have world-leading academic and scientific expertise, as the hon. Member for Cambridge set out. We have a competitive tax regime, and a health system that is committed to acting as a good innovation partner. Can we do better? Yes, of course, but it is a good innovation partner. We have to unlock the transformative power of real-world data—something that the NHS is unparalleled in being able to provide.

Despite the relatively gloomy picture that my hon. Friend the Member for Newton Abbot set out, there are huge signs of hope. Take the recent investment and deals that are coming to the UK from Moderna or BioNTech. These are huge investments in UK plc and UK life sciences, which we should be very proud of. Of course, we want to see far more. We also have some exciting opportunities, as my hon. Friend set out, through the O’Shaughnessy review and our desire to massively turbocharge clinical trials in the UK. As my hon. Friend and the hon. Member for Cambridge pointed out, we are losing market share to other countries across Europe. If we look, however, at foreign direct investment, in 2021 it was £1.9 billion from 49 projects, coming in only behind the United States in terms of value—a significant increase. Furthermore, the UK life science industry raised £7 billion in equity finance. It was placed third behind only the USA and China.

I can make the case for UK life sciences—it is a strong one—but we have to do better. We have to always continue to drive forward. I understand the influence of boardroom sentiment, which the hon. Member for Cambridge set out, and that price regulation schemes such as VPAS have to be a consideration in the decision to locate investment. That is exactly why we are committed to agreeing a deal.

[Daniel Zeichner]

The Minister is giving a very thorough reply. I wonder whether he will acknowledge—I have not heard him concede this point—that the 26.7% factor is a real problem that needs to be addressed.

[Will Quince]

I thank the hon. Gentleman; I am going to come to that exact point. I want to respond to as many of the issues as possible, and—rarely for a Westminster Hall debate—we actually have a little time.

We are committed to agreeing a deal that supports a strong UK life sciences sector and drives economic growth through investment, but I recognise what my hon. Friend the Member for Newton Abbot says: we have to do far more in many other areas—clinical trials, regulation, the life sciences missions and the investment therein. There is also the ongoing work around uptake.

The hon. Member for Cambridge talked specifically about the higher VPAS percentage rates, so let me move on to those directly. Of course I understand the industry concerns about higher payment rates, but it is important to stress that those were projected when the scheme was agreed—they were agreed with industry and negotiated by the ABPI on behalf of industry. They reflect the scheme working as intended: to limit to 2% the annual growth in the sale of branded medicines within the NHS.

We are firmly committed to VPAS and to continued working with the pharmaceutical industry to create an environment that facilitates innovation and maintains the UK’s world-leading position in the life sciences sector. I remain hugely grateful to industry for its continued participation in VPAS, which has offered much-needed financial security to our NHS during a period of significant economic uncertainty.

[Daniel Zeichner]

rose—

[Will Quince]

Let me conclude the point, as I may well answer the hon. Gentleman. He has pushed me on the negotiation that we are about to start—on our mandate and where we would aim to get to. The scheme ends at the end of this year and the negotiations for the successor scheme start tomorrow. As I have mentioned, what I can say today is limited by commercial sensitivity. The negotiations will be overseen by Sir Hugh Taylor, which is hugely welcome—he brings a wealth of experience and expertise that will be of immense benefit and, I genuinely believe, will ensure that we continue to get the best outcomes for patients, the UK life sciences sector and the taxpayer.

But in response to the hon. Gentleman’s question, I should say that we are very much open to ideas about how a successor voluntary scheme should operate from 2024 onwards. I look forward to working with industry, as I know Sir Hugh does, to agree a mutually beneficial scheme that supports the sustainability of the NHS spend on branded medicines, which is critical, and also improves patient outcomes and facilitates a stronger UK life sciences industry.

[Daniel Zeichner]

This is my final intervention, I promise —I am grateful. I think I heard the Minister say that the scheme was working as intended. There is not much transparency in this process, for reasons that are perhaps understandable, but my understanding was that the current situation was not really anticipated when the scheme was drawn up and that a range of things in between have led to it. Will he clarify that point?

[Will Quince]

I am happy to. I will answer by making two points. The first is that the situation was entirely predicted. Forecasts and projections were given; whether industry believed them to be possible is another matter, but my understanding—the scheme was negotiated several years ago, prior to my time as a Minister in the Department —is that it was projected that we could have got to this point through growth. Growth has been significant, which is why it is important that we negotiate a new scheme that takes on board industry’s concerns. More broadly, we have talked a bit about medicine pricing and it is important to stress international comparisons.

[Anne Marie Morris]

I apologise for interrupting the Minister’s flow. He is right that there was a forecast, but my understanding is that it was wrong and that there was an under-growth in all those years bar one. The consequence was that it was not possible for industry to have the predictability that he outlines. Forecasting will clearly always be a challenge, but, as I understand it, in this case it did not give industry what it needed.

[Will Quince]

I hear what my hon. Friend says, but we are talking about what is now history. I do not think anybody is realistically advocating any kind of change to the existing VPAS scheme—in effect, we would be saying that there would be a retrospective rebate to big pharma, despite what was agreed and negotiated. I do not think anyone here is proposing that today. What we are proposing is something that we get right—something that is totally transparent and open for the future in the new VPAS scheme. I know that getting this absolutely right will be at the forefront of the minds of the ABPI and industry as we approach new negotiations.

I want to briefly touch on international comparisons. While direct comparisons of rebate rates can be misleading —as has rightly been pointed out, they are not necessarily as clear internationally and there are differences in the structure of systems between countries—we none the less continue to monitor and consider UK spending on medicines in an international context. It is important to point out that the UK is around the median for spending on medicines per capita among comparable countries in Europe. We tend to spend the same as or more than Denmark, Sweden, Portugal, Spain and the Netherlands, and less than Germany, France and Italy. It is important to provide context.

I come back to the initial point: as important as medicines pricing is, it is part of a wider bricking-up of a UK environment on which global boards will make a decision as to whether the UK is a good place to invest. Yes, we take this matter very seriously. However, as important as VPAS is, I am equally concerned by and keen to address some of the other issues that industry is rightly pointing out. Understandably, given that we are just about to start negotiations and its importance to industry, the issue of the day is VPAS. However, I know how interested industry also is in getting our regulation right, in our speed in setting up clinical trials and our ability to get patients on to clinical trials, and the uptake of new and innovative medicines and medtech into our NHS. Those are huge issues for industry too, and they are areas I am focusing on.

I am conscious of the need to give my hon. Friend the Member for Newton Abbot time to wind up, so I will conclude by once again reassuring her and Members from across the House that the Government are committed to a mutually beneficial voluntary scheme that supports patient outcomes, a strong, thriving life sciences industry here in the UK and—vitally—a financially sustainable NHS. We can all agree that this scheme is vital to keeping the branded medicine bill affordable for our NHS and ensuring that the UK life sciences industry can earn the money it needs to fund research and development into the new and improved medicines of the future. We cannot overestimate the impact that the scheme has had for thousands of patients by ensuring that they have rapid access to new life-saving and life-extending treatments. We remain firmly committed to VPAS and to working with the industry to deliver a new branded medicines agreement. I will ensure that we put patients’ needs at the forefront of these discussions and at every step of the process.

17:49

[Anne Marie Morris]

As has been rightly said, we are encroaching on recess time, so I am grateful to all contributors for still being here. This has been an important debate, and one thing is clear: there is more agreement than disagreement on what we want to achieve. We all want growth in the UK economy and to see medicine prices set in such a way that they are affordable; however, we also want to ensure that the system is a partnership and that we do not disincentivise the very investment that makes all this possible.

I am heartened by what the Minister has said. I understand, of course, that this is not a simple, binary negotiation about medicine prices as against the life sciences vision. Indeed, in my proposals, all the things the Minister set out as issues for industry are things that should and could be part of the VPAS debate. The reason is that it is the only debate where Government and industry agree between them what they are going to do—there is no other opportunity. I urge the Minister to make the most of it by ensuring that all the things he says, and I agree, that industry wants—quite apart from the specifics of what the medicine pricing mechanism will be—are debated in the round. I am sure that Sir Hugh Taylor will do a first-class job supervising that, and I am delighted to hear that we have somebody independent. I will close on that note, and thank you, Mr Sharma, for your indulgence in allowing us to sit into recess.

Question put and agreed to.

Resolved,

That this House has considered the voluntary scheme for branded medicines and the Life Sciences Vision.

17:49

Sitting adjourned.