Westminster Hall

Wednesday 19th January 2011 Westminster Hall

Wednesday 19 January 2011

[Mr James Gray in the Chair]

Fuel Poverty

Wednesday 19th January 2011 Westminster Hall

Motion made, and Question proposed, That the sitting be now adjourned.—(Miss Chloe Smith.)

09:30

[Chris Evans (Islwyn) (Lab/Co-op)]

I am grateful to you, Mr Gray, for the opportunity to speak in my first debate in Westminster Hall—this is, I suppose, almost like my second maiden speech.

The topic of the debate has been brought into sharp focus by the fact that the recent cold weather has left many constituents struggling to pay household energy bills. Last December was the coldest on record for 100 years. As a result, every home owner used more energy to heat their homes, resulting in more households falling into fuel poverty.

Fuel poverty is a serious and complicated issue. It is defined as affecting those who spend more than 10% of their income on energy bills. It is caused by unaffordable fuel prices, combined with poor housing stock, which is often characterised by inadequate insulation and inefficient heating systems.

Fuel poverty has more than doubled in the UK since 2003. The “Annual Report on Fuel Poverty Statistics 2010” estimated that fuel poverty affected 2 million households in 2003, and the figure rose to 4.5 million in 2008. Official predictions say that that is only the tip of the iceberg and that the worst is yet to come.

On 16 December 2009, an Ofgem presentation forecast that 6 million households would be in fuel poverty. On 24 February 2010, Ofgem warned the Select Committee on Energy and Climate Change:

“there is a real chance that as we go towards the middle of this decade prices will not only go up but will become fantastically volatile. That is not good news for the consumer”—

quite. Age UK says that, between 2003 and 2009, average household gas bills doubled and average electricity bills rose by 60%. The latest estimate of fuel poverty in the UK shows that more than 3.5 million older people are in fuel poverty. Surely that must be a worry for us all.

Fuel poverty is not spread evenly throughout the UK. Nearly a fifth of households in England, more than a quarter in Wales, nearly a third in Scotland and more than a third in Northern Ireland are in fuel poverty. In Wales, the November 2010 fuel poverty figures showed that 332,000 households were fuel-poor in 2008, and that the figure had risen by 198,000 since 2004, representing a 15% rise. In 2008, 26% of Welsh households were estimated to be in fuel poverty. That is despite measures undertaken by the previous Government to address fuel poverty and to improve the energy efficiency of homes.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

One lesson that we all have to take on board is that the previous Government put too much reliance, especially in the early stages, on cutting energy prices and on the market delivering lower prices, so when the market put prices up, many people went back into fuel poverty. The hon. Gentleman is therefore right to say that it is important that we permanently deal with the energy efficiency of the housing stock.

[Chris Evans]

Yes, I agree, and I will develop that argument further.

The measures introduced by the previous Government included the winter fuel payment, central heating programmes, which the hon. Gentleman alluded to, and the energy efficiency commitment. All those have played a role in tackling fuel poverty, but their impact has been eroded by the financial crisis and what seem to be annual energy price rises. With rising fuel prices and lower disposable incomes, householders must make a tough decision between heating their homes and paying for other essential household expenses.

[David Simpson (Upper Bann) (DUP)]

I congratulate the hon. Gentleman on obtaining this important debate. He said that 6 million were in fuel poverty, and he mentioned Northern Ireland and that a third of households there are in fuel poverty. Does he agree with organisations such as Action Cancer and Macmillan Cancer, which are concerned that those with cancer-related diseases are more susceptible to the cold weather and that extra focus needs to be put on people with serious disabilities and illnesses?

[Chris Evans]

I am always happy to take interventions, but the hon. Gentleman has just raised one of the major points I am going to make. I will come to that, thank you very much.

In quite a cynical move, when people were about to celebrate Christmas, British Gas, Southern Electric, ScottishPower, and Scottish and Southern Energy, introduced a price rise. In fact, five of the big six suppliers have now announced increases, which have taken effect, although EDF has announced that it will hold its prices until March 2011. Those increases mean that average annual electricity and gas bills are now £1,239.

In November, the regulator, Ofgem, announced that it was reviewing whether the profits made by the industry were too high, but I have to admit that I am quite sceptical about that review. Since 2001, 18 reviews have been conducted by Ofgem, Members of this House, the European Commission, the Competition Commission and the Government, all of which have had little or no impact on prices.

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

I congratulate the hon. Gentleman on securing the debate. He is right to be sceptical about those reviews, but will he spend some time talking about those who rely on fuel from sources that are not regulated? In many rural areas, including my constituency, for example, about a tenth or a fifteenth of constituents are on off-mains liquefied petroleum gas or oil supplies. Over the past 18 months, their fuel bills have gone up by more than 100%—they are not regulated at all. Should the Government take steps to ensure that such fuel providers are regulated, just as mains providers are?

[Chris Evans]

Yes, I agree. I will come to off-mains gas later, but let me just say that fuel poverty is really bad in rural areas, and the hon. Gentleman is right to raise the issue.

The impact of price rises on fuel-poor consumers, many of whom are in low-income households, will be devastating. It is likely to push thousands more people, including many pensioners, into fuel poverty.

As a Welsh Member of Parliament, I am deeply concerned that Wales is one of the parts of the UK that is most badly affected by fuel poverty. Many pensioners in Wales have illnesses such as heart disease and diabetes, and many living in constituencies such as mine are former miners with lung diseases. They often have high fuel bills because of their health problems and need to keep their homes at a much higher temperature than other people. That problem is made even worse in older and poorly insulated houses.

Older people in Wales bear the brunt of increases in fuel prices. In my constituency, there were an average of 41 excess winter deaths between 2003 and 2008. Across Wales, more than 1,700 people die in winter every year as a result of fuel poverty, and that figure is certain to rise.

National Energy Action estimates that about 28% of households in Caerphilly county borough, where my constituency is situated, are in fuel poverty and have to spend at least 10% of their income on energy to keep warm. Some 20% of the population does not have access to mains gas. About 40% of fuel-poor households in Wales are pensioner households, and 28% contain single pensioners—often widows and widowers—who are desperately trying to make ends meet. Those pensioners face a double whammy, because electricity prices in Wales are up to £25 a year higher than in England.

A recent report on fuel poverty among vulnerable groups produced by Consumer Focus Wales found that 75% of those with a long-term illness or disability suffer fuel poverty. Some 62% of those aged 65 and over were concerned about paying their winter energy bills and were also more likely to cut back on their energy use at home to save costs. Across the population, the figure was 54%. What is more, more than 50,000 households in Wales are in debt to electrical suppliers and more than 46,000 are in debt to gas suppliers. It should be pointed out that the report was compiled before the recent energy price announcements.

The hon. Member for Upper Bann (David Simpson) mentioned cancer sufferers, and Macmillan got in touch with me to say that cancer patients, in particular, are struggling to pay their energy bills. According to its research, seven out of 10 working-age cancer patients suffer reduced household income, losing 50% on average. It is estimated that about four in 10 cancer patients of working age do not return to work after treatment.

Higher utility bills are one of the major additional costs that cancer patients face. One in five people with cancer turn off their heating in the winter, even though they still need it on. One in four wears outdoor clothing indoors to stay warm and reduce energy bills. Cancer patients have higher heating bills. In a survey for Macmillan, 59% of respondents said they had used more fuel since being diagnosed with cancer. Three quarters of those said that that was because they felt the cold more, and a similar number said that it was because they spent more time at home after being diagnosed.

A statement by the Secretary of State for Energy and Climate Change on 15 December muddied the waters further. He informed the House that the budget for the Warm Front scheme in England is fully allocated for this financial year. We are told that the scheme is fully subscribed and will be unable to take new applications for the remainder of the current year. The reason is that the scheme has a substantial order book of work, which will take until at least March 2011 to complete.

Essentially, the major problem with fuel poverty is that people who are victims of it do not necessarily know that they are. That may seem a strange statement, but many accept the difficulties they live with. When I worked for the previous MP for Islwyn, Lord Touhig, we prepared for a debate on this topic, and spoke to the secretary of the National Old Age Pensioners Association of Wales to ask what effects fuel poverty had on his members. We were both surprised to discover that members simply accepted that rising fuel prices are a fact of life. Whey they get cold they simply have to slip on an extra pullover, or heat just one room. Therein lies the great problem with fuel poverty. It can be difficult even for energy companies to identify customers who are fuel-poor.

[Albert Owen (Ynys Môn) (Lab)]

My hon. Friend is making an important point about vulnerable groups such as pensioners. Indeed, prior to coming to the House, I worked with several agencies, including Age Concern, as it then was, to identify them. That is why a universal benefit such as the winter fuel payment is important. For all its flaws, it gets to those people, who are often very proud and do not make claims. They are difficult to get to. All hon. Members should work with agencies to maximise benefit take-up so that people can get the benefits they deserve to help them with fuel poverty.

[Chris Evans]

My hon. Friend makes an important point. The dignity of pensioners is astounding, but in many respects they do not help themselves, because sometimes they are too proud to claim the benefits they are entitled to. I have said to every pensioner I have spoken to: “If you are entitled to it, claim it.” Those people have served this country. Many are veterans. Some people have devoted their lives to industry. If there is a benefit and they deserve it, they should claim it.

[Jim Shannon (Strangford) (DUP)]

Further to the previous intervention, I am sure that the hon. Gentleman knows of similar cases to what happened in my constituency, where, in the area where I live, the temperature dropped to minus 7° C: it went down as far as minus 19° C in other parts of the Province. The cold weather payment helps, but there was also a severe weather payment of £25. We had fluctuations of temperature in my area but there were places where the temperature was below 0° for a period. It seems that the system does not always work to the advantage of elderly people. Does he agree that perhaps the Government should be thinking about clarifying the system and improving it for people who need the payment most, at the time they need it, so that they do not miss out?

[Chris Evans]

I shall be making a point about the specific targeting of benefits. The severe weather payment is a difficult one, because it is supposed to relate to the temperature dropping at the local weather centre. It may be difficult to work out who is experiencing low temperatures.

To return to the point I was making, when energy companies target support to customers there should be additional support from the Government. That could be through the sharing of data; alternatively, local authorities and other community groups, which often have a better understanding of where support is needed, could be encouraged to work in partnership with energy companies to deliver energy efficiency programmes to vulnerable groups. Of course, as my hon. Friend the Member for Ynys Môn (Albert Owen) said, putting schemes in place is all very well, but if people do not know about them, the opportunity to assist them is lost. Members of Parliament should be doing much more to publicise the availability of existing schemes and to encourage people to take them up. The complexity of fuel poverty means that there cannot be a one-size-fits-all solution to tackling it. It is important that we look for long-term, sustainable solutions for families in fuel poverty.

One way to combat fuel poverty is to increase the income of many of those who are at risk of falling into the fuel poverty trap. There should be a review of the winter fuel payment and it should be better targeted, to reach those in need. Perhaps the payment should be targeted at the fuel-poor of all ages, including children and young people, those living in hard-to-treat homes and those with long-term health conditions, as well as older people. Another effective and sustainable way to tackle fuel poverty is through improved energy efficiency. The provision of energy efficiency measures and advice must be at the heart of all Government programmes, whatever the colour of the Government, to help vulnerable people to heat their homes adequately.

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

I congratulate the hon. Gentleman on a timely debate. He touches on the question of ensuring that every person who is eligible and vulnerable should try to get help from whatever form of warm homes scheme they have in the part of the UK where they live. Does he agree that perhaps we should consider upgrading the scheme, to target the older properties that he referred to earlier, which are particularly hard to heat, so that elderly and young people can have a warm home, rather than an additional couple of inches of roof space insulation, which some schemes offer?

[Chris Evans]

The point that I am trying to make is that one way to solve fuel poverty is to make sure people do not use so much energy; it brings the price of their energy bills down and they will have a warmer home. They will come out of fuel poverty and will not be in so much danger.

The welfare and public sector cuts that have been announced by the Government together represent a threat to the lives of millions of people. I worry that the number of people in fuel poverty will soar over the coming months as a result.

It is all very well quoting figures, and my telling the House how wicked I think the Government are, but what does it mean to live in fuel poverty? It means that families will have to cut back on essential items to allocate money for rising fuel bills, or will have to turn down their heating, risking their health by increasing the chances of contracting common ailments such as colds, flu or bronchitis. Fuel poverty causes stress in children and adults as well as long-term depression and anxiety. To many individuals and families it can be the main cause of social exclusion, and deteriorating life chances and educational achievement.

I welcome the independent review of fuel poverty targets that the Government have said they will initiate before the end of the year. Making the nation’s housing stock more energy efficient should be at the heart of the Government’s energy strategy in the Energy Bill. The Government have set out plans for their green deal, whereby loan-funded insulation costs pay for themselves through efficiency savings. However, at the same time, as I have said, the coalition have announced that they are cutting Warm Front funding to a third of its current level. That threatens to leave many fuel-poor households even worse off, because they are likely currently to be under-heating their home, so any savings from improved energy efficiency will be taken in additional warmth, and their energy bill savings will not be enough to cover the green deal finance repayments.

Furthermore, some vulnerable customers may be nervous about taking on a fixed charge on their energy bill, despite promises of lower final bills, as that will reduce their option to budget. I fear the green deal is unlikely to be sufficient to help the fuel-poor. That has been confirmed by Age UK, which states that while the Government’s plan to have loan-funded insulation costs pay for themselves through efficiency savings

“is likely to benefit mid and high income households, there remains a big question mark over whether it will work for those in fuel poverty.”

It is therefore vital that the energy company obligation should meet the needs of the fuel-poor. That is particularly important for the fuel-poor, as in some cases existing heating systems may be inefficient, but the existing carbon-focused schemes mean that it is not possible to install a new more efficient system.

In conclusion, given the pain that is being inflicted on people by energy companies, it should be remembered that, unlike consumer prices, wholesale energy prices are half of what they were in 2008. It is a matter of some urgency that the Government should intervene to curb excessive fuel price increases.

[Sir Robert Smith]

I certainly agree that the regulator, and everyone, should try to ensure that we have the lowest possible prices, but in tackling fuel poverty we must confront the fact that the underlying pressures of carbon reduction and world energy scarcity mean that we shall have to have a fuel poverty strategy that will cope with higher prices. We cannot just rely on low prices to get us out of the problem.

[Chris Evans]

As I said earlier, fuel poverty is a complex matter, and there is no magic bullet to solve the problem. We have to consider it in a holistic manner.

If the regulator does not have sufficient power to intervene to prevent huge price increases, the solution is clear. It is time for energy companies to be made to serve society again, rather than the other way round. In February 2010, Ofgem published the findings of its Project Discovery. One of the most radical proposals was to have a central energy buyer, on similar lines to the old Central Electricity Generating Board. At present, the big six energy companies own most of the UK power plants, which supply the majority of the country’s consumers, but a central Government-controlled body could require power plants to sell electricity at fixed rates that would then be sold on to customers, thus bringing an end to the dominance of the big six once and for all.

It is important to remember that fuel poverty is not simply about schemes and programmes. It is a matter of life and death for the many people who are forced to live in cold and damp conditions. We need a new, far-sighted fuel poverty strategy to ensure that fuel-poor households have a decent income and that sustainable energy-saving measures are prioritised.

09:50

[Guy Opperman (Hexham) (Con)]

I am grateful for the opportunity to speak in this debate, which is timely and well-intentioned.

Given the harsh weather conditions leading up to Christmas last year, fuel poverty has never been of such concern to the people of Hexham. I represent well over 1,000 square miles of rural Northumberland, and the subject is most important to my constituents. It is no exaggeration to say that many people have to make a straight choice between heating and eating. They are in a difficult situation. If that does not sound primitive enough, NFU Mutual, the rural insurer in my part of the world, found in its annual rural crime survey last year that domestic fuel was sixth on the list of the top 10 items most commonly stolen from homes. The “Crimewatch” scene in Northumberland is astonishing for the number of people who are suffering rural crime with the loss of their fuel.

Although there are ongoing recommendations on how to discourage thieves, this crime wave is something that the country cannot tolerate. Is it something that we can deal with or, in reality, do we need assistance in the March Budget? I certainly hope that we shall get such assistance; I believe that it would be right, because the problem is putting an unacceptable strain on people’s incomes.

I have extensively gone through the approximately 20-plus providers of heating oil in rural Northumberland. In excess of a dozen of them are owned by one company. Hon. Members will be amazed to hear that they are all using their old names, and that they are all operating and selling as if they were perfectly independent. Some people have been buying from these companies for 30 or more years. It is only when one starts digging that one realises that there is a significant problem, which affects well over half the population. It is well known that the company behind this is DCC Energy, a Dublin-based provider. The company’s fuel oil customers are less able to negotiate a good price, as the cost of oil continues to rocket.

[Sir Robert Smith]

A more serious problem in the working of the market is that, at times of stress, quite a few of these supply companies say when asked for a price, “We can’t give you a price now; it’ll be the price on the day that we make the delivery.” How can the market work efficiently if people cannot shop around when placing an order? Would the hon. Gentleman like to comment on that aspect?

[Guy Opperman]

I would: the simple truth is that customers, wherever they are and whatever problems they face, need to shop around. If they do not, they will face the problem that the hon. Gentleman describes, which I and others in Hexham have come across. They will be deprived of the ability to buy fuel on an ongoing basis.

[Roger Williams (Brecon and Radnorshire) (LD)]

The hon. Gentleman raises an important point that affects rural users of heating oil. He will not be surprised to hear that all the companies on a price comparator website were owned by one company—DCC. It is hardly surprising that there is no differential in the prices that they offer, and that customers are unable to make an informed decision.

[Guy Opperman]

A number of independent organisations in Hexham provide fuel—WCF, Wallace, Par Petroleum and Johnson Oil. Those four are the last independents that supply the area. It is amazing to chart how such companies have been bought up over the years.

What worries me most is that, without a strong local and competitive market, it is a lot easier for companies to hike up prices, delay things and move people on, explaining that they will produce a fair price at some stage or the right price only when they turn up. I am in negotiations with the Office of Fair Trading to ensure that it does investigate these matters. However, the reality is that it needs information from those whom we represent. I therefore urge individual constituents to write to the OFT, bringing such information to its attention, and I am doing so for people in my area that have complained.

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

Many families in Northern Ireland are trapped, as they have no alternative to oil for heating their homes, as gas is not available in many areas.

[Guy Opperman]

I accept that. Like the hon. Member for Westmorland and Lonsdale (Tim Farron), roughly 10% of my population is being provided by particular companies, with the market narrowing whether or not they like it. We need to help them in whatever way is possible. I hope that the Minister will address that point.

Costs are clearly getting out of control for the residents of Hexham. Fuel is a necessity in a constituency of 1,000 square miles, not a luxury. People do not spend their money on it because they think it would be jolly to go for a drive. Last week, when I filled my petrol tank, I was stopped by the garage owner, who unluckily recognised me and said, “What are you going to do about this?” [Interruption.] Yes, I did pay him—a lot of money. I pointed out that we are trying to address the problem. There is much that I hope that the Minister will do.

The trade body has made a statement justifying the price increase. It is long on generalities and short on specifics. I would have liked it long on specifics and short on generalities. I accept that DCC and other companies are perfectly entitled to a fair return, but the market has gone up and people—it matters not where—are at their mercy. That is not right.

Although wholesale costs have increased, the situation has been made worse by the extremely cold weather. Temperatures have been as low as minus 19° in my area. I am worried about the market in my constituency, which gives residents too little choice when trying to find the best price. The price hike is unacceptable, and the Government can do more about that. I hope that the status quo does not continue.

09:59

[Albert Owen (Ynys Môn) (Lab)]

It is a pleasure to follow the hon. Member for Hexham (Guy Opperman), who made an important point about off-grid supply. Before I touch on that matter, I congratulate my hon. Friend the Member for Islwyn (Chris Evans) on proposing and sponsoring this debate. Given the time that he has been in this House, tribute should be paid to him for the way in which he has battled with this matter on behalf of vulnerable people—Lord Kinnock and Lord Touhig in the other place also have a strong record on standing up for the vulnerable. I welcome my hon. Friend’s contribution.

I pay tribute to the Energy and Climate Change Committee, the report of which many hon. Members must have read. I am a current member of the Committee and cannot take any credit for the 2009-10 Session. It conducted an excellent inquiry into fuel poverty, and two members of that Committee are here today—the Minister himself and the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith). I pay tribute to them for their work and to the organisations and agencies that have worked long and hard to alleviate fuel poverty in our country.

In his opening remarks, my hon. Friend the Member for Islwyn mentioned Macmillan Cancer Support, which is carrying out pioneering work on identifying the hardships that are suffered by people with terminal cancer, and Consumer Focus. I will not make many political points today, but I will enhance some of the points that have already been made.

I am sure that the Minister agrees that the previous Government were right to give such a high priority to fuel poverty. Although the target for 2010 was not met, it was a bold one—to reduce the fuel poverty in England of vulnerable households—and the Government were right to set it. The Committee’s 2009-10 report said that average domestic fuel prices pushed the Government off their target. According to the Fuel Poverty Advisory Group, some joint electricity and gas bills went up by as much as 125% during the period from 2003 to 2008. The hon. Member for West Aberdeenshire and Kincardine has said that we cannot rely on just keeping prices down, but we cannot turn a blind eye to such rises either. We need to keep our foot on the pedal and keep the pressure on the energy companies that have been making excessive profits, which is why this Ofgem inquiry is so important. We must continue to work with the Minister, the Government and the devolved Administrations on the matter.

[Dr McCrea]

Is the hon. Gentleman aware of the appalling statistics on fuel poverty in Northern Ireland? For example, National Energy Action has found that in Craigavon borough some 44% of households are unable adequately to heat their homes. In Magherafelt and Ballymoney, there is 40% fuel poverty. We must not forget that behind every one of those statistics is real human hurt.

[Albert Owen]

The hon. Gentleman is absolutely right. I was not aware of those specific statistics. The hon. Member for Hexham was right to say that this matter affects not just parts of the country but all the country. We all have semi-rural and rural areas in our constituencies. Indeed, I represent a periphery area, which is something that I shall discuss in more detail later. Such areas face a double whammy in that they also have to get in fuel supplies. Cumbria faces such a situation, so I agree with the hon. Member for South Antrim. What connects us all across the political divide is that we are talking about not only statistics but real people. We are talking about how we can alleviate hardship for people. Indeed it is a common endeavour of all political parties to do that, although we disagree on the mechanisms by which to achieve it.

Earlier, I referred to how it is essential that we work with the devolved Administrations. I have been working with the Welsh Assembly Government on delivering energy efficiency, and they have a good record in that regard. Although provision is patchy across many parts of Wales, there is, as my hon. Friend the Member for Islwyn has highlighted, some good work being done by organisations in the areas of energy efficiency and loft insulation. None the less, we need a mechanism to deal with hard-to-treat properties. Some older rural properties do not even have proper insulation in the foundations, let alone in the walls, windows and roofs.

[Guto Bebb (Aberconwy) (Con)]

When we discuss rural areas, it is right to consider how to deal with hard-to-treat housing. It is also important to consider the fact that average wage levels in rural areas are significantly lower—that is certainly the case in north Wales. As a result, fuel poverty is a larger issue, because a larger percentage of income is spent on heating and housing. Fuel is also more expensive in rural areas. Therefore people in such areas suffer from both low income and high fuel prices, so there is an issue relating to economic development in rural areas and a need to create economic opportunities for people, so that they can enjoy an income level that is sufficient to allow them to meet fuel costs.

[Albert Owen]

Of course household income is an issue. In areas in which GDP is low, household incomes are not necessarily low; such indicators do not necessarily go together. There are joint incomes in rural areas. Many people feel that they have to have a supplementary income to pay the bills. None the less, the hon. Gentleman is right; in some of the more deprived areas of the United Kingdom, fuel poverty is worse. There are also other factors such as rurality and the problems faced by areas on the periphery of the United Kingdom, which is something that I will discuss later.

I welcome the Ofgem inquiry into the big six, which looked at their price mechanism and their excessive profits, and we must keep up the pressure on the companies. Indeed the Select Committee, of which I am a member, met Ofgem yesterday. A few weeks ago, we spoke to the big six. I make no bones about it; excessive profits are being made and they should be curtailed. We must give the regulator teeth to bring that about. We have peaks and troughs, and the inquiries always seem to come when the prices are subdued for a period of time and then there are the excessive profits. We have not been able to prove that through the Competition Commission and various other mechanisms, but it does happen and real people are paying the price.

[Jim Shannon]

One example can be found in Northern Ireland. The oil comes in through Belfast. We have variations in price across the Province. The price for 800 litres of fuel can vary by as much as £20 to £25. The hon. Gentleman has rightly said that it is an obscenity that companies are making excessive profits while people are experiencing difficulties. We need an extensive inquiry and some rules and regulations from the regulator.

[Albert Owen]

Yes. I will come on to the off-grid as well to provide some balance. I stress that Ofgem is doing a good job, but it needs more teeth. I know that we will have the opportunity to discuss both that matter and how we can beef up the regulator’s powers in forthcoming energy Bills.

I am a big supporter of winter fuel payments. The previous Select Committee included that matter in its report, to which this Government provided a response. Some people think that such payments should be modified, targeted or means-tested, but the benefit is a huge success. It is a substantial payment that is easy to claim and easily understood. I believe in universal benefits. As a nation, people contribute to the national pot, so that benefits can be given to people in need. I understand that we need a mixed package of targeted benefits in addition to the universal benefit. This particular benefit has been a huge success, and I am sure that the Minister will confirm that the Government have no intention of changing it. I know that there is a cost element to it, but the benefits far outweigh any negatives in this area.

I realise that there are other Members who want to speak, but it is important to highlight some of the points made by the hon. Member for Hexham about off-grid gas supply—indeed, a number of interventions have been about that matter. Households that are not connected to the gas mains experience a double whammy; many of them are in periphery areas and pay extra money for petrol and diesel, as well as having to pay more for domestic heating fuel. We need to consider that issue. For instance, liquefied petroleum gas is far more expensive than on-mains gas, and we have heard much anecdotal evidence in many debates about the huge rise in price for domestic oil and domestic LPG.

I do not believe that the Office of Fair Trading has been sufficiently proactive on this issue. I heard what the hon. Member for Hexham said about the importance of giving the OFT anecdotal evidence, which is one way forward although it is a cumbersome process. There should be a single regulator to look at gas and electricity prices, and it should consider both the grid and off-grid supply. We should have a single regulatory body, and I ask the Minister to consider that proposal for the future. There should be a single regulator looking at all domestic fuels with a view to regulating the off-grid supply as well as the grid supply, and that regulator should have real teeth and real responsibility to look after the most vulnerable people in our society, which is what the existing regulator was set up to do. In many areas, a huge number of people are not on the grid—in some areas, a majority of people are not on the grid—and they are suffering disproportionately as a result.

As the Minister may know, I have been campaigning on this issue for a long time. However, I have been frustrated by the responses that I have received from the regulator, from this Government and previous Governments, and from the gas distribution networks, agencies and energy retailers. There is no joined-up thinking on this issue—there is a blockage and things just do not happen. People who live within a short distance of gas mains are not connected to them. I am not talking about isolated properties. I am talking about villages of considerable size and hamlets that are close to the gas mains, but there is no incentive for them to be joined up, although to be fair to the Department of Energy and Climate Change the Government have had some schemes, agencies and partnerships over a number of years that have worked on that issue.

The differential between those who pay off the grid and those who pay on the grid is so great that there should be some real investment and a mechanism to provide connection to the grid, so that those people who are not on the grid can have additional choice. Choice is what I am talking about. If people wish to remain off the gas mains, it is a matter for them, but at the moment those people do not have any choice in the matter and are being hammered by domestic oil and LPG prices.

I hope that the Minister will act on this issue. I understand that new developments will need renewable sources of energy built into them when they are constructed, which I fully support—ground source pumps and other measures may be the future. However, we are talking about hamlets and villages that have been off the gas mains for an awfully long time. When coal was cheap, for historical reasons, it was okay for those communities; there was not the disparity that there is now between the price that they paid and the price that those on the mains supply paid. Today, however, because of the lack of regulation and the inability to connect people to the gas mains, there is a huge disparity between those who are on the mains supply and those who are not, and there is a huge amount of extra fuel poverty in those areas that are not on the mains supply. So it is something that we need to work on collectively. I am sure that the Minister will respond to that issue.

I want to make an overtly political point about fuel prices, which concerns the price of petrol at the pump in periphery areas. The extra fuel poverty that I have just referred to was made worse in January, because of the additional 2.5% hike in VAT, which is really hurting people. I am not talking about people who use their cars just for pleasure. I am talking about people who use their cars because there is a lack of adequate public transport in their areas and because they have to take their children to school or to leisure activities on a daily basis and the only means of transport is a larger car. Also, those people work in a communal fashion, as it were, by giving lifts to other people. Those people are paying—

[Mr James Gray (in the Chair)]

Order. We are drifting slightly away from the topic of the debate, namely fuel poverty, and it might be better to come back to it.

[Albert Owen]

I will certainly bring the debate back to fuel poverty, because petrol is a fuel, people are in poverty and the VAT hike is compounding the problem of the increase in their daily household bills, because they have to pay extra fuel duty on top of paying extra money for the off-mains supply of gas. It is a big issue in my area; people who are already paying additional money for their fuel also have to pay extra for their travelling costs, and as a result their household budgets have been squeezed considerably. That is the point that I am making. It is a serious point about fuel poverty and not just a political point about the VAT rise, although in my opinion that rise could have been avoided. It was a political decision and on top of the duty escalator it has hurt periphery areas the hardest.

I support the Government in looking for a stabiliser mechanism, because the peaks and troughs in prices are too great. I want to see some stability in prices, so that we can hold household bills down. I also welcome the proposals for a freeze on duty when there is hardship. I lobbied for that for a long time, and we achieved limited success under the previous Government. However, we need some stability because of the volatility of the prices. I want to see some sort of stabiliser mechanism, and I also want to see periphery areas receiving some benefit from that mechanism, which is an issue that the Government propose to re-examine. The pilot schemes that the Government are talking about for diesel and petrol are limited to the Western Isles and to St Ives and other parts of Cornwall. I want to see a Welsh and Northern Irish dimension to that programme, to include periphery areas in those regions.

[Roger Williams]

West Wales.

[Albert Owen]

And west Wales. I am calling for that extension, because those of us in those periphery areas are paying so much extra for fuel. The argument that we hear about petrol and diesel delivery is the same one that off-grid providers use; they say that they pay an extra amount to deliver fuel to those periphery areas. I do not think that we should be paying that extra amount for fuel in periphery areas.

I hope that the Minister will take that point on board. I am supportive in principle of a stabilising mechanism, although I would like to see how it works in practice. I also want to see area rebates extended to Wales and Northern Ireland in addition to England and Scotland, because they will help to alleviate poverty.

The differences between us on this subject are small, although I do not agree with scrapping the Warm Front programme, which was a success. I am not sure about the details of the green deal, but I will support those measures that help to alleviate poverty. As I have said, it was wrong to raise the VAT on petrol and diesel, just as it was wrong of a previous Government to try to introduce VAT on domestic fuel. Governments can disinherit some of these measures. I hear the Government saying now that they have to go ahead with the fuel duty price rise because they inherited it. However, the previous Labour Government disinherited the plans to put additional VAT on domestic fuel, and we are all comfortable with that move now. It was wrong to propose such a rise, which is why we should re-examine VAT and fuel costings.

We need to have a proper regulatory system, and we need to bring Ofgem and the OFT together in a single body when it comes to off-grid supply. That point is important, and I hope that the Minister will take it seriously. I believe in the retention of the winter fuel payment, which is a universal benefit that helps to alleviate fuel poverty. I also want to see an extension to the gas mains, whereby we have a proper, clear way of moving forward and a mechanism that allows people to choose whether to connect to the gas mains.

I am conscious of the time, so I will leave it at that. We have a common endeavour here to alleviate poverty. I know that the Minister, as a member of the previous Energy and Climate Change Committee, is at one with me on that issue, and I look forward to hearing his responses to my points. Finally, I again thank my hon. Friend the Member for Islwyn for securing this important debate.

10:18

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate the hon. Member for Islwyn (Chris Evans) on securing this important debate. He has said that this is his first time in Westminster Hall. I have spoken a few times in Westminster Hall, where I always find the level of debate enlightening. The first time that I stood up to speak in Westminster Hall was in a debate that I secured on fuel poverty, with a focus on rural Britain. It is nice to see some of the same faces again for today’s debate, adding new issues for us to consider and re-emphasising the issues that make fuel poverty a constant topic for debate in our constituencies, as my hon. Friend the Member for Hexham (Guy Opperman) has said.

In the debate that I secured, I focused on people off the mains gas grid, concentrating on oil and LPG. I am pleased to say that, as a result of that debate, electricity companies were falling over themselves to let me know what they were doing for my constituents. If this message has not got out I will repeat it now: anyone who does not have access to mains gas is allowed to claim for a dual fuel discount from all their suppliers. The electricity companies made their position on that scheme clear, and if any constituent of mine, or indeed of anybody else, is not taking advantage of that scheme at the moment, they should alert their electricity company to that fact.

Since then, we have also had the oil price spike, and both the Minister and I have homes that are heated by oil. He was already taking action on the matter when it was raised in December, and I commend him for some of the work that he has done, but there is no question in my mind but that the spike has plunged more people into fuel poverty. We are talking about a significant differential of hundreds of pounds between the cost of heating our homes with gas and the cost of heating them with oil or LPG, and I encourage the Minister to think more creatively. I do not want to sound like a socialist, but when the market is not operating efficiently, regulation is at times necessary—or just the threat of regulation might help.

We have already heard stories about prices rocketing; they have now fallen back a bit, but not to where they were in October and November. Some of that is due to the oil price rising. The spikes were of 70 or 80%, although some people say that they were higher. Rises of 50 to 70% were typical in my constituency.

The price has now dropped back to about 62p per litre, from an average, at its peak, of about 72p. Considering, however, that in October the price was about 40p, that is still a significant increase. In my view, if the price of mains gas or electricity leapt by 50% in a matter of weeks, there would be more action than we saw over student tuition fees.

I do want to pay some tribute to the previous Government’s Warm Front programme. It would be wrong to dismiss it entirely as it did quite a lot of good but, as I have said previously, I encourage the Minister not to repeat some of its mistakes, because it was inflexible and took no real account of the housing stock. Several of my constituents took advantage of the programme, seizing the opportunity to get more efficient boilers and similar equipment, but they were in properties that were already connected to the gas grid. Most of my constituents who fall under the fuel poverty definition missed out on an opportunity to do something about their heating situation.

The hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) mentioned that housing stock does not seem to be a factor in deciding how fuel poverty measures are applied. It absolutely needs to be, and the green deal is a great opportunity to do that. The green deal has been flagged up as being about efficiency, and I think that initially it over-focused on the insulation of existing houses. Energy companies and the Energy Saving Trust and similar bodies say that a lot of what is planned will be almost irrelevant if we do not all have thermostats in our homes. We can turn down our radiators manually and do other things, but if we do not have thermostatic control the boiler will still generate and consume the same amount of fuel. Prioritising thermostatic control is, therefore, one thing that we need to focus the green deal on.

There is also the issue of the funds available to households. I understand the simplicity of the green deal, and that it will mean about £6,500 for householders, but the plan is that the amount will be the same across the country. Frankly, with urban stock, householders could do a lot of what they wanted—insulation and draught excluding—for less than £1,000, as I did in my house in Hampshire, when I was living there. For about £12, I dramatically reduced my fuel bills, simply because I plugged the gaps that the old walls and doors did not—the change was significant. I am concerned that for my constituents who rely on LPG and oil, it will cost far more than £6,000 to rip out inefficient carbon-based fuel systems and replace them with more energy-efficient heating systems. I hope that the Government take that into consideration when doing their individualised, but hopefully targeted, programme. It would add complexity, but it would make a difference, rather than the programme just being about getting a bit more energy efficiency for the same money.

My hon. Friend the Member for Hexham talked about efficient markets—perhaps oligopolies—developing. I am not suggesting that suppliers in my constituency operate as such, but I am concerned about the efficiencies of the market because they have an impact on pricing. I have written to the Office of Fair Trading and, to my knowledge, it has not acknowledged my letters from over a month ago, which is disappointing. I hope that the Minister thinks about some of the suggestions that the hon. Member for Ynys Môn (Albert Owen) made about the importance to people of energy and of its pricing, and about whether the Office of Fair Trading is the best body to look at this energy sector, given that LPG and oil do not currently fall under the Ofgem banner. Despite my attempts to talk with that body about some innovative social tariff ideas, it keeps saying, “It’s not our issue.”

[Sir Robert Smith]

The hon. Lady makes an important point. When Ofgem is dealing with the other energy suppliers, those of electricity and mains gas, it looks at vulnerable customers and the way in which customers are treated, as well as the price of the product. The OFT, however, is far more limited in its powers and, it would appear, in its interests.

[Dr Coffey]

I agree strongly, and that is why I am keen to see an expanded role for Ofgem. I do not say that lightly, nor do I insist upon it, but I would like the Minister to consider the issue, because it is not going away. It is a fact of life that energy—certainly oil—is becoming more and more scarce.

It has been mentioned that quite a lot of people in this country live less than a mile from grid gas, so should we be considering introducing incentives to use some of the green deal money to get more homes on to the grid? Should we think about encouraging communities? Several communities already come together to do co-operative buying, so is there a way of rolling out best practice in that area? Again, I do not think that the OFT is the body to do that, and aspects of Ofgem could be involved.

I pay tribute to a collection of men who belong to a Rotary group, not in my constituency, but where I used to live in the North West Hampshire constituency. Every week they get together to chop wood and make it into kindling, which they supply to pensioners in the village—my mother is a beneficiary. It is a nice thing that these good people do, and spending £4 a week on a bag of kindling is welcomed by the pensioners. I am sure that the activity provides the men with exercise but, more importantly, it provides them with a sense of well-being and of knowing that they are doing a service. We should encourage good examples of communities working together to ensure that vulnerable people in those communities are well served.

In summary, I want the Minister to think more widely about the oil and LPG market, about its efficiency and how it operates, about how we can get social tariffs into oil and LPG provision, and about Ofgem’s role. Most importantly, the flexibility of the green deal is critical in making a difference to the fuel poverty of, and energy efficiency for, those not connected to the mains gas grid. I look forward to the Minister’s comments.

10:28

[Roger Williams (Brecon and Radnorshire) (LD)]

I apologise, Mr Gray, for not being here at the beginning of the debate because of other duties in the House. I shall take two minutes to mark up some other unfair practices that I believe take place among domestic heating oil suppliers, and which I have tried, unsuccessfully, to address in my constituency.

The Christmas before last, a couple who were moving into a new house and had never used heating oil, found the tank empty. They rang up a supplier and were given a price, which, because they had no understanding or no experience of oil, they accepted. It turned out to be exactly twice the going rate. I tried to take the matter up with trading standards officials, but they felt that they could not intervene. That is an example of unfair trading practices, and I have another from this Christmas when a couple in a very isolated house were asked to pay a £200 delivery charge on top of a very high price for the oil.

To give an example of my own—although I am not suffering—I ordered 2,300 litres of heating oil in October, but when I looked at the delivery note, I saw that only 1,600 litres had been delivered, at a price of about 40p a litre. To my surprise, in December, the company delivered another 1,000 litres of heating oil of its own volition, but this time at a price of about 65p a litre. My area still has the independent suppliers Calor and Watson, but the other four main suppliers are now owned by DCC. The Office of Fair Trading needs to look into that. I have written to the OFT before, and it has said that it cannot take on the issue, but I have now written again, as it appears that DCC has a substantial share of the market and might be in danger of abusing that position.

10:30

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

I thank my hon. Friend the Member for Islwyn (Chris Evans) for securing this important debate. He made a heartfelt presentation and raised some serious points.

None of us underestimates the increasing challenge of fuel poverty. It is worth reinforcing the figures that many hon. Members have mentioned. National Energy Action estimates that 5.5 million households, or one in five homes, will live in fuel poverty this year, which is the highest number in 15 years. The previous Labour Government made fuel poverty a priority and legislated to end that tragedy by 2016, introducing measures such as winter fuel payments and the Warm Front scheme. For a time, that investment ensured progress—between 1996 and 2004, the number of fuel-poor households fell by 70%, from 6.5 million to 2 million—but the steep energy price rises to which many hon. Members have alluded mean that despite the previous Government’s best efforts, the targets for eliminating fuel poverty among the most vulnerable have not been met.

My hon. Friend the Member for Ynys Môn (Albert Owen) has referred to the Fuel Poverty Advisory Group. FPAG’s annual report, which was published in July last year, stressed that a typical gas and electricity bill has increased by 125% over the past six years, and uSwitch, the energy consumer group, estimates that homeowners are paying £338 a year, or 37%, more for their gas and electricity than in 2008.

The past few months have squeezed families’ budgets to breaking point. We have just had the coldest winter for decades, with further sharp increases in energy prices. The domestic fuel shortage last month showed the difficulty of heating homes adequately in hard-to-reach rural areas. Many hon. Members have also spoken about the additional challenge of unregulated domestic oil supplies and a lack of transparency in pricing systems. Furthermore, the 2.5% increase in VAT and rising inflation will reduce families’ spending power even further. This will be an even tougher year for households on fixed incomes, so we must redouble our efforts to tackle fuel poverty.

I welcome the fact that the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle (Gregory Barker) recognised in the House on 11 November that

“We have to really attack fuel poverty”.—[Official Report, 11 November 2010; Vol. 518, c. 404.]

I agree. It cannot be right that in Britain, one of the world’s most prosperous countries, families must choose between buying food or keeping warm. As the hon. Member for Hexham (Guy Opperman) has put it, they must choose between heating and eating. It is vital that the Government match their actions to the scale of their rhetoric.

Before exploring the Government’s approach to tackling fuel poverty, I will consider their upcoming consultation and what it might mean for the future. How we define fuel poverty and its causes is key to ensuring that we focus our efforts to tackle it effectively. If the newspapers are to be believed, the Government are still having difficulty identifying someone to chair the review, but we have been told that it will report in the summer. Will the Minister confirm that that is still the case?

One of FPAG’s key recommendations in its latest report was that the Government should lay out a clear strategy for eliminating fuel poverty by 2016. Will the Minister confirm that the Government plan to include that in their review? The outcome of the review will shape what action is taken in the future, so it is important that it is fully independent and has full stakeholder engagement.

The Government currently define a fuel-poor household as one that must spend more than 10% of its income to heat the home to an adequate standard. Many of the stakeholders to whom I have spoken are deeply worried that the review’s aim is to narrow that definition to such an extent that fuel poverty is virtually defined out of existence. I sincerely hope that that is not the case. Will the Minister give us some clarity and assurance about the consultation’s terms of reference? I reiterate that the scale of the challenge must be faced.

It is also important that we examine who is affected by fuel poverty. I am sure that when most people hear the term “fuel poverty”, an image of pensioners comes to mind, but Save the Children highlighted in a report last week that many types of family face a poverty premium, which forces them to pay more for basic goods, services and bills because they do not have access to a bank account or cheaper payment methods such as direct debit and lower social tariffs. Save the Children’s research showed that one fifth of the poverty premium comes from fuel bills. If low-income families who pay the highest tariffs for gas and electricity were charged the same amount as families who pay by direct debit, they would save an average of more than £250 a year. The Government must adopt a range of measures to tackle the underlying causes of fuel poverty among disadvantaged groups. Fuel poverty extends beyond pensioners.

The Opposition’s concern is that the Government are adopting a sticking-plaster approach rather than tackling fuel poverty directly. Hon. Members have said that funding for the Warm Front scheme will be cut by two thirds over the next two years. Given that the Warm Front budget for this financial year has already run out, there is clearly need as well as demand for the scheme, and the reduced budget will not cover all those homes that still need new boilers to bring their heating systems into the 21st century.

The Government plan to introduce their warm homes discount later this year as a more targeted way of tackling fuel poverty. However, according to Consumer Focus, only about 25% of fuel-poor households in England will be eligible for the scheme, based on the most recent data. Two hon. Members have mentioned Macmillan Cancer Support’s campaign. Will the Minister confirm whether the warm homes discount will extend beyond low-income pensioners to other low-income, fuel-poor households, such as those with children or those where someone has a terminal illness?

FPAG advises that the only long-term and sustainable solution to fuel poverty is radically to improve the energy efficiency of every dwelling occupied by fuel-poor households, as many hon. Members have said. The Government have adopted that approach in their proposals in the Energy Bill for the green deal. The Opposition welcome the proposals in principle and will seek to work with the Government to ensure that their plans are workable and centre around fairness for the consumer. However, FPAG has also noted that the green deal’s financial model of measures paid for from bill savings may not be suitable for fuel-poor households, because many in fuel poverty currently under-heat their homes. If the Government are determined to base their approach on replacing Government-funded schemes to tackle fuel poverty directly with market-led schemes, they must ensure that they do not simply withdraw funding, leaving an abyss in its place.

The Energy Bill is starting its legislative journey in the other place, and in a few months’ time we will have the chance to scrutinise it in the Commons. However, will the Minister give us some details of how the Government foresee the green deal and the energy company obligation will work specifically to eliminate fuel poverty? I have heard from many stakeholders worried about low levels of green deal take-up among fuel-poor households and hard-to-treat homes, to which the hon. Member for Suffolk Coastal (Dr Coffey) has referred. It is vital that the Government get it right and ensure that the green deal works to tackle fuel poverty. The Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle has said that the green deal will be “the game changer” for fuel poverty. I hope that the Minister will be able to give us those assurances and a bit more detail.

On the Government’s proposals for electricity market reform, the Opposition acknowledge the need for reform. As the shadow Secretary of State, my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier), said in the House on 16 December, we will support fair and sensible mechanisms for reform. On 10 January, however, in a written answer to my hon. Friend the Member for Glasgow North East (Mr Bain), the Government indicated that the impact of their preferred reform options will hit the lowest-income families with the largest increases, stretching families’ budgets even further. I hope that the Government will review that problem as they work through their proposals and ensure that a fair outcome is reached, so that those in fuel-poor homes are not disadvantaged further.

10:39

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate the hon. Member for Islwyn (Chris Evans) on securing this debate and thank him for the interest that he has shown in this incredibly important issue. It is vital for his constituents, for Wales in general and for the country as a whole. I also congratulate him on the comprehensive way in which he outlined his thinking and his assessment of the challenges that we face. I reassure him from the outset that we share the same objectives. We both recognise where things have not been working, and we are both determined to do better. I look forward to working with him, as we try to make progress on the issues over the coming years.

I have also been encouraged by the contributions of my hon. Friends the Members for Hexham (Guy Opperman) and for Suffolk Coastal (Dr Coffey), and the hon. Members for Ynys Môn (Albert Owen) and for Brecon and Radnorshire (Roger Williams), as well as the extremely constructive contributions of many other hon. Members who have intervened in the debate, during which the full range of issues that affect fuel poverty have been considered. That breadth has made it extremely constructive.

Reference has been made to the Fuel Poverty Advisory Group, and I would like to put on record my respect and admiration for that group’s work, particularly the incredibly assiduous work of its chairman, Derek Lickorish, in drawing attention to the issues and how we should seek to address them.

The figures for fuel poverty, which have been set out by the hon. Member for Islwyn, make it clear that the situation in Wales is worse than in much of the UK as a whole. From 2005 to 2008, the number of households in fuel poverty rose from 2.5 million to 4.5 million, and it is estimated by many organisations that today’s figure is probably 5 million, so it has doubled over the past five years. In Wales, 26% of households—332,000 of them—are estimated to be in fuel poverty. That figure has more than doubled over the past six years. It is, therefore, absolutely clear that more needs to be done to address the problem. As the hon. Member for Liverpool, Wavertree (Luciana Berger) has said, this is not about rhetoric, but action.

The hon. Member for Ynys Môn talked about the importance of targets. They are important, but every bit as important as a target is a road map—a strategy for how one intends to meet the target. What we have lacked lately is a strategy on how to meet ambitious targets. The hon. Member for Liverpool, Wavertree said that we need action, not rhetoric, and that is exactly what we are determined to put in place. However, given what we inherited on the issue, we cannot continue to pretend that the previous policy was working. We need a different approach and there needs to be much greater urgency in how we address the issue.

Historically, Warm Front has been one of the main vehicles for trying to achieve that. I have no doubt that Warm Front has done much good work, but it has simply not been up to the scale of the challenge. Between 2008-11, Warm Front spent more than £1.1 billion helping 580,000 homes. In 2009-10 alone, it assisted 210,000 households by introducing 112,000 heating measures and 82,000 insulation measures. That will help to improve the standard assessment procedure rating of those properties from 33 to 66 points on average, which is the equivalent of an energy efficiency rating increase from band F to band D. The scheme has, therefore, been doing a good job on energy efficiency, which has led to average savings of £650 and more in the running costs of those households.

Those are real benefits, but, as other hon. Members have said, particularly my hon. Friend the Member for Suffolk Coastal, they have been dwarfed by the scale of the problem. The Association for the Conservation of Energy estimates that a quarter of the homes supported by Warm Front are in fuel poverty. Therefore, even at the peak of its work, when Warm Front was helping 200,000 households a year, only 50,000 of those were in fuel poverty. Some 5 million homes are estimated to be in fuel poverty, so it would take 100 years, using Warm Front, to deal with the problem. That is simply not adequate.

The vast demand for the Warm Front service has highlighted the problems, which is why we had to announce in December that the budget for this year had been allocated and was fully subscribed and that we could take no new applications in this financial year. We will still help 130,000 households in this financial year, and we expect the 55,000 jobs that are still in the queue to be completed by March. The measure is, undoubtedly, temporary and the scheme will open for new applications from next year. However, Warm Front has clearly not been able to deal with the scale of the problem, and we need a better approach.

Warm Front will continue for the next two years with a budget of £110 million in the first year and £100 million thereafter, as we get new measures that we think are more fit for purpose up to speed. We are consulting on the eligibility criteria, so that we can ensure that, for its remaining period, Warm Front is more targeted on the most vulnerable people, who are likely to be those on income-related benefits. Warm Front will be more targeted on the least energy efficient homes in particular, so that it can be more effective. Alongside that, we are committed to maintaining winter fuel payments, which were planned by the previous Administration, at a higher rate of support this winter.

There were some questions about how the cold weather payment would work, and I am keen to receive more information from the hon. Member for Strangford (Jim Shannon) about his concerns. It strikes me as a particularly well-targeted benefit. It is automatic and based on a postcode approach. When the temperatures in a postcode trigger a payment for those who qualify because of the benefits that they receive, they should receive it automatically. If the hon. Gentleman would like to write to the Department with his concerns, we would be keen to respond to them in more detail to ensure that the scheme is working as effectively as possible.

We are also committed to doing more to work with the energy companies to identify vulnerable customers. The energy rebate scheme has been an extremely effective mechanism. It has matched information from the Department for Work and Pensions about those who are on pension credits with the consumers of each energy company. That has enabled the companies to target those people with an £80 discount on their electricity bills, which has enabled 200,000 households to benefit to the tune of £16.5 million in total, with additional running costs paid by the energy companies themselves. That shows the benefits of the Government and industry working together.

We are determined to build on the success of that scheme through the warm home discount, which will also help to address the issue—this was mentioned by the hon. Member for Islwyn earlier—of hidden fuel poverty for people who do not necessarily come forward. It will require the energy companies to give a greater discount and to target it on the most vulnerable customers, sharing more information about other people who are in receipt of benefits. We expect it to be £140 a year, which almost doubles the discount on electricity bills. We are also looking at how we can spread the breadth of that for low-income families, those with long-term illnesses and those with disabilities, which are issues that have been raised in this debate. We are in touch with Macmillan to try to make this scheme work for those homes with someone suffering from cancer, for whom we all have tremendous sympathy and wish to help as much as possible. The scheme will be mandatory and worth £1.1 billion over four years. We expect it to help 2 million households a year.

Against that background, we also believe that the time is right for a fuel poverty review, and I am grateful for the recognition and support that it has received from hon. Members who have spoken this morning. It will ensure that the available resources are focused most effectively on tackling the problems underlying fuel poverty. It will be an independent review of the target and the definition of fuel poverty. We believe that that is the right place to start. Given the failure so far to meet the targets that have been set, it is right that the target and the definition should be the starting point. Additionally, if we are to have someone truly independent to chair the review, we are keen that they should also help to frame its terms of reference and its priorities. It will be fundamental in helping us to assess what will be the right measures to deal with the challenges.

We have heard a significant amount—understandably so—from hon. Members on both sides of the House about their concerns about the domestic oil market and the liquefied petroleum gas market. I want to make it absolutely clear that we understand those concerns. As a Member of Parliament, this is the largest issue raised in letters in my constituency postbag. As a Minister, it is the largest element of the letters in my ministerial postbag that express concerns to me in the Department. I have no doubt whatsoever that many hon. Members and members of the public do not believe that the market has been working as effectively as it should.

We recognise that many issues can affect prices—refinery capacity, stock levels, distribution costs, retail margins and exchange rates all have a role to play—and we are liaising with the Office of Fair Trading, which has the responsibility to consider any example of market failure. What has struck me in many of the letters that I have received and in the contribution of the hon. Member for Brecon and Radnorshire is the specific—not anecdotal—examples of where things have not worked as we would expect them to. I hope that the Office of Fair Trading will consider those matters very carefully. It is currently consulting on its annual plan and on proposals to prioritise markets impacted by high, rising and volatile commodity prices. The Department of Energy and Climate Change supports such an independent assessment of the off-gas grid supply issues for consumers and competition in the relevant markets.

Many issues need to be addressed in this context. However, we also need to consider how we address these matters more fundamentally. There are plans to extend the gas grid, but it is a slow process and we recognise the challenges that exist. That is also why we have attached so much importance to taking forward the work on the renewable heat incentive. We want to encourage those people who are off-gas grid to look at other renewable ways of heating their homes and providing hot water. The renewable heat incentive, on which details will be announced shortly, will be a crucial way to try to deliver on that.

[Albert Owen]

The Minister is very skilful in his reply. He mentioned the apparent failings of the Office of Fair Trading. Will he consider—I am asking for a consideration—whether DECC will look at the work done by Ofgem on the on-grid and by the OFT on the off-grid? Will he consider the comparisons and think about whether there should be a single body dealing with the matter, because the complexity of making reports to the OFT, which must then do so to the Competition Commission, does not benefit vulnerable people in those areas? I ask him as a DECC Minister to go back to his officials, look at those comparisons and come up with a possible regulator for the off-grid in the future.

[Charles Hendry]

If the hon. Gentleman looks at some of the speeches that I made when I was the Opposition spokesman, he will see that I raised those exact issues. It has been argued that there are many competitive companies in this area. We have heard about some of the challenges to the market in this morning’s contributions. The matter is so important—it is such an enormous part of so many people’s household budgets—that we are determined to ensure that we get the policy right. We will consider how the market is working and the role that the OFT can take, which is primarily independent in its ability to assess these matters. We will also look at the role of Ofgem, as we reform its role as a regulator. It is critical that we learn a great deal from the lessons of this winter.

[Roger Williams]

I am encouraged by the Minister’s commitment to engage with the Office of Fair Trading in these issues. The OFT did eventually relent and conduct an inquiry into liquefied petroleum gas supplies. Customers now have greater power to shop around for better supplies of LPG, but they often do not understand what they can achieve by doing so. A publicity campaign could result in real savings for those customers.

[Charles Hendry]

There is a great deal in what the hon. Gentleman says not just about the benefits of shopping around, but about people understanding the benefits of buying early. The price increase happened extremely quickly. It rose from 40p at the beginning of December to 70p within two or three weeks. More people should be ordering in October and November. I hope that they will not have the experience that the hon. Gentleman had of only getting a partial delivery. We need to ensure that people understand that issue more fully.

The most important change that we need to consider is whether to take a fundamentally different approach to energy efficiency. In this country, we have some of the least energy efficient housing in Europe. From 2012, the green deal, which is part of Energy Bill, will provide the opportunity for householders to take action to improve the energy efficiency of their homes and to protect themselves against energy price rises through greater energy efficiency. We are also introducing a new energy company obligation to replace both the carbon emissions reduction target and the community energy saving programme. That will do more to help the poorest and the most vulnerable consumers and it will offer basic heating alongside insulation.

The key to the green deal is that the consumer should receive the benefit before they have to pay for it. We also hope that it will be of benefit to people who are in private rented accommodation, which is often the most difficult area to deal with. The landlord will no longer have to pay up front to cover the costs because they will be recovered over time from the people living in that property, as a result of a small addition to the Energy Bill. We hope that the landlords will decide to do that work voluntarily, but the Energy Bill will provide powers to require that work to be done, including a new power for local authorities from 2015 to require action to improve the worst performing homes. As the Energy Bill goes through the other place and, ultimately, the House of Commons, we are keen to discuss much of the detail and to ensure that we deal with the matter in the most effective way possible.

[Sir Robert Smith]

The hon. Member for Suffolk Coastal (Dr Coffey) raised the fact that a lot of the early talk about the green deal related to measures such as the physical insulation of the home. Has there been any discussion with suppliers about expanding the green deal or working with installers to put more efficient equipment into the home? Is there any way that that can be integrated into the green deal?

[Charles Hendry]

The golden rule with the green deal is that the saving has to be greater than the long-term cost. Accordingly, measures can be considered—for example, more efficient boilers and thermostat controls—that will help to meet that energy efficiency goal and to fit within the total golden rule that I have mentioned.

The root of the problem of fuel poverty is that price rises and changes are reflected in the cost of energy. I am very disappointed that most energy suppliers announced price increases before the winter. I join the hon. Member for Islwyn in paying tribute to EDF, which deferred a price increase until after the winter. We should recognise good practice where it occurs, and EDF’s customers will recognise and appreciate such action. In addition, we want a complete end to retrospective increases, where customers are only told after an increase has come in that it is going to happen. We want to do more to help consumers switch by requiring more helpful information to be provided on bills, and we are pleased that Ofgem has announced a market review to consider the large increase that it has seen in the profit margins of such companies.

As the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) mentioned, rising commodity prices have been reflected in consumer prices. The increase has been on a rising trajectory, and I think that most hon. Members would assume that the price of oil—currently, $90-plus a barrel—will continue to increase. We are looking to the same companies to rebuild our energy infrastructure. Some £200 billion needs to be found to upgrade our energy infrastructure, because of the lack of investment over recent decades. Accordingly, an enormous amount needs to be done by the companies and we need to recognise that. I am pleased by Ofgem’s work and by the evidence that Alistair Buchanan gave to the Select Committee on Energy and Climate Change yesterday. I am in absolutely no doubt whatsoever about the robustness and thoroughness of the Select Committee’s investigation and the real powers that it has to address these issues.

Once again, I congratulate the hon. Member for Islwyn not only on securing the debate, but on giving hon. Members the chance to address these issues at an important time of year, when they are very much on people’s minds. I also congratulate him on the constructive and thoughtful way in which he introduced the debate.

Rail Services (West Kent)

Wednesday 19th January 2011 Westminster Hall

10:59

[Sir John Stanley (Tonbridge and Malling) (Con)]

This winter, my rail-travelling constituents, of whom there are a large number, have experienced unprecedented disruption in their rail services, and have had to fork out for an unprecedented hike in rail fares. This debate is timely and I am very glad to have been able to secure it. I am delighted to see in their places many of my hon. Friends from west Kent constituencies. I want to focus on four issues: specific rail services; the enormous increase in rail fares; the frankly dismal performance of Southeastern, Southern and Network Rail in trying to cope with the difficult weather conditions in December; and the financial penalties regime that applies to train operating companies.

As the Minister knows from the meeting that we had with her in the House of Commons in July 2010, the biggest single rail services issue in my constituency is the axing of services into the key London termini serving the City—Cannon Street, Charing Cross and London Bridge—on the Maidstone East line. Once again, I must stress to the Minister the truly devastating impact that that has had on my constituents and on the constituents of others along the Maidstone East line. As a result of those services being axed, individuals have had to move house, move their children’s schools and, in some cases, move jobs. Where they have chosen to stay put, they have had to incur substantial extra travelling time and cost driving to stations all over Kent and, in some cases, to south London to gain access to a station with a better rail service to London.

I was encouraged to receive the Minister’s reply in November, in which she said that she was considering options for dealing with this situation. One option, revealed to us in the meeting that Kent MPs had in December with the managing director of Southeastern, was to establish peak-time services on the Maidstone East line into Blackfriars station from May 2012, when its rebuild finishes and new platforms become available. Is that one of the options that the Minister has under consideration? I hope that she will also be able to give us, in her reply to this debate, information about the other options that she has under consideration. I would be particularly grateful for her assurance that, before any final decision is taken on which option to follow, the range of options put before her will be made public and that MPs, rail traveller organisations, local authorities and individual rail travellers will have an option to put their views on those alternatives to the Minister before any final decision is taken.

The other rail service to which I would like to refer specifically and which was axed under the previous Government is the through-rail service on the Tonbridge to Redhill line to Gatwick. We now have, frankly, the ludicrous position where Gatwick is the second largest airport in the UK—2 million people in Kent use it every year—and it is impossible to get a train service from any rail station in Kent, on a through-service basis, to Gatwick airport. The coalition Government pride themselves on their green credentials, but I have to point out that access to Gatwick from Kent is about as non-green as it is possible to be. I hope, therefore, that the Minister will be able to assure us that she and the Secretary of State will look with considerable urgency at the need to restore the through-rail service from Kent to Gatwick airport. That is a necessity and would be highly valued by the people of Kent.

I would like to come to two significant policy points that have a bearing on rail services but cover a wider policy issue. First, the Minister is a London MP and will therefore understand that there is an inevitable tension between the interests of commuters inside London and those who commute from outside London, because capacity is limited. Last year, in my constituency, I had a situation in which Transport for London unilaterally took over critically important train paths on the Uckfield line, used by Uckfield line commuters trying to get to London, for East London line services. That had devastating consequences for my constituents from Edenbridge in terms of overcrowding and inadequate capacity. This year, we hear that Transport for London is now trying to get Maidstone East line trains to stop at additional stations in London, adding still further to the inadequacy of the services on the Maidstone East line in terms of additional journey time and overcrowding. It is imperative that the Minister and the Secretary of State hold the ring between the interests of those who commute to London from outside the city and those who commute to the centre of the capital from inside. There has to be a fair and reasonable balance between those two competing interests and limited capacity.

Secondly, it is not reasonable to create a position in the commuter areas where train operating companies can axe individual services almost at will. In commuter land, individual families—huge numbers of them—make important decisions and lay out substantial sums of money on the assumption that current rail services will continue. That is the basis on which they buy their homes and decide to send their children to particular schools and, in some cases, whether to accept a particular job. It is simply not reasonable for those people to then find that, almost with no notice, those rail services, on which they are critically dependent for their family life, suddenly disappear. I therefore put it strongly to the Minister, and through her to the Secretary of State, that when they come to their review of franchising policy, they must avoid a situation in which train operating companies can turn individual services on their lines on and off like a kitchen tap. That is simply not acceptable or reasonable, given the massive decisions that individual families make when they locate to a village or town with a particular rail service and a particular station.

On rail fares, it is wholly unreasonable to put them through the roof at a time when people’s incomes are either frozen or, in many cases, significantly reduced. That is precisely what has happened to west Kent rail travellers. In west Kent, we feel particularly aggrieved on two scores. First, we feel aggrieved because Southern and Southeastern have justified their fare increases by virtue of investment. I do not deny that Southeastern has made investment, but the issue for us in west Kent is that our rail travellers cannot get any benefit from its two most significant investments. The investments that it has made, under the terms of the integrated Kent franchise, are on the channel tunnel rail link route domestic services into St Pancras and the high-speed services now available on the north Kent line. Those services are of no benefit or use whatsoever to our constituents and rail travellers.

Precisely for that reason, when the integrated Kent franchise was first let, I made strong representations to the then Secretary of State that finances for the channel tunnel rail link domestic services should be ring-fenced. I foresaw exactly what has happened, which is that those of us in west Kent would have to pick up a good proportion of the bill for the financing of those services. Our rail travellers have to pay substantially increased fares as a result of that investment.

[The Minister of State, Department for Transport (Mrs Theresa Villiers)]

I would like to reassure my right hon. Friend that the RPI plus 3% formula for Kent, which I shall address in my remarks, is not related to high-speed services but to the rolling stock. It was added to the lines on conventional services and is not related to High Speed 1.

[Sir John Stanley]

I am glad to have my right hon. Friend’s assurance, which brings me to my second point. The statement that she just made presents me with even more of a puzzle and sense of grievance than I had previously.

The second point of grievance for west Kent rail travellers is the fact that their rail fare increase is substantially greater than those being faced by commuters on other lines. For example, on the Brighton line, which is operated by First Capital Connect, the fare increase is 3.1%, but the increase for Tonbridge line commuters is 11.8%. I cannot see any reason or justification for why the fare increase for my constituents commuting from Tonbridge should be nearly three times as much as the one for those who commute from Brighton.

I put it to my right hon. Friend that it is imperative, within the limits of the present contractual arrangements entered into by the previous Government, that we re-establish a fairer and more reasonable fare regulation regime. After all, the companies are in effect monopolies, and monopolies tend to exploit. Therefore, one has to couple monopolies with effective and firm regulation, but all the evidence so far, as far as Southeastern and the people of west Kent are concerned, is that a firm and fair regulation system simply does not exist.

I said in a speech almost exactly two years ago, on 20 January 2009:

“I must put it to the Minister that the Government’s policy, as far as the thousands of commuters in the south-east are concerned, is resulting in one very clear trend: our commuters—our constituents—are paying ever more for ever less.”—[Official Report, 20 January 2009; Vol. 486, c. 727.]

What happened over the cold weather period is that our constituents and commuters actually were paying ever more for no services at all on several days.

My first question to the Minister is about whether she will tackle Southeastern and Southern to bring in a system of reimbursement for rail travellers for the days on which they have paid their fares but are not able to travel. It seems wholly wrong that someone can pay a fare through a season ticket, whether annually or monthly, but not be able to get reimbursement.

A fundamental point I must put to the Minister is that it was shown during the bad weather in December that the investment by Southeastern, Southern and, most particularly, Network Rail has been totally inadequate to deal with severe weather conditions. The franchise arrangements need to be changed to ensure that we have all-weather services.

[Michael Fallon (Sevenoaks) (Con)]

My constituents in Sevenoaks would certainly endorse all the points that my right hon. Friend has made, but does he agree that rather than a blame game between Southeastern and Network Rail over what happened in the winter, we now need a much more effective system of compensation for services that were cancelled or could have been run than we have at present and that the current penalty arrangements need to be thoroughly re-examined in the light of what happened in December?

[Sir John Stanley]

I am grateful to my hon. Friend, who rightly anticipates my final point.

[Mrs Helen Grant (Maidstone and The Weald) (Con)]

My constituents in Maidstone and The Weald are certainly suffering from the same appalling service outlined by my right hon. Friend: delays, overcrowding, wrong information on websites, lack of toilets, dirty rolling stock, lack of a City of London service, exorbitant rail fares—the list goes on. Does he agree that Kent commuters are feeling very let down and used and abused, and that urgent action is needed?

[Sir John Stanley]

I wholeheartedly endorse everything that my hon. Friend said. I come now to my final point, which is on penalties.

[Gareth Johnson (Dartford) (Con)]

This is about the issues that Southeastern had to contend with during the recent bad weather. Part of the problem was with communication. Many of my constituents in Dartford were informed by the website that Southeastern advertises that services were running and embarked on treacherous journeys only to find that the services were not, in fact, running. That is part and parcel of the problems that Southeastern needs to overcome.

[Sir John Stanley]

I wholly agree with my hon. Friend. The communication failures by both Southeastern and Southern during that period were abysmal.

My final point is that the penalties regime is wholly unsatisfactory, because it impacts solely on lateness. One important question for the Minister on a specific issue: is she satisfied with the accuracy and independence of Southeastern’s calculation? By the most wafer-thin of wafer-thin margins—0.04%—it has managed to escape financial penalties for lateness in its latest figures.

I come to the wider issue of the gross failure of the penalties regime—this was a failure by the previous Government—which applies to lateness but fails to apply to cancellations. As I said in a letter to the Secretary of State, that produces a perverse financial incentive for train operating companies to cancel services willy-nilly to avoid lateness, but the reality on the ground is that our long-suffering constituents and rail travellers would much rather travel on a train that arrives late than stand at the station from which they want to depart, waiting for a train that has not come.

[Mr Roger Gale (North Thanet) (Con)]

As an aside, I am totally taken aback by the Minister’s assertion that the 12.8% fare increase experienced in east Kent does not include a contribution towards High Speed 1, because that is certainly not the impression that we have been given in the past.

My right hon. Friend the Member for Tonbridge and Malling has just given the figures used by Southeastern to make the case for not paying compensation, but have the figures not been massaged by including the High Speed 1 service, which is normally fairly reliable? Were that taken out, the case for compensation would be overwhelming. Is it not a greater irony that if compensation were finally paid, the travellers on High Speed 1 would benefit from it?

[Sir John Stanley]

I am grateful for that intervention. We shall look forward to the Minister’s reply in respect of Southeastern’s figures. I hope that she and the Secretary of State will look fundamentally at the penalty regime for train operating companies, because it is clearly grossly inadequate and is actually working to the disadvantage of the rail-travelling public.

In conclusion, rail travellers in west Kent are, without doubt, getting a raw deal: they are getting inadequate services at excessive cost. What rail travellers and our constituents in west Kent want are satisfactory services that are accessible from a station reasonably close to their home, at a cost that they can afford. I look to the Secretary of State and the Minister to deliver just that.

11:19

[The Minister of State, Department for Transport (Mrs Theresa Villiers)]

I congratulate my right hon. Friend the Member for Tonbridge and Malling (Sir John Stanley) on securing the debate on west Kent rail services.

I note the array of Kent MPs who have come to express their concerns today, namely my hon. Friends the Members for Chatham and Aylesford (Tracey Crouch), for Maidstone and The Weald (Mrs Grant), for North Thanet (Mr Gale), for Dartford (Gareth Johnson) and for Sevenoaks (Michael Fallon).

I cannot think of a set of MPs more assiduous on rail matters than those gathered in the Chamber today. In particular, my right hon. Friend the Member for Tonbridge and Malling scrutinises the performance of train operators and Network Rail in his constituency with the greatest diligence, and he holds the Government to account when their decisions impact on passengers. He has expressed serious concerns today.

Before turning to the details that my right hon. Friend has raised, I emphasise the commitment of the coalition to investment in rail as a vitally important part of our transport system and the importance that we devote to improving services for passengers, addressing reliability problems such as those that my right hon. Friend has highlighted.

In the past, the axe has tended to fall first and hardest on infrastructure projects, including rail, following a spending spree. The Government have sought to break away from that, because we know the enormous importance of the rail network to our economy and, of course, to thousands of commuters throughout the country. Over the next four years, we will invest £18 billion in rail capital projects, on top of the money spent day to day on funding rail operations on the network, on infrastructure and on the subsidy for passenger train services. The Southeastern franchise is in receipt of the highest level of subsidy of any train operator in London and the south-east.

We are focused on dealing with capacity issues on services in Kent, Sussex and Surrey. We have secured the funding for Thameslink to be delivered in its entirety, albeit over a slightly longer time frame than originally intended. That major investment programme will virtually double the number of north-south trains running through central London at peak times, delivering up to 1,200 new carriages and providing commuters in Kent, Sussex and Surrey with a wide range of new journey opportunities to central London and beyond.

On the timetable issues highlighted by my right hon. Friend, December 2009 saw a radical overhaul of services throughout the county of Kent, delivering approximately 200 additional services per day as well as the introduction of the UK’s first domestic high-speed services. Unfortunately, with change on that scale, the concerns of people on different parts of the line will always mean conflicting interests and trade-offs. However, it is important that such timetable changes are properly consulted on. My right hon. Friend would like me to guarantee that there will be no changes in future to current timetabling arrangements. It would not be wise for me to give that assurance, although I can give an assurance about the importance that the Government place on ensuring that train operators consult the communities affected properly when making major timetabling decisions.

I am very much aware of the constituents of my right hon. Friend who are unhappy about the impact of the December ’09 timetable on the services at their station. As we heard from my right hon. Friend, I met him and others who are in the Chamber today at a meeting to discuss the issues, and they urged me to reassess the decision taken by the previous Government to remove direct services from Maidstone East to Cannon Street. I agreed to review the business case for the service and to look again at Labour’s decision not to introduce the service.

Following initial evaluation of the business case, I asked my officials to work with Southeastern to assess a range of options that could improve services to stations in the Maidstone area. That work is ongoing, and I am not as yet in a position to share any conclusions with my right hon. Friend or the Chamber, but I hope to write to him about the conclusions by the end of February. We are still assessing the different options. However, I emphasise that, given the current state of the public finances, changes will only be possible if they do not require funding from the Government in addition to the substantial sums already subsidising the Southeastern franchise and the infrastructure supporting it.

My right hon. Friend raised the Uckfield line issues resulting from Transport for London’s decision to strengthen services on the East London line. Again, that is a controversial matter. Local authorities are involved in deciding how rail services will be configured through a system of increments and decrements, which was what operated in that case. However, I emphasise that decisions on such changes must always take into account the interests of all the communities affected.

I can give an assurance to my right hon. Friend that the Government, in the decisions they take on the configuration of rail services, very much take on board the interests of those who live in London and those who live outside. In response to his concerns about whether his constituents are getting proper consideration in such decisions in comparison with people who live inside London, it is important to treat both groups fairly.

Looking ahead, the completion of Thameslink work at London Bridge in 2018 will trigger another extensive recast of train services throughout much of the county of Kent. Network Rail is developing options for the shape of those services from 2018, but decisions will not be made for some years yet. However, my right hon. Friend’s input into those decisions will be very welcome.

A number of my hon. Friends have expressed concern about disruption to rail services in Kent as a result of the severe weather in November and December. Throughout the crisis, officials were in constant touch with the rail industry, and the Secretary of State and I were also in contact with senior management at Network Rail and at the various train operators. Some disruption is inevitable in extreme weather conditions, but we need to ensure that transport operators work as hard as possible to deliver the services that are feasible in such circumstances.

On reliability as opposed to cancellations and the perverse incentives that my right hon. Friend is concerned about, I have urged the rail industry to consider how it assesses punctuality to ensure that it works on overall reliability as well as seeking to minimise cancellations and instances of significant lateness.

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

Will the Minister give way?

[Mrs Villiers]

Unfortunately, I have only a few minutes left.

The Secretary of State also asked David Quarmby to audit the performance of rail operators during the severe weather conditions, and his conclusions make it clearer than ever that rail operators and Network Rail must do much better on the provision of information to passengers about the new timetables imposed as a result of severe weather conditions. We are looking to the rail industry to respond to and learn lessons from what happened, and to do much better on providing accurate information to passengers about the impact of disruption.

We are also urging Network Rail to address the fragility seemingly revealed in the infrastructure on the part of the rail network served by Southeastern. Network Rail is looking to extend its trial on heating the conductor rail at key locations. It is also working to test the use of de-icing equipment on passenger trains.

Last week, I met senior representatives of the rail industry to assess overall performance after the severe weather. I singled out Kent and emphasised to Network Rail that improving the performance of the rail infrastructure used by the Southeastern franchise is vital. The rail industry’s national task force will, as a result, be reviewing operational performance of Southeastern and Network Rail in Kent. I emphasise that the review will not be limited to the adverse weather episode and will cover general performance levels. I expect senior figures from the operator and from Network Rail to discuss the work of the national task force with me.

The compensation and penalty arrangements that my right hon. Friend asked about are set out in the franchise. We take every step to ensure that train operators, whether Southeastern or anyone else, comply with their obligations. The passenger charter and compensation arrangements have to be regularly audited by an independent body. The penalties regime is also kept under review. I have no reason to believe that the figures produced by Southeastern have been inaccurate, and the franchise requires independent auditing.

11:30

Sitting suspended.

Government Skills Strategy

Wednesday 19th January 2011 Westminster Hall

[Mr Jim Hood in the Chair]

14:29

[Robert Halfon (Harlow) (Con)]

First, I would like to register an interest. I have an apprentice in my office who is paid partly by a local businessman, Mr Dean Barclay, and partly by Essex council.

One good thing about skills and apprenticeships is that they are not a party political football. We may sometimes disagree on the right approach, but all sides of the House want to see more jobs for young people and an internationally competitive Britain. As a new MP, I know that many hon. Members care deeply about the problems of youth unemployment, and there are many others who know more about that issue than me.

However, when one looks at the manifestos, initiatives, Whitehall targets and, crucially, the Budget Red Books from the past 20 years, there is a clear conclusion—for decades, the focus has been university, university, university. Let me be clear: I am not anti-university. I was lucky enough to study at Exeter university, which I would recommend to any student. [Interruption.] My hon. Friend the Member for Bromsgrove (Sajid Javid) is present. He was at Exeter university at the same time.

The massive expansion in higher education has left us with problems. First, the poorest have not really benefited. The representation and likelihood of success at university remain highest among young people with wealthier parents, and lowest among those from deprived neighbourhoods. Young people from our poorest housing estates are still the most likely to drop out, take one gap year after another, defer enrolment, and switch, repeat or continually restart their course. Secondly, there is a skills deficit. For years, construction has represented about 10% of our GDP, but we have consistently imported much of that labour from Europe. We have created a rootless, undereducated and jobless generation of graduates who do not always have the right skills for our growth industries.

Finally, there is a NEET problem. Despite the efforts of the previous Government, the number of young people who are not in employment, education or training rose year after year. Between 2000 and 2010, the number of NEETs aged between 16 and 24 steadily increased from about 600,000 to more than 1 million. That was not a temporary blip due to the recession; it was a structural problem that got worse and worse. Research by Edge, the vocational skills organisation, shows that two out of every five teachers push A-levels as being the best route to university, and believe that vocational routes are a risk because they rule out university altogether. The research shows that apprenticeships are seen by many parents as a second-class option or a B-grade back-up for young people who cannot handle—or cannot be bothered with—writing essays. I believe that apprenticeships are a forceful answer to the problems of social mobility, our skills deficit and the rising NEET population.

[David Simpson (Upper Bann) (DUP)]

I congratulate the hon. Gentleman on securing this debate, and offer apologies to the Chair. The Northern Ireland Affairs Committee is sitting today and I must leave early to attend that. He mentioned the needs of young people. Does he agree that, although we can have Government strategies and 50,000 new apprenticeships, or whatever, we must also have universities and FE colleges that provide the right courses? There is no point in someone going for an NVQ in politics if they are going to be a mechanic. We need a cocktail of measures, and our universities and FE colleges must provide the right courses to benefit young people as we go into the economic revival. That will certainly help industry.

[Robert Halfon]

The hon. Gentleman has said in 20 seconds what I will say in about 20 minutes. I agree with him entirely and that is an essential part of the skills strategy. It is no good having courses and apprenticeships if they do not provide what business and industry need.

[Mr Jim Hood (in the Chair)]

Neil Carmichael.

[Neil Carmichael (Stroud) (Con)]

Thank you, Mr Hood. I have had more success in this Chamber than I did downstairs. In my opinion, it is critical that people are signposted towards the right kind of course—that is certainly the feeling I have found in my constituency. We need to increase the range of skills and the number of people interested in learning those skills, and we need businesses to support that thereafter. Does my hon. Friend agree?

[Robert Halfon]

I agree with my hon. Friend. Like me, he has a passion for apprenticeships and skills. I do not want to ruin the excitement and anticipation of my speech, but I am sure that he will be in full agreement with my later remarks.

I welcome the Government’s skills strategy document. I pressed for this debate, and I am grateful to Mr Speaker for allowing it. However, we must tackle two fundamental problems. First, apprenticeships must be a better route to university. Secondly, and perhaps most importantly, we must change the culture in which apprenticeships are regarded and increase the prestige in which they are held.

Pessimists today look at the rapid industrial growth of the so-called BRIC economies, and the fact that even Brazil might have its own space programme, although we do not. Many people worry that Britain is in decline, and see only an endless series of eurozone bail-outs, shrinking British tax revenues and our slow but inevitable slippage down the international league tables in skills and education.

Nevertheless, there are reasons to be cheerful. To paraphrase Golda Meir, “Pessimism is a luxury that no politician should allow himself.” The independent Office for Budget Responsibility forecasts that our economy will grow in real terms in each year of this Parliament, and there is growing consensus that vocational skills and apprenticeships will play a big part in that. We see a shift in attitude in the passion of the new crop of MPs for vocational qualifications. My hon. Friend the Member for Gloucester (Richard Graham) has just entered the Chamber. He gave a very good speech in a debate on that subject last year. We also see the commitment of the Minister and his team.

In 2011 we need, above all, growth, jobs, confidence and young people doing training that will provide them with opportunities for the future. Apprenticeships are about not only economic utility but social justice, and I have always believed that if we give young people independence, a work ethic and the chance to improve their lives, we give them freedom. I do not argue for more apprenticeships and better skills because of economic reasons; I argue on grounds of social justice.

Margaret Thatcher is not often remembered for her views on skills and vocational qualifications, but she said:

“A man’s right to work as he will, to spend what he earns, to own property, to have the state as servant and not as master—these are the British inheritance. They are the essence of a free economy... and on that freedom all our other freedoms depend.”

That, in a nutshell, is why for me, apprenticeships must be at the core of our education system. Young people deserve the chance of economic freedom as much as everyone else.

In the Government’s paper, we see that most forcefully in the plans to make all vocational training free at the point of access, with costs repayable only when people are earning a decent salary. That will help young people of course, but more significantly it will open up apprenticeships to single parents, back-to-work mums, jobless adults, the homeless, and ex-offenders who want to go straight. Those people may have huge potential, but often cannot afford the fees to retrain. They deserve the chance of economic freedom, too.

At the same time, not everything in the garden is rosy. As the Government’s skills strategy paper points out,

“Our working age population is less skilled than that of France, Germany and the US and this contributes to the UK being at least 15% less productive than those countries.”

That is why the Government’s new focus on apprenticeships and their expansion of adult apprenticeships by up to 75,000 is essential. That will lead to 200,000 people starting an apprenticeship each year by 2013-14—numbers that are beginning to approach the scale of A-levels. The Minister’s plans to enhance the level 3 apprenticeship by classing it as “technician level” will also help to boost its prestige. That is especially true if people know that they can become an apprentice not just in a trade, but in finance, media, hospitality, business and even politics.

The apprentice in my Westminster office, Andy Huckle, who is sitting right behind me in the Public Gallery, is combining a year in the House of Commons with a level 3 course in business administration, which is like an entry-level MBA.

[Mr Jim Hood (in the Chair)]

Order. I remind the hon. Gentleman that he is not allowed to refer to anyone in the Public Gallery.

[Robert Halfon]

My sincerest apologies, Mr Hood; I was not aware of that.

My apprentice is a great example of my next point, which is that apprenticeships can be well suited to academic students, who can go on to achieve at university. He is now applying for degree courses to start next year and hopes to study history at the university of East Anglia. That is why I welcome the Government’s intention to create “clear progression routes” from level 3 to level 4 and higher education. That will give people like my apprentice a chance to see a busy workplace, to make things happen in the real world and to get money in their pockets, without having to abandon all hope of taking part in the pub crawls, protests at Westminster and student politics that so enrich university life.

[Mr Andrew Smith (Oxford East) (Lab)]

I congratulate the hon. Gentleman on securing this important debate and I agree with the thrust of what he is saying. Does he agree that there must be a thoroughgoing effort with employers, taking account of the needs of employers, in order successfully to establish more apprenticeships? In my constituency, we have the excellent example of apprenticeships at BMW, which encapsulate the sort of progression route that he mentions. Indeed, the demand to get on those apprenticeships is terrific, with the number of applicants greatly exceeding the number of places. Is it not the case that we need more such employers offering those opportunities, which will benefit them as well as the economy and those who are taken on?

[Robert Halfon]

The right hon. Gentleman has a lot of experience in these matters; indeed, his experience is far greater than mine. I agree with him. There are two sides of the coin, and this push will not work unless businesses are incentivised and encouraged in more ways than one to set up apprenticeship schemes and to do the things that he describes.

[Richard Graham (Gloucester) (Con)]

Like the right hon. Member for Oxford East (Mr Smith), I warmly congratulate my hon. Friend on securing the debate and championing apprentices in this Parliament. It is very nice to see his own apprentice here. Could I just ask—

[Mr Jim Hood (in the Chair)]

Order. I am assuming that the hon. Member for Gloucester (Richard Graham) heard what I said to the hon. Member for Harlow (Robert Halfon) when he made reference to an apprentice in the Public Gallery. It was not in order for him to do that, and nor is it in order for the hon. Member for Gloucester.

[Richard Graham]

Thank you, Mr Hood. Does my hon. Friend agree that a terrific opportunity is coming up in only a few weeks’ time, in national apprenticeship week, for employers to show their commitment, as he rightly says, to offering both economic opportunity and social justice to the young unemployed in our country by participating in that initiative? Does he also agree that what is being done in Gloucestershire, where we have the Gloucestershire apprenticeship fair, which will feature a keynote speech by the Minister responsible for apprentices, is exactly the sort of thing that should be happening throughout the country?

[Robert Halfon]

Yes. What my hon. Friend has just said, and particularly the fact that he has managed to secure the Minister responsible for apprentices for the event in his constituency, shows exactly why he is such a champion of apprentices. Something has come through to my office about MPs becoming apprentices for a day, and I hope very much to be able to do that during apprenticeship week.

I should also mention that my apprentice is partly funded by a local business man, who employs eight apprentices and 13 ex-apprentices in his construction firm. He wanted to support us because he was an apprentice many years ago. He is a real example of the social capital that can be built when employers take apprenticeships seriously, as the right hon. Member for Oxford East (Mr Smith) said.

The philosophical heart of the Government’s paper is that the world is too complex to be planned and delivered centrally. Hon. Members on both sides of the House will, I hope, welcome the new freedoms that the Government are devolving to further education colleges, with the simplification of budget lines and the reductions in audits and form-filling. Harlow college used to receive umpteen different ring-fenced types of funding for adult learners, all of which had to be monitored, with no flexibility to move funding between them. Now, there will be a single funding line for adults. It will be a much simplified system, with less paperwork.

At the same time, the quicker the Government can move to do the same for funding for 16 to 18-year-olds, the better. Harlow college at one time had 50 separate funding lines for 16 to 18-year-olds, all requiring separate reporting, which is bureaucratic insanity.

Possibly the greatest freedom that the Government are giving FE colleges—I am very excited about this—is the chance to bid for and run university technical colleges. The Minister is working closely with my right hon. Friend the Secretary of State for Education and with a former Education Secretary, Lord Baker, on their roll-out across the country. Like the old institutions that taught technical skills, although they will not be seen as second grade, university technical colleges will combine English, maths, information and communications technology and business skills with specialist subjects that require technical equipment—for example, engineering, product design, construction and environmental services. They will be part of the Government’s massive expansion in academies and, crucially, a conveyor belt to level 3 and 4 apprenticeships and higher education. As a major structural reform, university technical colleges tackle head-on the problems of low prestige and poor routes to university from which apprenticeships are suffering.

I have met several times Lord Baker and representatives of Essex and Harlow councils, Harlow college, Anglia Ruskin university and Pearson UK about the prospect of a UTC in Harlow. Lord Baker has visited Harlow college himself—as has the Minister—to try to bring that into being. Only last week, the Minister reminded us that Harlow college

“is an exemplar in so many ways.”—[Official Report, 13 January 2011; Vol. 521, c. 411.]

Under the principal, Colin Hindmarch, the college has been transformed from being at the lower end of the league tables to being nationally competitive. Indeed, it is rapidly becoming one of the best colleges in England. In terms of value added—how much a student improves between starting and finishing their course—it is one of the best places to study in the UK. I am delighted to tell hon. Members today that Pearson UK—a national firm based in Harlow—is examining how it could support the college’s bid for a UTC in Harlow, perhaps with an application later this year.

The former Prime Minister, Tony Blair, has argued that we have not really decided as a nation whether we want American levels of taxation or European levels of public services, but increasingly I think that that is a false choice. When the private sector makes a voluntary contribution to enhance a public service, it can result in the best of both worlds. As the Government’s strategy paper states, the cost of training

“should ultimately be shared between employers, individuals and the state to reflect the benefit each receives.”

So long as there is no barrier to access, such as up-front fees for courses inherited by the Government, sharing the cost is fair, as it recognises that education is both a private and a public good.

I clearly support the Government’s strategy on skills, but I believe that further steps need to be taken. I recently met apprenticeship organisations, from livery companies to UK Skills and from the Association of Colleges to Edge, each of which represents a different part of the jigsaw of occasional qualifications. We discussed the idea of establishing a national society of apprenticeships, even a royal society, similar to the Law Society or the British Medical Association—or, better still, the Royal College of Surgeons. I tabled early-day motion 587 in support of that notion and raised the proposal in Parliament. A society with membership benefits such as high-street discounts and social events would dramatically increase the prestige and culture of apprenticeships. The Minister will be aware that I have been holding discussions with relevant groups, businesses and student organisations for a number of months, and I hope that we and the Government will be making an announcement in the near future.

Secondly, last week I spoke to the Minister about the pioneering wage-subsidy scheme run by Essex county council, and asked whether the Government would consider encouraging other local authorities to roll it out.

[David Simpson]

I thank the hon. Gentleman for giving way a second time. He has hit upon a poignant matter: the incentivisation, if that is the proper word, of young people to go into apprenticeships. There needs to be some financial reward or incentive. In my constituency, 15 or 20 young people may start an apprenticeship course, perhaps at an FE college, but only five will finish it because the finance is not there. It is difficult to get companies to sponsor apprentices in the current economic climate.

[Robert Halfon]

The hon. Gentleman is exactly right. Part of the problem with people who want to do apprenticeships is that they cannot afford to do so. I am lucky that the apprentice in my office lives with his family; it would be much harder if he did not, as the apprentice wage is just under £100 a week. That is why we need a royal society of apprenticeships. That is why I am working with student organisations and others to bring about an incentive scheme. If we change the culture and prestige of apprenticeships, there will be a genuine substantial financial incentive for people to become apprentices. Another big problem relates to single parents wanting to do apprenticeships. The Essex county council scheme is specifically directed at such low-income groups, and it needs to be replicated.

I believe strongly that companies tendering for Government contracts should include a clause in their agreements that will boost apprenticeships. I suggested that Essex county council should consider including such a clause for its major construction projects. Today, I received confirmation that it is committed to making that happen; all who tender for major construction works with Essex county council will need to have an apprentice. That is an important step.

I turn to the question of EMA reform. A debate on the subject is taking place in the main Chamber as we speak, but I wish to discuss the matter with the Minister. A central aspect of further education is the affordability of studying, and getting young people not only to start but to finish their courses. I support reform of the educational maintenance allowance, as I accept that there are flaws in the current system. However, certain factors might affect students and apprentices, particularly those from deprived backgrounds. I shall use my local college as an example.

Nearly two thirds of learners at Harlow college receive the EMA, and 80% of them receive the full £30 a week. The college estimates that between 300 and 400 learners at Harlow—about 10% to 15%—depend on the EMA for lunch and dinner and for travelling to college. Those learners are the most vulnerable, from the poorest housing estates. The next tier is made up of a further 300 to 400 learners, another 10% or 15%, who are not the very poorest but are still from deprived backgrounds—people who strive and work hard. Without the EMA, they would need part-time jobs to increase their income significantly, but given the job market today that is not easy.

Harlow college is not stuck in the past, and it welcomes reform. It is not reactionary and does not represent what Tony Blair once described as the forces of conservatism. Whatever system we put in place, however, we must recognise the different financial positions of those two groups. I have discussed with the principal of Harlow college making the EMA, or a centrally administered college fund, dependent on improvement rather than attendance. It is something that he supports. We believe that learners should earn their money not simply by showing up, but by being punctual, behaving well, working hard and making good progress. As with apprenticeships, it would teach young people the work ethic. For level 3 courses, there are several value-added measures, including the key stage 5 achievement and attainment tables, that can be used at the end of a course to measure the success of tying EMA funds to achievement.

[Mr Andrew Smith]

The hon. Gentleman is being generous in giving way. He makes a good point. We could have a separate debate about the EMA; indeed, one is going on at the moment. He understands well the circumstances of the students and apprentices at his college. Does he believe that, under the Government’s proposals, there will be enough in the discretionary fund to incentivise and reward students, as he advocates?

[Robert Halfon]

I cannot answer that question because we do not yet know what the grant will be. I support reform of the system, but I want to ensure that those about whom I have spoken are not disadvantaged. As soon as I know what the grant will be, I shall be able to give a better answer.

Harlow College monitors the progress of learners every day on all the measures that I described earlier—attendance, punctuality, behaviour, work done and progress made. The Minister has a genuine passion and feeling for vocational education, and I hope that he will discuss the matter with his colleagues when considering reform.

The self-reliance, freedom and maturity that come from earning one’s own money are not to be underestimated. We have many reasons to be cheerful about the economy, and the Government’s skills strategy is a critical first step towards restoring the centuries-old British tradition of vocational training and manual craft. University technical colleges will accelerate the Minister’s efforts to improve the prestige and status of apprenticeships and to strengthen the routes from apprenticeships into higher education—especially if, as I hope, we have such a college Harlow. As I said, that is important for social justice, because apprenticeships are our best hope against the compounding problems of stalled social mobility, our skills deficit and our rising NEET population.

I sincerely hope that we can make progress in creating a society of apprentices, nudging other councils into adopting Essex county council’s pioneering wage-subsidy scheme, and creating an EMA system that supports the poorest and the most deserving. We must reward determination. One of my favourite books is “David Copperfield” by Charles Dickens. Although David starts off life being treated very badly by Mr Murdstone, he later finds an apprenticeship with a solicitor. Towards the end of the book, he says:

“I was not dispirited now. My whole manner of thinking was changed. What I had to do was to turn the painful discipline of my younger days to account by going to work with a resolute and steady heart.”

It was David Copperfield’s apprenticeship that transformed his life and circumstances. I know that that is what the Minister intends for our apprentices, and I look forward to his reply.

15:00

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

I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on his excellent contribution and the Government on their skills strategy, which is an excellent piece of work. Clearly, if we are to get this country back on its feet, apprenticeships will be key. They will generate private sector jobs, particularly in manufacturing and industry, which will create wealth, so I really welcome this strategy. The fact that we are creating 50,000 new apprenticeships for young people, using, in part, some £50 million from the Train to Gain fund is good news. Moreover, we will put some £605 million into creating 75,000 apprenticeships for adults. That is an area that has not been given the funding or attention that it deserves, so I really appreciate the investment.

My hon. Friend talked about the challenge of creating apprenticeships that are valued, and that goes hand in hand with making manufacturing jobs, or any job that requires the use of one’s hands as well as one’s brain, valued in this community. In Germany, those involved in such industries are well respected, and we must bring that view here. I agree with my hon. Friend that bodies should be created to help build some pride in the idea of being an apprentice. I ask the Minister to think of a way in which we can regenerate some value in the word “technician”. Those of us who have been lucky enough to go to university can call ourselves graduates, which is an incredibly valuable term. It would be good if we could make the word “technician” resonate in the same way.

The Government are looking to raise the baseline for apprenticeships. At the moment, we have NVQ level 2, which is the basic apprenticeship scheme, NVQ level 3, which is the advanced apprenticeship scheme and NVQ level 4, which is the higher apprenticeship scheme. The Government plan to make the advanced level the new baseline, which is an excellent idea. That will help people to aspire to something higher and enable employers to see how much we value the scheme.

Research has shown that those who take on apprenticeships do better economically than those who do not. An advanced apprentice is likely to earn £105,000 more over a lifetime than a colleague with a lower qualification, so there is a definite win for the individual who makes that investment.

The hon. Member for Upper Bann (David Simpson) talked about some apprentices starting courses and not completing them. I am heartened to find that the apprentice success rate is on the increase. The latest figures that I have seen put the success rate at 70.9%, which, in the grand scheme of things, is not bad at all. In my constituency of Newton Abbot, we have a history of manufacturing. Originally, Newton Abbot was at the heart of the railway industry. When that fell away in the 1950s, a number of individuals were taken on at Centrax, which has been the hub of engineering and manufacturing in my constituency. I am pleased to say that the organisation has attracted a number of other businesses to the area. Getting apprenticeships working well in the area should help more engineering businesses—some of them will be very small—to establish and develop in the area.

[Mr Andrew Smith]

I am following the hon. Lady’s remarks with interest. She referred earlier to the shift of more apprenticeships to the higher levels. Has she seen the Association of Colleges briefing for this debate, which points out that such a shift is not as simple as it might appear, because the time commitment and the cost increase for both the apprentice and the employer? Moreover, it found that there was less demand from employers for apprenticeships at the higher level. Does that not reinforce the point that I made earlier that there must be a thorough dialogue and engagement with employers, with incentives where appropriate, to ensure that they take advantage of the scope to expand the higher level apprenticeships?

[Anne Marie Morris]

The right hon. Gentleman makes a good point. It is crucial that we get employers as engaged in the process as the potential apprentices. A private sector vocational organisation in my constituency is an excellent example of that. Before finding the apprentices, it makes contact with local businesses to explain the opportunities offered by the scheme and to create those apprenticeships. That sort of proactive approach is invaluable. The more of that we can do, the better off we will be.

The real value of the apprenticeship scheme is that it will give young people an alternative. Not everyone is suited to an academic career. Many NEETs in our society feel that there is no real alternative. Nationally, we have more than 1 million NEETs, which is far too high. In Devon, within which my constituency sits, there are 1,190 NEETs between the ages of 16 and 18 —5.7% of the youngsters—which is a huge waste. Research shows that the cost to the taxpayer is substantial—around £97,000 over a lifetime. Some people put the cost as high as £300,000 because of the associated benefits, which is a huge price to pay both financially and socially. Therefore, this must be the right way forward.

To get the apprenticeship programme working well, we must look at the linked-in skills training that is on offer and establish the link between training colleges and sixth forms. Will the Minister tell us what sort of grant might be available to those skills colleges, because, at the moment, that is an area that lacks clarity? A number of training organisations and colleges in my constituency have questioned me on the matter. They ask what the picture will be when the Train to Gain programme slowly begins to evaporate. They are particularly concerned that grants will be as available to the smaller organisations as they are to the larger organisations. I am interested to hear the Minister’s thoughts on that particular front.

As I have said, it is important to get employers to play their part and to incentivise them, as the college I referred to earlier is doing. We want our colleges literally to go out on the streets and find those young people. I have been very impressed by South Devon college, which does just that. There are parts of Newton Abbot where young people with no education, training or job congregate. Individuals go to those places to talk to young people about what might be possible. That is absolutely the right way forward, and I welcome it.

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

The hon. Lady talks about actively targeting young people on the streets, but does she agree that some groups—I am sure things are the same in my constituency as they are in hers—are also actively involved in mentoring young people? Many young people feel helpless when it comes to getting the vocational training that might help them to get employment—they feel completely disempowered. If these groups get out there, they can target young people, help them, sit alongside them and bring them into the mainstream to ensure that they get essential qualifications.

[Anne Marie Morris]

That is a prime example of the big society. We are in a good position to achieve exactly what he has indicated. We are all in this together, and there is a lot that we can do together.

While we are on that point, my hon. Friend the Member for Harlow has mentioned his concern about the withdrawal of the EMA. I share his view that the old system did not work terribly well, but I also share his concern that there needs to be something to help young people. I am pleased that the new fund will be made available, but the real challenge is the transition and ensuring that nobody falls down the gap. One of the things that I have been doing locally in my constituency is trying to help deal with that gap. I have been working with colleges and voluntary charities that provide local transport and asking them whether we can find a way to work together and get young people to college. I am pleased to say that I have received positive responses from local transport charities. That is exactly where we should be going and what we should be doing.

Perhaps I can leave the Minister with a second and final question, which is about real challenge that we face in deprived rural areas, of which Newton Abbot is undoubtedly one. The cost of living in Newton Abbot is very high, partly because of the distances involved in getting around the constituency and, as hon. Members are well aware, because of the huge water bills. However, we also have very low salary levels. The challenges that my hon. Friend has mentioned are particularly acute in rural areas. I appreciate that we are in difficult times and that we must be careful to get value for every penny we spend, but I wonder whether particular consideration can be given to helping youngsters in rural communities access the apprenticeships and training that they need.

15:12

[Mr Andrew Smith (Oxford East) (Lab)]

I congratulate the hon. Member for Harlow (Robert Halfon) on securing this enormously important debate.

In my interventions, I stressed the critical importance of engaging employers, and I hope that the Minister will tell us how we will do that. It would also be helpful if he were to say in his concluding remarks how he sees the skills strategy in the context of the local economic partnerships and what scope there will be to take a strategic overview of local needs. Given the nature of my constituency, I have always been interested in that. The hon. Member for Newton Abbot (Anne Marie Morris) has mentioned the status of technicians, and their status in our world-leading universities in Oxford and in related scientific research institutions in Oxfordshire is critical. There are concerns whether there will be a supply of suitably qualified people to fill the vacancies when a lump of people retire at a particular time in the future. That is precisely the sort of issue on which a local economic partnership should be able to take a strategic view on an area basis.

I want to mention something that has not been touched on so far. The proposal that those on inactive benefits will no longer receive reductions in their course fees was not included in the skills consultation document published last summer. As I understand it, such people will have to meet 50% of the cost of courses, other than on courses for basic literacy and numeracy. Colleges are worried at the effect that that will have on participation among lone parents, those on incapacity benefit and others.

I have particular concerns about Ruskin college in my constituency. The college runs a number of short courses that attract a significant number of people who are presently in receipt of inactive benefits. Many are older learners, lone parents, carers, people on disability benefits, people who have suffered alcohol and drug dependency problems or mental ill health, and homeless people with no registered address. Most such students on short courses are unlikely to be in a position to pay fees.

For many of these students, going on a course is a step in re-establishing their self-esteem and acquiring useful skills that will enable them to progress further. Ruskin college has mentioned to me an example involving a woman who had a total mid-life crisis and mental breakdown. She saw the Ruskin college brochure in hospital and did free short courses with the college, benefiting from the full fee remission. She went on to get two degrees and she is now a college lecturer, probably helping with the skills drive that we are all so keen to sustain.

How does the Minister see the configuration that is coming forward addressing the needs of such people? Given that it will take time to put the Government’s new proposals in place, does it really make sense to end fee remission for those in receipt of benefits before other provision is put in place? This issue will affect a lot of people across the country, as well as at Ruskin and other colleges in my constituency. I would be grateful if the Minister were specifically to address that point.

15:17

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

I, too, congratulate the hon. Member for Harlow (Robert Halfon) on securing the debate. I also congratulate him on his clear and evident pride in his local college and on the work that he is already doing in Parliament to promote issues relating to apprenticeships. We have had a thoughtful and inclusive debate, which has not been rabidly partisan. I want to continue in that way, but I nevertheless want to pick out some of the implications and unintended consequences of the Government’s skills strategy, which gives Labour Members real concern.

I want briefly to comment on what the hon. Gentleman has said. He has discussed skills deficits, particularly in construction, and the NEETs problem. It is fair to say that none of us in any party and, for that matter, none of the experts has a magic wand to deal with that problem. We can argue about the rights and wrongs and about the needs behind the Government’s current economic policies, and we will, but I merely say—I invite the Minister to touch on this—that it is inevitable that those policies will sharpen the challenge that we face and increase the number of people in the category that we are talking about, at least in the short term. For example, we have seen that with some of the rises in unemployment. We also need to be careful that changes in administration within skills policy, and related issues in the Minister’s portfolio, do not, however well-intentioned, unintentionally exacerbate the problems of NEETs, because of their speed and the lack of a proper transition period.

It is particularly interesting that the hon. Member for Harlow has discussed access to loans, which other hon. Members have also mentioned. I want to touch on how the process will pan out, and put one or two questions to the Minister. At this point, all I want to say is that some people who have been mentioned, such as older people and single mothers, are, because of their backgrounds, precisely the ones who will need most nurturing and support in entering the process. As I have said before and will continue to say, the Government, or certain people in the Government—not least Business, Innovation and Skills Ministers—are keen on the concept of nudging people. We all nudge people, sometimes inadvertently on the tube, but it is highly relevant to the debate on the Government’s skills strategy to point out that sometimes—again, I am not imputing malevolence of plan or thought—the net effect of policies is to nudge people away from things, as well as to nudge people towards them.

It is interesting that the hon. Members for Harlow and for Newton Abbot (Anne Marie Morris) have raised concerns about the EMA. I congratulate them on referring to practicalities such as transport and support equipment. Those issues have, of course, been taken up by individuals and colleges. The same concerns have been expressed to me at the colleges in my constituency, Blackpool sixth-form college and Blackpool and the Fylde college, and they also show up in surveys conducted by the Association of Colleges and the 157 Group. If the Minister and I were not here in delightful surroundings under your chairmanship, Mr Hood, we would undoubtedly be in the main Chamber listening to the arguments about the Government’s current position on the EMA. What I took from the remarks of the hon. Members for Harlow and for Newton Abbot, as well as from other interventions, were concerns not only about the change itself, but about the process of change and the transition period. The Minister will want to comment and reflect on those remarks.

The hon. Member for Harlow has discussed university technical colleges, a concept with which I, like him, am familiar. Lord Baker bent my ear on the subject in my previous incarnation as chair of the all-party parliamentary group on skills, as he has successfully bent the ears of many others. Lord Baker is, like me, a historian, and he feels strongly that it is a matter of completing unfulfilled business from the Education Act 1944. The only thing that I say—again, I invite the Minister to make observations on this point—is that it is laudable and entirely desirable that there is a renewed emphasis on how best to provide vocational education to the 14-to-19 range and on the mechanisms for doing so. However, the problem is that the field is now getting crowded. There are proposals for university technical colleges, and there are long-standing proposals for studio schools, which the Secretary of State for Education warmly endorsed at the recent launch of the first tranche. I declare an interest in the sense that the local authority in Blackpool is strongly bidding for a studio school. Of course, the Prime Minister also made observations only a few days ago about the concept of free schools for 16 to 19-year-olds.

I make no comment on some of the ideological conflicts that may arise in that context; I merely point out that if there is a market including UTCs, studio schools and free schools for 16 to 19-year-olds, there will have to be a lot of careful adjustment and thought about the implications for sixth-form and further education colleges. I hesitate to use the words “Maoist and chaotic” in that context, because they have, of course, already been used, rather tellingly, to describe the way in which the Government—sadly, this involves the Minister’s Department—are proceeding with local enterprise partnerships. However, I want to stress the importance of not getting into a mess over a plethora of options in the relevant area. The last thing that any of us wants is for the new-found enthusiasm in all parties for the strengthening of vocational education to be dissipated by arguments about structure.

[Mr Andrew Smith]

I want to reinforce my hon. Friend’s argument. Is it not crucial that the core mission and function of further education colleges, and their ability to deliver it, should be buttressed, supported and enhanced? That should include such issues as inequality in funding per student, as between FE and schools. The previous Government started to narrow that discrepancy, but it should be removed altogether.

[Mr Marsden]

My right hon. Friend is right on that point. I shall spare the Minister’s blushes, but he has committed to continuing that process. Indeed, he emphasised that point from the floor when questions were raised about it at the conference of the Association of Colleges in Birmingham in November. The devil is in the detail, and the questions of how the aim is to be achieved within funding regimes through the Skills Funding Agency and how it relates to other possible views within the Government must be resolved. I have no doubt about the Minister’s personal commitment to proceeding with that aim, but my right hon. Friend has made a valid and important point.

The hon. Members for East Londonderry (Mr Campbell) and for Upper Bann (David Simpson) have made valuable interventions. They both made the important point that we should view apprenticeships, training and outreach work not only as economic activity but as a vital activity for social cohesion. I am particularly interested and impressed by what the hon. Member for Newton Abbot has said about the activities of her college in going out on to the street and trying, in the words of the Good Book, to compel them to come in.

There is a broader underlying issue, with which all of us have fought in recent years. It concerns not only the fundamental mission of further education colleges or apprenticeships, but how and where that mission is carried out. Some of the most valuable work that has been done via the splendid Blackpool and the Fylde college in my constituency has been done not on the main campus sites but in a city learning centre adjacent to one of the main housing estates. In reality, particularly in areas where people may be juggling two or three different types of job or responsibility, which is particularly true of women, the siting of, and immediacy of access to, training and further education matter a great deal. The hon. Member for Newton Abbot has discussed her constituency, and I am sure that what I have described is as true in rural constituencies as some urban ones, if not more so. Even in my constituency, some people on the estate who benefited from outreach courses would not have found it easy to get on a bus and travel 2 or 3 miles to take standard college classes. I entirely agree with what the hon. Lady has said, and I hope that the Minister will take that on board in developing future policy with colleges.

My right hon. Friend the Member for Oxford East (Mr Smith) has made valid and crucial points about how the skills strategy will fit with local enterprise partnerships, and I will return to that issue later. He made other key points that the Minister needs to respond to. The first is the concern that he expressed about skills shortages. That concern might seem perverse at a time when—let me put it bluntly—the demand for skills in the current economic situation is certainly not uniformly high. However, the truth is that even with modest growth generally and in certain areas in particular, because of the reasons that he gave, demographic changes will affect particular skill groups. We know from the Leitch report and various other things that we face a significant demographic challenge in the next five to 10 years, because the cohort of younger people available for skills training will reduce sharply. Of course, that will put even more emphasis on some of the points to which my right hon. Friend has referred. The comments that we have heard about skills shortages are significant.

I turn, with some gravity, to the Government’s skills strategy, on which I want the Minister to comment. Picking up my previous point about my right hon. Friend’s speech, the introduction of tuition fee-style loans for all those taking level 3 qualifications and the part-funding for a first level 2 qualification will seriously hit the strategy for retraining and reskilling older workers, if they are not handled carefully.

Questions have been put to the Department for Education and Skills and to the Minister himself about how much, under the current circumstances, colleges can be expected to charge when they increase fees for courses. I accept that we do not live, pace one or two things that have been said about the Secretary of State for Communities and Local Government, in a Stalinist “plan and provide” world. However, we need to have a little more assurance about the sums of money that people will have to borrow to fulfil a mainstream apprenticeship course. In an article in The Guardian at the end of last year, the Minister referred to a sum of about £9,000 over that period of study, but it would be helpful if he were to comment on the modelling by which the Government made that assessment.

Of course, if there is a potential impact of increasing fees, in terms of reducing enrolment, it will come at a time when colleges face a 25% reduction in the further education resource grant from the Department for Business, Innovation and Skills during the spending review period. Ministers have said that that reduction is nowhere near the “grim reaper” that has descended on the higher education sector, which is perfectly true. Nevertheless, that reduction and the potential impact of axing the EMA—both the Association of Colleges and the 157 Group have said that axing the EMA will have a significant impact on the number of people applying to college—mean that FE colleges may find themselves under real pressure as a result of Government decisions.

The Government have said that they want to get people back into work—how could we not want to get people back into work? However, the issue of how the Government expect to do that if they are going to remove the support for course fees from anyone who is not on active benefits is a live one. Even those claiming active benefits over the age of 24 will have to take out tuition fee-style loans to take level 3 courses. I have an open question, not a rhetorical one, about that issue; what incentive will there be for those people to take out a sizeable loan when there is no guaranteed income stream to repay it?

As has already been said and as—I am afraid—is the case with so many things that this Government are doing, they are in danger of wielding several sticks before offering a number of carrots. The fees for some level 2 and level 3 courses will be introduced as early as 2011-12 and the fees for the majority of those courses will be introduced in 2012-13. However, the Government say in their own statistics, which accompany the skills strategy, that they do not envisage the new loan structure being in place in full until 2013-14. That is one of the points that the Association of Colleges has raised in its briefing note to Members for today’s debate. However, the Association of Colleges has also raised the separate issue of the impact of the restrictions relating to benefits entitlement, which my right hon. Friend the Member for Oxford East has also raised. The Minister will know, because it was the subject of a question and answer session that he participated in at the Association of Colleges conference in Birmingham in November, that that issue is of great concern to colleges.

We support the Government’s aim to help more people off welfare and into work, and we understand the desire to focus efforts on those receiving active benefits. However, I remind the Minister that on a number of occasions he and I have talked about the importance of enabling skills to the life chances of people. There are real concerns, particularly in relation to some of the impacts of the restrictions on employment and support allowance, that, as I said earlier, people might find themselves being “nudged” away from participation in education and training rather than being “nudged” towards it.

Like me, hon. Members may find it curious that the Government preach localism, but that their new skills strategy effectively gives the power to set these plans nationally to the Skills Funding Agency. When we were in government, we talked about the crucial role that regional development agencies can play in this field. I also note, having heard the favourable comments that the hon. Member for Harlow made about the college in his own constituency, that Harlow recently opened a new £9.3 million university centre for higher education. Of course, that project, like the project in my constituency at Blackpool and the Fylde college, was partially funded by grants from the RDA. I am not here to argue the case for RDAs, but now that they have gone there appears to many people, including myself, to be a black hole in the connectivity of support for the successor bodies to the RDAs, including local enterprise partnerships.

Many business groups, including the British Chambers of Commerce, have commented on that lack of co-ordination between those in charge of skills policy and local enterprise partnerships. I remind the Minister that his colleagues in the Department for Communities and Local Government did not even put local enterprise partnerships in the Localism Bill when they introduced it, and they have resolutely refused, or at least been unwilling, to talk about establishing links in that respect.

[Robert Halfon]

I thank the hon. Gentleman for his measured and thoughtful remarks. Regarding RDAs, although it was welcome that part of the money for the college in my constituency came from the local RDA, at the end of the day that money is taxpayers’ money. That money does not necessarily have to pass through the RDA to reach Harlow college or Harlow; it could easily go through local councils or through the other mechanisms that he has mentioned. The support that Harlow college received is not necessarily a case for the RDA.

[Mr Marsden]

I was merely making an observation, and I was not saying that the RDA is the only mechanism by which this money can be redistributed. Of course, there were also other grants that contributed to the college. I was making the point that the RDA is a mechanism that supported that type of college development. Not only is the current level of economic activity across the country failing to replicate that support, but we do not even have secure promises about how local enterprise partnerships themselves will be supported and funded, so that they can provide similar support or access funding from the private sector. That is one of my concerns.

Finally and briefly, I turn to the issue of apprenticeships. The Government have been keen to trumpet the success of apprenticeships and their ambitions for them. I yield to no one in my delight that the Minister has made so many strong points about apprenticeships. However, we must remember that the pledge that there will be an extra 75,000 apprenticeship places applies only to adult apprenticeships. At a time when youth unemployment remains high and the Government have chosen to end schemes such as the future jobs fund and our September guarantee of a college place, training or a job for all those aged between 18 and 24, one must wonder what capacity there will be in business to provide these extra apprenticeship opportunities. Indeed, Members have touched on that issue in the debate today. Just as one can nudge people away from things as well as nudging them towards them, we need to take into account push and pull factors. It seems to me that no amount of ministerial criticism of Train to Gain can take away from the fact that axing the scheme leaves a serious gap in work-based training provision.

Finally, the Government are rightly putting an emphasis on level 3 money going in, but there is still a massive demand across the country for level 2 apprenticeships in leisure, tourism, catering and other applied service industries, and it is vitally important that they are not neglected. They need to ensure that they provide what employers want from apprenticeships, as opposed to what might fit their own agenda for the sector, however noble their intentions.

15:39

[The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes)]

It is a pleasure, Mr Hood, to serve under your chairmanship, even more so as it is the first time, and it is always a pleasure to follow the hon. Member for Blackpool South (Mr Marsden). While the right hon. Member for Oxford East (Mr Smith) was making his erudite interventions, I was thinking about what Chesterton said about Oxford:

“a place for humanising those who might otherwise be tyrants or even experts.”

It would be altogether more convenient if the person shadowing me were a tyrant or a fool, but unfortunately the hon. Gentleman is neither, which actually, on balance is a cause more of joy than sorrow.

It is also a pleasure to congratulate my hon. Friend the Member for Harlow (Robert Halfon) on securing the debate. I know how enthusiastic he is about the subject, and he rightly championed the work of Harlow college, kindly mentioning that I visited the college with him. He has illustrated his commitment to apprenticeships by taking on an apprentice himself, and I invite many other colleagues, including Ministers and shadow Ministers, to follow his example.

An even greater pleasure than serving under you, Mr Hood—and that pleasure is almost inestimable—is to be able to discuss the Government’s skills strategy, albeit in a short debate. I will endeavour both to talk about that, and to pick up the points that have been made by a variety of speakers today.

The skills strategy had its inception shortly after we came to government. As soon as I became Minister, we ran a considerable consultation—over the summer—and we engaged providers, employers and learners, with colleges obviously central to the process. We have now published the strategy, and I have copies here for anyone who would like one—shorter summaries for those with less patience and longer versions for those with more.

The genesis of the strategy dates to when, in opposition, I was able to study these matters over many years, and I had many discussions with the hon. Member for Blackpool South when he was running the all-party group on skills. I do not think that there is much of a gap between our views on the issues. It would be wrong to exaggerate the consensus, but I do go with Wilde in that arguments

“are always vulgar, and often convincing.”

So we do not want to have more of an argument than we need to, and there is certainly some unity of view as to the aim. I suppose that that is because we both broadly buy the analysis of the Leitch report, that an advanced economy needs ever-advancing skills, and that we are falling short in that regard. I shall say more about that in a moment or so.

The report mentions many other things, including, as has been mentioned, the need to upskill and reskill the existing work force as well as to train young people who enter the labour market. It makes particular recommendations on intermediate and higher-level skills, an area in which we are failing to do as well as we must if we are to maintain competitiveness. I am pleased to say—confirm, perhaps—that what is at the heart of that analysis is also very much the Government’s view, which is that skills have a direct relationship with productivity and therefore competitiveness. That is, I suppose, a matter of opinion, but I take it almost as an a priori assumption. I say that as though the case must be made only because some people would still argue a counter-view that labour-market flexibility and a much more fluid system for skills can work in a modern economy, but I take the contrary view that as we invest in skills the economy shapes around that investment. My perspective is, I think, reflected in the previous Government’s assumptions, and largely by Leitch.

It would be remiss of me not to say, as the hon. Member for Blackpool South was kind enough to point out, that we debate all of this in very difficult circumstances, but what is interesting about the strategy is that it would have been necessary irrespective of the changed and challenging financial situation. It had its genesis long before we came to government, long before we knew quite what size of deficit we would face and, indeed, long before we had devised a method for dealing with that deficit. The strategic change—the rethink about the skills we need and about how we will deliver them—preceded the advent of the economic strategy, which the hon. Gentleman mentioned, and the consultation that I described earlier preceded the comprehensive spending review negotiations which, of course, shaped the amount of money that the two Departments in which I am a Minister have to spend.

Without wanting to be unnecessarily partisan, I must say just a little about the previous Government’s record. I know that the hon. Gentleman will not mind a short partisan section in a speech that will otherwise be wonderfully and refreshingly non-partisan. The previous Government did get some of this badly wrong, not in ambition—as I have described—and not even in their analysis of the problem, but in the solution. There were two fundamental problems with their approach. Although they spoke the language of a demand-driven system, it was just that—mere words. The system that was constructed was centrally driven, built around targets and extraordinarily byzantine in structure. It was hard to navigate and inaccessible, bamboozling learners and demoralising employers. The result—a centrally driven, target-orientated, micro-managed system for the funding and management of skills—could never be sufficiently dynamic, or sufficiently responsive to the changing needs of a changing economy. Lord Leitch drew our attention to that, and Members on both sides have reflected an understanding of it in what they have said today.

I could say things that were altogether more colourful—in fact, I have such things in front of me—but why would I do that? I have said enough about the previous Government’s strategy, except for this suffix: the best thing that they did was to appoint the hon. Member for Blackpool South as the shadow spokesman on this matter when they came into opposition. There the flattery stops. Actually, it was meant as a compliment, not as flattery.

Perhaps partly as a result of the previous Government’s strategy, we remain mediocre on skills compared with other OECD countries, ranking 17th out of the 30 member countries on the proportion of our population qualified to level 2 or above. To any impartial observer, and by any independent analysis, it is absolutely clear that our further education and skills system requires not merely reform but rebirth, the effects of which would need to be felt by employers, individuals and training providers. The change that is most needed is one of perspective, as identified by my hon. Friend the Member for Harlow, when he spoke in elegiac terms about the need to elevate practical learning, a point supported by my hon. Friend the Member for Newton Abbot (Anne Marie Morris), the hon. Member for Upper Bann (David Simpson) and other Members. We have to understand that practical accomplishment can afford the same kind of status as academic achievement, because it confers both worth and purpose, which has economic value, and also because it changes lives by changing life chances.

The pride that people take in the practical skills that they acquire makes them stand tall. As they do so, they gain a different kind of recognition among their fellows. That was once widely understood. The case was richly argued by Ruskin—who was referred to in a different context; I will return to that—and William Morris, but it had scarcely been made with elegance and conviction until I started to make it a few years ago, when it gained some elegance and a lot of conviction. Changing the perception of practical learning is critical to encouraging people to acquire the skills that we need to drive our economy forward. It is a social and cultural matter as well as an economic one, being about aesthetics as well as utility. Rather apologetically, we usually debate skills as a matter of utility. I suppose that that is understandable—they are partly about utility, after all—but let us debate them differently, making the change in perception that I described.

I will now deal with the essence of the skills strategy and its many aims, which we published on 16 November last year. Its main premise is that skills are essential if we are to return to sustainable growth, build more inclusive communities and achieve greater social mobility. To do so, the Government must be prepared to devolve real power, along with the objective information that will allow people to use the system, to those who can benefit most from it, and especially to employers and individuals. We want to give them authority and power to drive the system. We want a more learner-driven, employer-focused, demand-driven skills system.

I will discuss the three critical elements of that and deal with some of the points that hon. Members have raised. First, we must ensure that colleges and training providers have the freedom and flexibility to respond to learner demand and employer need. The coherence that must accompany that requires a proper settlement in respect of relationships with other agencies, including local enterprise partnerships. I will take away the points that have been made about that and consider them. It certainly requires consistency and coherence in respect of school provision. As hon. Members will know, Professor Alison Wolf is carrying out a review of vocational education, which must marry with the strategy if it is to make a useful contribution to Government thinking.

The hon. Member for Blackpool South was right that there must be some consistency in the narrative about studio schools and university technical colleges. I am an enthusiast of UTCs. I think that Kenneth Baker has hit on an idea for which time has come; it is the completion of the unfinished work of Rab Butler. I see it in those ambitious terms. UTCs can play a valuable role in providing a vocational pathway that matches in clarity and progressive quality the academic route that many of us took.

I acknowledge the questions and points raised by hon. Members, and I accept the need for consistency and coherence, but central to what we will do is freeing providers and colleges from much of the bureaucracy that has hampered them and prevented them from being as good as they can be. There is immense human capital in the further education sector; it is the unheralded triumph of our education system. Both learners and teachers in FE deserve more praise than they have ever received. I am proud to put that on record. In the education Bill that we will be introducing shortly as a continuation of what I have announced in Government, we will strip away some of what the previous Government did—I am trying to use gentle words—to confuse the system and burden FE providers.

Secondly, there must be a changed role for individuals. Individual learners need more information, which is why we will introduce an all-ages careers service to provide them with good, empirical and independent information about the results of the courses that they choose and the subsequent careers to which they are likely to lead. As well, it was right that we began to ask who pays for what. Such questions are challenging, but I was determined that there should be no question of abridging people’s entitlement to basic skills in any way.

However, in higher skills, beyond the age of 24, individuals should make some contribution, on a par with what we expect of higher education students. They will be able to take out income-contingent loans on the same no up-front cost basis as HE students, at highly competitive rates. The hon. Member for Blackpool South asked about numbers and mentioned the figure of £9,000. He will know that it is difficult to come to a definitive answer, as apprenticeship frameworks cost different amounts. However, I do not think that it is unreasonable to mention an average of about £7,500. Compared with a degree, given what my hon. Friend the Member for Newton Abbot said about the income premium likely to result from an apprenticeship—it is roughly equivalent to a degree—an apprenticeship represents pretty good value for money.

Thirdly, on apprenticeships, we have allocated £250 million for 75,000 more apprenticeships during the spending review period. The hon. Member for Blackpool South asked about apprenticeships for 16 to 18-year-olds. I confirm that the Department for Education will provide extra investment to grow their numbers substantially too. It is my ambition while I am Minister to top 350,000 apprenticeships in this country, and the longer I am the Minister, the more apprenticeships we will have. Records are hard to compare because historically, the way that we have counted apprenticeships has been somewhat different, but it is probably true to say that the most that we have ever had in Britain was 400,000.

[Mr Andrew Smith]

Is the Minister not showing symptoms of the target-driven culture that he was decrying a few minutes ago?

[Mr Hayes]

That is the trouble with people associated with Oxford; they are just clever. That was the expression not of a target but of an ambition. How could my ambitions ever be described as anything so crude as a target?

The final element of the strategy is a link to employers. As well as being learner-driven, the system must be sensitive to the role of employers in ensuring that what is taught and tested matches employer need, therefore making people more employable and feeding the growth that we all want. To do so, we must move away from what I described as the slightly confused spatial arrangements made by the previous Government with regional development agencies and others—some of them did perfectly good work, of course, but they were heading in basically the wrong direction—towards a more sectorally driven system. I have asked the UK Commission for Employment and Skills, under the chairmanship of Charlie Mayfield, to consider becoming employer-facing, so that we can engage employers in ensuring that the system delivers what we want.

I believe that we can build a skills system that makes Britain prosperous, delivers individual opportunity on an unprecedented scale and contributes to social mobility, social cohesion and justice. As the Minister, I will do all that I can to make that so, for it is what is right for our people, our nation and our future.

Further Education Lecturers

Wednesday 19th January 2011 Westminster Hall

16:00

[Mr Graham Stuart (Beverley and Holderness) (Con)]

It is a pleasure to have secured this debate, which follows another education-related one. As I speak, hon. Members in the main Chamber are debating the education maintenance allowance, so Ministers, like the rest of us, are trying to be in two places at once.

This debate is about Government policy on the employment of further education lecturers as school teachers in schools. I am delighted to see present my predecessor as Chair of the Education Committee in its previous guise as the Children, Schools and Families Committee, the hon. Member for Huddersfield (Mr Sheerman). I hope that he will participate. The subject is important because the importance of vocational and practical education within our education system is too often underplayed. There is also an artificial chasm between those who teach in further education and those who teach in schools at a time when we are trying to create a system such as that in health, which tries to build pathways in relation to the patient so that, instead of providing health services on the basis of institutional convenience, everything is built in relation to the patient. In exactly the same way, institutions that serve young people in education should bend and shape themselves to suit the young people’s needs, rather than the other way around.

Further education lecturers are required to work through a four-tier qualification system, culminating in qualified teacher learning and skills status. FE lecturers with QTLS accreditation may then work in schools not as teachers, but as instructors, and only as a last resort. Even though they perform essentially the same functions, instructors have a lower professional status and, usually, a lower salary than schoolteachers. The equality of esteem and the need to ensure good vocational learning are undermined by that artificial divide.

Primary and secondary teachers, on the other hand, have a qualification known as qualified teacher status. Teachers with a QTS are currently eligible to teach in the FE sector. If the potential of the Government’s schools policy is to be realised, we need the best possible teachers in the classroom providing education at any one time. The Government’s schools White Paper rightly identifies teacher quality as the most important ingredient in improving the quality of education in this country, thus encouraging social mobility and other issues of social justice that hon. Members on both sides of the House devoutly desire. The White Paper states:

“All the evidence from different education systems around the world shows that the most important factor in determining how well children do is the quality of teachers and teaching.”

Many FE lecturers are dual professionals with expertise both in their vocational subject area and in pedagogy. That expertise needs to be used in schools on an equal and fair basis in the same way as that of teachers. I hope that the Government will look to overcome the obstacles and create a single teaching qualification, effectively moving the barriers that constrain the best use of FE lecturers.

The Government’s skills strategy shows that they are committed to the promotion of technical as well as academic qualifications—I believe that that issue has just been debated in the main Chamber—to promote a variety of routes to improved employment opportunities to students. My hon. Friend the Minister for Further Education, Skills and Lifelong Learning has just left the Chamber and, given his passionate espousal of the importance of craft and vocational learning, we must ensure that we make best use of our teaching work force. The skills strategy states:

“Skills are vital to our future and improving skills is essential to building sustainable growth and stronger communities. A skilled workforce is necessary to stimulate the private-sector growth that will bring new jobs and new prosperity for people all over this country.

And a strong further education and skills system is fundamental to social mobility, re-opening routes for people from wherever they begin to succeed in work, become confident through becoming accomplished and play a full part in civil society.”

The reality, however, is that there has been a lack of expansion of vocational expertise in the school work force, which fails to match the expansion of vocational curricula in schools. Schools too often do not have the appropriately experienced teachers to inspire students to excel in vocational courses.

The Children, Schools and Families Committee carried out an inquiry into teacher training in the 2009-10 Session and its report, “The Training of Teachers”, was published in January 2010. The Committee called for

“greater fluidity—and shared development opportunities—across the school and further education sectors.”

The report’s recommendations include:

“At the very least, teachers with Qualified Teacher Learning and Skills status should immediately be able to work as a qualified teacher in schools if they are teaching post-16, even post-14, pupils.”

That recommendation represents the nub of my case today, for which I hope we will have a sympathetic and constructive response from Ministers.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

Like the hon. Gentleman, I rushed from the main Chamber where we have both been speaking. We are a regular double act. The recommendations of the inquiry under discussion were made by a former Select Committee—the Children, Schools and Families Committee. It was one of our later inquiries and it was very much an eye-opener for all members of the Committee. We made recommendations on improvements to teacher education and asked why we had an artificial divide whereby a schoolteacher could not teach in FE and many people teaching in FE could not teach in schools. It seems a crazy divide.

[Mr Jim Hood (in the Chair)]

Order. I remind the hon. Gentleman that he is supposed to be making an intervention.

[Mr Sheerman]

Sorry, Mr Hood. It was a very long intervention. I hope that you will call me to speak again later.

[Mr Stuart]

I now know—if I did not already—that my predecessor would like to speak in this debate, so his intervention served that purpose. The report’s recommendations, under the hon. Gentleman’s august chairmanship, also stated:

“In the context of the 14–19 reforms, the Department should put in place a mechanism for assessing vocational or professional qualifications as equivalent to degree status.”

It added:

“Over the longer term we recommend that the training of early years teachers, school teachers and further education teachers become harmonised through generic standards.”

That is the request that I am making today—“harmonised through generic standards.”

Those recommendations seem to have been overlooked, with FE lecturers remaining on the sidelines. Despite their obvious expertise in the vocational pathway, we are clearly ignoring the opportunity to utilise their talents in our secondary schools. My Committee is currently conducting an inquiry into behaviour and discipline in schools, and wants to ensure that we have the best possible teachers to engage with young people who perhaps find their academic studies less inspiring. Having the best possible vocational teachers is a great way of getting people re-engaged in learning to the benefit of both academic and vocational skills.

The Skills Commission published a report, “Teaching Training in Vocational Education”, in February 2010, which states:

“If we are to successfully establish and maintain a vocational pathway through 14-19 education and on to higher education, we need professionals with recent and relevant vocational knowledge and skills”

to transfer their expertise to learners. Those are common-sense words, but there is a barrier standing in their way. The report notes that

“the system as it now stands is biased towards academic education and its teachers, and fails to recognise the crucial role that vocational education and its teachers play in 14-19 education… For vocational instructors employed in schools their conditions of service are inferior to those employed as school teachers.”

It adds:

“We cannot continue to perceive vocational education to be second class and inferior to academic education. In turn, we cannot continue to label teachers of vocational education as a ‘semi-profession’… The Commission believes that, in the short-term, greater transferability between the two professional statuses must be achieved in order to realise high quality academic and vocational provision throughout 14-19 education—getting the right skills in the right place of our education system must be a priority for policymakers.”

That is why I am delighted to be participating in this debate. The report continues:

“To realise this, the Commission believes that convergence courses should be developed to facilitate transferability between QTS and QTLS. The principle of this convergence would be central to the Skills Commission’s vision for 14-19 education, and to establishing a high quality route through the 14-19 phase... The two regimes should be replaced by a unified training system and a ‘universal teaching status’.”

So why have neither the recommendations of the former Children, Schools and Families Committee nor those of the Skills Commission been implemented by the Government? It seems that there are a number of possible objections to a unified teacher status. First, teaching young adults is considered a different playing field to teaching 11 to 16-year-olds. Therefore, an individual who is teaching in further education might not have the skills and pedagogical background necessary to teach younger children. That was one of the fears before the increased flexibility pilots were started seven years ago—I am sure that the Minister is familiar with them—when the national curriculum was made more flexible, so that it included a wider variety of settings in which students could study. In practice, FE staff found that teaching groups of 14 and 15-year-olds was not so very different from teaching 16 and 17-year-olds. The skills are fundamentally the same—good lesson planning, varying the pace, involving students and so on.

A second argument is that schoolteachers might have a better grounding in the theory of teaching and pedagogy than FE teachers. Teaching degrees and the PGCE provide a grounding in the theory of teaching and pedagogy, but so does the four-stage approach to the QTLS. FE lecturers are required to gain QTLS status by successfully going through professional formation, which is, according to the Institute for Learning,

“the post-qualification process by which a teacher demonstrates through professional practice the ability to use effectively the skills and knowledge acquired whilst training to be a teacher; and the capacity to meet the occupational standards required of a teacher.”

By contrast, there are strong arguments in favour of a universal teacher status. Academic and vocational education are both important and require equally rigorous teaching. It is simply unreasonable, not to mention unfair, that FE teachers cannot go into the school environment. As I have said, it is crucial that highly skilled and experienced professionals can use that skill wherever it is most needed. The current system of teacher qualification is over-complicated and should be simplified to allow high-quality professionals to teach in both sectors.

My predecessor as Chair of the Select Committee wishes to speak, so I will bring my remarks to an early close. I have made the key points that I wanted to make, and I hope that the Minister will be able to respond positively. We need to ensure that we have a rich curriculum that regards vocational and practical learning as equally important, equally valid and equally useful as academic learning. There should be a system through which we increase academic rigour, while ensuring that the whole work force and every type of learning are treated according to their merits and that every child can access the best possible teaching whatever course they are doing at whatever time.

[Mr Sheerman]

rose—

[Mr Jim Hood (in the Chair)]

Order. The hon. Gentleman who has secured the Adjournment debate has agreed to the hon. Member for Huddersfield (Mr Sheerman) saying a few words, as has the Minister, but I ask him to give the Minister adequate time to respond to the debate.

16:13

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

I apologise, Mr Hood. In the communication that I had with the Chairman of the Select Committee on Education, the hon. Member for Beverley and Holderness (Mr Stuart), there was obviously confusion about which debate we were talking in. We have contributed to the debates here and in the main Chamber, so sorry for the communication difficulty and thank you, Mr Hood, for the opportunity to speak briefly. I am also grateful to the Minister for agreeing to let me contribute. I only want to speak for two minutes.

I care passionately about the matter. If we are to have a system with increasingly diverse post-14 routes—apprenticeships, people staying on in FE, people doing diplomas and more conventional vocational routes and being able to switch across from those—we need a profession that can teach across the piece post-14. I make a plea for the recommendations of the former Children, Schools and Families Committee, of which I was Chair, to be considered. I also co-chair the Skills Commission, so I wear both those hats today. I should put on the record that Baroness Sharp in the other place played a significant role in the recommendations that came out of the Skills Commission. She is a very knowledgeable person in this area. We also had great help from Policy Connect in organising that inquiry.

I am here to support the Chairman of the Select Committee. I hope that the Minister will say that there can be some positive movement on the matter. He knows that we tried to be helpful when we did our inquiry into the training of teachers, and many of the people who have read that report think that it was balanced. The report had cross-party support, and it gives people in the Department the opportunity to consider how the future of the teaching profession can get even better than it is today.

16:15

[The Parliamentary Under-Secretary of State for Education (Tim Loughton)]

It is a pleasure to serve under your chairmanship, Mr Hood. I congratulate my hon. Friend the Member for Beverley and Holderness (Mr Stuart) not only on securing the debate but on being part of the dynamic duo that is now performing in this Chamber, having dual-tasked and performed just a few minutes ago in the main Chamber.

This is an important issue. I recognise the particular interest in the subject that the hon. Member for Huddersfield (Mr Sheerman) has and his background in the work that his Committee did before the election. It is therefore appropriate that he was able to contribute. My hon. Friend the Member for Beverley and Holderness made some positive and constructive points, and I wholeheartedly agree with the sentiment of his comments. He asked me to be sympathetic, constructive and positive in my response; as he well knows, I always endeavour to do so. Whether I can give him the detail of that sympathy, constructiveness and positivity remains to be seen, given that the Minister of State, Department for Education, my hon. Friend the Member for Bognor Regis and Littlehampton (Mr Gibb) would normally be responding to the debate. Of course, he is involved in the debate in the main Chamber.

[Mr Graham Stuart]

I am grateful to the Minister for responding to the debate, given the pressures on the Department. I understand why he finds himself in that position. As he is helping out the Minister with responsibility for schools, perhaps he will ask whether my predecessor as Chair of the Select Committee, Baroness Sharp—if she wishes to join us—and I can meet the Minister with responsibility for schools to discuss the matter further after having heard the Minister’s remarks.

[Tim Loughton]

I will be delighted to pass on that invitation for a meeting. I am sure that the Minister with responsibility for schools will be sympathetic, positive and constructive in his response to it. Notwithstanding what is going on this afternoon, the timing of the debate is also appropriate given the review of vocational education that the Secretary of State has asked Professor Alison Wolf to carry out—her name was mentioned in the main Chamber a little while ago.

The Government attach great importance to improving vocational teaching in schools. In response to my hon. Friend’s point, it is certainly not a question of being second class to academic education or treating vocational sector teachers as second class; it is a question of appropriateness and horses for courses, in the same way as perhaps primary school teachers do not readily transfer to become secondary school teachers and vice versa. I want to make it clear that all aspects of teaching those different areas are absolutely valued, but that they will be more appropriate for certain people in certain areas than in others.

My hon. Friend made a point at the beginning with which I wholeheartedly concur: we need to shape institutions around children and young people to ensure that they are getting the most appropriate support, education and training of whatever type, rather than trying to pigeonhole people into particular structures. The coalition agreement for the new Government included a commitment to better vocational education in England, and the Secretary of State’s speech to the Edge Foundation last year on 9 September set out the need for radical reform to address long-term weaknesses in practical learning. That is why we have asked Professor Wolf to carry out what is proving to be a major review and to make recommendations about how vocational education can be improved.

Professor Wolf’s review is considering how we can ensure that vocational education for 14 to 19-year-olds supports valuable participation and progression into the labour market and into higher level education. The final report will include practical recommendations on how vocational education will be improved in line with the public commitment that we have made. I know that Professor Wolf has made very good progress with the report. She has met teachers, heads and college principals to inform her review, and she has been considering submissions made as part of the call for evidence. We look forward to receiving her full report later in the spring, as the hon. Member for Huddersfield has mentioned.

[Mr Graham Stuart]

If I recall, the original timetable was that an interim report would be presented by Professor Wolf before Christmas. Has such a report been presented to Ministers? If so, can it be published?

[Tim Loughton]

I am not aware that a full-blown interim report has been presented to Ministers. I am aware that there have been preliminary discussions between Professor Wolf and Ministers about her initial findings. I do not think that an exact date has been set for publication so far, but when my hon. Friend has the meeting with the Minister with responsibility for schools I am sure he will be able to elaborate further on the exact details.

[Mr Sheerman]

When Professor Wolf, who used to be on the Skills Commission with us, was appointed by the Secretary of State, was she told that half way through her report, the rug of the EMA was going to be pulled from under her feet, or was she oblivious to that fact?

[Tim Loughton]

I cannot answer for any discussions my right hon. Friend the Secretary of State and other Ministers have had with Professor Wolf on her appointment. I am not in a position to answer that. Again, that is a question that the hon. Gentleman can address to the Minister with responsibility for schools. I am sure that the Minister will grant an audience to him, his dynamic duo partner and the noble Baroness Sharp at a later date.

An expert, experienced work force with the right training is, of course, essential to a successful future for vocational education. The Government have therefore asked Professor Wolf, as part of her review, to look at work force issues in particular. I know that Professor Wolf has identified many of the issues raised by hon. Members today, and that her report will consider further education teachers’ eligibility to teach in schools, and in particular the question of why FE-trained teachers, who have already achieved Qualified Teacher Learning and Skills status, also need to gain Qualified Teacher Status to be able to teach as qualified teachers in schools, which is the essence of my hon. Friend’s argument.

Pending Professor Wolf’s independent report, it would not be right for the Government to reach a definite conclusion on some of the issues that we have debated here today, and I am sure that hon. Members understand that. However, I can set out the simple ambitions that should guide us in reviewing this policy: getting the best people into schools and colleges, relevant to the demands of the particular curriculum or subject, whether academic or vocational; and fairness in dealing with the teachers who dedicate so much to providing excellent education, both academic and vocational. I include in “teachers” the experts from industry and professions who want to pass on their expertise to the next generation by supporting vocational education.

We do not think the current policy goes far enough in meeting those ambitions, which is why Professor Wolf is looking at this area so carefully. It is vital that schools have the flexibility to employ the staff they need to offer excellent vocational education to their particular set of students. It is also vital that the contribution that teachers with a further education background can make to schools is fully recognised by schools.

I want to address the specific proposal that the solution to the problems identified here today is simply to bring the professional statuses for further education and schools together into one status. I am aware of the conclusion of the Skills Commission inquiry into teacher training in vocational education, which was published last year and to which both hon. Members have alluded. It concluded by stating the need to achieve convergence of the two separate teacher training regimes that currently exist for teachers of academic subjects in schools, and those of vocational subjects in FE and the post-compulsory sector. The former Children, Schools and Families Committee reached a similar conclusion when it looked into teacher training and reported early in 2010, under the chairmanship of the hon. Member for Huddersfield, that there should be harmonisation of training programmes.

The Government accept the issues highlighted in those reports. There are clearly problems that we need to look at carefully and address, but in addressing those issues, and those raised in debate today, we must also be careful to take a balanced approach. That means that we must not remove the safeguards that guarantee to pupils and parents the standard of teachers that they expect in the schools that their children attend. We should remind ourselves of what we have at the moment: a wholly graduate teaching profession with expertise in teaching the national curriculum; teachers trained to deal with the particular challenges of providing a stimulating education to children; and a profession where individual teachers have the flexibility to teach across all school age ranges from five to 18. That is a foundation that the Government will build on to create an outstanding teaching profession, as set out in the schools White Paper, “The Importance of Teaching”.

I recognise the logic of convergence. There are, of course, many similarities between the jobs done by teachers in schools and in FE colleges. However, we must also be clear that QTLS status has been designed for the distinct requirements of the further education sector, with a focus on vocational learning and teaching over-16s. That does not prepare teachers to carry out the full range of work that is required of a qualified teacher in a school, as set down in the standards for qualified teacher status. Those include a degree, usually in the subject being taught, knowledge of the national curriculum, which it is the basic duty of schools to offer, and experience of teaching in two age ranges and capabilities around safeguarding and behaviour management that are different for younger children. Simply allowing anyone with QTLS to teach in schools would mean that we were not able to guarantee the rigorous academic expertise of teachers to pupils and parents. Whatever the recommendations, results and the way ahead, a good deal of work will need to be done to offer appropriate teaching to children and young people in those different educational environments. It cannot just happen simply because the rules have changed.

There are ways that the Government can address the need for reform in this area without undermining our plans to build a graduate teaching work force to create an outstanding, high status profession. For example, we have already consulted publicly on an assessment-only route to obtaining QTS for those who have substantial experience of working in schools or further education, and who have a degree. That will offer a more flexible route to QTS accreditation with minimal teacher training.

In the wake of Professor Wolf’s recommendations, I expect that we will be able to bring forward further proposals. For example, one such proposal might be to support teachers without degrees who wish to teach the vocational subjects in schools that they are already able to teach in colleges.

I hope, without being able to go into go into an enormous detail, pending the report and given the limitations on my own presence here and my particular brief in the Department for Education, that I have at least signalled to the satisfaction of my hon. Friend and the hon. Member for Huddersfield that this is a matter to which the Government are giving considerable and urgent attention in order to improve the current policy.

[Mr Graham Stuart]

I appreciate the tone and quality of the Minister’s remarks. The Government are backing university technical colleges, which will provide education for young people from the age of 14. Those young people will sometimes come in, dressed in a boiler suit at the age of 14, and have a spanner in their hand at 8.30 am or 8.45 am. If the Government are going to consider, following the Wolf review, greater flexibilities, the age at which young people start must be 14. That would fit with the university technical colleges and the wider Government programme. I just wanted to make that point on the record to the Minister today.

[Tim Loughton]

I hear what my hon. Friend has said. Those comments might have been as appropriate in the previous debate in this Chamber, which involved the Minister for Further Education, Skills and Lifelong Learning, who is a Minister in both my Department and the Department for Business, Innovation and Skills, but I have heard what he has said and will pass those comments on along with all the comments from hon. Members this afternoon.

I am confident that the decisions that we will take in the light of Professor Wolf’s review will result in a more logical position than we have at present—we all readily acknowledge that—which will continue to improve the quality of the school teaching work force, allow schools to make the best use of teachers with experience and expertise from outside the classroom and is fair to all those who play a role in the education of young people.

May I reiterate my gratitude to my hon. Friend the Chair of the Select Committee for the balanced, measured and informed way in which he put his comments? I undertake to pass on the points that both hon. Members have made and to urge my hon. Friend the Minister with responsibility for schools, in his greatly uncluttered diary, to find time to have a more detailed meeting with them.

[Mr Sheerman]

I remind the Minister that tens of thousands of young people who are 14 years old are presently being taught—not all week, but two or three days a week—in the FE sector. Studio schools, the first of which has opened in Huddersfield, will also be taking young people working in a work environment from the age of 14. It is a fact that 14-year-olds are being taught by highly qualified staff in the FE sector.

[Tim Loughton]

The hon. Gentleman can be duly contented that I am suitably reminded of the points that he has made and that I will pass them on to my hon. Friends as well. I thank him for his contribution.

Basic Bank Accounts (Scotland)

Wednesday 19th January 2011 Westminster Hall

16:29

[Sheila Gilmore (Edinburgh East) (Lab)]

It is a great pleasure to serve under your chairmanship, Mr Hood.

I am extremely grateful for the opportunity to introduce this debate. The stimulus for requesting it came from a report published in November 2010 by Citizens Advice Scotland—the umbrella group for citizens advice bureaux in Scotland—called, “Banking on the basics”. It was based on a survey that it carried out and the experiences of the many bureaux in the country. Many of the points and recommendations in the report are echoed in the report of the Financial Inclusion Taskforce, “Banking services and poorer households”, which was published in December 2010. It addressed the subject on a UK-wide level. Clearly, the issues are similar north and south of the border.

One of the relatively unsung but important pieces of work done by the Labour Government after 1997 was the detailed research, analysis and, most important, development of action plans to tackle poverty, deprivation and social exclusion. Outwith some of the political knockabout that sometimes takes place, I hope that we can all agree that it is only long-term, painstaking work of that kind that will make a real difference. It has to be sustained over a long period—we will not necessarily get instant results.

One of the strengths of the work was how it was spread across Government Departments, including the Treasury. It was not simply sidelined into the kind of Department that normally deals with poverty and deprivation. In 1999, Treasury policy action team 14 made its report on access to financial services, and from that flowed, among many other things, the basic bank account proposal.

Why is access to banking so important in this context? First, it helps people to manage their budgets more effectively and cheaply. Operating in cash is extremely expensive; for example, those who cannot pay fuel bills by direct debit pay a higher tariff, especially if they use prepayment meters. Buying essential household goods through catalogues, and mechanisms such as rent to buy are also extremely expensive. A useful report which highlights some of the issues for poorer families came out just this week from Save the Children.

Basic bank accounts also serve as a gateway to other mainstream financial services, including savings, insurance and credit, so people can make the journey from the basic bank account to other elements of financial inclusion in due course. Increasingly, many employers want to pay wages into a bank account. A number of bureaux survey respondents in the CAS report had encountered difficulties entering employment because of that. They could not get a bank account, or, if they got cheques, they encountered high bank charges to have them cashed.

Clearly, becoming “banked” will not in itself overcome poverty and deprivation, but it forms an important part of the jigsaw of policies and actions that are needed. There has been considerable progress. The goal of halving the number of the “unbanked” was met by 2009. Treasury figures for the UK in December 2010 show that the proportion of adults living in a household without access to a current, basic or savings account reduced from 4% in 2002-03 to 2% in 2008-09. The corresponding figures for Scotland show a fall from 6% to 3% over the same period.

The unbanked remain largely concentrated in the most deprived areas, and among certain groups: the retired, those who are of working age but in poor health and lone parents. Fairly significantly, in terms of access routes, 54% of the unbanked were council or housing association tenants. Only 16% of those with bank accounts fall into that category. I mention that partly because I think that that is a way in which some of the access routes could be enabled.

That still leaves a substantial number of unbanked adults. The CAS survey showed that two thirds of those who did not have access to a bank account had tried to open one. It is sometimes argued that the remaining unbanked do not want bank accounts.

[Chris Evans (Islwyn) (Lab/Co-op)]

I have listened to my hon. Friend. From my experience working in a bank—I worked for a bank 10 years ago, when the basic bank account was introduced—I have to say that the attitude of some bank workers was appalling. The basic bank account does not credit score, so they could not sell products, and they treated many people with basic bank accounts as second-class citizens. Does she agree that that is an absolute scandal in this day and age?

[Sheila Gilmore]

I certainly agree. I shall speak later about how we can move this forward, and one way is by improving the practices of some banks in that regard.

There are several main reasons why people cannot access basic bank accounts, of which that may well be one. Another is having a poor credit history or, indeed, no credit history. I shall quote one example from the CAS survey:

“I had a full driving licence but never had a bill in my name as I live with my mum and dad. I am 28 years old and can’t get a bank account.”

There are people who have not taken any credit in the past and do not have a record.

[Anas Sarwar (Glasgow Central) (Lab)]

I congratulate my hon. Friend on securing this debate. I was a dentist in a previous life—I am a glutton for punishment, perhaps. I have a similar story. We employed a new dental nurse who had no credit history at all. She did not have a driving licence—she was straight out of school—or her birth certificate, which had been lost in her parents’ messy separation, so she was not able to open a bank account. Instead, every week she had to take her cheques to one of the local pawnshops and pay £3.50 to get her money. That is a simple story, but the situation affects thousands of people across the UK.

[Sheila Gilmore]

I thank my hon. Friend for that example. It is important to understand that these things do still happen in this day and age, although it might be surprising to some people.

On the inability to meet some of the identity requirements, the Financial Services Authority permits use of a wide range of identification, but local advice agencies in my constituency have told me that meeting the requirements can be problematic. Not all banks operate to the FSA guidelines. They demand either a passport or a driving licence, which not everyone has. Such things as a letter from a housing association or benefit entitlement documents are not accepted, so the whole process takes a long time.

Other people are in a situation where they owe money to a bank. Sometimes it is appropriate that they open up a basic bank account elsewhere to enable them to function while they are dealing with previous debts. There is a growing difficulty with the consolidation of banks, in that there are too few banks in many places. In some small towns in Scotland, there is very little choice.

[Katy Clark (North Ayrshire and Arran) (Lab)]

My hon. Friend will be aware that an increasing number of people are being made bankrupt in Scotland because of the operation of legislation that allows people to be made voluntarily bankrupt because of their financial situation. That group in particular has a great deal of difficulty in opening bank accounts. Does she think that that issue also needs to be addressed?

[Sheila Gilmore]

I very much do. At present, only two of the mainstream banks allow undischarged bankrupts to open a basic bank account, and that creates a difficulty in Scotland in particular. One is the Co-operative bank, but it has few branches in Scotland, even with the merger with Britannia; the other is Barclays, which does not operate in many places in Scotland. In Edinburgh, there are only two Barclays branches. They are near each other in the centre of the city, so it is difficult for people to access any bank in Edinburgh that would enable them to have a basic bank account if they are an undischarged bankrupt.

There are also issues around high bank charges, which can lead people to abandon their bank accounts. For instance, a direct debit comes in at a time when there is no money in the account. They are unaware of that, and a bank charge is levied. Ironically, some people found that doorstep lenders who would be more expensive in the long term were more sympathetic and easier to use. They would allow a payment to be missed occasionally. We know that that is an expensive way of working, but the inflexibility of banks and an automatic bank charge when one is on a marginal income anyway put people off.

[Yvonne Fovargue (Makerfield) (Lab)]

Recent research has found that 60% of people go to the high-cost pay-day lenders to consolidate their borrowing. Does my hon. Friend agree that access to a bank account may prevent some of that from happening?

[Sheila Gilmore]

I agree that we need to stop that happening, and bank accounts are one way of doing so, although we must also take other measures.

How can we make further progress? My submission is that banks should be legally required to offer a basic bank account when an application for a current account has been refused. That was proposed in the March 2010 Budget and was a commitment in Labour’s 2010 election manifesto.

The Government also have a role in encouraging mainstream banks to use all the best practice and not to introduce obstacles such as those that several of my hon. Friends and I have discussed. That includes ensuring that undischarged bankrupts are allowed to open bank accounts and that people with no credit history are given access. Banks should market such basic accounts fully, and staff should be trained and encouraged to do so. The ID requirement should be reviewed and, again, staff should be clear about what is necessary; they should not over-ask, which puts people off. If, even with such changes, banks have to or feel that they have to refuse an application, they should at least be obliged to give people information about alternatives.

The Government need to support alternative providers for people on low incomes, including credit unions and community development financial institutions such as Scotcash in Glasgow, which not only offers loans but has been giving people assistance with basic bank accounts. In its second year of operation, Scotcash assisted 553 individuals to open a basic bank account. However, such organisations depend on a relatively high degree of public support, and it is important to consider ways of helping those institutions to grow further. Many were able to get started because of the previous Government’s £100 million growth fund. If that fund does not continue, many will have to reduce their operations in future years. Reforming community interest tax relief would assist them, as would keeping mainstream banks to their previous commitment to help such community financial institutions—most have not kept that commitment. The debate is not primarily about savings or credit, but such points illustrate how all the issues are linked and how the Government need to have an overall financial inclusion strategy and to act upon it.

I have some specific questions for the Minister. First, will the Government commit to establishing a universal right to a basic bank account? Secondly, will they continue the work of the Treasury’s Financial Inclusion Taskforce after the end of the current financial year, because it has been behind so many measures? Thirdly, how will they encourage banks to remove current obstacles to securing a basic bank account, as outlined? Fourthly, how will they support alternative mechanisms for those for whom a bank account may still be impossible or undesirable?

I have a couple of specific proposals for the Minister. What practical and financial support can be given to enable post offices and credit unions to enter partnerships? In the short time that I have been in the House, there has been much discussion but no specific action allowing that to happen. If post offices do that, there is a cost, which the post office network perhaps feels is difficult to meet at this stage in its operations, but the Government could assist.

[Margaret Curran (Glasgow East) (Lab)]

I apologise for missing the beginning of my hon. Friend’s contribution.

Has my hon. Friend shared my experience of young people in particular having difficulties? In my constituency, Save the Children has given compelling evidence about young people who have left the family home—they are put out of it—being denied the means to get a bank account and, therefore, the means to set up proper financial arrangements, further pushing them into poverty. The issue is a key plank in tackling poverty and helping people back on to their feet.

[Sheila Gilmore]

I thank my hon. Friend for making that point. The issue is important for young people. Many people talk about financial education being important—indeed, it is—but if someone does not even have the mechanisms in place to act on such financial information, which was perhaps got through school, participating fully in society, getting employment, having wages paid into banks and so on will be difficult. Many young people in that situation are setting up home for the first time, so it would be helpful if they could access facilities that, for example, allow them to make fuel payments cheaply.

Finally, and specifically, I am interested in the Government’s view on reforming the community investment tax relief to assist community development financial institutions, so that they can expand their business without necessarily being wholly dependent on grant assistance. That would enable such an important strand of financial inclusion to continue.

16:39

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I congratulate the hon. Member for Edinburgh East (Sheila Gilmore) on securing this important debate tracking progress on basic bank accounts and on what more needs to be done to encourage financial inclusion.

I confirm the coalition Government’s commitment to improving levels of financial inclusion. I have been involved and interested in the issue for some time. We believe that banks should serve the economy and that they should be committed to improving access to banking and the transparency of financial products for consumers.

Tackling unnecessary exclusion from banking services can help to alleviate some of the problems faced by low-income families who are currently unable to access mainstream banking services. As the hon. Lady has said, the benefits include being able to receive payments through different channels, having a more secure place to keep money and reducing the cost of household bills.

That is why the Government are committed to improving access to basic banking services and to helping people to use those services responsibly. That can only be achieved through collaboration between a number of parties, including the Government and the financial services industry, as well as a range of local partners, such as the devolved Governments, local authorities, social landlords, advice agencies, credit unions and others.

It is important to acknowledge, as the hon. Lady did, the real progress towards financial inclusion in recent years, and to note that such progress is due to the openness and support of many in the financial services sector. In her speech, the hon. Lady highlighted the reduction in the unbanked over the course of the past few years. Since 2002-03, the number of adults living in households without a transactional bank account has decreased from 3.57 million to 1.54 million in 2008-09. That number continued to fall in the last year for which we have information, with 200,000 fewer adults living in households without access to a transactional bank account. However, we cannot afford to be complacent. There is still scope to bring more households into banking services and to encourage the banks to maintain strong standards of customer service for poorer households.

I want to say a little more about the project to which the hon. Lady has referred to improve access to basic bank accounts.

[Chris Evans]

Before the Minister moves on, what does he believe that banks can do to manage people who are currently running their basic bank accounts very well on to mainstream banking, so that they can have credit facilities? What action can move people on to mainstream banking?

[Mr Hoban]

That is an important point. Banks should see the opportunity to encourage and enable people to get greater access to mainstream services, moving them from a basic bank account to a more fully functioning current account.

I will touch on the issue later, but we need to go with the grain of how people want to live their lives. Many people are comfortable with access to a bank account without an overdraft facility, for example. A challenge for policy makers is that we think of things that we might like as a function, even though sections of the community might not want such functionality in their accounts. We need to think carefully about that, although we should be clear that moving to a fully functioning current account ought to be open to those with basic bank accounts. Banks need to look at credit histories and how people manage their accounts as part of that process.

At the request of the financial inclusion taskforce, eight of the major retail bank account providers have collaborated to provide management data on their basic bank accounts. That allows us to look at levels of take-up in different local authority areas and wards across the country. At local level, there are financial inclusion champions, such as the group in Scotland funded by the Department for Work and Pensions. They are looking at how best to work in deprived areas to raise awareness and encourage more people to open bank accounts. We can continue to make effective use of up-to-date regional data to help tackle the issue in areas of financial exclusion.

The hon. Lady referred to the financial inclusion taskforce report that was published in December. That is a timely piece of work that gives us the opportunity to take stock of where we are. It raises a number of issues referred to by the hon. Lady and her colleagues, and I encourage hon. Members to read the report on the Treasury website.

The taskforce found that the experience of banking services for poorer households has been mixed. Many households have made savings on services and retail purchases, but some have lost money through bank charges. The taskforce found that the remaining unbanked are generally the poorest and most deprived people, and it recommended a number of minor changes to existing basic bank accounts to make them more accessible and easier for poorer households to use. It also highlighted the scale of the challenge of extending bank accounts to those who currently do not have them.

The research found significant indicators of relative disadvantage among the unbanked: eight out of 10 of the unbanked are in receipt of income-related benefits; more than a third have major health conditions; and a quarter have numeracy or literacy problems. As more people open bank accounts, we see the unbanked becoming concentrated in hard-to-reach, more deprived groups. We must think carefully about how to work closely with those groups to get people to open bank accounts and access the benefits that they bring.

Interestingly, we should not assume that those who do not have a bank account have not previously held one. Six out of 10 unbanked people have previously held a bank account. The research does not give reasons why those people do not currently have a bank account, but some may have had issues with managing their account and decided not to keep it open, or the account may have been closed. We are not necessarily talking about people with no experience of bank accounts. Some people may have opted not to have an account for a particular reason.

Let me reiterate the point about going with the grain of how people run their lives. Many unbanked consumers express a preference for managing their finances in cash. Some low-income households employ a number of strategies to ensure that money is available for essential living expenses, which include not withdrawing all their benefit payments at once, leaving a small amount of money as a buffer, or perhaps putting cash towards a particular purpose. We are well aware of the number of people who join holiday clubs or Christmas clubs to try to keep money in a defined account that is kept for a specific purpose, and a lot of people on low incomes find that to be a more effective way of having control over their money. They want direct control over their spending and feel that a bank account takes that away from them. Unbanked people are more concentrated in particular groups, but not having a bank account could be a conscious decision as much as a matter of exclusion, and we must therefore have a more flexible approach.

In the long term, the taskforce believes that the introduction of new models and channels for the delivery of financial services may be necessary to address the difficulties that poorer households can experience with banking. It has called on the Government to engage further with banks, e-money service providers, bill payment organisations, retailers and post offices to pursue new ways to improve the opportunities for low-income households to make the most of their money. We are in danger of getting stuck by thinking about a model of banking based around bank accounts. Increasingly, people are turning to prepayment cards or e-money as a way of controlling their finances or paying bills online.

[Sheila Gilmore]

The Minister has correctly identified one concern of the financial inclusion taskforce—that of bank charges that are very high in relation to the sums of money that people are dealing with. Does the Minister have any proposals to address the banks on that issue, given that by definition, people cannot run up unnecessary debt on those accounts? Perhaps bank charges should be reduced for that customer group.

[Mr Hoban]

The coalition agreement commits us to tackling the issue of bank charges, and we are working closely with colleagues in the Department for Business, Innovation and Skills.

I want to respond to a couple of specific points. Hon. Members have discussed bankrupts not being able to open bank accounts, and the hon. Lady was right to say that Barclays and the Co-operative bank allow undischarged bankrupts to open accounts. A number of banks are currently reviewing their policies and, in response to a call by the Government in July for banks to reconsider the issue and recognise the problem, the Insolvency Service is working with the British Bankers Association to decide how to address the issue.

The guidelines in law on identification are high level, and banks and financial services institutions have a great deal of flexibility in deciding how to prove someone’s identity. It is not only about having a driving licence or a passport, because there are other ways of doing it. In one of my constituency cases, a letter from the local council addressed to the person who was seeking to open a bank account was deemed to be sufficient proof of identity. I encourage banks to make their staff more aware of the rules and flexibility, and we will continue to raise that matter with the banks and the BBA.

The hon. Member for Islwyn (Chris Evans) asked whether banks are open to people opening basic bank accounts. The work of the financial inclusion taskforce, which sent mystery shoppers into banks, demonstrated that 80% of bank managers are much more open to people opening basic bank accounts. That issue has been a problem in the past, and we must maintain pressure on the banks to ensure that they offer basic bank accounts and do not turn customers away. We must tackle the barriers to people opening bank accounts.

Community investment tax relief is an important way of providing support. That tax is due for review shortly, and we will work with a full range of stakeholders to consider the options available for reform.

[Ian Murray (Edinburgh South) (Lab)]

I am grateful to you for giving way, Mr Hood, and I apologise for missing the start of the debate.

[Mr Jim Hood (in the Chair)]

Order. I did not give way; I was not doing anything.

[Ian Murray]

Thank you, Mr Hood. I will get used to the conventions of this place eventually. The Minister has responded to my hon. Friend the Member for Edinburgh East (Sheila Gilmore) on the subject of basic bank accounts. One point that I regularly heard from the BBA, the Royal Bank of Scotland and HBOS, as it was at the time, was that if the staff in local branches were not able to offer a full bank account to potential customers, they did not then offer a basic bank account. Will the Government consider issuing guidance on that through the BBA to ensure that people who do not meet the criteria for a full bank account are automatically offered a basic bank account?

[Mr Hoban]

I do not want to get bogged down in what banks should or should not do. Through its mystery shopping exercise, the taskforce looked at the offering of basic bank accounts, and it will publish a more detailed report this year that will help inform those processes. Obviously, the Banking Code Standards Board will also have an interest in how such accounts are offered.

The hon. Member for Edinburgh East also asked about support for credit unions and post offices working together. There has been much discussion about that in recent months, and there is already a lot of co-operation between post offices and credit unions. For example, credit union current account holders can access their accounts through the post office, and more thought is being applied to that area.

We take financial inclusion seriously, and we want to ensure that more people have access to a bank account and the benefits that that brings. It is important to ensure that bank accounts and financial services work with the grain of how people live their lives. We must look at new technological approaches and the barriers to opening bank accounts. Together, we will take forward the work of the financial inclusion taskforce in conjunction with our partners not only in government but in the financial services sector. If I have not replied to any of the hon. Lady’s points I will happily respond to them by letter.

[Sheila Gilmore]

It appears from the Minister’s words that the financial inclusion taskforce will be continuing.

[Mr Hoban]

The previous Government committed the financial inclusion taskforce to a five-year life. The problem is ensuring that inclusion becomes a mainstream financial services issue and is not seen as something on the margins. That is why I will work closely with the financial services sector and other interested parties to see how we can best take forward the work of the financial inclusion taskforce. It is not an issue for those on the margins; it is an issue that should be taken seriously from bank boards to bank branches.

17:00

Sitting adjourned without Question put (Standing Order No. 10(11)).