Oral Answers to Questions

David Mowat Excerpts

Thursday 8th November 2012 Commons Chamber

[Michael Fallon]

The best way that the hon. Lady can help that company is to support our proposals to unlock new housing, particularly affordable housing, and new infrastructure as set out in the Growth and Infrastructure Bill, which unfortunately the Labour party voted against on Monday night.

[David Mowat (Warrington South) (Con)]

Earlier the Secretary of State gave us an update on the good progress we are making on the green investment bank. Can he confirm, however, that EU state approval specifically excludes the nuclear supply chain, which is a major low-carbon industry, and that organisations such as Sheffield Forgemasters will be excluded if we do not appeal that?

[Vince Cable]

We have indeed got state-aid approval for the green investment bank. There are no plans for it to invest in the nuclear supply chain, but we have not ruled that sector out. As it happens, a working party is being assembled to develop a strategy for the nuclear supply chain, which my colleague the Minister of State, Department for Business, Innovation and Skills, the right hon. Member for Sevenoaks (Michael Fallon), will be co-chairing, and we expect to give it substantial support.

Enterprise and Regulatory Reform Bill

David Mowat Excerpts

Wednesday 17th October 2012 Commons Chamber

[Neil Carmichael (Stroud) (Con)]

rose—

[David Mowat (Warrington South) (Con)]

rose—

[Mr Wright]

I shall give way to two eminent members of the Public Bill Committee, but I must bear in mind the fact that we do not have time to debate these issues at length.

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[Mr Wright]

I understand that. The hon. Gentleman will recall that I posed a number of questions in Committee: could the green investment bank invest in forests or in the supply chain for the automotive industry to ensure that we have low-carbon engines? There was a whole range of different debates in Committee, which I thought were useful. As I said, there is a balance to be struck, and that is what new clause 22 is about. Is the aim to achieve what we all want to achieve—igniting, for want of a better term, the green economy—or is the provision too prescriptive? There is a balance between being too broad and too narrow.

[David Mowat]

I thank the shadow Minister, but I am a bit disappointed by the tone of his remarks. I want to get clarity about the point that was raised a few moments ago about nuclear, so that I can understand the position of those on the Opposition Front Bench. Would Sheffield Forgemasters, for example, which is a nuclear supply chain company, be eligible for assistance from the bank?

[Mr Wright]

The hon. Gentleman will recall that I mentioned this issue at length in Committee, when he quite rightly probed me on it. I reiterate my answer to the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) a few moments ago. There is a conflict here. What is the purpose of the green investment bank: is it to ensure that we have innovative technologies where there is current market failure making it difficult to get investment, or is it to ensure that we do as much as possible to tackle carbon emissions, meet low-carbon targets and so forth? Within that, nuclear could be a source of investment.

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that investment would fail to materialise if the Chancellor and the Government did not take steps to address the high levels of uncertainty and political risk that were afflicting the sector.

[David Mowat]

Will the hon. Gentleman give way?

[Mr Wright]

I know that the hon. Gentleman is a keen advocate of manufacturing in this country, but we require policy certainty. I hope that he will address the point made in an excellent article by Camilla Cavendish that appeared in The Times last month. She wrote that

“instead of building the equipment in England”,

companies were building offshore wind turbines elsewhere:

“These companies remain uncertain about investing in the UK… the impression that the coalition is split has spooked companies whose boards need to commit capital for 20, 30, 50 years, whether in wind or nuclear power, biomass or solar.”

Is not the lack of the long-term certainty that is so necessary undermining the chances of jobs and growth in this crucial area?

[David Mowat]

I thank the shadow Minister for telling me what I should say in my intervention. What I was going to say was that, although I did not catch the name of every company in the list that he read out, I am pretty sure that the headquarters of all of them are outside the UK—as, by the way, are those of the major manufacturers of offshore wind. And, yes, it is a problem.

[Mr Wright]

That is why I am pleased that the hon. Gentleman will be supporting our amendment 77—which is intended to promote the growth of small and medium-sized enterprises in the supply chain and to ensure that we can realise the great potential of the green economy—and will object to the Government’s amendments 1 and 3, which state that investment can take place not in the UK but elsewhere. As someone who wants to support manufacturing in the UK and the ability of home-grown businesses to provide jobs, growth and export potential for our companies, he will doubtless be supporting us in the Lobbies.

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[David Mowat]

I believe the Minister said that the European permission excludes nuclear power, which forms by far the largest part of low-carbon electricity in this country and is likely to continue to do so. Given that, will he amend the purpose stated in clause 1(1)(a), as it is no longer accurate?

[Matthew Hancock]

The application, which has just succeeded, did not include nuclear. We do not plan to amend that purpose, not least because the Bill provides that the bank can, in time and if appropriate, be moved from the public sector into the private sector using secondary legislation, without changes having to be made to primary legislation.

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[Matthew Hancock]

Clearly, one reason for establishing a green investment bank is to ensure that it delivers against the green purposes. Of course cost is vital. That is why we are setting up the bank so that it will act on a commercial basis. The crucial point is that it must act in accordance with one or more of the green purposes; otherwise there would be no point in it being a green investment bank.

[David Mowat]

For clarity on the point that was made from the Opposition Benches, there is a proposal for a very large wind farm in the Republic of Ireland, whose output would come over to the UK through an interconnector and would therefore hit our green purposes. Could we invest in that scheme in the Republic of Ireland under the Bill?

[Matthew Hancock]

I would want to look at the details of the scheme. However, the amendments that we have made to the articles of association refer to the bank contributing in the UK. I would expect, though I cannot formally confirm, that an interconnector would have an impact in the UK as well as on the other side of the Irish sea. I will write to my hon. Friend with more details.

Amendment 2 was tabled in response to a suggestion from the hon. Member for Hartlepool (Mr Wright) that the designation of the bank should be subject to an affirmative resolution of Parliament. We made it clear in Committee that we are looking towards that. We want to ensure that Parliament has the full ability to scrutinise these issues and I hope the Opposition will support that change in arrangements.

Amendments 4 and 5 deal with directors’ pay. The Government have repeatedly demonstrated their commitment to ensuring that UK companies apply the highest standards of corporate governance. We have already introduced measures under the Bill to require quoted companies to seek shareholder approval for the directors’ remuneration policy. This change ensures that the bank will abide by these new commitments so that it is treated as a quoted company for the purposes of chapters 4 and 4A of part 10 of the Companies Act 2006, and so that the company is required to seek shareholder approval for the directors’ remuneration policy. This requirement would continue if the bank were one day moved into the private sector. I am sure hon. Members on both sides of the House will support the Government’s commitment to the very highest standards of corporate governance.

Opposition amendments 76 and 89 deal with the bank’s ability to borrow. As I said, the Government committed in Budget 2011 to fund the green investment bank with £3 billion to 2015. This is a serious demonstration of the Government’s green credentials and it is an appropriate level of funding for a new financial institution so that it can build market confidence and show a positive commercial return, while mobilising additional capital for green infrastructure projects in accordance with its green purposes. It is a major injection of capital which underlines our strong commitment to the bank.

We have also already given a clear commitment that the bank will be able to borrow, including from the capital markets. It may help if I explain the legal position in respect of borrowing by the bank. As a company formed under the Companies Act, the bank already has the power to borrow. The bank’s constitution provides, understandably, that the company will not incur borrowing without Government consent. This restriction is imposed by the Secretary of State as shareholder and does not affect the underlying position under company law that the company, as a legal person, has the ability to borrow.

I want to be clear that we are considering carefully the case for the bank borrowing from the capital markets from 2015-16, subject to the caveats I have mentioned. It is too early to make commitments about the level or type of funding. The views of the bank’s board will be an important factor, so we will have to discuss with it the appropriate level and source of future borrowing. We made a firm commitment in Committee to seek state aid approval from the Commission in respect of borrowing before the end of this Parliament. However, we cannot move to seek that approval before we know the mechanism for and quantum of borrowing. The bank’s borrowing will clearly be scored against national debt totals, so it is entirely reasonable for the Government to take that into account as part of our future spending and fiscal plans.

In summary, the Government agree with hon. Members about the importance of the issues relating to the bank’s funding, and their role in highlighting those here is welcome, as the Government want no one to be in any doubt about our serious ambitions for the bank and the green economy. These considerations will clearly be critical to the bank’s future and we will consider carefully how to provide clarity, either through the company’s constitution or by other means, about the legal position with regard to the bank’s borrowing.

Energy Supply

David Mowat Excerpts

Thursday 6th September 2012 Westminster Hall

[Mr Yeo]

The hon. Gentleman—in terms of the Committee’s work, he is probably my hon. Friend—is absolutely right about that point. The situation will get much more serious from Europe’s point of view in relation to its reliance on imports from Russia. I commend the work of the International Energy Agency, and especially of Fatih Birol, who has a particularly mature and perceptive view of long-term energy trends. The IEA’s work gives us a lot of warnings.

Despite all that, in what I hope will be a diversified mix of energy sources—gas, nuclear, low-carbon and renewables—gas will remain important in the next 15 years. We cannot do without it, so I hope that the Government’s gas strategy will include a further expansion of gas storage capacity, which is currently only a fraction of that routinely maintained by Germany, Italy, France and the United States.

Our report also recommended that the Government should set up an independent central agency to manage Britain’s strategic oil stocks, so we look forward to progress on that. We distinguished, although not everyone does, between independence and security. Independence of energy supplies is not attainable for Britain in the foreseeable future but, in any event, security is more important. Security means much more than just reliable sources and supplies of energy, although that is a pre-requisite, as it makes storage and interconnection important factors, too. It means having adequate generating capacity and a mix of generation that delivers value for money to consumers and protects consumers in the event of a much higher carbon price, which may well emerge—indeed, it is likely—in the 2020s and 2030s.

I note en passant, and with approval, the continued spread of emissions trading as a policy instrument. It has been adopted in a growing number of countries, although that trend that was not apparent three years ago. We now see it in countries in Asia, in Australia and in parts of America, and pilots are taking place inside China, as we reported recently. That points to the use of emissions trading and the possibility of a rising carbon price in 15 or 20 years.

[David Mowat (Warrington South) (Con)]

I have just been reflecting on that point about security and diversity going hand in hand. Does my hon. Friend think that France, which is relatively undiversified—it has 70% to 80% nuclear—has inherently less secure energy than us?

[Mr Yeo]

That is an interesting point. France is exposed to the risk of something that derails nuclear technology. Last year’s Japanese accident, which was actually an industrial rather than a nuclear accident, effectively led to the closure of nuclear power in Germany. France has rightly taken a more robust attitude. The factors that led to the Japanese accident would not apply for the most part to French nuclear power stations. None the less, a great reliance on a single technology inherently puts a country in an exposed position, although that is perhaps less the case for nuclear power, given that the supply of uranium is probably reliable for the foreseeable future. Interestingly, France is also quite a big investor in wind power which, again, is not something that depends on imports. I would not say that France is excessively exposed, but would be in the event that something went wrong with its nuclear power stations. It is also struggling to renew its nuclear power stations, and cost overruns and time delays have affected EDF quite badly. None the less, I remain a strong supporter of investment in new nuclear power.

[Mr Yeo]

I am always encouraged when a Minister intervenes on my remarks. It suggests that he is listening, not that I expect anything else from the present Minister, and that we are debating something that is of some consequence. It is an interesting question. We are likely to see from China and the other Asian tigers huge demand for imported energy. China has a lot of coal and it may have some more gas that we do not yet know about, but the likelihood is that it will become an importer. Countries such as Korea are already huge importers of fossil fuels. I suspect that the world price of gas will tend to be driven up by the growth in these economies. There will be some interesting consequences. America, which may well be self-sufficient in gas for the time being, will thereby have a competitive advantage because if it wants, it can keep down its gas prices, although if I were a gas producer in America I would wonder about exporting it to a jurisdiction where the price was higher. It would be prudent for Britain to assume that, even if the price of gas remains decoupled from that of oil, we may see a significantly higher gas price by 2030, and that if we were too dependent on gas we might find that we were paying more for our energy than if we had a more diversified mix. A lot will depend on how much investment takes place in nuclear power in some of these countries, because at the moment that seems to be an open question.

[David Mowat]

I hesitate in trying my hon. Friend’s patience further. I was going to mention this earlier. There is no such thing as a world price of gas. There is a European price of gas and a Henry hub price of gas in the United States of America. Currently, the gas price in the US is one quarter of the price here—that is a game changer. Although the demand in China will be high, the US price may represent a constraint on price even in Europe because, if the US lets it happen, liquefied natural gas can be imported into Europe at a cost that is less than the differential between US gas prices and our gas prices now.

[Mr Yeo]

I agree with my hon. Friend: clearly, there is an opportunity for the very low price in the United States to influence prices here. If the US is allowed to do that—and it is converting some of its terminals to export rather than import LNG—the differential is too attractive not to pursue it. However, I doubt whether that by itself would be sufficient to offset the upward pressure from the much faster-growing and larger economies in the east.

Security also depends on a much greater investment in energy efficiency. As we all know, Britain now needs a huge investment in generating capacity. There is no guarantee that that will be forthcoming unless we have clarity and general stability of policy. I urge the Minister to ensure that there is no slippage in the discussions—not just those about the energy Bill but the negotiations on strike prices for contracts for difference—that are under way. The nuclear industry in particular requires as much clarity as possible as it has enormous capital needs and long delays before any return is achieved. I am sure the Minister will find that matter pretty high up his briefing pack.

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[Barry Gardiner (Brent North) (Lab)]

I am delighted to speak in this important debate, and I am particularly delighted to welcome the Minister to his position. His work within his previous skills portfolio was much respected, and I think that many of us hope that he will bring not only the dedication that he showed in that role, but his focus on developing green skills, into this new portfolio, where he is considering the UK’s energy supply. It is a difficult time to be taking on the brief, and I think that we all sympathise with him for taking over at this juncture, with so much on his ministerial plate. I assure him that the Committee—both sides of it, I think—will seek to co-operate with him to ensure that he gets his feet under the ministerial desk as quickly as possible and can take the brief forward.

I do not want to go over the ground that the Chairman of the Committee and the hon. Member for South Thanet (Laura Sandys) have already covered—I entirely agree with most of what they said, particularly the hon. Lady’s call for certainty in policy. She is absolutely right; that is one of the key things that will hold back—is already holding back—the investor community from pressing ahead with the sort of investments that we need, if we are to see the £200 billion investment come on stream and ensure that we have the continuity of a secure supply of energy over the next decade.

I want to focus on subsidy and the importance of getting subsidy right. Earlier this summer, there was a contretemps between the Treasury and the Department of Energy and Climate Change on the subsidy for onshore wind. The debate was not phrased in that way; it was phrased, “How much can we cut from that subsidy?” Should the subsidy be cut by 10%, which is the Department’s public position? Or should it be the far more severe cut of 25% proposed by the Treasury? Interestingly, the Department won the day in that political debate. In a straight fight between the Chancellor and the Secretary of State for Energy and Climate Change, most people in most circumstances would back the Chancellor, but in this case the Department won.

We need to consider the economic case for onshore wind. The new Minister has previously commented on onshore wind. We subsidise the technology, which operates intermittently. Wind does not blow all the time and cannot provide the base load of electricity supply. On a number of occasions, the Minister has remarked on the way in which the technology adversely affects communities in the countryside.

Long-term subsidies are not good. I think we can all agree with that. In my view, we should not subsidise any energy in the long term. Subsidies should never be a permanent feature of any market. Subsidies should be introduced only to address market failure and they should be withdrawn gradually as such market distortions are addressed. I hope even the Chancellor and the Treasury accept the economic rectitude of those remarks. Whether they can square that with this country’s ongoing fossil fuel subsidy is an entirely different matter.

Last year, the OECD estimated that, in 2010, UK subsidies for coal, gas and petrol amounted to £3.6 billion. Additionally, the Chancellor announced in his 2012 Budget further exploration and production subsidies of £65 million to develop the west of Shetland fields. The market failures addressed by those subsidies are unclear. On the contrary, fossil fuels appear to have an entrenched subsidy culture in which such taxpayer handouts are regarded as a right, rather than a means of addressing an otherwise unlevel playing field.

By contrast, the total subsidy paid to onshore wind amounted to less than £400 million in 2010-11, or £6 on the average household’s annual bill. That gives a better sense of the subsidy onshore wind currently enjoys against the £3.6 billion in consumption subsidies that fossil fuels enjoy before factoring in the cost of carbon emissions.

[David Mowat]

I am interested in the make-up of the £3.6 billion. Are we talking about tax reductions, or am I missing something?

[Barry Gardiner]

I hesitate to speak for the OECD, but my understanding is that the £65 million is composed of production subsidies, VAT subsidies and other things. I am sure information on the figures is available from the OECD, because they are the OECD’s figures, not mine.

[David Mowat]

I am sorry, but I do not understand that answer, because £3.6 billion is a very large amount of money. The hon. Gentleman makes a powerful point if that figure is a true reflection of the situation, and it is reasonable to ask how the money is being transferred at that rate to the energy companies and, presumably, their shareholders, because that had previously passed me by.

[Barry Gardiner]

Members of Parliament are not noted for admitting ignorance, but I am happy to do so. I cannot give the hon. Gentleman a detailed breakdown, but that figure has been given by the OECD. As I said in response to his previous intervention, my understanding is that the subsidy is accounted for in VAT subsidies and in other production subsidies, such as the ones I mentioned. I cannot go further than that. I do not claim to be the economist or accountant who worked out the figures published by the OECD, to which I refer him.

The real market failure is that the environmental, economic and social costs of greenhouse gas emissions are not properly factored into our fossil fuel price. The Government recognise that and have tried to attribute a price to carbon emissions through the EU emissions trading scheme. Unfortunately, the carbon price has neither been stable enough, as the Chairman of the Select Committee mentioned earlier, nor high enough to redress that market failure, even for the 40% of UK carbon emissions covered by the ETS. Fossil fuels are operating in a market tilted distinctly in their favour. Those who support renewables such as onshore wind that do not produce polluting carbon emissions are perhaps entitled to claim that there is clear justification for that level—albeit a very low level, as I have shown—of subsidy.

Bringing new technologies to market can be difficult, and many technologies have died in the valley that lies between demonstrator a prototype and full commercial development. If the UK is to develop world-leading renewable technologies, such as those mentioned by the Chairman of the Select Committee, particularly marine technologies, we need further subsidies to enable renewables to make that transition from prototype to full commercial scale. The renewables obligation subsidy introduced by the previous Government was designed to do that to some extent and supported new wind generation as the technology successively improved and economies of scale reduced production costs. It is worth noting that it is onshore wind’s positive trajectory in reducing costs that led the Department to argue that the subsidy could be reduced by 10% in the first place. As the technologies become cheaper, it is right to scale down the subsidies. That trajectory has led some in the industry to project that onshore wind will be cost competitive with gas by 2020, which brings another element to our discussion. Indeed, the hon. Member for Warrington South (David Mowat) highlighted that differential and the possibility of seeing cheaper gas in the UK because of shale gas in the United States.

Clear social and environmental costs are associated with shale gas in the United States, and the Committee flagged them up in its report on the potential for shale gas in the UK. However, at every point we should aim to factor the cost of pollution into the true cost of the fuels that we use. That is really how we should evaluate the cost. We do not, for example, factor into the cost of fossil fuels the cost to the health service of people with bronchial or asthmatic conditions caused by carbon emissions from diesel and petrol engines. If we want to get a far better handle on our energy needs and supply, and the security of that supply, let us compare the true costs of the separate parts of our energy mix, and not simply look at the market cost.

I want to go off slightly on a tangent and mention, in response to the shale gas debate, one other aspect that I think it important to draw to the attention of the House. As shale gas provides the USA with increasingly low-cost fossil fuel, there will be a substantial shift in American foreign policy, which has been fixated on the middle east—for good reason. Its fossil fuel supply has substantially depended on stability in the middle east providing continuity of supply. The discovery and exploitation of shale gas in the United States significantly changes that perspective, and when we look to the future of European and UK energy we need to factor that in too. The drivers that caused the US to be so involved with middle east countries will shift. We need to recognise that, as much as we recognise the shift happening in the gas fields in Siberia, and the rise in demand from India and China.

There is one further thing I want to comment on: the fourth pillar of the Government’s proposals on electricity market reform—the emissions performance standard, the carbon floor price and the way in which they interact. Is not it strange that the emissions performance standard was set at 450 grams per kWh? Whom did the Department think it was fooling by setting that figure? It is clear that it was set because it excludes dirty coal without carbon capture and storage, but it has a beneficial effect on investment in nuclear, boosting the price.

In the past year and a half, the Committee has spent a lot of time talking to the investment community, which has been generous with its time and views and has made clear the way in which the risks associated with different technologies and energies manifest themselves. There are planning, construction, operational and price risks and, particularly with the nuclear industry, a decommissioning risk. The key matters on which the investment community focused in discussions with the Committee were construction risk and the period during which capital is exposed in the construction of new nuclear, as opposed to new gas, technology, and the different lengths of time needed to get production in place and price coming through. The investment community made clear to the Committee its belief that without Government subsidy—not covert subsidy by way of price subsidy through the EPS but real subsidy in relation to those risks and the extra cost of capital—there will not be the level of nuclear infrastructure development that the Government have said they want.

I come back to where I began on the question of subsidy: without a much more transparent understanding of the subsidies going to fossil fuels, and the lack of accounting for their cost in damage to health and the environment, and pollution; without factoring those things in; without a clear understanding of the subsidies necessary as technologies develop, and the reduction in subsidy necessary as they become more cost-effective; and without transparency about the real subsidies that the Government are offering the nuclear industry, and the structuring necessary to get the development we need, we will not have a successful energy policy.

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[David Mowat (Warrington South) (Con)]

As the second hon. Member to speak who had nothing to do with the report, I congratulate the Select Committee. Three of the report’s features strike me as particularly good. It was short, which is always good for Select Committee reports. Secondly, it talked about gas storage. It is odd that we talk so little about gas storage, because it is a structural issue. Thirdly, I want to talk about recommendations 5 and 6, which ask the Department to publish performance indicators on security and the route or road map that we are trying to get through. That is needed, because there is a lot of misinformation on this subject and the Government’s response to the recommendations was quite weak; the only part that was perhaps adequate was the last sentence, which stated:

“The Government continues to examine options for further improvements.”

That needs to be considered by the Government, and I would just like to put into the mix four potential issues that have not been talked about.

Biofuels are rapidly becoming the biggest source of renewable energy in the UK. We have to be very careful on this with regard to security. In October, the United Nations described the increasingly prevalent practice around the world of turning corn and wheat into ethanol as a “crime against humanity”. One of the best points in the speech by the hon. Member for Brent North (Barry Gardiner) was about how the geopolitical aspects of shale gas are affecting US foreign policy. That is absolutely right. There are geopolitical issues in continuing to put corn and wheat into cars and power stations, as though we are pursuing some great environmental truth when we are not, and that is difficult.

The unique point about the UK’s energy position compared with the rest of Europe is that we have to spend £200 billion in the next decade. We will apparently double the amount of electricity that we currently generate at the same time as decommissioning coal stations—let alone the oil refineries to which my hon. Friend the Member for New Forest East (Dr Lewis) referred—and nuclear power stations. It is beginning to look like a very difficult issue indeed, and the Minister has come in just in time to manage it.

We have put ourselves in a position, particularly on nuclear, where we are negotiating with a single supplier. People talk about the cost of nuclear. A colleague of mine who I used to work with once told me that, if he was running a utility and was dealing with the UK Government, the only coherent strategy to take would be to wait until they were desperate enough to pay the money. Roughly speaking, that appears to be what is happening, and I wish the Minister luck with those negotiations. In a scenario in which we are not going to let the lights go out—let us assume that that is going to be the case—I always thought there would be a dash for gas. When considering a strategy, one always asks, “If this strategy fails, how do we know it has failed?” The dash for gas is obviously the default.

In the past few months, and possibly the past year, there has been another emerging aspect of strategy failure: the increasing amount of imported electricity through the interconnector from France and Holland. Currently, we import approximately double the amount of electricity that we generate from renewables. If there is a policy failure above all policy failures, it is the fact that this country is apparently no longer able to generate its own electricity and has to take electricity from the French and the Dutch, even though much of it is generated using relatively cheap nuclear power.

I add in passing that in the past six months there have been two announcements about increased capacity in the French nuclear grid—1.6 GW in Flamanville and 1.8 GW in Penly—coming on stream in the next 18 months. France appears to be able to do this a lot more easily than we do. This may be an issue for the Select Committee, but I do not wholly understand why the French can get nuclear power stations on stream without the pain that we apparently need to go through. A road map of the Department’s plan in this regard would be very useful. The fundamental strategy of putting out the energy market and saying that the market will decide will become increasingly untenable, as we get close to the day when the lights might go out.

Finally, what is causing so much error in policy is the conflict between the Climate Change Act 2008, which I support, and the need to reduce emissions and the EU 20-20-20 directive, which states that not only do we need to reduce emissions, which I support, but that that must be done with renewables. That has caused a huge amount of misallocation of capital resource and expertise. Germany is often used as a great example of a country that has hit the renewable button hard and has done it well. It is true that Germany has four times as many renewables as the UK. It also has 30% more carbon per head than the UK, because it burns more coal. We have to focus on what matters, and the directive is deeply flawed and has caused a misallocation of capital and the resources that go with that. The Minister may wish to consider that in the months and years ahead.

Oral Answers to Questions

David Mowat Excerpts

Thursday 24th May 2012 Commons Chamber

[Mr Willetts]

Let us be clear about what the Government have done. We have tackled abuse in bogus colleges and the issue of overseas students who, sadly, did not have the necessary academic qualifications to benefit from coming into higher education in this country. That abuse had to be tackled. We now have a clear message that legitimate students are welcome, with no cap on numbers, to come from anywhere in the world to study at British universities. I work very closely with our universities, including the university of Durham, on trade missions to get that very positive message out across the world.

[David Mowat (Warrington South) (Con)]

16. What discussions he has had with the Secretary of State for Energy and Climate Change on the potential effect on process manufacturing of the Government’s policy on energy pricing.

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Norman Lamb)]

The Secretary of State regularly meets the Secretary of State for Energy and Climate Change to discuss energy and climate change policies, including their impact on manufacturing. We are committed to ensuring that manufacturing remains competitive, and in the autumn statement we announced a package worth £250 million to reduce the impact of policies affecting the cost of electricity for electricity-intensive industries most at risk of carbon leakage.

[David Mowat]

In January, the Department of Energy and Climate Change published figures showing that 18% of electricity costs for business go towards supporting the renewables industry. Last week, in the Financial Times, the chief executive officer of Solvay said that high energy prices are a bigger issue for his business in the UK than the eurozone crisis. What assurance can the Minister give us that as we decarbonise, we do it as cheaply as possible to ensure that we minimise value destruction and the number of jobs lost?

[Norman Lamb]

I give the hon. Gentleman that absolute reassurance. In terms of global carbon emissions, it makes no sense for a business to relocate to another country, so we will do everything we can to ensure that businesses remain competitive.

School Funding

David Mowat Excerpts

Tuesday 24th April 2012 Westminster Hall

[David Mowat (Warrington South) (Con)]

I congratulate my hon. Friend the Member for Gloucester (Richard Graham) on leading the charge on this matter. I am not from the south-west and have no real knowledge of Schleswig-Holstein. Warrington is one of the lowest funded of the F40. Periodically, I visit primary and other schools, as we all do, most recently Broomfields in Appleton. Over and over, governors take me to one side, show me spreadsheets and say, “Why does this school in another part of the country, which has the same characteristics as our school, have so much extra money? Can you explain to me, as our MP, why an incoming Government with a Front Bench bristling with talent, energy and reforming zeal, can acknowledge the problem and understand it has to be fixed, yet does not seem to have the appetite to have a go at it?”

Warrington is not a wealthy place. It has wards that are among the most deprived in the country. Over the weekend I looked at many spreadsheets—I congratulate the Department on the volume of spreadsheets on its website—and noticed that there is a 50% discrepancy between the funding level of Warrington and Westminster, where I live during the week. Is Westminster that much worse off than Warrington? Are the deprivation indices that much more difficult? I do not think so.

In preparing for this debate I read a lot of papers on websites and various materials that are around. A lot of words have been written about how difficult it all is, but none of the analyses attempt to justify the status quo. I have seen no serious attempt to say that where we are now is the right place. None of the hon. Members who will speak or have spoken already are asking for a national funding formula to be put in place and implemented immediately. We are asking for a start to be made.

I recognise—perhaps the Minister will address this in his remarks—that it could take 10, 15 or 20 years to fix this in its entirety, but that is all the more reason at least to make a start. That is what I find most difficult to explain to my constituents. I have a suggestion for the Front-Bench spokesman.

[Andrew Bridgen (North West Leicestershire) (Con)]

Does my hon. Friend agree that even a modest increase in the budgets of low-funded local education authorities would make a significant difference to the education that could be offered to children?

Picking up on a point made by my hon. Friend the Member for Loughborough, Leicestershire is the lowest-funded area in the country. Coalville, the most deprived town in Leicestershire, is in my constituency. Even in the centre of Coalville there is below average take-up for free school meals, so we will not benefit from the pupil premium to the extent that the Government might expect. There are a lot of proud people out there and they are reluctant to take up free school meals because a great stigma is attached to them.

[David Mowat]

I agree. Clearly, every hon. Member has places in their constituencies that are deeply deprived and lose out in this regard.

It is said that it is difficult to put in place a national formula, but I do not think it is. An exercise to decide the inputs to the national formula, indices of deprivation, London weighting and historical issues could take place over a long period. Several things could be done, and I find it difficult to understand why they have not been, because there is a precedent in a national formula for health funding. The way in which all our primary care trusts are funded is driven by the ACRA formula—called after the Advisory Committee on Resource Allocation—which appears to work reasonably well. A characteristic of the ACRA formula is that it gives different numbers and numbers that one might not want to adjust to immediately because they are too far up or down in the next year. The Department of Health deals with that with what it calls a direction of travel adjustment—adjustment to the correct number takes place over a number of years. I see no difficulty in the education community doing something similar because, as I said, no one is asking for the problem to be fixed quickly. We want to know that there is a direction of travel and that over the next decade, say, it will be sorted out.

Finally, I very much support our policy and what we are doing with academies and free schools. For me and for people in my constituency on the wrong end of the formula, however, the funding issue is more potent. It is disappointing that our Front Bench is on the same side as the teaching unions, which should give Ministers pause for thought. We are asking not for the problem to be fixed now but for a start to be made.

--- Later in debate ---

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

It is a pleasure to respond to the debate under your chairmanship, Mr Gray. I congratulate the hon. Member for Gloucester (Richard Graham) on securing the debate and on the erudite way in which he introduced his argument. When discussing an issue of local government finance, by law it is necessary to invoke the Schleswig-Holstein question, which he wisely did. When looking at education funding and the many complex questions about welfare expenditure and the formulae for allocating funding to local authorities, it is right to reflect on the complexity and difficulty of such issues, which the Government are discovering to their cost.

I understand that many hon. Members today made sincere and heartfelt arguments in defence of their own local communities and about some of the funding discrepancies that occur between local authority areas, reflecting the differences in local authority funding formulae broadly, not just in education, and some of the discrepancies that occur between individual schools in their local communities. A common thread seemed to be an argument for additional spending on education. That is absolutely fine, but it does not quite fit with some of the concern expressed about the record of the Labour Government and the deficit. The fact is that we saw a dramatic increase in investment in education and in schools during those years and we are now seeing a squeeze on schools funding within which some of these difficult issues need to be played out.

It is true, as the hon. Member for Gloucester said, that this is a long-standing issue. It goes back far longer than 20 years. The entire problem of discrepancy that we are grappling with reflects the fact that the education funding formula has a historical root. Allocation to schools and to local authorities was based on an incremental change in existing historical patterns. Then there were changes, many of which were introduced by the Labour Government, to make that system more progressive through the various specific grants that were introduced and to achieve particular ends and outcomes in education through those specific grants. The aim was also to begin the process—it was begun—to try to deal with some of the funding discrepancies through such means as the dedicated schools grant.

Therefore, it would not be fair to say that the Labour Government were not engaged in finding ways of dealing with some of the inexplicable and difficult variations in funding. The then Opposition spokesperson, Baroness Buscombe, reflected that fact when the dedicated schools grant was introduced, saying:

“We welcome the principal policy behind the regulations, the new ring-fenced dedicated schools grant, the multi-year budgets and the rationalisation of standards grants.”—[Official Report, House of Lords, 16 February 2006; Vol. 678, c. 1340.]

Progress was being made.

However, there are tensions in relation to what hon. Members want. All of us wanting to see fairer and more progressive funding need to recognise that there are tensions between those two objectives. It is sometimes difficult to be more progressive and invest money in education outcomes that deal with some of the disadvantages that children have in schools and at the same time have a more equal funding formula that flattens some of the discrepancies to allow schools to have similar levels of funding.

[David Mowat]

Three times now the hon. Lady has used the word “progressive”. Can she explain to us how it is more progressive that Warrington, which has a substantially lower income per head than Westminster, has 50% less funding for its schools? That does not seem progressive to me.

--- Later in debate ---

[Ms Buck]

I was about to come to the issue of free school meals. Of course it is difficult to accommodate, as an indicator of deprivation, any element that involves a degree of take-up. All Governments have had to and will continue to grapple with that. Some changes in local government allocations in the funding formulae, which have factored in the index of multiple deprivation and the take-up of tax credits, have proved to be even more difficult, because that variation is even more challenging. Obviously, if we could come up with a deprivation funding formula without dealing with take-up, that would be better. If we could find a way of doing that, I could understand why people would want to do so.

To return to my point, there is a tension between fair funding and progressive funding that we have not managed to resolve. There is also a tension between the core desire to see all schools and all pupils have a basic funding allocation to which a progressive element—a pupil premium or whatever people want to call it—is a relatively small top-up, and the historical desire for local authorities to have a say and for local democracy to be an element in deciding how funding is allocated. In another context, the Conservative party would argue that case quite strongly. One reason why it proved to be such a challenge, not just under the Labour Government but before that, was that local authorities were receiving funding for schools but not passing all that funding on to schools or were making their own decisions about how to share out the grant. Accusations can be levelled at all political parties, in different ways, because of what was done, but of course some of that is intrinsic to local democracy. If we take it out of the equation completely, that throws up other and very difficult questions.

We recognise that school funding is extremely complex, that there is a case for further reform and that that reform is of course far harder to achieve when funding is as tight as it is now. We are seeing the squeeze on school budgets. Even with the pupil premium, funding will fall. At the time of the 2010 spending review, the Department for Education said that total funding for the schools budget would be increased by 0.1% in real terms in each of the following four years. However, subsequent higher projections of economy-wide inflation have changed the real-terms calculation. They indicate, according to the Institute for Fiscal Studies, a real-terms cut over the whole period of about 1% and a small real-terms increase in only one year. Of course, that is at a time when pupil numbers are expected to increase. That gives us an indication of the broader context in which some of these demands have arisen.

To make the position even more complicated for the Government, there is an absolute shambles going on because the Department for Work and Pensions has failed to work out a system whereby the new universal credit can accommodate a proper indicator for school dinners. It is struggling to find a way of doing that. That means that the way of calculating the deprivation indicator is moving even further away from what the hon. Member for South East Cornwall (Sheryll Murray) is saying should be the case. We are, at the moment, at a complete loss to know how the deprivation factor will be properly assessed when it comes to future funding. Both those things—the squeeze on funding and the inability to calculate a future pupil premium, because of the free school meal entitlement shambles—undermine the Government’s case that the problem is so desperate that an immediate solution must be found.

Following the Government’s consultation, the Institute for Fiscal Studies brought out an absolutely damning critique of the Government’s thinking. The report exposes the rather arrogant belief, which we see in so many other areas of public policy, that the problems can be sorted now that we have a Conservative Government, and that the previous Government had, by definition, got everything wrong. When it looked at the small print, however, it found that things were much more difficult.

The report, which I encourage all Members to look at, shows that: the Government’s plans would lead to a large funding transfer from secondary schools to primary schools; the average gains and losses could be 10% or more; one in six schools would face budget losses of 10% or more; there would be huge numbers of winners and losers; and, even over a transitional period lasting six years, some schools would incur annual cash losses of up to 5%. The Secretary of State has therefore started to row back from his enthusiasm for seeing early movement on finding a response.

[David Mowat]

I am sure the IFS’s list of problems, which the hon. Lady has just read out, is correct, but does that not demonstrate the size of the problem that must be fixed? The fact those problems will exist if we move to a fair formula demonstrates how much inequity there is at the moment. However, will the hon. Lady clarify the Opposition’s position on introducing a new funding formula? Would they like us to carry on as we are doing, or would they prefer to see a new formula developed, albeit over time?

[Ms Buck]

As I thought I made clear in my opening remarks, I completely understand that there are arguments about similar schools with similar characteristics receiving different grant funding because of an historical pattern. I am merely pointing out that that was difficult to tackle when we had a generous funding framework, because of the impact on schools and the numbers of winners and losers. If it had been easy to tackle those issues, and there had not been large numbers of winners and losers, much greater progress would have been made, and some of the winners and losers would have been secondary schools in Conservative Members’ constituencies. Now, however, we are in a time of public spending constraint, so most of the challenges are far greater and could be far more damaging for schools, including some in the constituencies represented by Members here, who have made a powerful case, in principle, for having a fairer formula. My critique relates to the fact that the Government are rushing in and saying, “This can all be solved. The previous Government made a complete shambles. We’ll be able to oblige you with a solution,” when they cannot, of course, offer one or answer many of the questions that have been asked.

I want to finish by asking the Minister a few questions. How many winners and losers will there be as a result of the “Next steps” proposals and the Government’s decision to dictate to local areas how they organise their funding? Do the Government propose any modelling or pilots to test their proposals? In the light of what head teachers, collectively, want, why are the Government restricting local formulae to 10 centrally chosen criteria? Why will they not allow some flexibility to reflect differences in local circumstances?

What is the cost of using the Education Funding Agency to administer the budgets of increasing numbers of academies? Can academy chains gather all the funding and distribute it as they see fit, including holding back money for central services? If that is the case, does the Minister propose any restrictions? Is he taking any steps to monitor salaries in academy chains? Obviously, top pay will impact on the money spent on pupils.

How will the introduction of universal credit affect the Department’s thinking on free school meals and the pupil premium? The Department acknowledged it will cause “turbulence”. What exactly did that mean? Is free school funding per pupil per actual pupil or per notional pupil? Finally, will the Minister confirm that, as a result of the Government’s botched efforts, there will be no major overhaul of school funding during this Parliament?

--- Later in debate ---

[Mr Gibb]

In 2013, those issues will be made public, so if some schools forums are redistributing the pupil premium in a way that was not intended, it will become clear and apparent.

[David Mowat]

Are the 10 factors, which the Minister has read out, that are to be used within a local authority to achieve a fair allocation potentially the basis for a national funding formula by which the money would get to the local authorities in the first place, which is the nub of the problem?

[Mr Gibb]

My hon. Friend raises a good point. Those are the very issues on which we are consulting, in moving to a national formula. We must move away from the phenomenally complicated formulae that currently apply in allocating funds to local authorities.

To ensure that we are better placed to introduce a national funding formula over the coming years, we are also making changes that will substantially improve how local authorities are funded. They will continue to be allocated amounts for each pupil through the dedicated schools grant based on previous funding levels. The difference will be that that grant will be allocated in three notional blocks: for schools, early years and high-needs pupils. The notional blocks will not be ring-fenced, so local authorities will continue to have flexibility over how they spend their money. That approach will benefit pupils and schools from all sectors and phases.

We will use the October census, rather than the January census as we do now, to calculate budgets for the schools block. Therefore, mainstream maintained schools will receive their budgets earlier, giving them more time to plan. The separate high-needs block will help to secure a more transparent and sustainable approach to funding pupils with high needs. Schools and other providers will be expected to contribute to the costs of a pupil with high needs, up to a clearly defined threshold. Any cost above that threshold will need to be met from the high-needs block. That will ensure that funding for high-needs pupils is funded in an equivalent way, whatever type of institution they attend, and it will improve consistency when young people move from one part of the country to another. The early years block will continue to be funded on the basis of the January census, but that funding will be adjusted to reflect actual numbers by the end of the financial year, to take into account the fact that young children join the school system at different points in the year. It will ensure that local authorities have greater certainty about funding for early years children.

We are aware that we need to reform the administration of the local authority central spend equivalent grant, which is very dear to the heart of my hon. Friend the Member for Gloucester, so that there is greater comparability and transparency. We are exploring a new Department for Education grant that would substitute an element of the formula grant that is currently paid by the Department for Communities and Local Government. The new grant would cover relevant central educational services and be paid on a national basis, per pupil, to local authorities and academies. That, combined with the maximum devolution of funding to schools, would replace the need for LACSEG. Making the local system simpler and more transparent will mean that, when we come to address the national system, there will be far less complexity for us to untangle. This is the start of the process for which my hon. Friend the Member for Warrington South calls.

I am aware of the concerns covered in the opening remarks made by my hon. Friend the Member for Gloucester, including those about small schools, which were also discussed by other hon. Members during the debate. We have considered the additional needs of small rural schools in developing the new funding arrangements. As my hon. Friend the Member for South East Cornwall (Sheryll Murray) pointed out, very small schools are very expensive. We have built enough flexibility into the proposed system to allow local authorities and schools forums to support successful small schools—for example, through the lump sum that I referred to earlier.

In the remaining period of the spending review, schools are being funded at flat cash per pupil, in addition to which schools receive £600 per pupil eligible for free school meals. However, to support our proposed changes and to protect all schools, including small schools, from significant locally decided fluctuations in their budgets, we will continue to operate a minimum funding guarantee of minus 1.5% per pupil for 2013-14 and 2014-15. Therefore, in most circumstances, schools across the country can be assured that, over the next two years, their budgets will not be reduced by more than 1.5% per pupil each year.

Our analysis has shown that those measures will protect the majority of small schools. However, we are consulting on the issues and listening to all the sector’s concerns. Formal decisions on protection for small schools and, indeed, other areas of reform will be announced in the summer.

Economic Growth and Employment

David Mowat Excerpts

Wednesday 23rd November 2011 Commons Chamber

[Roberta Blackman-Woods]

My hon. Friend has made an excellent point. It is interesting to note that before the general election, in my region at least, the Liberal Democrats were apparently in favour of regional development agencies.

[David Mowat (Warrington South) (Con)]

Will the hon. Lady give way?

[Roberta Blackman-Woods]

I am sorry; I am running out of time.

We know that the RDA helped to invest in a new generation of advanced technologies with expanding markets around the world, which greatly helped growth in the north-east. Through industry, Government and university collaborations, a number of sectors were identified in which growth should be prioritised, including the processing and chemical industries, automotive and advanced manufacturing, and printable electronics. Those sectors, critically, were underpinned by centres of excellence supported by the regional development agency.

Did the incoming Government seek to build on that? No. What they did instead was get rid of One North East, although it had extensive support from businesses and the community in the north-east, and what we have in its place is the regional growth fund, about which I shall say more in a moment. The loss of the regional development agency led to a loss of expertise in regard to the sectors that needed to be developed in the north-east, and a loss of what was necessary to support that development. In great contrast, the regional growth fund not only has less money but is not strategic at all. I am very pleased that a number of north-east companies have benefited from the RGF, although the Secretary of State must address the fact that getting the money through to the companies is taking a long time.

--- Later in debate ---

[Mr Gordon Marsden (Blackpool South) (Lab)]

I thank all those who have participated in today’s debate. On this side, we heard sparkling presentations from my hon. Friends the Members for Ochil and South Perthshire (Gordon Banks), for Ellesmere Port and Neston (Andrew Miller), for Mitcham and Morden (Siobhain McDonagh) and for City of Durham (Roberta Blackman-Woods). We heard interesting contributions from Members on the other side of the House, too, including a speech from the hon. Member for Solihull (Lorely Burt), who appears to give our five-point plan two out of five, and a particularly stimulating speech from the hon. Member for Bedford (Richard Fuller)—I do not think, however, that it will put him on the Secretary of State’s Christmas card list.

It is clear that for businesses, councils and communities across England, this has been a wasted and frustrated year for growth in England’s regions under the Department’s watch. It has been a wasted and frustrated year for the entrepreneurs and communities who have found their ability to grow and innovate stifled through the Department’s inability to present a coherent framework for growth or to stand up for their interests against other Government Departments. In all three key areas that are vital to growth—supporting the local enterprise partnerships, making the regional growth fund work properly and securing regeneration funding from Europe—the Department has been weighed in the balance and found wanting. Time and again, the Department has failed to be the Department for growth.

As long ago as last September, the Minister of State, the hon. Member for Hertford and Stortford (Mr Prisk), felt the need to write to the Secretary of State to warn of the icebergs ahead. He listed the organisations that were anxious about the way the LEPs were being set up and the failure to make them more sufficiently business-orientated and he ended by warning that

“the danger is that the CBI and others become detached from this policy heralding likely failure in large parts of England”.

Who can forget that the Secretary of State himself famously described the process as Maoist and chaotic, while the former CBI director general, Richard Lambert, simply confined himself to saying that it was a shambles?

That should come as no surprise given that in June 2010 the Secretary of State went to the Northwest RDA, praised the work that it and other agencies had done and gave them assurances, only to have to confirm their abolition two weeks later after he lost the argument with the Chancellor, who wanted them axed. It was an early example of the loss of authority and dismemberment of decision making that his Department has endured ever since. BIS Ministers allowed a decade’s worth of expertise and local know-how to be lost almost overnight. Experienced RDA staff were let go before the LEPs were up and running and at the very time when they could have provided crucial assistance.

No wonder that even the Government’s growth tsar, Lord Heseltine, who heads up the regional growth fund, has come out and said that their hasty abolition of RDAs was a mistake. Not the least of the errors was the fact that this swept away all the informal architecture and channels of connection between business, further education, higher education and small employers that had been built up to boost growth in the English regions. We saw the cost of their hasty abolition when Pfizer announced the closure of its Sandwich plant in February. The South East England Development Agency had previously been able to act swiftly with a task force to help those affected to find jobs, but this time the Government failed to use that RDA even though it still had some people in post who could have given advice.

[David Mowat]

Will the hon. Gentleman give way?

[Mr Marsden]

No, I will not because there is not time.

The Government failed to put Sandwich in the initial list of enterprise zones or to approve any of Kent’s first-round RGF bids. We saw the same pattern of help being denied initially and then an enterprise zone being hastily cobbled together when disaster struck at Derby with Bombardier and with BAE at Warton and Samlesbury. The Department is behind the curve and out of touch with events on the ground.

Back in February, the Labour Front-Bench team made six proposals to support LEPs, such as giving them first refusal on assets, providing them with start-up funding, giving them powers over skills funding, allowing them to form larger groups for infrastructure projects and giving them a central role in the delivery of funding from the European regional development fund. The Government’s response, however, was to block them from receiving assets or even acquiring them by deferred payment. It was only the broad support across a whole host of business organisations for our direction of travel that pushed the Government into a climbdown over their proposed fire sale of RDA assets.

The Government have given only limited seedcorn funding to LEPs—about £6 million for 40. That remains inadequate and the future of LEPs, especially for those without enterprise zones as growth vehicles, remains fragile. The Government have also failed to address other key measures that would empower LEPs and give them the tools to do their job—despite repeated calls for the LEPs to be given more powers. As has been warned by the Federation of Small Businesses and, more recently, Centre for Cities in its report, the Government need to get a grip of underperforming LEPs before it is too late. There are real fears that entrepreneurs and local businesses in LEPs will simply walk away if they simply become talking shops—as the Forum of Private Business has warned in its briefing today.

We have always argued on principle that money intended for the regions should remain in the regions. That is the stark contrast between our real localism and the Government’s sham localism. They preach localism but when they had the chance to give LEPs additional powers in the Localism Bill they funked it. As growth in the economy has flatlined, the Department for Business, Innovation and Skills has become progressively enfeebled as it has lost turf battles to the Department for Communities and Local Government and the Treasury.

The Department for Business, Innovation and Skills still protests that the regional growth fund will save the day but, as my hon. Friend the shadow Secretary of State has so forensically detailed, there is no more fitting emblem for its failures than the regional growth fund. Right from the start, the Department’s grasp on the fund has been feeble and flawed. In rounds one and two it was hopelessly oversubscribed, but the only response of the Minister of State was “That’s life”. Well, he should tell that to the consortia and to businesses. He should tell it to those who have had to wait an age for the cheque in the post. No wonder Andrew Neil said so memorably on “Daily Politics” to the Secretary of State for Environment, Food and Rural Affairs, “The £1.4 billion fund has so far disbursed £5.8 million. Why is your Government so useless?” How many people does the Department have working on round two? The answer that was dragged out of them through parliamentary questions was that there are only 11 full-time staff working on the fund. We can do the maths ourselves. How long will it take 11 people to work through the 119 successful bids to the second round?

Small and medium-sized enterprises, which are a key element in growth across the regions, find themselves short-changed and unrepresented on a number of the boards. They are frozen out by the Government’s thresholds of £1 million minimum on RGF funding and £5 million on the business growth fund. No wonder there is such frustration. What is more, the growth fund seems to have hardly any regional input. All the decisions are being micro-managed by Whitehall civil servants. There is no regional consultation or input and no sign that local offices will play a meaningful role in the process. With the propriety of some of their decisions called into account, the Government have pulled down the shutters on the detailed parliamentary questions that we have tabled about the process and the conflicts of interests on the advisory panel. That is not surprising, as BIS presides over a scheme into which it does not put a penny. Despite proclaiming, as he has done again today, the number of jobs that will be created, the Secretary of State has admitted that they are merely going on their own estimates.

Despite the money that the Department for Transport has put into the growth fund, the fund has failed to look at new public transport projects or build on the importance of travel-to-work areas. The Government have abandoned the active industrial policy that, in our last years in office, we pursued, and that led to the successful carbon strategy pursued by One North East. Ministers from the Department for Business, Innovation and Skills should have done everything in their power to unlock the European funding that did so much good and boosted jobs and growth across the regions, but in this, as in other areas, they have been sidelined.

Why have the Government produced the Growing Places fund like a rabbit out of a hat? Is it because even the Chancellor and the Secretary of State for Communities and Local Government have given up on the Department for Business, Innovation and Skills? Once again, there will be no BIS input in the process—only tanks on its lawn from the Secretary of State for Communities and Local Government.

England’s regions are full of people with ambitions and ideas about how to bring growth to their area, but the indecision and powerlessness shown by the BIS ministerial team has short-changed them and failed to rebalance our economy or provide a plan for growth. They have failed to stand up for the needs of local businesses, whether it is small towns in Kent or former industrial areas in the north-east. They have gone too far, too fast, in scrapping the regional development agencies and their collaborative structures, and become mangled in lost turf wars with CLG and the Treasury. They are like a rabbit caught in the headlights, petrified of the markets, but there are positive things that could be done for the fight. Roosevelt famously said that there is nothing to fear but “fear itself”, and Lincoln said that when the

“occasion is piled high with difficulty…we must rise high with the occasion. As our case is new, so we must think anew, and act anew.”

The Opposition understand that, which is we have a five-point plan for growth. We understand that young people across England’s regions are crying out for the opportunities that our national insurance changes will provide by enabling us to build affordable homes and reduce VAT to 5% on repairs. We understand the need for an industrial strategy, and we understand the need for new ideas, and then, by thinking anew and acting anew, we will save our country.

Employment (North-West)

David Mowat Excerpts

Wednesday 6th July 2011 Westminster Hall

[David Mowat (Warrington South) (Con)]

I, too, congratulate the hon. Member for Blackpool South (Mr Marsden) on securing the debate.

It is a pleasure to take part in a debate with the phrase “north-west” in the title, because there is a bit of a structural issue in this place about the treatment of the English regions vis-à-vis other parts of the country. We hear a great deal about Scotland, and we have Scottish questions. We also have Welsh questions and Northern Irish questions. However, we hear little about the English regions, which is why I am pleased to take part in the debate. In that regard, at least, people on both sides of the Chamber have more in common with the each other than not.

I want to talk first about how London-orientated our economy is. The gross value added of the north-west is approximately 60% of London’s, and no other major economy in western Europe or the US has a similar discrepancy. That is extremely serious for our constituents, because there is an assumption that anything world-class that happens in this country goes back down to London, and we need to do what we can as MPs to fight that. I will talk a little about some of the world-class enterprises that we have in the north-west, which we need to encourage.

I also want to talk about the public spending that Scotland gets vis-à-vis the English regions. Today’s debate is not the place to discuss the Barnett formula, but it is a fact that if my constituency was north of the border, and it had the same demographics and a similar needs profile, it would get about £1,600 a head more in public spending.

A small thing that happened a fortnight ago should give us all food for thought in the north-west. We have talked about the Mersey Gateway project, but another major bridge programme will take place just north of Edinburgh, when the Forth road bridge is replaced. That bridge will not be tolled, but ours will be, and it is increasingly difficult to understand why such discrepancies and differences can continue in the same country and still be defended.

I want to go back to the point about London. I will not make a party political speech, but the fact is that London has got away from the rest of the UK, including the north-west. That has got worse over the past decade. That was principally because of the financial services boom in London, which caused the rather frothy increase in GDP per head there, and we saw the reckoning that occurred. One of the reasons why the situation got worse—again, this is not a party political point, but one for both Front Benchers—is because two years ago, Government capital spending per head in London was three times what it was in the north-west. That level of discrepancy generated private sector jobs, affluence and all that went with it for London. I very much hope that the coalition will do what it can not to let that happen in the future.

Infrastructure is part of how the north-south divide—

[Hugh Bayley (in the Chair)]

Order. I remind the hon. Gentleman that the subject for debate is a narrow one. We are talking about career opportunities for young people in the north-west, not about the regional or national economy more generally.

[David Mowat]

My point is that the degree of affluence and gross domestic product that we can generate in the north-west translates to career opportunities. The reason why many of our young people come down to London to make their way is because there are not enough world-class organisations in the north-west. However, I will take your point, Mr Bayley, and move on to the changes in education and career opportunities that have occurred over the past 30 years.

The jobs that our young people need to do, whether or not they are in the north-west, are increasingly technology-based and technology-focused. Companies such as Google, Yahoo!, Facebook, Microsoft and Apple are all technology companies. Each has generated perhaps as many as 250,000 jobs in their immediate infrastructure. None of them are in the UK, let alone in the north-west. It is important that this country can compete on technology. One of the most striking things that has occurred over the past 30 years is that while we have increased the number of graduates by a factor of five—that applies to the north-west as well—we have fewer people studying engineering than we did 30 years ago. That is not a point for just the previous Government or the Government before that, because it is what has happened in our country. The consequence is that many of our young people cannot compete for high-technology jobs or in the expanding market in high-technology. That is a shocking failure—it is possibly one of the most dramatic failures in education policy in the past. I will be interested to hear the Minister’s response to that.

Finally, our economy will continue to be fairly focused on manufacturing. A unit of GDP generated from manufacturing uses more energy than a unit of GDP generated from services. It is important for the north-west economy, and therefore for the prospects of the young people in the north-west, that energy prices are kept competitive. I am interested to hear how the Minister addresses my concern, which is that this country is sleepwalking its way into having higher energy prices than any similar economy in Europe. That will bear down particularly hard on parts of the country where manufacturing, especially process manufacturing, is a significant feature.

[Hugh Bayley (in the Chair)]

I need to start the winding-up speeches at 3.35 pm at the latest.

--- Later in debate ---

[Bill Esterson (Sefton Central) (Lab)]

I add my congratulations to those given to my hon. Friend the Member for Blackpool South (Mr Marsden) on securing a very important debate. Given the good and positive discussions that we had in the Select Committee on Education some weeks ago on similar topics, I am looking forward to the Minister’s response.

I shall pick up the excellent points made by my neighbour in the Chamber today and in the north-west, my hon. Friend the Member for West Lancashire (Rosie Cooper), about rebalancing the economy geographically. It is absolutely crucial that we establish good employment prospects for young people, so that they stay in the region. We should do that through investment in the local economy. The abolition of the regional development agency has created a big problem in achieving that, but there are opportunities.

The port of Liverpool has been mentioned. Although the cruise terminal would be a welcome development, we need to go much further than that and provide opportunities for export through the sorts of hi-tech industry that hon. Members have mentioned. It is absolutely essential that we achieve that for the wider economy and for the future of young people.

[David Mowat]

The RDA has been mentioned in the previous two contributions. I do not deny that that organisation did a great deal of good in the north-west. However, if an organisation is given £3 billion a year to spend, that is what will happen. Does the hon. Gentleman accept that each job created by the RDA in the north-west, which was one of the better RDAs, cost £60,000? That is an awful lot of money, and we need to consider alternatives.

[Bill Esterson]

I am grateful for that intervention, because it ties in with two other issues that I was going to raise: the abolition of the future jobs fund and the phasing out of the young apprenticeship scheme. Both programmes are being phased out because of the high cost of success. The hon. Gentleman is making the same point about the RDA.

Disadvantaged Children

David Mowat Excerpts

Thursday 20th January 2011 Commons Chamber

[David Mowat (Warrington South) (Con)]

I, too, congratulate my hon. Friend the Member for East Hampshire (Damian Hinds) on securing the debate and I applaud Members on both sides of the House for the good temper in which it has been held. I also congratulate my hon. Friend the Member for Rugby (Mark Pawsey) who spoke just before me in a debate on life chances. He and I started 43 years ago in the same class. I sat three behind him, and I am delighted that his life chances have not been overly impacted by that experience.

We are talking today about social mobility, which, to me, is the hallmark of a civilised society. It is a subject that probably 650 Members on both sides of the House would agree really matters. It really matters that we get this right. I want to speak on one aspect of this, and it is about how we measure it and targets. Occasionally targets get a bad press and people say that we should not have so many, but in this area, targets are important. The problem is that we have confused three different things—poverty, inequality and life chances. Those three are quite different. They are heavily correlated, but they are not the same, and the danger is that if we apply a policy to the wrong one, or try to affect another, we will get the wrong outcomes.

My concern is that we have made the measurement of inequality a proxy for success in that area. We have discussed the intention of the last Prime Minister but one to eradicate child poverty by 2020, which is a noble ambition, but the principal definition used for that purpose—median income at 60%—is a measure of inequality, not poverty. The risk is that money is spent sub-optimally and that, even though we make transfer payments of £150 billion over a period, we will still be ranked 21st out of 21 countries in a UNICEF report.

[Kate Green]

Will the hon. Gentleman give way?

[David Mowat]

I apologise for being the third Government Member not to give way, but we have been asked to rattle through.

One of the most important aspects of the report produced by the right hon. Member for Birkenhead (Mr Field) is the indices for life chances. Targets matter, and if we could start to measure the correct things, it is possible that we could really start to make a difference in those outcomes.

My hon. Friend the Member for East Surrey (Mr Gyimah) gave the example of the Chinese community and the fact that in schools, the poorest Chinese children outperform children from all other parts of society, except the richest Chinese children. That shows that something is happening that is not just about money. I have conceded that everything is correlated, but it is not just about money; it is about attitude. The words in the right hon. Gentleman’s report that I found the most useful in that context were those relating to positive parenting. “Positive parenting” is a strong phrase that describes the breeding of self-confidence and aspiration in some communities. I hope that the Government will test those indices and take them up if they find them valuable, because we need a proxy for social mobility that is not the same as some of those embedded in the Child Poverty Act 2010.

I will make a final point on a different subject. We can continue what we are doing on educational attainment, but we must also create jobs and ensure that the people leaving our universities are able to take up the opportunities that will exist in the world over the next few years. That relates increasingly to a knowledge of applied science, engineering and technology. I applaud what the coalition Government are doing on apprenticeships. One of the most significant policy failures of the past 20 years has been that we have succeeded in increasing the number of people who go to university by a factor of five, while at the same time fewer of them are studying applied science and engineering. That is at a time when the world is moving towards more advanced manufacturing and all that goes with it. I will finish by reiterating that social mobility is the hallmark of a civilized society. The coalition Government, who are supportive of that aim, should be ready to be judged by their success on that, or lack thereof, over the next few years. That is important to us all.

Royal Mail Privatisation

David Mowat Excerpts

Tuesday 18th January 2011 Westminster Hall

[Mr Reid]

I agree with my hon. Friend; there is no problem with a post office being located in a supermarket and I was not saying that was a bad idea. My point is that a different type of outlet—PayPoint, for example—could be in a filling station but not in a dedicated post office that is part of a supermarket or filling station. In such situations, a person will not receive the same help and advice as they would in a post office located in a supermarket. I have no problem with a post office being located in another outlet—in my constituency, almost every post office is within a shop, filling station or supermarket. However, I would be concerned if the contract for benefit cheques was given to PayPoint, for example, because if an elderly person is in the same queue as people who are waiting to pay for their petrol, they might not receive the same quality of advice and help. A post office in another outlet is great, but if the facilities are simply part of that other outlet they will not offer the same social benefits to the customer.

The benefit cheque contract of the Department for Work and Pensions is for paying pensions and benefits to vulnerable people who are considered unable to use the Post Office card account. That contract was put out for renewal by the previous Government and I understand that the Post Office and PayPoint have bid for it. I hope that once the DWP has weighed up all the factors involved, including social factors and access criteria, it will keep the contract with the Post Office. PayPoint has a large number of outlets, including in my constituency, but nearly all those outlets are in towns and it does not have the same coverage throughout rural areas and islands as the Post Office.

If the contract were taken away from the Post Office and given to PayPoint, it would mean that on several of the islands in my constituency, there would be nowhere for people to cash the cheques. Also, in the rural areas of north Argyll, there would be nowhere for people to cash their cheques, because although there are plenty of PayPoint outlets in Oban, once people go outside Oban, they have to go all the way to Ballachulish or Inveraray to find another PayPoint outlet. It is therefore very important both for social reasons and for access reasons that the contract remains with the Post Office. I hope that the Minister will go away from today’s debate and knock on the door of the Secretary of State for Work and Pensions to tell him just that.

[David Mowat (Warrington South) (Con)]

Does my hon. Friend agree that it is extraordinary that the Government on the one hand are giving much-needed subsidies to the network—£1.3 billion over four years; £50,000 per location per year—yet on the other hand are taking away some of the contracts? No other shareholder or business would act in that way. It just is not joined up.

[Mr Reid]

I hope that the Government will not react in the way that my hon. Friend fears. I share his concerns, however. What worries me—I hope that these fears are ungrounded—is that there may be silo thinking within the Government. Clearly, in these very difficult financial times, with Departments having to make huge savings, it must be very tempting for Ministers to go for the cheapest contract, but I hope that they will resist that temptation, that there will be joined-up thinking in the Government and that the Post Office will be given work because of the good service that it provides. I hope that that will be the case for social reasons and because of the access provided by having a network that is unmatched throughout rural Britain and on many of the islands in my constituency.

Let us consider other Government work. When I tour my constituency, as I do every summer, one bone of contention that keeps cropping up in the rural parts of it is vehicle excise duty. Vehicle excise duty can be renewed only in certain post offices. I understand that that is because the Department for Transport decided the number of outlets that it wanted. However, it means that people living in rural areas must go into the town if they want to renew their car tax at a post office. Clearly, the temptation, then, is to use the internet, and if people do that, the work is lost to the Post Office completely.

My understanding is that the computer system is the same in all post offices, so there seems to be no reason why vehicle excise duty cannot be paid in any post office. Again, I hope that the Minister takes that point away from the debate and has a word with his ministerial colleagues in the Department for Transport, so that when that contract comes up for renewal, the restriction on the number of outlets can be removed.

I also want to refer to the BBC. As we all know, during the last Parliament, the contract for renewing TV licences was taken away from the Post Office and given to PayPoint. When Ministers are questioned on that, we just get indignant responses that the BBC is not part of the Government. However, it is a public body, and I hope that the Government are explaining to all public bodies the benefits of the Post Office and the Government policy of supporting the Post Office, and are encouraging the BBC and other public bodies to use the Post Office.

I was delighted with the commitment given during last week’s Report stage of the Postal Services Bill by the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), who is responsible for postal services, that Post Office Ltd and Royal Mail would sign an inter-business agreement for the longest legally permissible period before they become separate companies. That is important to give post offices time to adapt to being part of a separate company from Royal Mail.

I do not share the concerns of the hon. Member for North Ayrshire and Arran about Royal Mail in the long run taking business away from post offices. I do not believe that supermarkets or other shops could replicate what the post office does. Post office staff undergo a tremendous amount of training. There is also the computer system. One of the hon. Lady’s fears was that in urban areas, supermarkets would take over the contract, but in rural areas the post office would be responsible. That would mean two separate computer systems and training other staff. I simply do not see that happening. As I said in response to a point made by my hon. Friend the Member for Weaver Vale (Graham Evans), I see no problem with post offices being located in supermarkets, but I simply cannot see the benefits to a privatised Royal Mail of having a different arrangement in towns compared with rural areas. Many post offices are located in supermarkets. In the towns in my constituency, that is the norm and I see no problem with it, but I simply cannot see a situation in which there would be separate arrangements in towns and villages.

--- Later in debate ---

[David Mowat (Warrington South) (Con)]

I want to add just a couple of quick points to what has been said.

To put these issues in context, there were 20,000 post offices a decade ago; now, there are fewer than 12,000. The Government have committed to keeping 11,500 of those open for the next four years. I do not share the confidence of my hon. Friend the Member for Argyll and Bute (Mr Reid) that the network will be stable for the next decade. Unless action is taken, it will be stable for only the next four years—that is, for the period of the subsidy that is currently going through. Although I welcome the £1.3 billion subsidy in terms of keeping the network open, 7,000 of the 11,500 post offices that remain are loss making. Unless that is fixed, the prognosis cannot be positive. We have 7,000 loss-making post offices, and that is with the inter-business agreement in place. It is worth telling Opposition Members that. The issue is not the IBA, but sustainability over the medium term.

Will the Minister answer two questions? I want to know more about the modernisation programme that will be put in place over the next four years, which involves something like £350 million. I also reiterate the point that Members on both sides have made about joined-up thinking in the Government. It is not sustainable that we are, on the one hand, investing millions of pounds in trying to make the network better, albeit in ways I am not sure I fully understand, while Departments are, on the other hand, tendering business in a way that no commercial organisation would. I have heard EU legislation being used as an excuse, but I do not accept that and think that the argument should be tested. I do not intend to reiterate the types of Government business that are being removed or that could be removed, but it is anomalous that so much work is potentially threatened, while on the other hand we are spending £50,000 per location, per year, to keep post offices open.

[Mr Philip Hollobone in the Chair]

I shall be particularly interested to hear from the Minister, in relation to the modernisation programme, about who is accountable for its success and what the measures of its success will be. In particular, what is his estimate of the number of post offices that will be in profit after the four-year period has elapsed? At the moment, the number is 4,000. We are to spend £300 million on modernisation. What number would he, at this stage when the money is being committed, expect to be viable after the modernisation programme? The corollary to the answer to that question is what level of subsidy the Government and the Minister expect to be payable after four years to maintain, for the purpose of argument, 11,500 post offices.

--- Later in debate ---

[Nia Griffith]

The hon. Gentleman rightly mentions geographical spread, which is important. Provision should be made for it. Perhaps we should look to the Australian model. There it is guaranteed that 90% of the urban population will have a post office within 2.5 km; and almost unbelievably in such a large continent it is guaranteed that 85% of the rural population will have a post office within 7.5 km. If they can manage that in Australia, we could introduce a guarantee that is much more robust than what we now have. The irony is that, if Deutsche Post were to purchase Royal Mail, consumers here could have a reduced service, while they contributed to the profits of a company which must provide a specified number of outlets in its own country. In other words, we could have a poorer service here, while propping up a better service in Germany—a scenario we might associate more with 19th-century colonialism than modern Britain.

The Under-Secretary did not give convincing answers on Report about what exactly the legal obstacles are to the inclusion in the Bill of a guarantee of an inter-business agreement. He did not tell us about any legal precedents on which he was drawing, or what research his team has done on any relevant challenges in EU law.

The Under-Secretary has also failed to tell us about options outside the Bill itself. Currently both Royal Mail and the post office network are in public ownership. Both the chief executive and the chairman of Royal Mail speak favourably of the post office network. They recognise the respect it commands, the trust it enjoys in our communities and its value as a business partner. What, therefore, is preventing the signing of a new inter-business agreement now, while Royal Mail is still in public ownership? I am not now talking about a new clause in the Bill, but a new business agreement: an agreement that goes beyond the end of the current inter-business agreement, which could run out within a couple of years of privatisation, depending on the time scale, and that lasts for an additional 10 years. Has the Minister explored that possibility with Royal Mail? What would be the legal difference between an inter-business agreement with just a couple of years to run and one that was to last five or 10 years? Has he sought to capitalise on the warm words of Moya Greene and Donald Brydon about the post office network? Has he had any talks about an extended IBA between Royal Mail and the post office network?

I am sure that the Minister does not need to be reminded that Royal Mail is currently in public ownership. He must realise how serious the loss of business would be to the post office network. Even though any decision by Royal Mail to abandon the Post Office will be taken after privatisation, and therefore will technically not be a Government decision, he knows that the people of this country will not be slow to make the connection between the privatisation of Royal Mail and the demise of their local post offices.

The pity is that the Minister does not seem to want to take specific action. He seems to think that he can rely on warm words to guarantee Royal Mail business for the Post Office, but people are wary of warm words. There have been warm words about no rise in VAT and warm words about no increase in tuition fees—people are becoming very cynical about warm words. No shrewd business person would trust future business security to warm words. Surely, in his enthusiasm to privatise Royal Mail, the Minister has not overlooked the fact that it is currently in public ownership, and that he therefore has every opportunity to influence the way forward and to negotiate a longer IBA, here and now, before proceeding to privatisation.

Indeed, the Under-Secretary told us on Report that the Government

“as shareholders, will ensure that the commitment that Royal Mail made in its evidence to the Public Bill Committee—that it would conclude the longest legally permissible contract before separation—is fulfilled.”—[Official Report, 12 January 2011; Vol. 521, c. 357.]

I ask the Minister to enlighten us about what talks he or the Under-Secretary have had with Royal Mail about drawing up a longer IBA with the Post Office before privatisation. What was meant by the “longest legally permissible contract”? Is there a legal limit on such a contract? If so, what is it? As I said in last week’s debate, purchasers take over existing contracts and responsibilities in all sorts of takeovers, and such arrangements can be long-lasting.

The hon. Member for Warrington South (David Mowat) rightly questions what joined-up thinking has taken place on the subsidy. In our debate on the subsidy on 20 December, I said that the taxpayer is paying a large subsidy to the post office network, of which only 48% is necessary to continue the subsidy that Labour introduced to maintain the operation of the current post office network. We have been told that the remainder includes money to convert post offices to the post office local model, which involves paying the sub-postmaster by transaction, but that has been criticised by the Rural Shops Alliance, which questions why anyone would want to work longer hours for less income. It predicts difficulty in attracting new entrants to the post office local model; indeed, a similar pilot in Linlithgow ended with the shopkeeper saying that it simply was not worth his while to provide post office services.

Taxpayers will rightly ask what is the point of so much taxpayers’ money going into the post office network, particularly when they are seeing savage cuts in other services, and given that the Government are doing absolutely nothing to help secure the 37% of post office income that comes from the IBA with Royal Mail.

[David Mowat]

The Opposition continually talk about the IBA as if it were some kind of nirvana. Even with it in place, 7,500 post offices in the network are making a loss. At least the Minister has proposals on fixing that and on modernisation. Do the Opposition have any proposals other than the status quo?

[Nia Griffith]

Frankly, despite the Government’s fine words, the Post Office has no new Government contracts and no new streams of business, and it faces the possibility of losing all its Royal Mail business. Taxpayers will ask why they have to pay for that.

Taxpayers understand the idea of investment that brings returns and the value of business start-up funds, which can help to launch new businesses that subsequently stand on their own two feet, and they accept the need for some subsidy to make the network a truly nationwide service. However, if the post office network does not provide nationwide access to postal services or develop new business streams to improve its viability, the taxpayer may well ask what is the point of allocating £1.34 billion to the post office network. The taxpayer has every right to ask what steps the Minister is taking to ensure that the Post Office continues to do for Royal Mail business that provides 37% of its income.

In its recent report, the Scottish Affairs Committee stated that:

“we recommend the Government take a more proactive approach to facilitating a long and robust IBA, through removing any obstacles: practical, legal or otherwise that may exist. Ideally, a ten year agreement should be reached prior to any sale of Royal Mail. We understand that this may affect the marketability of Royal Mail, but it is essential to the sustainability of Postal Services in Scotland. It is in everyone’s interest”.

Members on both sides have stressed time and again the valuable social role of the post office, and the Government’s recent subsidy allocation suggests that it is a role worth paying for.

Will the Minister say whether concern about the marketability of Royal Mail is the reason for the Government’s reluctance to pursue a robust IBA? If so, does he consider potential diminished marketability to be a price worth paying when it comes to guaranteeing the future of 37% of the post office network’s business? What analysis have the Government made of the cost of a presumed lower price for Royal Mail with a robust IBA with the Post Office, and the cost of continued subsidy of the post office network? Once Royal Mail is privatised and possibly sold to a foreign owner without a long-term IBA in place, it will be too late to insist on one.

The Government will not be able to insist on Royal Mail using the Post Office. They will not be able to do what Lord Mandelson did. They have the chance here and now. I want to know whether they are going to take it.

--- Later in debate ---

[Mr Hayes]

I was about to say that stamps will continue to bear the sovereign’s head, which is right and proper. I hear what my hon. Friend says, and I share her view; it is important that we retain the iconic pillar box with the Royal monogram on. That is something that the Government will consider. I can say no more at this stage, but I know that my hon. Friend will want to take up that point and see what can be done.

In evidence to the Postal Services Bill Committee over recent weeks, there has been strong backing for the separation of Royal Mail and Post Office Ltd. I noted that no one made a case against that today. As I said, it was, I think, accepted by most Members in this House. They are different businesses that will benefit from focusing on different challenges. In his evidence to the Committee, Richard Hooper of Consumer Focus and Postcomm supported the separation of the ownership of the businesses.

In her evidence to the Committee, Moya Greene, chief executive of Royal Mail, said that it would be unthinkable not always to have a strong relationship between the Post Office and Royal Mail. To underline that point, Donald Brydon, Royal Mail’s chairman, pledged in his evidence that before any privatisation of Royal Mail could take place, a continued long-term commercial contract will be in place between the two businesses for the longest duration that is legally permissible—a point that was picked up by the hon. Member for Argyll and Bute (Mr Reid). Such a pledge provides a reassurance about the marriage between the two, which is essential to maintaining the post office network that we all feel so strongly about. This is done not for sentimental reasons, but because it makes good commercial sense. The post office network has an unparalleled reach and a very strong brand. As my hon. Friend the Member for Newton Abbot (Anne Marie Morris) said, we can be optimistic about the relationship. A stronger Royal Mail is more likely to secure the future of many more post offices. If we do not take the necessary radical steps to support and invest in Royal Mail, post offices will be at risk. That is something that we can look to with confidence, based on the belief that post offices not only provide important services, but are at the hub of local communities. The post office in my own village of Moulton, which is run by Gary and Jane, does an excellent job not just providing postal services but as a centre for all kinds of activities in the village. It is a shop, too, and provides a valuable local service.

As a representative of a rural constituency, I understand some of the concerns expressed by other rural colleagues. We heard from the hon. Member for North Ayrshire and Arran that there are concerns about the spread of the network—the universality. Let me make it clear that in terms of universality, the Bill will create a fundamental duty at the heart of the legislation for a six-day per week collection and delivery of letters at uniform and affordable prices. To do that, we need a service that is spread across the whole nation and not a partial service; we are committed to that and I personally feel very strongly about it.

It is important to say that the future success of the post office network will depend on its providing a fuller and wider range of services. I hear what my hon. Friend the Member for Warrington South (David Mowat) says about cost and subsidy. We can deal with that by allowing post offices to do more, thus ensuring that they can be profitable businesses. We are looking at a range of additional services—both local government and national Government services—that post offices can provide. Post offices can act as a front line for those clients or users that need to do things in their community in a way that is accessible and convenient. We are piloting a range of services that post offices can provide and, as a result of this debate, we will look at other things that Government can do to make the post office network more viable, commercial and profitable. I know that my hon. Friend is anxious about that and I understand why.

However, there will always be small rural post offices, perhaps in more remote communities, that will find it very hard to operate without subsidy. I do not have a problem with that. Post offices are so culturally and socially important that we need to take that on board. Certainly, all those that can be profitable should be profitable.

[David Mowat]

After the modernisation programme, how many post offices does the Minister think will be self-sufficient?

[Mr Hayes]

As part of the recent £1.34 billion funding package, there is a legally binding commitment to a minimum number of post offices—the Post Office is required to provide a network of at least 11,500 branches. As I have said, there will be no closure programme under this Government. I am confident that many more post offices can be made profitable, but I will not speculate on which post offices will take up which services in which locations; my hon. Friend can hardly expect me to do that.

I have just time to say a word about demutualisation, which was raised by the hon. Member for Edinburgh East (Sheila Gilmore). Demutualisation is not something that we see happening; indeed it will be specifically prohibited.

A better future for Royal Mail means a brighter future for post offices. This Government seek that brighter future and will deliver it; nothing less will do.

Education Policies (Warrington North)

David Mowat Excerpts

Tuesday 23rd November 2010 Westminster Hall

[Helen Jones (Warrington North) (Lab)]

It is a great pleasure, Mr Rosindell, to serve under your chairmanship. It is a pleasure, also, to see the Minister in his place; he and I used to serve on the Select Committee for Education and I know that he has a genuine interest in education. I hope that he will take seriously what I am about to say.

I welcome the opportunity to discuss the impact that the Government’s education policies are having, and will continue to have, on my constituency. In truth, however, the Government’s decisions and their cuts to the education budget will seriously hamper the life chances of many young people in my constituency, especially the poorest.

The borough of Warrington does not rank high in the indices of deprivation. It contains some affluent areas, but it also contains areas of multiple deprivation. Many of the poorest wards in the borough are in my constituency—indeed, they are among the most deprived in Cheshire—and it is those areas that are now being hit.

The cuts began with the Government’s decision to cancel the Building Schools for the Future project. As a result, two schools in my constituency—William Beamont high school and Lysander high school—saw their hopes of new buildings disappear rapidly over the horizon.

We opened one new school in my constituency under the BSF project. It was Culcheth high school, and I went to the opening in the autumn. It is a fantastic building, and it will enhance the opportunity for teaching and learning in the area, as well as providing more facilities for the community. It is so good that Warrington’s cabinet executive member for education, Councillor Sheila Woodyatt, called it the best thing to happen to Culcheth in 100 years—and she is a Conservative. It is sad that some of the more deprived areas in my constituency will not have the same opportunities.

The BSF project was cancelled without properly assessing the need to rebuild in certain areas. Indeed, I asked the Department what assessment it had made of the need for rebuilding at a number of schools in my constituency, but it took a long time to answer. I asked the question in July; I received the answer on 26 October. The answer made it clear that no real assessment of need had been made before cancellation, yet BSF would have given us £80 million to rebuild Warrington’s schools. That sum would have enabled the rebuilding of William Beamont high school and modernised Lysander high school. Those schools serve some of the most deprived areas in the borough. They serve wards where many have low incomes, and where an increasing number of people are unemployed. Above all, they serve areas where many have no qualifications, yet those schools have done a fantastic job in increasing aspiration and improving educational outcomes.

William Beamont is a specialist sports college with a second specialism in IT. Lysander high school is another specialist school. William Beamont has increased the number of children getting five good GCSEs; it has cut its exclusion rate, and it has increased attendance. Lysander school has exceeded its targets for improving its GCSE results, and it has also exceeded the council’s targets. They did all those things in old and unsuitable buildings. I ask the Minister to imagine what could be done if they had decent, up-to-date facilities.

Facilities matter. Conservative members of Warrington borough council know that they matter. When the BSF project was announced, Councillor Woodyatt told the Warrington Guardian that she welcomed the difference that it would make not only to teachers and pupils but to the community. Her allies, the Liberal Democrats—Warrington, too, has a Conservative-Liberal coalition—trumpeted about the BSF money in their newsletter, saying that

“substantial sums of money have been secured to modernise our schools”.

They did not say then that it was not necessary, and they did not foresee any problems. They were glad of it. Now, however, those schools will have to bid again for money from a much-reduced capital spending pot.

The Government’s criteria in the Treasury’s Green Book for allocating that money are clear; they are population growth and modernisation. Deprivation is not mentioned anywhere. We know that population growth will lead to a bulge in primary school pupil numbers, which will necessitate the spending of more money. The Government also want to spend money on free schools and academies, thus depleting the pot even more. The Warrington schools will be bidding for money from a reduced pot, but experience shows that many of those that have already been given the go-ahead are receiving only 40% of what they expected. That is a huge slap in the face for the poorer communities in Warrington.

[David Mowat (Warrington South) (Con)]

Will the hon. Lady give way?

[Helen Jones]

I am sorry, but I have limited time and the hon. Gentleman did not seek my permission to participate in the debate.

The BSF cuts are not the only problem faced by Warrington schools. As I said, those two schools are specialist schools, yet specialist funding has been stopped. William Beamont is part of the school sports partnership, which hugely increased the number of young people taking part in sport in Warrington. That funding, too, is to be axed.

As for the overall settlement, we foresee further problems. The Government are keen to tell us that they are to increase spending on schools by 0.1% each year. However, that takes no account of the fact that the pupil premium, which we were told would be extra, is included in that settlement. It is not extra money. It also fails to recognise that the growth in pupil numbers will mean a reduction in spending per pupil over the next four years.

Those schools will be left in unsuitable buildings, with a decreasing amount of money per pupil. They will also have to suffer the problems caused by council cuts. Services that they used to receive from local councils are gradually being reduced, and they will have to purchase them elsewhere. I give one example; the council is already considering withdrawing IT support for schools. That would give rise to further problems.

I turn to the Government’s decision on the education maintenance allowance. Almost 2,000 young people in Warrington receive the EMA. That money has made a real difference to participation rates in education; £10, £20 or £30 may not seem much to some, but it allows the poorer families in my constituency to pay bus fares to college, gives young people money to buy lunch and is has helped some to buy stationery and other things that they need for their courses. Those are all things that the poorer families find difficult to purchase.

Reducing that allowance will make a real difference to participation rates in education, because the money has worked during the past few years; it has increased the number of students staying on and the number of students in my constituency who go into higher education. The number of students in my constituency going into higher education rose by more than half in the 10 years from 1999 to 2009.

It seems that we will get in return a fund that will be used by head teachers and principals. I have tried asking the Government what the criteria will be for the allocation of that money and I cannot find out. In the last Education questions, I asked whether head teachers had been consulted about this change and the Minister for Further Education, Skills and Lifelong Learning was terribly courteous, but he just did not answer my question. He also did not tell me whether there would be an appeals process. So we do not know how that money will be allocated and it seems that we are moving from a system in which people receive money according to their income—as of right—to a type of “Lady Bountiful” system, in which money will be dished out by head teachers. Actually, I doubt that many head teachers want to do that.

What we do know is that the Government will be saving more than £500 million on the EMA, but they will be allocating only £150 million to the new scheme. That means a huge reduction in the cash available to the poorest students. Although the Government tell us that they want to increase participation and staying-on rates, they will the ends without willing the means.

At Warrington Collegiate in my constituency, 61% of students aged between 16 and 18 are in receipt of EMA and a third of the intake is from areas of multiple deprivation. Warrington Collegiate strongly fears that removing EMA will mean fewer students coming through the college.

Warrington Collegiate also faces another cut in its budget. It is clear from the comprehensive spending review that the unit costs for 16 to 19-year-olds will be reduced. Warrington Collegiate does not yet know how that reduction will feed through into its budget. It expects a cut of at least 3%. May I repeat that those 16 to 19-year-olds are the very people whom the Government say they want to keep in education?

To add insult to injury, the university of Chester, which has a large campus in Warrington, has seen 88.5% of its teaching funding go. That is all the teaching funding for group C and group D courses, and probably half the funding for group B courses. The university estimates that to fill that gap it will have to charge fees of £7,000. The university is vital to Warrington and its economic development and to the development of the Omega site, which is a huge employment creation site in my constituency. The university of Chester has done tremendous work with schools to increase aspirations and to get more young people from families where no one has been to university before to enter higher education.

The results of this decision to cut funding could be very serious indeed for the courses that are provided at the Warrington campus such as courses in creative industries, business, media and sport. It is fashionable to sniff at those courses, but the Minister knows as well as I do that most of the graduates from those courses actually get jobs. It will be a very serious matter for young people in my constituency if they can no longer gain access to that facility.

In effect, what we are seeing is a triple whammy. I have no time today to go into the axing of the programmes for rebuilding special schools in my constituency, or what will happen with the reduction in school support staff, or the further reductions in council services. However, we have seen the building programme cut, we are seeing funding cut and we are seeing support for students cut. The impact of those cuts on the poorest wards and the poorest families in my constituency cannot be overestimated. The Government tell us that we are all “in this together”, but these are the very people who do not have the resources to replace that funding.

I say to the Minister that that is wrong on two counts. First, it is wrong economically. We all know that in the future unskilled jobs will start to disappear, and that the future of this country is in producing a skilled and educated population. We cannot underbid other countries in wages all the time; we have to gain on skills. Without education provision, however, our skills will not improve.

Secondly, it is wrong morally. “Morally” is not a word that we often use in Parliament, but I believe that these cuts are wrong morally. It is morally wrong to penalise our poorest communities and our poorest families in this way.

I know that the Minister is a decent man and that he has a real concern for underprivileged students in education. I hope that he will listen to the case that I—along with many others in their own communities—am making, because if we do not get changes in this policy what will happen is very simple. Fewer of our young people will stay on in education; fewer will go into higher education, and this country will suffer for many years ahead as a result. Young people are our most precious resource. We ought to be caring for and husbanding that resource, rather than chopping it off.

There used to be a slogan among the teaching unions—I think that it was used at the time of the last Tory Government—that, “If you think education’s expensive, try ignorance”. I think that we are in danger of trying ignorance. The people in my constituency whom I have talked about today will suffer hugely as a result, and I hope that the Minister will give the facts that I have outlined serious consideration.

--- Later in debate ---

[Mr Gibb]

Yes—I was coming on to that point. I was not citing those figures as a reason not to take action; I merely wanted to point out what has been achieved in Warrington already.

In 2009, the proportion of 11-year-olds in Warrington achieving expected levels of attainment in both English and maths was 77%, compared to 72% in all schools in England. However, as the hon. Lady intimated, within Warrington, as in many other areas of the country, performance varies significantly from school to school. There are excellent schools in Warrington, as there are many excellent schools nationally, but it is also the case that too many schools are still struggling or coasting. The results at national level and the large gaps in performance between different groups of pupils are why we believe urgent reform is needed.

It is the Government’s ambition to raise academic standards in all this country’s schools to ensure a high-quality education for all children, particularly those from poorer backgrounds. The Government’s key objective is to close that attainment gap between those from the wealthiest backgrounds and those from the poorest backgrounds. We therefore share the hon. Lady’s aim that she set out in her remarks. Education is key to social mobility—indeed, in my opinion it is the only route to social mobility. That is why we announced yesterday our focus on ensuring that every child has mastered the basic skill of decoding and reading words by the end of the second year of primary school, through a light-touch screening check.

That is why we also sought to put onto the statute book the Academies Act 2010, to enable us to expand the academies programme, with 144 new academies having opened since the start of the academic year. That Act for the first time enables primary and special schools to become academies and to enjoy the greater freedoms that academy status brings.

[David Mowat]

I am interested in what the Minister is saying about social mobility. Does he recognise that in the past decade, we as a nation have slipped from fourth to 14th in science teaching and from eighth to 24th in mathematics teaching? The impact of that will have been felt in Warrington. Those statistics are a damning indictment of our ability to be socially mobile. Science, technology, engineering and maths, more than anything else, will provide jobs and skills for the future.

[Mr Gibb]

My hon. Friend makes a good point. I know that he has been campaigning in Warrington for his schools, and I congratulate him on his work, as I congratulate the hon. Lady on hers. On his point, that is why we are considering the national curriculum with the intention of restoring it to its intended purpose of providing a minimum core entitlement built around subject discipline. It is also why we are enabling parents, teachers and other education providers to set up free schools, so parents have a real choice for their children.

Good school buildings, though, are part of that package. School buildings need continuing investment, but it is vital that future spending represents the best possible value for money. Building Schools for the Future was an important programme of the previous Administration, which aimed to rebuild or refurbish every one of our 3,500 secondary schools by 2023. That was a bold and impressive ambition, but unfortunately the programme has failed spectacularly to live up to the hype. During five years of the programme, just 263 schools have benefited. The number of schools completely rebuilt under the programme is even smaller: just 136. That is a very small number for such a grand ambition.

Where BSF has delivered, it has been at exorbitant cost. As has been pointed out, rebuilding a school under BSF has turned out to be three times more expensive than constructing a commercial building and twice as expensive as building a school in Ireland, while the BSF budget has grown from £45 billion to £55 billion and the time scale has increased from 10 years to a projected 18. Some of the reasons for the additional cost and delay are understandable, but the fact remains that BSF had become a vast and confusing morass of process and cost by the time it was ended, and it represented extremely poor value for money. Some £60 million of the £250 million spent on BSF was frittered away on consultants and advisory costs before a brick had even been laid.

[David Mowat]

The Minister might be aware that the average cost of bidding for a BSF project was about £1 million, which is approximately the cost of a new primary school. Does that not say all that there is to be said about the waste implicit in the programme? Everybody wants more and better schools. Two schools in my constituency, Sir Thomas Boteler and Penketh high schools, desperately need refurbishment, but that must be done cost-effectively, not while frittering away money as BSF did.

[Mr Gibb]

That is where we want the money to go: not on consultants, but on refurbishment and bricks.

Nobody comes into politics to cut funding, least of all a new Government who have inherited a school system that we are worried lets down too many of its pupils. However, we are faced with a £156 billion budget deficit, and it is our responsibility—difficult and painful though it might be—to tackle that problem. Although we have announced the end of the BSF programme, that does not mean the end of capital spending on schools.

The hon. Lady will be aware that my hon. Friend the Member for Warrington South (David Mowat) has organised a meeting with my noble Friend Lord Hill at the Department for Education to make the case for Warrington schools. Also present will be the leader of the council and the head teachers of several schools that have been affected. I know that she is to attend that meeting as well, to represent the schools in her constituency.

In determining which projects would go ahead and which would cease, the Government developed a single set of criteria and applied it nationally. The three types of school project allowed to continue were: those projects that were part of their area’s initial BSF schemes and had reached financial close; the so-called sample projects that were part of their area’s initial BSF schemes, where financial close had not been reached but a preferred bidder had been appointed at close of dialogue; and some planned school projects in addition to a local authority’s initial scheme.

As the hon. Lady will know, Warrington formally entered the BSF programme in February 2010. As Warrington did not have any sample schemes or an outline business case approved before 1 January 2010, the Warrington scheme was stopped. I recognise that those areas close to the cut-off point for BSF, including the hon. Lady’s constituency, might find that extremely frustrating and upsetting, and I am acutely aware that stopping the BSF programmes for schools in her constituency has, understandably, caused dismay among students, teachers and parents. However, it is important to remember that the end of BSF does not mean the end of capital spending on schools. Money will still be spent on school buildings, but it is imperative, as my hon. Friend pointed out, that that money is spent on school infrastructure and buildings, not on the process, especially if we are to meet increasing demand for school places over the coming years as the birth rate rises.

To correct the hon. Lady, cash per pupil is per-pupil cash. Funding for schools will be maintained at the same amount of cash per pupil, so schools’ expanding pupil population will not affect it. On top of that, the pupil premium will come from outside the schools budget, meaning that over four years, spending on schools will rise in real terms.

[Mr Gibb]

Yes. The £2.5 billion is what enables us to deliver real-terms increases across the schools budget.

We appointed a review to consider how capital spending will be allocated in future. The hon. Lady discussed the Green Book allocation process; we will be considering the new basis on which scarce resources will be allocated. We appointed Sebastian James to conduct a root-and-branch review of all capital investment in schools, sixth-form colleges and other services for which the Department is responsible. The review is due to report back at the end of December. It will consider how best to meet parental demand, make design and procurement cost-effective and efficient, and overhaul the allocation and targeting of capital. That will give us the means to ensure that future decisions on capital spending are based on actual need and that all schools provide an environment that supports high-quality education.

Given the fact that the review is still in progress, I am sure that the hon. Lady and my hon. Friend will understand that I cannot make any specific commitments today on how much money will be allocated or exactly when. However, I assure them that the Department will continue to make capital allocations on the basis of need, in particular on dilapidation and deprivation, and that the end of BSF does not therefore mean the end of school building.

[David Mowat]

Does the Minister agree that this week’s announcement by Councillor Woodyatt, who has been mentioned extensively in this debate, of a new primary school in Warrington North, Oakwood avenue, is an example of the fact that capital spending is continuing? Not everything has been stopped by the hiatus in BSF.

[Mr Gibb]

Again, my hon. Friend makes a worthwhile intervention, for which I am grateful. Capital spending is being conducted, and several hundred schools are continuing work under the BSF programme.

The hon. Lady spoke about the education maintenance allowance. I acknowledge that evidence from the pilots shows that the EMA was successful, in its early days, in encouraging young people to stay in education. The decision to end the scheme will be disappointing to many young people, but I do not believe that anyone will have to drop out of education as a consequence. Already, 96% of 16-year-olds and 94% of 17-year-olds participate in education, employment or training. Attitudes to staying in education post-16 have changed. We are committed to going further still and attaining full participation by all young people up to the age of 18 by 2015.

However, a payment designed as an incentive to stay on is no longer the right way to ensure that those facing real financial barriers to continuing their education get the support that they need. We must reconsider the most effective way to support the most vulnerable young people to stay on in education. There is evidence that the EMA has helped a small number of young people stay on, but the same evidence suggests that the scheme has a significant dead-weight cost. Pilot evidence throughout the scheme and more recent research from the National Foundation for Educational Research found that almost 90% of young people receiving the EMA believe that they still would have participated in their courses if they had not received it.

The EMA is a hugely expensive programme, costing more than £560 million a year, £36 million of which is administration. Of course we do not want any young person to drop out of education due to financial difficulty, but we cannot justify continuing to fund a programme so expensive and poorly targeted. Currently, a discretionary learner support fund gives £25 million a year to schools, colleges and training providers to enable payments to be made to young people to help them meet the cost of their education. Colleges value the fund and are happy to play Lady Bountiful, as the hon. Lady said, by handing out the money to the young people whom they consider to be most in need. They can also respond to changes in students’ household income during the year. After the EMA is abolished, the fund will be increased significantly over the spending review period. The detail of future arrangements is still being considered.