House of Commons

Wednesday 18th April 2012 Commons Chamber

Wednesday 18 April 2012

The House met at half-past Eleven o’clock

Prayers

Wednesday 18th April 2012 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Wednesday 18th April 2012 Commons Chamber

The Secretary of State was asked—

[Mrs Anne McGuire (Stirling) (Lab)]

1. What recent representations he has received on the provisions of the Scotland Bill.

[The Secretary of State for Scotland (Michael Moore)]

On 21 March, I tabled a written ministerial statement to confirm that agreement had been reached with the Scottish Government on the Scotland Bill. The Scottish Government have tabled a legislative consent memorandum recommending that the Scottish Parliament support the Bill, and Members of the Scottish Parliament will vote later today.

[Mrs McGuire]

The new Scotland Bill will pass significant powers to the Scottish Parliament, including those relating to tax. Among the representations that the Secretary of State has received, has there been a request from the First Minister to work jointly with him to highlight and promote those new powers, to show that we can maximise devolution while maintaining the integrity and strength of the partnership of the United Kingdom?

[Michael Moore]

The right hon. Lady will not be surprised to hear that I have not received a representation on that particular subject. I agree with her that the Scotland Bill is a significant piece of legislation; it represents the most significant transfer of financial powers from London to Edinburgh since 1707. After the agreement on the legislative consent memorandum and, I hope, their lordships’ approval of the Bill’s Third Reading, we must quickly get on with its implementation in the right way, to show that devolution works, and works well for Scotland.

[Angus Robertson (Moray) (SNP)]

The Scottish Government and the majority of Members of the Scottish Parliament believe that the Scotland Bill could have been significantly improved, through the inclusion of job-creating powers among others, but that has not happened. Will the Secretary of State take this opportunity to confirm that the UK Government have agreed to safeguards ensuring that the Scottish Parliament will need to be satisfied that funding arrangements will not be detrimental?

[Michael Moore]

I have a very different view of the future of Scotland from that of the right hon. Gentleman; I want to see Scotland continue to be a strong part of the United Kingdom. On his specific question, I am pleased that the Scottish Government have now accepted the Scotland Bill. We have worked carefully together to ensure that we have the right measures in place to implement it carefully for all the people of Scotland.

[Angus Robertson]

Will the Secretary of State acknowledge that, in the wake of the historic Scottish National party victory last year, every single political party is now miraculously in favour of more powers being devolved than are currently contained in the Scotland Bill? Which further powers does he want to see being exercised in Scotland?

[Michael Moore]

Once again, we are seeing fantastic diversionary tactics from the right hon. Gentleman. He never talks about independence. Why not? Because his party cannot answer the fundamental questions about it. I am delighted that he wants to work with us, and I can tell him that devolution has always worked on the basis that we promote ideas, reach consensus and implement them. The debate on devolution will continue, but we must resolve the issue of independence. Why does he not want to get on with that debate?

[John Robertson (Glasgow North West) (Lab)]

2. How many meetings he had with the Chancellor of the Exchequer in the two weeks preceding his financial statement of 21 March 2012 on the effect of the Budget on Scotland.

[The Secretary of State for Scotland (Michael Moore)]

I have regular meetings with senior Cabinet Ministers, including my right hon. Friend the Chancellor of the Exchequer, in which a wide range of issues are discussed. This includes the period in the run-up to Budget 2012.

[John Robertson]

I thank the Secretary of State for his answer, although I have my doubts about whether he did have any such meetings. Anyway, there are more families losing their tax credits and more pensioners set to be affected by the granny tax in Glasgow than there are millionaires who will be affected by the mansion tax in the whole of Great Britain. Is that what he calls the Liberal Democrats speaking up for Scotland?

[Michael Moore]

The hon. Gentleman just cannot get the Labour party off the hook of the mess that it left the economy in at the end of the last Parliament. We are having to sort out the biggest deficit in peacetime history and get ourselves on the path to sustainable growth. We have had to take some tough decisions, but I am proud of the fact that, because of the measures in the Budget, more Scots will be taken out of income tax altogether and pensioners will receive the biggest cash increase in their pensions that they have ever had, in contrast to the insult of the Labour party’s 75p increase.

[Iain Stewart (Milton Keynes South) (Con)]

Did my right hon. Friend or the Chancellor receive any Budget representations from the Scottish Government about the financial consequences of Scotland separating from NATO?

[Michael Moore]

Funnily enough, we did not.

[Stewart Hosie (Dundee East) (SNP)]

In the discussions that the Scottish Secretary had in the run-up to the Budget, did he make a case for re-profiling capital investment for funding shovel-ready projects, which would be the most effective thing we could do to build gross domestic product growth, or did he simply roll over, have his tummy tickled and accept the tax cut for millionaires?

[Michael Moore]

The hon. Gentleman should reflect carefully on the case he is trying to make. Perhaps, in a rare moment of generosity, he would welcome the fact that since the spending review, we have announced £1 billion of further spending allocations to the Scottish Government. We are continuing to create the conditions for sustainable growth to support businesses, and in Dundee there are now enterprise zones that get 100% capital allowances. I had hoped that the hon. Gentleman would welcome that.

[Mr Alan Reid (Argyll and Bute) (LD)]

In Argyll and Bute the high price of fuel is doing damage to businesses and people’s incomes, because of the long distances people by necessity have to travel. Will the Secretary of State please have a word with the Chancellor and encourage him to cancel, if the price of fuel remains high, the August fuel duty increase?

[Michael Moore]

My hon. Friend is a consistent campaigner on this issue, and I am always happy to have discussions with him about it. I hope that he, like me, would recognise that as a result of the measures we have taken, we have provided a cut of 10p on fuel relative to what Labour was proposing, and provided support to remote rural communities in Scotland as well.

[Mr Ian Davidson (Glasgow South West) (Lab/Co-op)]

Will the Secretary of State tell us the last time he ate a hot bridie? Did he discuss with the Chancellor the impact of taxation on hot bridies, and does he recognise that his Front-Bench colleague looks as if he has eaten a lot of hot bridies recently?

[Michael Moore]

I would have thought that the hon. Gentleman was above such personal attacks. My own preference is for fish and chips. He will know that there are plenty of places in Galashiels and elsewhere where a fine fish supper can be had. We have had to take tough decisions, but have made sure that everything is fair on that particular front.

[Jo Swinson (East Dunbartonshire) (LD)]

Does my right hon. Friend agree that in difficult economic times it is vital for the Government to help people on low incomes by cutting their taxes and taking the lowest paid out of tax, which is in stark contrast to the last Labour Government, who doubled the 10p tax rate, hitting the lowest paid the hardest?

[Michael Moore]

My hon. Friend is entirely right. Our priority in difficult times must be to give help to people on low and middle incomes—the earners who need the most support. Because of that, more than 160,000 Scots will be out of income tax altogether, and millions more will pay less tax. That is the right way to approach this.

[Margaret Curran (Glasgow East) (Lab)]

May I begin with a quote?

“The simple equation is that we think the priority is to help those on the lowest incomes. Clearly that is going to have to be paid for and we think it is fair that those who have the broadest shoulders should be the ones to contribute to that.”

Can the Secretary of State tell us which Cabinet member said that about the recent Budget?

[Michael Moore]

The important point is that in the very difficult economic circumstances that we inherited from the hon. Lady’s Government, we must fix the deficit, get the economy on the right track and in doing so make decisions that help the lowest paid and middle-income earners. That is what we are doing by taking people out of tax altogether and by ensuring that we reduce the tax burden on others.

[Margaret Curran]

I am surprised that the Secretary of State did not even recognise a quote from himself. He should know that the Resolution Foundation has confirmed that cuts to tax credits will dwarf any gains from an increase in personal tax allowances—so he needs to stop using that argument. Will he tell us why he has changed his position since he last spoke to the Evening Standard, when more than 400,000 Scottish pensioners are going to be hit by the granny tax and more than 84,000 families in Scotland will have lost all their tax credits, while at the same time his Budget has given 16,000 of the richest Scots a massive tax cut? Will the Secretary of State finally admit that this Budget has hit Scotland hard and has done more for millionaires than for hard-working families? When will he stop being a Tory front man and stand up for working people in Scotland?

[Michael Moore]

The last Labour Secretary of State, who has now joined the hon. Lady on the Front Bench, said that Labour had to be credible on the economy and on the financial regime, but it is not being credible in the proposals it is making. I stand by my comments. My intention and that of my colleagues with this Budget is to ensure that we provide support to the lowest and middle-income earners and that those on the highest earnings pay their way. Through the abolition of tax reliefs, we will ensure that they do.

[David Mowat (Warrington South) (Con)]

3. What discussions he has had with the Chancellor of the Exchequer on the funding formula for Scotland.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

The Government are aware of the concerns that have been expressed about the current system of devolution funding, whereby changes to the block grant are calculated according to the Barnett formula. Owing to the unprecedented deficit that we inherited, our immediate priority is to reduce the deficit, and we have no plans to change the present arrangements before the public finances have been stabilised.

[David Mowat]

Given that the Government have no plans to replace the current formula with a formula based on need, and given the requirement for clarity so that the people of Scotland know what proportion of the national debt they will inherit before they vote, does my hon. Friend agree that the Barnett multiplier would provide a good solution?

[David Mundell]

I believe that we need to move on from the discussion of issues of process relating to the referendum, and engage in a substantive debate on the issues that would affect Scotland if it became independent. Having, it would appear, campaigned relentlessly for independence, the SNP now seems to want to delay the question and the issues for as long as possible.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Does the Minister agree that the high price of fuel is creating major problems in Scotland, and that, at a stroke, cutting VAT, which is perhaps the unfairest tax in the country, would help Scottish families, who are suffering greatly as a result of the Budget.

[David Mundell]

rose—

[Mr Speaker]

Order. I hope that the answer will refer to the funding formula for Scotland, as the question should have done.

[David Mundell]

The funding formula for Scotland is calculated on the basis of a basket of taxes raised by the United Kingdom Government. Scots would be much worse off if fuel duty were 10p higher, as it would have been if Labour were in power.

[Mr David Evennett (Bexleyheath and Crayford) (Con)]

Does my hon. Friend agree that it is vital to maintain the Union in the interests of both England and Scotland, but that the funding formula should be fair to both countries?

[David Mundell]

I agree absolutely with my hon. Friend’s sentiments, but as he and many other Members are aware, this Government inherited the worst deficit in peacetime history from the Labour Government, and stabilising our nation’s finances must be the focus of their efforts.

[Gordon Banks (Ochil and South Perthshire) (Lab)]

My question relates directly to the question from the hon. Member for Bexleyheath and Crayford (Mr Evennett) and the Minister’s answer to it. Does the Minister agree that the Scotland Bill will increase the amount of revenue gathered in Scotland to about a third of its spend, and will thus decrease dependency on a block grant?

[David Mundell]

I agree that the Scotland Bill represents a radical, historic and significant change to Scotland’s financing. More than a third of spending by the Scottish Parliament will result from funding from taxes that it determines and raises. That is a major step forward in terms of devolution and accountability, and should be welcomed by all Members.

[Alun Cairns (Vale of Glamorgan) (Con)]

4. What assessment his Department has made of the responses to its consultation on the proposed referendum on independence for Scotland.

[Amber Rudd (Hastings and Rye) (Con)]

8. What assessment his Department has made of the responses to its consultation on the proposed referendum on independence for Scotland.

[The Secretary of State for Scotland (Michael Moore)]

The Government published their response on 4 April. The responses to the consultation gave strong endorsement to a referendum involving a single, clear question on independence, overseen by the Electoral Commission, using the same franchise as that used to elect the Members of the Scottish Parliament, and held sooner rather than later.

[Alun Cairns]

Does my right hon. Friend agree with the consensus established by the responses to the consultation, which is that people do not want to wait 1,000 days to exercise their votes in a referendum?

[Michael Moore]

This is a fundamentally important decision, the most important that we as Scots will make in our lifetimes, and the longer it is delayed, the greater the uncertainty will be. The sooner we can get on with resolving the process and the question, the better.

[Amber Rudd]

Do the responses of the consultation reflect my view that there should be a simple “yes or no” question in any referendum if we are to secure a decisive outcome for Scotland?

[Michael Moore]

My hon. Friend is entirely right. We must not muddle the issue of independence with a separate debate on the future of devolution. Today we mark another important milestone in the development of the Scotland Bill. What we want after its enactment—assuming that we receive their lordships’ support—is a clear decision on the future of our country, and for it to stay in the United Kingdom.

[Pete Wishart (Perth and North Perthshire) (SNP)]

Does the Secretary of State wish to take this opportunity to thank the Labour party for providing his meagre consultation with more than a quarter of the responses? I suppose that that adds a new meaning to the term “Labour block vote”. Can he tell us how many other responses he received from the Labour website with a slightly amended text, and why the Labour party is doing all the groundwork for his Tory-led Government’s consultation?

[Michael Moore]

It should hardly be a surprise to the hon. Gentleman that political parties want to take part in consultations. This is an intensely political process. Even this morning, there was a pre-prepared script on the Scottish National party website inviting people to respond to the SNP’s consultation, so SNP Members should be a wee bit careful about the argument they are trying to make.

[Pamela Nash (Airdrie and Shotts) (Lab)]

Some 70% of respondents to the UK consultation felt that 2014 was too long to wait to decide Scotland’s constitutional future. Businesses and financial institutions in my constituency have made it clear that this state of limbo is damaging the economy in Scotland. Has the Secretary of State received similar representations from businesses elsewhere in Scotland?

[Michael Moore]

The hon. Lady is entirely right to draw this issue to the attention of the House and to highlight that across Scotland and the UK, businesses, like individuals, want answers. We need to resolve this hugely important issue sooner rather than later, so we do not lose out on investment in jobs and we understand our future within the UK.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

5. How many people in Scotland will be affected by the Chancellor of the Exchequer’s proposal to withdraw the additional personal allowance for people over 65 years of age.

[Lindsay Roy (Glenrothes) (Lab)]

9. How many pensioners in Scotland will be affected by the Chancellor of the Exchequer’s decision on age-related personal allowances.

[Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)]

10. How many pensioners in Scotland will be affected by the Chancellor of the Exchequer’s decision on age-related personal allowances.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

13. How many pensioners in Scotland will be affected by the Chancellor of the Exchequer’s decision on age-related personal allowances.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

Three hundred and sixty-seven thousand.

[Michael Connarty]

Will the Government not admit that the figures do not reveal the fact that this is an attack on people who have put away money for their retirement? The amount involved is up to £30,000 a year. This is an attack on middle-class people. There is also an attack on single people, who will lose income through being hit by the bedroom tax. People cannot be elderly and they cannot be single—and it would appear they cannot be hungry either, as there is a tax on fish and chips.

[David Mundell]

It will not surprise the hon. Gentleman that I do not accept his analysis. He and others who scaremonger on this issue fail to point out that more than half of those in Scotland aged over 65 will not pay any tax at all.

[Lindsay Roy]

Is the Minister not ashamed of his Government’s decision to reduce tax for the wealthiest Scots while at the same time penalising pensioners with a tax grab, whereby they will lose up to £322 per annum?

[David Mundell]

I know that the hon. Gentleman was not a Member of this Parliament for most of the 13 years of the last Labour Government, but most of his colleagues from Scotland were, and I did not hear them calling at that time for an increase in the higher rate of income tax. He is wrong to say that there will be losers in relation to the age-related allowances; there will be no cash losers.

[Sandra Osborne]

If, as the Government say, this measure is about fairness and simplification, why did they not wait until the full £10,000 personal allowance was in place before imposing this stealth tax on pensioners?

[David Mundell]

I acknowledge that the hon. Lady is well known for speaking up both for the low-paid and for those on the minimum wage. That is why I would have thought that she would have welcomed the fact that the Government are raising the personal allowance to £10,000 during this course of this Parliament. [Interruption.]

[Mr Speaker]

Order. There are a lot of noisy private conversations taking place in the Chamber. I would like to hear the questions and the answers.

[Gregg McClymont]

What does it say about the priorities of this Government that they impose a granny tax on 367,000 Scots while giving a tax cut to the wealthiest 14,000 Scots?

[David Mundell]

What the hon. Gentleman and his colleagues fail to acknowledge is that this Government have delivered the largest pension rise in the last 30 years, whereas the last Government, which his party led, introduced a pension rise of 75p, so we are not going to take any lectures from Labour on the treatment of pensioners in Scotland.

[Mr William Bain (Glasgow North East) (Lab)]

Just how out of touch are this Government if they think that it is right or fair that almost 400,000 Scottish pensioners should pay on average £83 a year more in tax from next April just so that 16,000 top-rate taxpayers receive a tax cut of £10,000 a year on average? People retiring next April will face an annual tax hike of £322 a year because of the granny tax and the ending of the savings credit in 2017, on top of higher VAT and cuts in winter fuel allowance introduced by this Chancellor. With a record in government like that, surely it is no surprise to the Minister that Tory election strategists are gloomy about winning any seats at all in Scotland at the next general election.

[David Mundell]

What I think is fair is that half of pensioners over 65 in Scotland will not pay any tax at all; that those earning less than £10,000 will, by the end of this Parliament, be subject to a personal allowance of £10,000; and that this Government have delivered the largest increase in the pension—£270 compared with the 75p offered by the previous Government.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

Those pension increases will, of course, be wiped out by this tax grab. People living on modest pension incomes have already paid a very high price for the financial crisis. They have lost the value of their savings and investments, and they are having to face inflation and extremely low interest rates. How can the Minister justify this tax grab on pensioners while taxes are being cut for millionaires?

[David Mundell]

I am afraid that I am not going to accept any lectures on economics from the hon. Lady. She is offering pensioners in Scotland the prospect of breaking up the United Kingdom, with no certainty as to where pension funding would come from.

[Julian Smith (Skipton and Ripon) (Con)]

6. What assessment his Department has made of the implications for the currency used in Scotland of a vote in favour of independence for Scotland.

[The Secretary of State for Scotland (Michael Moore)]

We are confident that people in Scotland will continue to support the United Kingdom in any referendum. It is the Scottish Government who are proposing independence and they must answer for the implications of their proposals, including on currency matters.

[Julian Smith]

Is it not the case that the weight of legal opinion suggests that an independent Scotland would become an European Union accession state and would therefore be obliged to join the euro?

[Michael Moore]

The Scottish National party is changing its position on what currency it wishes to adopt and how it would go about this. There is no doubt that the SNP needs to answer some hard questions on this matter and resolve, for us all, what an independent Scotland would look like. I think that Scotland is better off in the UK.

[Anas Sarwar (Glasgow Central) (Lab)]

The Secretary of State will be aware that a separate Scotland would have to create its own currency, join a weaker euro or make its biggest business partner its biggest business competitor, with the Bank of England setting its interest rates, its spending limits and its borrowing limits. Does this not show the incoherence of the SNP’s economic policies?

[Michael Moore]

The hon. Gentleman is entirely right to point out that even in its best moments, when it tries to offer us some detail, the SNP does not resolve what a monetary union with the rest of the UK might look like, how it would deal with the fiscal rules and the regulatory environment or whether the Bank of England would be the lender of last resort. I think that Scotland deserves some answers on those points.

[Malcolm Bruce (Gordon) (LD)]

Does the Secretary of State acknowledge that if an independent Scotland were to use the pound sterling, that would require conditions that cannot be known now? Indeed, that is one of a growing number of issues that are unknown and unknowable, and it shows how uncertain Scotland’s future would be if it left the United Kingdom.

[Michael Moore]

My right hon. Friend is entirely right that when given the opportunity, the SNP ducks giving the answers to all these hard questions, because it does not have those answers.

[Guy Opperman (Hexham) (Con)]

7. What steps are being taken by the Government and the Office of Fair Trading to tackle fuel poverty in Scotland.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

The Secretary of State chaired the first ever annual summit in Scotland on fuel poverty, bringing together the heads of the big six energy companies and Scottish consumer groups. That led to suppliers providing information to improve the application of key policies in Scotland, such as the warm home discount scheme. I am convening a follow-up meeting soon to review progress.

[Guy Opperman]

Does the Minister agree that the problem of a lack of competition in the availability and provision of heating oil in the Scottish border region needs addressing urgently?

[David Mundell]

I represent a large rural constituency in the Scottish borders, so I certainly share my hon. Friend’s concerns, although I understand that in his constituency there are some innovative initiatives whereby communities are coming together to purchase heating oil and are therefore able to negotiate better prices with suppliers.

[Mr Mike Weir (Angus) (SNP)]

As well as pressing the Office of Fair Trading, will the Minister press his own Cabinet colleagues to look at providing practical help, for example by bringing forward the pensioners’ winter fuel allowance for off-grid consumers to allow them to fill up their tanks before winter hits, when prices tend to be lower?

[David Mundell]

The off-grid issue is of concern in rural Scotland, as elsewhere, and I would be happy to meet the hon. Gentleman to discuss his concerns.

[Mr Graham Allen (Nottingham North) (Lab)]

11. What powers would be devolved to Scotland under devo-max.

[The Secretary of State for Scotland (Michael Moore)]

Devo-max is a term used by the Scottish Government with no clear definition. This Government are focused on delivering the Scotland Bill, which will represent the largest transfer of fiscal powers to Scotland since the Act of Union in 1707.

[Mr Allen]

Does the Secretary of State agree that devo-max is a wonderful idea for Scotland and will he therefore discuss with some of his Cabinet colleagues extending that wonderful idea to the regions and localities of England?

[Michael Moore]

It is always dangerous for a Scot to enter into the constitutional debate in England but there is a lively debate to be had. The important thing today is that we acknowledge the important next steps we are taking in Scotland through the real proposals in the Scotland Bill which are due to get the consent of the Scottish Parliament and, I hope, their lordships next week. That will put us on track for the biggest development in devolution since 1998.

The Prime Minister was asked—

[Naomi Long (Belfast East) (Alliance)]

1. If he will list his official engagements for Wednesday 18 April.

[The Prime Minister (Mr David Cameron)]

I am sure the whole House will wish to join me in paying tribute to those servicemen who have fallen since we last met for Prime Minister’s Question Time—Captain Rupert Bowers from 2nd Battalion the Mercian Regiment, Sergeant Luke Taylor from the Royal Marines, Lance Corporal Michael Foley from the Adjutant General’s Corps, and Corporal Jack Stanley from the Queen’s Royal Hussars who died on Sunday 8 April from wounds sustained in Afghanistan in February. We are indebted to their courage and their selfless service and at this difficult time we send our heartfelt condolences to the families, friends and colleagues of these men, who have made the ultimate sacrifice for our country. They will not be forgotten.

This morning I had meetings with ministerial colleagues and others, and in addition to my duties in this House I shall have further such meetings later today.

[Naomi Long]

I, too, would want to offer my condolences to the families of those who have lost their lives in conflict in recent days.

In Northern Ireland, party political donations are not subject to the same publication rules as those in the rest of the UK. However, my party has delivered on our commitment to publish the relevant information on a voluntary basis. Will the Prime Minister commit to bringing the Northern Ireland publication rules into line with the rest of the UK, and further will he demonstrate his commitment to openness and transparency by following our lead and publishing voluntarily lists of donors to the Conservative party in Northern Ireland?

[The Prime Minister]

I am very happy—we publish those donor lists and quite rightly so. As the hon. Lady knows, the previous Government passed legislation with specific treatment for Northern Ireland for reasons that I think are quite well known to the House. As far as possible, we want Northern Ireland political parties to show the same approach as in the rest of the UK. If parties choose to publish that information on a voluntary basis, that is very welcome, so I very much welcome what her party has done, leading by example.

[Stephen Barclay (North East Cambridgeshire) (Con)]

Following the unlawful killing of my constituent David Gray as a result of his out-of-hours GP’s inability to speak English, I welcome today’s announcement of a consultation on strengthening the controls on foreign doctors. Does my right hon. Friend agree that GPs working in England should be able to speak English and that the legitimate desire for freedom of movement within the EU is not an excuse for compromising patient safety?

[The Prime Minister]

My hon. Friend is entirely right, and today’s announcement makes it clear that doctors should not be operating in the NHS in our country unless they can speak English. Under the proposals, senior doctors will need to assess whether doctors have the necessary language skills to be able to communicate effectively with patients. If they cannot do that, they cannot practise.

[Edward Miliband (Doncaster North) (Lab)]

Let me join the Prime Minister in paying tribute to Captain Rupert Bowers from 2nd Battalion the Mercian Regiment, Sergeant Luke Taylor from the Royal Marines, Lance Corporal Michael Foley from the Adjutant General’s Corps and Corporal Jack Stanley from the Queen’s Royal Hussars. I join him in saying that they showed the most enormous courage and bravery and that all of our thoughts are with their family and friends.

Will the Prime Minister confirm that the cut in the 50p tax rate on which we will be voting tonight will be worth at least £40,000 a year to Britain’s millionaires?

[The Prime Minister]

The cut in the 50p tax rate is going to be paid five times over by the richest people in our country. I notice that the right hon. Gentleman does not ask about unemployment. Every month when unemployment has risen he has leapt to the Dispatch Box to leap on the bad news, but today we see unemployment fall by 35,000 and employment go up by 53,000 but no welcome from him. Does that not show all his priorities? Will he now welcome the increase in people employed in our country?

[Edward Miliband]

Only this Prime Minister could think it was a cause for celebration that more than 1 million young people in this country are still out of work. It is no wonder people think he is out of touch. The House will have noted that he could not deny that Britain’s 14,000 millionaires are getting a £40,000 cut in their income tax. As for the figures produced for the Budget, today even the Treasury Committee says they are bogus. Millionaires are winners from this Budget, but what about everyone else? Will he confirm that by freezing the personal tax allowance year on year on year, 4.4 million pensioners will lose as much as £320 a year?

[The Prime Minister]

The Budget is about cutting taxes for 24 million working people, taking 2 million people out of tax, freezing council tax and cutting corporation tax so that we are competitive with the rest of the world. For pensioners, this month we have increased the basic state pension by £5.30 a week, far more than Labour ever would have done. If the right hon. Gentleman is concerned about the 45p top rate of tax, perhaps he could explain why the amendment he will be asking everyone to vote for at 4 o’clock this afternoon would get rid of the 45p top rate of tax and leave us with a 40p top rate? He has not had much to do over the last month—some of us have been quite busy. He has had almost nothing to do, but even what he has to do he is completely incompetent at.

[Edward Miliband]

The Prime Minister is talking rubbish as always. He points to the increase in the basic state pension. Only this Prime Minister could try to con Britain’s pensioners by taking the credit for high inflation. Everybody will have noticed that he did not deny that Britain’s pensioners are seeing a tax increase year on year. It is not just pensioners he is trying to con; it is families with children. Will he confirm that, according to the Institute for Fiscal Studies, as a result of all his tax changes from this April families with children will be more than £500 a year worse off?

[The Prime Minister]

I notice the right hon. Gentleman has moved off the top rate of tax because he does not want to talk about it. He has to withdraw his amendment, because if he is successful he will give us a 40p tax rate. The other reason he does not want to talk about the top rate of tax is that he cannot convince Labour’s candidate for Mayor of London to pay his taxes.

When it comes to pensioners, what we have done is increase the basic state pension; we have kept all the pensioner benefits, and the freeze in age-related allowances means there will be no cash losses. Compare that with Labour’s pathetic 75p increase proposals. We remember what Labour’s Budgets did. Will he stand up and condemn Labour’s candidate for Mayor of London who will not pay his taxes?

[Edward Miliband]

The Prime Minister is very excited today. In case he has forgotten, it is Prime Minister’s questions. The clue is in the name. I ask the questions and he is supposed to answer them.

No answer on pensioners, no answer on families—what about charities? The Prime Minister’s big idea was the big society, but since the Budget—[Interruption.] I do not know why he is taking advice from the part-time Chancellor sitting next to him—I wonder which job he is doing today. Since the Budget, the Government have managed to insult people who give to charity and he has insulted the charities themselves by implying that they are bogus. The Prime Minister claimed that he worked on the Budget line by line. Did he know that when he signed off the Budget it represented a hit of as much as £500 million on Britain’s charities?

[The Prime Minister]

Those figures are completely wrong. First, we heard absolutely no defence of Ken Livingstone—not a word. This is all about making sure that the richest people in our country pay their taxes. Last year there were over 300 people earning over £1 million who paid a rate of tax of 10%. I do not think that is good enough, and we have a Labour candidate for Mayor of London who is paying less tax on his earnings than the person who cleans his office. I think that is disgraceful. Why will the right hon. Gentleman not condemn it?

[Edward Miliband]

This is—[Interruption.]

[Mr Speaker]

Order. The usual level of orchestration from the usual suspects on the Government Back Benches. Be quiet, Mr Burns. It will be better for your health. You are the Minister for Health. Get better.

[Edward Miliband]

What a desperate Prime Minister, who cannot even justify his own Budget. If he wants to talk about the Mayor of London, we have a candidate for Mayor of London who will cut tube fares, who will make rents fairer, who will bring back the education maintenance allowance. What has the Prime Minister got? A candidate for Mayor of London who is out of touch and was arguing for the cut in the 50p tax rate.

On charities, the reality is that the Prime Minister is not making the rich worse off. He is making charities worse off. Over the past month we have seen the charity tax shambles, the churches tax shambles, the caravan tax shambles and the pasty tax shambles, so we are all keen to hear the Prime Minister’s view on why he thinks, four weeks on from the Budget, even people within Downing street are calling it an omnishambles Budget.

[The Prime Minister]

We have a Mayor of London who pays his taxes. Nothing from the right hon. Gentleman about unemployment, nothing about the rich needing to pay their taxes, nothing about Ken Livingstone’s responsibilities. The right hon. Gentleman asks about the Budget. This Budget cut taxes for 24 million people. This Budget cut corporation tax. This Budget made Britain competitive. He talks about my last month—I accept that it was a tough month. Let us have a look at his last month. He lost the Bradford West by-election. That was a great success! He has given one person a job opportunity—George Galloway. The right hon. Gentleman lost the Bradford West by-election, he showed complete weakness when it came to the Unite trade union and the fuel strike, and he has a candidate for Mayor of London who will not pay his taxes. That is his last month—as ever, completely hopeless.

[Edward Miliband]

The Prime Minister talks about the fuel strike. I will not take any lectures on industrial relations from a Government and a Prime Minister who caused panic at the pumps. That is the reality. When he gets to his feet, let him apologise for the gross irresponsibility, for the Cabinet Minister who caused that panic at the pumps, and for himself. [Interruption.] The Prime Minister should calm down. This Budget comprehensively fails the test of fairness and it spectacularly fails the test of competence. We have a Prime Minister who is unfair, out of touch and incompetent. Never mind “We’re all in it together”; when will he get a grip on his Government?

[The Prime Minister]

The right hon. Gentleman will not take any lectures on the fuel strike because he is in the pockets of the people who called the fuel strike. That’s right. They vote for his policies, they sponsor his Members of Parliament, they got him elected. Absolutely irresponsible—that is what we have heard once again from the right hon. Gentleman. Not good enough to run the Opposition, not good enough to run the country.

[Karl MᶜCartney (Lincoln) (Con)]

Has my right hon. Friend noted that Standard & Poor’s, the rating agency that downgraded both the US and France, affirmed a stable outlook on the UK’s triple A rating on Friday and said:

“We could lower the ratings if we came to the conclusion that the pace and extent of fiscal consolidation was slowing beyond what we currently expect”—

in other words, if the discredited policies of the Opposition were adopted?

[Mr Speaker]

That was far too long. I call the Prime Minister.

[The Prime Minister]

My hon. Friend makes the important point that in this week of all weeks we are getting yet more reminders from other countries in Europe of the importance of getting on top of deficits and debts and of having a proper plan to deliver that. That is what needs to happen. What Standard & Poor’s has done is welcome, and we also need to keep our interest rates low to ensure that we deliver the growth our economy needs. It is absolutely extraordinary that the shadow Leader of the House of Commons has gone on television today calling for higher interest rates. I do not think the Leader of the Opposition focused on that—he had better go and look at the transcript.

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

2. In January, the First Minister of Northern Ireland requested that the Prime Minister meet the families of 10 innocent workmen murdered in the Kingsmills massacre of 1976. I know that the Prime Minister has met other families and that he desires to be balanced in his approach. Will he assure me that he will meet the families of those innocent victims?

[The Prime Minister]

The Kingsmills massacre was an appalling event in Northern Ireland’s history. I am well aware of that and my sympathies are with the families. I will arrange for the families a meeting with the Northern Ireland Secretary and, if it is possible for me to attend, of course I will do that as well.

[Stephen Gilbert (St Austell and Newquay) (LD)]

The Prime Minister will be aware that no VAT is chargeable on caviar, yet the Government propose to charge VAT on the Cornish pasty. Can he tell me why that is fair?

[The Prime Minister]

I understand that feelings in Cornwall run high on this matter, but let me explain that what I think is unfair is that the same products that are subject to VAT when sold in a fish and chip shop can be sold in supermarkets without being subject to VAT. I do not think that that is fair and that is why it is right for us to redraw the boundaries.

[Kerry McCarthy (Bristol East) (Lab)]

3. While the Prime Minister entertains millionaire party donors with cosy kitchen suppers at his Downing street flat, thousands of ordinary people are queuing at food banks because they cannot afford to feed their families. What do those people who are worst hit by the Government’s cuts and the biggest rise in food prices since August 2010 have to do to get a quiet word in the Prime Minister’s ear? Is there any chance he could invite some of them round for supper?

[The Prime Minister]

What this Government have done is introduce the biggest increase in the child tax credits that go to the poorest families in our country. In April 2011, there was a £255 increase—the largest ever—and there is a further increase this year of £135. Added to that, we have taken 2 million of the poorest people out of income tax altogether, and one of the things that would hit families hardest is an increase in interest rates, which is now the official policy of the official Opposition.

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

Given that 1,200 jobs at Group Lotus in south Norfolk might be at risk following the company’s recent change of ownership, will the Prime Minister put all possible pressure on the Malaysian Government to ensure that DRB-HICOM permits the sale of the business only to buyers who wish to see it continue as a going concern in Norfolk?

[The Prime Minister]

I raised this issue with the Malaysian Prime Minister and with the new Malaysian owners of Lotus’s parent company. Lotus makes a key contribution to the UK automotive sector. The sector is doing well and I want to see Lotus succeed and to have a secure future. We are in contact with the company, monitoring the situation very closely and ensuring that it knows about the regional growth fund money that is available.

[Teresa Pearce (Erith and Thamesmead) (Lab)]

4. This flawed Budget makes 230,000 additional pensioners pay tax and will bring 500,000 extra parents into the self-assessment regime because of tax on their child benefit, yet this week we have heard that 10,000 members of staff will be cut from HMRC. Is not the Chancellor so incompetent that he will not have the staff to deliver his own budget plans?

[The Prime Minister]

We have increased staffing at HMRC to ensure that we crack down on the sort of tax avoidance that is shown, to put it frankly, by the hon. Lady’s candidate for the Mayor of London. That is what it has come to and those are the measures we are taking.

[George Freeman (Mid Norfolk) (Con)]

5. I am sure that I speak for many across the House in expressing support for entrepreneurship and the creation of new businesses. Does my right hon. Friend agree that service companies set up by Labour politicians to disguise their hypocrisy on tax are a disgraceful betrayal of real entrepreneurs up and down the country?

[The Prime Minister]

My hon. Friend makes a good point. The Opposition do not want to hear it, but the fact is that the man whom they are putting forward to be Mayor of London has set up a company to funnel all this money into and is potentially paying a lower tax rate than the people who would work for him at the Greater London Assembly. It is completely disgraceful and even at this late stage I call on the Labour leader to get the Labour candidate to publish all the information so that we can see the tax that he is paying.

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

Does the Prime Minister agree that the specialist ACE Centre in Oxford, currently facing closure, does outstanding work unlocking the isolation of children with acute communication difficulties? Given the pressure charities are under, will he step in and pull together some bridging finance so that this outstanding centre can continue helping the children and young people who need it so much?

[The Prime Minister]

As the right hon. Gentleman probably knows, I do know that centre. I have visited it in the past, and I am very happy to look with him, as a fellow Oxfordshire MP, at what can be done to help the centre and the very good that it does, particularly for disabled children.

[Andrew Selous (South West Bedfordshire) (Con)]

6. The Prime Minister rightly wants to crack down on tax avoidance, so what does he think about Ken Livingstone, who said that “I get loads of money, all from different sources, and I give it to an accountant and they manage it”?Is that modern socialism for you—[Interruption.]

[The Prime Minister]

They don’t like to hear it. I thought the Labour party wanted rich people to pay their taxes properly. That is what we have ensured through the Budget and through the extra resources for the Revenue, so why the deafening silence from the Opposition? Why not a condemnation of that appalling behaviour?

[Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab)]

Does the Prime Minister share my concern at the actions of the Northern Ireland Attorney-General in using an outdated and discredited law, of disrespecting the court, to invoke contempt proceedings against the former Northern Ireland Secretary, my right hon. Friend the Member for Neath (Mr Hain), for comments in his memoirs? Should not respect for the independence of the judiciary be balanced with the rights of individuals to fair comment on that judiciary?

[The Prime Minister]

I do have a great deal of sympathy with what the right hon. Gentleman says. Parliamentary privilege, obviously and quite rightly, allows hon. Members to express their views in Parliament. In terms of what is said outside Parliament, let me just say this: there are occasions, as we all know, when judges make critical remarks about politicians; and there are occasions when politicians make critical remarks about judges. To me, that is part of life in a modern democracy, and we ought to keep these things, as far as possible, out of the courtroom.

[Stephen Mosley (City of Chester) (Con)]

7. I, like the Prime Minister, welcome the strides towards democracy being made in Burma, and I welcome also his efforts to achieve a controlled suspension of sanctions. With a decision on his proposals due next week, will he ensure that measures to monitor human rights in Burma are included in the discussion?

[The Prime Minister]

My hon. Friend is entirely right. While it is clear that the Burmese regime is making some steps towards greater freedom and democracy, we should be extremely cautious and extremely careful. We want to see the further release of political prisoners, we want to see the resolution of ethnic conflicts and we want to see that democratisation process continue. That is why we are pushing across Europe for the suspension of sanctions, excluding the arms embargo, which should stay, rather than for the lifting of sanctions. We now have support for that position from most other leading European countries, and I hope that we can deliver it. That would be the right thing in demonstrating to the regime that we want to back progress, and it would also strongly support what Aung San Suu Kyi has said is the right approach.

[Ian Murray (Edinburgh South) (Lab)]

8. My constituents are angry that the Prime Minister’s priority in the Budget was to give a £40,000 tax cut to millionaires. Will he tell the House how much collectively, as a result of the reduction in the top rate of income tax, his Cabinet will be better off?

[The Prime Minister]

Let me just make this point about the top rate of tax—[Hon. Members: “Answer.”] Let me just make this point. The Labour party had 13 years to introduce a 50p top rate of tax. It did so one month before a general election that it knew it was going to lose. That top rate of tax has not raised any money, and the 45p rate that we have is higher than what Labour had for 12 of its 13 years in government.

[Paul Uppal (Wolverhampton South West) (Con)]

9. Earlier this week the journalist Mary Ann Sieghart wrote an article in The Independent about the many young south Asian women who feel that traditionally their votes have been hijacked through abuse of the postal vote system. Will my right hon. Friend please look at revisiting the issue of postal votes on demand not only to strengthen our democracy and trust in it, but to ensure that all voters have a vote and, particularly in the case of south Asian young voters, their votes are not stolen?

[The Prime Minister]

My hon. Friend makes a very important point. I am happy to look at the issue of postal voting, but first we need to sort out individual voter registration. This is vital to make sure that we do not have a system that allows lots of people to be logged on to a housing register when actually nobody is living there at all. There is growing evidence of abuse and concern, and it is right that we are acting on it.

[Kelvin Hopkins (Luton North) (Lab)]

10. Two years ago, in his pensioner pledge, the Prime Minister said:“it is fundamental to me that people who have worked hard all their lives, and are now drawing their pension, deserve to be treated with respect.”Does he really think that trying to sell his granny tax as a “simplification” is treating pensioners with respect?

[The Prime Minister]

Let me explain what we are doing for pensioners. We are increasing the basic state pension by £5.30 a week this April; that is not an increase that Labour would have made. At the same time, we are saving the winter fuel payments, the cold weather payments, the free television licence, the free bus pass, and the other pensioner benefits. That is what this Government are doing. At the same time, we are examining the case for a single-tier pension of around £140 each. I would have thought that Members in all parts of the House welcomed that, because it would be a well-paid basic state pension that encouraged people to save before they became pensioners, and a thoroughly welcome reform.

[Caroline Dinenage (Gosport) (Con)]

Over 30 years ago, a British toddler, Katrice Lee, went missing in Germany, and, partly due to the chronic mishandling of this case by the British military police, her parents still have no idea what happened to their little girl. Will the Prime Minister agree to meet the family to hear their calls for an independent inquiry into the bungling of this investigation and give them the closure that they so desperately need and deserve?

[The Prime Minister]

I will certainly look at the case that my hon. Friend mentions and see what more we can do. These cases of missing people are completely tragic, and the family do not get closure, as this case and, sadly, other tragic cases show. I am very happy to look at the case and to get back to her.

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

11. Churches and places of worship, including many in Blackpool, do immensely valuable work in adapting their buildings for community and voluntary sector use. Why, then, is the Prime Minister backing a 20% VAT raid in the Budget on alterations to listed buildings, which will cost many of those churches and places of worship millions of pounds—in the case of the Church of England, an estimated £10 million—thereby infuriating them and the charities concerned and shooting his own big society in the foot?

[The Prime Minister]

Let me try to explain to the hon. Gentleman the basic unfairness in the current system. Repairs to churches are already subject to VAT, whereas alterations to listed buildings are not subject to VAT. That means that if you repair a church, you do pay VAT, but if you put a great big swimming pool in a listed Tudor house, you do not pay VAT, so it makes sense to redraw the boundaries. But this is the crucial point: we will be putting money aside to make sure that churches that are undertaking repairs and alterations get the moneys that they need.

[Mr Douglas Carswell (Clacton) (Con)]

A few weeks—[Interruption.]

[Mr Speaker]

Order. Let us have some order in the House. I want to hear Mr Douglas Carswell.

[Mr Carswell]

A few weeks ago in this House, I asked the Prime Minister to what extent he believed that the Whitehall machine—the Sir Humphrey factor—was frustrating reform. He assured us that it was not. According to the Financial Times, in Malaysia last week the PM said:

“I can tell you, as Prime Minister, it”—

“Yes Minister”—

“is true to life.”

Can he tell us what has happened to make him change his mind?

[The Prime Minister]

There are a few occasions when I think that my hon. Friend does need a bit of a sense of humour.

[Alex Cunningham (Stockton North) (Lab)]

12. The Prime Minister’s official spokesman argued last week that rich individuals were avoiding tax by giving to charities which “don’t, in all cases, do a great deal of charitable work”.Can the Prime Minister name any of these charities?

[The Prime Minister]

The figures I gave earlier show that last year 300 people earning over £1 million in our country got their rate of tax down to 10%. Of course we must protect charities and encourage philanthropic giving, but we need to make sure that rich people are paying their fair share of taxes. I would have thought that that principle had some attraction in all parts of the House.

[Mr James Clappison (Hertsmere) (Con)]

Q13. Does my right hon. Friend agree that universities should be free to admit students on the basis of merit?

[The Prime Minister]

My hon. Friend is entirely right. It is welcome that a greater proportion of 18-year-olds are applying to university than at any time in the past 13 years. No one pays up-front for their tuition or other fees, which is also welcome. He is absolutely right that university entry is about academic merit.

[Anas Sarwar (Glasgow Central) (Lab)]

Q14. The Deputy Prime Minister said recently:“We have succeeded to pull the economy back from the brink”.With record youth unemployment, growth lower than forecast and inflation up, does that not show that the Deputy Prime Minister is the Prime Minister’s broken arrow—he does not work, but the Prime Minister cannot fire him?

[The Prime Minister]

I notice that there was absolutely no welcome of the fact that today unemployment has fallen, employment has gone up and youth unemployment has come down. Of course, unemployment is much too high and far more needs to be done. Let me bring the House up to date with one scheme, the work experience scheme, on which the evidence is growing. Fifty per cent. of the young people going into the scheme come off benefits within six months. That means that it is 20 times more cost-effective than the future jobs fund. That scheme is part of the youth contract that the Deputy Prime Minister has been spearheading, and he has been doing an extremely good job.

[Claire Perry (Devizes) (Con)]

Today, a group of MPs—[Interruption.]

[Mr Speaker]

Order. Hon. Members should not be yelling at the hon. Lady. It is very discourteous. I want to hear what she has to say.

[Claire Perry]

Perhaps Members should listen before yelling. Today, a cross-party group of MPs from across the political spectrum published a report into a matter that is incredibly important to many of us: how we can keep our children safe online. We think that internet service providers should do more and that the Government should deliver a strong lead on this issue. Will the Prime Minister undertake to at least read the summary of the report—I know that he is busy—and perhaps to meet us to discuss our recommendations?

[The Prime Minister]

I am very grateful to my hon. Friend, who dropped off a full copy of the report to my office this morning. She raises an important subject. As a parent and as a politician, I am keen that we should help to protect people from such material. I have got together some of the technology and telephony companies to look at offering a choice of blocking all adult and age-restricted content on their home internet. If we start to work with the companies to deliver such changes, I think that we can protect more young people.

[Kate Green (Stretford and Urmston) (Lab)]

Q15. The Government have said that they want to simplify the tax system, so why are they introducing changes to child benefit that the Treasury Committee today said will create further uncertainty?

[The Prime Minister]

I say to the hon. Lady, who did very good work as head of the Child Poverty Action Group, that we have to make difficult decisions to deal with the debt and the deficit. I do not think that it is defensible to ask people who earn £20,000 or £30,000 to pay their taxes so that people sitting in this House can get child benefit. I do not think that that is fair. I know that Opposition Members will walk through the Lobby tomorrow for something that they will benefit from financially, but I think that it is profoundly wrong. [Interruption.]

[Mr Speaker]

Order. I want to accommodate Back Benchers.

[Andrew Percy (Brigg and Goole) (Con)]

The caravan industry employs thousands of people across the country, and nowhere more so than in east Yorkshire, where the vast majority of such manufacturing is located. Will the Prime Minister listen to my pleas and those of other local MPs, including my hon. Friend the Member for Beverley and Holderness (Mr Stuart) and my right hon. Friend the Member for Haltemprice and Howden (Mr Davis), and think again about this tax, which will cripple an already suffering industry?

[The Prime Minister]

Obviously, I have listened carefully to the points that my hon. Friend has made, and the Chancellor has met other Yorkshire MPs. Again, this is an issue about drawing the VAT boundaries fairly. I do not think that it is fair that VAT is payable on a mobile caravan, but not on a stationary one. No one is talking about putting VAT on park homes, which are people’s permanent homes. This is about a fair drawing of the boundaries to ensure that there is a fair approach in our country.

[George Galloway (Bradford West) (Respect)]

As I was saying, Mr Speaker, there is an iron-clad consensus across the Front Benches of the three main parties about what they call a mission, but which, given the amount of blood on the ground and the rapidly deteriorating military situation, most of us call a war in Afghanistan. In the wake of Ms Gillard’s decision to accelerate the withdrawal of Australian forces from that war, and in the wake of the Bradford West by-election, will the Prime Minister reconsider his planning on our withdrawal from the bloody maw of Afghanistan?

[The Prime Minister]

First, I congratulate the hon. Gentleman on his stunning by-election victory and his return to the House of Commons. I know that he always speaks with great power and great force, but on this issue I have to say I profoundly disagree with him. Our troops are in Afghanistan not fighting a war against Islam but at the invitation of an Islamic Government and under a UN resolution, to try to help that country have a peaceful, prosperous and stable future. He knows the dangers in the past of walking away from Afghanistan and leaving that country to become the terrorist-supporting haven that it did under the Taliban. We must not make that mistake again, and I urge him not to play to the gallery on this issue but to speak up for the work that our forces are doing to make Afghanistan a safer country.

Points of Order

Wednesday 18th April 2012 Commons Chamber

12:35

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

On a point of order, Mr Speaker. Before the Prime Minister leaves, I point out that he has just told the House in Prime Minister’s questions that the 50p rate did not raise any money, a claim that is flatly contradicted by both the documents published on Budget day and the Treasury’s own figures published on Monday. Could the Prime Minister correct the record before he leaves the House? [Interruption.]

[Mr Speaker]

Order. These matters will be the subject of debate later today. If I did not know the right hon. Member for Morley and Outwood (Ed Balls) as well as I do, I would think that he was trying to use the device of a contrived point of order to continue the debate, but because I know him as well as I do, he can take it from me that I know he would not be guilty of such unworthy conduct.

[Paul Flynn (Newport West) (Lab)]

On a point of order, Mr Speaker. May I ask you to consider the situation that exists because the Backbench Business Committee has only one slot to allocate and had nine applications? One of those applications was for a motion asking Parliament to follow the example of the decisions in Australia, Canada and the Netherlands to withdraw troops from Afghanistan independently. Is it not a shame that procedure is preventing this Parliament from taking the decision to act independently to withdraw our troops from a conflict that very few people now believe in?

[Mr Speaker]

The hon. Gentleman is a wily and mature bird of a very distinct pedigree, and he has penned a book, recently updated and republished, on how to be an MP and how to operate as a Back Bencher. It is a much-thumbed tome, and he uses every device to get his concerns across. That is what he has done. I say to him, though, that all sorts of things are a shame, a pity or regrettable, but sadly they are not matters for the Chair. I think he would like them to be, but unfortunately they are not. We will have to leave it there for today.

Diabetes Prevention (Soft Drinks)

Wednesday 18th April 2012 Commons Chamber

Motion for leave to bring in a Bill (Standing Order No. 23)

12:38

[Keith Vaz (Leicester East) (Lab)]

I beg to move,

That leave be given to bring in a Bill to establish a programme of research into diabetes prevention; to require manufacturers of soft drinks to reduce the sugar content of soft drinks by 4 per cent; to make provision for a mechanism through which manufacturers of soft drinks are required through reinvestment of part of their profits to support the research programme from 2012; and for connected purposes.

At the very outset, I need to declare my interest: I am a type 2 diabetic. My chance diagnosis made me aware for the first time of the devastating costs of diabetes to the United Kingdom, both human and financial, yet we are not powerless in the face of type 2 diabetes. We know how it is caused and how to prevent it. The link between obesity and type 2 diabetes is firmly established, and we can prevent it with the right diet and exercise. With decisive action, we can stop the problem increasing at such an alarming rate.

There are 2.8 million people with diabetes in the United Kingdom. It has complications that include amputations, blindness, heart problems and strokes. The number of obese adults is forecast to rise by 73% in the UK over the next 20 years, by which time more than 10% of the population will have diabetes. Last year, 24,000 people with diabetes died early from causes that could have been prevented.

Diabetes costs the NHS £9 billion per year, which is £1 million an hour. It accounts for 10% of spending for the entire NHS budget. The NHS is expected to make savings of £20 billion by 2015; diabetes patient numbers are set to double by as early as 2015; and 80% of type 2 diabetes is preventable with the right diet and exercise. Therefore, with successful lifestyle changes, the NHS could save up to £720,000 per hour.

Academic research tells us that 90% of weight loss is achieved by cutting calories. Researchers at Glasgow university, led by Naveed Sattar, the professor of metabolic medicine, only yesterday revealed that nearly a quarter of those they questioned did not take into consideration their liquid sugar or calorie intake when controlling their diet. The average person in the UK consumes 450 calories per day through non-alcoholic liquid intake. That is the equivalent of nearly a quarter of recommended daily calories for a woman and a fifth for a man.

A can of Coca-Cola contains eight teaspoons of sugar, which is 39% of a person’s recommended daily allowance. Certain brands of pomegranate juice contain as much as 22 teaspoonfuls of sugar. Consumption of soft drinks is increasing substantially every year: it was up by 5.8% in 2010, when 14.5 billion litres of soft drinks were consumed in the UK.

Most concerning is that consumption is increasing fastest among the young, paving the way for our future generations of diabetics. Advertising for sugary drinks is explicitly targeted at young people. YouTube has 21 channels run by fizzy drinks companies. The Children’s Food Trust found that 72% of parents had bought fast food or other unhealthy products as a result of hard lobbying—some may say pestering—by their children. We all know how persuasive our children can be, but 31% of UK children are now classified as overweight. To save them from the diabetes epidemic, we must act now on obesity.

The irony is that while a patient with diabetes complications lies dying in a hospital bed, just outside the ward their relatives go to vending machines for fizzy pop and junk food. It is a national scandal that schools and hospitals, which should promote healthy lifestyles, have high-sugar drinks for sale. I urge colleagues to go back to their constituencies this weekend and ask their local schools what types of drinks are stocked in their vending machines. Every school and hospital in the country should declare itself an unhealthy food and drink free zone.

Perhaps we should follow suit in Parliament. Even here, in the Tea Room, such drinks are readily available, along with crisps and all manner of fattening snacks. When hon. Members go to the counter to pay, they must wade through baskets laden with chocolates for sale.

The Government should go further and they need to legislate. We have seen that the voluntary targets set by the Food Standards Agency to reduce sugar content by 2012 have not been met. Although I welcome the commitment of a number of companies to the Government’s voluntary food and responsibility deal, I believe that we need firmer action. This weekend, the Academy of Medical Royal Colleges described the Government’s approach as “inherently flawed” in trusting the industry to cut calories voluntarily. These voluntary deals fail to recognise that we are dealing with a health emergency. Diabetes and obesity are at crisis levels.

We need to ensure not only that action takes place but that it takes place fast. Over the past decade, the Government have spent £2 billion tackling obesity levels, but levels have failed to fall. If current trends continue, 60% of men and 50% of women in our country will be clinically obese by 2050. Many of them will then develop diabetes, but the NHS simply cannot afford that, which is why we should put in place a statutory duty on drinks companies to reduce their products’ sugar content.

Government action on Government terms, not the industry’s, would send a strong and unequivocal signal about the need to moderate sugar and fat consumption. Government measures to reduce smoking have shown that intervention on public health issues works. Heart attack deaths have fallen by 50% in eight years. It is estimated that diet-related diseases are responsible for 35 million deaths worldwide, dwarfing the 5 million to 8 million smoking-related deaths. There is therefore a compelling case for action.

Intervention is not unprecedented. In October last year, Denmark, which is hosting the first EU diabetes conference next week—I am glad that the Minister with responsibility for diabetes, the hon. Member for Sutton and Cheam (Paul Burstow), will be attending the conference and speaking on behalf of the Government—introduced a “fat tax”, and in December France’s Constitutional Council approved a “soda tax”. Hungary has taken similar action. These measures make people think twice before they reach for the litre of coke or bucket of fries.

Research into prevention can dramatically cut the costs. Last year, Newcastle university found that, with the right type of diet, type 2 diabetes can be reversed. The revenue of some food and drink companies is bigger than the gross domestic product of more than 100 countries. PepsiCo made about £10 billion in 2011. So the companies can afford to make this change.

The Bill would help to save millions of lives and billions of pounds. It is only a first step in the action we need to take to tackle the twin epidemics of obesity and diabetes. But it is an important one. We cannot afford to wait until it is convenient for the industry to effect change. We need to show the people of Britain that Parliament is willing to tackle the problem head on. I commend the Bill to the House.

Question put and agreed to.

Ordered,

That Keith Vaz, Mr Aidan Burley, Jonathan Edwards, Derek Twigg, Ian Paisley, John Hemming, Jim Shannon, Rosie Cooper, Phil Wilson, Mr Mike Hancock and David Morris present the Bill.

Keith Vaz accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 27 April, and to be printed (Bill 329).

Finance (No. 4) Bill

Wednesday 18th April 2012 Commons Chamber

(Clauses 1, 4, 8, 189 and 209, Schedules 1, 23 and 33, and certain new Clauses and new Schedules relating to value added tax)

[1st Allocated Day]

Considered in Committee

[Mr Lindsay Hoyle in the Chair]

[Relevant document: The Thirtieth Report from the Treasury Committee, Budget 2012, HC 1910-I.]

Clause 1

Charge for 2012-13 and rates for 2012-13 and subsequent tax years

12:50

[Owen Smith (Pontypridd) (Lab)]

I beg to move amendment 1, page 2, line 4, leave out paragraph (c).

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following:

Amendment 76, page 2, line 4, at end insert—

‘(1) The Treasury shall, within two months of Royal Assent of this Act, publish a report on the additional rate of income tax.

(2) This report shall make recommendations on—

(a) preventing the tax-avoidance measures employed by individuals to avoid making payments at the additional rate of income tax, and

(b) the impact upon Treasury revenue of setting the additional rate to—

(i) 50 per cent and

(ii) 45 per cent in the tax year 2013-14.’.

Amendment 7, page 2, line 5, leave out subsections (3) to (6).

Amendment 62, page 2, line 22, at end add—

‘(7) The Treasury shall, within two months of Royal Assent, make an assessment of the relative administrative costs of—

(a) making an additional charge to income tax payable by all individuals with an adjusted net income above a certain amount; and

(b) the measures in section 8 of, and Schedule 1 to this Act.’.

Clause stand part.

[Owen Smith]

It is a great pleasure to be under your chairmanship, Mr Hoyle.

The legislation we deal with in this House can sometimes appear rather obscure or require a significant amount of interpretation. For financial legislation that is often true in spades, but not so with this Bill, because what do we have, straight off the bat, on page 1, in part 1, chapter 1, clause 1? A tax cut for millionaires—£40,000 for 14,000 millionaires, signed away in one short line, in subsection (2)(c), which cuts the additional top rate of tax from 50p to 45p. Let me be clear: our amendment would get rid of that provision. It would do what we as the Opposition are able to do and strike out from the Bill the change from 50p to 45p. Let there be no doubt whatever: we will be voting to remove paragraph (c) later today.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

rose—

[Owen Smith]

But for now I look forward to the intervention that I am about to receive from the Exchequer Secretary.

[Mr Gauke]

I am grateful to the hon. Gentleman for giving way, but under his amendment there would be two rates of income tax for 2013-14: 20% and 40%.

[Owen Smith]

No; which is why I wanted to nose off on this point. Let us clear out of the way this obscurantist nonsense that we are hearing from those on the Treasury Bench—first from the Prime Minister earlier today and now from the Exchequer Secretary. He will know that protocol dictates that we cannot table an amendment that would straightforwardly put the rate back to 50p. That is what colleagues on the nationalist Benches attempted to do, and they were ruled out of order. However, what has been ruled in order by the senior Clerk responsible for this Bill is precisely what we have done, to try to get rid of the Government’s shift from 50p to 45p. The Government would then need to decide exactly what they would do with that rate, but our view is clear: it should be 50p, as it was previously. That is why we have tabled what we have tabled, on the Clerk’s advice.

[Mr Gauke]

rose—

[Owen Smith]

I will give the Minister one more chance, but I warn him that he will listen to the country, and the country is telling him that it knows where Labour stands on this issue. We are in favour of keeping the rate at 50p. The Government are getting rid of the 50p rate; the rest is complete nonsense, and smoke and mirrors. If he wants to blow some more smoke, come on up.

[Mr Gauke]

The country is aware that Labour did not vote against the change to the 50p rate in our debates on the Budget resolutions, although the nationalists did. It is indeed the case that there would be two income tax charges as a consequence of the amendment that the hon. Gentleman is moving. I do not want to do his job for him, but if he wanted to achieve the objective that he is setting out, he could have tried to remove subsection (2) entirely, but he did not. He has kept the charge at 20% and 40%. If his amendment succeeds, we will have those two rates of income tax next year.

[Owen Smith]

I am not going to indulge in this procedural nonsense much longer, because frankly the country is interested in the substance of the debate. However, if the Exchequer Secretary wants to intervene on me one more time, he can take the opportunity that the Prime Minister eschewed earlier today and correct the misleading comments that he made about the 50p rate, which he said raised no money. We know that it did raise money. We know that page 52 of the Her Majesty’s Revenue and Customs report makes clear how much money it raised and how much it would have raised in future. If the Exchequer Secretary wants to intervene on that point he can, but as for our amendment, drafted on the Clerk’s advice, we are confident in it, we are happy about it and we will debate the substance rather than the nonsense.

[Chris Bryant (Rhondda) (Lab)]

I am grateful to my hon. Friend and neighbour from Pontypridd for giving way. He will know that my constituents, like his, find it inconceivable that the Government should be trying to reduce the tax rate from 50p to 45p at this time. Will he confirm that literally the only people in this House who can even table an amendment to put it back to 50p are Ministers of the Crown? That is what they should be doing today, rather than hiding behind the procedure of this House.

[Owen Smith]

I am grateful to my hon. Friend because he reiterates the point that I have made. The Government are the only body in this House who can choose to raise taxation.

[Michael Ellis (Northampton North) (Con)]

Will the hon. Gentleman give way?

[Owen Smith]

No, I am not going to give way.

The Government are the ones who could decide today to put the rate back up to 50p. They have chosen to cut it from 50p to 45p. We are not going to indulge in any more of this procedural gibberish. The reality is that we are here to debate the substance of the issue, which is the values and the evidence that underpin the decision.

[Graeme Morrice (Livingston) (Lab)]

My hon. Friend has referred to the fact that at Prime Minister’s questions today the Prime Minister said that the 50p tax rate provided no additional income to the Treasury. However, can my hon. Friend confirm what the actual loss to the Treasury would be from reducing the rate to 45p?

[Owen Smith]

I would be absolutely delighted to confirm that, because we have got it in black and white, in the HMRC’s dodgy dossier, as I think of it these days. Page 39 of the HMRC paper says that the post-behavioural yield—that is, the amount of money realised—of the 50p rate for the one year in which it was in existence was £1.1 billion. The summary, on page 2, says the same thing. In answer to my hon. Friend’s supplementary point, the amount of money that would be forgone in forthcoming years, which is captured in table A2 on page 51, is £3 billion, rising to £4 billion over the spending period. That is the reality, there in black and white in the HMRC document. These are not uncertain numbers, like some of the other ones. I will now give way to the hon. Member for Northampton North (Michael Ellis)—[Interruption]—who is looking off into the ether.

[Michael Ellis]

I am grateful to the hon. Gentleman for giving way. If he disputes the Government’s suggestion that his amendment would reduce the rate to 40%, can he say what it would reduce it to? Also if he thinks it so important that the rate should remain at 50%, why did his Government sit on their hind heels for 13 years before raising it to 50%?

[Owen Smith]

I will answer the hon. Gentleman’s last point first, because I answered it on Monday, too. When we introduced the 50p rate, in the Budget for the year before it took effect—we first floated the notion in 2009, allowing a year for it to be implemented, as is good practice—the rationale was simple. We wanted the people with the broadest shoulders to pay the maximum amount, and to pay an amount that is fair and just. This Government have a different set of priorities.

[Graeme Morrice]

I am grateful to my hon. Friend for giving way again. On the basis of the confirmation from the official HMRC report that the loss is indeed in excess of £1 billion, does he think that the Prime Minister should be asked to come back to the House and correct the record accordingly?

[Owen Smith]

I do. It is absolutely extraordinary that the Prime Minister should have misled the House in the manner in which he did. However, it is in keeping with the misleading of the House that is writ large throughout the HMRC document, which has frankly come up with this £100 million loss—not flat, as the Prime Minister suggested—with the flimsiest of evidence and on the basis of economic modelling that I intend to take to pieces later on.

13:00

[Derek Twigg (Halton) (Lab)]

There are a couple of points to make. First, there is no uncertainty that 14,000 millionaires will significantly benefit from the change. Where there is uncertainty, however, is in the Government’s arguments about the overall impact on the Exchequer, in terms of tax gained and tax lost. The Select Committee on the Treasury has said today:

“The cost and benefits of reducing the additional tax rate to 45p are both highly uncertain”.

The Government have tried to make an argument, but they have not even got the facts right in the first place to make their argument stick.

[Owen Smith]

The word “uncertain” is used so many times in the various documents that I have lost count. In fact, I must apologise to the Committee. On Monday evening, I said, perhaps with my dander up, that there were three instances in the HMRC document of the words “uncertain” or “uncertainty”, when there are in fact 32 such references—one for just about every page. I shall read out some excerpts from the document later.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The reason that amendment 6 was not selected for debate was that the House had already divided on that matter. Unfortunately, the hon. Gentleman’s party abstained on that occasion. On his amendment, it is my understanding from the Clerks that there must be an additional rate in the Bill. Is there not therefore a danger that the Government could use his amendment to drop the top rate of tax to 40p, thereby creating a tax break on a tax break? Several Members made that point on Monday.

[Owen Smith]

I suppose that there is a risk of that happening, because the Chancellor has wanted to reduce the rate to 40p all along. He might even want to go lower; perhaps we will get an indication later of how low he and his Ministers think they can go on income tax. With respect to the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), the reason that he gave was not the reason that his amendment was not selected. It was not selected because it is only the Government who can choose to put up taxes—

[Mr Gauke]

rose—

[Owen Smith]

I am not going to give way again to hear more obscurities of protocol. They are nonsense and are just being used to distract attention from the measures.

[Elizabeth Truss (South West Norfolk) (Con)]

What impact does the hon. Gentleman think having the highest rate of income tax in the G20 has on this country’s competitiveness?

[Owen Smith]

We do not know—[Laughter.] Conservative Members might laugh, but I would like to see them present some evidence on this, instead of the flannel and rhetoric that we are hearing—[Interruption.] The Minister is waving the HMRC report. Will he point to the part of it that gives definitive data on the impact on competitiveness of any rate of tax? There is nothing about that in the report, which is why he is not getting up to point it out. Come on! Let him show me the part of the report that substantiates the point made by the hon. Member for South West Norfolk (Elizabeth Truss).

[Kwasi Kwarteng (Spelthorne) (Con)]

rose—

[Owen Smith]

Is the hon. Gentleman about to—

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

Order. I am sure that the hon. Member for Spelthorne (Kwasi Kwarteng) has only just walked into the Chamber. He cannot have picked up the debate quite this quickly. He might need a little more time to listen before he intervenes.

[Owen Smith]

We should give the hon. Gentleman time to warm up, but if he wants to intervene to tell me where in the HMRC report we can find a definitive set of data on the impact on competitiveness of the various rates of tax, I will gladly sit down and wait for him to do so.

[Mark Reckless (Rochester and Strood) (Con)]

rose—

[Owen Smith]

Does the hon. Gentleman want to intervene on me on the point of competitiveness using evidence or anecdote?

[Mark Reckless]

The document says that all this is highly uncertain. That means that there is a significant possibility that the 50p rate was losing the Government revenue. Would the hon. Gentleman therefore welcome support for his amendment from the Government Benches at 4 o’clock?

[Owen Smith]

I am very pleased that I gave way to the hon. Gentleman. His intervention has exposed the fact that Conservative Members do not read the documentation, even though they listen to the flannel from their Front Bench. I repeat that page 39 of the document shows, under the heading “Adjusted impact on 2010-11 tax liabilities”, that the post-behavioural yield is £1.1 billion. It is there in black and white. That is how much money the 50p rate raised. No one is disputing that, and I presume that the Exchequer Secretary is not going to get to his feet and dispute what is written on page 39, or indeed, what is written on page 2, in the summary. I do not think that he is going to do that.

[Kwasi Kwarteng]

rose—

[Alun Cairns (Vale of Glamorgan) (Con)]

rose—

[Owen Smith]

I am not going to give way at the moment. I want to carry on with my speech, then I will give way again. Perhaps by then the hon. Member for Spelthorne (Kwasi Kwarteng) will have warmed up and will be able to give us some evidence, instead of more rhetoric.

[Sammy Wilson (East Antrim) (DUP)]

Much has been made of the effect of the top rate of tax on revenue and on competitiveness. Given that the Government have stated their intention to change the top rate of tax, is it not surprising that the Chancellor has said that he is going to initiate

“some real research into dynamic scoring, and what the broader economy effects are of changes to taxation”?

It seems that even the Government do not know the impact of the change in taxation.

[Owen Smith]

I knew it would be worth while giving way to the Treasury spokesman for the Democratic Unionist party. His intervention offers a contrast to some of the more pedantic contributions that we have heard from Conservative Members. He is right to say that it was far too early to make a decision, ostensibly based on evidence, just one year after the implementation of the new tax rate. That is what the Institute for Fiscal Studies has concluded, and it is what the Office for Budget Responsibility has effectively concluded in suggesting how uncertain the conclusions are. It is also, unfortunately, what the country is concluding.

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

The information in the report shows that the cost to the Treasury of the tax cut will be £3 billion. That is rather conveniently predicated on behavioural change bringing in an extra £2.9 billion. Given that scorn has been poured on that figure of £2.9 billion, what confidence does my hon. Friend have that this tax change will not end up costing the Treasury far more than its report suggests?

[Owen Smith]

I have absolutely no confidence whatever. My hon. Friend’s point goes to the heart of the dodgy economics in the dodgy dossier. The figure of £100 million is entirely predicated on the assumption that there will almost be a net offset of the £3 billion static loss as a result of the change to the 50p rate, through people deciding to work harder, save less, take their income in the current year, and hide their income less. Those are the behavioural changes that the Government are assuming will take place, but there is no real evidence base for the change. It is fundamentally dodgy.

[Alison McGovern (Wirral South) (Lab)]

Does my hon. Friend agree that we are debating the difference between those of us who do our economics using evidence and those on the Government Benches who do it using spurious theory? We should all be responsible; we should look at the evidence and report that evidence. That is why it is important that the Prime Minister should return to the House to correct the record.

[Owen Smith]

I am tempted to say to my hon. Friend that the golden phrase “expansionary fiscal contraction” tells us all that we need to know about the ability of those on the Treasury Bench. Expansionary fiscal contraction! That is working really well, isn’t it? It is going splendidly.

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

If we set aside the shadow Minister’s amendment, which would leave us with a 40p top rate of tax—[Interruption.] Let us set that aside for the moment. My question to him is this: would he reverse the decision on the 50p tax rate if he were in office? A yes or no is all I require.

[Owen Smith]

Yes. Right now, we would not have cut the 50p rate in this Parliament. Full stop. End of. Thank you very much.

[Nadhim Zahawi]

rose—

[Owen Smith]

No, the hon. Gentleman has just heard my answer. Throughout this Parliament, we would not have done that. No tax rate is set in stone for ever, but the question of whether we would reverse that decision is irrelevant because we are not in government. You lot are, and you cut it, but that would not have been our priority. Neither was it the priority of the present Chancellor just 18 months ago. When we introduced the 50p rate, we said that we wanted those with the broadest shoulders to pay the most, in order to deal with the global turmoil—[Interruption.] Members should just listen for a moment. When he was shadow Chancellor, the present Chancellor said that he agreed with us. In October 2009, he said that

“we could not even think of abolishing the 50p rate on the rich while at the same time I am asking many of our public sector workers to accept a pay freeze to protect their jobs. I think we can all agree that would be grossly unfair.”

I still agree with that.

[Brandon Lewis (Great Yarmouth) (Con)]

rose—

[Kwasi Kwarteng]

rose—

[Owen Smith]

No, there is more from the Chancellor. Conservative Members ought to listen to this, because it is their very competent Chancellor speaking. A year later, in October 2010, he said:

“The public must know that the burden is being fairly shared. That’s why I said last year: we are all in this together. And I am clear…that those with the most”—

like those on the Treasury Bench—

“need to pay more. That is why… I have stuck with the 50p tax”.

Have I missed something over the past 18 months since this Chancellor has been in trouble? As far as I have seen, the economy has flatlined, growth is at absolutely zero, business investment is going nowhere and inflation is rising. The only thing that has fallen recently is unemployment. Thanks be to goodness that it has dipped today, but it is still at 2.6 million, and as I pointed out to the Minister on Monday night, 2,500 people were queuing for 200 jobs at a supermarket in my constituency last week. That is the reality of the economy under this Government, unfortunately.

[Alun Cairns]

rose—

[Owen Smith]

I shall give way to a Welsh colleague.

[Alun Cairns]

I am grateful. How does the hon. Gentleman reconcile his enthusiasm for the 50% rate with the view of the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), who said that the 50% rate was temporary? How temporary is temporary for the Labour party?

[Owen Smith]

The 50p rate was introduced, as I said earlier, when we were in the depths of the biggest global recession—[Interruption.] I add the word global, unless Government Members are still suggesting that the collapse of Lehman Brothers in the US was the fault of the Labour Government. Among the many risible claims of the present Government, that is right up there with “expansionary fiscal contraction”. While we are still asking the poor to pay the price for that global recession and piling misery upon misery on them, with VAT changes, increased job insecurity and wage stagnation, cutting the 50p rate is fundamentally the wrong thing to do.

[Chris Bryant]

My hon. Friend the shadow Minister has referred to several things that are uncertain, but has it not already become clear that two things are absolutely certain? The first is that the Prime Minister gave us a pork pie earlier when he was talking about how much the 50p rate would raise. Secondly, the only reason there have been so many cock-ups in the Budget and the Finance Bill is that the Government have had to try to justify to the public their cut to the 50p rate. The whole mistake of the Budget hangs on that one initial mistake in cutting the 50p rate.

[Owen Smith]

I grateful for that intervention. I am not sure whether the pork pie was served at ambient temperature, but it was certainly a pork pie.

[Mark Reckless]

rose—

[Mr David Lammy (Tottenham) (Lab)]

rose—

[Owen Smith]

I have already pointed out three times that it was a pork pie, including to the hon. Member for Rochester and Strood (Mark Reckless), to whom I do not intend to give way. I will give way, however, to my right hon. Friend.

[Mr Lammy]

My hon. Friend has done a very good job of demonstrating that the Government are not at all clear on the figures and the money that will be lost. Does he think that the Government have more clarity about the Mayor’s position on this issue? Boris Johnson, the Mayor of London, made eight separate interventions to get this tax reduced, but made no interventions on VAT, no interventions on an increase for pensioners and no interventions on charities. He sought to intervene on behalf of the richest Londoners. My hon. Friend may agree that the Government ought to publish those interventions, so that we can be absolutely clear whether or not the Mayor has any evidence.

[Owen Smith]

Again, I am pleased that I gave way, as I think that is an excellent suggestion, which we really should take up. Of course the series of interventions on the 50p rate from the current Mayor of London—I say current; I hope he will not be Mayor for much longer—and, indeed, the series doubtless coming from the Chancellor’s and Prime Minister’s other wealthy mates, backed up the ideological decision to get rid of it. In fact, I am tempted to say that the cut in the 50p rate gives a whole new meaning to the phrase “mates’ rates”.

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

The hon. Gentleman will recall that when, in November 2008—for the first time and 11 and a half years into the Labour Government—the suggestion was made to change the higher rate of income tax, the then Chancellor suggested bringing in a 45p rate. Might that rate have been suggested simply because it was felt it would maximise the tax take from it? Is that not one reason the hon. Gentleman is somewhat misguided in supporting this amendment?

13:15

[Owen Smith]

No, and I shall get into the technicalities in my response, if I may. When the 45p rate was initially mooted, the recession was not as profound as it subsequently became, justifying the shift to the 50p rate. If we look at the calculations underpinning the suggestions of the 45p and 50p rates, we find that they were informed by the use of a taxable income elasticity number of 0.35, which shows that an even higher rate, nearer 56%, might have been the optimal level for imposing the tax. We did not impose that rate, and—before the hon. Member for Cities of London and Westminster (Mark Field) bobs up and down excitedly—I am not for a minute suggesting we ought to impose it. What I am saying is that there is uncertainty about the optimal rate, which is why it is so foolhardy for this Prime Minister and Chancellor to hang their credibility, and the claim of fiscal neutrality at the heart of their Budget, on economic calculus and economic modelling that is inevitably uncertain. That is the word used 32 times in the document, and I am going to use it some more in a moment. Unfortunately, it shows the truth for this Government.

[Mark Field]

I entirely appreciate that the hon. Gentleman’s case applies to all sides—that there is much uncertainty about precisely the optimum rate of tax—but does he not accept that the 45p rate mooted three and a half years ago, which has now been put in place, was suggested simply because of the totemic effect of having to pay less than half one’s income at the highest rate of income tax? That totemic effect has a massive impact on both entrepreneurial spirit here and the international competitiveness that my hon. Friend the Member for South West Norfolk (Elizabeth Truss) mentioned earlier.

[Owen Smith]

What I would accept is that the rate was raised to 50p in the end because we felt that there was still an overriding imperative to help through the period of recession the people in our economy who are the most vulnerable and to ask those who are the most fortunate in our economy to bear the broadest and biggest burden in order to allow that transfer to occur. That is the totemic rationale from our perspective. What is totemic for this Government, I fear, is the idea that the 50p rate is not approved of in the City or by the wealthiest people, but I do not believe that that provides a justification for making this decision—and nor does the Chancellor, which is why he eschewed the possibility of arguing from a political or ideological perspective to justify the cut to 45p. He argued that it was being done on the basis of evidence. In fact, that was the only Keynesian bit of logic in the Chancellor’s Budget speech. He effectively said, “The reason I no longer believe what I believed in 2009 and 2010 is that the facts have changed”, and he changed his view accordingly. In his view, based on the dodgy dossier, the rate was not bringing in the anticipated amount of money, which is what justified paring it back to 45p.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

There appears to be an emerging cross-party consensus that there is great uncertainty in this area. Is it not therefore appalling that the Chancellor should go ahead at such short notice without any evidence base? Does that not confirm that he had made up his mind without looking at the evidence?

[Owen Smith]

I hate to say it, but it is worse than that. What happened is that the Chancellor made up his mind, and then made the evidence fit his decision. [Interruption.] I am asked where is the evidence, but 32 times in the one exculpatory piece of evidence provided, the Treasury covered its behind by referring to uncertainty. I shall go through them in a minute, but that shows how often it was necessary to justify this damascene conversion.

[Mark Reckless]

Does the hon. Gentleman not accept that because the situation is uncertain, the 50p rate might have cost revenue, so the Government had less money for the least fortunate in society?

[Owen Smith]

I do not know how many times I need to keep telling the hon. Gentleman this, but the simple answer is no. He should turn to page 2 of the document, which clearly says that this rate raised £1 billion; he should turn to page 39, which says that it raised £1.1 billion; he should turn to page 51, which says that it will rise to £3.1 billion next year. These would be the static costs. It goes on to say—[Interruption.] No, £1.1 billion is the actual amount lost to the national accounts as a result of this change. That is a fact. It is not uncertain; it is a fact. The Treasury thinks that the money would have gone up to £3 billion, rising to £4 billion subsequently.

[Harriett Baldwin (West Worcestershire) (Con)]

Will the hon. Gentleman give way?

[Owen Smith]

Yes, for the last time.

[Harriett Baldwin]

Can the hon. Gentleman confirm that his party’s next manifesto will contain a pledge to restore the 50p rate?

[Owen Smith]

When we get close enough to the next election to write our manifesto, we will write it, and the hon. Lady will be able to see it then. That is the simple answer to her question. Can she tell us exactly what will be in her party’s manifesto at this stage? I do not think so, and I do not intend to tell her what will be in ours. We will decide.

I wonder what the Tory manifesto will say about the NHS and VAT at the next election. I suspect that it will not say that the Tories will look after the former or fail to increase the latter, because no one would believe them any longer, would they?

Let us be clear. The document says that £3 billion would be the static cost of a cut in the rate to 45p. It also says that the behavioural change based on the magic of Arthur Laffer’s cocktail napkin calculus would generate £2.9 billion. Unfortunately, as I have said, HMRC is not terribly certain about that, which is why it has covered its rear so often.

I promised to give the Committee a few examples of the use of the words “uncertain” and “uncertainty”, which occur more than 30 times in the document, and I cannot resist doing so, because they are so juicy. The document states that

“the yield estimates were highly uncertain.”

It states:

“There is considerable uncertainty over the true level of the elasticity.”

It states:

“The incompleteness of returns at this stage gives the results and conclusions a margin of uncertainty.”

In fact, there is so much uncertainty in it that there is a separate section entitled “Areas of uncertainty”. My personal favourite appears on page 38, where uncertainty is expressed about the uncertainty. In an attempt to estimate the behavioural effects, the document states:

“The level of uncertainty associated with this estimate is therefore driven by the uncertainty of all the other stages described above.”

Why is the document so uncertain? The reason, in short, is taxable income elasticity or TIE. The Treasury decided that the appropriate TIE for the calculation of a £100 million loss was 0.45; not the standard number that the previous Treasury had used, 0.35, and not—I look forward to an intervention on this point—the standard numbers used in the vast welter of academic research which puts a delta at between 0.12 and 0.4. The figure of 0.46, which is used in this Treasury document, is at the very top end of the possible delta. Even if it were true that 0.45 is appropriate, however, the uncertainty would still be enormous. All we need do is shift the figure slightly to 0.35, and what do we find? Not a £100 million loss, but a loss of £700 million. If we shift it nearer to the 0.12 that has been used in many United States studies, we see a loss to the tune of between £3 billion and £4 billion.

Paul Johnson, director of the Institute for Fiscal Studies, told the Treasury Committee, whose report was published only today, that the Treasury’s

“central estimate… is incredibly uncertain, to the extent that we think that its estimate suggests there is only a two-thirds probability that a revenue-maximising rate lies between 30 per cent and 75 per cent.”

That is what the IFS had to say about what the optimal rate might be on the basis of the Treasury’s calculus. Mr Johnson continued:

“Those numbers are absurd in some sense, but that gives you a sense of the level of numbers of assumption and uncertainty that underlie what”

the Treasury

“has done.”

[Mr Gauke]

The hon. Gentleman has referred to the academic debate. May I refer him to page 20 of the HMRC document, which relates to the IFS study? It states that Brewer, Saez and Shephard estimated a TIE of 0.46 in 2008, and Gruber and Saez estimated a TIE of between 0.5 and 0.7. It also states:

“The TIE estimate of 0.35 used in the Budget 2010… estimate”

—which the hon. Gentleman described as “standard”—

“was deliberately at the low end of the academic elasticities surveyed.”

The 0.45 TIE is much more consistent with the academic position than the claims of the last Government.

[Owen Smith]

I am thrilled to have given way to the Minister, because his intervention has revealed that, although he may have read the dodgy dossier, he has not read the academic literature. If he had done so, he would have read more recent publications such as that of Saez, Slemrod and Giertz, which is a review of all the pieces of work done on TIE. It concluded that many of the earlier studies, including the HMRC study, had relied on estimates that were excessively high owing to flaws in the data and the methodology used. Saez et al suggested that

“the best available estimates range from 0.12 to 0.40”.

That is the same Saez from whose earlier paper the Minister quoted. In his most recent paper, he changed his mind and concluded that between 0.12 and 0.4 was the generally accepted estimate. The Treasury has cooked the figures on the basis of one academic study produced as part of the Mirrlees review.

[Mr Love]

Is my hon. Friend aware that the IFS study that is cited so regularly by Government Members refers to taxes increasing in the 1970s and decreasing in the 1980s, and is way out of date in relation to today’s circumstances?

[Owen Smith]

Absolutely. The key correlation is not between top rates of tax and GDP. There is very little evidence of that. However, there is evidence that top rates of tax have a massive impact on the distribution of wealth across the deciles, and are concentrated on the richest percentage of our economy. That is the truth, and that is why the Government ought not to have made the decisions that they made.

All this stuff may seem rather arcane, but it is central to the Budget. If the Treasury got it wrong—if the amount that will be lost is not £100 million, but a great deal more—the neutrality of the Budget is bust, as is the credibility of the Government. Who will pay the price of that bust? It will not be the 14,000 millionaires who are 40 grand better off as a result of the extraordinary largesse from this millionaires’ Government. It will be the pensioners, the unemployed, the vulnerable, and squeezed middle-earning and low-earning families throughout the country, who will be £500 worse off as a result of this Government’s activities.

We fear that that is the price that will be paid. We believe that written into clause 1 are the priorities and the politics of the Government, which are ideological, value-driven and fundamentally wrong: wrong for this time, and wrong for this country. That is why we will vote against the proposed change and in favour of our amendment, and we hope that Government Members will look to their consciences and do the same.

[Elizabeth Truss]

I am delighted to see the back of the 50p tax rate. Of all the shallow, politically motivated activities of the last Government, it was possibly the worst. They spent 13 years enjoying the fruits of the 40% top rate of tax that had been put in place by our reforming Chancellor Lord Lawson in 1988. It was a bold move at the time to create a top tax rate at that level, but, as we have seen, other countries around the world have been reforming their tax systems and tax rates in order to become competitive and to face the other countries—the emerging economies—that are now competing on the world stage.

The 50p tax rate was announced in the 2009 Budget, five weeks before the last general election—an election the Labour party knew it would lose. Can things get any more cynical? That was the ultimate scorched-earth policy, and it has done enormous damage to our economy. Labour knew the economics were flawed, and the increase in the tax rate from 40p to 50p raised only a third of the £3 billion it had predicted. Meanwhile, between £16 billion and £18 billion was moved forward into income in the previous year, diverting productive activity from industries that we needed to thrive in order to keep our economy going during the recession. The change to the rate was made purely for political motives.

13:30

[Mark Reckless]

My hon. Friend makes a powerful case for the merits of a 40p top rate of tax. Will she therefore support the Opposition amendment?

[Elizabeth Truss]

I am not quite sure whether their amendment expresses what they wanted it to express. As with the HMRC report, there may be some uncertainty about what exactly the Opposition intend to do.

First, the introduction of the 50p tax rate diverted resources from the productive economy at a very important time—just as we were heading into the worst recession, thanks to the dreadful economic policies of the previous Government.

[Sheila Gilmore (Edinburgh East) (Lab)]

How can people postponing their income from one tax year to another, but nevertheless presumably still getting that income, prove so damaging to the economy? Is the hon. Lady suggesting that, having got the income a year early, they simply sent it abroad? Surely it can still be invested.

[Elizabeth Truss]

When income is artificially moved from one year to the next, it is not properly used for investing in projects. Under the previous Government, a lot of expenditure went into unproductive areas of the economy. Much of it went on excessive public spending and into the property industry, leaving us with the scorched-earth situation that we have had to address.

The signal that the previous Government sent to the rest of the world was that Britain was anti-aspiration, anti-business and anti-work. That happened at a time of increasing international competition, as it is now ever easier to move people and capital around the world because of improved technology and globalisation. Other countries were reforming their tax system, however, so as they were moving forwards, we were moving backwards.

[Kwasi Kwarteng]

Will my hon. Friend outline just how uncompetitive the 50p rate was compared with the rates of other G20 countries?

[Elizabeth Truss]

It was the highest income tax rate in the G20. We heard earlier from the Opposition spokesman that Labour did not understand the effect that that would have on our international competitiveness, which shows why it is not fit for office.

[Harriett Baldwin]

Did my hon. Friend share my shock at hearing the Opposition Front-Bench spokesman arguing that the sensitivity of the top rate of tax is static? The logic of that argument is that the top rate should be 75p, 80p, 90p or, perhaps, even 100%.

[Elizabeth Truss]

Yes, and perhaps some Opposition Front-Bench Members should move to France, where they might find that such policies are more conducive to their way of thinking.

At this time of increased international competition and great movements of people and capital around the world, and with new economies rising such as in India and China, according to the World Economic Forum Britain is 94th in the world in respect of the effect and extent of our taxation. One factor in that is the top rate of tax under the previous Government, and another is the extremely long tax code, which is a result of their meddling with our tax system over many years.

The UK is 11% less productive than the G7 average, and our skills base is lower than that of the US, France and Germany. If we are to become competitive again and improve our productivity and skills, we need incentives for people in this country to work and to invest in their skills, and we need to rebalance the tax system away from income tax and taxes on work such as national insurance, which the previous Government increased. We also need to reform our education and welfare systems and take the 2 million lowest earners out of tax, in order to give everybody more incentive to work. We must also merge our income tax and national insurance system to make things simpler for employers. We need to get rid of the previous Government’s flagship 50p tax rate as well, as it has done so much damage to people in this country who are seeking to work, to invest and to be part of building our future economy.

The Government have made it clear that we want shareholders to have proper control over executive pay in their companies, and that must happen. People must be rewarded in line with the skills they use, the risks they take and the income they generate. We need incentives for people to set up businesses, and to create and produce more. We also need to look outside Britain and see what the rest of the world is doing. We need to move away from the myopic approach that it does not matter what is going on elsewhere. If our country takes that approach, we will not succeed.

[Chris Bryant]

I had not intended to speak in this debate, but the previous—[Interruption.] I am grateful for all the waves from Government Members. The contribution of the hon. Member for South West Norfolk (Elizabeth Truss) has prompted me to speak, however.

First, I want to talk about what my hon. Friend the Member for Pontypridd (Owen Smith) referred to as the constitutional shenanigans. For many centuries, it has been a convention in this House that only a Minister of the Crown can lay a charge or an amendment to a Finance Bill that increases or changes a charge and thereby adds a duty to the people of this country, but that is a mistake. The myth that we have a Budget needs to be exploded, too. We do not have a Budget. What we have is a speech by the Chancellor of the Exchequer, followed by a Finance Bill and some Ways and Means resolutions. In addition, we have a separate process whereby Supply is granted. That system does not result in our properly evaluating whether we are raising money properly and fairly and whether we are spending it properly. I know many of these processes have existed for a very long time, but they lead to profound confusion in most ordinary voters’ minds about how we in this House conduct our business.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does the hon. Gentleman therefore join Members on my side of the House in applauding the Government for establishing the Office for Budget Responsibility, which is conducting independent forecasting and analysis of the Budget, and for putting far more information than before in the Red Book about the distributional impact of tax changes on the people of this country?

[Chris Bryant]

Broadly speaking, yes, I do, just as I supported making the Bank of England independent at a time when the Conservative party was opposed to doing so. However, my point remains that this House does not really vote properly through the expenditure of the Government; we do not, in any sense, analyse it line by line. We also do not match expenditure with the raising of taxes, unlike nearly every other legislature in the world. Most countries that have based their system on ours have now amended their processes and have better processes than we do for budgetary matters.

[Mark Field]

I entirely associate myself with the comments made, because the hon. Gentleman is absolutely right, and I hope that most Government Members would also agree with what is being said. He might also point out that it is probably difficult, given that we have a deficit of £126 billion, to match that expenditure with tax, and going down that route might well lead to the significant reduction in the deficit that many Government Members very much support.

[Chris Bryant]

I do not entirely disagree with the hon. Gentleman. However, if the Government want to take the country with them as they are taking through enormous cuts, it is important that they have a process in Parliament that people can understand. We simply do not have that, which is one reason why people are so angry about some of the cuts that are happening.

[Mark Reckless]

I commend the hon. Gentleman on what he says and associate myself fully with his remarks. May I ask whether the Opposition Front-Bench team would support amendments to Standing Orders to put our tax and spend process on the proper basis that he describes?

[Chris Bryant]

That is way above my pay grade. I am just speaking for myself in this regard, and I hope that hon. Members will take my comments in that sense, but I have made this argument for a very long time and tried to do the same when I was Deputy Leader of the House.

I just say to the hon. Member for South West Norfolk that my constituents do not particularly want very high rates of tax, either for themselves or for wealthy people. There is no sense of bitterness and a determination to grind the wealthy down among my constituents, many of whom have very noble aspirations to be wealthy themselves. They hope one day to be paying higher rates of tax, so the point for them today is not about whether a 50p rate of tax is ever the right thing; it is about whether that is the right thing now. I say to her that my constituents feel that the past few years have been very tough, not just the Conservative years, but the last two years of the Labour Government, because of the global financial crisis. People such as my constituents have suffered the most in that time and they do not see people in the City of London suffering—the sales of champagne have still been pretty good—but they do feel themselves suffering. In that situation, it is all the more incumbent on us to think very hard before lessening the tax rate for the wealthiest.

[Several hon. Members]

rose—

[Chris Bryant]

I will give way to the hon. Member for South West Norfolk, because I referred to her directly.

[Elizabeth Truss]

The point that the hon. Gentleman makes is a political one. Is not the crucial issue here the economics and what will actually benefit his constituents? Should he not be considering the issues of whether they will have jobs, whether new businesses will flourish and whether people will aspire to work harder? Rather than the political presentation, should he not be considering the economic case?

[Chris Bryant]

I will deal with the economic case, but this is where I fundamentally disagree with the hon. Lady ideologically. I do not think we can put economics and politics into separate boxes; the one drives the other. If we want a happier country, where people prosper because they feel that the whole of society is engaged in the same endeavour, we have to make sure that it feels as if everyone has equally got their—I am going to get my metaphors all mixed up—shoulder to the grindstone. I say to Government Members that in my constituency it does not feel that that is the case at the moment. It feels as if the poor are having a very rough time, and there is very little prospect of changing that. I believe that my hon. Friend the Member for Pontypridd said that 2,700 unemployed people in his constituency were going for 200 jobs. The statistics are even worse just up the road in my constituency. It is not a question of someone getting on their bike and going somewhere else to find a job, which is why the politics matter. I am talking not about party politics, but about the sense of whether we are genuinely all in this together.

[Alun Cairns]

The hon. Gentleman has made a powerful point in comparing the incomes of people in his constituency with those of some in the City of London. But in order to raise the wealth and prosperity of people in his constituency and in every other constituency across the UK, particularly those in the north, Wales and Scotland, do we not need to attract investors and to attract the best brains in the world? That 50% rate is extremely important in respect of providing investment to his constituency, my constituency and others of hon. Members across this House.

13:45

[Chris Bryant]

I do not want a 50p rate to last for ever and I accept that the City of London plays a very important role in the whole UK economy, but I tell the hon. Gentleman that I feel anxious that this country’s economy depends far too much on what happens in London and the south-east. My fear about the way in which this policy has been developed in the past few months is that the Government intend to increase that dependency, rather than undermine it. I know that there are logical arguments to say that we should have different pay rates for public sector jobs in different parts of the country—

[Richard Harrington (Watford) (Con)]

rose—

[Chris Bryant]

Just one moment. However, I say to Government Members that if they do that, they will further exacerbate the gap between peripheral parts of the economy—places such as the Rhondda and the Vale of Glamorgan—and the south-east of England and London. That will undermine the very competitiveness that the hon. Member for South West Norfolk is trying to advance.

I also disagree with the move that the Government are making because, politically, it sanctions the process of avoiding paying tax, in which some wealthy people have engaged. I have not been in this place for that long—just for 11 years—but in that time I have heard an awful lot of Chancellors say, “The solution to this is to close a tax loophole.” However many times we try to close these loopholes, wealthy people will still employ accountants to try to minimise how much tax they pay. I would prefer to live in a country where the vast majority of wealthy people said, “You know what, I am a wealthy person and I want to contribute my fair share. However easily I can legally avoid paying tax, I actually want to pay my fair contribution.”

[Several hon. Members]

rose—

[Chris Bryant]

If hon. Members bear with me, I will give way. I have already promised to give way to the hon. Member for Watford (Richard Harrington), so I will do so in a moment. I just say that the message coming out of this is, “Frankly Mr Wealthy Person or Mrs Wealthy Person, if you have not got an accountant and you are not trying to minimise how much tax you are paying, you are pretty daft.” That is a bad place for us to be in ethically.

[Richard Harrington]

I apologise for stopping the hon. Gentleman in mid-flow on two occasions, but I would like to ask him whether he accepts that for people in business, who are creating wealth and—we hope—employing a lot of people and investing money, a very high personal income tax rate is a disincentive to doing that. Does he accept that however public-spirited business people are—in my experience, most people do take the view that he put forward and they are prepared to pay a reasonable rate of tax; they do not try to avoid paying every penny and they want to contribute to society—a high tax rate is a disincentive and would lead to a lot of people saying, “I am just not going to do the extra and employ more people”?

[Chris Bryant]

Broadly speaking, of course I agree with the hon. Gentleman; a very high tax rate could act as a disincentive to many people and, as the hon. Member for Vale of Glamorgan (Alun Cairns) was intimating, could make this country uncompetitive compared with other countries. However, I just ask two questions in return, the first of which is: what counts as a “very high” tax rate? That is a judgment call; it is about our rate relative to that of others and whether we have the balance right. My second question is: given that, when is the right time to change? I just say to hon. Members that now is not the time, because this country will gird our economic loins and start seeing economic growth only if everybody does genuinely feel we are all in it together. This move undermines that precise point.

[Nadhim Zahawi]

The hon. Gentleman is making a thoughtful speech and some serious points. He talks about the relativity of the level at which we set income tax, but of course we must not forget that it is not just 50p because there is national insurance on top, taking one over the 60p mark to 62p. Some of the things we need to look at are the behavioural changes we saw when income was moved to avoid the 50p rate when it was first brought in, and the disparity between corporation tax and capital gains tax. When income is taxed at 62% but capital gains and corporation tax rates are much lower, those very wealthy individuals who are creating wealth have options to move money around, so there will be behavioural change as we go up the income tax scale and create that differential.

[Chris Bryant]

I am grateful to the hon. Gentleman for giving way. Broadly speaking, I agree with elements of what he said. For example, it is a mistake, as hon. Members have said, to seek to tax people solely via their income because that is not the sole determinant of wealth and therefore of what one should put into the national pot. Similarly, I am quite critical of those in my constituency who say, “Mrs Jones down the road—she’s never paid tax.” Nobody never pays tax because everybody pays VAT in some shape or form; everybody makes some kind of contribution. My fundamental point is that now is not the right time to change the top rate. We are living in austere times and if the country is to gird its economic loins, we need everyone to be on the same side, but this measure is relatively divisive.

[Nadhim Zahawi]

rose—

[Alison McGovern]

rose—

[Andrea Leadsom]

rose—

[Chris Bryant]

I am not going to give way to the hon. Member for Stratford-on-Avon (Nadhim Zahawi) again—[Interruption.] No, he gestures that his intervention would be short but the last one went on for ever, so I am going to give way to my hon. Friend the Member for Wirral South (Alison McGovern) instead.

[Alison McGovern]

May I draw my hon. Friend back to his remark about the ethics of this issue? The ethics of whether people feel as though we are all making a contribution turn very much on what is happening around this rate of tax. Paul Johnson from the Institute for Fiscal Studies has said:

“The truth is we still do not know the true effect of the 50p rate on revenues.”

Does not this make it extremely difficult to make the right political and ethical choice at this time?

[Chris Bryant]

My hon. Friend is absolutely right. In fact, I think she must have been reading my notes, which were very close to her face, because they say that it is completely uncertain how much this will cost. That is, as my hon. Friend the Member for Pontypridd said, at the nub of this. The Government have no idea how much this is going to cost them or how much would have been raised had we continued with the 50p rate of tax for another five years. That rate has not been in place long enough for us genuinely to see how it has affected people’s behaviour. Sometimes, when a new rate of tax is brought in it has a sudden impact that then evaporates two or three years later. There is absolutely no certainty and I say to Government Members, who I am sure are going to march loyally through the Lobby with the Exchequer Secretary this afternoon not because he is persuasive but because they believe in this—[Interruption.] He may be persuasive, but I do not think he is going to persuade me. I say to them that I think this will end up being a divisive measure.

[Mark Field]

rose—

[Andrea Leadsom]

rose—

[Chris Bryant]

The hon. Gentleman cannot have another go, but the hon. Lady can.

[Andrea Leadsom]

I am very grateful to the hon. Gentleman. I want to draw his attention and that of the hon. Member for Wirral South (Alison McGovern) to a point about ethics. Does the hon. Gentleman accept that the Government intend to increase the tax take from the wealthiest in this country? Where ethics are concerned, it is appalling that people have deliberately used a company to buy a multi-million pound house simply to avoid paying stamp duty. Does he accept that taking measures to ensure that people pay what is a reasonable and acceptable level of tax is a better method than trying to enforce something that is very easily avoidable for many people?

[Chris Bryant]

Well, I am really impressed by the hon. Lady. I can understand how my hon. Friend the Member for Wirral South read my notes but not how the hon. Lady managed to read them from over there. I was going to come to exactly the point she makes but not quite in the same way. Yes, there is an ethical clash about whether this is the right time to introduce this measure for political and economic reasons, but my concern is that because the Chancellor had, I think, personally decided that he was going to cut the 50p rate to 45p, so many other elements of the Budget had to follow that change. A prime example is the fact that the Prime Minister and the Chancellor wanted to be able to say that the rich would pay five times more tax after the Budget than before—I think that is, broadly speaking, the point that the hon. Lady is making. I am not opposed to some of the measures that will increase the amount of tax paid by people who have wealth in a variety of circumstances, but I think that some of the measures in the Budget and the Finance Bill ended up there only to try to shore up that argument, and I do not think that due diligence was done around them.

Let me take one example—I note the look in your eye, Mr Hoyle, and I shall bring my remarks to a close very soon. I think that the measure about capping the tax relief available for people giving money to charities is in the Budget solely so that the Government can argue that the rich will pay more. It is not based on fact or research. There might be perfectly good things we could do on whether charities outside this country that are not covered by the Charity Commission should be removed from the system or on whether greater powers should be given to the commission, but I think that the only reason that the measure was in the Budget was so that the Government could say that tax has increased. This has left the Chancellor and the Prime Minister somewhat double-faced—I shall not say two-faced, because obviously I could not. On the one hand they are saying that the top rate of tax should go down and the rich should not pay so much and, on the other, they are saying that the rich should pay more.

I hope that I have persuaded all the hon. Members on the Government side to change their mind. I see that I have persuaded the reckless Member over there, the hon. Member for Rochester and Strood (Mark Reckless), to support the amendment in the name of my hon. Friend the Member for Pontypridd.

[Mr Christopher Chope (Christchurch) (Con)]

I do not think it is necessary for me to speak to amendment 1 because my hon. Friend the Member for South West Norfolk (Elizabeth Truss) and others have, in their interventions, destroyed the Opposition’s argument. I recall that the TaxPayers Alliance organised a wonderful celebratory dinner not long ago, in the Guildhall I think, at which the guest of honour was none other than Dr Laffer of the Laffer curve. I am delighted that the Treasury is now paying more attention to the principles behind the Laffer curve, which, in my view, are well represented in the argument for reducing the top rate of tax back to 40%, rather than 45%. I hope that in due course my hon. Friend the Minister will explain why someone like me should not be tempted to vote for amendment 1 on the basis that it would reduce the level to 40%.

[Owen Smith]

When Dr Laffer attended the dinner at the Guildhall, did he bring with him the famous cocktail napkin on which he sketched the curve?

[Mr Chope]

Dr Laffer did not bring any visual aids with him; he was able to command his audience without them. I remember being surprised by how relatively youthful he was—it seemed that his principles and his curve had been talked about for so long that I had assumed he was going to come in with a walking stick, but he did not. He was very lively in mind, body and spirit so I think he is someone we can continue to listen to in the months and years ahead.

I want to use my short speech to comment on amendment 62, which is in my name and that of my hon. Friend the Member for Rochester and Strood (Mark Reckless). It calls on the Treasury to

“within two months of Royal Assent, make an assessment of the relative administrative costs of…making an additional charge to income tax payable by all individuals with an adjusted net income above a certain amount; and…the measures in section 8 of, and Schedule 1 to this Act.”

14:00

The background is my concern that the provisions in clause 8 and schedule 1 relating to child benefit—the income tax charge for those on higher incomes—introduce enormous unfairness and complexity. There must be another way to meet the Government’s avowed objective to ensure that those on higher incomes contribute more to deficit reduction than they have hitherto. Her Majesty’s Revenue and Customs produced a technical document to accompany the Finance Bill and the Budget. In the section headed “Child Benefit: Income Tax Charge for Those on Higher Incomes”, it states under “Policy Objective”:

“In order to address the fiscal deficit the Government believes that it is right to ask those on higher incomes to contribute more.”

I do not disagree, but the document does not say that it is right for those on higher incomes with children to contribute more while those on higher incomes without children do not. As it is not possible to table an amendment to increase a charge in the Budget, but only to propose to reduce taxation or to oppose the Government’s proposals, I thought the best way to introduce discussion was to ask the Government to produce a report on the relative administrative costs for the option of going ahead with clause 8 and schedule 1, or for introducing a uniform charge for all those earning more than £60,000.

On Second Reading I gave some rough figures. The Government’s proposals would yield about £1.5 billion a year, but if instead there was a charge on all those earning more than £60,000 a year, the yield would be £2 billion. Not only would the yield be higher, but the costs of administration and collection would be much lower and the opportunities for confusion, fraud and evasion much reduced. I hope that my hon. Friend the Exchequer Secretary will tell us that the Government will look into whether it is right that we should increase the complexity of the tax system when the Government’s avowed intent is to reduce it.

[Mark Reckless]

Will my hon. Friend confirm that the estimates of administrative and staff costs the Government have given us for the higher income child benefit charge are actually somewhat higher than the entire revenue that they estimate, with some uncertainty, we will lose from reducing the top rate of tax from 50p to 45p?

[Mr Chope]

Exactly. My hon. Friend’s excellent point shows the gravity of the complexity that the Government are introducing. The figure is more than £100 million in administration costs to take away child benefit from 1.2 million families, either in total or in part.

[Mark Field]

Is my hon. Friend concerned that the estimate is likely to be somewhat conservative? Many people are employed as consultants, so they do not know from one year to another whether they will be earning between £50,000 and £60,000. Huge costs will be involved in trying to collect the money, and I dare say a massive amount will have to be written off year on year if the charge goes through as proposed.

[Mr Chope]

My hon. Friend makes a series of good points that are recognised in the HMRC document to which I have referred. It says that the definition of a partnership will be the same as the one in the Tax Credits Act 2002, yet we already know that the Act and the technical manual that flowed from it resulted in an enormous administrative burden for those trying to work out who formed a couple, or when partnerships began or ended. There is a great file of documentation on how to interpret the tax credit definitions of partnership when people are cohabiting, whether or not they are in civil partnerships. The complications of the child tax credit system have resulted in a lot of fraud.

If we apply new rules to a fresh group of taxpayers and for the first time introduce in the tax system definitions of couples and partnerships, we shall create an enormous administrative burden. The document notes that the overall impact will be that HMRC will have to spend approximately £100 million on staff resources. If we say that that is £20 million a year—although it is actually more—at an average cost of £30,000 for a member of staff, we should be taking on 650 extra staff just to administer the removal of child benefit from 1 million families who currently enjoy it.

That is not the end of the story. We also have the problem that 500,000 tax-paying families who previously have not had to make a tax return will now have to do so. That is not mentioned in the cost analysis, but it is a cost on the tax-paying public that will not be borne by the Exchequer.

The proposal is highly flawed, as the Treasury Committee has recognised. Paragraph 23 of its report on the Budget notes:

“We recognise that the Government needs to take difficult decisions to tackle the Budget deficit. Nonetheless, the Government’s latest proposals for reform of Child Benefit solve only one of the two main problems identified with its original policy. They add further complexity.”

That conclusion is based on evidence the Committee received from the Chartered Institute of Taxation, the Institute of Chartered Accountants of England and Wales and other experts. They all drew attention to the complexity involved, and some of them pointed out the odd distinction between the child benefit charge and the justification articulated by the Chancellor for removing the age allowance for the over-65s. During the Budget debates, the Chancellor told us that the main justification for removing the age allowance was to bring about simplification, yet that will be the reverse of the added complexity that he is introducing through the child benefit tax charge.

I hope we shall have a bit of give from the Government. If they want everybody on a higher income to make an additional and fair contribution to deficit reduction, will they tell us why their proposals are targeted on those on higher incomes with children, while those on higher incomes who do not have children are excluded? I hope the debate will give us the opportunity to get answers from the Government on those points.

[Mark Durkan (Foyle) (SDLP)]

Does the hon. Gentleman also hope to have clarification from the Government of why, if the measure is about deficit reduction, they have refused to say that it will be reviewed or revised when the deficit is reduced? It will not necessarily be temporary, whereas the Chancellor was very clear that the 50p rate, while he adhered to it, would only be temporary.

[Mr Chope]

Absolutely. The hon. Gentleman makes a very good point. He may be of an age to recall what happened in the 1970s when we had the International Monetary Fund dictating to the then Labour Government what they should do to bridge the fiscal deficit that existed then. One of the measures that was introduced as a result was, in effect, an income tax surcharge which was retrospective for a year, but everybody who had been paying tax at a particular level had to pay a surcharge to help deficit reduction.

It would be possible for the Government to do something similar in this Budget to put a time limit on that, but the problem is that because of the enormity of the mess that the previous Administration made of things, we will not begin to reduce the debt until well on into the next five or seven years. In the meantime our debt will go beyond £1.5 trillion, so I am not sure that if we introduced a time limit, it could be an early time limit. It might have to be reviewed by Government in about 20 years. However, I take the hon. Gentleman’s point. Before he intervened, I was about to conclude my remarks as I know that many more colleagues wish to lay into the Opposition on their wholly misconceived amendment 1.

[Jonathan Edwards]

It is a pleasure to serve under your chairmanship this afternoon, Mr Hoyle, and to contribute to the debate. I shall speak to amendments 7 and 76, in my name and that of the hon. Member for Foyle (Mark Durkan), relating to the cut in the additional rate of income tax, and consequential amendments. I intend to press amendment 76 to a Division at the appropriate time unless, of course, it is accepted by the Treasury.

Despite heavy lobbying over the past year to remove the 50p additional rate of tax, the switch to a lower rate of 45p was one of the more surprising announcements in the Budget last month. It had been assumed by many that the Government mantra of being “in it together” meant that it would be politically necessary to show that all parts of society were paying more tax and facing the same level of public service cuts. Many therefore assumed that the 50p rate would be with us for at least as long as the Government maintained their plan A for cutting the deficit. After all, pressing issues such as Barnett formula reform have been conveniently parked in the name of the war on the deficit.

For my party, the issue is a matter of principle, irrespective of the timing and the state of the wider economy. Those with the broadest shoulders should bear the burden of taxation. A progressive taxation system based on the Scandinavian model is part of our political DNA. Someone who earns at the additional rate of £3,000 of taxable income per week is clearly in that category. Only a handful of people who earn that kind of money reside in my constituency. We therefore support the maintenance of the current 50p additional rate.

As I made clear in my speech on Second Reading on Monday, my opposition to this tax cut is on the record, as I voted against it during the Budget votes last month. The income tax rates for 2013-14 were one of the founding resolutions of the Budget, and offer very little scope for change today. My amendment 6, which would mean that the additional rate would be 50%, appears on the amendment paper but was not selected.

Hon. Members can therefore imagine my surprise that the official Opposition did not join my colleagues from a variety of smaller parties in opposing this measure on 26 March. That was the vote against a cut in the additional rate, but the Labour party unfortunately abstained, apart from two honourable exceptions. The hon. Member for Leeds West (Rachel Reeves) representing the official Opposition kindly allowed me to intervene on her during the debate on Monday. I asked her to confirm whether this was a deliberate or a tactical abstention. Her response was that the Opposition had voted against the whole Finance Bill and that was sufficient.

The hon. Lady’s answer would have been a semi-appropriate response, were it not for the fact that, if my memory serves me well, her party divided the House on resolution No. 8 on higher income benefit. Clearly, some resolutions were more important than others that evening.

[Owen Smith]

Just to clarify, as my hon. Friend the Member for Leeds West (Rachel Reeves) made plain, we had already voted against the whole Bill. There was a further reason for not supporting the hon. Gentleman’s amendment, which was that unfortunately it would have wiped out all the rates of taxation, not only the 50p rate.

[Jonathan Edwards]

I am sure the hon. Gentleman read the leaked e-mails from Labour insiders the following day, which were widely reported on the Guido Fawkes blog and which indicated that this was a major balls-up—excuse the pun.

14:15

[Mr Gauke]

May I help the hon. Gentleman? The motion on which he voted against the Government related to the tax charges for 2013-14. With apologies to the hon. Member for Pontypridd (Owen Smith), it would not have wiped out all the tax rates for this year. It was specifically for next year. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) is right. It would not have had the impact that the hon. Member for Pontypridd suggested.

[Jonathan Edwards]

I am grateful for that clarification.

The idea that the Tories would offer a tax break to millionaires would surprise nobody in my constituency—in fact, they would expect it—but that Labour would abstain after announcing it would vote against it has led to a great deal of confusion. I have had a lot of fun on the doorstep in the past few weeks explaining that, while campaigning for the local authority elections. It is similar to the way the official Opposition announced the policy of a temporary cut in VAT last June, then two weeks later abstained on the Finance Bill when I and my colleagues proposed such a measure. A lack of consistency and clarity on economic matters explains why it is so easy for the Government to continue to pin the blame on the official Opposition for the UK’s economic mess in spite of the flawed and ideological cuts programme which is destroying the fabric of the economy.

[Stephen Williams (Bristol West) (LD)]

Does the hon. Gentleman recall that 12 months ago there was a similar set of circumstances, when the Labour Opposition said on three occasions that they opposed the rise in VAT, continued to say that they were opposed to the rise in VAT, but on three occasions failed to vote against it?

[Jonathan Edwards]

I am grateful for that intervention. The hon. Gentleman is of course right. It is a matter of record, and it shows that when it comes to a vote in the House, the Labour party does not have a policy.

[Charlie Elphicke (Dover) (Con)]

The issue was not invented there so the Opposition could not vote for it, whereas although I disagree wholeheartedly with the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), I credit him with being principled, and principled in his voting, rather than trying to have it both ways, like Labour.

[Jonathan Edwards]

I am grateful to the hon. Gentleman for confirming that we are more efficient than the official Opposition.

[Chris Bryant]

The hon. Gentleman knows that I am very fond of him, so may I give him a tip? It is not to believe what he reads in newspapers, not to believe what he reads by Guido Fawkes—most hon. Members would agree with that—and not to listen to Liberal Democrats, who will support and vote for the cut from 50p to 45p, but to focus his anger on the Government, who are introducing this change.

[Jonathan Edwards]

I am grateful for that intervention. I am coming to that. Unfortunately, the papers did not report Labour’s shameless record on some of these issues.

Monday’s Second Reading saw Members from both sides continuing to trade a barrage of figures to explain why the additional rate should be cut or remain as it is. I thought the contribution from the hon. Member for Pontypridd on Monday night was excellent in explaining the political and economic value of the 50p rate. It is clear that there is no agreement over the mechanics of the issue, and given that Labour’s agreement to the 50p rate in the first place was based on revenue-raising rather than principle, that is a very important fact.

The Treasury should therefore instigate a report on the income-shifting and avoidance measures used to lower the amount of tax paid under the additional rate, and on possible revenue from a 50% and a 45% rate, taking into consideration the outlying factors that always impact heavily on the first year of any tax innovation. Such a report would clarify the situation and allow the House to make a considered judgment one way or the other in the next Finance Bill. As always, the majority of people pay the tax that they should, but there are some who will always try to avoid as much as possible.

The artificial shock of the Chancellor at the scale of tax avoidance suggests that he takes Members of this House for fools. Although I accept the argument for a relationship between a lower taxation rate and economic growth and perhaps larger revenues, I find that argument counter-intuitive for income tax rates on this occasion. The majority of those who seek to avoid paying income tax at 50% will, I suspect, also seek to avoid paying it at 45%—and, as the Government contend over the 50% rate, they will have the resources to avoid doing so.

My amendment 76, which would require a review, neatly coincides with the Opposition’s amendment, so I assume that when my amendment is pressed to a vote they will join us in the Lobby. After all, they have already signed up to my amendment 7, which, I shall explain for the benefit of the Committee, is consequential on the additional rate changes relating to dividend and trust payments, the transferring of retirement benefits to a non-additional rate tax payer and the notional tax credit attached to some capital payments. We look forward to dividing on amendment 76 at the appropriate time.

[Karl MᶜCartney (Lincoln) (Con)]

It is a great pleasure to follow my hon. Friend the Member for Christchurch (Mr Chope), the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) and, of course, the hon. Member for Rhondda (Chris Bryant), who should take heart from the fact that although our initial reaction on the Government Benches perhaps disproves the adage that everybody goes crazy about a sharp-dressed man, we agreed with some of the points he made, which were valid. I will cover in my speech some of the points on which I perhaps do not agree with him.

[Chris Bryant]

You broke my leg.

[Karl MᶜCartney]

Not on purpose.

We were told during the dying days of the previous Labour Government that the 50p tax rate was always intended to be a temporary measure. That remark came from very near the top level, as it was made by the previous Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling). Many of us suspect, however, that at the top of that economically discredited Labour Government, the then Prime Minister, who is now much missed in his absence, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), had a more political plan, perhaps with three prongs. First, the 50p tax rate was a bone to throw to the Opposition’s political masters who run the unions. It said, “Look how we are clobbering those who earn—or should I say ‘are paid’—slightly more than you.” Secondly, it was part of the Labour party's scorched-earth policy, a desperate act up there with the protectionist decision of the right hon. Member for Kirkcaldy and Cowdenbeath further to increase the indebtedness of our armed forces’ budgets by ensuring the most watertight contract, despite the fact that Whitehall lawyers are not renowned for their prowess in closing legal loopholes, for two new aircraft carriers, which funnily enough were not to be built in English or Conservative Members’ constituencies.

[Stewart Hosie (Dundee East) (SNP)]

Will the hon. Gentleman give way?

[Karl MᶜCartney]

Not at this stage.

Thirdly, the 50p tax rate was designed to be something that any new Government would have to address at some time early in the next Parliament and to reduce to an acceptable level to ensure the competitiveness of our nation in the international marketplace.

[Stewart Hosie]

Will the hon. Gentleman give way now?

[Karl MᶜCartney]

In a minute.

One hopes that the Labour party knows and realises that the 50p tax rate it introduced for spurious reasons made our country economically uncompetitive, but it has never let the truth get in the way of a good soundbite, has it? It is not fair to say that the reduction in the 50p tax rate and other measures announced in the Budget are a tax break for the wealthiest because, in total, the measures announced will see the wealthiest paying many times more.

[Alison McGovern]

Will the hon. Gentleman give way?

[Karl MᶜCartney]

No, I certainly will not at this stage.

[Chris Bryant]

That is very ungenerous to a lady.

[Karl MᶜCartney]

Later, I will be as generous as the hon. Gentleman was if hon. Members will let me get through some of my speech. I certainly will not speak for as long as he did.

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

Order. I think we are having a few too many interventions. I say to the hon. Member for Rhondda (Chris Bryant) that although the hon. Member for Lincoln (Karl MᶜCartney) might have broken his leg, he obviously did not break his tongue, which he ought perhaps to hold a little more.

[Karl MᶜCartney]

Thank you, Mr Hoyle for letting me continue. I feel I ought to correct what might be an untruth: I did not break the leg of the hon. Member for Rhondda. I gave him quite a good pass—not even a hospital pass—on the rugby field and the two large gentlemen who were about to tackle me then tackled him.

The independent Office for Budget Responsibility agrees that the 50p rate raises only a fraction of what was supposedly intended. So, one of my questions to the Chancellor and his Ministers is whether they know of any reason why any Member would disagree with the highly respected OBR other than for disingenuous political gain.

The 50p rate is bad economics. The previous Labour Government’s Chancellors and Prime Ministers and the Labour party’s current shadow Chancellor, the right hon. Member for Morley and Outwood (Ed Balls), are well aware of that privately but cannot bring themselves to acknowledge it publicly. Ultimately, it is the highest tax rate in the G20. Our Government are clear where they stand on the 50p tax rate: it has not raised anywhere near the revenue expected as many individuals cleverly engaged their own or their accountants’ knowledge to bypass the rate and lower their tax bills. The Government have now sent out a clear signal to the international community that Britain is open for business and will no longer have the highest tax rate in the G20. The same clear signal cannot be said to be coming from those on the Opposition Benches.

[Owen Smith]

Will the hon. Gentleman give way?

[Karl MᶜCartney]

Not at this point.

It has been interesting—and would be again—to hear from the Chancellor or his Ministers what positive signs we have seen from businesses after he announced the change. Once again, why does the Labour party fly in the face of business leaders’ opinion? As I have said, the 50p tax rate raises only a fraction of what was intended and is bad economics. It is better to put the British economy first, ahead of cheap headlines, but then that was never the Labour way, was it? One would have thought by now that Labour might have learnt some economic lessons.

The cut in the 50p tax rate was never a priority of this Government. Raising the personal tax allowance and helping low and middle income earners has always been the No. 1 priority tax cut for the Government and that is what we have done. This is a Budget to be welcomed by all with far-reaching tax reform that Labour should be embarrassed it never even considered. It announces the largest ever increase in the personal tax allowance, which will benefit 24 million ordinary families up and down our country. Most basic rate taxpayers will gain at least £220 every year. In total, this Government will have taken 2 million low paid people out of tax altogether.

Labour spent much of the aftermath of the recent budget indulging in photo calls in unfamiliar territory for Labour Members—any pasty shop they could find. Even an unannounced visit to my own constituency of Lincoln by the photogenic brother of the Leader of the Opposition, the right hon. Member for South Shields (David Miliband), featured such a stunt. Among all this new-found fondness for pasties, but perhaps notably not for one bottle of a famous brown sauce, the Leader of the Opposition has strongly criticised the decision to cut the top rate from 50p.

The right hon. Member for Doncaster North (Edward Miliband) made a laughable claim when he said:

“After today’s Budget, millions will be paying more while millionaires pay less.”—[Official Report, 21 March 2012; Vol. 452, c. 809.]

He is the true heir to Blair, is he not? Soundbite, not substance—and not even basic mathematical understanding. After this Budget, not only will millions of people pay less tax, but many low earners will pay little or no income tax. If, as we know, the 50p top rate raised only a fraction of what was intended and in addition harmed our international competitiveness and, as other Budget changes have ensured that the direct cost of the reduction to a top rate of 45p has been mitigated many times over, that should surely be welcomed by Members on both sides of this House.

[Sammy Wilson]

Let me make it clear that my party is not a party of high taxation. We do not wish to see people squeezed until the pips squeak and we are not ideologically committed to high taxation.

[Michael Ellis]

Are you sure?

[Sammy Wilson]

The hon. Gentleman asks whether I am sure. The record is open to scrutiny. In local government in Northern Ireland, when the Democratic Unionist party is in control of any council its rates are the lowest. In the Northern Ireland Administration at Stormont, where again we have control of the finances, we have more generous tax allowances for manufacturing industry and we have held local taxation frozen at the same point for the past four years and for the next three years. The hon. Gentleman asks from a sedentary position whether we are sure, but we stand on our record. When we have the ability to influence or the possibility of influencing taxation, we want to be a party of low taxation.

My comments in this debate are predicated on such policy and should be set against that background. I want to address the reduction in the top level of tax from 50% to 45%, which I believe is a huge political mistake for the Government. More importantly, I believe that it will impact on the ability to deliver sound fiscal policy and economic policy across the United Kingdom while getting people behind the measures that are required to get us out of our dire present situation.

The Government’s main argument has been that this is a good, sound economic policy and that it is necessary for a number of reasons. It is necessary, first, because the 50p rate of taxation has not worked: it has not raised the intended revenue. Indeed, the Prime Minister today claimed that it had not raised any revenue, but if he had read the documents that his own Chancellor endorsed he would have found that that is not true.

14:30

Although the Office for Budget Responsibility and Her Majesty’s Revenue and Customs point out that the increase may have been less than expected, and they talk about it having been perhaps £1 billion less, they do not say that the measure did not raise any revenue. Part of the reason the figures for this year do not show the increase in revenue that the Government expected is that, as the HMRC report points out in paragraph 6.3, £16 billion to £18 billion of income was pushed forward: it was forestalled. But it cannot keep being pushed forward for ever, so, if we had looked at the figures over another year, we would have found that the revenue started coming in as the forestalled income started to be taxed. So the first argument that has been made—that the measure did not raise revenue—is not backed up even by the Government’s own published figures.

The second argument, which is being made here today, is that the change will raise more revenue because of the way in which people will change their behaviour. But, again, if we look at the figures that HMRC has published, we find that they are factual because they are based on what is happening at present with the static cost, and, then, that there are predicted figures—those that are based on what are called behavioural changes, about which there has been much discussion today.

The one thing that we do know, because we can be absolutely sure of the figures, is the revenue that will be forgone as a result of the change. The forgone revenue is not up for debate, because we know what was collected and what people normally paid—which they are not going to pay any longer. The figures are clear: in the next financial year, 2013-14, £3.01 billion will be forgone; in the year after that it will be £3.35 billion; in the year after that it will be £3.7 billion; and in the year after that it will be £4.19 billion. That is what we know is going to happen, because those are the static figures, as the Minister has said from a sedentary position, and the Government hope that that will be offset by behavioural changes, but, even by their own admission in their own document, those changes are fraught with uncertainty.

In evidence to the Treasury Committee, Mr Chote of the OBR said that there had been an “heroic exercise…to disentangle” all the factors that would be included in those behavioural changes, and that it was one of the six “areas of particular uncertainty” that had been identified. The changes are uncertain because—without getting into the technical phrase that has been used—“income elasticity” is uncertain. The income elasticity figures are so uncertain that, according to the Institute for Fiscal Studies, the rate of taxation that could maximise the Government’s revenue—the top rate of taxation—varies between 30% and 75%. Again, in evidence to the Committee, it was said that that the numbers are “absurd” in some sense, because the variations are so wide.

So before we talk about a concrete, cast-iron economic case, let us just look at the assumptions behind the model and the assumptions on which the revenue that the Government boast about raising are based. Once we start peeling them away, we see that the figures for the behavioural effects, which conveniently just about offset the static cost, are less than certain.

The third argument that has been made is that the change will help us to become more competitive because the high rate of taxation has had an impact on investment, on job creation and on the willingness of people to work harder and to declare their income in the United Kingdom. There is an odd thing about that argument, however, because if the Government are so certain of it why has the Chancellor, in answer to a question on the issue, indicated that he is going to initiate research into its broader macro-economic effects? One would have thought that, if we were absolutely certain that it was what we needed to do to improve the performance of the UK economy, we would have done the research, known the dynamic effects and ascertained the macro-economic impact. That has not been done.

The Government are only now, after making the change, indicating that they are prepared to initiate the research into it. So we hear all the certainties, that we did not raise the money that we wanted to, and that we will raise the money that we want to from this new tax, but, if the Government are so certain of that, why are they not introducing it this year? If we are in such perilous times and they actually believe that the measure will raise more revenue, they should be rushing to introduce it, but they have delayed it for another year. The economic case for the change has not been made.

As I said at the start of my speech, I am not against lower taxation. In Northern Ireland we have kept the tax regime—given what powers we have over taxation—as low as possible and sought to make adjustments by looking at administrative changes. Indeed, I am quite proud of the fact that in Northern Ireland this year we have cut the cost of the administration of government by 3.8%. Rather than raise money through taxation, we have looked for efficiencies in many different ways.

When the hon. Member for Rhondda (Chris Bryant) talked about the political aspects of the change, the hon. Member for South West Norfolk (Elizabeth Truss), who is no longer in her place, said, “We should not be concerned about the politics of it; we should only be concerned about the economics of it.” I do not believe that any economic decision can be made in isolation from the political context in which it has to be made, and the political context in which the decision to reduce the top rate of taxation is being made is one in which the Government are saying to people, “We are in a difficult economic situation, we have to reduce the deficit,” and I agree. We have to get the economy back on a stable footing and to make sacrifices to do so. If one is in the public sector—

[Richard Harrington]

Will the hon. Gentleman give way?

[Sammy Wilson]

Yes.

[Richard Harrington]

I am grateful to the hon. Gentleman for giving way and sorry for interrupting him mid-sentence, but in welcoming you, Mr Hood, to the Chair, I should like to ask him this question. Does he believe, as I do, that there are circumstances in which economic beliefs have to take precedence over political ones? Governments have to consider what they believe to be good in the long term for the country, for the economy and for growth, not just what might appear in newspaper headlines.

[Sammy Wilson]

I do agree, but if the hon. Gentleman had been listening he would have heard that the economic case—that we did not raise as much revenue as we should, that we will raise more revenue than we were doing and that we will improve the competitiveness of the UK economy through this new measure—has not been made. [Interruption.] The hon. Gentleman laughs, but on the basis of the Government’s own publication, the economic case has not been made.

[Richard Harrington]

To be clear, that is not what I was asking. I accept that the hon. Gentleman does not believe that the current economic policy is the right one, but does he accept my view that in many circumstances Governments have to consider what they believe to be the best economic case over and above the politics of the situation?

[Sammy Wilson]

That may well be the case. However, if a Government have to make that decision—and, yes, there are occasions when that has to be done— they must first convince people that the economic case is sound, and on the basis of the Government’s own published information, that is not so. Indeed, even the Prime Minister did not seem to know what his own Government’s information said when he was answering Prime Minister’s questions earlier. It cannot be argued that there are times when the economic case is more important than the politics and so the right decision has been made, because the Government have not made a sound economic case.

We have a political context in which the Government are saying to people: “Make sacrifices. If you’re working in the public services, take a pay freeze. If you’re a motorist, you’re going to have to pay more for your petrol. If you’re a pensioner, you must have your tax allowances frozen for some time so that allowances can catch up, with the result that you’re collectively going to lose £1 billion a year. You’re going to have to do this because we’ve got a deficit that we’ve got to address.” I could go through a whole lot of other measures. If people are going to be asked to follow a policy that is designed to reduce the deficit and to accept those impacts on their standard of living, they must understand that the weakest are not being selected for the heaviest burden. This decision is not only economically flawed but politically flawed because it will call into question the Government’s sincerity when they argue that we all have to make sacrifices together.

I have another role in Northern Ireland as Finance Minister. We have frozen wages. We have stopped all bonuses in the public sector where that has been possible and there are no contracts. We have said to people that there will be no recruitment or promotion within the public sector. We have said to people who work in the private sector, “You’re going to have it tougher because we’re going to be spending less on public sector contracts and so on, with the impact that that has on people’s jobs.” We have said about new house building and a whole range of other things, “This can’t be done.” We have said to voluntary groups and community groups, “You’re going to get cuts in your grants because we don’t have the money to do this.”

By and large, I have found that most people accept that when they see that it is evenly spread. People stop me in the street all the time and talk about the impact that it is having on their lives. They say, “We don’t like it, but if we have to put up with it because we know we can’t carry on spending money we don’t have, we’ll do it.” Nothing undermines the argument made by those of us who wish to be responsible about the budget deficit more than the news that the Government are saying to people, “Make sacrifices”, while those who are earning more than they need to live on will get a 20% or a 10% tax cut. That is why the politics of this is all wrong. The economics is not sound and the politics is not sound, and for that reason we will vote against it.

[Alun Cairns]

Thank you, Mr Hood, for calling me to contribute to this debate on amendment 1. It is a privilege to follow the hon. Member for East Antrim (Sammy Wilson). I accept some of his points about the importance of the economics, but I certainly do not agree with his conclusion. I will comment on the weakness of the argument presented by the hon. Member for Pontypridd (Owen Smith) a little later.

[Mr Love]

Does the hon. Gentleman accept that the message of this Budget is, “We’re all in this together except for the 1% of the richest people in this country”?

14:45

[Alun Cairns]

That is clearly not the situation, as I will seek to demonstrate in the next few minutes.

The starting point of any Budget has to be the scale of the national debt, and the debate must take into account the legacy of the deficit that has been inherited, the scale of public spending, and the projections that can be made in a situation that is uncertain because of the volatility in the economy in the UK, in Europe and across the rest of the world. There is also an important central element about the setting of personal tax rates. We need to create an environment where the economy is growing and this country is attractive to international investors and to investors who reside in the UK. We want to recreate a business-friendly environment where wealth and jobs are created, and where that is spread across all parts of the UK.

The 50% rate is absolutely key, and an awful lot of attention has been paid to that. The hon. Member for East Antrim talked about the economics and the politics of it and claimed that both were wrong, but in fact both are right. If one thing in the Budget sent a positive message to every investor and every mover of capital around the world, it was the reduction of the 50% rate to 45%, which said that Britain is once again open for business.

[Jonathan Edwards]

If the politics is not wrong, why was the policy not in the Tory manifesto in 2010, and why has the hon. Gentleman’s party dived 10% in the polls since the Budget?

[Alun Cairns]

I am grateful for the hon. Gentleman’s point. In fairness to him, he has presented a respectable view. I disagreed with it, but I expected him, as a columnist in the Morning Star, to present that sort of image. On that basis, he would want to tax as much as he can and spend as much as he can—something that I disagree with. There is a difference between the respectable point that he made and the unrespectable point made by the hon. Member for Pontypridd because of the confused message that he is presenting because of the uncertainty.

[Owen Smith]

With the greatest respect to the hon. Gentleman, I have absolutely no idea what his last sentence meant, but I will move on. If this was such a good Budget for business, why did the OBR conclude that over the next year business investment in Britain will go up by 0.7%, which is down by almost 8% on last year’s estimate? If business is supposed to be spending lots more money as a result of the 50p rate cut and many other measures in the Budget, why is that not shown in the OBR figures? Why is GDP going up by only 0.1%?

[Alun Cairns]

It is interesting that the hon. Gentleman is extremely selective in whom he quotes and when he quotes them. He chooses to quote the OBR’s figures when it suits his argument on one occasion, but chooses to quote the HMRC’s figures when it suits his argument on another occasion. That relates back to the uncertainty that I mentioned.

[Charlie Elphicke]

I have a couple of points. I always understood that the issue of the 50p rate was not in our manifesto because the previous Government said that it was temporary. It therefore did not need to be in our manifesto, because it was always meant to be a temporary measure. On the nonsense that Opposition Members have spouted about business investment, has my hon. Friend seen paragraph 3.62 of the OBR’s “Economic and fiscal outlook”, which states:

“We therefore expect only moderate growth in business investment this year as the heightened uncertainty from the ongoing euro area difficulties limits firms’ investment plans”?

It is not the UK that is at fault, but the eurozone, which the Opposition wanted to take us into.

[Alun Cairns]

I could not agree more with my hon. Friend. Once again, he makes a cutting point that exposes the weakness of the argument of the hon. Member for Pontypridd.

The politics of this measure is that it sends a message to international investors that Britain is once again open for business. The 50% rate needs to be added to the national insurance rate. People could well be paying a tax rate well in excess of 60%. For some individuals, it is as high as 68%. What sort of message does that send to international investors? The politics of this is extremely important in relation to how it is interpreted by the people we want to attract to this country, because they will bring their capital with them.

[Sammy Wilson]

I am not sure what Government Members are saying is causing the lack of investment. Is it the situation in the eurozone—I agree with the hon. Member for Dover (Charlie Elphicke) about that—or is it because of the high rate of taxation? The hon. Member for Vale of Glamorgan (Alun Cairns) seems to agree with both propositions.

[Alun Cairns]

I am sure that the hon. Gentleman would recognise that there is no silver bullet. I suggest that there is a range of issues. It is partly to do with the eurozone, partly to do with the debt that we inherited from the previous Government and partly to do with the global environment. Thanks to the Chancellor and the Treasury team, we are putting Britain on the road to the recovery. The reduction of the rate from 50% to 45% is central to that because of the message that it sends to every investor around the globe, as I have outlined.

We must recognise that we have had the highest tax rate in the G20. That has an effect when international companies consider where to invest. The G20 countries are in the top league of where international companies spend their money. Obviously, I want us to be seen as the most competitive nation in the league, not for us to be at the bottom of the league. That is the situation that we inherited.

The message of the Labour party consists of nothing more than envy. Labour fails to recognise that the top 1% of earners pay 30% of the income tax in this nation. The marginal rates are exceptionally important, as has been mentioned. We need to create an environment in which Britain is open for business and make it an attractive nation to investors from the UK and from elsewhere.

The argument presented by the hon. Member for Pontypridd is hollow. He misses a number of points. First, the 50% rate was intended to be a temporary rate in the first place. In response to interventions, he said that he did not think that the temporary rate should be adjusted just yet. How temporary is temporary? He gave the impression in his response that the rate should remain at 50% for the remainder of this Parliament. That would take us up to eight years of this temporary tax. He said in another response that he could not predict the Budgets that would happen after the next general election. There are three years remaining in this term. He cannot have it both ways. He says that the temporary tax should last for eight years, but that he cannot predict what will happen in three years’ time. The reality is that the Labour party is merely presenting the politics of envy. It wants to be the tax-and-spend party once again. It was the tax-and-spend party when it left office, and it has done little to move on from that position.

[Owen Smith]

The hon. Gentleman can rest assured that there is no envy on my part of him or other Government Members. I did not imply what we would have done in my speech; I stated explicitly that we would not have got rid of the 50p rate for the duration of this Parliament. The reason for that was equally clear: the Opposition are still asking for an equitable distribution of difficulty in these difficult times, as opposed to the Government, who are giving a tax bung to millionaires. We would not have done that and we think that it is the wrong thing to do. He clearly thinks that it is the right thing to do.

[Alun Cairns]

The hon. Gentleman has repeated that by “temporary”, the Opposition mean eight years and that it could be even longer. On the one hand, he is not prepared to make a commitment for three years’ time, but on the other, he is prepared to make a commitment for the next three years. That is another inconsistency in his argument.

The Opposition’s strongest argument is about the uncertainty over the change in income when the rate changes from 50% to 45%. To be kind, one would say that the hon. Member for Pontypridd has been selective; some might say that he has not been wholly honest. Everything is uncertain. There is no guarantee about how the economy will grow, nor about how the European or the global economy will grow. There was exactly the same uncertainty when the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), introduced the 50% rate. He predicted that it would bring in three times more than it has brought in.

[Alison McGovern]

On a point of order, Mr Hood. I believe that the hon. Gentleman referred to my hon. Friend the Member for Pontypridd (Owen Smith) as not being wholly honest. Will you clarify whether that is in order?

[The Temporary Chair (Mr Jim Hood)]

I thank the hon. Lady for her point of order. It is not a point of order for the Chair if an opinion is expressed by an hon. Member. It is certainly not against the Standing Orders of the House.

[Alun Cairns]

If my remark caused offence to any Opposition Member, I will happily withdraw it. To rephrase what I said, the hon. Member for Pontypridd was inconsistent in his argument.

There is obvious uncertainty about the data that HMRC presents.

[Owen Smith]

In the interests of consistency, will the hon. Gentleman confirm that he agrees that there is gross uncertainty about the revenue receipts and about the £100 million loss? Does he therefore think that the Exchequer might lose more than that?

[Alun Cairns]

I am grateful to the hon. Gentleman for that intervention, because I can answer him directly. Exactly the same uncertainty that there is now existed when the previous Chancellor increased the rate from 40% to 50%. The economic situation has changed. Therefore, there will obviously be uncertainty in all the data, be they from the OBR, HMRC, the Institute for Fiscal Studies or any other independent forecaster. The Chancellor needs to make a judgment based on the data that are presented. [Interruption.] I will happily give way if the hon. Gentleman wants to intervene.

[Owen Smith]

I just want to point out that we know how much money was raised by the 50% rate. That is not in dispute or uncertain. It raised £1.1 billion. That is there in black and white on page 39 of the HMRC document on the 50p rate. It is the projections that are uncertain. It is uncertain that £100 million will be the loss to the Exchequer. However, we know that the static cost, if there is no behavioural change, will be £3 billion. We know all that.

[Alun Cairns]

The hon. Gentleman is missing the point. The increase from 40% to 50% raised only a third of what was projected when it was introduced. That is how uncertain things were. If it is a bad tax and is not raising what it is intended to raise, let us get rid of it and have a sensible tax that is a lot more business-friendly and attractive to international investors. If that is the Opposition’s best argument in opposing the reduction of the rate from 50% to 45%, it demonstrates how weak they are.

[Owen Smith]

I am grateful to the hon. Gentleman for giving way, because I did not get a chance to say this earlier. The notion that the rate raised only a third of what was anticipated is another half-truth that was included in the Budget speech. In the year when we set the rate, we anticipated that it would raise £1.3 billion. That is there in black and white in the Labour party’s final Budget. It raised £1.1 billion. That is not a third of what we anticipated, but £200 million shy of it.

[Alun Cairns]

There are uncertainties about the drafting of any Budget at any time. There will be uncertainties in the Budget next year and the year after, as there have always been for any Chancellor writing a Budget. In the end, it comes down to the fact that a Chancellor has to make a judgment. This Chancellor had to make a judgment about whether a marginal tax rate in excess of 60% was right for Britain to attract investors and create wealth within the nation. He did so on the basis of information from the OBR, HMRC and the Institute for Fiscal Studies that at a time when we needed growth more than ever, that marginal tax rate sent the wrong message to other nations, and that a reduction in the headline rate of tax from 50% to 45% was exceptionally important.

15:00

[Charlie Elphicke]

My hon. Friend is making an incredibly forceful and passionate argument. The hon. Member for Pontypridd (Owen Smith) said that according to the HMRC report, the 50% rate had raised £1.1 billion. He is playing fast and loose with the figures, because in the 2010 Budget, Labour said it would raise about £2.6 billion extra. It is an ever-disappearing amount of receipts. Is it not the case that when the rate is cut, it normally ends up increasing the take?

[Alun Cairns]

My hon. Friend obviously makes an extremely strong point. It underlines the argument that the last Chancellor faced the same uncertainty as the current one. The last Chancellor made a judgment that he should increase the rate of tax, and the current one has made a judgment that he should reduce it. That is the core difference between the Labour and Conservative parties. We want to create wealth, unlike the Labour party, which is the party of envy and wants to punish people and spend their money instead of giving individuals greater choice.

[Mr Love]

The hon. Gentleman rightly says that because of the uncertainty about all these figures, the Chancellor had to make a judgment. Was that judgment a political one, casting doubt on the Government’s claim that it was made for purely economic reasons? It was not an economic decision; it was a political one.

[Alun Cairns]

It was quite obviously an economic judgment, but we cannot ignore the politics, which is what international investors interpret when they are considering placing their money and creating jobs in the hon. Gentleman’s constituency or mine. They consider how much they, their senior management, their greatest innovators and their scientists will have to pay under the top rate of tax. The politics cannot be ignored, but the economics, as demonstrated by the Chancellor and the Treasury team, is sound according to figures from the OBR, the IFS and HMRC. I absolutely accept them.

[Stewart Hosie]

We back amendment 1. As the hon. Member for Pontypridd (Owen Smith) said, it is the only way in which we can score out the cutting of the 50p rate of tax. Government Members have made some obscurantist points, as he described them, about why the amendment may not do precisely what is intended, but we would expect the table showing the 2013-14 rates to appear in the 2013 Finance Bill, as the equivalent table does in the Finance Bill every year, whether the amendment succeeds or not.

We believe it is wrong to remove at this point the temporary 50p rate for those earning more than £150,000 a year. I want to say a little about the context in which that extraordinary tax giveaway is happening. The Government say that we are all in it together and point in their various documents to the fact that every decile in society will be worse off and take some share of the burden. However, they then tell us that, almost uniquely, the personal tax-raising measure of the 50p rate is now deemed ineffective in bringing in much-needed revenue to tackle the deficit and debt, which is their primary objective, and in bringing down their borrowing requirements, which they see as an essential part of their plan.

The Revenue has produced an assessment of the impact of the change, which I am certain the Exchequer Secretary will pray in aid to justify the Government’s case. I will come back to that assessment, but first I shall explain why the removal of the temporary 50p tax rate proves that we are not all in it together, and why that single tax cut amplifies the unfairness of the Government’s plans. I hope to expand on the points that the hon. Member for East Antrim (Sammy Wilson) made in his very good speech.

For those on low and fixed incomes, pay cuts, wage freezes and now a shock rise in inflation have meant the erosion of their living standards over some time. They will see no benefit from a tax cut for millionaires. For families in receipt of working tax credit, the new rules mean that their household income will fall by up to £3,800-odd a year if they are unable to find an extra eight hours of work a week. We know from our constituencies that such work often simply does not exist. They will see no benefit or fairness in cutting the 50p tax rate.

Of course, the families who face a fall in working tax credits are those who tend to earn only about £17,000 a year in total. They will see no benefit from a tax cut for millionaires. Indeed, real middle-class families earning £40,000, £50,000 or £60,000 a year—not somewhere over £250,000 a year, as I suspect the Government assume middle-class families earn—are about to have their child benefit removed, even with the taper changes to be proposed.

Before a Liberal gets up to tell me that there have been moves to increase the basic personal allowance from £6,475 in 2010 to £9,205 by 2013, an increase of £3,000 leading to a saving of some £600, I point out that the threshold above which one pays the 40p rate will go down from £37,400 to £32,245 in the same time frame. That is a fall of £5,000, so the fall in the threshold at the top end is larger than the increase in the allowance at the bottom. The net impact is that by 2013, the percentage of people paying the 40p rate will go up to 15% of all taxpayers, or some 5 million people earning more than £41,500. We have never had such a percentage of our taxpayers paying that rate before, and they will see no benefit from a tax cut for millionaires.

That is before we even consider the tax changes for older people. The changes to age-related allowances—the so-called granny tax—will have an impact on some 40% of pensioners. Those above the basic tax and pension credit threshold but below the £30,000 level at which they would not benefit anyway, or some 4.41 million older people, will be worse off. They will be singing in the streets of Raith, as they say, at the millionaires getting a tax cut that they are paying for.

The Government are providing a tax cut for millionaires that is being paid for by those on fixed incomes hit by inflation, poor working families whose tax credits are being cut or removed and middle-class families earning just over the ever-reducing 40p tax threshold. It is hardly fair, it is not right, and we are definitely not all in it together.

How precisely do the Government justify that? It is an inevitable consequence of a financial plan that is seeing the Government fetishise debt and deficit levels to the extent that they plan to take £155 billion a year out of the economy by 2016-17 for fiscal consolidation, through cuts and tax rises. To understand the Tory priorities, we need to understand how the proportion of spending cuts to tax rises is changing, which is very instructive. I hope some Tories will find it instructive, because their constituents will soon be knocking on their doors asking why it is happening.

In 2011-12, spending cuts were planned to be 56% of the total consolidation, the rest of which would be tax rises, which is a pretty reasonable balance. However, the Government are increasing the proportion of the consolidation that is cuts through the next few years to 62%, 69%, 74% and 79%, and up to a whopping 81%—only 19% of the consolidation will be tax increases by 2016-17.

[Alison McGovern]

In addition to those comments, does the hon. Gentleman agree that there is a geographical dimension? Those likely to benefit from the tax cut are clustered in certain locations in our country, and those who lose money, as he has described—they will also suffer from public spending cuts—cluster in other areas.

[Stewart Hosie]

That is absolutely right, but I want to be careful in answering. It is not good enough to say that people in the north or Wales or Northern Ireland or Scotland will lose, because unemployment and poverty in London is enormous. The geographical areas are not the ones traditionally described in lazy journalism—it is not that the north is poor and the south is rich—because pockets of poverty and of wealth exist in every single constituency in the country. The hon. Lady is right, however, that there are such pockets.

Even with all the pain and austerity, and the social and economic problems that the Government’s plans will cause, the Chancellor has been able to find a tax cut for millionaires. How does he justify it? Whatever his justification, the measure does not make sense economically, to answer the points made by the hon. Member for Vale of Glamorgan (Alun Cairns), who seemed to think that the measure is economically robust.

The Government’s fiscal rules—that the structural current deficit should be in balance and that debt is falling as a share of GDP in the final year of the forecast—are under enormous pressure. The problem—this is the evidence we ought to look at—is that the deficit in this Budget was forecast in the 2011 Red Book for 2011-12 to be £90 billion, but it is now forecast to be £98 billion. That is £8 billion worse than planned. The net borrowing requirement in the 2011 Red Book was forecast for 2011-12 to be £122 billion; it is now £126 billion. That is £4 billion worse than planned. The national debt or the treaty ratio that was due to peak at 87.2% of GDP—£1.25 trillion—in 2013-14 is now expected to rise, on the same count, to 92.7% of GDP in 2014-15. That is up again; it is worse than the Government’s forecasts. Everything is going in the wrong direction, so this is the wrong time to forgo revenue yield.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

The hon. Gentleman has set out the figures for the overarching macro-economic situation very well, but is it not clear from the OBR that the effect on business investment will be minus 6.8%? The Budget incentivises no one in terms of the real growth that we require.

[Stewart Hosie]

The points on business investment are incredibly well made. The Government’s targets were based on heroic rates of growth over four and five-year periods, but the 2011 Budget forecast for 2011 business investment growth was 6.7%. By the time of the 2012 Red Book, the forecast was 0.2%. The 2011 Budget forecast for 2012 was 8.9%, but as the hon. Gentleman says, that has been marked down to only 0.7%. Of course, that makes it even more extraordinary that there is a net fall year on year of central Government consumption and investment, which in normal circumstances in normal countries would be called an automatic stabiliser and would compensate. Of course, this country does not have that.

That means that for the Government to stay on their course, they almost certainly need the revenue yield that the 50p rate would have delivered. There is a debate on precisely how much that yield is. It could be the £360 million over four years forecast in the Red Book, or it could be the higher £3 billion a year static forecast we have heard cited. Whatever the actual figure, given that all those other metrics are going in the wrong direction, it is extraordinary that the Chancellor is prepared to forgo any revenue yields, whether they are in the hundreds of millions of the £1 billion range.

15:15

However, I am most concerned that the Treasury has chosen to reduce the temporary rate now on the back of a review of one year’s self-assessment returns, which may well have been lower in any case because of the recession and flat economy. I am concerned at the over-reliance on behavioural change metrics, which have allowed the Treasury dramatically to recast the expected yield and minimise the nominal loss—it is a loss—of real yield, and I am concerned about the Government’s reliance on the argument of substantial forestalling to justify this change.

The hon. Member for East Antrim made the point that the Revenue report says:

“The uncertainty regarding the extent to which the unwinding of this forestalled income depressed incomes in 2010-11 makes isolating the true underlying…response to the additional rate challenging.”

I shall translate: the Government do not have a clue. It would have been better—surely—to have allowed the temporary rate to continue for another year or two, or at least until the economic indicators were pointing in the right direction, rather than butchering the public sector to fund the millionaires’ tax cut.

It is a political decision to give a tax cut to very wealthy people and to pay for it by increasing the value of cuts to Government expenditure and increasing the ratio of cuts to tax increases. The Government have done it in a way that threatens their fiscal plans and that is extraordinarily unfair. Low incomes are being squeezed by inflation, pay freezes and wage cuts; for many, working tax credits are going; 4.41 million pensioners will be worse off because of the granny tax; 5 million middle class, middle earners are being dragged into the 40p tax bracket; and there is a tax cut for 14,000 millionaires. That is not credible, and the Scottish National party and other parties will be delighted to support amendment 1.

[Charlie Elphicke]

Much of the discussion on the 50p rate has been on whether it is an economic decision or a political one. My viewpoint is very simple. If we wanted a nice, easy time, and if our Ministers wanted a nice easy ride on the “Today” programme, where all those nice, gently liberal-leftie, metropolitan BBC people would congratulate us on doing nothing whatever, we would have left the higher rate at 50p. I am sure the hon. Member for Pontypridd (Owen Smith) would have approved and been happy to congratulate us. If, on the other hand, we wanted to take action and do the right thing economically—the one thing that really matters is getting this country growing as quickly as possible—even if it were politically hard for us to sell, we would support the entrepreneurs, wealth creators and aspirant people who create the jobs and money that make this country go. For my money, that is the bottom line. The economics trump the politics.

[Owen Smith]

I wholeheartedly agree with the hon. Gentleman that getting the country growing is the most important thing. The trouble is that that blue book he was waving around a moment ago, taking into account the 50p rate cut and all the other measures, says that the Government will increase GDP by 0.1%. Are they not failing?

[Charlie Elphicke]

I completely disagree. The Government are doing a great job. We have had the most difficult year, in which recovery was effectively postponed because the European and eurozone crisis caused massive uncertainty. I will not shirk from the point: that uncertainty has caused businesses to delay the business investment that was expected by about a year. The OBR, in the blue book that the hon. Gentleman says I am waving around, makes that perfectly clear. I will happily take him on on the issue of business investment. The situation has come to pass basically because of the eurozone. Also, the OBR says that business investment for the fourth quarter can be a bit lower than expected but that it often, statistically, bounces. It also says that the Government’s pioneering reduction of business taxes will have a positive effect in helping the country to grow.

The bottom line of economics is that we need to ensure more jobs and money as quickly as possible to help the country to grow faster despite the chaos and financial mismanagement in the eurozone. Let us not forget that Labour, if it had had its way, would have taken us into that chaos and into the euro. If Labour had won the election, it would also have carried on spending at an unsustainable rate and rapidly taken us the way of Greece, Spain, Italy, Portugal and Ireland, which would have put us in an extraordinarily difficult position.

On the revenue numbers, Labour’s central argument is that we should not cut the 50p rate because, first, we need to hit the rich and squeeze them until the pips squeak and, secondly, we are letting money go that would otherwise be brought into the Exchequer and are looking after our rich friends. That is its analysis. However, the summary in paragraph 4.7 on page 84 of the OBR report states:

“The Chancellor’s decision to cut the”

50p rate

“has an estimated direct cost to the Exchequer of £0.1 billion, excluding the impact of ‘reverse forestalling’ as people shift…income from”

one year to another

“to take advantage of the lower rate. The figure is small because the additional rate is now assumed to be close to its revenue-maximising level.”

In other words, it does not make much difference—£100 million here, £100 million there, out of a total budget that I believe is getting on for £700 billion, is a small amount, particularly given that it sends a positive message to aspirants, entrepreneurs and the people who work hard to deliver so much value-added for our country.

[Michael Connarty]

We can all pick selectively from the OBR report—I have referred to it quite a few times—but this is a comment based on the Government’s own estimate that there will be an inflow of £2.9 billion from increased activity by those who pay the 45% rate. There is absolutely no fact behind that yet. It is basically a comment based on a prediction by the Government. In other areas, again and again since they took office, they have been very wrong. It is a hope, not a statement of fact. The actual cost will be £3 billion until the money comes in that the OBR has accepted from the Chancellor’s estimates.

[Charlie Elphicke]

I thank the hon. Gentleman for bringing me on to my next point. The hon. Member for Pontypridd is fond of saying, “Ah, look at the HMRC impact report. It brought in £1.1 billion but the estimate was that it would then have brought in much more.” [Interruption.] Some £3 billion, he says. That was the estimate in the March 2010 Budget, which mentioned an additional £2.6 billion. In the June 2010 Budget forecast, that increased to £2.7 billion. However, when we look in detail at what happened and how much was brought in, it appears that the OBR and HMRC now estimate the figure to be £0.6 billion in 2012-13.

[Owen Smith]

I will explain to the hon. Gentleman why there is a step from year 1, when we anticipated it would raise £1.3 billion but when it actually raised £1.1 billion, to the subsequent figure of £3 billion. The explanation, of course, is that it gets far harder to bring money into earlier years. It gets far harder to forestall the income. That is what happened in the first year, but it would have been increasingly difficult to do so afterwards.

[Charlie Elphicke]

The hon. Gentleman makes that assertion. Let us consider the detail of what the OBR says, leaving aside forestalling. Page 108 of its report, which considers this matter in great detail, states:

“These steps might include labour supply responses (e.g. working less”—

working less hard, basically—

“taking a lower paid job, retiring early, or leaving the country)”.

As we know, many people have given up, upped sticks and gone—driven away by the anti-business, anti-aspiration policies of the Labour party.

[Alison McGovern]

Will the hon. Gentleman tell us exactly how many people have left the country? If so, what is his source for that statistic?

[Charlie Elphicke]

I am simply reporting what the OBR has said. I will not pretend that I am an expert on immigration to and emigration from this country. I might represent Dover but that does not mean I count everyone in and out. I have to trust the OBR. Having said that, in the past decade my constituents have complained that an awful lot of people seem to have come in. They are very upset about that and think there could have been more border security. But that is not the key point of this debate.

[Harriett Baldwin]

I am listening to my hon. Friend’s excellent speech with great interest because of his expertise as a tax accountant.

[Charlie Elphicke]

Lawyer.

[Harriett Baldwin]

Tax lawyer even. Was he as surprised as I was at the £16 billion to £18 billion of forestalling measures taken after it was preannounced that the rate would rise to 50p?

[Charlie Elphicke]

Very much so. My hon. Friend makes a good point. It is also in the OBR report. These are the forestalling measures—[Interruption.] Labour assumes that people forestall for only one year and that the income will suddenly pop up the following year. That is not what really happens. Often people will take a long career break. [Interruption.] I shall give the hon. Member for Pontypridd, who is chuntering from a sedentary position—

[The Temporary Chair (Mr Jim Hood)]

Order. I will not accept this happening across the Committee. Right hon. and hon. Members should know better.

[Charlie Elphicke]

I will give the Committee an example. Let us say that I earn £150,000. Obviously, as a Member of Parliament, I do not, but let us assume that I did and that I did not feel like paying the 50p rate. What could I do? People’s response—the market response, if one likes—is to set up things such as personal service companies, and then we will not see the 50p tax rate again. They will shove money into their personal service companies and pay the small companies rate of taxation. They then sit tight and pay a very low dividend rate of taxation when they get the money out as and when they see fit. Alternatively, they do this trick where they loan themselves lots of money and pay an extraordinarily low beneficial loan rate of tax. I think that such behaviour is wrong. The Labour party ought to know about this not just because of Ken Livingstone but because others of them are up to it as well. They should come clean and be a bit clearer with the Committee about their understanding that people will avoid and forestall for good.

[Mark Durkan]

Is the hon. Gentleman trying to tell the Committee that none of those schemes or scams will happen under the 45% rate?

[Charlie Elphicke]

With the 45% rate, there is less utility and less maximisation of revenue from doing so. Of course, it is marginal, but the unacceptability of paying—paying, not avoiding—at 45% is less than it is at 50p. People resent 50p and think, “These people are trying to stuff me and take all my money away.” The 40p rate was well settled and people’s behaviour was sort of booked in. The judgment is that the most revenue will be raised halfway between the two because, on the one hand, people will think it acceptable—they will not go the extra mile to avoid it—and, on the other hand, they will not think they are being fleeced as they were under the so-called temporary 50p rate, which Labour is now saying was not temporary.

[Owen Smith]

rose—

[Charlie Elphicke]

I will give way to the hon. Gentleman one more time, but I would ask him to say whether it was always the intention that the 50p should be temporary. Yes or no?

[Owen Smith]

I have already answered that three times in this debate, so I am not going to repeat myself. Yes, the rate was temporary, although we would not have got rid of it for the whole of this Parliament. However, let me remind the hon. Gentleman what the Business Secretary’s response was to the argument, which he has just made, about the equanimity with which people will pay full tax at the 45p rate: “Pull the other one”.

[Charlie Elphicke]

The Business Secretary is well known for having strong and principled positions from which he never resiles. The hon. Gentleman makes a fascinating point, although I do not know the detail of that quotation.

Let me turn to tax planning, and avoidance and evasion. As I have said, people set up personal service companies and, quite frankly, fiddle the system. To be honest, we need stronger anti-avoidance legislation to stop that kind of thing. However, the important point is that we need it if the rate is at a level at which people regard it as socially acceptable to pay, and do not feel that they are being completely fleeced.

[Mark Reckless]

My hon. Friend has substantial expertise as a tax lawyer. Does he think that a “look-through” anti-avoidance measure for personal service companies of that type would work?

15:30

[Charlie Elphicke]

That is a really interesting question. In practice, it is incredibly difficult to distinguish between the person who is setting up a personal service company simply to play the system and the person who is in business and is genuinely using such a company so as not to go bankrupt. It is difficult to draw the dividing line to distinguish the husband and wife who are simply trying to play the system—that often happens—from the genuine business that is acting for true commercial purposes. It is quite invidious to separate the two.

It is better to set the rate at a level where, as the OBR would put it, the willingness of high-earning individuals is such that they regard it as slightly more socially acceptable to pay. Indeed, the OBR was not just the Exchequer’s patsy on this issue; rather, it was independent. As the OBR says on page 109 of its report, it reviewed in considerable detail what the HMRC report said about what the revenues would be, in considering whether to reduce the tax rate to 45p. It looked at the methodology used by the Institute for Fiscal Studies in the Mirrlees review, at the work of Brewer et al, while also adjusting for forestalling—a point the hon. Member for Pontypridd raised—and at the HMRC study on the underlying behavioural response. Therefore, a lot of work has been done on what exactly the position is.

It is true, of course, that things are quite uncertain. The cost to the Exchequer might not be £100 million. Indeed, students of tax history will know that when the rate originally went from 80% to 60%—a massive cut—the revenues did not fall, but rose dramatically. Did receipts fall when the tax rate was then cut from 60p to 40p? No, they rose dramatically. My understanding of the history, therefore, is that if we reduce the rate, we up the take. There is real risk and massive uncertainty. Indeed, rather than costing the Exchequer £100 million, this measure may well make the Exchequer up to about £500 million. From the history, it seems far more likely that we will have an increase in the take, which will mean improvements for our schools and hospitals, and in our ability to pay down the massive debt that the previous Government saddled us with. I therefore think this is the right policy at the right time.

[Mr Gauke]

As we all know, the previous Government were reluctant to take any meaningful steps to reduce the deficit. However, they could point to the imposition of an increase of more than 10% in the additional rate in three months, even though there was scepticism at the time about the projected levels of revenue. It is also worth pointing out that the then Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), accepted that the increase was “a temporary measure”. He recognised some of the difficulties with the policy. He accepted that the behavioural effect would steeply reduce potential revenues—the estimate at the time was that the measure would reduce revenues by two thirds. That is about £4 billion of revenue that he accepted would never materialise, owing to behavioural adjustments, such as individuals deciding to work less or not remain in the United Kingdom. He also accepted that the 50p rate would damage the UK’s international standing, giving us the highest statutory income tax rate in the G20. He also accepted, I am sure, the fact that although the measure was temporary, it would be politically difficult to reverse.

However, I have to say to the Opposition, and to the many hon. Members who have participated in this debate, that although Labour may claim to want to raise taxes on the wealthy, the reality is that the 50p rate was not succeeding in getting the money in. I do not think that it is a coincidence that the 50p rate was in place for only 36 of the 4,758 days for which the previous Labour Government were in power. When we came into office, we inherited a tax rate that we were told would damage our competitiveness, that would bring in questionable levels of revenue and that was always expected to be temporary.

[Owen Smith]

The Minister has repeated the line that the 50p rate was not getting the money in. What exactly does he mean by that? His own HMRC report says, in paragraph 5 on page 2, that the yield was

“around £1 billion or less”.

It does not say by how much less. Page 39 of the report states that the figure for the yield is £1.1 billion.

[Mr Gauke]

The hon. Gentleman cites the report; let me give him the full quote. On page 2, the summary gives the estimate that the yield from the 50p rate could be

“around £1 billion or less…and that it is quite possible that it could be negative.”

We need to compare that with the previous Government’s estimate of a yield of £2.6 billion—[Interruption.] Ah! The hon. Member for Pontypridd (Owen Smith) says that it was £1.3 billion in the first year. Let me explain why the figure was £1.3 billion in the first year. He is presenting that as a great triumph. Most of the money that comes in from wealthy individuals comes in through the self-assessment system, and most of the money raised from the top rate will be collected in the year after the rate is introduced. Only a certain proportion will come in through PAYE. The reason the figure was £1.3 billion in the first year was purely one of cash flow. If the hon. Gentleman is claiming that the revenue was only ever expected to be £1.3 billion, that is not a fair representation of the previous Government’s estimate, which was of a steady rate of £2.6 billion and rising.

[Owen Smith]

rose—

[Mr Gauke]

I will give way to the hon. Gentleman if he wants to make a correction.

[Owen Smith]

I simply want to ask the question one more time. If the yield was less than £1 billion, how much less was it? Surely the Minister knows how much the top rate got him.

[Mr Gauke]

The central estimate, which the OBR has confirmed, is £700 million. We are reducing the rate to 45%, and the central estimate of the cost of that is £100 million. Were we to take it down to 40%, which would be the consequence of the hon. Gentleman’s amendment, the central cost would be £700 million.

[Mark Reckless]

I think the Minister is being rather too modest. On page 21, the report states that

“most of the studies…produce TIEs”—

taxable income elasticities—

“in the range of 0.4 to 0.7”.

Let us take a central estimate of 0.55 from within that range. If we look at page 51, we see a graph that suggests that a reduction in the additional tax rate—whether to 45% as proposed by the Government, or to 40% as proposed by the Opposition—would raise £600 million. Could the Minister use some of that money to enable him to accept our amendments on child benefit?

[Mr Gauke]

My hon. Friend is right to say that we have taken a cautious approach to this matter. Indeed, many estimates suggest that we are overstating the amount that the 50p rate is bringing in. He is right to cite those figures.

[Richard Harrington]

Does the Minister agree that the Opposition are missing the point by talking about the amount that was raised by the 50p rate? The real point is the money that was not raised, owing to the disincentive that it created for people to set up businesses and to spend to create jobs and provide the growth that the country needs.

[Mr Gauke]

My hon. Friend is absolutely right. Let us put away some of the rhetoric that we have heard this afternoon and focus on the disagreement over the previous Government’s assessment of the behavioural impact of the 50p. Their assessment was that about 66% would be lost through behavioural impact. On the basis of the additional evidence that has emerged following the HMRC study, which is consistent with the consensus of the academic studies in this area, the estimate that the OBR has signed off is that the behavioural impact is closer to 83%. No reasonable case can possibly be made that there is no behavioural impact, yet the shadow Chancellor’s consistent argument that this is a £3 billion tax cut for the rich implies a behavioural impact of zero—miles away from any realistic case.

[Mr Love]

The Minister quotes research that is primarily associated with the United States rather than the United Kingdom. British research under the Mirrlees project related to events occurring 20 or 30 years ago. The reality is that there is great uncertainty in these areas; the Government’s claim that that is not the case simply ignores the reality. We can pick out whatever number we choose, but the reality is that we are losing taxable income as a result of this change.

[Mr Gauke]

The hon. Gentleman is right that the assessment of Her Majesty’s Revenue and Customs, signed off by the Office for Budget Responsibility, is very similar to that of the Mirrlees review, which looked at evidence from the 1970s and the 1980s. Given that the big behavioural impact owes much to the mobility of international labour at that end of the scale—the highest earning individuals in the world are very mobile—and given that the mobility of labour has clearly increased, particularly in that sector, since the 1980s, it would appear that the hon. Gentleman is making a case to suggest that the elasticity we are using is too low, not too high, so he might like to have a conversation with my hon. Friend the Member for Rochester and Strood (Mark Reckless).

[Chris Bryant]

On a point of order, Mr Hood. You may not be aware of it, but the media are reporting that, contrary to what was announced to the House yesterday afternoon, Abu Qatada might have been arrested by the Home Office illegally because it had not consulted the European Court of Human Rights on the last available date to—

[The Temporary Chair (Mr Jim Hood)]

Order. I have heard enough of the hon. Member’s contribution to give him a ruling. That is not a point of order for me. He can request that the Government make a statement to the House on the media or television report to which he refers, and if the Government agree, they can do so. As I said, it is not a point of order for me to deal with in this debate.

[Mr Gauke]

Thank you, Mr Hood. To return to the matter in hand—

[Mr Love]

rose—

[Mr Gauke]

I do not have much time, so I would be grateful to the hon. Member for Edmonton (Mr Love) if he would allow me to press on.

The Chancellor made it clear in a pragmatic way that we wish to see the evidence. HMRC conducted a review, making use of the self-assessment returns that became available in January this year. They provide the most complete source of data on high earners’ tax affairs, which only HMRC can analyse as they contain confidential taxpayer information. In this report, we have seen that the additional rate is distorted, that it is damaging to international competitiveness and that it is an economically inefficient way of raising revenue. These conclusions are based on that analysis of self-assessment data and international studies. The report finds that the behavioural response has been substantially larger than expected. The previous Government had estimated the revenue from the 50p rate to be approximately £2.5 billion each year. The HMRC analysis states that the yield would be £1 billion at best, and at worst might raise nothing at all. That is because of the much greater than anticipated behavioural effect.

We have seen huge levels of forestalling, and HMRC estimates that between a third and a half of the behavioural effect comes from genuine reductions in income through such changes as reduced hours worked or reductions in participation in the UK labour market. This suggests that total income fell by £2.9 billion and £4.4 billion as a result of the 50p rate, and that gross domestic product is between 0.2% and 0.3% lower. So this is not just a loss of tax revenue, but a loss to the economy as a whole through lower productivity and economic activity. Those are the conclusions of HMRC’s analysis.

It is very clear that the 50p rate has failed. It has been criticised by business, it has posed the risk of lasting damage to the UK economy, and it has raised considerably less for the Exchequer than expected, possibly costing rather than raising revenue.

15:45

[Mark Durkan]

The Minister has said that the Chancellor wants to work on an evidence basis. He has previously told us that the Chancellor wants to pursue tax avoidance. Will he therefore accept amendment 76, which focuses on ensuring that the House is given the evidence relating to both tax avoidance and the effects of the additional rate of tax?

[Mr Gauke]

We have a report that produces evidence. I can also assure the hon. Gentleman that the Government have made clear their determination to reduce tax avoidance, and have taken a number of steps to do just that.

Amendment 1 has created some confusion. The Opposition Members who tabled it propose that the additional rate for 2013-14 should be left out altogether. Unlike the 45p rate proposed by the Government, the higher rate of 40% would apply to income over the higher-rate threshold. I understand that Labour sources have been briefing this afternoon that the amendment deliberately leaves the top rate undecided. It does not leave it undecided; it abolishes it. The Labour party has found itself in an extraordinary position.

We have heard astonishing suggestions that we should accept the “static” argument, although, to be fair to the hon. Member for Pontypridd, he has been somewhat hesitant about simply quoting the static numbers as if they were acceptable. We must take account of the behavioural impact, and as we have seen more evidence, it has become clear that it has been greater than was anticipated.

The effect of the 50p rate has been damaging not just to the Exchequer in failing to raise the money that was anticipated, but to competitiveness. There has been a 29% increase in Britain’s—[Interruption.]

[The Temporary Chairman (Mr Jim Hood)]

Order. I apologise for interrupting the Minister, but I cannot hear a word he is saying because of the noise made by his colleagues who are sitting on my right. I ask Members to give their own Minister some order when he is winding up a debate.

[Mr Gauke]

Thank you, Mr Hood.

As I was saying, there has been a 29% increase in the number of Britons given permission to work long-term in Switzerland, and the United Kingdom has become less competitive. As a result of our reforms—the additional measures that we are taking to cap charitable and other reliefs, and the measures we are taking to deal with avoidance—27% of revenue from income tax will come from the top 1%, who paid between 20% and 25% under the Labour party.

The reduction in the additional rate is understandably controversial, but we should look at the evidence, not the Opposition’s rhetoric. The 50p rate did not raise the revenues that it was intended to raise, and what money it did raise came with a cost of damage to growth and competitiveness. This is not a sustainable position, so we are reducing the rate to 45p, providing certainty and clarity for those affected. That will mean a relatively small cost to the Exchequer and a significant boost to our competitive position. As the CBI has said,

“Reducing the 50p income tax rate will send a clear signal that the UK is open for business. We must continue to encourage top talent to live and work in the UK.”

This change is good for our long-term tax revenues, it is good for our economy, and it is good for the UK as a whole. I therefore ask hon. Members not to press their amendments, and propose that the clause should stand part of the Bill.

[Owen Smith]

Labour Members do not believe that the cut from 50p to 45p is good for the economy, and we do not think for a moment that the Minister has justified it today. Nor do we think that he has justified the claim that the rate raised practically nothing, which is what the Prime Minister, rather curiously, told the House earlier today. The Minister himself contradicted the Prime Minister in conceding that it raised perhaps £1 billion. In fact, I think the Minister definitively said £700 million whereas the Prime Minister said it raised nothing. I do not know which of them is right, but I am assuming the Minister is right.

[Mr Gauke]

Will the hon. Gentleman give way?

[Owen Smith]

I do not think I have time to give way, as I want to press the amendment to a Division.

Nor do I think the Government have succeeded in persuading any Member of this House that it is anything other than voodoo economics to suggest that the cost of this rate change will be only £100 million. It is very likely to be closer to £3 billion than to £1 billion.

As we remain wholly unpersuaded, we shall press the amendment to a vote—

15:50

Three hours having elapsed since the commencement of proceedings, the debate was interrupted (Programme order, 16 April).

The Chair put forthwith the Question already proposed from the Chair (Standing Order No. 83D), That the amendment be made.

15:50

Division 517

Ayes: 256

---

Labour: 233
Democratic Unionist Party: 8
Scottish National Party: 6
Social Democratic & Labour Party: 3
Plaid Cymru: 2
Independent: 2
Liberal Democrat: 1
Alliance: 1
Green Party: 1
Conservative: 1

Noes: 323

---

Conservative: 277
Liberal Democrat: 45

The Chair then put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83D).

Amendment proposed: 76,  page 2, line 4, at end insert—

‘(1) The Treasury shall, within two months of Royal Assent of this Act, publish a report on the additional rate of income tax.

(2) This report shall make recommendations on—

(a) preventing the tax-avoidance measures employed by individuals to avoid making payments at the additional rate of income tax, and

(b) the impact upon Treasury revenue of setting the additional rate to—

(i) 50 per cent and

(ii) 45 per cent in the tax year 2013-14.’.—(Jonathan Edwards.)

Question put, That the amendment be made.

16:06

Division 518

Ayes: 254

---

Labour: 235
Scottish National Party: 6
Democratic Unionist Party: 5
Social Democratic & Labour Party: 3
Plaid Cymru: 2
Independent: 2
Alliance: 1
Green Party: 1

Noes: 321

---

Conservative: 276
Liberal Democrat: 44

Clause 1 ordered to stand part of the Bill.

[Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)]

On a point of order, Mr Hood. Have you had any indication whether the Home Secretary will come to the House either this evening or tomorrow morning to make a further statement on Abu Qatada? She is currently in the television studios addressing the issue that has emerged this afternoon, which is that the Home Office may have got the dates wrong and may have illegally arrested Abu Qatada yesterday. Do you not think it would be appropriate for the Home Secretary to come to the House, clear up this shambles and let the House know what is going on?

[The Temporary Chair (Mr Jim Hood)]

This is the second time that I have had to deal with a point like this and that is not a point of order for me. I have been chairing the Finance Bill Committee for the past two hours and I am unaware of whether anybody has been in touch with the Chairman of Ways and Means or with Mr Speaker himself about any such statement. That is a matter for the usual channels and not for me.

Clause 209

The Bank Levy

[Owen Smith]

I beg to move amendment 5, page 121, line 19, at end add—

‘(2) The Chancellor of the Exchequer shall review the possibility of incorporating a bank payroll tax within the bank levy and publish a report, within six months of the passing of this Act, on how the additional revenue raised would be invested to create new jobs and tackle unemployment.’.

[The Temporary Chair (Mr Jim Hood)]

With this it will be convenient to discuss clause stand part and schedule 33 stand part.

[Owen Smith]

It is a pleasure to serve under your chairmanship, Mr Hood—the first chance that I have had to say that today.

Clause 209 and our amendment to it, amendment 5, relate to the bank levy. The point of the amendment is to raise the issues that Opposition Members believe ought to be at the forefront of the Government’s thinking and at the heart of their Budget: what we do to stimulate growth and, in particular, to generate jobs in our economy. Crucially, on a day when we have seen yet another report, this time from the Institute for Public Policy Research, on the scarring impact of long-term unemployment on, in particular, young people, and on a day when we still see 1 million young people languishing on the dole, it seems to me a very easy argument and a very simple point to make to the Government that such issues ought to be at the forefront of not just our mind but theirs.

This aspect of the Bill, the bank levy, offers an opportunity for the Government to do something to fill the gaping hole at the heart of their Budget when it comes to creating growth and generating jobs. There is not a single word in the Budget or in the Bill about the problem of youth jobs, and that is a crying shame, so I hope that the Government will later today amend that omission.

In a moment I shall discuss the background to the bank levy, but to begin with I shall draw together some of the common themes that run through my remarks and the Bill—themes from the debate that we have just had on clause 1 and this debate on clause 209 and the bank levy.

First, I want to raise some questions about the Government’s competence. Clause 1, the profound uncertainty about Government decisions, the other more general decisions in the Budget in relation to VAT on caravans and on pasties, which we will debate later, and the various other curious measures that they have brought forward have all already raised enormous and pressing questions about the competence of the Chancellor and the Government when it comes to managing our economy.

Secondly, there are questions about certainty. Earlier we debated the HMRC report on the Exchequer effect of the 50p rate, and Opposition Members such as the hon. Member for East Antrim (Sammy Wilson) and my hon. Friend the Member for Rhondda (Chris Bryant) asked significant questions about the accuracy of the Government’s modelling in that report and the accuracy of the claims that only £100 million will be lost to the Exchequer. There are further questions to be asked about the accuracy with which the Government have measured the impact of the bank levy to date and juxtaposed it with the rates of revenue which were raised by the bank bonus tax that the previous, Labour Government introduced.

Thirdly, there is a crucial set of questions about values and priorities, because both the clauses that we have debated to date and the clause before us raise questions about the priorities and values of this Government versus those of the Opposition. Those questions do not reflect terribly well on this Government, Mr Gale, it is a pleasure to welcome you to the Chair—[Interruption.] Sir Roger, of course. How on earth could I have forgotten? Sir Roger, welcome. It is a pleasure to serve under your chairmanship.

I suggest that the Government could simply do the decent thing today by deciding to retain the bank levy but also introduce a bank bonus. That would be the wise thing to do, and it would set about raising the revenue that could be used to try to create 100,000 jobs for young people.

[Mr John Redwood (Wokingham) (Con)]

Does the shadow Minister think that the Royal Bank of Scotland and Lloyds HBOS need less profit and less retained cash to get out of the mess they are in, or more?

[Owen Smith]

I would be terribly happy for all the banks, including RBS and HBOS, to make more profit. That would clearly be a very good thing for the British economy; we are entirely agreed on that. At the moment, however, they are not being asked to bear a particularly heavy burden, and nor are the other banks that are already making significant profits—lower than in previous years, but still significant. It is not easy to square that with the Conservative Government’s previous commitment to honour our intention to make those with the broadest shoulders bear the greatest burden. The Government’s decisions on the 50p rate and the bank levy do not bear out their former agreement with us; rather, they speak of a Government who have decided to make a different set of decisions over the past few years, as borne out most recently by the 50p tax rate. The Government should think again about how much money they are raising from the banks and what is the appropriate amount that they should raise.

[Alun Cairns]

Will the hon. Gentleman give way?

[Owen Smith]

I will keep going for a moment and then happily give way.

The bank levy currently impacts on banks only after the first £20 billion in equities and liabilities is taken into account, capturing, in effect, the millionaires of the corporate world. When the idea of the levy was first mooted—initially by Labour Members and then after being picked up by the International Monetary Fund— [Interruption.] I am afraid that that is true. My right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) first mentioned a bank levy, and then the IMF picked up on it. It is a simple point, but I will happily give way if the Minister wants to intervene.

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

May I point out that the previous Government ruled out a bank levy because they did not want to introduce one unilaterally? This Government had the courage to do that, and to do the right thing so that banks could pay their fair share to the Exchequer, whereas the previous Government ran away from the issue completely.

[Owen Smith]

When the IMF first talked about a bank levy, it thought that an equitable, sensible amount to get from the banks in this country was £6 billion—not the £2.5 billion that the Government claim to be raising. The reality—people out there ought to understand this—is that by the end of the current spending period, the Government will be raising as much from people who eat pasties, buy or sell caravans, sit in caravans, do up listed buildings and do all the other things that have been changed under the VAT rules as they will be raising through the bank levy. That is the real comparison. The right hon. Member for Wokingham (Mr Redwood) laughs, but it is a fairly accurate comparison, and people out there will not think that it is fair or equitable. They will not understand why caravan users and pasty eaters—even if the pasties are not eaten at an ambient temperature—should bear the same degree of pain as the bankers, who, as I think many people would concede, were at the very least involved in the global crisis that paved the way for the recession of recent years.

[Mr Hoban]

The hon. Gentleman said that the VAT changes will raise as much as the bank levy. If he looks at table 2.1 on page 50 of the Red Book, he will see that in 2016-17 closing loopholes and correcting anomalies will raise about £350 million, but the bank levy will raise £2.5 billion. How can he square the two statements that he made?

[Owen Smith]

May I take this opportunity, Sir Roger, to apologise to you, to the Minister and to the House for misleading you all? Of course, I misspoke; I should have factored the granny tax into all the VAT changes. If the Minister does the maths, I am sure he will find that when one adds in pensioners on top of caravanners, those eating pasties, and those affected by the other VAT changes—

[Mr Hoban]

If the hon. Gentleman looks at page 50 of the Red Book, he will realise that he is still £1 billion short. He needs to get his facts right before he makes such statements.

[Owen Smith]

I am afraid that I have been getting my facts right all afternoon: it is Government Members who have been getting their facts wrong. [Interruption.] No, amendment 1 was not wrong; it was absolutely spot on. To say that it was wrong is nonsense.

16:30

Let us get to the question of how much the Government are raising through the bank levy and how much the previous Government raised through the bank bonus tax. Just as the fallacious claim that the £100 million that will be lost through the change to the 50p rate will be met fivefold by increases in taxes on the wealthiest has been proven today to be completely false, because the £100 million figure was plucked from thin air, so the Government’s manipulation of the figures in relation to the bank levy and the bank bonus tax will be shown to be false. The independent OBR, which the Government are so fond of quoting when it suits them, states on page 101 of the blue book that in 2010-11, the bank payroll tax raised £3.5 billion.

[Mr Hoban]

Gross.

[Owen Smith]

The Minister gives the lie to the argument that the Government have made about this figure, which allows them to state that it is £2.3 billion, not £3.5 billion, and is therefore lower than the £2.5 billion that they are ostensibly raising through the bank levy. Of course, both the £2.3 billion figure and the £2.5 billion figure are open to question. It is not just me who thinks that; many commentators have said so.

How did the Government manage to reduce the yield of £3.5 billion that is written in black and white on page 101 of the blue book to £2.3 billion? I could tell the Committee, but I will go one better and read out a comment piece from the Financial Times from earlier this year:

“The Treasury reached its £2.3bn figure for last year by lopping off £1.2bn from the original £3.5bn figure—citing the income tax and NI which the exchequer may have lost due to banks paying lower bonuses than they might have done. (A speculative behavioural assumption).”

As anybody who has read “The Exchequer effect of the 50 per cent additional rate of income tax” will know, highly speculative behavioural assumptions are the bedrock of this Government’s economic policies. The article went on to forecast that the bank levy, which was meant to reach £2.5 billion in 2012, would actually reach only £1.3 billion. In truth it reached £1.8 billion, but it certainly did not reach the £2.5 billion that is claimed repeatedly by Government Members.

[Stephen Williams]

The shadow Minister said that the figure of just over £1 billion being lost because of behavioural change was speculative. Of course, the previous Chancellor stated that the bank bonus tax was introduced in the last Parliament to drive down the awards of bonuses. It was meant to change behaviour. The previous Chancellor therefore speculated at the time that there would be a reduction in the number of bonuses and, therefore, in the income tax and national insurance contributions taken in by the Treasury.

[Owen Smith]

That would have been a good intervention, were it not for the fact that the £3.5 billion that was realised is written in black and white on page 101 of the OBR document. It is clear how much money was raised—£3.5 billion. [Interruption.] If the Minister wants to intervene to correct me on that, he can do so.

[Mr Redwood]

Will the hon. Gentleman give way on that point?

[Owen Smith]

Yes.

[Mr Redwood]

The shadow Minister is not completing the thought. We are not disputing the gross amount. We are asking how much other revenue was lost because of the behavioural consequences. He has agreed that the purpose of the bank bonus tax was to drive down bonuses. Assuming that there was some success, the Exchequer must have lost a pile of money in other taxes.

[Owen Smith]

The right hon. Gentleman is right that there would have been behavioural impacts. We do not dispute that, nor do we dispute that there would have been behavioural impacts in respect of the 50p rate. What we dispute is that the behavioural impacts would be as significant as those projected in the document on the 50p rate and those alleged by the Government on the bank levy. Given how fallible those projections have been shown to be in today’s Treasury Committee report and in any number of comments written about the HMRC report on clause 1 and the 50p rate, we are entirely right to question the basis of the assumptions both on the 50p rate and on the bank levy.

[Mr Redwood]

If the hon. Gentleman reads the Red Book further, he will see that £4 billion-plus more a year will be raised from self-assessment income tax under the 45p rate than under the 50p rate. Indeed, in the year to April 2012 there was a 9% reduction in self-assessment income tax, because the top income tax payers paid themselves 25% less than the year before.

[Owen Smith]

At the danger of being ruled out of order for repeating today’s earlier debates—[Interruption.] The Financial Secretary says from a sedentary position that I am on the back foot, but I am absolutely not. I have been pointing out to his colleagues for the past couple of hours that the volume of behavioural change anticipated in the Exchequer analysis is fundamentally flawed. The taxable income elasticity point chosen by the Exchequer to derive that volume of behavioural change is completely outwith the normal delta used by economists to assess the elasticity of top incomes. [Interruption.] No, we are talking about the future. We are talking about what behavioural change there will be and what the yield will therefore be in future.

That takes us to the central question of the Government’s competence. There are questions to be asked about the competence of the way in which they set up the bank levy. Why on earth did the Government choose in the first instance a rate of 0.045%, only to have to increase it five times in the past 18 months to hit their annual yield target of £2.5 billion? I would be delighted to hear the Financial Secretary explain that to us. Why did the Government do it that way around? It does not make any sense to me. It would have been more sensible either to have stuck with the payroll tax, as we suggested, or to have arrived at a hard figure and allowed the yield to set the rate, not the rate to set the yield.

Thus we come to the question of how the Government can keeping saying that they are certain that the bank levy will yield £2.5 billion each year. It did not in its first year, when it hit £1.8 billion. The reason the Treasury team is continually having to tweak the rate is that it is not certain how much money it is going to yield.

[Mr Hoban]

Is the hon. Gentleman against the rate going up or in favour of it?

[Owen Smith]

I am absolutely not against the rate going up. My question is about the Government’s competence and whether they know what they are doing. They clearly do not know what they are doing about the granny tax, the 50p rate, VAT—

[Mr Hoban]

He’s all over the place.

[Owen Smith]

No, you’re all over the place, with the greatest respect, as this car crash of a Budget has shown not just to the House but to the whole country over the past three weeks. As an editorial in The Times said on Monday, when the Budget is still leading the headlines three weeks after the Chancellor has sat down, we know something has gone wrong, and it ain’t just one thing that has gone wrong but just about everything.

[Lyn Brown (West Ham) (Lab)]

I have been reading the media reports too, and I have been astonished to find the Prime Minister called a dilettante. Would my hon. Friend like to comment on that?

[Owen Smith]

I am not sure that he is a dilettante, but I certainly think he does not pay terribly much attention to details. Had he paid attention to details, he would not have said what he did earlier today in Prime Minister’s questions, when he told the House that the 50p rate had raised next to nothing, only to have his Exchequer Secretary confirm just a few hours later that the actual amount it had raised was £700 million. By my way of looking at it, in a period of fiscal austerity £700 million is not nothing, it is rather a large chunk of change. Certainly the £3 billion that we might lose over an extended period is a very large chunk of change.

I do not know how the Government continue to argue that we are all in it together, when they have given a tax cut to 14,000 millionaires, or how—this is a political point—they can continue to say that the only thing that matters economically is to cut the deficit. They have chosen to forgo a lot of money next year. Let us call it £700 million, but it will be far more. They have done that to give a tax cut to millionaires, so how on earth can they continue to say that only thing they care about is cutting the deficit?

[Brandon Lewis]

Does the hon. Gentleman agree that it was a mistake to introduce a bonus tax that was not only a one-off, but that was set up so that it would encourage people to pay less and therefore reduce the amount of money going to the Exchequer, as opposed to introducing an ongoing levy that will continually bring money into the Exchequer and therefore benefit the country?

[Owen Smith]

One needs to consider these things in the round. We have heard repeatedly from the Government that they will take more money from the rich than the previous Government and do more on tax avoidance, but none of those claims stands up to scrutiny. The previous eight Labour Budgets did more on tax avoidance than the current Government—those are not my numbers, but those of the IFS. The notion that the rich in this country are paying five times more than the poorest is clearly fallacious.

[Brandon Lewis]

Will the hon. Gentleman clarify what he said because he has not answered my point, which was not about tax evasion? Does he agree that an ongoing bank levy will raise more money than a one-off tax would have done?

[Owen Smith]

If Labour had won the election, it may have changed its view and continued the bank bonus tax. The Opposition certainly believe that Government ought to impose a bank bonus tax in addition to the current levy—[Interruption.] Well, the bonus tax was introduced for a one-off period, but I think a Labour Government would have continued it based on our priorities and values that we described in respect of the 50p rate. We would not have thought it right at this juncture, in a period of fiscal austerity, either to give a big benefit to the wealthiest individuals or to ask the wealthiest corporations to pay a lesser amount.

[Kelvin Hopkins (Luton North) (Lab)]

The hon. Member for Great Yarmouth (Brandon Lewis) implies that paying tax is voluntary, but surely it is compulsory in this country. It is just a question of ensuring that the people who owe tax pay it.

[Owen Smith]

The debate on the 50p rate was interesting in that it revealed the differing attitudes of Opposition Members and Government Members to paying taxation. From the way in which some Government Members responded to the debate, one could surmise that they are very comfortable with people finding every possible means, illicit or legal, to avoid tax. [Interruption.] Well, there was a clear implication from some hon. Members in the earlier debate that the boundaries and borders of the envelope can be pushed, as they were. In some respects, that argument was deployed to justify the cutting of the 50p rate, because so much money was, through fair means or foul, pulled forward into 2009 when it should have been taken in 2010.

[Karen Bradley (Staffordshire Moorlands) (Con)]

If the Labour party is so keen on stopping tax avoidance, will the hon. Gentleman explain why Labour Members voted against an anti-avoidance measure in a Finance Bill last year?

[Owen Smith]

Will the hon. Lady explain which anti-avoidance measure Labour Members voted against? I tell her very straightforwardly that all Chancellors ought to tackle tax avoidance in all Budgets. The current Chancellor has risked far too much credibility on his belief in his ability to tackle tax avoidance and his belief that he is doing more than previous Governments did so. The facts bear out my claim—the IFS, not the Labour party, has done the analysis—that Labour Chancellors, in seven out of last 10 Labour Budgets, raised more money for the Exchequer through tackling tax avoidance than the current Chancellor will do with this Budget.

[Michael Connarty]

Is my hon. Friend aware that since they came to power the Government have had the ability to forbid the Cayman Islands to refinance its sovereign debt unless it revealed all the transactions taking place in the Cayman Islands? I understood that to be one of the things they aspired to do to stop people putting money into tax havens to avoid paying tax in this country. They have failed to do so and allowed the Cayman Islands to refinance its sovereign debt without any conditions whatsoever.

16:45

[Owen Smith]

As is in the Bill, have also cut a deal with Switzerland that allows people avoiding tax by the Government putting money into Switzerland to continue doing so. Again, on the plausibility of the Government’s estimates, they claim that it will net between £4 billion and £7 billion for the Exchequer, but the OBR thinks that highly questionable.

[Alun Cairns]

I am astounded by the Opposition’s attitude, particularly given that their major party donor used to use those benefits in Switzerland, which we have now closed, and to hear them brag about the previous Government’s anti-avoidance measures, given that their candidate for Mayor for London is using every scheme in the book to avoid paying tax. What influence have those changes had on him?

[Owen Smith]

The hon. Gentleman ought to read some of the Budget documentation. The Government have not closed anything in respect of Switzerland; they have opened it up and continued to allow people to put money into Switzerland. They have asked them to acknowledge how much they have there and then charged them a lower rate of tax than they would have been charged had they kept their money in the UK. What is worse is that it runs fundamentally contrary to the European train of thought, established across Europe and supported by the previous Labour Government over their last five years, which is that we want more transparency, not less, in our tax affairs. Unfortunately, we will have less transparency as a result of his Government.

[Kelvin Hopkins]

I find it tiresome that while the overwhelming majority of my constituents, who are ordinary working people, pay tax through pay-as-you-earn and have no opportunity to evade or avoid, we spend countless hours debating the minority of rich people, defended by the Conservative party, and their tax affairs. I want the rich to pay their taxes in the same way as those on PAYE so that they do not escape paying one penny.

[Owen Smith]

rose—

[The Temporary Chair (Sir Roger Gale)]

Order. I am beginning to find it a little difficult to relate this debate to amendment 5 or the related matters. Perhaps we could return to them.

[Owen Smith]

I am grateful to you, Sir Roger, although I found that debate terribly entertaining. [Interruption.] Oh no, I am more than happy to talk about tax avoidance all evening, especially about the Swiss deal, which is particularly disgraceful. No doubt we will do that upstairs in Committee.

I return to the question of the bank levy and the bank bonuses tax and which was the most effective measure. It is clear that, as the OBR said, the bank bonus tax raised £3.5 billion in 2010, which is almost twice what the levy raised in 2011. Those are not disputable facts; they are there in black and white in the Red Book and the OBR’s analysis. Choosing not to reinstate our bank bonus tax represents an effective tax cut for the banks.

[Nigel Mills (Amber Valley) (Con)]

rose—

[Brandon Lewis]

rose—

[Owen Smith]

I shall keep going for a moment.

That is before we consider the actual tax cuts being introduced in the year-on-year reductions in corporation tax and the other changes to the controlled foreign companies legislation.

[Stephen Williams]

The hon. Gentleman says that banks will all get a tax cut because of the reductions in corporation tax. That assumes that they have taxable profits. Many have accumulated losses and will not be paying corporation tax for quite some time, whatever the rate.

[Owen Smith]

I would not dispute that for a moment. Many of the banks are under water and so will not end up paying tax for a significant period, but not all of them, and that is my point. Broadly speaking, the banks and financial services account for about 8% of corporation tax in this country. Overall, there will be a reduction to the Exchequer, through the cut in corporation tax to 22%, of about £5.5 billion per annum. That is leaving aside the CFC changes. On average, then, we would expect the financial services and banks to get about £450 million off their tax bills as a result of the Government’s changes. That is the point I am making. The question that needs to be asked in the round is what we are doing to tax corporations and tax our banks.

[Nigel Mills]

Does the hon. Gentleman agree that we need a predictable tax system, so that investors can understand what they will be expected to pay? When measures are described as “one-offs” or “temporary”, we ought to be able to rely on that, rather than allowing them to be permanent fixtures.

[Owen Smith]

By and large I would agree with the hon. Gentleman. Tax policy ought to be predictable. Indeed, the current Government deserve some credit for continuing with the trajectory set by the previous Government on tax policy planning and tax making, by seeking to consult significantly and publish things well in advance. [Laughter.] For some reason the Minister is chuckling. I would point to the introduction of the 50p rate, which was first mooted in 2009 and introduced in 2010, which was probably what led to all the forestalling. However, that approach is a good idea, by and large. We ought to consult carefully on tax policy, because as this Government are learning to their cost, so often there are unintended consequences of tax policy. I might highlight, for example, the simplification introduced so blithely by the Chancellor in his Budget speech, when in just one sentence he waved away Churchill’s special personal allowance for the elderly and introduced the granny tax. That was a simplification that seemed sensible at the time, but in hindsight it has had unintended consequences.

[Michael Connarty]

We would all agree—hopefully one day Governments and Chancellors will also agree—that we should not do unpredictable things in tax policy. The thing that has damaged the economy tremendously and harmed all our constituents is the production tax on oil and gas in the North sea, which has disincentivised people massively and sent the price of fuel through the roof for people who cannot afford it, damaging their employment prospects and the economy of the country.

[Owen Smith]

At the risk of stepping off-piste again and incurring your wrath, Sir Roger, all I would say is that that is another example of this Government’s incompetence. A year ago they were trying to squeeze the oil and gas companies by introducing new taxes on them. Then the Government were lobbied like billy-o for a year, and what have they done? They have effectively reversed the position. They have introduced a slightly different measure, but bluntly, they have taken money from one pocket and put it back in the other. If the Government had been a little more competent, if they had shown a little more foresight and if they had thought things through a little, as they so clearly have not done with this desperate Budget, they might not have made those mistakes.

[Brandon Lewis]

To return to the bank levy, the hon. Gentleman has referred again to the potential reintroduction of the bank bonus tax. Bearing in mind that the right hon. Member for Edinburgh South West (Mr Darling) said that it could only ever be a one-off, is the hon. Gentleman saying that the previous Chancellor was wrong, or will he say how many times something has to be reintroduced before it is no longer a one-off? I am just curious.

[Owen Smith]

I am saying that Chancellors have to keep things under review. In a period of fiscal austerity such as we are in right now, I am confident that a Labour Chancellor—particularly one as knowledgeable and shrewd as my right hon. Friend the Member for Edinburgh South West (Mr Darling)—would have found ways to try to exact a fair return and a fair set of receipts for the Revenue from the bankers, who, we must all remember, were complicit at least to some degree in some of the problems that we have faced over the last few years.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

We all agree that the financial services industry is vital for our economy and that we want it to remain a world leader. However, we also understand that it needs to pay its share towards getting the deficit down and dealing with some of the consequences of the downturn. We have discussed the fact that the amount raised by the bank levy is just over half the amount raised by Labour’s bank bonus tax—£1.8 billion compared with £3.5 billion. However, a repeat of the bank bonus tax would not be permanent, but would be a temporary measure. It could be construed as temporary to do it again, realising that we need to pay the cost of tackling long-term youth unemployment, which, as we know from a report out today, could hit nearly 1 million. We need to look at priorities and deal with what is vital for young people’s futures.

[Owen Smith]

My hon. Friend is right. She is talking about the values and priorities that I mentioned at the beginning of my speech. What are our values? What priorities do we set, according to those values, in respect of fiscal and budgetary decisions? At the moment, it is hard to discern that this Government’s values involve anything other than protecting privilege at the expense of hard-working families and of the most vulnerable in our society.

[Mark Durkan]

The amendment represents an attempt to make the bank levy a more articulate tax by incorporating a payroll tax element into it. Would an attempt to ensure that bankers on excessive remuneration did not benefit unduly from the cut in income tax be consistent with the Government’s efforts to increase the levy because they want to ensure that banks do not benefit unduly from the reduction in corporation tax?

[Owen Smith]

That would be entirely consistent. The Minister knows that our amendment merely asks the Chancellor of the Exchequer to review the possibility of incorporating a bank payroll tax in the bank levy, and to publish a report within six months on how the additional revenue might be spent. We have suggested that we would spend it on creating 100,000 jobs for the unemployed youth of our country, 1 million of whom are still out of work today despite the recent small but welcome fall in unemployment. We would also spend the money on building 25,000 affordable homes, which are equally vital at a time when homelessness is rising at a rate that has not been seen for 25 years.

[Andrew Gwynne]

My hon. Friend is making a compelling case. May I share with him the figures that I have obtained from the House of Commons Library for the 16 to 24-year-olds in the borough of Tameside who are not in employment, education or training or on an apprenticeship? The figure for 2010 stood at an appalling 20%, or one in five. The most recent figure is 33%, or one in three. Does not that show how urgently we need to tackle the underlying structural employment issues in constituencies such as Denton and Reddish?

[Owen Smith]

It absolutely does. On Monday night, I put it to the Chancellor that he and those on his Front Bench were entirely out of touch with the reality in constituencies such as mine and that of my hon. Friend. Pontypridd is fortunate, right now, to have the prospect of a new supermarket opening, which will create 200 jobs, but 2,500 people queued 600 yards down the main street to try to secure one of those jobs. They came not only from my constituency but from right across south Wales. That is the desperate reality that many people in this country are facing. I saw the queue myself, and I know that many of those people were young and eager to work. They also felt that the opportunities for them were diminishing under this Government, rather than increasing. They are looking to the Government, and the Opposition, for action. They want us to put on the table solutions that will deliver growth and jobs and that will stop the economy flatlining.

Unfortunately, the net effect of all the measures in the Budget, including those in clause 209, will be an increase of only 0.1% growth in GDP—[Interruption.] The hon. Member for Vale of Glamorgan (Alun Cairns) shakes his head, but those are the numbers in his Government’s documentation that have been agreed and validated by the OBR: growth of 0.1% in GDP and growth of 0.7% in business investment, which is down almost seven points from where we thought we were going to be just 18 months ago. That is a desperate state of affairs. How on earth can he defend it?

[Alun Cairns]

It has been said in the previous debate as well as in this one how cautious the Chancellor rightly needs to be in planning the Budget and in working with growth figures. Does the hon. Gentleman recognise the improvement in the UK’s economic position announced by the Institute for Fiscal Studies earlier this week, leading it to increase its growth predictions?

17:00

[Owen Smith]

Yes, I recognise that. I also recognise the Ernst and Young ITEM club, which uses precisely the same methodology and precisely the same numbers as the Treasury in calculating its growth projections. It said earlier this week that it did not expect to see 0.8% growth as the OBR anticipates, but 0.4% growth over the next year. It is not expecting 2% growth, but 1.5% growth in the following year. Very few credible commentators believe in the heroic suggestions of a bounce back next year, the year after and the year after that. Those suggestions are clearly a load of nonsense, just as it is a load of nonsense to assume that we will see 0.8%—

[The Temporary Chair (Sir Roger Gale)]

Order. I assumed the Chair in anticipation and excitement at the prospect of listening to the debate on amendment 5 and the bank levy. We really are straying a long way from it. The Opposition Front-Bench spokesman has now been on his feet for more than 40 minutes, yet he has still not finished speaking to his amendment.

[Owen Smith]

I am grateful, Sir Roger. I am bringing my remarks to a conclusion.

The amendment we have tabled is very simple. It simply requires the Government to look at the possibility of reintroducing a payroll tax on the banks.

[Nigel Mills]

Will the hon. Gentleman give way?

[Owen Smith]

No.

We think that would generate significant revenues, which could be used to create youth jobs to tackle the scourge of youth unemployment in our country and to create new affordable homes. We want the Government to look at that; we want them to get their priorities right; we want them to undo some of the damage they have done in the last two years. That is why we will of course press the amendment to the vote when the appropriate moment comes.

[Karen Bradley]

It is a great pleasure to contribute to the debate on how we should tax our banks. First, it is important to put on the record the fact that I think banks should pay their share towards paying down the deficit. Every day, we are borrowing more money to pay for public services, so it is important for the banks to pay their share so that the deficit can be dealt with as soon as possible. How, then, does one take money or tax? As a tax accountant by training, I know that there are many different ways of extracting revenue from businesses. We can tax them based on their income or their profits or in many other different ways.

One thing about the bank levy introduced by this Government is that it guarantees that the banks will pay some tax. If they are loss making, their losses will not wipe out that tax. The bank levy cannot increase the losses; it is non-tax deductible for corporation tax purposes. We will be ensuring that, each year, the banks pay their fair share towards reducing the deficit.

Reductions in corporation tax are also not taken into account in the levy. It is absolutely the right thing to do to cut corporation tax. We need to cut it for all our businesses, to promote entrepreneurship, so that our businesses have more money left over at the end of every year to invest in new employment, new plant and machinery and shareholder returns. Given that shareholders are often our pension funds, it is extremely important that we ensure that those pension funds get the return that they so desperately need to allow our pensioners to enjoy the living standards they expect. As I say, reducing corporation tax is important, but we need to ensure that the banks do not benefit too much from that reduction—and the bank levy makes that happen.

[Alun Cairns]

Does my hon. Friend recognise that a balance needs to be struck? Banks need to pay their fair share, but we also need a level of taxation that will help us to attract to the UK the best bankers across the globe. We do not want to drive the banks overseas to Hong Kong, Switzerland or elsewhere, which would mean a net loss to the Treasury.

[Karen Bradley]

I entirely agree. Clearly 50% of nothing is not as much as 45% of something, It is important for us to tell the world that the UK is open for business, and to say “Bring your business to the UK”. That applies very much to the financial services sector.

We have already discussed how much money the banks might or might not pay towards reducing the deficit. What we are considering now is just the additional amount that they are paying as a result of the increase in the bank levy. They are, of course, paying an awful lot more to the Exchequer. I believe that the financial services sector contributes about £32 billion to our economy, and I think it important for us to retain and increase that amount of revenue. I firmly believe that we should have taxes that raise the maximum amount of revenue to be spent on our schools, hospitals and police officers, and that ideology should not determine how we set our tax rates.

The main point that I want to make about the bank levy is that it will raise the money irrespective of the amount of bonus paid. I remember when the previous Chancellor announced, in his 2009 pre-Budget report, that the banks would pay

“a special one-off levy of 50 per cent.”—[Official Report, 9 December 2009; Vol. 502, c. 367.]

At that time I was working in a large accounting practice, and was analysing the Budget. The biggest surprise came when the then Chancellor said that the Treasury expected the bonus tax to raise £500 million. Those of us who were in that firm at the time—it was one of the big four—were staggered that the Treasury should think that only £500 million-worth of bonuses would be paid, given that the tax meant that an equal amount would be paid to the Exchequer, and I think we have now seen that that did not happen.

The purpose of the levy was to drive behaviour. The point of it was that the banks would not pay the bonuses. The then Chancellor said that the Treasury expected a reduction in the level of bonuses that would be paid that year, but that simply did not occur: the bonuses were still paid. I personally believe that tax is a very blunt instrument for the purpose of driving behaviour, and that people will behave in the way in which they wish to behave, whether it involves charitable giving, buying pasties or paying bonuses. Tax is something that businesses “manage around”. They do not think of it as a behaviour driver, and it clearly did not drive behaviour in the way that the Treasury expected in that instance.

[Mark Durkan]

Has the hon. Lady not just contradicted what she said a couple of minutes ago? She suggested then that if we entertained this idea, we would ensure that banks became financial refugees in all sorts of other places in the world.

[Karen Bradley]

I do not agree about the contradiction. If it is suggested to the banks that the rate of tax will be at a certain level and that there will be a bonus tax, that will discourage them from remaining in the UK but it will not stop them paying the bonuses, which is what the Treasury wanted the special one-off tax to do.

[Nigel Mills]

Does my hon. Friend agree that the bank payroll tax has morphed from its original role of reducing bonuses to become purely a revenue-raiser in the eyes of those who want it, and that it is not even intended to reduce the amount of bonuses paid?

[Karen Bradley]

I was coming to exactly that point. It is, in fact, a revenue-raiser. We need to return to the question of how money can be raised from the banks, and if that is what we wish to do, I think that the bank levy is a better way of doing it.

In preparation for the debate, I rang various former colleagues and others involved in the financial services sector. I could not find anyone who would express the view that the bank levy was a terribly bad thing. They all accepted that the tax needed to be paid, and they thought that this was a reasonable way in which to pay it.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I am trying to follow the hon. Lady’s argument. What impact does she think the bank levy has had on the level of bonuses given to bankers?

[Karen Bradley]

My point is that it is not the Government’s job to try to drive the level of bonuses. The last Government wanted to do that, and failed miserably. It must be accepted that the bank bonus tax is a revenue-raiser and not a behaviour-driver, and that it will not determine the way in which bonuses are paid. The actions taken by the present Government to limit the level of cash bonuses that can be paid, and other such measures, are far more effective in ensuring that the bonuses that are paid reflect the performance that contributes to the building and growth of a financial services business. That is what we want in our economy. We want businesses to grow, because if they do, they will pay more corporation tax. They will also pay more payroll tax, because a 13.8% national insurance charge is levied on all employers for the sums they pay their employees. Therefore, if the banks make more money, they will pay more in payroll tax, which is a good thing.

[Nigel Mills]

Does my hon. Friend agree that targeting a payroll tax at one industry is not a particularly coherent way of running a tax system? If those who propose doing that were truly concerned about inappropriate bonuses and high pay, they would want to impose a tax on other areas, too, such as high pay in the City—and, perhaps, on footballers or on energy businesses—rather than targeting it on just one industry that they do not happen to like at the moment.

[Karen Bradley]

My hon. Friend makes an important point. Financial services are an incredibly important part of our economy. The 2002 pre-Budget report revealed a drop in revenue, and the explanation it gave for that was that the expected City bonuses had not been paid, and as a result those bonuses were not contributing as much tax as forecast—and we all accept that we need to raise tax in order to pay for our schools, hospitals, police officers and all our public services.

The bank levy is the right way to tax the banks. It is not unpopular with the industry, so far as I can ascertain from the experts to whom I have spoken. They accept that they have to pay their share, and that that is the way they will do it.

[Sheila Gilmore (Edinburgh East) (Lab)]

This debate has clearly demonstrated that Members have very different views on how to tackle the current economic situation. I was very struck by one commentator’s observation that the Government were leaving economic recovery to business—that they were expecting business to spring up and solve our problems. That is what we heard almost two years ago, in the so-called emergency Budget—which did not, in fact, do anything terribly urgent. We were told then that very shortly the shoots of private enterprise would spring to life, particularly if we cut the public sector. Almost two years later, we are still waiting for that, however; it simply has not happened. It is not good enough for us simply to sit back and say, “Somehow, this is going to sort itself out.” It is right to want to stimulate the economy, and to create jobs and work.

Construction and affordable housing are essential. I live in a city with an acute shortage of affordable housing. There are many planning permissions and consents in place for new house building, which would have had at least an element of affordable housing, so the problem is not the planning system. Nothing is happening, however. The ground lies idle, and the building firms have paid off their workers and are waiting for the upturn, hoping that the land values will carry them through.

What is so wrong with wanting to raise some extra revenue and stimulate the economy in that way? If building workers are back in employment and private building firms are flourishing, then those workers will have income with which to stimulate the economy.

There has been a huge downturn in retail over the past few months. I read today that there has recently been a slight upturn because of the good weather in March, but, certainly where I come from, that has now been followed by three weeks of pretty rubbish weather, so presumably that upturn will now have been reversed. There has been a downturn in retail because people feel they do not have money to go out and spend. The whole local economy is affected by that. The knock-on effects on the local economy of investment in affordable housing are huge.

[Jack Dromey (Birmingham, Erdington) (Lab)]

The Government’s own figures show that house building is down and homelessness is up. In 2008, a Labour Government acted, at the time of the bankers’ crisis, with a kick-start programme, which resulted in 110,000 homes built, 70,000 jobs created and 3,000 apprenticeships. That sustained the building industry. Do we not now need a fresh kick-start programme—hence the importance of our bankers’ bonus tax—so that we can build 25,000 homes straight away, create jobs for unemployed building workers and create hope and apprenticeships for the young people of our country?

17:15

[Sheila Gilmore]

I agree absolutely. I saw clearly, in my city, the follow-through of that financial stimulus. It was followed through to the Scottish Government, and I give them credit for bringing forward some of the construction spending at that stage. We had more affordable homes built in 2009 than we had had for some years. I believe that the figure was 900 affordable homes, which is high for Edinburgh, but that has now plunged right down again. This was not sustained and we are back in the same cycle as we were in before. Such an approach can work, as we get the homes and the jobs, and we ensure that unemployment is not rising as fast as it otherwise would.

When Labour Members suggest stimulating the economy, Government Members invariably ask how we would pay for it. They say, “Oh, you are going to borrow yet more. That is absolutely shocking.” When we make any proposal on how we would fund it, we are immediately told, “You cannot possibly do that. You should not do that.” We are making a genuine proposal here. We have talked about it for several months, but it has not yet been taken up by the Government. The economy is still flatlining and we are seeing all the results of that in our local communities. So, yet again, we are justified in tabling this amendment.

We are constantly told about all the people who are going to go abroad if we do such and such a thing—we hear that banks are going to disappear off, to wherever—but there is not a great deal of evidence of that happening. It feels very much as if we are being blackmailed and as if powerful people are trying to say, “We will take our ball away. We are not going to play.” We have to be very clear that a lot of this does not actually happen in practice; indeed, there is evidence to suggest that the bankers did not leave the country during the period of the previous bonus levy. There is no evidence to suggest that they suddenly swanned off somewhere else. If we are serious about building and growing our economy, as we have to be, this measure will be one small part—it is not suddenly the answer to everything—of enabling us to get this economy going again. It will stop us from sitting on our hands and expecting that somehow to happen, because it will not.

[Mr Redwood]

I remind hon. Members that I am an adviser to an industrial company and to a small investment management business. I am not a tax adviser, so I feel able to participate in this debate.

I was interested in the Opposition amendment and it turns out to be rather disappointing, for a number of reasons. It asks the Government to produce a report

“on how the additional revenue…would be invested to create new jobs and tackle unemployment.”

As phrased, it does not actually ask for a report on how a bank payroll tax would work, although that is perhaps what Labour Members wanted, too. Interestingly, the Opposition have shifted from wanting a bank bonus tax—a tax originally described as a “one-off” and clearly aimed at very high earners in certain kinds of investment bank, which everybody loves to hate at the moment—to wanting in this amendment a general bank payroll tax. I ask them to think about what that means, because most of the people on the payrolls of our leading large banks are, of course, modestly remunerated. This payroll tax would give a further incentive to bank directors and managers to try to get rid of personnel they are employing, because if we tax something, we clearly do not like it. The Opposition say that they do not like payroll, so they are trying to tax payroll.

[Owen Smith]

I am grateful to the right hon. Gentleman for giving me this opportunity to clarify the wording—[Interruption.] No, there is no “Ah ha” moment, I am afraid. The wording we have used reflects the wording used by the OBR to describe the temporary bank payroll tax. It is no more than that.

[Mr Redwood]

It is worth teasing these things out, because I think we have had confirmation from the Opposition that they have in mind a general payroll tax, which would hit people other than the very high earners in investment banks. The amendment does not say “a bonus tax for investment bankers”, for example; it says a “payroll tax”. One therefore has to assume it would affect conduct.

[Owen Smith]

With the greatest respect, either the right hon. Gentleman misunderstood what I said or he is deliberately misrepresenting what I said—mischievously, I suggest. We were not intending to do anything other than replicate that which we have done previously, so a bonus tax is what we were talking about. The language adopted in the amendment is reflective of that used by the Government and the OBR—that is all.

[Mr Redwood]

Well, I think we are very grateful for that clarification. We await the details that, unfortunately, we did not get from the Opposition about how they would target the measure, whom they have in mind, how much those people would have to earn and how much bonus they would get. The point rests on perhaps a narrower base than the words in the amendment lead one to infer. One has to assume that the tax will lead banks to employ fewer people.

The tax that the Government have adopted also has consequences. They have decided to get extra money out of the banks by taxing the size of their balance sheets. I think the Government might be right that that is a slightly better way of doing things than taxing personnel costs because it is more general, but that too has adverse consequences. All taxation has adverse consequences as well as some positive uses. The Government tax encourages banks to shrink their balance sheets because they do not wish to pay too much tax. What does that mean in normal language? It means they want fewer deposits and less share capital and that they want to lend less money to people because the way to reduce the tax burden is to have less taxable capacity in the United Kingdom. The tax therefore has a cost. I do not disagree with what the Government are doing: I understand the awful financial situation that the country finds itself in and I can see how this tax is more popular than many others, but let us not pretend that these things are costless. At a time when we need more growth and more loans of a suitable kind to people who can afford to pay them back in order to create demand and more loans to smaller and medium-sized enterprises at a time when they need to grow, taxes on banks are not terribly helpful.

I am enough of a politician to know that banks are very unpopular and that it is an easy hit for politicians who want to improve their own popularity to take a position against the banks, so I am being something of a foolish hero by standing up and saying that not all banks are bad and that quite a lot of people who work for banks are perfectly decent people doing a decent job. The banking service that is supplied around the country to small and medium-sized enterprises and to you and me, Sir Roger, is very necessary, and sometimes it is well handled and well conducted.

There is a dreadful run of debate in this country that everything to do with the word “bank” is evil and wrong, that it serves the banks right and that everything has to be directed against them, but we have to work with the banks—the good, the bad and the indifferent—because we need them to be on the side of economic growth and recovery to tackle the very real problem that the Opposition have identified in the second part of their amendment—tackling unemployment. We need to get unemployment down, and one way of doing that is by having a strong banking sector working closely in partnership with the small and medium-sized enterprise sector and with those people who have a reasonable income and might want to borrow more to buy things and create demand.

[Kelvin Hopkins]

The right hon. Gentleman glosses over the fact that the banking system has two distinct components. There is the banking for ordinary people and small businesses and then there is the casino component, which is about gambling with vast sums of money—often our money—and often losing it by the billion. That is the bit of banking we are complaining about, not the retail banking that looks after our money and ordinary working people’s money.

[Mr Redwood]

If it were that easy to make the distinction and to close down or punish the one and reward or encourage the other, I am sure the outgoing Government would have done it. The fact that they did not implies that in office they realised the situation was far more complicated. When we consider the complications of a large conglomerate bank—as it happens the taxpayer should have a lot of knowledge about them because we are the forced owners or part-owners of two such banks—it is immediately obvious to any sensible analyst that the activities of the investment bank are deeply integrated with, and related to, those of the normal commercial bank; for example, in their service for small and medium-sized enterprises. A small or medium-sized export business may need forward currency cover or trade finance and credit, or it may have an investable surplus. It may need all kinds of services that go well beyond the basic banking that the hon. Gentleman was trying to describe—just having a current account to make payments and a simple savings account. The world is much more complicated than that. If we are to survive and compete in a global world with international trade, we need to be able to handle its requirements.

[Mr George Mudie (Leeds East) (Lab)]

I do not share the right hon. Gentleman’s confidence that the banks are so optimistic, and that they are so ambitious to provide loans that will get jobs for the million youngsters who are out of work. The Government signed up to Merlin scheme for loans to small businesses, but were badly let down by the banks who did not live up to their part of the agreement. This year’s Budget wheeze is the loan guarantee scheme, which is supposed to get jobs for youngsters. The Treasury Committee took evidence and accepts in its report that the scheme will not provide additional lending for firms; it is only a method for lowering current rates, so why is the right hon. Gentleman so confident?

[Mr Redwood]

I do not think I expressed any confidence on the subject at all. The hon. Gentleman, the Government and I are in agreement that past levels of lending have been inadequate. That is why the Government have come forward with yet another scheme to try to encourage more lending, which I should have thought everyone in the House would want them to do. If the hon. Gentleman wants to know why there has been too little lending in the last couple of years, there are two simple reasons. The first is that after the crash the banks were forcefully regulated not to lend more—[Interruption.] The hon. Gentleman says that is nonsense, but their problem is obvious. The banks were told by the regulator that they needed to hold more cash and capital relative to their lending; the only way they can do that, especially the nationalised ones, is to keep lending down. They are not in a position to raise more money because the taxpayer does not want to put more money into RBS at the moment, and I entirely agree with the Government’s view that we should not be doing so. There is thus a regulatory squeeze on the amount of lending.

The banks would say that the projects are not out there. I am not so sure. The hon. Gentleman and I probably know of financeable propositions on which we would like to see the banks rise to the challenge. We hope that will be possible with the new scheme, but under the Opposition amendment we would spend any revenue that might be raised from what they call a payroll tax, although it is apparently a bonus tax on new jobs and tackling unemployment. We do not know exactly how much they have in mind; the amount would probably be quite modest, as it was from their bonus tax. If the banks see another bonus tax coming in this climate, there will be even fewer bonuses to tax, but the Opposition may welcome that.

[Mr Dave Watts (St Helens North) (Lab)]

Is it not right that the people who caused financial problems and hardship for many families and created mass unemployment pay a fair amount of tax to compensate for the damage they did to the economy? Is that not exactly what the amendment would provide for?

[Mr Redwood]

Many people would think that the outgoing Government had a lot of responsibility for the crash, along with their professional advisers, the quangos and the Bank of England, who apparently did not see it coming. They had very light regulation in the lead-up to the credit crunch and then very tough regulation. [Interruption.] Labour Members feel there is some justice in my response, as they are getting very heated, but we are straying rather far from amendment 5.

The point of the amendment is that the Labour party wants to raise an unspecified amount by taxing unspecified people who apparently earn more than Labour thinks is good for them. The Opposition would spend that on youth measures, and they want the Government to come back with a report on how that money could be spent.

My hon. Friend the Member for Staffordshire Moorlands (Karen Bradley), who rightly said that she could support a bank levy to try and get the deficit down, was speaking sense, but this, as she will have realised, is not the proposition of the Labour Opposition. They do not want to get the deficit down. They want to find another pot of money to increase spending. I am with them in their aim of reducing youth unemployment. We will make much more progress in reducing youth unemployment if we have stronger banks able to finance a more vigorous recovery. I urge the Government to work more strongly on that. The more money they take off the banks in taxes, however tempting that is, the less the banks will be able to lend to people to get the recovery going, so the proposal could be self-defeating.

17:30

[Mr Bailey]

I had not intended to speak in the debate, but I felt it was necessary to contribute to try and counter the argument from Government Members that taxation does not drive behaviour. It does.

The arguments that I have heard from Government Members are contradictory. On the one hand we are told that the bank bonus tax did not change behaviour and there was therefore no point in imposing it. On the other hand it is argued that if we have excessive taxation, people will leave the country and move banking elsewhere. One cannot argue both cases at the same time. Either taxation alters people’s behaviour or it does not. I believe that it does, but it is incredibly difficult to assess what will happen. The Treasury predictions over the past few years have not been very good at doing that.

The point has been made by several speakers that the original bank bonus tax was designed to drive behaviour, rather than to raise money. That resulted in an original estimate of receipts of about £500 million. Although the then Chancellor made it clear that it was a one-off tax, it was also made clear in the pre-Budget report that

“the Government will consider extending the period of the charge so that the tax remains in place until the relevant provisions of the Financial Services Bill come into force. Where there is evidence of avoidance schemes being put in place, the Government will take action to close those schemes.”

Implicit in that is the anticipation that other measures would defeat the bonus culture that was so damaging to our economy. It leaves open the suggestion that the then Government were prepared to review the tax if that did not happen.

It is obvious that the tax did not affect the bonus culture, which is why the tax raised about £3.5 billion. It is interesting to note that even as late as March 2010 the Treasury estimated that it would get only £2 billion—a huge underestimate of the amount that the tax would raise. Given that it raised more, behaviour had, by definition, not changed.

It is difficult to know whether the absence of any change in behaviour was in anticipation of a Conservative Government coming in who would not tackle the problem. That is a possible assumption. I contend that the previous Government had left open the option to deal with that culture, and this may be one of the measures that they would have taken both to raise revenue and to deal with the bonus culture. Given the June 2010 Budget introduced by the subsequent Chancellor and the apocalyptic vision he presented of the nation’s finances, I find it strange that a bonus tax that was raising so much money should be abandoned so readily and ruled out of consideration. The substitute tax is quite obviously designed not to raise as much and is not in accordance with the principles of responsible capitalism to which the Government say that they are committed. If we want responsible capitalism, it seems to me to be quite sensible to have a taxation regime that penalises those who act irresponsibly while at the same time raising a considerable amount of money to offset any potential burdens on those who act responsibly.

[Alun Cairns]

If the motivation behind the bonus tax is to tax those who have acted irresponsibly, would the hon. Gentleman suggest that we had an additional tax on former Labour Ministers who led us into the situation that has contributed to the debt of the nation?

[Mr Bailey]

Perhaps we should. Perhaps we should introduce a tax on certain members or major funders of the Conservative party, too.

[Mr Watts]

Does my hon. Friend not think that it a bit ironic that people who are suggesting that the previous Labour Government’s problems created the financial crisis are the same people—the Liberal Democrats and the Conservatives—who were calling for less regulation? It is interesting how the Government are trying to rewrite history.

[Mr Bailey]

I have often made the same point myself. I was on the Government Benches at the time of the so-called financial crisis and the run-up to it, and I do not remember any demands whatsoever from the then Opposition for us to introduce heightened regulation of the banking system. It is very easy to be wise in retrospect.

[Mr Redwood]

I think the hon. Gentleman has experienced some memory loss on that point, because I can remember both the Conservative and Liberal Democrat parties pointing out—as I did, too—that the borrowing was excessive and needed to be reined in.

[Mr Bailey]

I believe that the right hon. Gentleman introduced a paper on reducing regulation which subsequently disappeared and sank without trace in the light of the financial crisis.

In conclusion, we can argue about the behavioural changes but one thing that is absolutely certain is that the bank bonus tax raised a lot of money, that it was consistent with the principles of responsible capitalism and that it may well have affected the behaviour of bankers in the long-term if they had known that the tax would be in place as long as their behaviour justified it. The fact that the Government have removed it has meant that the bonus culture has continued. There is still a sense of unfairness and outrage within the community at large that they will have to pay for the excesses of the banking community and that the Government are not prepared to do anything about it. Even at this late stage, if the Government believe that we are all in it together, that is one thing they could do that would both benefit the Treasury and demonstrate their commitment to that principle.

[Mr Hoban]

This has been a useful debate and the clause and schedule that we are debating legislate for a change in the rate of the bank levy, increasing the full rate to 0.088% from January 2012 and making a further increase to 0.105 % from 1 January 2013. The rate changes are intended to ensure that the levy will raise the £2.5 billion a year that we said that it would and ensure that the additional corporation tax rates do not benefit the banks, a point that the hon. Member for Pontypridd (Owen Smith) did not seem to recognise.

The amendment looks remarkably familiar, as it was proposed last year, and it is good to see it being given another outing this year, but in the shadow spokesman’s 43-minute speech we heard remarkably little about it. We saw him dig himself out of a few holes of his own making, but we did not hear anything about whom it was targeting, what measures would be taken into account or, indeed, how much it would raise.

I say that because I have been going through some transcripts of radio interviews, and so far the Opposition have claimed that their measure would be used to finance £29.6 billion of additional spending or taxation. That is 10 times the amount the bank payroll tax raised when the Labour party was in government, but that is not just protestation on my part. The Leader of the Opposition, when quizzed by Jeremy Vine on 6 January 2011 about how the Labour party would pay for its VAT rise reversal, replied:

“I said for example we should have a higher bank levy.”

He was asked in a Fresh Ideas question and answer session—we have not heard many fresh ideas in today’s debate—on 25 March 2011 about how to cut the deficit, and he said that there should be “another bankers’ bonus tax”.

That is not a concoction; those are the words of the hon. Gentleman’s party leader, and I am afraid to say that the starting bid is £29.6 billion—[Interruption.] The hon. Gentleman should not question people’s arithmetic when his own was earlier found to be flawed. He should be very careful what he says. I suggested to him last night that he should have spent more time on his speech and less time in the Members’ Dining Room, but he ignored that advice. He should have followed it, shouldn’t he, really?

So we do not know how much the Opposition’s proposal would raise or at whom it would be targeted, and there is a stark difference between it and the levy that we introduced when we came into office. The bank levy is a tax on the balance sheets of banks, banking groups and building societies, and it complements wider regulatory reforms aimed at improving financial stability, including higher capital and liquidity standards. The levy ensures that the banking sector makes a fair and substantial contribution, reflecting the risks that it poses to the financial system and to the wider economy. The levy is also intended to encourage banks to move away from risky funding models.

From the outset, the Government have clearly stated that they intend the levy to raise at least £2.5 billion each year. That is an appropriate contribution, which was set with consideration to the wider environment, and it reflects the international programme of regulatory reform, the global economic conditions and the need to maintain the competitiveness of the UK financial sector.

The forecasts produced by the Office for Budget Responsibility implied that, if we did not adjust the rate, receipts for future years would fall short of the expected £2.5 billion. We will undertake a full assessment, before next year’s operational review of the bank levy, of the reasons why there is a shortfall, but fragility in the eurozone will inevitably have had a greater than the previously expected impact on last year’s balance sheets. The rate increase introduced in the clause puts us back on track to ensure that from 2013 and in future years the levy will raise at least £2.5 billion.

The target yield was set out in this Government's first Budget, when we also announced our intention to make significant cuts to the main rate of corporation tax. We were clear at the time, as we are now, that the bank levy yield far outweighs the benefit that banks receive from the corporation tax change. Other sectors, including manufacturing, will benefit from the reduction in corporation tax, but the banks will not benefit because the bank levy rate increase will offset it.

Since our first Budget, we have gone further: we have announced additional reductions in the main rate of corporation tax, so that it now stands at 24%; and we will continue with the two further cuts planned next year and the year after. As a consequence, Britain will have a 22% rate of corporation tax—the lowest in the G7. To offset the benefits to the banking sector, and to maintain the same incentives on the banks to move to less risky funding, the increase in the levy rate in this clause takes into account additional cuts in corporation tax.

The Opposition’s amendment seeks to reintroduce the bank payroll tax, and, as I said earlier, this is not the first time that we have heard it suggested. The House disagreed with it last year, and now, as then, the Government believe that such a tax would be counter-productive and unnecessary. The tax was introduced in the last Parliament as a one-off interim measure ahead of changes in remuneration practices from corporate governance and regulatory reforms. As the previous Chancellor clearly stated, it could not be repeated. The net yield of this one-off tax, accounting for the impact that it would have on income tax and national insurance contribution receipts, was £2.3 billion—less than our annual target for the permanent bank levy. The previous Government told us that they would apply the bank bonus tax only until changes in remuneration practices were put in place.

17:45

As my hon. Friend the Member for Staffordshire Moorlands (Karen Bradley) pointed out, the Government have taken firm action in this regard. The Financial Services Authority’s remuneration code of practice sets out detailed rules on pay for firms in the financial services sector. The code ensures that bonuses paid for significant risk takers are deferred over a number of years and are paid in shares to retain a clear link between remuneration and performance. That is a clear break from what happened under the previous Government, when bonuses could be taken in the year in which they were awarded and in cash, straight away, with no chance of their being clawed back if future performance did not live up to the commitments given by management.

Alongside action to curb excessive risk taking and strengthen balance sheets, we are taking action to increase transparency and power for shareholders, including implementing the most comprehensive remuneration transparency and disclosure regime among the major jurisdictions; introducing ambitious reforms to the UK’s corporate governance regime to give shareholders the powers to hold directors accountable for remuneration decisions; and putting in place a wide range of policies to tackle the structural and tax distortions that are the source of unacceptable bonuses.

[Mark Durkan]

rose—

[Mr Hoban]

I am trying to deal with the point that the hon. Gentleman made. It is clear that the bank payroll tax had a negligible impact on bonuses paid, whereas this Government’s action has led to bonus pools falling year on year. For example, RBS’s bonus pool fell by 40% compared with the previous year’s, and Barclays’ bonus pool was down by 25% compared with that in 2010. Real changes in remuneration practice are coming through as a result of measures that this Government have championed.

[Mark Durkan]

I wanted to ask about a previous point that the Minister made. He said that he hoped there would be shareholder activity to help to restrain bank bonuses. Would putting a bank payroll tax window into the permanent bank levy that the Government are introducing not be an aid to shareholders’ interests, because it would mean that the level of bank bonuses affected the overall levy that the bank was paying?

[Mr Hoban]

I think shareholders are well aware that bonus pools affect banks’ profitability and the amount that they are able to pay to their shareholders by way of dividends. I am demonstrating that the reforms that we have introduced since we have been in office have been far more effective in curbing behaviour in bank boardrooms than the bank payroll tax.

Let me deal now with youth unemployment, which is highlighted in the Labour amendment. The Government have introduced a wide range of measures to tackle the problem. We have improved the support that is available to jobseekers. We have introduced a more flexible jobseeker’s allowance regime better to support a jobseeker in the search for work. In June last year, we launched the Work programme, providing specialist support over the next five years to help to support the longer-term unemployed and help the most vulnerable jobseekers to keep in touch with the labour market. Later this year, we will run a pilot to find the best way to introduce a programme of enterprise loans to help young people to set up and grow their own business. We are taking other actions to tackle the problem.

We are strongly of the view that it is right that banks should make a fair contribution that reflects the risks they pose to the UK financial system and the wider economy. That is why we introduced the permanent bank levy—a move that Labour Members chose to disregard when they were in government. We need to balance fairness and competiveness and raise the revenue that we need. The actions that we are taking demonstrate that we have a clear strategy in place to enable economic recovery and create jobs. The bank levy is the right course of action. I ask the hon. Member for Pontypridd to withdraw his amendment, and I move that clause 209 and schedule 33 stand part of the Bill.

[Owen Smith]

There are still 1 million unemployed young people in this country. That is the highest rate since records began. Long-term youth unemployment is growing as never before. In my constituency of Pontypridd, there has been a 333% increase in long-term youth unemployment in the last year alone. The point of the amendment is to highlight that problem in the real economy. We are trying to connect this out-of-touch Government to the reality of youth unemployment, and to get them to do something to tackle it and to get growth in our economy. I have not been persuaded to withdraw the amendment and we will press it to a vote.

Question put, That the amendment be made.

The Committee proceeded to a Division.

[The Temporary Chair (Sir Roger Gale)]

I ask the Serjeant at Arms to investigate the delay in the No Lobby.

17:49

Division 519

Ayes: 251

---

Labour: 232
Scottish National Party: 6
Democratic Unionist Party: 5
Social Democratic & Labour Party: 2
Plaid Cymru: 2
Independent: 2
Alliance: 1
Green Party: 1

Noes: 322

---

Conservative: 278
Liberal Democrat: 43

Clause 209 ordered to stand part of the Bill.

Schedule 33 agreed to.

New Clause 1

Value Added Tax: limitation on new orders

‘No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 which:

(a) Amends the current definition of “hot food” in the Act, or

(b) Amends the Act to limit the zero rate to the supply of caravans used for residential purposes.’.—(Cathy Jamieson.)

Brought up, and read the First time.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I beg to move, That the clause be read a Second time.

[The Temporary Chair (Sir Roger Gale)]

With this it will be convenient to discuss the following: new clause 2—Review of VAT Exemption for small vehicles—

‘The Treasury shall, within two months of Royal Assent to this Act, lay before Parliament a report on the effect on the availability of transport services on the VAT exemptions for small vehicles.’.

New clause 3—VAT impact of changes—

‘No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 unless the Chancellor of the Exchequer has fully reviewed the impact of those changes on jobs, living standards and businesses and placed the review in the Library of the House of Commons.’.

New clause 4—Definition of ‘hot food’—

‘No new Order shall be made under section 30(4) of the Value Added Tax Act 1994 which amends the current definition of “hot food” in the Act.’.

New clause 5—Value Added Tax: baked products—

‘No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 which shall affect baked products when no attempt is made to keep the product hot for consumption.’.

New clause 6—VAT on caravans—

‘No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 which amends the Act to apply to holiday caravans that are currently zero rated.’.

New clause 7—VAT: protected buildings—

‘No new Order shall be made under section 30(4) of the Value Added Tax Act 1994 which amends the current definition of “protected building” in the Act.’.

New clause 8 has not been selected because it is outside the scope of the Bill. I indicate to the Committee that it will be for my successor in the Chair, the Second Deputy Chairman of Ways and Means, to determine, once she has heard more of the debate, whether to call any of the new clauses other than new clause 1.

[Cathy Jamieson]

It is a pleasure to follow some excellent speeches. As we heard earlier, the harsh reality of the Budget is that it has done nothing to give Britain the jobs and growth we desperately need. We have heard how it has failed—[Interruption.]

[The Temporary Chair]

Order. I am sorry to interrupt the hon. Lady. Will Members leaving the Chamber please do so quietly? I wish to hear the debate.

[Cathy Jamieson]

Thank you, Sir Roger. That gives me the opportunity to repeat, for those unable to hear because of the conversations, my point about the harsh reality of the Budget, which has done nothing to give Britain the jobs and growth we desperately need, and about how it fails the fairness test. It has done nothing to help support families and pensioners on modest and middle incomes. We will discuss that further tomorrow so I shall not dwell on it now. It would, of course, be outwith the scope of the new clauses. I shall only say that families are already finding out just what the Government’s decisions will mean for their household budgets. As we will hear, businesses are also now finding out that the botched Budget makes no economic sense for them either.

There was a time when people might have given the Chancellor some credit for his strategic brain. Some on middle incomes and small businesses might even have given him the benefit of the doubt on economic policy, notwithstanding our many warnings about cuts that go too far and too fast. They might have given him the benefit of the doubt even if they did not completely agree with everything he was doing. But how times change. The Chancellor has had several weeks of torrid headlines—The Mirror: “Half-baked Tory tax a mistake-and-bake from Osborne and co”; The Sun: “PM David Cameron is urged to show leadership over pasty-gate”; The Guardian: “‘Pasty tax’ is the last thing people need”; the Evening Standard: “Heston says pasty tax will stop artisan bakers earning a crust”; and even “Tax on beloved Cornish pasties sparks furore in Britain” in USA Today and “‘Pasty tax’ row heats up for British PM” on the al-Jazeera website.

[Mr Redwood]

Is the hon. Lady at all worried that the fine reputation of the pasty will be damaged by so many MPs trying to associate themselves with it and get their ratings up as a consequence?

[Cathy Jamieson]

I am sure that the pasty industry is looking on as we speak and will want to know exactly which MPs have gone and sampled the local delicacies in whichever part of the UK they happen to live.

Those weeks of torrid headlines have led us to the current situation. There is now a pasty petition, and there has apparently been a pasty summit, while Greggs is planning a pasty protest march on Downing street to plead with the Prime Minister to step in personally and kill off the hated pasty tax.

[Brandon Lewis]

rose—

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

You’ve had too many pasties.

[Brandon Lewis]

The shadow Chancellor is quite right. Does the hon. Lady not agree that in removing this VAT anomaly, it is only fair to protect the interests of the fish and chip mongers in places such as Great Yarmouth?

[Cathy Jamieson]

The interests of fish and chip shops have been raised on a number of occasions in this debate, and I am sure that plenty of people will want to patronise those local establishments. However, that does not get us away from the fact that the introduction of this measure has been an absolute shambles.

[Matthew Hancock (West Suffolk) (Con)]

Will the hon. Lady give way?

[Cathy Jamieson]

No.

[Ed Balls]

No, no—always take him.

[Cathy Jamieson]

I give way to the hon. Gentleman.

[Matthew Hancock]

I am grateful to the hon. Lady and to the shadow Chancellor for encouraging her to give way. I have a simple question: is Labour going to reintroduce this anomaly, should it ever win an election?

[Cathy Jamieson]

I am almost disappointed that I took that intervention, if that is the best that the hon. Gentleman can come up with.

We on the Opposition Benches like to be helpful, so we are going to give the Government the opportunity to step back from the current mess, which is entirely of their own making, and drop these ill-thought-out plans, which have led to more questions being asked about hot and cold snacks than anyone could have dreamed were possible.

Before I move on, and before anyone asks me when I last ate a pasty—or a bridie, as it would be in Scotland—I have a confession to make. I am one of Parliament’s three vegan MPs, so the delights—[Interruption.] I hear calls of “Resign!” The delights of the Greggs steak bake have passed me by, although it is a firm favourite with my son, and the cheese and onion bridie is a staple component of my husband’s diet. However, I am very grateful to Brownings the bakers, in Kilmarnock in my constituency, which, in advance of Kilmarnock football club’s recent cup final triumph, created a vegan Killie pie, to mimic the award-winning Killie pie, so that I would not go hungry—some Ayrshire colleagues on the Government Benches can see where this is going—while other Kilmarnock supporters were enjoying that award-winning local delicacy.

When I went along to the bakery to receive the pies, it never occurred to me that such delicacies would become the hot—or cold—political topic only weeks later. We have seen quotation after quotation from bakeries and other producers of hot snacks, warning the Government of the problems that the tax will create for them. Indeed, who would have thought that the Treasury Committee would be taking evidence from the Chancellor on what constitutes an ambient temperature? Efforts on Second Reading to clarify exactly what “the ambient temperature” means did not elicit much more information, although we did learn that the hon. Member for North East Somerset (Jacob Rees-Mogg), who I see is in his place, prefers sausage rolls to pasties. I am sure that that was very useful information, and it was interesting to find it out, but it threw very little light on the rest of the subject.

Notwithstanding the Chancellor’s attempt to explain his rationale on hot takeaways to the Treasury Committee—which makes for fascinating reading—we are still struggling to find out whether the hot roast chicken selected in the supermarket by my right hon. Friend the Member for Stirling (Mrs McGuire), to which she referred on Second Reading, would be liable for VAT if it had cooled down by the time she reached the checkout.

18:15

[Mrs Anne Main (St Albans) (Con)]

In successful pasty shops such as Pengenna’s in Bude, the pasties come out of the oven and people eat them hot straight away. They are not being kept hot; they are being delivered hot and fresh from the oven. Does the hon. Lady share my concern that that represents an anomaly?

[Cathy Jamieson]

The hon. Lady makes a good point, and it will be interesting to see how she votes at the end of the debate.

If I were to go back to Brownings, my local baker, and purchase two vegan Killie pies, one to eat there and then and one to take home for another day, would one or both be VATable, to use the term the Chancellor used before the Select Committee?

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

rose—

[Cathy Jamieson]

I will give way—I was going to say “to my hon. Friend”, but he is actually my former colleague from another place.

[Mr Wallace]

The hon. Lady will know that Kilmarnock has some of the best fish and chip shops in Scotland. If she were not a vegan, she would certainly know that. Is she really saying that her party wants to maintain the competitive disadvantage that her local fish and chip shops have? Is she really supporting the big supermarkets and chains that will put those small chip shops out of business by ensuring that that loophole is exploited?

[Cathy Jamieson]

I am sure that the hon. Gentleman patronises many of those chip shops on his regular visits to my part of the world—and sometimes to my constituency. I hope that he will go to Brownings the bakers and have a Killie pie, if he has not already had one. The point that he makes does not negate the fact that it is primarily the smaller bakers—the so-called artisan bakeries and those that produce traditional products—that are going to have a problem as a result of this tax.

I want to return to my point about whether one or both of my two vegan Killie pies would be VATable. I am unsure whether “to VAT” is actually a verb that would provide us with the word “VATable”. I am, however, aware that the word “ambient” has its roots in the Latin word for “going round”. The Chancellor’s reputation, if not his ambitions for the future, seems to be going round in ever-decreasing circles as a result of this furore.

The Treasury Committee employed its usual straightforward way with words when it stated:

“We recommend that, where changes to complex areas of taxation are proposed, the greatest possible supporting material be published to allow for greater scrutiny of the possibility of unintended consequences.”

Those are extremely wise words—[Interruption.] I am happy to take an intervention from those Government Members who are mocking the wise words of the Treasury Committee.

[Sir Alan Beith (Berwick-upon-Tweed) (LD)]

Am I to understand from what the hon. Lady is saying that the Labour party is making a costed commitment to remove the tax from pasties, and to ensure that there is no anomaly by also removing it from fish and chips and from every other foodstuff as well?

[Cathy Jamieson]

I have to confess that, the last time I looked at the Labour party manifesto, it did not mention fish and chips, or pasties, or bridies. We are absolutely clear that this tax will do nothing to support those local industries and that it will place yet another burden on hard-pressed customers.

[Julie Hilling (Bolton West) (Lab)]

Does my hon. Friend agree with John Carr, the managing director of Carr’s pasties in Bolton, that when VAT was introduced on food in 1980, it was a total mess? It meant, for example, that biscuits were deemed a luxury although cream cakes were not. Will not this change in VAT create an even bigger mess? Is it not a ridiculous measure to have introduced?

[Cathy Jamieson]

I thank my hon. Friend for that intervention. I want to give plenty of opportunity for Back Benchers to contribute to the debate. It is not just a debate about pasties; it is also about caravans. I know that many Members will wish to speak on that issue because of its importance for their local industries. [Interruption.] I would be happy to take an intervention from Ministers or from one of those senior Tory MPs quoted as having met the Chancellor today to lobby on the issue of caravans. Does anyone want to give us an update on that? No, I see no takers at the moment. Perhaps we will hear about it later. [Interruption.]

[The Temporary Chair (Sir Roger Gale)]

Order. I am sorry to interrupt the hon. Lady again. The hon. Lady must be heard, and she really should not have to shout from the Dispatch Box to put her message across. Many Members on both sides of the Committee want to participate in the debate. Whether or not they are called will depend to some extent on their behaviour in the Chamber, and it will also depend on the amount of time available to us.

[Cathy Jamieson]

Thank you, Sir Roger. I will do my best to bring my remarks to a speedy conclusion so that others can contribute.

Let me briefly mention other issues. I have already mentioned caravans, but building work on churches is also important, and I know that some colleagues will speak about it later. One other area, if I can be pardoned a very bad pun, not yet highlighted in the headlines is the whole issue of hairdressers’ chairs. I mention it simply because the Government’s proposal shows once again a lack of understanding of the operation of many small businesses.

People and women—and it is often young women—starting out on their hairdressing careers, perhaps on their first business opportunity, often rent a chair in a larger salon. I see some nods of agreement from Government Members. It is welcome if some of them understand the issue, but it does nothing at all to help those people setting out on their first business venture if they suddenly find that they are going to have to pay more costs. The National Hairdressers Federation has highlighted further anomalies. Conservative Members might not be aware of it, but it is common practice in hairdressers’ businesses to rent out space not only to other hairdressers, but to others in the beauty and therapy professions. The anomalies highlighted by the NHF are made worse by the Government’s proposals.

[David Morris (Morecambe and Lunesdale) (Con)]

I can tell the hon. Lady of a loophole that has needed closing for many years. Although it is possible to rent a chair in the hairdressing industry, the problem has been that VAT is levied on the premises. I think it is right to place it on the individual because these people operate individually.

[Cathy Jamieson]

I am slightly surprised to hear that from the hon. Gentleman. All I wanted to do in raising this particular issue was to make the Government recognise that the consultation, which has been brought forward, amounted to too little, too late, and that it would have been far better if it had been done earlier.

Back Benchers want to contribute, so I shall close in order to give them the opportunity to speak. It would be useful, however, if some Conservative Members were able to give us an update on the meeting apparently taking place today. Will there be a change of position? Will the Government withdraw, particularly from the caravan tax, but also from the other ill-thought-out taxes? Once again, I see no one seeking to intervene on this particular point, so I shall finish and allow others to raise further issues.

[Peter Aldous (Waveney) (Con)]

I am grateful to be called to speak. I shall restrict my comments to new clause 6 and the proposed application of VAT to the sale of static holiday caravans from 1 October. My interest is a constituency one, as I fear that the impact of the measure will be far greater than HMRC has estimated.

I have received representations and expressions of interest from a variety of parties. These include Hoseasons, one of the largest holiday providers in the UK, which is based in Lowestoft in my constituency; and five park operators, including the chairman of my own constituency Conservative association, who has herself written to the Treasury and a number of other Members. Small and medium-sized enterprises, including painters and decorators, and a bank are also concerned about the impact of the proposal on business viability.

Let me make three observations. First, I fear that HMRC’s assessment of the impact of the change takes full account of neither the whole supply chain serving the industry, nor the fact that the industry is concentrated in specific geographical areas that will be hit very hard. Some of those areas are pockets of deprivation and unemployment, and many are coastal communities such as my constituency, where tourism is a vital component of the local economy.

The supply chain includes manufacturers who are located almost exclusively in the UK—mainly in the Humberside area—wholesalers, and park operators. In recent years, the sale of static caravans has become a vital part of park operators’ businesses. Without such sales the future of some businesses will be at best uncertain, while others will cut both staff and the reinvestment in facilities that is so important if they are to continue to attract customers and ensure their own financial viability. Trading conditions have been very difficult for those operators in recent years, and the introduction of the new tax on 1 October, following so soon after the imposition of VAT on pitch fees, rates, and water and sewerage bills on 1 January, would contribute to a double whammy.

I am especially concerned about the fact that HMRC’s assessment takes no account of the numerous SMEs that work in the parks. There are builders, decorators, plumbers, electricians, people who fit carpets and curtains, and people who service plant and equipment. We should also bear in mind that many of those who work in the parks—admittedly on a seasonal basis—are young people gaining their first experience of work. An unintended consequence of the measure could, in some cases, be the removal of that vital first rung on the employment ladder.

[Mr David Hanson (Delyn) (Lab)]

In my part of north Wales, the projected 30% drop in sales shown by the Government’s own figures will have an impact on new purchases. Those who come to north Wales do not just buy static holiday homes; they buy cars and go to restaurants, pubs and shops, and their income and expenditure help to boost our economy. That will hit the hon. Gentleman’s constituency as well.

[Peter Aldous]

I shall come to that issue in a moment.

My second point is that HMRC’s analysis fails to take account of the vital role played by static caravan owners in a local economy such as that in Waveney. They are, in many respects, the “anchor tenant” for the whole tourism industry. They come to stay in the area for most weekends, and they do not limit their visits to the summer season. They spend money in local shops, restaurants and pubs, visit the many day attractions in my area such as Pleasurewood Hills and Africa Alive, or spend a day on the beach or boating on the Broads. A reduction in their numbers would have a significant knock-on effect on the many businesses in the area.

Finally, I believe that the rationale for the introduction of the tax is flawed. It is claimed that it addresses an anomaly, as touring caravans are subject to VAT while static caravans are not. However, the industry has come a long way since 1973, when the VAT exemption was first made, and I believe that today’s static caravan has more in common with a holiday home than with a mobile caravan. Static caravans are more like second homes in terms of their facilities and the nature of the accommodation, the investment that their owners have made in them, and the way in which they are used—not just for once-a-year holidays, but for regular visits throughout the year.

[Albert Owen (Ynys Môn) (Lab)]

Another consequence of the tax is that those who currently buy caravans to use as second homes would actually buy second homes. That would raise the price of affordable homes, especially in rural areas such as the hon. Gentleman’s constituency.

[Peter Aldous]

I am not sure that I entirely agree with the hon. Gentleman. The problem with many second homes is that they are very expensive. What worries me that, certainly in my area, people would go abroad for holidays. They might even buy a villa in Spain, which really would be cheap, and the whole tourism industry would be affected.

In many respects, the current tax treatment of second homes and statics is, by chance, similar. The former pay stamp duty, while the later pay VAT on movable items only. To change that balance would unfairly penalise this group of people. Many of them cannot afford a second home, yet they are similar to second-home owners in so many ways. Such a move would be regressive in taxation terms.

In summary, I believe that the impact of this proposal will be far greater than HMRC’s assessment implies. It will have a significant negative effect on the economy and on jobs in specific locations around the country, including my constituency. Further, I question whether the anomaly it is intended to address actually exists. I therefore urge the Government to think again, and to allow a vital industry to continue to play a key role in securing the economic recovery.

18:30

[Alan Johnson (Kingston upon Hull West and Hessle) (Lab)]

I join the hon. Member for Waveney (Peter Aldous) in supporting new clause 6, and I wish to make a few brief points.

First, on the anomaly issue, in the early ’70s a Conservative Chancellor looked at towable caravans, which are VATable, and residential caravans, which are not, and decided that so-called static caravans should be classified as residential property and therefore not be subject to VAT. In the ensuing 40 years, every Chancellor, both Labour and Conservative, has made the same decision.

In the global recession of 2008, the caravan industry was hit hard. In my neck of the woods, east Yorkshire, we know how difficult that was. I took a delegation to meet the well-known caravan user Lord Mandelson, to make the argument that the industry needed a bit of help from his Department—which was not at that time known as the Department for Business, Innovation and Skills. [Interruption.] Yes, yachts were his main form of holiday. In the entire history of the caravan industry, so great has been its feeling that it could survive independently without Government help that not a single official in the whole vast empire of that Department knew anything about it. Frankly, apart from a bit of tinkering around the edges of the car scrappage scheme, there was not much that we could do for the caravan industry. As a result, companies went bust, people went bankrupt and the supply chain was hit very hard.

Through its own efforts, however, the industry is now getting its head back above water. Atlas Leisure Homes in my constituency went into receivership in 2008 and lost 250 jobs. It has fought its way back and now employs 120 people in an area that has been badly hit by unemployment. Companies in the supply chain have had similar experiences. Meadley International Transport is involved in distribution. It is run by a father, his son and his daughter. He put in the whole of his pension and all his assets to get Meadley through the global downturn, and it, too, is now getting its head back above water.

This measure will destroy Atlas and Meadley. It will destroy small businesses across the country. It will destroy an industry that is almost the last purely British success story in the manufacturing sector. Some 95% of UK caravans are made in this region. In 2008 and 2009, people did not decide not to buy a caravan; they deferred that purchase. If those companies had gone out of business, German and Dutch firms would now be prospering from the fact that a market is developing again.

[Karl Turner (Kingston upon Hull East) (Lab)]

As my right hon. Friend will know, I have three such manufacturers in my constituency. One of the biggest is Willerby Holiday Homes. It is based in east Hull and employs 700 people. I spoke to its chief executive today. He tells me the firm has been operating a three-day week since the banking crash in 2007, but he hopes it may return to full-time work in the next few months. He says it is ridiculous to expect that to be able to happen if this VAT measure is introduced.

[Alan Johnson]

My hon. Friend raises a crucial point. I say the following to those on the Treasury Bench: this was meant to be a Budget for manufacturing; it was meant to be a Budget for growth in the British economy; it was meant to be a Budget that ended some of the anomalies in the north-south divide.

How can we go ahead with this measure, given that hon. Members in all parts of the House know the effect it will have on jobs and British manufacturing, and know that the savings of about £40 million to £45 million set out in the Treasury’s own document will be far exceeded by the costs in unemployment, waste and redundancies throughout the country? How can the Treasury possibly decide, after 40 years of looking at this, that this is the year in which it needs to put the price of caravans up? Again, its own figures show that that will lead to a 30% reduction in demand, although the National Caravan Council says that the real figure will be more like 75% or 80%. I believe Treasury officials now understand that their own analysis was deeply flawed.

[Diana Johnson (Kingston upon Hull North) (Lab)]

As a Hull MP, I wish to stress that we are facing job losses in so many private sector businesses, from BAE Systems, Comet and P&O to many others across the city. It sounds as if we may end up with thousands more job losses as a result of this measure, and we really cannot afford to see that happen in our city.

[Alan Johnson]

My hon. Friend is right because, on the Treasury’s assessment, more than 1,000 jobs are going to be lost. Some 90% of this manufacturing industry is based in east Yorkshire. I say to those on the Treasury Bench that this is not an industry that has asked for help from the Government—indeed, in 2008-09, it had to pull itself up by its bootstraps. Having done that, this is not a question of its asking the Government for any help; it is about asking the Treasury and the Government not to inflict on that industry a possible death blow to a great British manufacturing success story.

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

It is my pleasure to follow the other speakers. Like all those who have spoken so far, apart from those on the Front Bench, I shall speak to new clause 6 and the proposal that the Finance Bill should set out that this House will not approve, in a future statutory instrument, the imposition of VAT on static caravans. So much has already been said, but I must point out that my constituency contains ABI, a major manufacturer in the heart of Beverley; companies in the immediate area that are part of the supply chain; and a series of parks along the Holderness coast that depend for their profits on the sales of static homes, as we discover when we speak to the owners.

The Treasury’s assessment of the impact of introducing the VAT is that there would be a 30% reduction in sales. When we think about the employers in the various constituencies in Hull, in my constituency and in those of my right hon. Friends the Members for Haltemprice and Howden (Mr Davis) and for East Yorkshire (Mr Knight), we find that so many companies are involved. More than 90% of the production of static caravans in the UK is concentrated in east Yorkshire and, as has just been said, so successful is this industry in the UK that nearly all the caravans that are bought and installed in the UK are built there. So my constituency has a great concentration of all those who may suffer from a 30% reduction in demand—manufacturers and all the people who work in that area, suppliers, and the parks themselves.

[Glyn Davies (Montgomeryshire) (Con)]

I associate myself with the concern that my hon. Friend is showing and that many of my constituents also show. Does he share my concern about the disruption around the introduction date that will be caused to the manufacturing side of the industry? Does he share my hope that in the intervening period Ministers will examine ways in which they can limit that disruption?

[Mr Stuart]

I am grateful to my hon. Friend for his intervention, but I am not looking for Ministers to limit that disruption; I am looking for them to remove that disruption altogether. However, he is right to mention the date. We are talking about a major manufacturing business. We are talking about businesses with 700 staff involved in tooling up, buying in the resources and planning their production, yet we are facing the introduction of this VAT on 1 October. Let us imagine the impact on the supply chain; imagine the impact on ordering; imagine the eddies of people looking to beat the deadline and at the same time destock to make sure that they do not hold stock on 1 October when whatever product they have will be 20% more expensive and potentially unsaleable.

[Miss Anne McIntosh (Thirsk and Malton) (Con)]

I have been listening very carefully to my hon. Friend. Is he concerned that, as in my constituency, the business plans for this year of businesses that have static caravans and want to increase their numbers will be completely in ruin?

[Mr Stuart]

My hon. Friend is right. We have heard examples of managing directors of companies being called in by their banks to talk about lending provision because of the threat and uncertainty that this measure brings. It will be extremely disruptive to a fantastic British manufacturing success story. Let me go through the process. The supply chain is in the UK. It is very much concentrated in east Yorkshire but hundreds of people are employed by suppliers elsewhere in Yorkshire and across the country.

[Andrew Gwynne]

The hon. Gentleman is making an eloquent case regarding the supply chain, which is indeed spread right across the United Kingdom. Let me draw to his attention the correspondence I have had from a company called Phantom Ltd, based in Reddish in my constituency, which supplies security and safety systems to the leisure market, including the caravan market. It says that the VAT increase could be “devastating” for its business and that its

“plans for expansion will be severely curtailed and new employment opportunities will be lost.”

Is that not the reality of these measures for the wider supply chain?

[Mr Stuart]

I fear that the hon. Gentleman may be right.

As I was saying, there is the supply chain and manufacturers, all of which are UK-based, then there is the sales channel and the deployment of the end product. Where? That is in rural and often coastal areas and areas with low incomes all over the country. What is the effect? It is to bring people, once they have made the capital investment in a caravan, to visit those areas week in, week out, bringing all sorts of economic benefits to areas that otherwise do not have a lot of industry to fall back on. When one looks at the industry in the round like that, one sees that it is special. Perhaps everybody says that, but we must consider how successful it is and who it serves. I have not even got to the point about who will be affected. We are talking about people who want to make a purchase of a home for about £30,000, not people who can switch easily to making a bricks-and-mortar purchase. When the tax-dodging, socialist, multi-millionaire candidate for the London mayoralty goes off to console himself by buying a cottage, he will not have to pay VAT, but when hard-working, decent people who like to pay their taxes go to get a slice of the decent life and have a stake in the countryside they will find that the caravan they want to buy at £30,000 now costs £36,000.

[Mr Alan Reid (Argyll and Bute) (LD)]

The hon. Gentleman is making his case eloquently. In my area, which is a large, rural, coastal area, there is a large number of caravan sites, which bring a lot of money into the local economy. He is right that this measure will affect large parts of the country. I fully support him in his new clause and I hope that the Government will have second thoughts.

[Mr Stuart]

I am grateful to my hon. Friend.

[Andrew George (St Ives) (LD)]

I, too, have put my name to the new clause. Is the hon. Gentleman aware of the anomaly in areas such as mine where there is a planning restriction on occupancy where static caravans exist, making them ideal for people who want to use them for holiday homes? Under the measure, static bricks-and-mortar constructions will not be subject to the same level of taxation, so the measure will benefit those who can afford to have a second home and will therefore have an impact on the availability of housing for local people, whereas the presence of static caravans does not impact on the local community in the same way.

[Mr Stuart]

My hon. Friend is quite right. That is why the hon. Member for Ynys Môn (Albert Owen) has a fair point. Some people will be able to afford permanent housing, thereby further pressurising the housing market in areas where such housing is limited. Static caravan parks have been a perfect arrangement, because they allow both the local community and people from outside to benefit. They have meant that the local worker who is looking for a house—often someone who works at a caravan park—has been better able to find a house.

[Chris Bryant]

I hope the hon. Gentleman will accept that in some cases people will not be making choices but will have absolutely no choice. In my mother’s case when everything had gone wrong in her life and the only money she had was the money she was going to spend on a static home, the difference between £30,000 and £36,000 would have been the difference between homelessness and having a home.

18:45

[Mr Stuart]

I am grateful to the hon. Gentleman, although properly designated permanent homes will continue to be VAT-free. We are talking about static holiday homes that are not supposed to be a main residence, although there are people in my constituency and elsewhere who are occupying under false pretences, whether misled by the owner of the park, as sometimes happens, or having allowed themselves to be misled.

[Nadhim Zahawi]

I am listening carefully to my hon. Friend. What would he say to a dealer and park operator in my constituency who said that we cannot defend the anomaly for what is deemed a luxury purchase? They want a bit more time for consultation and forward planning. The idea that a towable caravan is VATable, but a static one is not is indefensible.

[Mr Stuart]

In truth, if we were starting with a blank sheet the tax system would look nothing like it does today, but we are not starting with a blank sheet. We have an industry with the characteristics I have described, yet at this of all times we are about to introduce VAT. Will it raise £500 million or £1 billion towards the massive deficit left to us by Labour? No. At best, it will raise £45 million a year while damaging the economy in east Yorkshire and in rural areas across the UK. As a practical politician, keen though I am on tax simplification, it is not obvious to me that this particular simplification is justified now. It is not, and the Government should think again.

The Government are consulting; they accept that they do not have all the answers and the proposal is out for consultation. The shadow Chancellor may not take it at face value that the Government are serious and that they are consulting properly, but I do. I have met the Chancellor and he has told me that that is the case, so I call on the Government to listen to the representations from the Chamber today and to those that will come from the industry over coming days and weeks, and to think again. Given the appalling inheritance from the shadow Chancellor, there is no embarrassment in looking hard at every area. There is a good intellectual case for the proposal in theory, but in practice it is a bad idea. It will not bring in enough money. It threatens many jobs and it should be rejected, as I am sure it will be.

[Mr Greg Knight (East Yorkshire) (Con)]

There is a lot to be said on the issue, so does my hon. Friend agree that the Government would be wise to extend the consultation period?

[Mr Stuart]

My right hon. Friend is right. Having secured from the Chancellor an absolute commitment that there will genuinely be consultation, I ask the Government to extend the period and allow us to make the strongest possible case. It will also allow us further to expand the coalition in the House. Ministers will be aware that there is strong feeling in the Committee today that the proposal should be reconsidered. I look for a sign that they recognise the strength of feeling in the Chamber. The proposal does not make economic sense; we have not one but two enterprise zones in east Yorkshire. Why? It is because of the difficulties of unemployment in our area.

We have had great news. In all the years under the Labour Government when they spent so much money, did they reduce the tolls on the Humber bridge? No, they did not, but this Government have made the right decision. They are putting in commitment. This is a Budget for growth. It is a Budget that takes people out of tax. It is a Budget that reduces corporation tax. It is a Budget that will create employment in east Yorkshire, which is why we must make sure we get all the detail right. I am grateful that the Government are consulting. I recognise that it is a sign that they see room for manoeuvre. I want them to extend the consultation period and I look forward in due course to their finding other ways of dealing with the vast deficit left behind by the incompetents who sit on the Opposition Front Bench.

[Several hon. Members]

rose—

[The Second Deputy Chairman of Ways and Means (Dawn Primarolo)]

Order. A large number of Members wish to participate in this debate, which ends in one hour. I ask Members to make shorter speeches in order to accommodate their colleagues, so that the Minister can hear all the views. Interventions from now on must be short, or I will stop the Member from speaking at length on an intervention. I hope that helps the debate.

[Karl Turner]

I shall speak to new clause 6. I am delighted to follow the hon. Member for Beverley and Holderness (Mr Stuart), although I disagree with some of the points that he makes.

This was certainly not a Budget for jobs and growth. For hon. Members on the Government Benches to make that point time and again, as they do, shows me and my constituents how out of touch they are. On the subject of VAT on static caravans, I have three manufacturers based in Hull East. One of them, Willerby’s, the biggest manufacturer, has 700 staff. I said in an earlier intervention that the firm had gone from a full working week to a three-and-a-half day week. The firm tells me that it is probably ridiculous to suggest that there is a possibility of returning to a full working week if the proposed VAT is implemented on 1 October.

I want to address the question of whether there really is an anomaly. I do not think there is. I do not think people buy static caravans for the same reasons that they buy trailer caravans. A static caravan is often a second home, but if I accept that there is an anomaly, surely there should be time for a proper consultation and an opportunity for people to think about the impact on their businesses and jobs. It is the wrong time, while the economy is flatlining, to try to deal with an anomaly, if that is what it is. We need jobs and growth in this country. We do not need a savage attack on manufacturing industry.

[Helen Goodman (Bishop Auckland) (Lab)]

Does my hon. Friend agree that a Budget which increases taxes on static caravans and pasties, but cuts taxes on ski lifts tells us far more about the consumption patterns of those on the Government Front Bench than anything else? The Chancellor said he has never eaten a pasty. Has my hon. Friend found out whether the Chancellor has ever stayed in a caravan?

[Karl Turner]

My hon. Friend makes an excellent point.

The Government’s impact assessment suggests that sales will drop by 30% as a result of VAT on static caravans. That would be disastrous for the static caravan manufacturing industry in Hull. I appeal to the Government to listen to the representations that have been made from both Members Opposition and Government and to think again. The measure will be disastrous for that industry.

[Stephen Gilbert (St Austell and Newquay) (LD)]

I shall speak to new clause 5, in my name and the names of all Cornish MPs. We have a Cornish coalition moving forward to try to protect the Cornish pasty. The proposals from the Government are, I fear, unfair and unworkable and will be bad for the economy of Cornwall.

Let us consider the economic impact first. Cornwall is already an extremely disadvantaged part of the United Kingdom, being the only part that qualifies for convergence funding, yet the 86 million pasties that are produced contribute £37 million directly to the Cornish economy, and the 40 Cornish Pasty Association members turn over £150 million a year.

[Sheryll Murray (South East Cornwall) (Con)]

Does my hon. Friend agree that the small bakeries in our town centres and villages are keeping or helping to keep those town centres and villages alive? This measure could push them beyond economic viability.

[Stephen Gilbert]

My hon. Friend makes an entirely relevant point. Some 2,000 people in Cornwall are employed directly in the production of the 84 million pasties a year and that 2,000 does not count the many scores of others who work in bakeries on the high streets of many towns across Cornwall.

We know from YouGov research that 32% of people said that they would stop buying pasties altogether if the VAT extension went forward. Let us assume that one in three is too high a number and that there is a 20% fall in sales. What will that mean? The Cornish pasty producers will lose £30 million a year, £7.5 million will be lost in secondary spend in the Cornish economy and 400 jobs will be lost directly in the industry.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

The hon. Gentleman will appreciate that we also have a pasty industry in Devon. He is talking about job losses and I have already come across workers for pasty companies in Cornwall who live in Plymouth and who are already on a three-day week. It is already having an impact and it will get much worse.

[Stephen Gilbert]

The hon. Lady makes an accurate point. Pasty producers tell me that they are already feeling the squeeze. They are feeling the same pressures as us all through fuel costs and so on. They simply do not feel that they can reduce the net price and therefore absorb that extra 20% so there are serious concerns that it will add problems to an already damaged industry.

The Government’s change is supposed to be about simplification and replacing the subjective test of the purpose of selling the pasty under the current VAT rules with a much simpler test, but in fact we are only replacing one set of anomalies with another. VAT will be charged if the pasty is bought hot but not if it is bought cold. Will we have an army of HMRC inspectors going around with their standard issue thermometers and testing pasties?

[Nadhim Zahawi]

In my constituency, the Subway franchisee sells cold sandwiches without VAT and must charge VAT when the sandwiches are heated. Spudulike has to charge VAT. The idea that when one serves hot food one has to charge VAT—even in the chip shop in Stratford—is only about levelling the playing field—

[The Second Deputy Chairman of Ways and Means (Dawn Primarolo)]

Order. That is not brief enough and interventions should ask a question.

[Stephen Gilbert]

I understand the point that my hon. Friend is trying to make, but there is a big difference between eating cold fish and chips, which would not be very pleasant, and eating a cold pasty, which, when it is a good pasty, can be enjoyable. My hon. Friend will also see in the amendment paper that I have not tried to oppose any simplification in this area. I have tried to be helpful to the Government by suggesting that no VAT should be charged on products when no effort is made to keep the product warm. By phrasing it in that way, my intention was to encourage the Government to think again about whether we can achieve the aim of hitting the sale of rotisserie chickens while keeping an exemption for baked products. Perhaps when he sums up, the Minister will be able to tell me that he has considered my suggestion and that there are some good reasons why he would agree with me, but I doubt it.

This unfair tax unfortunately plays to the perception that some Government Members do not understand what day-to-day life is like for millions of people in our country. It plays to the perception that an attack is being made on quite an iconic Cornish dish. This is not just about the Cornish pasty, but about the meat and potato pie of my hon. Friends in the north and, as we heard from the Opposition spokesperson, the Scottish bridie. I simply think that the Government do not understand that millions of people eat those every day as part of their routine. We need to reconsider whether we have the balance right.

When my right hon. Friend the Chancellor visited Cornwall in 2008, he said:

“Cornwall is having a tough time with the economy and businesses are finding it hard. There are things that the Conservatives can do.”

I am desperately proud to be part of a coalition Government who have introduced a local enterprise partnership in Cornwall, produced an enterprise zone in Newquay, taken 19,000 Cornish people out of income tax, delivered a council tax freeze and made sure that Cornwall is the first part of the country to have access along its entire length to superfast broadband, but, when my right hon. Friend the Chancellor says that there are things that the Conservatives can do, I ask, please, that this is one thing that the coalition Government do not do. I shall request a separate Division on new clause 5.

19:00

[Mr Ben Bradshaw (Exeter) (Lab)]

I rise to support new clause 7 in my name and those of several other right hon. and hon. Members.

The upkeep of our beautiful and historic buildings is vital to the preservation of Britain’s unique cultural heritage, and it is often done, particularly in the case of churches, thanks to tireless fundraising by volunteers. Raising VAT from 0% to 20% on alterations to our churches and other historic buildings, at the same time as the Government are making fundraising harder with their cap on philanthropy, represents a double whammy to our heritage sector and a dreadful blow to our historic churches—and cathedrals, in particular.

Our great churches and cathedrals are not just historic piles of bricks and mortar or even just places of worship for the few. They are among our most important tourist attractions, bringing thousands of overseas visitors to Britain every year, and well-run major churches and cathedrals, such as the stunning cathedral in Exeter, open their doors constantly to the local community and provide a vital public service. They are our greatest physical symbol of the big society.

I can think of countless occasions in Exeter—for example, a service of thanks for the work of the Royal Marines in Afghanistan, or a funeral for a local teenager tragically murdered—when the cathedral has been packed to the rafters with local people in celebration or in grief. It is a unique service not provided by any other institution.

[Nicholas Soames (Mid Sussex) (Con)]

I wholly support the point that the right hon. Gentleman is making, and does he agree with me that the issue is about not just cathedrals, but small village churches with, in many cases, small congregations, who go to great efforts to raise large sums of money to make their facilities more usable for the rest of the community? Does he agree also that the proposed change is a pretty poor advertisement for the big society?

[Mr Bradshaw]

I absolutely agree.

The Government, in their consultation document, claim that the impact of the change on churches will be small, but that is not the case. Some 45% of grade I listed buildings in England are maintained by the Church of England, including 42 cathedrals. Their upkeep is incredibly expensive, and there are no central funds available for building maintenance.

A very large proportion of the alterations made to churches are about making them easier for the community to use, including, for example, installing disabled toilets, kitchens and so on, but the charge will also hit traditional skills and crafts, such as bell hanging and organ building. About £100 million is spent on those works annually, and imposing 20% VAT on them will add £20 million a year to those bills. In reality, much of the work will simply stop, and that will hit local churches, local communities and the building trade—and it will not raise a single extra penny for the Treasury.

The Prime Minister said earlier today at Prime Minister’s questions that the Government would be giving churches the money that they need to make up the loss, but that is also not the case. The compensation being offered in the Budget by extending the listed places of worship grant scheme, which currently refunds the VAT liable on repairs, is a wholly inadequate way to meet the extra cost that the VAT rise will create.

The Government have already cut the listed places of worship grant scheme by a massive two thirds, from £23 million to £7 million a year, and it already covers less than half the cost of current repairs.

[Jonathan Ashworth (Leicester South) (Lab)]

I am grateful to my right hon. Friend for giving way, and I suppose I should declare an interest as a patron of the St Peter’s project in my constituency, where we are trying to raise funds to make much-needed alterations and renovations to St Peter’s church in Highfields. There are already considerable pressures on the listed places of worship grant scheme, which is a very good scheme, but one problem with it is that when a church applies to it there is no certainty about the amount of grant that it will receive. Now that this change is being made, those pressures are only going to increase.

[Mr Bradshaw]

My hon. Friend is exactly right. As I said, the grant already covers only less than half of the cost of repairs, and the £5 million that is being offered to extend it to alterations covers only a quarter of the likely annual cost of those alterations.

A number of churches and cathedrals have already put on hold schemes that were planned or under way. My own cathedral in Exeter faces having to raise several hundred thousand pounds more for its exciting cloister project. The wife of the dean of Wakefield cathedral, which faces an extra £200,000 of costs for alterations, has famously composed a protest song about the VAT hike. The lovely little church in the small Herefordshire village of Llangarron, at which I attended Easter Eucharist, will have to find an extra £60,000 for a project that has been in the pipeline for seven years.

As 26 deans of cathedrals wrote in an unprecedented letter to The Sunday Times on Sunday, this change will seriously jeopardise the sustainability of many of our great buildings, not only for present-day use but for that of future generations. I urge the Government to think again on this very important matter, and I hope, Ms Primarolo, that you will help to facilitate the expression of the will of the House on it shortly.

[Mr David Davis (Haltemprice and Howden) (Con)]

I want to associate myself with the comments made by my right hon. Friend the Member for East Yorkshire (Mr Knight), by my hon. Friend the Member for Beverley and Holderness (Mr Stuart), and by my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson); I embarrass him again by calling him that. The proposal for VAT on static caravans will have a seriously deleterious effect on all of east Yorkshire, including Hull, dramatically cutting employment in the area at a time when we are trying to encourage growth and to balance the books. This proposal will do neither; in fact, it will reverse both.

This is a Finance Bill; the aim is to raise money. The latest estimates of the employment impact of this measure are that it will result in 4,000 to 7,500 job losses, of which 1,500 to 2,000 will be in the vicinity of our constituencies. The effect of that in financial terms is pretty straightforward to calculate. The Government estimate that they will raise £30 million to £40 million in VAT from this change. They will lose between £32 million and £65 million in lost national insurance, lost inland revenue, and extra welfare costs. It will therefore do the opposite of what the Budget is attempting to do. When I put that point to the Treasury, people said to me: “We don’t calculate things in that way.” That might sound silly, but there is a substantive point behind it—as I am sure that the shadow Chancellor, who is smiling, will know. Usually when one introduces a tax change that leads to job losses, people will, in due course, find another job. In east Yorkshire, two of the three Hull seats have dramatically high unemployment levels already, and the ratio of jobs available to unemployed people seeking them is one of the highest in the country. As a result, the resulting unemployment will not be short term but is likely to last for more than five years. We should calculate the effects of the proposal in this way because, for the foreseeable future, it will cost more than it will raise.

[Diana Johnson]

The right hon. Gentleman is making an excellent speech. Has he seen today’s report that 43 people in my constituency are chasing every vacancy? I set that figure alongside the comments that he is making.

[Mr Davis]

The hon. Lady makes a powerful point that I am not unfamiliar with. We have all been in similar battles over job losses at BAE in Brough and, in my constituency, job losses to the tune of 1,700 have been announced in the past six months.

This proposal does not stand up, on the Government’s own criteria. Accordingly, I support new clause 6 and will vote for it when it is put to the test.

[Albert Owen]

It is a pleasure to follow the right hon. Member for Haltemprice and Howden (Mr Davis). Although I agree with the contributions of Members on both sides of the House on the pasty tax and the church buildings tax, I will concentrate on the caravan issue.

As has been said eloquently by the previous speaker and my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson), the exemption was put in place for good reason. It has been left as it is because previous Chancellors have understood its importance, not only to manufacturing but to tourism. Those two important industries will be damaged if this proposal goes forward. I do not have the confidence of some Members who have spoken that the Chancellor will extend the consultation and that all things will be rosy. The effect of the proposal will be catastrophic for tourism across the United Kingdom.

[Alex Cunningham (Stockton North) (Lab)]

Chris and Helen Brown set up the Drovers Way holiday caravan park in my constituency just two years ago to diversify their farming business. They have an exciting business model, but they tell me that the VAT proposal will kill their business and put them out of work. What message does the Chancellor have for people like them?

[Albert Owen]

My hon. Friend is absolutely right. The people who have contacted me on this issue are not natural Labour supporters, but business entrepreneurs. The Government have said on numerous occasions that they want to encourage aspiration and to help entrepreneurs and those who want to take risks in business. Those are the very people who will be damaged by this proposal.

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

Does my hon. Friend agree that the problem relates not only to static caravans, but to mobile caravans? A company called Fifth Wheel in my constituency has just invested £1 million in the manufacture of mobile caravans. It has won 10 awards from the Caravan Club of Great Britain in the past 10 years and two awards from the Daily Post. Its legs have been knocked from underneath it by a tax that has been foisted on it without any consultation.

[Albert Owen]

I am grateful to my hon. Friend for making that point. I am referring specifically to static caravans, but he is right to say that this important industry includes mobile caravans.

A business that employs many hundreds of people across the United Kingdom, including in my constituency, wrote to me to say that 60% of its turnover comes from the sale of caravans. The proposal will be a huge knock to such companies.

Because of the time, I shall keep my remarks brief, but I want to raise one issue that has also been referred to by the hon. Member for St Ives (Andrew George). It will predominantly be the young people who work in this industry who will lose their jobs as a consequence of the proposal. Young people face many pressures in rural areas, especially in finding work and finding a home. Many people get a mobile home in such areas because they aspire to have a second home. They then rent it out to other people when they are not using it, which contributes to the local economy. However, in deprived areas where property prices are low, those people may transfer—because they want to come to beautiful places such as the Isle of Anglesey—

[David Morris]

Will the hon. Gentleman give way?

[Albert Owen]

I will not give way again; I have already given way twice and I want to finish my point.

People who visit places such as the Isle of Anglesey, which I represent, want to go to them regularly. They will therefore buy terraced houses or properties at the lower end of the market and force up the prices of those properties. That will put pressure on affordable housing. I do not think that that is an issue that the Treasury has taken on board.

This exemption is not an anomaly, but is meant to help the industry. If that industry suffers, many people in the tourism and manufacturing industries across the United Kingdom will suffer. We have seen headlines about the granny tax, the pasty tax and the charity tax, but this proposal is an Osborne tax. It was made in No. 11 and will have consequences across the United Kingdom. Tonight, Members on both sides of the House have the opportunity to vote it down. That is the strongest and clearest message that we can send the Chancellor of the Exchequer and his lieutenant. That is true not only of the caravan tax but of the pasty tax, which I will also vote against if there is an opportunity to do so tonight. Let us be consistent. The caravan tax will not raise extra revenue for the Treasury, but it will damage jobs, entrepreneurs, coastal areas of beauty that rely on tourism and areas that rely on the manufacturing of caravans.

[Gordon Henderson (Sittingbourne and Sheppey) (Con)]

I should like to draw to the Government’s attention a couple of anomalies in the VAT rules that they have created with their Budget proposals. That is quite ironic considering that the reason that Ministers have given for their proposals to change the current VAT rates for pies, pasties and caravans is to iron out such anomalies.

I start with hot food. The Government propose to amend note 3 in the existing legislation so that

“the current test for ‘hot takeaway food’ which is based on the purposes for which food is heated becomes a simpler and more objective test based on whether the food is above ambient air temperature at the time it is provided to the customer.”

That suggestion is nonsense, and I will explain why.

19:15

I have in my constituency a baker who has a very small shop in which he bakes bread, pies and pasties. He takes his baked products out of his ovens and lets them cool in his glass-covered but unheated serving counter. My constituent, being a good citizen, starts baking his products at 5.30 in the morning, so by the time he opens at 9 o’clock his products are cold before he sells them to his customers. Sometimes his customers want a hot pie, so my baker friend has a microwave oven that he uses to heat up their pie. He then religiously—I have seen him do it—records that the sale of that pie is subject to VAT.

However, when he is busy, my baker friend has to bake a second batch of pies to replenish his stock. If he is really busy, his customers snap up those pies before they have time to cool down. Under the existing regulations, my baker friend does not have to charge VAT on that batch of pies, but it is unclear whether he will have to do so under the new regulations. To be honest, my advice to him was to carry on operating exactly as he does now, but it would be good if the Exchequer Secretary could clarify exactly what his new proposal actually means.

The Exchequer Secretary might also like to explain what is meant by “ambient temperature”, because that is where the new regulations threaten to cause anomalies. For instance, the ambient temperature in my baker friend’s shop is very hot, because his shop is so small that the ovens heat it up. Because he has no air conditioning, the temperature in his shop is even hotter in the summer. Further along the high street, there is a branch of a national chain of bakers, which is larger and air-conditioned, so the ambient temperature there is much lower. That means that under the new rules, one shop in my high street will be able to serve pies at a higher temperature than another without charging VAT. The new rules also mean that both shops can serve hotter pies without charging VAT in the summer than in the winter, when the ambient temperature is much lower. If that is not an anomaly, I do not know what is.

How will the proposed regulation be monitored? Are we going to see hordes of VAT inspectors armed with thermometers swooping down on bakers’ customers as they leave the shop and sticking their thermometers in their pies to see whether they are hotter than the ambient temperature?

[Mark Garnier (Wyre Forest) (Con)]

My hon. Friend may be interested to hear that the written evidence given to the Treasury Committee by the Institute of Chartered Accountants in England and Wales states that these VAT changes are broadly sensible reforms

“but will still leave plenty of anomalies”.

[Gordon Henderson]

I can only agree with that:

I accept that there is an argument for trying to address the current situation whereby some shops sell hot pies without charging VAT but others, such as my local chippy, have to charge VAT on the hot pies that they sell. However, the Government’s proposal is not an answer. Nor, sadly, is the Opposition’s new clause 1, which is why I cannot support it. I very much hope that the hon. Member for Pontypridd (Owen Smith) will withdraw it, and that he and his colleagues will support new clause 5, which I believe would achieve the Government’s objectives while protecting businesses such as that run by my friend.

[Andrew George]

I am pleased that the hon. Gentleman will be supporting new clause 5. As he knows, no one eats fish and chips cold, but a lot of people eat a good pasty cold. In fact, they are delicious cold. A lot of people go to the many pasty bakers in my constituency, buy pasties hot, take them home, put them in the freezer and use them later. The Government’s proposal clearly does not address that type of consumption.

[Gordon Henderson]

I am pleased that the hon. Gentleman agrees with me that the proposal is nonsense, but I want to move on to caravans, which are important to my constituency.

The Government’s proposal is allegedly to iron out an anomaly by ensuring that the sales of holiday and leisure caravans are taxed consistently at the standard rate, but once again, it simply creates another anomaly, which I will describe in a moment.

The proposal must be one of the most ill-conceived and badly thought out of all the proposals in this year’s Budget. We have been told consistently that the Government want to help coastal communities, which have become increasingly deprived over the past couple of decades, and which often have a higher level of unemployment than other areas. The Isle of Sheppey in my constituency is one such coastal community. As I have mentioned in the House on a number of occasions, unemployment on the Isle of Sheppey is among the highest in the south-east of England. The island took another knock earlier this year when Thamesteel went into administration. To give them their due, both the Department for Business, Innovation and Skills and the Department for Communities and Local Government have been working hard with my local authorities to find ways of mitigating the closure of Thamesteel by encouraging the growth of other industries, but one of those industries is the tourism and holiday industry, which has declined over the past 40 years, since its ’60s heyday.

In recent months, we have seen the green shoots of recovery in our local tourism scene, boosted in part by the decision of Swale borough council to allow many caravan parks to extend their operating periods from eight to 10 months of the year. That decision gave caravan park owners a real incentive to invest in and upgrade their parks, but success in the caravan holiday business is reliant on a good mix of park-owned caravans for hire and pitches for owner-occupiers. The sale of holiday caravans will be very badly hit if they incur VAT at 20%, and, in turn, the park-owned business will be hit because operators will have to increase their hire charges to balance their books, driving away even more much-needed visitors.

Let us not forget that those visitors are not wealthy people; in the main, they are working class people who strive for a better life by having their own holiday home here in Britain. In my view, the policy has been dreamt up by somebody who has never holidayed in a caravan park, has no idea of how the holiday park business operates and has no conception of the disastrous effect the policy will have on many coastal and rural communities.

It is deeply ironic that the Government are striving to give coastal communities help up the ladder of prosperity while using their feet to kick away the very same ladder with this ill-thought-out proposal. I urge hon. Members to support new clause 6.

[Several hon. Members]

rose—

[The Second Deputy Chairman of Ways and Means (Dawn Primarolo)]

Order. May I just let Members who wish to speak know that I need to give the Minister time to reply to the debate and intend to call him at 7.40 pm? Hon. Members might therefore want to make their remarks slightly shorter.

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

I wish to speak principally to new clause 7, but, in passing, I associate myself with the remarks of the hon. Member for Sittingbourne and Sheppey (Gordon Henderson), particularly on seaside and coastal towns. I have received a letter on precisely those issues from my holiday village, Martin Mere, in Blackpool, which has caravan sites as well as wonderful beaches.

My right hon. Friend the Member for Exeter (Mr Bradshaw) eloquently described the broader issue. I do not want to dwell on the architectural glories of churches, but in my constituency, churches and places of worship have done immensely valuable work in adapting their buildings for community and voluntary sector use. That is why I was mystified when I raised the issue in Prime Minister’s questions today. He had a bizarre brief on swimming pools in Tudor houses. We do not have many swimming pools in Tudor houses in Blackpool, but we have many of the churches and places of worship to which I referred. Incidentally, although it will suffer massively from this proposal, this is not just an issue for the Church of England. Many of the reformed and independent Churches, the Roman Catholic Church and other denominations and religions also do immensely valuable work.

[Sir Alan Beith]

I declare an interest as chairman of the Historic Chapels Trust, which is restoring a Catholic church in Blackpool. Does the hon. Gentleman recognise that when alterations were taxed differently from repairs there was a perverse incentive to alter rather than merely repair, but that the Government could help a lot if they were prepared to put more money into the fund that churches can use to bypass VAT?

[Mr Marsden]

I thank the right hon. Gentleman for that intervention and I pay tribute to his work as chairman of the Historic Chapels Trust. I can only say, however, that I know of no examples in Blackpool where such a process has been the driver. The driver in Blackpool has been to make churches, such as the town centre church, St John’s church, and Holy Trinity church in South Shore, accessible for community meetings and so on. As has rightly been said, this is the big society in action.

Blackpool also has a Salvation Army citadel. It does an immense amount of good work, not least with the homeless community. If it wants to make alterations to its buildings to expand the outreach services and community use it currently offers, it will, as a result of this proposal, face a whopping 20% extra in VAT on any building or alteration work. That is a recipe for stopping all that good work nationwide. As I indicated to the Prime Minister earlier, that is shooting the big society in the foot. It is absolute nonsense.

My right hon. Friend the Member for Exeter referred to the listed places of worship grant scheme. I deplore Ministers’ attempt to cloud the issue by saying that they have thrown £5 million into the pot for the grant scheme. Treasury Ministers and the Secretary of State for Culture, Olympics, Media and Sport are perfectly aware that that will not address the issue, in any shape or form, of the losses that will be made under this process.

[Sir Peter Bottomley (Worthing West) (Con)]

Would it be appropriate for the Minister to say whether the Government consulted the Churches’ Legislation Advisory Service and whether they were aware that the Churches were responsible for nearly half the grade I listed buildings that this proposal will affect?

[Mr Marsden]

It would be absolutely appropriate, not least because there seems to have been scant consultation with any of the Churches or other religious groups or places of worship on this issue. Perhaps the Government would like to start taking notice of the e-petition on this issue, which already has more than 16,000 signatures. Anne Sloman, chair of the Church Buildings Council, wrote to the Chancellor last week stating:

“a very large proportion of the alterations to these buildings…are concerned with making these buildings viable for use by the wider community by installing meeting rooms, lavatories and kitchens. This is the Big Society in action. The imposition of 20 percent VAT…means…most of it will simply stop.”

In conclusion, this is a nonsensical policy. At the end of holy week, the Prime Minister piously talked about the Church in action, but at the same time he let this howler through in a Budget that he claimed to have read line by line. I appeal to the Treasury Front-Bench team, if it is worth appealing to them on this matter, to take notice of what is being said across the Committee. They ought to do a little more line-by-line consideration of this proposal’s perverse effects if they want to dissuade people from the general judgment often passed—possibly very cynically—that some officials and others in the Treasury do indeed know the price of everything and the value of nothing.

[Nicholas Soames]

I believe that there is a great deal in the Budget to applaud and support, but on this issue I wholly agree with the hon. Member for Blackpool South (Mr Marsden), who has just sat down, and the right hon. Member for Exeter (Mr Bradshaw), who put it very well. I also know that my hon. Friend the Member for Banbury (Tony Baldry) has written a powerful letter about this matter.

19:30

I understand entirely the Chancellor’s desire to make it a reality of public policy that methods and amounts of taxation should be synchronised and brought together. However, there must sometimes be occasions in our public life in this country when that is simply not possible, and that is the case when it comes to damaging the fabric of this country, which is what this VAT proposal will do. It will make things impossible for the churches and congregations the length and breadth of the land, and not just in the great cathedrals in the great cities, but in the small churches with small congregations, who, by the sweat of their brow, secure those buildings for the future. They make them the centre of their communities, the very places around which we on this side of the House—and, of course, those on the other side—want to bring to reality the whole concept of the big society.

[Richard Graham (Gloucester) (Con)]

Does my right hon. Friend agree that the churches and the cathedrals across the land play a vital role in regeneration, growing the economy and tourism, and contribute to our community in a number of different ways, which makes it essential that the Treasury looks on VAT for alterations with great compassion?

[Nicholas Soames]

They do all those things, but they are also places that represent the spirit of England down the centuries. To trifle with them in this way is really not a sensible thing to do, either for the nation at the moment or for the future.

I beg the Treasury Minister to consider whether it would not be worth while laying this measure aside and considering how better it might be to come up with a different scheme. As the right hon. Member for Exeter said, the listed places of worship grant scheme could not possibly compensate for the kind of money involved in imposing a 20% VAT rate on alterations. I urge my hon. Friend the Minister to view this issue with great care, to pay attention and to understand the feelings in this House and elsewhere in the country among people who give of themselves to keep such places going. They mind very much indeed, and their views should be heard and considered.

[Ian Lucas (Wrexham) (Lab)]

I wish to speak in support of new clause 2, which stands in my name. It deals with a long-standing campaign that I have undertaken alongside a charity in my constituency, Chariotts, which offers dial-a-ride-type services to disabled people and has been established for a number of years. It has become more and more successful, transporting people in wheelchairs and those with severe disabilities across the constituency.

The problem in recent years is that as the charity has grown, so has the likelihood of its becoming registrable for VAT in the near future. A VAT anomaly exists that is relevant to Chariotts, as well as other organisations across the country, which is that there is an exemption from VAT for public transport vehicles with 10 seats or more, but not for those with fewer than 10 seats. That means that a disabled passenger undertaking a journey in a small vehicle will have to pay VAT on the journey. When the charity becomes registrable, there will be a 20% increase for disabled passengers, which is extremely serious for individuals on fixed incomes.

I have raised this issue on many occasions in the Chamber, as well as with the Exchequer Secretary elsewhere. He told me in a written answer:

“No estimates have been made of the cost of extending this zero rate as long-standing formal agreements with our European partners prevent us from unilaterally extending the scope of our existing zero rates or introducing new zero rates.”—[Official Report, 28 November 2011; Vol. 536, c. 718W.]

That was quite a categorical no to extending the exemption, to go alongside the statement that European policy was preventing it from occurring. Imagine my astonishment, therefore, when I learned on Monday that the Budget introduces an exemption—a further VAT concession—for small cable-based transportation systems. Ski lifts and the like will benefit from a tax cut from 20% to 5%. There is to be a reduced rate of VAT for skiers on the piste. We have already heard about pasties and caravans. Now, for reasons that are unclear, the Government are giving a tax cut to people having a luxury holiday.

[Mr Reid]

Skiing is an important industry in the highlands of Scotland, and I am delighted at this tax cut.

[Ian Lucas]

I beg to differ. It will affect one particular sector. It is rather convenient that the Chief Secretary to the Treasury, who has Aviemore in his constituency, has been much more amenable to this tax cut than to a tax cut for disabled people not only in my constituency but in Skye, in the highlands of Scotland and right across the country. It is a disgrace that the Government said no to me when I asked for assistance for disabled people but then said yes to a request from the Chief Secretary to the Treasury, who has a major constituency interest. I want the Exchequer Secretary to tell the Committee how much this tax cut is going to cost the Treasury, and to undertake to look into the matter, for the benefit of disabled people and not of skiers.

[Several hon. Members]

rose—

[The Second Deputy Chairman of Ways and Means (Dawn Primarolo)]

Order. I remind Members that I will turn to the Minister at 7.40, which means that I will stop the Member who is making a contribution at that time.

[Andrew Percy (Brigg and Goole) (Con)]

I rise to support the comments that have been made by my right hon. and hon. Friends from across east Yorkshire, who have outlined the terrible impact that the so-called caravan tax will have on the county. For the sake of brevity, I shall not repeat their arguments.

Instead, I shall concentrate on a particular document that has caused me considerable alarm. It has also alarmed one of the park owners in my constituency. My constituency also covers part of Lincolnshire, which contains a large number of holiday parks that will be affected by the measure. The HMRC document that outlines a summary of the impacts says of the economic impact:

“This measure might lead to a small increase in the price of static caravans”.

Even I can do the maths on that one, even though my bank balance might suggest otherwise. Applying 20% VAT to the price of a static caravan is not a small increase; it is a considerable increase. One of my park owners told me that the manufacturers sell their units for an average price of £25,000. Doing the math, as the Americans would say, we discover that that will mean an increase of £5,000, which is not a small increase at all.

That same park owner also wanted me to pass on to Ministers a point that I thought we all understood—namely, that businesses make decisions based on the tax regime that is in place, and that they look forward and make those decisions for the many years ahead. Another of my constituents has invested £500,000 this winter to extend the number of pitches on a holiday park that currently has 450 pitches. He said that the tax change would make it almost impossible for him to continue to employ the same number of people that he does at present, or for that expansion, in a relatively depressed area, to go ahead. I urge colleagues across the House to vote tonight to save that industry.

[Frank Dobson (Holborn and St Pancras) (Lab)]

As the chair of the all-party parliamentary group on historic places of worship, I have been approached by people from all over the country and asked to come out against the proposal to take away the zero VAT rating on alterations to listed places of worship. Such alterations include improved access for the disabled, the installation of toilets and small kitchens, the provision of better heating and lighting and the introduction of more energy-efficient measures. They are not just for the congregation; they are for the whole community. They encourage the community use of religious buildings and make an increasing contribution to attracting tourists all over the country. These church buildings are vital, whether they be vast edifices like York Minster, of which as a York lad I am immensely proud, or small parish churches all over the country. The Government need to look again at this silly, stupid, unprecedented and unconsulted-on proposal.

[Mr Gauke]

We have had a thoughtful and impassioned debate this evening, and I am pleased to have the opportunity to set out the Government’s case for addressing some of the anomalies within the VAT system. In the time available, I will try to address as many points as possible, but I hope the Committee will forgive me if I do not take many interventions, so that I can cover as much ground as possible.

Let me begin with hot takeaway food. The current rules on the VATability of such food have been made complex and unfair by a patchwork of different legal decisions taken over the decades. The definition of hot takeaway food has been in place since 1984, and it applies to food that

“has been heated for the purposes of enabling it to be consumed at a temperature above ambient air temperature”

and that is

“above that temperature at the time it is provided to the customer”.

There have been repeated efforts since the 1980s, however, to chip away at this boundary. A number of businesses have argued in litigation that although the food they may provide to their customers is hot and is taken away, it should not be taxed as hot takeaway food, but should instead be zero-rated. Some have argued successfully that their intention was not to provide their customers with food to be eaten hot, but that they heated their food for other reasons instead—for hygiene reasons, or to finish the cooking process, or to provide evidence of freshness, or to create an aroma or to improve appearance, crispiness or texture.

[Dan Rogerson (North Cornwall) (LD)]

Will the Minister give way?

[Mr Gauke]

No. As I said, I am not going to give way very often.

Those arguments have not always been successful, but they have resulted in some businesses being able to secure VAT-free treatment for a range of hot products, such as hot rotisserie chickens, meat pies, pasties and panini. Other businesses, however, have continued to apply VAT to the similar hot-food products that they sell. They have accepted or the courts have ruled that their intention is to heat their food products so that their customers can eat them hot. Under the current rules, a small independent fish and chip shop will have to charge VAT on its hot chicken, but a major supermarket will argue that its rotisserie chickens are zero-rated. One baker who keeps his sausage rolls in a hot cabinet to provide his customers with a hot snack will charge tax, but the baker next door who keeps them hot and argues that the purpose is to maintain an appealing aroma will claim that they are zero-rated. The current rules mean that many customers simply do not know whether they are being charged VAT on their hot food because the treatment depends on the particular supplier’s purpose in heating the food. The new rules will ensure a level playing field, and we are removing the subjective element.

[Dan Rogerson]

Will the Minister give way?

[Mr Gauke]

Let me make a point about the arguments surrounding ambient temperature. This test has been in place since 1984. We do not expect staff to take detailed temperature readings every time they sell a pasty. HMRC will take a pragmatic approach, and provide businesses with guidance, taking into account the responses of businesses on how to implement the change. I have to point out that existing simplification schemes are already available to allow businesses to calculate their VAT liability by reference to a fixed percentage of their turnover without requiring staff to consider the temperature of every product sold. This is a pragmatic approach, already in existence.

[John Mann (Bassetlaw) (Lab)]

Will the Minister give way?

[Mr Gauke]

Let me deal now with listed buildings. There are some areas of confusion. The fact is that repairs and maintenance to all buildings, including listed buildings, have always been liable to VAT, while alterations to non-listed buildings have been since 1984.

[Mr Edward Leigh (Gainsborough) (Con)]

Will my hon. Friend give way?

[Mr Gauke]

No, I really want to make some progress.

None of that has been changed by the Budget announcement. There is a borderline that causes confusion between repairs and alterations. The Budget decision also reflects the view that grants provide a more flexible mechanism than VAT for providing specific financial support for heritage—

[Mr Leigh]

On that point, will my hon. Friend give way?

[Mr Gauke]

Well, I am about to make a point about it. We have increased the funding for the listed places of worship grant scheme and broadened its scope so that churches and other listed places of worship can claim grants to offset the impact of VAT on their alterations.

[Mr Leigh]

Will the Minister give way on that point?

[Mr Gauke]

Our original announcement of £5 million was based on a Church report, but it is not set in stone. We are talking to Churches, and if there is good evidence that more is needed, we will be happy to provide it.

[Mr Leigh]

Will my hon. Friend give way?

[Mr Gauke]

I will, very briefly.

19:45

[Mr Leigh]

This is a key point. The Government have announced that they will increase the listed places of worship grant scheme by £5 million, but they have cut it from £23 million to £7 million, so that is totally inadequate. What we want tonight is a commitment from them that they will resolve the problem. Half the ancient buildings in this land are run by the Church of England, by ordinary people who want to support their local communities. The Government must compromise on this issue.

[Mr Gauke]

I refer my hon. Friend to the comments that I made before his intervention.

Let me respond briefly to what was said by the hon. Member for Wrexham (Ian Lucas). We are restricted in regard to what we can do for public transport. If we provided a reduced rate for passenger transport, we would not be able to focus it entirely on charities; it would apply more widely to taxis.

Taxing static holiday caravans and larger touring caravans will bring their treatment into line with that of other holiday accommodation. VAT is already paid on mobile caravans, camper vans, canal narrow boats and camping equipment. We therefore propose to replace the current definition of a zero-rated caravan, which is based on size, with a new definition based on whether the caravan is designed for residential use. We are considering applying British Standard 3632, and are also considering an additional test. However, I have received representations from, among others, my hon. Friend the Member for Boston and Skegness (Mark Simmonds) arguing against that, and we will examine those arguments closely.

[Mark Simmonds (Boston and Skegness) (Con)]

Will the Minister give way?

[Mr Gauke]

I cannot, because I have only about two minutes left, but my hon. Friend has expressed his views to me very strongly.

We have heard a number of forceful and impassioned arguments this evening. The Government think it right to address anomalies in the tax system, but some of the arguments that we have heard outside the House and some of the media commentaries have not been terribly well informed, and we want a proper, informed debate and consultation. I have heard the arguments in favour of extending the consultation period and I think that that is reasonable in the circumstances, so rather than closing the period on 4 May, we will extend it to 18 May. We want people to respond to the consultation, although it is right for us to address the anomalies. For example, those with static caravans and those who run park homes or caravan sites are registered for VAT, but can recover—

[Several hon. Members]

rose—

[Mr Gauke]

I will give way to my hon. Friend the Member for Beverley and Holderness (Mr Stuart).

[Mr Graham Stuart]

A two-week extension is not a large extension, but it is an extension none the less. However, the Government and the Chancellor must ensure that this is a genuine consultation. Ministers have heard what has been said tonight. They must think again, and reverse their proposal. If they say that they will do so, I shall be happy to take that at face value, but we do not want to see thousands of jobs in east Yorkshire axed as a result of this measure.

[Mr Gauke]

My hon. Friend continues to make his case very strongly. We are, of course, listening to the arguments, but we think it right to have a VAT system that deals with some of the anomalies, and that is why we have finally addressed some of the problems that have remained in our VAT system for too long.

[Cathy Jamieson]

At the outset of this debate there was a bit of laughing and joking, but the tone quickly changed as people realised the seriousness of the issues under discussion. The Minister’s contribution reminded me of the well-known phrase, “When you’re in a hole, you’d better stop digging”—particularly when Members on the Government Benches are looking so miserable.

I hope the Minister has listened to what has been said. In order to be helpful—and recognising that it was, perhaps, lack of attention to detail and unintended consequences, rather than malevolence, that prompted the Government to introduce these proposals, which would affect jobs and the economy—I beg to ask leave to withdraw the clause, but I shall press other new clauses in this group to a Division.

Clause, by leave, withdrawn.

19:50

Seven hours having elapsed since the commencement of proceedings, the proceedings were interrupted (Programme Order, 16 April).

The Chair put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83D).

New Clause 3

VAT impact of changes

‘No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 unless the Chancellor of the Exchequer has fully reviewed the impact of those changes on jobs, living standards and businesses and placed the review in the Library of the House of Commons.’.—(Cathy Jamieson.)

Brought up.

Question put, That the clause be added to the Bill.

19:50

Division 520

Ayes: 246

---

Labour: 227
Scottish National Party: 6
Democratic Unionist Party: 5
Plaid Cymru: 2
Social Democratic & Labour Party: 1
Alliance: 1
Green Party: 1
Independent: 1
Conservative: 1

Noes: 312

---

Conservative: 269
Liberal Democrat: 42

New Clause 5

Value Added Tax: baked products

‘No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 which shall affect baked products when no attempt is made to keep the product hot for consumption.’.—(Stephen Gilbert.)

Brought up.

Question put, That the clause be added to the Bill.

20:03

Division 521

Ayes: 260

---

Labour: 229
Conservative: 10
Scottish National Party: 6
Democratic Unionist Party: 5
Liberal Democrat: 4
Social Democratic & Labour Party: 2
Plaid Cymru: 2
Alliance: 1
Green Party: 1

Noes: 295

---

Conservative: 261
Liberal Democrat: 33

[The First Deputy Chairman of Ways and Means (Mr Nigel Evans)]

We come now to new clause 6. I call Mr Stuart to move it formally.

[Mr Graham Stuart]

After the concession by the Government, I choose not to move the new clause.

New Clause 6

VAT on Caravans

‘No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 which amends the Act to apply to holiday caravans that are currently zero rated.’.—(Diana Johnson.)

Brought up.

[The First Deputy Chairman]

The question is, that the clause be—[Interruption.] The clause has been moved by another Member, which is allowable.

Question put, That the clause be added to the Bill.

20:15

Division 522

Ayes: 262

---

Labour: 228
Conservative: 17
Scottish National Party: 6
Democratic Unionist Party: 5
Social Democratic & Labour Party: 2
Plaid Cymru: 2
Liberal Democrat: 1
Alliance: 1
Green Party: 1

Noes: 287

---

Conservative: 250
Liberal Democrat: 36

New Clause 7

VAT: Protected Buildings

‘No new Order shall be made under section 30(4) of the Value Added Tax Act 1994 which amends the current definition of “protected building” in the Act.’.—(Mr Bradshaw.)

Brought up.

Question put, That the clause be added to the Bill.

20:28

Division 523

Ayes: 258

---

Labour: 228
Conservative: 14
Scottish National Party: 6
Democratic Unionist Party: 5
Social Democratic & Labour Party: 2
Plaid Cymru: 2
Alliance: 1
Green Party: 1

Noes: 293

---

Conservative: 252
Liberal Democrat: 40

Clause 189

Air passenger duty

Question proposed, That the clause stand part of the Bill.

[The Second Deputy Chairman of Ways and Means (Dawn Primarolo)]

With this it will be convenient to discuss amendment 8, page 532, line 14, in schedule 23, leave out sub-paragraphs (2) to (5).

Amendment 52, page 532, line 29, after ‘journey’, insert ‘or relevant Scotland journey’.

Amendment 53, page 532, line 41, at end insert—

‘(4E) A passenger’s journey is a “relevant Scotland journey”—

(a) in the case of a journey which has only one flight, if the flight begins in Scotland, and

(b) in any other case, if the first flight of the journey—

(i) begins in Scotland, and

(ii) is not followed by a connected flight beginning at an airport or aerodrome in the United Kingdom or a territory specified in Part 1 of Schedule 5A.’.

Amendment 43, page 533, line 13, after ‘duty)’, insert—

‘or section 30B (Wales long haul rates of duty)’.

Amendment 54, page 533, line 13, after ‘duty)’, insert—

‘or section 30B (Scotland long haul rates of duty)’.

Amendment 44, page 533, line 16, after ‘30A’, insert ‘and 30B’.

Amendment 55, page 533, line 16, after ‘30A’, insert ‘30B’.

Amendment 45, page 534, line 45, at end insert—

‘30B Wales long haul rates of duty

(1) This section applies to the carriage of a chargeable passenger if—

(a) the carriage begins on or after the relevant day,

(b) the only flight, or the first flight, of the passenger’s journey begins at a place in Wales,

(c) the passenger’s journey does not end at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A, and

(d) if the passenger’s journey has more than one flight, the first flight is not followed by a connected flight beginning at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A.

(2) Air passenger duty is chargeable on the carriage of the chargeable passenger at the rate determined as follows.

(3) If the passenger’s journey ends at a place in a territory specified in Part 2 of Schedule 5A—

(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph, and

(b) in any other case the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.

(4) If the passenger’s journey ends at a place in a territory specified in Part 3 of Schedule 5A—

(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph, and

(b) in any other case, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.

(5) If the passenger’s journey ends at any other place—

(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph, and

(b) in any other case, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.

(6) The rate of £0 may be set for the purposes of any paragraph.

(7) The same rate may be set for the purposes of two or more paragraphs.

(8) Any rate set must not exceed the rate that would apply if this section were not in force.

(9) Subsections (5) to (7) and (10) to (12) of section 30 apply for the purposes of this section as they apply for the purposes of that section.

(10) “The relevant day” means the day appointed as such by an order.

(11) Section 42(4) and (5) does not apply to an order under subsection (10).

(12) An Act of the National Assembly of Wales means an Act passed under Part IV of the Government of Wales Act 2006.’.

Amendment 56, page 534, line 45, at end insert—

‘30B Scotland long haul rates of duty

(1) This section applies to the carriage of a chargeable passenger if—

(a) the carriage begins on or after the relevant day,

(b) the only flight, or the first flight, of the passenger’s journey begins at an airport or aerodrome in Scotland,

(c) the passenger’s journey does not end at an airport or aerodrome in the United Kingdom or a territory specified in Part 1 of Schedule 5A, and

(d) if the passenger’s journey has more than one flight, the first flight is not followed by a connected flight beginning at an airport or aerodrome in the United Kingdom or a territory specified in Part 1 of Schedule 5A.

(2) Air passenger duty is chargeable on the carriage of the chargeable passenger at the rate determined as follows.

(3) If the passenger’s journey ends at an airport or aerodrome in a territory specified in Part 2 of Schedule 5A—

(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the Scottish Parliament for the purposes of this paragraph, and

(b) in any other case the rate is the rate set by an Act of the Scottish Parliament for the purposes of this paragraph.

(4) If the passenger’s journey ends at an airport or aerodrome in a territory specified in Part 3 of Schedule 5A—

(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the Scottish Parliament for the purposes of this paragraph, and

(b) in any other case, the rate is the rate set by an Act of the Scottish Parliament for the purposes of this paragraph.

(5) If the passenger’s journey ends at any other airport or aerodrome—

(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the Scottish Parliament for the purposes of this paragraph, and

(b) in any other case, the rate is the rate set by an Act of the Scottish Parliament for the purposes of this paragraph.

(6) The rate of £0 may be set for the purposes of any paragraph.

(7) The same rate may be set for the purposes of two or more paragraphs.

(8) Any rate set must not exceed the rate which would apply if this section were not in force.

(9) Subsections (5) to (7) and (10) to (12) of section 30 apply for the purposes of this section as they apply for the purposes of that section.

(10) “The relevant day” means the day appointed as such by an order.

(11) Section 42(4) and (5) does not apply to an order under subsection (10).

(12) An Act of the Scottish Parliament means an Act passed under section 28 of the Scotland Act 1998.’.

Amendment 46, page 535, line 11, after ‘30A’, insert ‘or 30B’.

Amendment 48, page 535, line 16, after ‘Ireland’, insert ‘and Wales’.

Amendment 58, page 535, line 16, after ‘Ireland’, insert ‘and Scotland’.

Amendment 49, page 535, line 18, after ‘operators’, insert ‘in—

(a) Northern Ireland and

(b) Wales.’.

Amendment 47, page 535, line 22, after ‘30A’, insert ‘or 30B’.

Amendment 50, page 535, line 27, after ‘30A’, insert ‘or 30B’.

Amendment 51, page 536, line 12, at end insert—

‘41B Wales long haul rates of duty: disclosure of information

(1) An officer of Revenue and Customs may disclose to the Secretary of State, the Treasury or Welsh Ministers any information for purposes connected with the setting of rates of duty under section 30B above, including (in particular) to enable the setting of rates under that section to be taken into account for the purposes of section 118 of the Government of Wales Act 2006 (Payments into Welsh Consolidated Fund: grants).

(2) Information disclosed under subsection (1) above may not be further disclosed without the consent of the Commissioners (which may be general or specific).

(3) In section 19 of the Commissioners for Revenue and Customs Act 2005 (wrongful disclosure) references to subsection 18(1) of that Act are to be read as including a reference to subsection (2) above.’.

Amendment 60, page 536, line 13, at end insert—

‘41B Scotland long haul rates of duty: disclosure of information

(1) An officer of Revenue and Customs may disclose to the Scottish Ministers, the Treasury or the Secretary of State any information for purposes connected with the setting of rates of duty under section 30B above, including (in particular) to enable the setting of rates under that section to be taken into account for the purposes of Part 3, section 64, subsection 5 of the Scotland Act 1998 (Scottish Consolidated Fund).

(2) Information disclosed under subsection (1) above may not be further disclosed without the consent of the Commissioners (which may be general or specific).

(3) In section 19 of the Commissioners for Revenue and Customs Act 2005 (wrongful disclosure) references to subsection 18(1) of that Act are to be read as including a reference to subsection (2) above.’.

Amendment 61, page 536, line 17, at end insert—

‘(1) The Scotland Act, Schedule 5, section A1 (exceptions) is amended as follows:

(2) After ‘rates)’, insert—

“(1) Air Passenger Duty on all flights that are—

(a) originating from an airport or aerodrome in Scotland and,

(b) not part of a connecting flight from—

(i) a domestic UK airport or aerodrome, or

(ii) a territory specified in Part 1 of Schedule 5A of the Finance Act 1994.”’.

That schedule 23 be the Twenty-third schedule to the Bill.

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

To ensure that all hon. Members who wish to do so can speak in this debate, I intend to lay out extremely briefly what clause 189 and schedule 23 do and reprise at the end of the debate.

The clause and schedule make four changes to air passenger duty. First, they set APD rates for 2012-13, which took effect from 1 April this year, as announced in the autumn statement of 2011. Secondly, they extend APD for the first time to business jets and flights taken aboard other small aircraft. Thirdly, they give statutory effect to the reduced rate of APD on all direct long-haul flights from Northern Ireland, which was introduced in November. Fourthly and finally, they introduce the long-term solution of granting the Northern Ireland Assembly the power to set APD rates for all direct long-haul flights in future.

The changes provide certainty to both industry and the consumer. I commend them to the Committee and look forward to a brief debate.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

I rise to speak to amendment 8 in my name and those of my colleagues, and I should like to press amendment 61 to a Division.

I am short of time, so I shall keep interventions to a minimum. There has been co-operation among the parties to try to give hon. Members time to speak, and I shall try to keep my part of the bargain.

In fact, I have risen to speak in favour of a Government policy—a well-thought-out policy that would do wonders for the economy. I am speaking, of course, of the devolution of air passenger duty to Northern Ireland. I like that great idea so much that I should like APD devolved to Scotland as well. We want equality of treatment and opportunity for Scotland.

In reality, I and many in Scotland, and the aviation industry, feel that APD is unfair and that it places an undue burden on business and travellers at a time when the Government should be encouraging the movement of people and goods to spur economic growth. The amendments in my name and those of my hon. Friends therefore propose to halt the rise in APD and devolve the power to Scotland, which is a recommendation not only of the Scottish Government, but of the Calman commission.

The idea of the cut in APD is simple: the UK already has the highest APD in the world, which surely cannot boost economic growth. The industry has had its say. Derek Provan, managing director of Aberdeen airport has said:

“Aberdeen, Edinburgh and Glasgow airports issued a joint letter to the Chancellor ahead of the Budget calling on the UK Government to create a level playing field for the UK aviation industry, which is subject to the highest aviation taxes in the world…The leaders of BA, EasyJet, Ryanair and Virgin Atlantic also jointly warned that the double inflation increase would hit ‘millions of hard working families in the UK.’ They said a family of four flying economy class to Australia would pay £500 in APD, whereas in 2005, they would have paid just £80. BA also recently revealed that it had plans to halve the number of new recruits in 2012 as a result of APD.”

Jim O’Sullivan, managing director of Edinburgh Airport, has said:

“APD is already costing Scotland passengers and having an impact on tourism revenues. We know from discussions with our airline partners that it is a major factor in their decision to connect further routes to Scotland. We would urge the Westminster Government to see Scotland as it does Northern Ireland and understand the need to both reduce and devolve this unfair and damaging tax.”

[Sammy Wilson]

I agree with much of what the hon. Gentleman has said about the general level of APD, but does he not recognise that this measure is the result of the climate change legislation passed in a previous Parliament which his party supported? The chickens are coming home to roost, with extra green taxes being imposed on poor consumers across the United Kingdom.

20:45

[Mr MacNeil]

It is not the taxes that are the problem but the level of the taxes, who is controlling them and what they are doing with them to stifle economic growth.

Furthermore, Amanda McMillan, chief executive of Glasgow airport, said:

“On the question of devolution of APD, Glasgow Airport has always been supportive of this proposal given the Scottish government’s more progressive approach to aviation and its greater appreciation of the role the industry plays in supporting the growth of the Scottish economy.”

[Charlie Elphicke]

Will the hon. Gentleman give way?

[Mr MacNeil]

I am sorry but there is no time. [Hon. Members: “Ooh!”] If I have time later and the hon. Gentleman wishes to intervene then, he may.

The Scottish Government Transport Minister, Keith Brown, said:

“We need to be able to deal with the competitive and connectivity disadvantages that Scotland faces and if APD were devolved now we could provide the means to incentivise airlines to provide new direct international connections to Scotland, benefiting our aviation industry and our passengers and supporting the growth of the Scottish economy. The UK government needs to listen to the many voices in Scotland who clearly want to see full devolution of”

the APD powers to Scotland. The Scottish Chambers of Commerce’s chief executive, Liz Cameron, said:

“Current rates of APD seem more suited to controlling capacity constraints at Heathrow than they do with the needs of regional airports, and devolution of this tax would afford the Scottish Government the opportunity to create an air transport package for Scotland designed to improve our direct international connectivity.”

A range of voices throughout Scottish industry and aviation are clearly calling for the devolution of APD.

We have been calling for the devolution of APD to the Scottish Parliament for some time. Most recently, we called for it to be part of the Scotland Bill, but unfortunately the Government and Labour opposed the idea. Today, however, we are arguing again for the devolution of APD in a different context. We do not need to argue the viability anymore, because the Government conceded that point in agreeing to devolve APD to Northern Ireland.

[Charlie Elphicke]

We have airports in Kent. Why should we not have regionalisation of APD for all regional airports? Why should it just be special pleading for Scotland?

[Mr MacNeil]

The hon. Gentleman makes a good point. I hope he will join me in the Lobby, because if it is good enough for Scotland, surely it is good enough for Kent. We are happy enough for it to be devolved to Kent if it wants it. We are not the type of people to want a power for ourselves that we would deny to others. We are not the type of people who would give it to Northern Ireland but not to Scotland.

The amendment is straight and to the point. It would allow the Scottish Parliament to set APD rates for Scotland. By passing it, under the rules in the Scotland Act 1998, the Treasury would redirect those specific funds to the Scottish consolidated fund instead of to a UK consolidated fund. With this economic lever, we in Scotland would have the ability to set our own rates, although owing to legal reasons we could not increase them—but frankly why would we? Higher rates of such taxes and the punitive fuel duty can only increase inflation and reduce productivity.

The evidence is growing in our favour. My office has discovered that Scotland has been getting the short end of the stick on non-EU flights. According to the Department for Transport, Scotland has only four non-EU direct routes—air routes that fly in and out of Scotland to a non-EU country. Let us compare that with our Celtic and Scandinavian neighbours. Norway and Ireland are connected to key emerging economies such as Russia, and Denmark is connected not only to Russia but to China, Japan and 24 other non-EU countries. Norway has connections with about 15 non-EU destinations, and Ireland with about 10, while Scotland is trailing with four. It is remarkable, given all this, that Edinburgh is such a successful financial centre. Arguably, Scotland was comparatively better connected in the days of the Icelandic sagas than it is now, with the Westminster Government controlling APD.

The UK Government are responsible for the negotiation of air routes with other countries. In short, Governments agree to routes in international air agreements and later decide where the routes go. In that capacity, the Westminster Government have failed Scottish airports. For more than 65 years, Governments have argued for more and more routes to the south-east of the UK, with only a handful making the road north of the M25. Devolving APD would take the pressure off Heathrow, with the calls for a third runway. Given that Monday is St George’s day, this measure would be almost a St George’s day gift from the SNP to the people of the south-east of England.

[Cathy Jamieson]

Before the hon. Gentleman moves on to other things, I wonder whether he might say a bit more about the relationship with his Celtic friends, as several amendments in this group affect Wales. Would it not make sense to look at the issue when the Silk commission reports, given that it is looking at a range of fiscal issues concerning Wales?

[Mr MacNeil]

I am glad that the hon. Lady seems to support devolving air passenger duty to Wales. Perhaps that could be extended to Scotland as well.

Without the ability to negotiate our own air routes, we therefore need other economic levers to attract businesses and travellers to Scotland. The current situation forces business and travellers to commute to Scotland via one of the most congested air hubs in the world. The south-east can absorb the impact of an 8% increase in air passenger duty. With the countless flights that go through London everyday, it would take a very severe drop in tourism indeed to affect travel through London. However, given that Scotland has already seen a serious decline in air routes—from BMI pulling out of Glasgow, as well as Ryanair—we have to think about the impact that the APD rise will have on us.

[Mr Reid]

I infer from what the hon. Gentleman is saying that if APD were devolved to Scotland, the SNP in the Scottish Parliament would want to cut it. Does he accept that that would mean less income for the Scottish Government, and if so, what cuts does he plan to make to services to make up for that?

[Mr MacNeil]

Perhaps I can expand the hon. Gentleman’s thinking. If we were to grow from four non-EU routes to 10 or 15, or to the 24 that Denmark has, we might see a growth in revenue. This is about raising revenue, not the precise level of taxation. We would be looking to raise revenue in Scotland and grow our economy, which is the plan for independence—indeed, it is why we want independence.

If APD is increased, Scotland will be put at a further disadvantage in attracting not only international passengers, but international business. As I said earlier, the Government have already conceded that point in devolving APD to Northern Ireland.

[Phil Wilson (Sedgefield) (Lab)]

The hon. Gentleman is being a bit disingenuous as far as Northern Ireland is concerned. The reason APD was devolved to Northern Ireland was because the airport in Northern Ireland was in serious danger of losing continental flights. Also, people were travelling to the south of the island, to Eire, to travel. The decision was made for economic reasons, to maintain the airport in Northern Ireland. It was nothing to do with the principle of devolution.

[Mr MacNeil]

It is not unusual to see Labour once again abandoning principle in its arguments. Surely we should be looking to allow Scotland to compete with other countries in the world. I hope that the hon. Gentleman would reflect on that.

[Brandon Lewis]

I appreciate the hon. Gentleman’s generosity in giving way. Does he not accept, however, that there is a simple logistical and geographical difference between Scotland, which is linked with England and its airports, and Northern Ireland, which is obviously competing with a fellow European Union member state? That alone is a big difference.

[Mr MacNeil]

As I have pointed out, our proposal would benefit the south-east of England as well as Scotland. Surely the hon. Gentleman can see that, given what Conservatives say about taxation.

[Phil Wilson]

Will the hon. Gentleman give way?

[Mr MacNeil]

I am sorry, but given the time I will take no further interventions.

Three airports support the devolution of air passenger duty, as do the chambers of commerce. They want it to be independently controlled in Scotland. They will be frustrated by what the House of Commons in London will probably do this evening, when I press amendment 61 to a vote. Frustration is a negative, but in my view this will have a positive outcome. Members who cannot yet understand the rising support for Scottish independence can surely see that those who are frustrated about APD this evening will begin to see a better way of dealing with the allied intransigence from London, on this and other matters, large and small. That will be one of the many reasons why people will vote for Scottish independence in 2014—to move the Scottish economy and Scottish connectivity forward.

I only hope that I have aided Members in understanding that this is not an SNP call: we are only a vehicle for the community of Scotland, along with the three airports and the chambers of commerce, in improving industry and creating better chances for families. The amendments in my name and those of my hon. Friends therefore seek to stop the increase in APD and to continue the pattern of devolving things to the Scottish Parliament, which is a more sensible locus for controlling air passenger duty.

[Cathy Jamieson]

I shall keep my remarks brief in order to give other Members an opportunity to speak. I have listened to the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) and, as I said in an intervention, it is important that we should have an opportunity to look at this matter in the round. Given that a recent review of air passenger duty resulted in no changes being made, I hope that the Minister will take this opportunity to consider taking a further look.

[Phil Wilson]

I have a small airport, Durham Tees Valley airport, in my constituency. The problem with air passenger duty relates to regional airports, and I believe that we need a UK solution, rather than a Scottish solution or a Welsh solution. There are specific reasons for the arrangements in Northern Ireland. We need a duty that reflects the needs of the regional airports outside the south-east of England.

[Cathy Jamieson]

That is exactly the point that I was going to make. I understand the strength of feeling in Scotland on this matter. I also understand the situation in Wales. I understand why people want to grow the economy there, and I could talk about a whole range of issues relating to that. I shall resist the temptation, however, and stick to the matter in hand.

The workings of the Silk commission could provide an opportunity to look at this matter. There are also opportunities to do so in Scotland. The Labour party there has said that it is not against the notion of further devolution in principle, but it would have to be done for common-sense reasons and at the right time. My hon. Friend the Member for Sedgefield (Phil Wilson) has just made a sensible point. Every part of the UK arguing for its own small bit of devolution would not provide a joined-up solution or a common-sense approach to growing the economy; it would be unhelpful.

Will the Minister tell us whether, having listened to the debate tonight, she is minded to look again at the matter, given that the review produced no change? Perhaps she could look into the matter, taking into account the points that have been raised not only about Scotland and Wales—vital though they are—but about other parts of England.

[Jonathan Edwards]

I was going to make a far longer speech on the probing amendments that I have tabled, but I shall be brief. In Wales, we are normally calling for equality with Scotland, but tonight we are calling for equality with Northern Ireland. Phase 1 of the Silk commission is looking into fiscal powers. A precedent is clearly being set, in that this Finance Bill is being used to devolve job-creating levers to one devolved Government of the British state. If there is cross-party consensus on phase 1 of the Silk commission, we would expect those recommendations to be implemented in the next Finance Bill. We do not want to be told that we shall have to wait years and years for another Government of Wales Bill.

[Phil Wilson]

This is an important issue for airports outside the south-east of England. We should pursue a course of action that reflects its importance to regional airports and other airports in Scotland and Wales. I have been sent a letter asking for regional and national variation in air passenger duty outside the south-east. It is signed by people who run airports not only in Scotland but in England. This is a UK-wide issue.

[Bob Stewart (Beckenham) (Con)]

Will the hon. Gentleman give way?

[Phil Wilson]

I will not give way, as I do not have much time.

Will the Minister look into whether there is a way of varying air passenger duty? I understand that there might be some European issues to deal with, but we must consider the congestion around Heathrow and Gatwick. Perhaps there could be two variations in the duty, and a small congestion charge to encourage the growth of regional airports around the country.

[Miss Chloe Smith]

I thank hon. Members for the breadth, and the brevity, of their comments in the debate, and I shall endeavour to cover all the relevant points in the few minutes available to me. Of course the Government firmly believe—as I think all hon. Members do—that aviation plays a vital role in the UK economy, by which I mean all the UK economy. I have taken on board the regional aspects of tonight’s debate. As hon. Members know, recent economic conditions have been difficult for airlines, but the UK remains internationally competitive and there are positive signs for the air industry, as shown by the growth in passenger numbers at major British airports—including Heathrow, but not limited to the south-east of England.

21:00

I should note that measures in the Budget such as the corporation tax cut help to set a positive background for business. Members will want to note that, in contrast to the tax systems of other countries, the UK does not apply VAT on domestic flights. This Government are therefore firmly committed to maintaining the UK’s status as a global aviation hub, but this must be balanced against the Government’s general revenue requirements and the need for a fair contribution from the sector towards reducing the deficit.

I shall focus the majority of comments on the calls for devolution to Scotland and Wales, as reflected in the preceding debate. The issue of devolution was raised in the consultation on air passenger duty last year as well as by hon. Members today. Indeed, in the recent Committee debate on the Scotland Bill in the other place, the issue of devolved taxes was considered in some detail. One of the questions raised there, as it has been here tonight, was why the Government had acted on APD for Northern Ireland, but not for Scotland or Wales.

Hon. Members, including my near neighbour, my hon. Friend the Member for Great Yarmouth (Brandon Lewis), have touched on the fact that Northern Ireland faces a unique challenge, given that it is the only part of the UK to share a land border with another EU member state—one where aviation duty has recently been cut to a substantially lower rate. That is the context in which we have taken the decision to devolve direct long-haul rates to the Northern Ireland Assembly. I thank the hon. Member for Sedgefield (Phil Wilson) for his sensible acknowledgement that this was for economic development reasons. Any decision to devolve APD further, such as to Scotland or Wales, must of course be based on a full examination of the evidence.

[Bob Stewart]

Will the Minister give way?

[Miss Smith]

Extremely briefly.

[Bob Stewart]

I thank the Minister. I have just one thing to add to the argument—that there are small airports in the south-east of England, too, and they also require support. These are not the big airports that everyone talks about.

[Miss Smith]

My hon. Friend makes a fine point, and I acknowledge it in what I am saying about the regional aspects of the debate and the necessity of aviation in many different parts of the United Kingdom.

[Cathy Jamieson]

Briefly, I heard what the Minister said about looking again at the whole issue of devolution. Does she accept that there is also a need to look at aviation taxation generally in the round? Does she have any plans to do that, as well as looking further at the question of devolution?

[Miss Smith]

In brief, all taxation is, of course, kept under review. If the hon. Lady will allow me, I will proceed and I shall endeavour to answer her other points in doing so. My main point about the potential devolution of APD is focused on the wider-ranging impact such a move might have across the whole of the UK economy. We should not run the risk of replicating the same problems that Northern Ireland has faced with its land border and lower taxes in the Republic.

Let me reiterate here today the Government’s determination to examine the full range of effects that the devolution of APD could have on Scotland, Wales and the UK as a whole before any final decision is taken. As I think the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) knows, this sits in context with a number of other pieces of work that the Government are doing on aviation.

Let me briefly deal with the issue of rates, which the lead amendment is designed to alter. Hon. Members will know that the Government were able to freeze APD for a year in March 2011. At the high cost to the Exchequer of £140 million, I think people will appreciate that this was not easy. Looking to the future, if we are to stay on course with our deficit reduction plans, it is necessary for APD rates to rise. The fact of the matter is that, over the two years 2011-12 and 2012-13, the increase in APD rates equates to a rise of no more than inflation. Indeed, most passengers will pay only £1 more on their flights. That increase is necessary. To provide greater certainty, we have also set out in this Budget the APD rates for two years up to 2013-14.

Let me move on briefly to other issues in the amendments. As I said earlier, passengers on business jet flights currently do not pay APD, whereas ordinary passengers aboard commercial flights do. We have recognised that anomaly, and are introducing fair changes to include business jet flights for the first time.

I have touched briefly on the changes that we are making in relation to Northern Ireland. I think that they have been welcomed by Northern Ireland Members here tonight, and by others outside the House.

The Government have listened, and have taken on board many of the concerns that were expressed during the recent consultation. I believe that we are striking the right balance—

21:05

Eight and a quarter hours having elapsed since the commencement of proceedings, the debate was interrupted (Programme Order, 16 April).

The Chair put forthwith the Question already proposed from the Chair (Standing Order No. 83D), That the clause stand part of the Bill.

Question put and agreed to.

Clause 189 ordered to stand part of the Bill.

The Chair then put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83D.)

Schedule 23

Air Passenger Duty

Amendment proposed: 61, page 536, line 17, at end insert—

‘(1) The Scotland Act, Schedule 5, section A1 (exceptions) is amended as follows:

(2) After ‘rates)’, insert—

“(1) Air Passenger Duty on all flights that are—

(a) originating from an airport or aerodrome in Scotland and,

(b) not part of a connecting flight from—

(i) a domestic UK airport or aerodrome, or

(ii) a territory specified in Part 1 of Schedule 5A of the Finance Act 1994.”’.—(Mr MacNeil.)

21:05

Division 524

Ayes: 9

---

Scottish National Party: 5
Labour: 2
Plaid Cymru: 1
Green Party: 1

Noes: 312

---

Conservative: 264
Liberal Democrat: 42
Democratic Unionist Party: 4
Alliance: 1

Schedule 23 agreed to.

The occupant of the Chair left the Chair (Programme Order, 16 April).

The Deputy Speaker resumed the Chair.

Progress reported; Committee to sit again tomorrow.

Business without Debate

Wednesday 18th April 2012 Commons Chamber

Delegated legislation

Wednesday 18th April 2012 Commons Chamber

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Statistics Board

That the draft Statistics and Registration Service Act 2007 (Disclosure of Social Security and Revenue Information) Regulations 2012, which were laid before this House on 27 February, be approved.—(Mr Newmark.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Education

That the draft Apprenticeships (Alternative English Completion Conditions) Regulations 2012, which were laid before this House on 27 February, be approved.—(Mr Newmark.)

Question agreed to.

European Union Documents

Wednesday 18th April 2012 Commons Chamber

Motion made, and Question put forthwith (Standing Order No. 119(11)),

Commission Work Programme

That this House takes note of European Union Document No. 17394/11 and Addendum, relating to the Commission Work Programme 2012-Delivering European Renewal, which sets out the Commission’s priorities and previews the legislative proposals, initiatives and communications that the Commission is planning to put forward in 2012; supports the Government’s view that the most significant initiatives are those that help to deliver growth in the EU, including measures towards completing the Single Market, improving stability in the financial sector and the flexibility and competitiveness of the EU, and reducing the overall EU regulatory burden on business; shares the Government’s concerns about the potential impacts of a small number of specific proposals on the EU’s ability to achieve growth; and further supports the Government’s view that any proposals should be evidence-based and avoid increasing burdens on business, especially small enterprises and micro businesses.—(Mr Newmark.)

Question agreed to.

Selective Dorsal Rhizotomy

Wednesday 18th April 2012 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Mr Newmark.)

21:20

[Chris Heaton-Harris (Daventry) (Con)]

A couple of years ago, like every other candidate in the general election I was eagerly watching my local press—for me, mainly the Daventry Express—to see what stories were making local headlines. In the run-up to the election, the Daventry Express and its sister paper the Northampton Chronicle and Echo both rather brilliantly covered the story of Holly Davies, a young girl from Daventry who was suffering from cerebral palsy and whose family were raising £40,000 so that she could go to America for a life-changing operation that would enable her to walk freely for the first time in her life. A few months later Holly, who could barely walk before the operation, returned from the St Louis children’s hospital a completely different girl. The procedure she had is called selective dorsal rhizotomy, or SDR, and Holly was operated on by the world’s leading expert surgeon in this field—Dr Tae Sung Park.

Dr Park is without doubt one of the world’s leading paediatric neurosurgeons, has received a host of honours for his surgical innovations and clinical research, and has literally been the pioneer in this field. St Louis school of medicine in Washington university, where Dr Park is the Shi Hui Huang Professor of Neurological Surgery, is ranked third in the US, while the St Louis children’s hospital is ranked fifth in the US for overall performance in medicine. Those world-leading institutions would not allow the SDR operation to be practised if it did not work or if it had significant complications. They know that it works. Indeed, SDR is so successful that every single medical insurance policy that can be bought in the States covers the procedure because it is realised that spending money up-front on these individuals saves a great deal more expense in the future—a point I wish to heavily underline in this debate.

Dr Park has operated on people from 48 different countries and a number of those countries have trained or are training surgeons to offer this procedure. Indeed, SDR is currently performed in Germany, Sweden, the Netherlands, Italy, Poland, Korea, Japan, Hong Kong, Canada and Mexico. As of 30 March 2012, 145 people from the United Kingdom have been operated on in St Louis—120 from England, 18 from Scotland and 7 from Wales.

So what is this miracle operation, selective dorsal rhizotomy? Of all the surgical procedures currently performed on patients with cerebral palsy, SDR has probably undergone more thorough scientific scrutiny than any other, including the various types of orthopaedic surgery. Accumulated evidence and my constituent’s experience indicate that SDR is an excellent option for selected patients with spastic cerebral palsy.

SDR involves the sectioning, or cutting, of some of the sensory nerve fibres that come from the leg muscles. There are two groups of nerve roots that leave the spinal cord and lie in the spinal canal. The ventral spinal roots send information to the muscles and the dorsal spinal roots transmit sensation back from the muscles to the spinal cord. In the operation, the neurosurgeon divides each of the dorsal roots into between three and five rootlets and stimulates each electronically. By examining the electromyographic responses from muscles in the lower extremities, the surgical team can identify the rootlets that have caused the spasticity. The abnormal rootlets are selectively cut, leaving the normal rootlets intact, which reduces the number of mixed messages from the muscles, resulting in a better balance of activity in the nerve cells in the spinal cord and thus reducing spasticity.

Let me tell the House what that means in human terms. Last year, I was fortunate enough to meet for the first time Holly’s mum, Jo Davies, who wanted to talk to me about Holly’s new post-operation life. I shall read a few lines from “Holly’s Diary” a few years after her operation:

“September 2011—and Holly is starting school. She has her school shoes, bought from Clarks, not from Northampton General Hospital—and she loves them! It is such a small thing, but something I really never thought she would be able to do. I used to worry about school shoes—I know this sounds silly but the NHS would only give you one pair of boots at a time and this was either going to mean her having pink boots for school or black boots for home. Not very fair on a little girl—but now we don’t have to worry. She is wearing normal school shoes, has flashing trainers for the weekend and now even has a pair of ‘Ugg’ boots!

We recently posted a video of Holly on her Facebook page as people were asking how she was doing. It isn’t until you watch the before and then after videos that you see the amazing progress she is making. Dr Park even commented on her video and was really pleased with what he saw and has assured us that more improvements will be seen in the next 3 months.”

[Tom Brake (Carshalton and Wallington) (LD)]

May I draw to my hon. Friend’s attention the success of the operation for my constituent Dana Johnston, and encourage him to commend the work that she and her family have done with Support4SDR to campaign on the issue?

[Chris Heaton-Harris]

I happily commend their work. I have met Dana and her mother—a very powerful lady who has fought hard for her daughter’s rights and saved a lot of money so that she could have the procedure.

To return to the diary:

“Just these last couple of days she has started to learn to run. Prior to SDR her running technique was no faster than my normal walking pace and she had a swing to her hips that made it look like she would trip at any moment. I now need to walk very fast and sometimes even jog to keep up with her run and she has less swinging of the hips. She is still a long way off the speed and ability of her friends when it comes to running but she is definitely getting better at it.”

The next point is very important:

“Holly has also grown in confidence. She speaks out at school, joins in with activities more and is a nightmare at the park. She climbs up climbing frames that even her 7 year old sister would be wary over. It really is hard to believe that without the operation she would not be able to do these things.”

[Jim Shannon (Strangford) (DUP)]

I am very pleased about the successful outcomes for the hon. Gentleman’s constituent and for the constituent of the right hon. Member for Carshalton and Wallington (Tom Brake). Billy Douglas is three years old and lives in the village of Ballygowan in my constituency. Unfortunately, he has not yet had the operation but is trying to get it. Does the hon. Gentleman agree that it is not just a question of the operation, but the physiotherapy as well? It is a nine-month process and it is very important. Does he think that the NHS ought to make provision not only for the operation but for the physiotherapy? Families are asked to provide £50,000 for the operation and the physiotherapy, but that is beyond the budget of many people. Even with fundraising events it is almost impossible to reach that amount unless the Government or the NHS are prepared to help. Does he agree that we need compassion and financial help for many families across the whole United Kingdom?

[Chris Heaton-Harris]

I absolutely concur. Indeed the final paragraph I wanted to read from “Holly’s Diary” states:

“Finally—we are continuing with Holly’s strict physio programme. She has 1 hour a week from the NHS and we pay privately for a further 2 hours a week from different therapists.”

As we have just heard, for the best results from SDR the operation must be followed by intensive physiotherapy. As an aside, one thing that all the parents who have raised the money for their child’s operation have in common is the basic lack of interest in the patient from the NHS when they return home from abroad, especially when they try to get regular physiotherapy to ensure that their children benefit from the operation to the maximum extent possible. Essentially, the more physio a patient receives in the first years after the operation, the greater the level of ongoing success and the level of manoeuvrability in the patient. Can the Minister help to remedy the situation?

[Jesse Norman (Hereford and South Herefordshire) (Con)]

I congratulate my hon. Friend on securing this debate. Is he familiar with the case of young Ellis Jones in my constituency, who has just returned to the UK after his family raised an extraordinary £45,000 to fund what appears to be highly successful SDR surgery with Dr Park in St Louis? I pay tribute to Ellis and his family, to the generosity of the communities around them, and to the Hereford Times, which led the way in gathering local publicity and support. Ellis is just two years old. Does my hon. Friend think there may be a case for extending the current treatment under NICE guidelines to include suitable children as young as two years old?

[Chris Heaton-Harris]

I thank my hon. Friend for that intervention. I will come to that, but I entirely concur. The earlier the problem can be tackled, the better, in general terms.

As I mentioned previously, the global medical community gradually became aware of Dr Park’s superb work in St Louis. Here in the UK, on 3 May last year, the very first UK micro-neurosurgical SDR was performed in Frenchay hospital in Bristol. Kristian Aquilina, the consultant neurosurgeon, and his team carried out this operation. Towards the end of last year, I took Mr Aquilina and some parents whose children have benefited from SDR, including my constituent Jo Davies into the Department of Health for a very helpful meeting with a couple of the Minister’s officials, in a bid to encourage the NHS to offer SDR here in the UK. The hope is that there would be three or four centres of excellence that could offer the operation to those patients who had been evaluated as able to benefit massively from the procedure.

From speaking to Mr Aquilina, I know that he has now set up a multidisciplinary team at Frenchay hospital to evaluate and select children for SDR. This team consists of a number of people—a paediatric physiotherapist with special expertise in cerebral palsy, a paediatric neurosurgeon, a paediatric orthopaedic surgeon and a paediatric neurologist. Mr Aquilina tells me:

“Children over four years of age, with a diagnosis of spastic diplegia following premature birth, should be considered for SDR. Children with typical spastic diplegia, whether born prematurely or at term, should also be considered. These children tend to have delayed motor development and spasticity interferes with their progress.”

I am also aware that another surgeon, Mr John Godden, from Leeds has been out to St Louis to learn about the procedure and is ready to undertake his first operation.

One of the common causes of cerebral palsy is premature birth and there is now extensive evidence, recognised by NICE, that demonstrates the value of SDR for these children. The NICE guidelines for SDR were issued in December 2010 and concluded:

“The evidence on efficacy is adequate. Therefore this procedure may be used provided that normal arrangements are in place for clinical governance and audit.”

But a more recent guideline focused on the lack of long-term studies of outcome and changed the first NICE guidelines, recommending that SDR be done in the context of clinical research. The problem with that is that a long-term study for, say, 10 or 20 years after surgery, costs an awful lot of money, and because no long-term study has been done on any of the non-surgical and surgical treatments currently employed here in the UK, following that rationale to its logical conclusion would mean that this successful proven treatment for cerebral palsy cannot be covered by the NHS for years.

[Jackie Doyle-Price (Thurrock) (Con)]

I commend my hon. Friend for the eloquent way he is making the case for the procedure. I have two cases in my constituency where the local community has come together to raise £40,000 each time to fund the treatment. On the point that my hon. Friend is making about the need for long-term trials, surely all NICE needs to do is to look at those children and how their lives have been transformed by that procedure.

[Chris Heaton-Harris]

I absolutely agree. In the United States, SDR has been practised since late 1986. Dr Park has been performing the operation since May 1987. SDR is currently performed in many medical centres across the US and has undergone unprecedented scientific and clinical scrutiny by orthopaedic surgeons, neurologists, rehabilitation medicine practitioners, therapists—the lot. At this time, medical evidence shows that SDR is more robust than any other treatment for cerebral palsy. It is the only treatment that can reduce spasticity permanently and that enables patients to move better and thus allows them to exercise as they grow, which anyone with spasticity cannot do. SDR at an early age reduces the rate of orthopaedic surgery and there are many other proven benefits.

SDR is safe. Of Dr Park’s 2,300-plus patients, only two have developed spine problems and three have had spinal fluid leaks that needed surgical repair. None has developed neurological complications such as paralysis or loss of bladder control. Some of Dr Park’s patients who had SDR 20 or 25 years ago are now in their mid-40s and not one patient has returned to him with late complications.

The purpose of the debate is to ask the Minister, his Department, NICE and the commissioners of procedures in the future to look at the success of SDR elsewhere in the world and help those practising it in the UK to overcome any of the remaining hurdles so that it can be performed on the NHS without problems or charge.

Children suffering from cerebral palsy in the UK are invariably given a frame for the first four or five years of their life and are then given a wheelchair when it becomes too difficult for them to walk with the frame. SDR can enable many of those wheelchair-bound children to walk independently, sometimes for the first time. An excellent example of this is a constituent of my right hon. Friend the Member for Carshalton and Wallington (Tom Brake), Dana Johnston, whom I had the pleasure of meeting very recently and who used a wheelchair 90% of the time before she had the SDR operation. Now, eight months after that operation, Dana does not use her wheelchair at all and is looking forward to a future of walking everywhere and living as close to a normal life as possible.

SDR would not be a very common operation, but it would change those who undergo the procedure from being recipients of taxpayers’ money via the NHS over a protracted period—in fact, for their lifetimes—to being active, tax-paying members of society in the future.

In Chichester, a friend of a friend is trying to raise £24,000 so that his grandchild, Finlay Fair, can be operated on by Mr Aquilina in Bristol. Indeed, Finlay’s financial target has nearly been reached and if all is well he will be operated on later this month. As I mentioned earlier, in the past three years or so 145 parents have raised the £40,000 and more required to get their children SDR in St Louis. I completely understand that the NHS, the Department of Health, NICE and any future commissioning body will all have procedures and processes that need to be followed, but surely it is now time for us to say that this life-changing, well-researched operation should be funded across the country by the NHS. We have surgeons with the expertise, an operation with a long-track record of success and children who could be walking and running independently, rather than being consigned to a life in a wheelchair.

I ask the Minister for whatever support he can give to ensure that SDR is offered by our excellent national health service so that in the future the parents of remarkable children such as Holly Davies, Dana Johnston and Finlay Fair as well as those given as examples by my colleagues do not have the burden of having to raise large sums of money to pay for their children to have this amazing, life-changing operation.

21:38

[The Minister of State, Department of Health (Paul Burstow)]

I congratulate my hon. Friend the Member for Daventry (Chris Heaton-Harris) on securing the debate and bringing this very important matter to the attention of the House. The contributions of other hon. Members demonstrated just how strongly people feel about the issue. He outlined with great clarity the huge impact on the lives of children and of their families. Such debates are often prompted by casework but, interestingly and quite rightly, they can be prompted by the diligent work of local journalists reporting in the local press, which is testament to the importance of our local papers.

As my hon. Friend is aware, cerebral palsy is a brain condition that affects movement, posture and co-ordination. It might be seen at or around the time of birth or might not become obvious until early childhood. Some children will have lower limb spasticity, which can cause problems with walking and sitting, as well as discomfort, cramps and spasms. Sadly, there is no cure for cerebral palsy and as no two children are exactly the same, which means that they will not be affected by cerebral palsy in exactly the same way, treatment programmes vary widely.

Occupational therapy, speech therapy, medication and surgery all have a role to play in reducing the impact of the condition, but, because all children with cerebral palsy have movement problems, physiotherapy, to which the hon. Member for Strangford (Jim Shannon) referred, is undoubtedly the bedrock of the condition’s good management.

NHS physiotherapy services, including post-surgery physiotherapy for children with cerebral palsy, are provided on the basis of assessed clinical need, but initiatives such as the self-referral-to-physiotherapy pilots, the allied health professional referral-to-treatment revised guide and the AHP service improvement project are all supporting improvements to access and outcomes, and I will certainly look further at the point that my hon. Friend made about ensuring the provision of such access, when treatment has been delivered outside the NHS, so that people receive the appropriate aftercare.

My hon. Friend also made powerful references to several cases and, in particular, to the one from his constituency, that of Holly Davies, whose life, from my hon. Friend’s own testimony today and from her diary entries, has clearly been transformed by undergoing selective dorsal rhizotomy, SDR, under the care of Dr Tae Sung Park—whom my hon. Friend rightly described as one of the world’s leading paediatric neurosurgeons—at St Louis children’s hospital in Missouri.

Dr Park and his colleagues have pioneered the use of this procedure, which has benefited many thousands of children from throughout the world. We also heard today how Holly’s family have worked tirelessly to raise both awareness of the procedure and the funds to send their daughter to the USA to receive the treatment, and I can well understand the frustration, expressed by hon. Members in this debate, at the sense that the NHS might in some way be denying people access to the procedure.

Of course, those of us who are parents—even those of us who are not—want the best for our children, and in many cases SDR has been shown to improve a child’s comfort and quality of life. Even the simplest day-to-day tasks, such as standing and walking, can be made easier due to the increased flexibility in their limbs, so SDR is a major surgical procedure that aims to reduce the amount of information, as my hon. Friend rightly described, that the sensory nerves carry. As he also said, after the procedure patients need long-term physiotherapy and aftercare, and it is important to ensure that such continuity of care is part of the service that they receive.

The current technique, in which only those nerve rootlets that contribute most to the spasticity are divided, was introduced as far back as 1978, but it is important to stress that SDR is not a cure for cerebral palsy, nor is it suitable for the treatment of abnormal movements or of balance problems. Indeed, it is suitable only for appropriate children, as Members have acknowledged in this debate, after assessment by clinicians. It is therefore unlikely to be suitable for other types of cerebral palsy.

As my hon. Friend will be aware, the Department does not make central decisions or directions on the funding of treatments; it is for local commissioners to decide whether to approve funding for treatments, based on proper consideration of the clinical evidence and—it is important that I stress this—the patient’s individual circumstances.

[Tom Brake]

Given that the Minister and the hon. Member for Daventry (Chris Heaton-Harris), who opened the debate, have identified that a relatively small number of children would benefit from SDR, what role will specialist commissioning or, indeed, the NHS Commissioning Board play in looking at treatment throughout the whole country for those young people?

[Paul Burstow]

My right hon. Friend makes a rather important point. One of the opportunities that the Health and Social Care Act 2012, which we have taken through the House, provides is through the establishment of the NHS Commissioning Board. For the first time, all specialised commissioning will be done in one place and at one level, and, although no decisions have yet been made about the area under discussion, it is one of many, involving rare conditions or where specialist expertise needs to be brought to bear, in which the board can contribute to driving improvement.

Parliament has given the job of assessing the clinical evidence to the National Institute for Health and Clinical Excellence in order to provide clinicians with guidance on the safety and efficacy of procedures. NICE does so through its interventional procedures programme, which is different from the more recently published guidance, to which I shall turn in a moment. NICE’s interventional procedures guidance protects patient safety and supports people in the NHS in the process of introducing new procedures. Many of the procedures that NICE investigates are new, but it also looks at more established procedures of the sort that we are discussing and at issues of safety and how well procedures work. By providing guidance on how safe procedures are and how well they work, NICE makes it possible for new treatments and tests to be introduced into the NHS in a responsible way. NICE’s interventional procedures guidance has a slightly different, but equally important, purpose from that of its other guidance products. Interventional procedures guidance does not provide advice on whether treatments are clinically and cost effective, but it does provide advice on whether such procedures are safe and efficacious enough to use in clinical practice.

As my hon. Friend said, NICE published its updated interventional procedures guidance on SDR for spasticity in cerebral palsy in December 2010 in the light of the emerging evidence base from this country and around the world. NICE’s guidance states that the procedure may be used provided that normal arrangements for clinical governance and audit are in place. While the evidence suggested that the operation can improve the comfort and mobility of some people who have cerebral palsy, it was recognised that there are none the less serious risks that would have to be mitigated and managed as part of the procedure, not least in relation to harm to bladder function and walking ability. NICE was clear that if appropriately trained health care professionals wish to offer this treatment, they must fully explain to the families what is involved and that further surgery and intensive aftercare may be needed. NICE is also aware that the surgical techniques used within this procedure are still evolving, and that is why it has made recommendations about further ongoing research, although my hon. Friend made a very powerful case about the evidence base that has developed in the United States over many years of the treatment’s use in that country.

My hon. Friend will be interested to know that NICE is currently developing clinical guidelines on the management of spasticity in children and young people that will provide guidance to the NHS on whether SDR represents a clinically and cost-effective use of NHS resources. NICE consulted on the draft guidance last October. The draft guidelines explained that the available evidence for the procedure shows that it is most likely to be effective in children with particular symptoms, but that the evidence of sustained benefit was not currently available or weak. That is another area where it says that there is a need for research.

I assure my hon. Friend that I will ensure that this debate is provided to the decision makers within NICE so that they can see the additional material that he has brought to the House’s attention and the contributions of other hon. Members. That is very important. I hope that others who are championing this cause have taken the opportunity to respond to the consultation on the draft guidance. I understand that the final version of the published guidance will come out in June this year.

My hon. Friend referred to the work of Kristian Aquilina in Bristol and touched on the work of Support4SDR. I strongly commend the work that both are doing to raise awareness of SDR as a treatment. I know that in December they had a very productive meeting with officials from my Department, not least Dr Sheila Shribman, the national clinical director for children and young people. I gather that the meeting was useful and that a number of avenues were set out for further pursuit and exploration. Throughout the health and social care system, more information for patients and their families and clinicians can help to ensure that more informed decisions are made. The key challenge for Mr Aquilina and Support4SDR will be to increase the awareness of SDR as a possible treatment for some children with cerebral palsy. At the meeting, a number of possible avenues were suggested, not least engagement with the Royal College of Surgeons, working closely with the Council for Disabled Children, and updating the relevant section of the NHS Choices website. My officials stand ready to continue to engage and to work with those wishing to pursue this.

The issues spoken of tonight are very important because of the impact that cerebral palsy can have on children and their families and the hope of a better future that can be offered by appropriate treatment, which, for some children, might mean SDR. Raising public awareness about the procedure is undoubtedly part of what tonight’s debate has done. I commend my hon. Friend and others for contributing to that and for continuing to do so beyond the debate. I hope that the debate will be a contribution to NICE’s deliberations.

Clearly, promoting SDR as a safe procedure for appropriate children can be done only at a clinician-to-clinician level, so I urge my hon. Friend and others to continue to work with Support4SDR and Mr Aquilina carefully to document and spread the results of this surgery. The compelling stories of those mentioned in the debate, whether it be Holly, or Dana—the constituent of my right hon. Friend the Member for Carshalton and Wallington (Tom Brake)—or Finlay, or many others, all bear testament to how this can make a difference to people’s quality of life. I look forward to seeing the work that is produced by NICE and others in the coming months.

Question put and agreed to.

21:50

House adjourned.

Westminster Hall

Wednesday 18th April 2012 Westminster Hall

Wednesday 18 April 2012

[Dr William McCrea in the Chair]

Mental Health Care (Hampshire)

Wednesday 18th April 2012 Westminster Hall

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

00:00

[Dr Julian Lewis (New Forest East) (Con)]

Last November, I secured a short Adjournment debate entitled, “Woodhaven Hospital”, the subject matter of which ranged far more widely than the future of that state-of-the-art mental health unit, which was opened in New Forest East only eight years earlier. At issue was the vital question of how many acute beds should continue to be provided by the Southern Health NHS Foundation Trust, which covers most of Hampshire.

The trust was proposing a 35% reduction in acute mental health beds for adults, from 165 to only 107, 10 of which would go from Antelope House, Southampton, 24 from the Meadows in Fareham and 24 from Windsor ward at Woodhaven in my constituency, with this last unit being reused as a low secure unit for much longer-term detained patients. No one disputes that some beds will always be needed for people in crisis, and everyone welcomes the use of new mental health therapies to reduce the number of admissions and enable people to go home earlier. The argument is purely about how many beds are required and whether the trust has shown adequate statistical rigour.

The trust’s consultation document seemed to be designed to persuade the public that bed numbers were much higher and length of stay much longer in Hampshire than the national average, when that was not the case. Two other matters also caused particular concern. First, about half the acute in-patients at any one time had been detained or sectioned under mental heath legislation, so most detained patients would still need beds in the future. It seemed obvious therefore that the proportion of beds allocated to such patients would rise from about half to some two thirds or even three quarters if there were a 35% reduction. Yet, when I said on the BBC’s “South Today” programme that people’s best chance for future admission would be to get themselves sectioned, the chief executive of the trust, Katrina Percy, sent a letter to Ministers, councillors and Hampshire MPs denouncing such comments as “unfounded” and “scaremongering” and with

“no place in the 21st century”.

The trust feared the broadcast because it also demonstrated my second contention, which is that people were being misled about the number of unused acute beds out of the 165. As was explained in the previous debate, at 4 pm every day a bed states report is issued, showing the total number of beds available in each acute adult mental health unit. The figures are broken down into four important categories: male beds, female beds, vacant beds and leave beds. Male and female beds are obviously not interchangeable, except in the minority of cases where the configuration of a ward allows a bed to be used for either gender. Leave beds are those whose patients are away for a few nights, and beds empty for longer periods are rightly regarded as vacant and genuinely empty. Despite what the trust says, one cannot rely on admitting the same number of new patients as there are leave beds because people come back after two or three nights to reclaim such beds.

The trust hates my use of these 4 pm daily snapshots of bed occupancy, yet what is its alternative? It issues simplistic graphs, which plot three elementary tracks. The top line shows the number of beds in the system; the middle one shows the number currently in commission in case some have had to be closed; and the bottom one, which fluctuates widely, shows the number of patients in beds on each day. The picture presented by the graphs seems reassuring, because there is always a visible gap between the number of patients in beds and the number of beds in commission, but they do not distinguish between the different categories of unfilled beds. The graphs assume that all the beds are interchangeable regardless of gender and that they are all available for admitting new patients, when many are leave beds, which are, by definition, never empty for long.

In last November’s debate, I pointed out that between 21 September and 6 October 2011 the combined total of vacant and leave beds had varied from just three to just 11 out of the 165 in the system and that over the three months from August to October, even if all the leave beds had been counted as fully available for new admissions, bed occupancy was still at almost 92%. One must have huge confidence in the ability of the trust’s proposed alternative—virtual wards at home for acutely ill people—to think that a 35% reduction in beds will be safe and sustainable. In the previous debate, I said that it was

“distinctly probable that the overview and scrutiny committee of Hampshire county council may decide to refer this matter to the Secretary of State.”—[Official Report, 10 November 2011; Vol. 535, c. 552.]

That health overview and scrutiny committee—HOSC—can do that if it is sufficiently concerned about proposed changes in NHS arrangements.

I was a little perturbed to hear that HOSC’s relatively new chairman, Councillor Pat West, apparently said that I had my figures wrong. Before Christmas, I made contact with Mrs West, who took the trouble to meet me at the home of my caseworker, Councillor Diana Brooks, who is the health portfolio holder on the district council in the New Forest. The HOSC chairman went though some of my data, and forcefully explained her poor opinion of the Southern Health NHS Foundation Trust and one of its most senior administrators. She even hinted that there was a question mark over the suitability of the trust to continue with its contracts and said that the future of the acute mental health beds was just part of a bigger picture. She also added that the HOSC had considered referral to the Secretary of State but felt that that was premature at present and that matters would be considered further at the next HOSC meeting on 24 January. Encouraged, I put the date in my diary.

Meanwhile, the trust’s chief executive, Katrina Percy, had responded to my November debate, and that led me to prepare a full analysis of the deficiencies so far discovered in the trust’s information. My memorandum, entitled “Unreliable Statistics”, was sent to my right hon. Friend the Minister, Miss Percy and the HOSC chairman on 11 January. My covering letter to Pat West stated:

“I hope the HOSC will consider the contents presently”.

With the HOSC meeting drawing near, I asked my parliamentary assistant, Colin Smith, to ring Councillor West to ask about my addressing her committee, perhaps with a delegation. She was adamant that there was no need for me to go to the 24 January meeting. She said that it would be “counter-productive” and that she would much rather keep me “in reserve” for later. Having no reason to doubt the advice, I followed it. My feelings can be imagined, therefore, when the day after the meeting I discovered that the HOSC had fully endorsed the bed closure plan and would not be considering it again until July, by which time all 58 beds would have closed.

I immediately telephoned the leader of Hampshire county council and expressed my incredulity that an elected councillor from my own party could have misled me so blatantly. Subsequently, the HOSC chairman spoke further with my office. She still insisted that my attendance would have been counter-productive. I am at a loss to know how the meeting could have been more counter-productive. Could her committee have voted to close all 58 beds twice over?

Suspecting that my paper on bed statistics had been suppressed rather than circulated, I sent it directly to all HOSC members and set out the circumstances in which their chairman had dissuaded me from attending. In case anyone thinks that I am relying on parliamentary privilege, this is what I wrote without it:

“She gave no inkling that there was the slightest chance of a decision to close the beds being taken at that meeting. I was, therefore, amazed and dismayed to learn (from a local press report) that that is precisely what happened. I feel totally misled and let down on behalf of some of my most vulnerable constituents... In almost 15 years as a Hampshire MP, I have never received treatment like this from an elected colleague in my own party, and I am deeply shocked by it.”

When the row broke in the local press, Councillor West refused to comment to the Southern Daily Echo, saying that she

“did not want to get into a slanging match with the MP in the media”.

However, on 3 February, she replied to my original letter of 11 January covering my memo to the HOSC and to my later letter to committee members:

“I am sorry that you could not attend the 24 January meeting”,

she wrote, without a trace of irony, adding that the agenda and papers for the meeting had been on the council’s website and would have shown me that the HOSC

“would be considering recommendations which related to the closure of beds”.

Apparently, I had only myself to blame for not distrusting her enough to ferret around on websites to check that I was not being misled.

The minutes of the meeting and the resulting press coverage revealed that two factors had featured prominently in the HOSC deliberations. The first was a statement by the trust’s clinical director, Dr Lesley Stevens:

“With regard to the data on bed demand, it was highlighted that between 20 and 30 beds had been vacant consistently over the past three months, and that this trend coincided with the introduction of new community services.”

That is precisely the sort of claim that I had intended to challenge.

On the very day of that meeting on 24 January, the trust’s own figures showed clearly that there were no vacant male or female beds, no leave male beds and just six leave female beds in the entire system, giving a grand total of six unoccupied beds. In November and December 2011, there had certainly been an unusual rise in the number of empty beds, in stark contrast to the previous month, October, when on 17 days the total number of male and female vacant and leave beds had been in the single figures, not 20 to 30.

Indeed, on 10 October, there had been no vacant male beds, no vacant female beds and just one male and one female leave bed in the entire directorate. Still, if overall totals of empty beds in January had continued at November and December’s high levels, I would have ended my campaign to prevent the closures. However, that did not happen. For example, on at least 14 days in January, there were no vacant male beds, and on at least 10 days, there were no vacant and no leave male beds, so no beds for men at all.

Later, I wrote to the local press about Dr Stevens’s claim to the HOSC that there had been 20 to 30 vacant beds consistently in the past three months. I pointed out in my letter that actually only a handful of beds had been empty when she claimed consistent totals of 20 to 30 unoccupied, and I noted:

“It is true that during November and possibly December”—

I did not have the full figures for December at that time—

“there was a sudden surge in available beds totals. Yet my continuing investigations have shown this to have slipped back since Christmas—and this would have been known to the trust’s representatives when they made their presentation to HOSC.”

Although my letter was published in at least three local papers, including the Southern Daily Echo, in which Dr Stevens had aired her views, as far as I can tell, she did not respond in any of them.

To deal with any suggestion that the trust’s new programme of intensive day therapies had been responsible for the temporary glut of beds in November and December, I asked senior trust members at a routine meeting on 3 February whether the new therapies and arrangements begun in 2011 were still in place. Dr Shanaya Rathod from the trust confirmed that they were. Therefore, the rapid decline in empty bed totals in January cannot be explained away by suggesting that the trust had stopped doing whatever it claimed was responsible for the temporary surge in beds during the last two months of 2011.

The second major factor that influenced the HOSC on 24 January was also set out in the minutes of the meeting:

“It was reported that the Centre for Mental Health had independently reviewed the evidence for the changes the trust was proposing and concluded they were necessary to meet the challenges the trust faced. The trust offered to provide the full report to HOSC members when available.”

On 27 January, I met the trust’s chief executive, Katrina Percy, and was given that document. In fact, it consisted of two separate reports. The first, from the Centre for Mental Health, supported what are termed recovery-oriented services, which the Government are rightly keen on, but did not analyse bed numbers. The second report was by Steve Appleton of Contact Consulting. Less than one page of his report dealt with Southern Health acute bed data, but every reference was footnoted to a single source, which was not attached—a third report called “Inpatient Capacity” drawn up by a third organisation, Consilium Strategy Consulting.

I recall the important debate secured by my hon. Friend the Member for Burton (Andrew Griffiths) on 19 December last year. With my hon. Friend the Member for South Derbyshire (Heather Wheeler), local consultants and the press, he had been battling similar techniques designed to justify closing acute beds at the Margaret Stanhope Centre in his constituency. Those techniques had also relied on an appeal to external authority and an “independent” report by Staffordshire university, which turned out to have been produced by someone on the payroll of the local trust.

Wondering whether something similar had happened in Hampshire, I contacted the Centre for Mental Health, formerly the Sainsbury Centre, which I knew enjoyed a deservedly high reputation. Its chief executive, Professor Sean Duggan, met me on 23 February, and later confirmed in a letter:

“The scope of the centre’s work did not include an examination of the number, type or location of beds that would be needed now or in future. A separate analysis, by Contact Consulting, looked at bed numbers...[The] Centre for Mental Health is an independent charity and as such we would not seek to endorse or condemn specific local decisions about reconfiguring inpatient mental health services.”

Yet, as we have already seen, the second report by Contact Consulting depended on a third report by Consilium Strategy Consulting that had not been made available.

I wrote to Katrina Percy on 28 February, pointing out that

“the so-called independent report that you handed me involved no examination primary source data whatsoever, but simply relied upon a third document—a report by Consilium—which it described as having been produced when the Trust ‘conducted its own benchmarking process’.”

I asked for a copy of the Consilium report; for a statement of the status of Consilium, in particular of how independent it is, if it all, from the trust; and for its contact details. Miss Percy replied on 9 March:

“I would just clarify that the content and status of the Consilium report, as mentioned in your letter to me, is commercially sensitive and is therefore not available to share publicly. However, should it be required, I would be pleased to provide you with the contact details of the consultant involved so that you may contact them directly.”

Despite two phone calls from my office to hers, and a further letter from me, the trust’s chief executive has yet to supply even the contact details of the Consilium consultant.

Although reluctant to reveal data that ought to be available, Southern Health resents criticism of its slippery methods. Yet how else can one describe the activities of an organisation that seeks to discredit, as it does, a public petition with more than 1,000 signatures against the closure of Woodhaven’s 24 acute beds by claiming that

“a number of people contacted the Trust and told us variously that they either did not know anything about the petition, could not recall signing the petition, suggested a friend or neighbour may have signed it on their behalf without their knowledge or consent… I am sure you would also acknowledge that the petition only has limited value in terms of a valid indicator of people’s views”?

If the trust had pointed out that I have some 70,000 adult constituents and that a petition, quickly compiled, represented only a fraction of them, that would have been fair enough. Sadly, it preferred to use a few anomalies to discount the views of 1,000 people and to cast doubt on the integrity of the petition’s organisers.

On Monday 5 March, the trust’s clinical director Lesley Stevens was interviewed for “South Today”, whose chief reporter—in fact, political editor—Peter Henley, challenged her claims about empty beds, given the figures in January’s bed status report. She insisted that there was no shortage of acute beds, yet the very next day the trust sent an e-mail to its consultants, stating:

“There are currently no unassigned acute beds in the Directorate. Can CRHT”—

the crisis resolution and home treatment teams—

“and the acute wards ensure that all clients are reviewed for leave or early discharge as a matter of urgency, please?”

I was also interviewed for the “South Today” report, which was broadcast on 13 March and said that that e-mail had given the game away completely. In-patients were already being reviewed for early discharge at a time when only 18 of the 58 beds scheduled for closure had actually gone. I said then, and I repeat now, that the trust’s policy of closing so many beds on the basis of bogus claims about surplus beds is inhumane.

As a result of the row over the January HOSC meeting, I was invited to take a deputation to the next one on 27 March. Although it was late in the day, a chance had been created to persuade the committee to at least pause the closure programme once the 34 beds at Antelope house and the Meadows had gone. We could then see whether the trust could cope with so many losses before starting to close the 24 Woodhaven beds as well. That had consistently been urged by Councillor Keith Mans, a governor of the trust and a former Member who was once a Parliamentary Private Secretary to a Secretary of State for Health. We believe that closures on this scale must be trialled properly and in stages before full implementation.

At the March meeting, I distributed tables showing how wrong it had been to claim that 20 to 30 beds were still empty when the January vote was held. I was given 10 minutes to state my case, which was a relief, because right up to the start of the meeting the chairman, Councillor Pat West, had told me that three out of the five of us would have to share 10 minutes between us. Mary Bryant, who was one of my deputations, spoke movingly of the burden on carers that the loss of the beds would impose; Councillor Sally Arnold gave the results of a survey of parish councils that had not been properly consulted; and Mrs Jane Barnicoat-Chongwe, a nurse practitioner on the acute ward at Woodhaven who had contacted me, expressed professional concern about the trust’s proposals. I put on the record now that at no time has she given me any data whatsoever or any documents from the trust.

Our fifth spokesman was Andrew Evans, a service user who for decades has relied on periodic admission to acute units. With extraordinary eloquence, Andrew explained not only the pressure on his parents, who are his carers, if he stays at home when in an acute crisis phase, but how the loss of the en-suite facilities at Woodhaven—remember that the unit is only eight years old—which are not available in some of the other units, will have a traumatic effect on in-patients’ dignity in future. The HOSC and the audience broke into spontaneous applause at the end of his presentation.

Thereafter, none of us could contribute further to the discussion, and I watched in frustration as Dr Stevens blandly maintained that the bed closures at Antelope house and the Meadows, which, of course, had only started after 24 January, had absorbed the 20 to 30 beds, which, in the face of all the evidence, she still claimed to have been empty up to that January meeting. She then mistook the e-mail of 6 March—which said that the system was full and that early discharges were needed, and which had been shown on the “South Today” programme—for another one, sent three days later. She explained how such communications were so normal and so routine that she would be concerned if she were not receiving them. I have since checked with sources at the trust, who have told me that no such e-mails had been sent for months before 6 March.

When questioned by HOSC member Councillor John Wall about the lumping together of male and female empty beds as if more than a fraction of them were interchangeable, Dr Stevens told the committee that a female could be allocated an empty male bed, for example, as long as “one-to-one observation” by a member of staff was maintained. So much for our long years of campaigning to eliminate mixed-sex wards in NHS hospitals.

Once the trust had finished its long presentation, the chairman put a motion to the vote that reflected the case made by Keith Mans and others, including me, that there should be a pause before the closure of the Woodhaven beds began, while an independent panel would seek to resolve the disputed figures about bed occupancy. To our delight, it was carried nem. con., at which point Dr Stevens interrupted the proceedings, which was out of order, because the trust’s presentation had ended. If there were any delays, she exclaimed, the Woodhaven staff would be so unsettled that many would leave, the unit would close and it would not reopen at all—even in its new role, I presume she meant. To my utter astonishment, the first vote was then ignored, as though it had never happened, and replaced by a much weaker proposal that a small panel of committee members and key stakeholders would examine the issues urgently and seek to resolve them without any delay to the closure of Woodhaven’s beds.

Given that the only reason any of this was happening was because of the data I had unearthed and my exclusion in January—remember that originally the matter was not supposed to have been considered again by the HOSC until July—hon. Members might think that I should be a part of the process if it is meant to be more than a charade. Not a bit of it. This little panel will go on its merry way looking at points previously raised in writing by me and others. If it cannot resolve any of those points, according to its terms of reference,

“this will be handled as a matter of urgency through the chairman communicating to the trust”

on behalf of the health overview and scrutiny committee. So our arguments and objections will be safe in the hands of Councillor Pat West and Katrina Percy, supported, no doubt, by the zealous Dr Stevens.

What then should Ministers do? At a meeting with Keith Mans and me on 26 March following an earlier exchange at Prime Minister’s questions, the Minister here today explained that Ministers cannot intervene to pause the process or have an audit carried out unless the HOSC refers the matter to the Secretary of State; but he did confirm that such a referral could still be made. Ministers’ hands are not completely tied, nor should they be given the deplorable tale I have set out today. If a Minister were to say that to restore a degree of public confidence he would welcome a referral to the Secretary of State, and if he were to invite and encourage such a referral to be made, it would be surprising if the committee rebuffed such an expression of concern. If he is unwilling to do so immediately—I quite understand if that is the case, although I would love it if he did—I expect Ministers to consider doing so later, when reflecting on my narrative.

It would be easy to summarise this story as that of a trust that could not be trusted with its own statistics and of a committee chairman who deceived an MP about a vital meeting. However, what it is really about is carers such as Mary Bryant, nurses such as Jane Barnicoat-Chongwe and, above all, service users such as Andrew Evans. It costs nothing to applaud such people, but applause will not help them. What they need is a Minister to grip this situation and send an unmistakable message to the scrutiny committee that he stands ready and willing to bring in the Independent Reconfiguration Panel on referral of the matter to the Secretary of State.

00:00

[Caroline Nokes (Romsey and Southampton North) (Con)]

I pay tribute to my parliamentary neighbour and hon. Friend the Member for New Forest East (Dr Lewis), not only for the outstanding work he has done to highlight this important issue, which is of grave concern to his constituents and to many residents of southern Hampshire, but for his tireless work to analyse bed availability within the Southern Health trust area. From what he has told us this morning, there can be little doubt that the work done to analyse and challenge the statistics of bed usage, including the somewhat confusing question of what is an available bed and what is simply a leave bed, has taken a great deal of time.

What many of my constituents and other local residents want is to make sure that the outcome of the process is correct for local users of adult mental health services. As my hon. Friend has correctly indentified, this is not an argument about the philosophy of how best to care for those in need. There will always be a need for acute in-patient beds, although we certainly believe there is potential to improve arrangements and thus avoid in-patient admission for those who can be successfully and safely treated in the community. However, what has not been clarified throughout this process is the number of beds that there are in the system and the number of beds that are needed. My hon. Friend has certainly done sterling work over the past few months analysing bed usage, and I do not intend to repeat any of those statistics—we have heard in great detail what may or may not be available. Suffice it to say that, in the past six months, there have been many occasions when there have been no vacant beds across the service.

On top of that, there are many valid questions from service users in my constituency about the choices made about which beds should remain available in the locality. At the start of the year, I attended a meeting organised and hosted by my hon. Friend to learn more about the concerns of local service users and to hear at first hand how important the provision at Woodhaven is to local people, their families and their carers. Given the location of Woodhaven and the distribution of mental health beds across Hampshire, it is inevitable that this closure will impact on not only the constituents of my good Friend, but those of several Members across southern Hampshire. As my right hon. Friend the Member for New Forest West (Mr Swayne) has indicated, mental health problems are no respecter of, and trust boundaries are not contiguous with, constituency boundaries.

Of course, when discussing reconfiguration of health services, frequently the focus is on location, and service users will emphasise the distance of travel to get to a facility, the availability of public transport and how convenient it is for loved ones to come and visit. Interestingly, when discussing Woodhaven, that was not the message I received from service users or their families. Indeed, if we were to analyse the journey times and the ease of access, it is possible to argue that, for the vast majority of my constituents, Woodhaven is simply not as accessible as alternative provision at Melbury Lodge in Winchester. Woodhaven is a great deal further away for many people, and the public transport links are much poorer.

However, location has simply not been the focus for any of my constituents who have had experience of either Woodhaven or Melbury Lodge, or indeed both. Far from emphasising convenience, my constituents’ concern has been regarding the quality of provision. The questions they have posed have been eminently sensible. Why is it proposed to deprive acutely ill patients of the benefit of 24 modern en-suite beds that were opened only eight years ago? Why would the trust choose to keep the facility that is not as good, that does not afford the same level of privacy and dignity and that has no en-suite facilities at all? I would like to highlight the comments made to me by just two constituents who have contacted me. The first wrote:

“My wife has been an inpatient at both Woodhaven and Melbury Lodge. Melbury Lodge isn’t anywhere near the standard of Woodhaven. Woodhaven is very pleasant, with a lovely atmosphere. Melbury Lodge by comparison is very intimidating with a lock down high security approach. This may be appropriate for some of their patients but for the majority it’s just scary.”

The second constituent provided me with a very detailed account of his mental health issues, a suicide attempt in 2008, and his own stay at Woodhaven under section. He wrote:

“Having been an inpatient at Woodhaven I would emphasise the privacy. Having a breakdown surrounded by others who do not respect your privacy is very difficult. When I was in acute crisis I desperately needed short term care and support, it would be a disaster for local service users if those high quality short term beds were lost in favour of a less good facility, or worst case scenario, no bed at all.”

I pay tribute to one of my hon. Friend’s constituents, who made a lasting impression on me at the meeting mentioned earlier. He had been an in-patient under section at both Melbury Lodge and Woodhaven and, again, it was the privacy aspect he emphasised. While an in-patient at Woodhaven, he felt he had retained his dignity by being able to have his own bathroom. That clearly made an enormous difference to him personally, and I think we can safely draw the conclusion that a feeling of having some personal space and privacy can greatly improve the overall sense of well-being and aid the chances of a swifter recovery.

I have absolutely no doubt that the facility at Woodhaven is of an extremely high standard; we know that from the comments made by consultant psychiatrists. We know that the demand for short-term acute beds is high, and that one in four of the population suffers from some level of mental health problems at one time or other during their life. We also know that the NHS trust’s figures on bed usage and length of stay at the unit have been called into question. Is now the right time to press ahead with a closure, or is it timely to call a pause to the process until such time as the disputed statistics have been independently analysed?

10:08

[Andrew Griffiths (Burton) (Con)]

I will speak briefly in support of my hon. Friend the Member for New Forest East (Dr Lewis). We have joined together on many occasions to campaign on the provision of acute mental health facilities, and today I shall express my concerns about how these processes are being undertaken by primary care trusts across the country. If anybody wants to see why the health care reforms that the Minister has fought so valiantly to introduce are needed, PCTs’ actions and decisions to close mental health facilities are the perfect example and demonstrate how they are out of touch, need reform and need to change.

Sadly, three weeks ago South Staffordshire PCT took the decision to close Margaret Stanhope Centre, a unit of 18 acute mental health beds in my constituency. It took that decision not only in the face of huge opposition from local people—8,200 people signed a petition as part of a campaign run by my local newspaper the Burton Mail and the Friends of Margaret Stanhope campaign group—but in the face of the evidence. I am a new Member of Parliament, elected for the first time at the last general election, and I had always assumed that such decisions were based on fact and on evidence—that the PCTs that took such important and often life-threatening decisions would be able to stand up to defend their decisions by proving their case. However, in the closure of the Margaret Stanhope Centre the PCT acted irresponsibly, recklessly and had no factual evidence to back up its decisions.

We conducted some research and found an Audit Commission report: 46 PCTs across the country had taken part in a benchmarking exercise, and the report showed that the average provision of acute mental health beds in those 46 PCTs was 27.5 beds per 100,000. In my trust, however, provision was 14.5 beds—almost half that average. The PCT then prayed in aid the following report, produced during the consultation process. It claimed that, miraculously, its provision had shot up to 31 per 100,000, and that there was nothing to fear.

I tried to get the facts. I tried to get the information. I asked and I asked and I asked for independent data. When the data came, they showed that the PCT had got its figure wrong: provision was not 31 beds per 100,000, but 22. However, when analysing the raw data, the PCT had included such things as mother and baby post-natal depression beds, beds for eating disorders, and drug and alcohol rehabilitation, so actually the figure for provision came out at 13.2. The PCT then prayed in aid an independent report that it had commissioned from Staffordshire university. We asked for that report. When we received it—it took two and a half months to come—we found that the person who had conducted the independent report, Dr Eleanor Bradley, was being paid not only by Staffordshire university, but by the NHS trust. The independent report that it claimed demonstrated how safe it was to close the Margaret Stanhope Centre was actually conducted by somebody on its payroll.

One claim made in the report was that the PCT had been able, through a pilot scheme, to reduce the in-patient stay by a third, but when we managed to drag the report out from the PCT, we discovered a number of things. First, we discovered that for stays in Margaret Stanhope of more than 91 days, it had managed to reduce average stays beyond 91 days by more than a third, from 39 days to 23—a reduction of 41%. However, the vast majority of admissions—88%—were between two and 90 days, and there the reduction was just 1.1%. The PCT claimed to have reduced in-patient stay by a third, but had actually reduced it by just 1.1%. I could go on about how flawed was the evidence used by my PCT to justify the closing of a much loved and much valued unit that serves the most vulnerable in my community. The process began some four years ago, so this is not a party political point, but a point about the actions of the PCT.

We met three weeks ago to discuss the passionate campaign for the continued existence of the unit. The process used to make that decision—

[Dr William McCrea (in the Chair)]

Order. May I draw the hon. Member’s attention to the fact that we are having a debate on the closure of acute adult mental health beds in Hampshire? I am sure that he is building his case from his experience, but it must be linked directly with the situation in Hampshire.

[Andrew Griffiths]

Forgive me, Dr McCrea. I will do exactly that and draw my speech to a close.

What I have seen is that the processes are flawed. What I have seen is that PCTs cannot be trusted to make the decision in Staffordshire and they cannot be trusted to make the decision in Hampshire. It is essential that we reassure the most vulnerable in our communities and in society. It is essential that the Minister understands their concerns properly and reassures himself that the decisions being made in Hampshire, and the decisions made in Staffordshire, are correct and are based on fact and evidence. I urge the Minister to train his laser-like vision on this important issue and to reassure himself, so that he, we and our constituents can be confident that mental health provision in Hampshire and in the rest of the country is not being jeopardised by false decisions made by people who are unaccountable, unelected and are not making those decisions in the best interests of our constituents.

10:16

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Member for New Forest East (Dr Lewis) for securing the debate. Health matters are devolved in Northern Ireland and I do not have a direct input into them, but I do have compassion for those who are less well off and that is why I am here as an MP. I want to try to change lives for the better. I recognise the issues that affect the hon. Gentleman’s constituency. He outlined clearly where the process works and where it has not worked, which is what we are debating today. As MPs, we look at the grand scheme of politics—we are all drawn to do that—but today I want to support the hon. Gentleman on the issue specific to his constituency and give an example from my area to illustrate the importance of acute mental bed provision.

As we all know, acute mental health bed provision is vital. Those who use it do so because they have to. The reason such provision is made is to ensure that they receive all the care they need in the best place for that care to be given. The hon. Gentleman outlined how and why the 56 acute mental health beds in his area were removed. That that should happen without full and open consultation with the MP who represents the area or with the many people who are affected greatly by the removal is nothing short of scandalous.

In my constituency, I am aware of the care that is needed for those with acute mental health problems. As you will know, Dr McCrea, the Bamford review raised awareness of mental health issues in Northern Ireland and the importance of having provision for them. It stated that nothing should happen until all the parts were in place, and that if something was to be removed there had to be something else there to take its place. The Bamford review was very important for Northern Ireland.

It has been suggested what the bed closures will mean. According to the background information, if someone is not in hospital, they will be at home. If so, has provision been made for them? The hon. Gentleman described how the system worked and how the consultation process did not involve everyone. Perhaps it did not look fully—it should have done—at how those at home, receiving care in the community, will be affected. Is that care of sufficient value and weight to fit the gap that has opened because of bed closures? I do not know whether it is or not, but back home, when there were changes, we also had to ensure that there was provision for care at home. That is important for those with acute mental health issues. I am not sure, from what I have heard so far, that that has been done in the case the hon. Gentleman has raised. I hope that the Minister can give us some idea of how that will work out.

The hon. Member for Romsey and Southampton North (Caroline Nokes) mentioned another problem. Sometimes, Members of Parliament think that they represent problems specific to their constituency, but they are not really, because all hon. Members represent people similarly and similar problems occur in Hampshire, Dorset, Scotland, Wales and in my constituency of Strangford in Northern Ireland. Last year, after changes were made, one of my constituents affected by mental health issues would have had to travel some 40 to 50 miles on a bus, because there was no car provision. To illustrate the point, we got on the bus and did the whole journey together, me and her, to the destination. There and back, the journey took seven hours and cost £39.40, not to mention the annoyance, hassle and problems that occurred. Whenever people talk about removing beds, they have to consider what happens outside that, including the effect on provision of care packages at home and on the families, and how they get from their home to the hospital whenever a person needs care. I am not sure that, when decisions are taken, people understand that families are also involved. It is not just about the person with the acute mental health problems, but about the families as well. When a stone is thrown into the water and it hits the centre, the ripples spread out: the centre is the person with the acute mental health needs, but the ripples spread out to the family, the community and everywhere else.

The hon. Member for New Forest East mentioned a petition with 1,000 names. I do not agree with Councillor Pat West, who commented that 1,000 names is only a small portion. A thousand names on a petition is a very great number and, I believe, represents a large part of the community.

[Dr Lewis]

For the sake of fairness, let me say that it was the chief executive of the NHS trust, Miss Percy, who sought to dismiss the petition in that way. The trust said that it had tried to validate it and said that a number of people professed not to know about having signed it. How big or small that number was, I have yet to discover.

[Jim Shannon]

I thank the hon. Gentleman. The name stands corrected in Hansard for us all, including me. I still say that 1,000 names can never be ignored. Ignore them at your peril, because those 1,000 people have families and so on, and the numbers are important.

The loss of beds puts pressure on a great many people. The hon. Member for Burton (Andrew Griffiths) spoke about the practicalities. It is important that we consider those, because before anything is done, people have to look at their effect further on. From what I have heard today, it is clear that this process has not been truthfully, honestly and fairly carried out.

To illustrate my point further and give examples, back home there has been pressure on mental health and acute mental health beds. I have pressed in this regard, as have other hon. Members—you have been involved as well, Dr McCrea, and the end result is a new 30-bed unit in Templepatrick, in your constituency. That is a £10 million to £15 million project undertaken in partnership with the health service, private enterprise and private monies as well. The unit is for acute mental health issues. I have become aware of some mental health issues over the years. People who have anorexia and bulimia have acute mental health issues to address; they feel that, no matter how thin they are, they are not thin enough. The 30-bed unit in your constituency, Dr McCrea, is there because of the vision of some of those in private enterprise, and individuals, who have worked with the Minister, Edwin Poots, to ensure provision.

I commend the hon. Member for New Forest East for bringing this matter to the House. Any closure or removal of mental health beds impacts not only on those who need them, but on families who have to live with their family members’ trauma and, wider afield, on the whole community, which also shoulders the burden. I look forward to the Minister’s response, which I am sure will be full and helpful. Again, I hope that we will get the answer that the hon. Member for New Forest East needs, confirming the retention of the beds, because that is the best way forward.

10:26

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

It is a pleasure to serve under your chairmanship as always, Dr McCrea, and to contribute to this important debate. I commend the hon. Member for New Forest East (Dr Lewis) for ensuring that this issue is raised in Parliament and for the comprehensive, forceful and eloquent case that he and his colleague, the hon. Member for Romsey and Southampton North (Caroline Nokes), made for protecting services in Hampshire. After contributions from his colleague from the not-quite-neighbouring county of Staffordshire, the hon. Member for Burton (Andrew Griffiths), and from Northern Ireland—the hon. Member for Strangford (Jim Shannon)—we are indeed a United Kingdom in making the case for adult acute mental health care beds.

Given the huge changes that are going on in the NHS, it is important that we do not forget those who are genuinely most in need. Mental health services and mental health provision have often been referred to as the Cinderella service. It is crucial that the provisions for those with mental health needs do not slip down the gaps in health care provision.

The hon. Member for New Forest East forcefully raised local concerns about the plans of the Southern Health NHS Foundation Trust, and he is right to do so. This debate is important, because statistically one in four of us will experience a mental health problem in our lifetime—an example of how we live our lives in the 21st century. Mental ill health will soon be the biggest burden on society, both economically and sociologically, costing some £105 billion a year. The World Health Organisation predicts that, by 2030, more people will be affected by depression than any other health problem.

The previous Labour Government made important progress on mental health, with the national service framework early on and the improving access to psychological therapies programme towards the end. But we must also look to the wider challenges of modern life. People are living longer, less stable, more stressful and isolated lives. It is clear that there is still a tendency not to talk openly about mental health. The stiff-upper-lip culture is ingrained in our society, at home, in our work places and, yes, even in Government and Parliament.

The challenges of 21st century living demand a rethink in our approach to mental health. We need to consider a number of issues. For people to get the support that they need from the NHS to live full and economically active lives, and if it is to be sustainable in the 21st century, mental health must move from the edges to the centre of the NHS. Also, we can no longer look at people’s physical health, social care and mental health as three separate systems. They must be part of one vision for a modern health care system. Changes in our public services will be successful only if matched by a wider change in attitudes towards mental health.

We need to pay attention to and look at the stigma surrounding mental health, because not only must people face the direct effects of depression but their problems can be compounded by the reactions of others. People do not feel able to admit to having a problem that could change their employment and prospects or lose them their friends. With most illnesses, people get a sympathetic shoulder to cry on, but with mental illness, they may get the cold shoulder. Even if people admit a problem, family and friends might not know how to advise them adequately. The public debate that has been so powerfully led by Stephen Fry, Frank Bruno and others is therefore tremendously important. It is essential that the excellent “Time to Change” campaign, led by Mind and Rethink and funded by the Department of Health, ultimately prevails.

The specific issue of today’s debate was put so eloquently by the hon. Member for New Forest East. I do not wish to stray into the politics of Hampshire’s health overview and scrutiny committee, nor into the internal politics of the local Conservative party—fun though that might be—but he made some important points. It would be helpful if the Minister clarified whether he has seen any meaningful assessment of how many mental health beds there should be in Hampshire. Of course, trusts all over the country have to make efficiency savings, but cutting front-line services and making efficiency savings are two very different things. So although I understand the need for referral from the health overview and scrutiny committee to the Minister, has he been able to analyse whether there is an adequate supply of beds for mental health patients throughout the county of Hampshire, particularly if required in an emergency admission? Is there adequate capacity? If so, has there been an assessment of future operations with the reduced beds available?

I ask those questions not least because the hon. Member for New Forest East made it clear that the statistics that he had obtained contradict the statistics that have been put forward by his local NHS trust and that are being used by the health overview and scrutiny committee. To move forward, we need certainty, clarity and confidence in those statistics, so that decisions made locally are based on sound statistics. We will see more instances of trusts forced to make difficult decisions. Indeed, we have heard what is happening in other parts of the country today. Such decisions will undoubtedly have real consequences for the care received by patients, not least because of the combined effect of the Nicholson challenge, set in train by the previous Government, and the huge top-down reorganisation pushed through by this Government under the Health and Social Care Act 2012.

Finally, mental health is an equality issue, and social progress in the 21st century depends on us waking up to that fact. Children from the poorest 20% of households are at a threefold greater risk of mental health problems than children from the most affluent 20% of households. We will only have a fairer and more equal society in this century if we work to change attitudes to mental health and to look at a whole-person approach to health care, so that the problems that we might all face at some point in our lives do not stop us from reaching our potential. Again, I commend the hon. Gentleman for putting his case for mental health in Hampshire so forcefully. I, too, look forward to the Minister’s response.

10:29

[The Minister of State, Department of Health (Mr Simon Burns)]

It is a pleasure, yet again, to attend a debate under your chairmanship, Dr McCrea.

The commitment of my hon. Friend the Member for New Forest East (Dr Lewis) is quite evident, because not only is this the second debate on the issue in the past five months but he has had ministerial meetings. He has championed the interests of his constituents, as expected of an assiduous Member of the House. I also congratulate my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) on her speech and on how she represented the views and concerns of her constituents on a difficult and sensitive issue. My hon. Friend the Member for Burton (Andrew Griffiths) and the hon. Member for Strangford (Jim Shannon) managed, intriguingly, to merge Burton and Strangford into the southern county of Hampshire. To do so took political skill—debating skill—but they achieved it and made some interesting points that were a valuable contribution to the debate.

I have to say, however, that I am not quite sure what more I can say in response to my hon. Friend the Member for New Forest East following our meeting of 26 March, when we discussed the matter. My hon. Friend has campaigned vigorously since the autumn of last year against Southern Health NHS Foundation Trust’s proposed redesign of acute adult mental health services in Hampshire, and in particular against the withdrawal of the adult in-patient mental health ward at Woodhaven hospital in his constituency. Nevertheless, in the course of my remarks, I will seek to explain and to lay out the policy towards the provision of mental health care in Hampshire and the knock-on effects elsewhere.

The debate also gives me the opportunity to thank all the NHS staff who work in the field of mental health and, in particular, the staff at Southern Health NHS Foundation Trust, who do a fantastic job, day in, day out, looking after some of the most vulnerable and frail members of our society with complex medical problems. Locking into the valid point made by the hon. Member for Denton and Reddish (Andrew Gwynne), the staff must also combat the stigma associated with mental health issues. The hon. Gentleman is absolutely right to congratulate Stephen Fry, Mind, Rethink and others who work continuously to break down such barriers. I will be a little more generous politically, because the Major Government in the mid-1990s and the previous Labour Governments of Tony Blair and the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) did a tremendous amount of work to help bring down barriers and reduce stigma. The trouble is that there is still a long way to go and none of us can relax in fighting that battle.

If one suffers from an acute medical problem, people are all too willing to make hospital visits, to ring up and to inquire after someone’s general well-being, but it is a disgrace that if one’s mental health is suffering, people still too often do not want to find out or are frightened to ask. Even worse, the family and friends of people who suffer from mental illness want to ignore it or hush it up. The patients themselves are often too scared to allude to their medical problems because they are fearful of the response that they might get from family—less often—or friends and, generally, from people in the community. That is our challenge, and that is why I am so full of admiration for people in the NHS and elsewhere in the charitable and voluntary sector who do so much work, not only to look after people at a particularly vulnerable time in their lives but as ambassadors in seeking to break down the barriers and the stigma.

As I explained to my hon. Friend the Member for New Forest East when we met recently, the reconfiguration of local health services is exactly that—a matter for the local NHS. Although he is calling for a halt to the closure of beds at Woodhaven, Ministers cannot and should not be seen to interfere. My hon. Friend, who is generous and courteous, tried to tempt me —he slightly sugared the pill by suggesting that, if not today, perhaps upon reflection—to send out a message, almost like the white smoke that appears from the Vatican when a new Pope is elected, to the trust, and if not to the trust, certainly to the Hampshire HOSC, saying how much I would welcome a referral to my right hon. Friend the Secretary of State.

[Dr Lewis]

Do it.

[Mr Burns]

I know that nothing would give my hon. Friend greater pleasure, but I must warn him that I have been here too long to fall into that pit. It would completely compromise the independence of local government. I am sure he agrees that all too often, Governments of different political parties have been criticised for interfering too much in local government, and that local councillors are elected to local authorities to make decisions about matters that they, because of their representation of their constituents, are most familiar with. It would not be the way forward for a heavy-handed Minister at 79 Whitehall to issue messages of welcome for things. It would compromise the ethos and independence of local democracy, and the way in which local people elect local councillors to represent their views. Therefore, I must disappoint my hon. Friend.

[Andrew Griffiths]

I am a fan of localism, and I completely support what the Minister says, but does he not recognise that there is a massive lack of democratic accountability in how PCTs operate? No one elects them. They make decisions, and they are accountable only to themselves and ultimately to the Minister.

[Mr Burns]

My hon. Friend makes a valid point, and I have total sympathy with it. It is precisely why we are abolishing PCTs on 1 April next year, and why we are creating the clinical commissioning groups under the Health and Social Care Act 2012. Those groups will consist of GPs, who are most familiar with their patients’ needs and requirements, and will commission care for their patients, and create the health and wellbeing boards which will, for the first time in a generation, have democratic accountability because they will include locally elected councillors and will have responsibility under the Act and the reforms to look out for and to ensure that the needs of the local health economy are being met in local communities. That is a positive and straightforward step in addressing the very problem that my hon. Friend raised.

In response to my hon. Friend the Member for New Forest East, decisions on reconfiguration of services will be made by the local health economy, not Ministers in Whitehall. He will be aware that planned changes to in-patient mental health beds in Hampshire have been the subject of local discussions since 2009-10. However, to reiterate the clinical case for change, it will allow investment in better alternatives to in-patient care by increasing home treatment, and developing other measures to support people outside hospital in Hampshire. The number of in-patient beds will decrease by 58, from the current total of 165, to 107. That addresses the question asked by my hon. Friend the Member for Romsey and Southampton North about how many beds were involved from the start to the finish of the process. The change will also enable growth in community reablement services in the New Forest to help and support people with longer-term mental health needs, allowing them to live a more independent and fulfilling life when that is clinically appropriate.

Doctors and other professionals, the public and service users have all been involved in this process in Hampshire from the outset, and their views have always been taken into account, even when they were not supportive of the proposals and the proposals were not radically changed or abandoned.

[Dr Lewis]

It is true that there has been public consultation. It is also true that soon afterwards an analysis of the responses listed concern about this, that and the other. If I remember correctly, the consultation ended in October last year, and it took me until March to get the trust to admit that the heavy majority of people who responded to the consultation were against the bed closures. It consults, and then carries on as though nothing has happened.

[Mr Burns]

I appreciate that point, and I will come to it.

I must reiterate that decisions on the reconfiguration of services are, as with all reconfiguration, for the local health economy to make, led by local people, local GPs and local clinicians. I have been assured that the proposed changes are supported by the majority of GPs, most but not all clinicians and the clinical commissioning group in the New Forest, as well as the Hampshire HOSC. I listened to the procedures and activities of the Hampshire HOSC and what happened at its meetings, but my hon. Friend will appreciate that those decisions do not come within Ministers’ responsibilities.

The Hampshire HOSC consists of elected county councillors who are responsible for and accountable to their local communities, and they made the decision not to refer the matter to my right hon. Friend the Secretary of State. I am sure that my hon. Friend accepts that I cannot dictate—I would not seek to, because it would be inappropriate—what an HOSC should do. It is an independent body with democratic accountability, and it will consider the sort of complaints that my hon. Friend and others have raised to see whether, on balance, it believes that they could lead to its deciding that the proposed reconfiguration is inappropriate and that it should be referred to my right hon. Friend with a request that it is then sent to the independent reconfiguration panel.

The problem for my hon. Friend and others who oppose the proposal is that that body, which has the power to seek a referral, has so far refused to do so. I am sure that my hon. Friend will accept that not only do I have no right or power to do that, but it would be totally inappropriate for me as a Minister to seek to interfere with the working of that local government committee and its decisions.

[Dr Lewis]

I fully respect and accept the Minister’s point. Will he reiterate the point that he made at our previous meeting that even now, if it chose to do so, the HOSC could make that referral to the Secretary of State?

[Mr Burns]

I can reiterate that if the HOSC decides—my hon. Friend said during his eloquent speech that there will be a further meeting in May—that there is new evidence, or whatever, and that it wants to reverse that decision, nothing in the rules and procedures prevents it from doing so. However, it has had two meetings and has heard the evidence and arguments, and the pros and cons, and has not decided so far to take that decision. It has decided not to make a referral to my right hon. Friend. I do not know whether it will change its mind at the meeting in May, and it is not for me to speculate, or to try to influence it. However, in theory, if it wished to make that referral, it could.

I understand that the trust is investing more than £1.3 million in community services and developing alternative patient care in Hampshire. For example, four new specialist liaison staff will help service users to move more easily from in-patient care to the community, and crisis funds will help service users who may struggle to pay things such as deposits on accommodation and household items, or electricity and gas charge cards. As my hon. Friend will accept, it is important to have plans and measures in place so that those people for whom treatment is more appropriate in the home or the community have the structures to help them ensure that that happens. Mental health services are no different from those for acute care, and no one wants to be in hospital for a day longer than they have to be. If it is more appropriate to care for someone in a home setting, with proper support and access to services, or in the community, that is better for the patient. However, such care must be based on a clinical decision about what is most appropriate.

More than 50 staff will form part of hospital-at-home teams, providing intensive support to people where they live and helping them to remain or return to their homes. They will also help to prevent readmission to hospital. In the west of Hampshire, three members of staff will work to support service users who have more complex mental health needs and to help them to gain emotional and vocational skills that will support their recovery and health.

The launch of those services, which are still in their early days, has shown that service users are able to re-establish links with their community and gain the confidence to adapt to home and family life. As a result of the investment, the trust has seen people staying in hospital for a shorter period of time because they receive more intensive support both before they leave hospital and afterwards in the community.

Independent service user and carer groups—for example, the west Hants area service user involvement project or the Princess Royal Trust for Carers—have worked closely with the trust to develop plans, and they have been supportive of the changes. The service user-led recovery philosophy for mental health services has underpinned many of those proposed changes.

As I said earlier, the proposed changes have had throughout the full support of GPs, most clinicians, service users and the HOSC, thereby demonstrating the importance of locally led change at the heart of our NHS. As my hon. Friend alluded to, the Hampshire HOSC last met on 27 March, and its chair wrote to Katrina Percy, the chief executive at the Southern Health NHS Foundation Trust, advising her that pausing the proposed changes would not be in the best interests of local people who were affected by them.

Of course, the HOSC recognises that local people are worried about the changes, and that is why it has agreed to set up a small task and finish group to discuss the concerns raised at the meeting on 27 March. The group will report its findings at the HOSC meeting scheduled for 22 May 2012. In the meantime, let me say that the changes proposed in Hampshire are not unusual—we got a flavour of that from my hon. Friend the Member for Burton, who I know has conducted a vigorous campaign about elements of the proposals in his county that he considers to be deeply flawed.

[Dr Lewis]

On a slightly lighter note, the Minister may be interested to know that the Southern Health NHS Foundation Trust appears to think that what it has been doing is a suitable model and template for the whole country. It has applied for NHS funding because it wants to design a

“comprehensive, independent service evaluation...to inform day-to-day operational business context”

and

“future modelling of service changes.”

Instead of giving the trust more NHS money, perhaps the Minister should provide it with a link to today’s debate, which will show everyone exactly how such trusts go about their reconfigurations.

[Mr Burns]

That is an interesting point that gives one side of the argument. I do not want to labour the point, but unfortunately the other side of the argument suggests that most GPs and clinicians, together with many service users and the HOSC, have so far not shared that view because in various ways they have been supportive of what the trust is doing. That is a serious problem for my hon. Friend, because the nub of the argument is that the democratically elected overview and scrutiny committee has so far refused, or felt it unnecessary, to decide that the trust’s proposals should be referred to the Secretary of State and then to the independent reconfiguration panel. That is the mountain that my hon. Friend has to climb, and as with most arguments there are two views about the effectiveness, efficiency and correctness of the proposals. So far, he is on the losing side within the rules and the way that things are done locally.

Hampshire is not unusual, but the important point is to achieve the best possible outcomes for people in mental health crisis. Significant changes have been made to community and hospital services, so that they become more responsive to people’s needs and more attentive to the physical environments in which care is received.

Other mental health trusts in England have already reduced the number of in-patient beds, so that more support can be given to people in familiar and appropriate surroundings, such as their own homes. Local changes are in line with the “no health without mental health” strategy that was launched on 2 February 2011. As my hon. Friend will know, that is a cross-governmental mental health outcomes strategy for people of all ages, with the twin aims of improving the population’s mental health and improving mental health services. The strategy takes a life course approach and sends the message that prevention and early intervention are key priorities. It also stresses the interdependence of mental and physical health—a point raised by the hon. Member for Denton and Reddish.

The bulk of the strategy will be delivered locally—as it should be—by experts on the ground working with service users and their families and carers. At national level, our early years policies, including health visitors and the pupil premium, are about helping children and young families to get the best start. We expect that investment to save the NHS £272 million, which will then be available to doctors and nurses for reinvestment in front-line services. That will save the public sector £704 million over the next six years—again, that money can be reinvested in front-line services, which I am sure all hon. Members would agree is where it should go.

As the Department of Health completes the nationwide roll-out of psychological therapy services for adults who suffer from depression or anxiety disorders, we will pay particular attention to ensuring appropriate access for people over 65 years of age. We have also committed an extra £7.2 million for mental health services for veterans—a key point given what is happening in that area of mental health.

Many patients who suffer from long-term conditions do not expect a long stay in hospital. They expect to be treated promptly and then discharged, so that they can go home and continue to recover with proper support and access to proper care and treatment. That is the most important thing. Patients in my hon. Friend’s constituency, those of all Hampshire MPs or, indeed, throughout the country who suffer from mental health problems must receive appropriate and swift care and be looked after to the highest standards and in the most appropriate setting. That lies at the heart of the problems highlighted by my hon. Friend.

In conclusion, my hon. Friend should continue his discussions not with a Minister with a heavy-handed approach who dictates things from Whitehall, but with democratically elected councillors and others on the ground in his constituency and in Hampshire.

Young Entrepreneurs

Wednesday 18th April 2012 Westminster Hall

11:00

[Justin Tomlinson (North Swindon) (Con)]

I called for this debate on encouraging young entrepreneurs in order to focus our support for business on the next potential generation of wealth creators. During my time as an MP, I have focused much effort on supporting businesses. That is based on my experience of owning my own company and the regular business and retail forums that I organise in Swindon. I myself was a real wheeler-dealer when I was at school—if someone needed football stickers, comics or school lockers, I was their man. I want that type of young entrepreneurial flair to be promoted and supported.

I note that in the debates on business and enterprise, we often do not focus on encouraging young people to consider, as a career path, setting up their own business. When I go round talking to young people in schools and colleges, I find that they are incentivised by incredibly popular television programmes such as “The Apprentice” and “Dragons’ Den”. When I ask them to put their hands up if they would be interested in setting up their own business, the hands shoot up. In many ways, that is the perfect time for people to start their own business. Once people are a bit older and have children and a mortgage, they have a lot to lose. For a young person with a good idea, often the worst that can happen is that they will blow their savings.

When hands are thrust up into the air enthusiastically to show that those young people are keen to follow in the footsteps of those they have seen on “The Apprentice” and “Dragons’ Den”, I ask a follow-up question: “How many of you will take this up as a career?” Immediately, the hands go down, there is a deafening silence and tumbleweed rolls across the room. I ask why that is the case and it transpires that they simply do not know how to turn those ideas and that enthusiasm into setting up a business. It is crucial that we change that, because just over 1 million 16 to 24-year-olds are unemployed and 25% of graduates cannot find work. Many of the graduates who do find work do not necessarily use their degrees; they do not necessarily work in the areas in which they gained their qualifications. In addition, we as a nation are seeking to rebalance the economy.

Those are clear reasons why we should be supporting young entrepreneurs. I am delighted that the Government are right behind that. The decision to create 40,000 business mentors is key. I will come on to that. We have also had the exciting announcement of the £10 million pilot of an enterprise loan scheme that will give young people access to finance in a similar way to the student loan concept.

[David Simpson (Upper Bann) (DUP)]

I congratulate the hon. Gentleman on obtaining the debate. I remember well starting my own company some 32 years ago. I do not claim to be a wheeler-dealer like the hon. Gentleman; nevertheless, we managed to succeed. Does he agree that although it is important to encourage young entrepreneurs, we need to get to grips with the issues of financing young entrepreneurs and the bureaucracy and form-filling that they have to go through, which puts many young people off?

[Justin Tomlinson]

I thank the hon. Gentleman for his intervention and for being someone who took the plunge and set up his own business. I will say that when I was at school, not all my businesses went according to plan. A thriving comic business was thwarted when my friend William’s yoghurt pot exploded in his bag, destroying our entire back collection of comics, so we do not always succeed. The hon. Gentleman is right, and I want to focus later on some of the ways in which we can help people.

With regard to schools and colleges, I want as many schools as possible to encourage entrepreneurial opportunities. That can be done in a variety of ways. For example, there are a number of courses that schools could offer students. Those courses include the ifs School of Finance certificate and diploma in financial studies and the finance baccalaureate being piloted at King Edward VI college in Stourbridge, backed by the Royal Bank of Scotland. They are examples of where young people can do courses to encourage entrepreneurial flair. In some schools, that could be an appropriate way to encourage it.

We should also get schools to embrace the opportunities given to them by the fantastic young enterprise scheme. That gave me my first proper taste of running a business while I was at school. I understand that 250,000 students a year have the chance to try their hand at making money. I want to encourage every school possible to take that up and give their young people that brilliant opportunity. We should give students the chance to do that and we should also support them by getting lots of mentors who are connected to the school to support the young enterprise scheme. For example, a simple letter could be sent to all the parents saying, “Are any of you business people? Can you come and help with the young enterprise scheme?”

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

I entirely endorse what my hon. Friend is saying about the need for support and for mentoring. Is he aware of the work that NACUE, the National Association of College and University Entrepreneurs, is doing? With regard to the point that he is making about schools, does he agree that similar support needs to be provided as people exit schools? This issue should not be considered only when young people are leaving universities and colleges. The concepts of mentoring, advice and business incubators should be considered at school, not just at university.

[Justin Tomlinson]

I thank my hon. Friend for that very helpful intervention. I will refer to that organisation later, but she is spot-on, because what I will talk about in relation to universities can be replicated to boost the young enterprise scheme.

I have seen a number of young enterprise schemes in action—partly when I was a student myself, but also while visiting schools and colleges since becoming an MP. I have only one slight issue with some of the schemes that I see. They are set up so that young people raise money from their friends. They sell goods to their friends—they know what their friends want to buy—and they sell them in their friends’ environment. That means that they can cash in a favour, as it were. They can say, “Look, I’ll go to the cinema with you on Friday if you’ll buy my T-shirt off me today.” That is great, but I want young people to have more real-life experience, so I have struck up a deal in my constituency with the Blunsdon indoor market. That is a challenging market environment in which price is key and the customers are very savvy about haggling.

New college, in the South Swindon constituency, which many of my local students attend, is involved. The young people will take their young enterprise business and have three days of trading—a Wednesday, Saturday and Sunday. They have to comply with strict rules. If they have not set up their pitch by 9 in the morning, they lose that day’s trading. They get only a table, so they have to dress that table up, but of course if they get too carried away with that, they will have no money left and will not make a profit. They have to do research to see which products are already being sold, where the gap in the market is and what they can do. They have to stand on their own two feet—and trade on their feet all day long. They have to be able to do mental arithmetic, because the customers will haggle. This is something in which the local media are particularly interested. I am delighted to say that the market will then identify the businesses that do well and say to them, “You can come back in the summer holidays at a discounted rate.”

That scheme could be the first door opening to young people starting their own businesses. The owner of the Superdry clothing company started on a market stall and is now turning over £165 million a day. The Mary Portas high street review said that every town centre should have market stall days, although there are not enough market stall traders. I have now asked Swindon borough council to identify which retail premises in the town centre it cannot lease out at the moment in order to look at giving short-term leases to allow young entrepreneurs just to dabble. Those types of short-term contract can always be found in office blocks. People pay a little more rent, so they would do it only short term, but it enables them to test the water. We need to see the same in retail. I hope that the concept involving New college and Blunsdon market will be a success and provide a model for others to follow.

Turning to universities, I did a business and marketing degree. There were 350 of us and, to the best of my knowledge, I am the only one of those 350 who went on to set up their own business, which ultimately employed people, which is what this country needs. That is in part because 29 of the 30-odd modules that I did focused my mind on how to be good on the corporate ladder. My work placement year was spent in the corporate environment. Entrepreneurial risk taking and flair was in a way educated out of me.

On that point, my old university was Oxford Brookes and I am delighted to say that having met some Virgin Media pioneers—I will say more about them later—they showed me some of their peer-to-peer mentors and I stumbled across Rebecca Hunter, the vice-president of the Oxford Brookes society for entrepreneurs. This scheme has been set up at a number of universities across the country by NACUE, the organisation highlighted by my hon. Friend the Member for Newton Abbot (Anne Marie Morris). It is a fantastic scheme. I spoke to Rebecca last night and asked her how it works. She told me that there are 3,000 people on the mailing list at Oxford Brookes university and 600 people attended the events last year. It is about business mentors coming in and giving people practical advice. The best part is that a number of the students involved in the society are already operating their own businesses. Some are doing so to pay for their university costs and some are setting themselves up for their lives post university. That is absolutely fantastic, and I would urge as many universities as possible to make time available for these things and to encourage people to do them. When it comes to the work-placement years, we should look at how students can run their own businesses, rather than simply be a marketing assistant in a sandpaper department, as I was.

I have been absolutely overwhelmed by the number of fantastic outside organisations that are doing their bit to support young entrepreneurs. I do not have time to mention them all, so I will pick just a few. Perhaps surprisingly, the first is the Scouts. My fiancée, Jo, and I had the pleasure of being invited to act, in effect, as “Dragons’ Den” business mentors and advisers to the Stratton St Margaret first scout group. The entrepreneurs badge is new, but 10,000 children have already taken it, and I am delighted that my hon. Friend the Member for South Swindon (Mr Buckland), who I share an office with, will be encouraging his son, George, to take it as soon as he joins the Scouts.

I learned two things from my experience. First, the kids absolutely loved doing the badge. They spent the first three weeks raising money. In a similar way to people on the young enterprise scheme, they came up with their business concepts. There were two teams, which Jo and I had to judge. They were both very creative. Indeed, as soon as we arrived, the first team said, “You look thirsty. Can we make you a cup of tea?” Spotting a way to influence our decision, the second team then said, “You look hungry. Here’s a cake.” That worked, and we were impressed.

We had to choose which team was likely to be the most successful, and that team was then given a £50 boost. The teams’ ideas were brilliant. We were able to advise them. For example, one team had secured a pitch in front of the big screen in the town centre. The team was really excited, but I asked what would happen if it rained, because the pitch was not properly covered. That was the sort of advice the teams needed before they started.

I also met people from Virgin Media Pioneers, a brilliant scheme that allows young people to upload videos asking questions and seeking advice from other young people taking their first tentative steps into business. The scheme is a wonderful resource. I took time to look at some of the videos and at some of the questions people were asking. Underneath, there were reams of comments and helpful suggestions. The person who asked the original question would come back and say, “Thank you. That’s what I’m going to try.” I am delighted that such things are there, because young people get technology.

On Monday, I met Miles Jacobson, the main guy at Sports Interactive. For those who are not computer geeks, like myself, I should explain that Sports Interactive creates Football Manager, which sells more than 1 million copies a year. We had a good, productive meeting, at which we talked about how easy it is in theory to get young people to start technology businesses creating apps and computer games. Miles Jacobson believes that, for as little as £10,000, people can have all the licences and equipment they need to get going. We are looking to embrace high-tech industries, and the one thing young people certainly understand are the mobile phones we all carry around and get confused by. I therefore encourage the Government to look at that issue.

In summary, I want to highlight my three key requests. I have met so many young people who are keen to be entrepreneurs, and they just need that extra bit of help. I welcome the provision of access to finance, but the single most important thing we can do is provide mentors and advice. Where there are opportunities such as those offered by the young enterprise scheme and the Scouts, they should be built on. These things are not simply fun exercises that can be put away and forgotten in the back of people’s minds. People who take part in such schemes should be told, “You’ve done really well. This is your No. 1 choice as a career path. You should think about it.”

I want the Government to do everything they can to accelerate the delivery of the business mentor programme, to encourage the organisations that take part in it, such as Virgin Media Pioneers, and to give young people the opportunity to access the programme. I also want Ministers to do all they can to encourage schools, colleges and universities to promote the opportunities offered by entrepreneurial schemes, which give young people real life experience.

Finally, I make a direct plea to the Minister. I want him annually to celebrate and highlight the best young entrepreneurs from across the country and to support the organisations that help them achieve what they do. In that way, we—the key decision makers in Parliament—will understand these issues, demand support for those involved and push entrepreneurism as hard as we can as a real career path for young people.

11:14

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

I congratulate my hon. Friend the Member for North Swindon (Justin Tomlinson). I was not quite as successful as he was in my wheeler-dealer days. At one point, I did corner the market in Curly Wurlys, but I should perhaps cast a veil over that. It was only a couple of years ago—actually, I am teasing.

What is exciting when we engage with young people is that we immediately see their sense of inspiration when they realise they can make money by understanding the people around them, by thinking laterally and by solving problems. Those are really important skills, whether or not they go on to become the next Sir Richard Branson. I really like the market idea that my hon. Friend highlighted. I would like to have a closer look at it with him, because I think it sounds like an exciting initiative that we will want to talk to market traders and others about. The Scouts initiative is great. I was aware that the Scouts were doing that. We should not assume that it is only college and university students who do these things; often, it is the youngest students who recognise that the moment they become their own boss is important.

Before I come to the question of young enterprise, however, let me go to what for me is the heart of the broader debate. Enterprise and entrepreneurship are vital to the economy, but they also have an important social message. “It doesn’t matter what your background is or where you went to school. If you have ability, ambition and the will to work, you can be your own boss and make your own fortune,” is a really powerful message, especially for the next generation. I applaud my hon. Friend’s work because in addition to what the Government are doing, all of us as Members of Parliament have a useful role to play in encouraging young people to see the range of opportunities before them. Even if people go into a salaried career for the first 20 years of their working life, many of them will still have those opportunities in the back of their mind. If they are shown what paths there are when they are young, their chances of progressing down them will be much greater. The number of start-ups in the UK is an encouraging sign: between 2003 and 2010, the number of business start-ups was static, but last year it jumped. I look at those numbers and see an encouraging shift in people’s ambition and aspiration to start their own business.

Alongside conventional economic reforms, we have tried to ensure that people have, as my hon. Friend said, the tools to turn their dream into a reality. We started by reforming all the business information the Government provide, putting it in a usable form and making sure it is where people want it, when they want it. We are looking to develop it in an app-based form, which is especially important for young people. We then looked to establish the principle of mentoring and money through the new enterprise allowance, mirroring what the Prince’s Trust has done in the past. That is important, because it will help unemployed people to become self-employed, creating up to 40,000 new businesses.

The broader question is how to get the advice right. I am absolutely committed to the principle of good business mentoring. That is why we have replaced the 1,600 state- paid business advisers with real business people: we have not even got to the end of the first year of the Mentor Me programme and 15,000 such people are already in place and helping many others to start businesses. We want to increase their number to 26,000 this year and, yes, we aim to get to 40,000, but I want make sure we get the quality right. I have that target in my mind, but I want to make sure that I do not race for 40,000 and get the quality wrong. That is an important issue. Mentoring is absolutely fundamental.

I want to focus on helping young people in particular. I will come to the enterprise loan for young people, but I cannot talk about start-ups and enterprise without briefly mentioning the importance of being able to access finance. That will never be easy following the 2008 crisis, but we have tried to think about it in the round. We are trying to improve debt finance and ease lending, which is what the enterprise finance guarantee and the national loan guarantee scheme are about, but we also need to think about the use of the tax system, and that is what the enterprise investment scheme is about. A key measure is the development of business angels, which to my mind are the logical next step for business mentors. If we nurture the community of mentors, we are more likely to generate more business angels, so alongside the mentoring programme, we are also putting in place the co-investment fund to expand the number of business angels, so that we get an underlying network to help people to start up.

What can we do and what are we doing to help young people to turn a bright idea into a real venture? Enterprise education has real benefits. My hon. Friend mentioned the young enterprise scheme; the evidence that it and other such programmes have produced shows that in almost every case when people engage in enterprise education, the proportion who actually start up a business doubles. However, there is an added benefit: even those who do not immediately go on to start up often demonstrate a greater appreciation of those skills and are better able to fulfil their career potential, so that they may go on to become successful in a salaried career. In other words, such education helps people to reassess what they are capable of and gives them the confidence to think in the round.

We have tried to foster enterprise education across the education system. Hon. Members have all said, “Let’s not just think about universities. Let’s think about schools, colleges and universities.” That is absolutely right, and that is why we are doing work in each of those areas. We want to enable most students, wherever they are in the education system, to learn about the opportunities and practicalities while they are still in learning. In schools we have established Enterprise Village, an online resource that has been up and running for the past few months, which aims to help teachers and students to start a business in the school. The Norwegians are good at that, and have established a principle of running a business in every school. We want to foster and encourage the same here. The importance of role models at local level was rightly mentioned, and alongside the Enterprise Village programme we have established Inspiring the Future, an army of 2,500 business champions or local entrepreneurs who fulfil an ambassadorial role in a formal sense, but, more important, provide inspiration. Those two elements are very important.

We have also thought about those who are struggling on the edge of the school system, and we were delighted to support the Premier League Enterprise Academy, a good programme that uses the draw of premier league clubs to get young people engaged in the process of entrepreneurship. We should not ignore a fact that I discovered by accident a few years ago, which is that many entrepreneurs struggled at school far more than the average student. Routinely, if I were to ask a group of entrepreneurs whether they had dyslexia or significant problems at school, about 40% would put up their hand. Whether that is because entrepreneurs are wired differently, or because the struggle at school made them entrepreneurial, I do not know. I do know that we need to think about that side of people’s learning alongside the conventional academic route.

My hon. Friend the Member for North Swindon took us on a wonderful trek through his educational and entrepreneurial career, and he rightly highlighted his university experience. I am a few years older than he is, and when I was at university the clubs, societies and networks were not oriented towards business—and I was doing a vocational degree. I felt strongly that we needed significantly to expand opportunity during learning, regardless of the subject students were taking—so not going down the exclusive business school route, but saying, “I don’t care whether you are studying land management or classics: you have the opportunity to be part of an entrepreneurial network on campus.” While my party was in opposition, I came across the nascent National Association of College and University Entrepreneurs, which in government we have been able to turn into a formal charitable group. This year we will put more than £1 million into NACUE, to make sure that the number of entrepreneurial clubs goes up from 40 or 50 to 90 during this Parliament. That is important, because they are not just clubs: they are the focal point for setting up competitions and other entrepreneurial opportunities, and for bringing in the other things that universities can do, such as establishing incubators, which has rightly been highlighted. I have seen that for myself at the university of Hertfordshire, where a youngster in his first term started a photography business. He has a space there and is studying, learning and earning. That is a wonderful combination, and, my golly, he is a mature and capable young man.

We want to make sure that alongside such programmes we build other networks, because where entrepreneurship really flourishes is where people group together and then bring in people with the business finance. It may involve academics, who have an invention that they are not sure how to commercialise. That fusion—whether in silicon valley or, indeed, Boston—lets people really make things happen. That is why we have actively been supporting such programmes as StartUp Britain, involving people who are dynamic, engaged, and of the relevant age group. They see universities as a place in which to put their business, although they may be well past the university stage. What I think of as a sort of entrepreneurial ecosystem is bringing finance, invention and the entrepreneur together. That is where we find the best opportunity.

We also wanted with NACUE to think not just about our friends at universities, but about the many people at further education colleges. We should not ignore the fact that if we help young people to gain a trade or craft that is crucial to the economy and to their ability to earn, we need also to ensure they know how to be self-employed in those trades and crafts. That is why, partly at the behest of Doug Richard, who bent my ear on the subject, we have also given NACUE the task of rolling out entrepreneur clubs to about 160 campuses by the end of this Parliament, so that we will be dealing with schools, universities and colleges.

My hon. Friend mentioned finance, which is important. It is especially challenging for young people. When I was a mentor for the Prince’s Trust, I learned that the combination that we often see in the context of micro-loans—money and a little grey hair—is the mix that helps a business to succeed, especially over a two or three-year period. We wanted to get the infrastructure ready on college campuses and so on, and then think about the finance side, and that is why we announced in the Budget a £10 million programme, to which my hon. Friend alluded, to provide enterprise loans to 18 to 24-year-olds. In a sense that mirrors what is available in the market for other entrepreneurs, but it is an exciting concept because it will provide the means to take a nice idea that needs to be tested in the market through to a business plan, and then on to becoming a real business. I can tell the House that we will start the pilot next month, and this morning I had a meeting with many of the private sector partners who want to participate. I am particularly grateful to Lord Young, who has been leading on the matter and advising the Prime Minister and the Government. He has brought real enthusiasm and energy to the work.

On a broader point, my hon. Friend mentioned the need to engage lots of people, and I have always taken the view that the Government’s job is not to try to run all this. If we did try, we would do it badly. We want to create the environment in which a thousand flowers can indeed bloom in the entrepreneurial community. That is the nature of entrepreneurs. Some will fail, and some will not. Some will bloom and go to great heights, and others will nearly disappear but come back next year. That is fine. That is why, to celebrate entrepreneurship, we have taken the concept we inherited of the global entrepreneurship week—it started in this country and now encompasses more than 120 countries—and set the ambition of having an entrepreneurial week every week. I have got together all the different entrepreneurial partners in Young Enterprise and beyond to produce something that is more focused and that builds on the things that Young Enterprise, the Prince’s Trust and many others already do. That is what StartUp Britain is doing, in part, through the year-long calendar it has just launched, which shows people the fantastic array of events taking place in this country. We are the most entrepreneurial country in Europe, but I want us to be the most entrepreneurial country in the world. We have to make sure that we help young people in that process.

I am excited by the ideas that my hon. Friend suggested. In a way they reflect the broader activity that is going on in many of our constituencies. Entrepreneurship is a positive message for young people. Our job is to enable all students, whatever stage they are at in their school or university career, to get access to the right information, advice and networks, so that they can take their bright idea and turn it into a successful business for the future.

11:29

Sitting suspended.

MOD Logistics (Bicester)

Wednesday 18th April 2012 Westminster Hall

[Mr Dai Havard in the Chair]

14:30

[Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)]

I am pleased to have secured this debate. I raised the issue last year when I asked the Prime Minister about a pair of £44 boots that MOD logistics at Bicester had shipped to Northern Ireland at a cost of nearly £800. That is not the only example of MOD Bicester’s excessive spending, excessive pricing and excessive commissioning that has come my way in the intervening months. The scale of management error is so large and so endemic that, to my eyes, it almost looks systematic. In a nutshell, we believe that the logistics operation is having its costs inflated in order to hive it off into the private sector. I also believe that MOD logistics is being fattened for that purpose.

[Tony Baldry (Banbury) (Con)]

The hon. Gentleman uses the word “we”. Unless he is becoming very royal, who does he mean when he says “we”? For whom is he speaking when he makes these attacks on my constituency?

[Mr Llwyd]

First, I am making attacks not on the hon. Gentleman’s constituency, but on some people who might not be completely open in the way in which they deal with matters at MOD logistics at Bicester. Secondly, those who advise me are included in the “we”—I do not pretend to be of any royal stock. I hope that I have made my position clear. The hon. Gentleman knows that my argument is not with him or his constituents, but with the MOD logistics department, which is the whole purpose of this debate.

I believe that the officials responsible for this are perhaps positioning themselves to make a fortune out of it in due course; and that, to make that operation less apparent, misled the Minister, who has in turn, unintentionally, perhaps misled the Commons. I have evidence and a confession from the head of logistics, who said on Monday night that all the information that I had been asking for over the last six or eight months was available, but had been declared to the Minister to be unavailable. There was a repetition of the word “unfortunate” when he said that the Minister had been misled.

The same official told me that there are plans to restructure the department, which may be announced in the coming weeks, so the debate is timely. I did not ask for this debate to make any particular political point, nor do I want to embarrass the Minister, who I know is a man of integrity and who may well have been placed in the unhappy position of unintentionally misleading Parliament on one occasion at least. He did indeed correct himself in due course, which is what I would expect of him.

This is a debate about administrative propriety upon which all parties in this Chamber agree, about a specific exercise in holding the Government to account and about the spending of public money. It is also a debate that asks, “Does Parliament have any power to hold the Government to account? Does the Government have the necessary control over their civil service in this area, or are we all to be treated as nothing more than a nuisance by officials who spend £27 million a year of the public’s money?”

I suspect that what we have here may be a fraudulent operation. It needs urgent and perhaps unusual treatment by the Minister’s office. My suggestion is that the Minister appoints a small team of two or three who will be given access for 48 hours to the TMS—transport management system—computer system that records the logistics operation and who will then report to him in due course. They should be the Minister’s own team, because there are some in senior management positions who are perhaps not worthy of complete trust. Information has been concealed, withheld and manipulated. Those people now have no incentive to do anything else. Most important, there is a proposal for further restructuring

“to bring together the component parts of the logistics organisation into site-based groups.”

That sounds like a return to the structure before the last restructuring. There is also a rumour of a management buy-out. The idea that the same management who created this mare’s nest can then profit from it will cause revulsion in anyone not directly benefiting from it.

Before I lay out a summary of the case, I ask the Minister for assurances that the people, however senior, who have supplied me with information will not suffer from proceedings by their managers or from other parts of the MOD hierarchy. I have no doubt that the Minister will respond to that in due course.

Military logistics planning is usually conducted in acronyms and the language of consultants. For the convenience of the House, I will present the case in layman’s terms. Ministry of Defence logistics is the term used for transporting equipment for the Army, Navy and Air Force round Britain and overseas. The main southern distribution hubs from which supplies originate are Bicester and, secondarily, Donnington. Bicester stores and sends equipment to our forces nationwide and worldwide, via RAF Brize Norton or Heathrow. It was from Bicester that the equipment for Iraq was delivered, for example. The main day-to-day task in peace time is resupply: Bicester transports everything from ship engines and heavy machinery to documents, toilet paper, body armour and ration packs and, yes, the famous boots going to Northern Ireland. There are flight steps from the Falklands, equipment, kit, documents, jiffy bags and pallets—all are ferried round the UK and round the world largely from the two centres.

Let me describe succinctly the operational structure before and after the restructuring—how it was done then and how it is done now. Before restructuring, supplies were transported out from Bicester in one of three classes of vehicle: a Luton van size; a removal truck size and a standard articulated lorry—a 44-tonne truck. Those vehicles carried supplies from Bicester to one of the regional centres around the country, from where supplies were sent on in smaller vehicles to their final destination. It is the hub system by which all major transport companies, such as FedEx, United Parcel Service and the Royal Mail, work. There is a universal logic to the system: the large trucks carry larger quantities of goods longer distances more cheaply, and the smaller vehicles conclude the delivery with a short local journey.

That conventional model was abandoned in 2008 and a new system was put in place. The managing director of Bicester was at that time, and is now, Steve Brannigan. He decided to close these regional distribution centres, to reduce the fleet and number of drivers, and to make up the shortfall in in-house capacity by greater use of private hauliers, contractors and couriers—generically called third party logistics, or 3PL for short. As a result of that new structure, it was said, the cost of the regional distribution centres—nearly £4 million a year—was saved. In a letter dated 28 July 2011, the Minister describes those as “net savings”, but my understanding is that that is very far from the truth. Again, I stress that I do not impugn the hon. Gentleman’s veracity over any action that he has taken. The crucial figure has been concealed and withheld.

What is the total sum paid to private transport? That figure is not yet forthcoming. We are told the total budget for transport, but not the total budget for private transport, and I believe that it is much higher than has been reported by senior people. The restructuring of the system reduced the number of in-house trucks and drivers and contracted their replacements from outside the Department. The idea behind the restructuring was to outsource much of the driving work and make efficiencies by competitive tendering. Palletways, the trucking firm, now does much of the work that the MOD used to do itself. Thus Bicester sends four or five articulated trucks carrying the supplies that it needs to have delivered to the Palletways centre in Staffordshire. Palletways then does the job that Bicester used to do in precisely the same way that Bicester used to do it, by sending the supplies out to its own regional distribution centres.

It is said that contracting out has a good reputation in management circles. The use of private contractors promises greater flexibility, lower overheads and more competitive tendering. Paid staff are not idle when there is no work. Contractors are assumed to have a commercial incentive to work harder than employees as their position is less secure. That is the theory. Often it works, but it does not translate into good practice automatically.

Has the restructuring of Bicester MOD logistics been a success? Has the evaluation process worked? The results should be apparent in the accounts, including the total operating sum spent on logistics before restructuring and the total operating sum afterwards. Those figures have been held very close by the Bicester MOD logistics management. In fact, they refuse to reveal them. Why is that? I believe that it is because the total cost of private transport makes a nonsense of the outsourcing, that total third party logistics costs show that no savings have been made, and that the restructuring has actually resulted in net losses.

It is easy to see how private contractors would struggle to match in-house costs: private sector drivers have a higher cost per hour than public sector drivers; there is the cost of operating licences and there is VAT on agency driver fees. Compare that with the defence infrastructure of bases and personnel, which can be used intelligently at low, or even no, marginal cost. There is also the need to transport MOD supplies to the main contractor’s depot 75 miles away from Bicester.

Those factors prompt questions that need to be answered. Did the restructuring work? Have the new arrangements saved money? Were the highly paid consultants who devised the new system worth their fee? The fact is we do not know whether the business operation has been analysed to show whether it works better or not. The figures have been arranged to show a financial benefit from the new structure. Real-time reports from the computer system, as well as common sense, present a very different picture.

The Minister will remember the question that started this process off last year; it was about the famous pair of boots that were transported from Bicester to Northern Ireland at a cost of almost £800. At that point, we were trying to establish the ongoing costs of the restructuring and we asked what those costs were. However, the costs of couriers were left out of the answer, when they are about a third of the total. The Minister said:

“I have been categorically assured about the omission of the courier costs.”

He also said that the error was

“a result of human error rather than any intent to mislead”.

That is what the Minister said.

[The Parliamentary Under-Secretary of State for Defence (Peter Luff)]

If I had let an inaccurate answer lie on the record, I would have been criticised. It was a genuine clerical error—a mistake. There is no conspiracy behind those figures at all. It was an error that we corrected as soon as we became aware of it. In my experience, it has happened two or three times. It was an error—no conspiracy.

[Mr Llwyd]

As I have already said, I do not have any real argument with the Minister about this matter, and I accept what he says. However, we are told that there was “a formatting error.” I must remind the House that the MOD is responsible for transporting nuclear missiles around the country and that “a formatting error” could have incalculable consequences.

The Minister has been assured that there was an “error” and I accept what he says. In addition to the “formatting error”, however, the bill for private contractors is not merely the bill for Palletways, private couriers and agency drivers from Pertemps. I know that there are as many as 25 private trucks a day coming in and out of Bicester MOD that are not Palletways trucks or trucks used by private couriers—25 trucks a day that have not appeared in any explanations or admissions.

As I have already said, the Minister has been told that there were £4 million of net savings from the closure of regional distribution centres. The figures given by Logistic Commodities and Services Bicester show that £7,535,000 was spent on private contractors, private drivers and private couriers in 2008-09, and in 2009-10 £6,305,000 was spent on private transporters. That is a palpable reduction, but those figures do not include the cost of private hauliers—those 25 trucks a day. Where do the costs incurred by those private hauliers appear? They include Hacklings, Metcalfe Farms Haulage, Kenyons, Newsomes, Reason Transport, Andover Transport—the list goes on. Who is paying for those trucks? Out of what budget are they paid? There is some “find the lady” trick going on here, or some accounting sleight of hand to hide the costs of between 6,000 and 10,000 trips a year. Where are those hidden journeys accounted for? Who has paid for them, and how much? What does it do to the net saving figure claimed by officials? These questions must be answered.

I tabled a series of parliamentary questions asking for basic management information. I was trying to determine whether the restructuring has been a success. I asked the pertinent questions about how many miles were driven, the number of trips that were made, the hours that were taken, the class of vehicle driven and the cost per mile. I was told that the information was not held centrally and was not available, except at disproportionate cost. That is not true. The Minister was also told that the information was not available, but he was misled. The information is available within half a dozen keystrokes on the TMS computer system, assuming it has not been deleted—I have evidence of deletions from the central computer, so I do not dismiss that possibility. The TMS system records every journey, every driver and every distance. All the information is there within half a dozen keystrokes and we would hope that it is there. Otherwise how could the Department know what it was actually spending and what it was doing?

I had believed that the information was readily available, centrally held and available at almost no cost—and so it was admitted to me by Neil Firth, the head of logistics, on Monday. He repeated that it was “unfortunate” that the information was not provided. First, it was a “formatting error”; then it was “unfortunate”; and next it will be “the dog ate it”. The Minister and Parliament are being taken for a ride. That is not “unfortunate”; it has put a Government Minister in the position of misleading Parliament. In my experience, that is a very serious matter. Again, I stress that I am not impugning the Minister.

I have other examples of that type of activity. People can see courier vans lined up on the A34 outside MOD Bicester in the dead of night waiting for a job to be called. They pick up, they drive to their destination before 6 am, the unit is shut and the courier drives back to Bicester with the parcel, saying that it was undeliverable. Then the courier gets to deliver it again in daylight hours. That means one job, two charges. It happens all the time. Couriers pick up at night and deliver before the depot is open. There are days, weeks and years of it. Every Christmas and every Easter, deliveries are sent out and returned on the first day of the holiday. They come back marked, “Unable to deliver”, as the unit is “closed for the holiday”, so the courier tries to deliver it the next day, and the next day, and the day after that. “Closed for the holiday”, “Closed for the holiday”—one job, three charges, every year.

There are many other examples of couriers being contracted at £100, £125 or £150 to take small parcels here and there, even though MOD trucks are going to the exact same destination at the exact same time—that, too, was admitted to me on Monday. It is suggested that half a trailer of failed deliveries comes back every night from Palletways to Bicester, to be redispatched and recharged again and again. We have seen examples of MOD trucks and drivers standing idle while commercial trucks and drivers are paid to do the work that could be done in-house.

I understand that the MOD units can pitch for MOD jobs, but they have to quote using a kerbside price for fuel, which is around £1.45 a litre. For the same job, Eddie Stobart can quote using his bulk price in Belgium of 80p a litre. Who made that decision? Why is the MOD systematically instructed to price itself out of competition with the private sector? I believe that the costs are being increased superficially and drastically, and that the goose is being fattened.

The Minister is categorically assured, and so assures the House, that there have been net savings of £4 million, but the evidence is not available, apparently, except at a disproportionate cost. I believe that there have not been net savings, but that the same people who carried out the disastrous restructuring are quietly trying to conceal their errors in another one. I repeat: it is also possible that the costs are being allowed to escalate through daily inefficiencies, to make a management buy-out seem like a good idea and demonstrate palpable savings. This might be straying into other forms of liability, but it is possible that the management are tolerating, and in some cases promoting, such inefficiency and cost inflation in order to buy out the business and make a fortune from it.

It is in the interests of good government, in the interests of the public and in the interests of accountability and transparency that a fast, urgent investigation is undertaken, perhaps with two or three investigators, with a report prepared for the Minister. If there is to be another restructuring, it is essential that it is done properly and openly, and in a way that permits challenge and scrutiny, especially in these days when cuts are being made in every service and the armed forces are at full stretch. I hope that this debate will put things right. I feel sure that the Minister will investigate the matter thoroughly and urgently, because nothing else will do.

14:51

[Tony Baldry (Banbury) (Con)]

The hon. Member for Dwyfor Meirionnydd (Mr Llwyd), like me, is a lawyer, and his speech was long on assertion and short on evidence. Indeed, it seemed more appropriate for the inside back pages of Private Eye than as a sensible contribution to Hansard and parliamentary debate.

It might be convenient for the House to know that I have represented Bicester for nearly 30 years—some three decades. During that time, the logistics depot has gone through a number of names, so for convenience I shall refer to it as the Bicester depot.

The Bicester depot has working at and within it a number of trade unions: Unite—previously the Transport and General Workers Union—and the Public and Commercial Services Union, or PCS. Over the years, I have developed a practical working relationship with them, and I stress that because they are clearly not necessarily political friends of mine. The convenor of the Whitley council at Bicester and of the International Telecommunication Union, Les Sibley, has been my Labour opponent at the past three general elections, and the hon. Gentleman can rest assured that if either Unite or PCS thought that something untoward was happening at Bicester, they would be shouting it from the rooftops.

I wonder why an hon. Gentleman from a Welsh constituency is seeking to investigate, by assertion, what is happening in a military depot in Bicester. The hon. Gentleman did not answer when I asked him who the “we” was who had been advising him. The answer probably lies in the first lines of the Library briefing for the debate. The first newspaper article in the briefing, from the Oxford Mail, has the headline, “Bicester can be ‘heart of MOD’”, and continues:

“Bicester’s MP has called for the Ministry of Defence to consolidate its UK logistic operations in Bicester.”

I am pleased that the hon. Member for the Wrekin is here because I would not want to make these comments without him being present.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

It is Telford.

[Tony Baldry]

I apologise: the hon. Member for Telford (David Wright). At the moment, there are a number of logistic centres for the Ministry of Defence, including one at Donnington. It is no secret that the Ministry has for some time been considering whether Donnington, Ashchurch and other logistic bases should be consolidated, and it is no secret that my submission to Ministers has always been that if one is to consolidate defence logistics, the logical place—the only place—to do so is at Bicester. Bicester is in the heart of the country, near Brize Norton, which is now the major air gateway, and the M40. The east-west rail link is being developed, which will connect Southampton to Felixstowe. Given all that and the Bicester’s internal railway connections, it is the ideal location in which to consolidate defence logistics. That is not just my view; it is that of the trade unions at Bicester.

Richard Kelsall, who represents the PCS, says:

“Over many years and many in-depth studies it has been concluded that Bicester is the only site that can fulfil the MOD’s strategic aims; meeting its customers’ needs whilst safeguarding the Public purse.”

I hope that the Front-Bench spokesperson, the hon. Member for Plymouth, Moor View (Alison Seabeck) will listen to this with care. Les Sibley who, as I said, has been the Labour parliamentary candidate for three successive general elections and is a former mayor of Bicester, a current district and town councillor and a former county councillor, says:

“The pivotal role that MOD Bicester has played throughout its long history in its provision and delivery of services to the Armed Fortes worldwide over many decades is well documented.

The MOD is a large organisation and by the very nature of its role, it is inevitable that sometimes mistakes happen because we are not infallible and as such we rectify any mistakes as quickly as is humanly possible.

We have built an enviable reputation of expertise over time, and this expertise is still readily available to the MOD for future Logistics and Distribution purposes. Therefore, the most logical way forward is that these attributes can be offered to the MoD by the loyal and long serving civil service workforce whenever called upon. By utilising these skills together with the centralised location of MOD Bicester offers a winning formula for future excellence of delivery to the Armed Forces when considering any future operational requirements.”

I fully recognise that Members of Parliament who represent Donnington, Ashchurch or other locations and depots will have different arguments. I accept that, but in the context of this debate my point is that the House can be assured that if the trade unions at Bicester felt that something was systemically wrong with how the depot was being run they would be making it clear, not just to me but to Labour Front-Bench colleagues—people such as the hon. Member for Birmingham, Erdington (Jack Dromey), who used to be assistant general secretary of the Transport and General Workers Union and visited Bicester regularly during that time. I am quite sure that if the trade unions felt that something was going systemically wrong at Bicester they would have made it clear to leading members of the Labour party and to the Labour Front-Bench team.

[David Wright (Telford) (Lab)]

I am the MP for Telford. Donnington falls within the constituency of the hon. Member for The Wrekin (Mark Pritchard), but is about 150 yards from the boundary of mine, and many of my constituents work at what I will call the depot at Donnington, mirroring what the hon. Member for Banbury (Tony Baldry) calls the depot at Bicester. Clearly, he is making a pitch for Bicester, but I argue that Donnington is an ideal location for the work.

It is important that the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) has secured this debate. I am interested in the fact that, if further changes are made to how logistics operate in this country, they must be considered on a level playing field. If we are to make decisions about the future location of logistics work, we must use information that is even and level across the sites and easily understandable. We must be able to compare sites properly. I hope that the Minister will confirm that that will be done.

[Mr Dai Havard (in the Chair)]

Order. Before the hon. Gentleman responds, I remind hon. Members that interventions should be short.

[Tony Baldry]

I do not think that the Minister or any of us would disagree with that. The point that I am making is that the hon. Gentleman who introduced this debate did so on the basis that systemic failures and abuses of practice were occurring at Bicester. My response is that he has not produced any evidence. Further, if there were any such evidence, I assure him that that it would have been drawn to the attention of management, politicians, the House and me by the trade unions and that it would have been investigated.

I understand, of course, that in the run-up to ministerial decisions about the future of defence logistics, there are some around the country who will have an interest in rubbishing Bicester, but I am sorry that it has been done in such a way. I will come to what I think would have been the correct way to deal with the matter.

[Mr Llwyd]

It is no part of my function to rubbish Bicester. I came across something that looked doubtful, and I raised it appropriately. Let us be fair: the hon. Gentleman was with me when I met the head of logistics. When I put the accusations to him, he said, “That may well have happened, yes; we’re not perfect,” and so on. They are not groundless. By the way, I am a Privy Counsellor.

[Tony Baldry]

I apologise if I did not refer to the right hon. Gentleman as such. He should not be quite so touchy. What Neil Firth said at that meeting was, as everyone would concede, that thousands of items go out from Bicester each day, and errors are always possible, particularly as priority is set not by Bicester but by the requesting unit.

A little while ago, a constituent of mine, who left Bicester shortly afterwards on voluntary agreement, made allegations not dissimilar to those made by the right hon. Gentleman, relating to boots and one or two other items. He did not assert that there were systemic failures at Bicester, but he thought that occasionally, boots and other things were made more costly than necessary. I immediately took up the matter with Ministers in the Ministry of Defence, and the Minister for the Armed Forces, the hon. Member for North Devon (Nick Harvey) responded. In fairness, in response to my letter, a full investigation was carried out at Bicester. The Minister for the Armed Forces said, perfectly fairly:

“Every day, consignments and routes are developed to ensure that freight carriage is optimised and the use of commercial hauliers balanced against in-house resources. Of course, from time to time, routing errors do occur, but this must be placed in context. On a daily basis the JSCS”,

joint support chain services,

“handles between 8,000 and 10,000 transactions, of which the large majority are delivered on time and in the most cost-effective way. Indeed, the costs of transport have been reduced by £10 million in the past two years against 2008 operating costs and the level of service improved from a success rate of 80% of transactions completed on time based on 10 working days to a success rate of 95% based on seven working days.”

Suggestions were made about agency staff. The Minister for the Armed Forces said:

“Of course there are occasions when agency staff will be required to supplement existing staff resources, for example to respond to increases in demand and to meet operational needs. In such cases, existing MOD-wide commercial arrangements are used which ensure that agency staff are employed at the most cost-effective rate.”

He went on to conclude:

“JSCS is an operational organisation that exists to meet the often urgent requirements of the armed forces. The organisation, therefore, has to balance these demands against achieving value for money for the taxpayer. The 2009-10 annual report and accounts clearly demonstrate that operating costs are now 28% less than they were six years ago, but that service delivery has significantly improved.”

I suspect that if every public service could show a 28% improvement over six years, we would all be grateful.

There are two issues in respect of Bicester that I should like the Minister to hear. First, I genuinely believe that defence logistics should be consolidated at Bicester, for the reasons that I have said. I also suspect that, as part of that, the private sector will increasingly need to be involved, as it is currently involved, not least when investing in new logistics sheds, warehousing and equipment at Bicester. However, age is an issue. Bicester’s existing work force are loyal and have worked there for a long time, and being civil servants is an important part of their lives. I hope that if changes are made at Bicester, transitional changes will be possible whereby those with civil service status can retain it if new private sector investors and partners start to work more with the MOD on logistics handling, support and delivery. I am sure that that is possible.

I invite the right hon. Member for Dwyfor Meirionnydd to come to Bicester. He is welcome to visit, and to come with me to meet the trade unions of Bicester, so that he can put his allegations and assertions to them and the work force at first hand. I think that he would be interested in their detailed response, but he would also see the huge land footprint at Bicester. It has a lot of surplus space that is not being used as effectively as it might be. I have no idea why, in the first world war, such a huge area of land was taken for those purposes at Bicester. The rumour is that it was to resist zeppelin attacks. That is a matter of history, but we have an enormous amount of space; we are at the heart of the country; and we have excellent rail and road connections.

Rather than an investigation into unfounded allegations about what is said to have gone wrong at Bicester, it would be more helpful to have a review of how to get the maximum potential for the country out of the Bicester estate, both for the defence industries and in terms of releasing surplus land for other commercial and residential use. The potential is considerable.

I do not think that the assertions made by the right hon. Gentleman have any substance. There is no smoking gun. In an operation as large as that at Bicester, things will occasionally go wrong, but I suspect that other logistics operations such as DHL, the Post Office and Amazon are not always perfect. I do not think that the percentage of error is greater in defence logistics than in any other major logistics operation.

To conclude, I return to the first line of the Library briefing for the debate:

“Bicester’s MP has called for the Ministry of Defence to consolidate its UK logistic operations in Bicester.”

[Mr Dai Havard (in the Chair)]

I call Alison Seabeck. Are you right hon?

15:09

[Alison Seabeck (Plymouth, Moor View) (Lab)]

No, certainly not. It is a pleasure to serve under your chairmanship, Mr Havard.

The right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) has raised issues that give serious cause for concern, and I will listen carefully to the Minister’s response. Many of his allegations are entirely new, and his written questions have obviously started the ball rolling.

The reform of the Defence Storage and Distribution Agency at Bicester and in other parts of the country, including Plymouth, has not been straightforward. Problems have arisen along the way, and the hon. Member for Banbury (Tony Baldry) alluded to some of them.

From meetings and correspondence I had with the MOD and trade unions in my constituency, I know there were concerns at the time about how the new set-up would operate and—this relates particularly to the weapons operating centre at Plymouth—about the care taken over the management and movement of explosives. In Plymouth, genuine concerns were raised about how the new, more centralised logistics arrangements and the transport of explosives—perhaps by less experienced operatives—would operate and about what safety procedures would be put in place. There were also concerns about stock levels and value for money.

The unions in Plymouth worked not only to inform those involved in the decision-making process of where they saw weaknesses, but to protect their members. Locally, they highlighted areas where efficiency could be improved and waste could be prevented. As the hon. Gentleman made clear, the unions worked with the changes to make sure there was no waste.

Under the Government’s proposals, there is the potential for further changes at Bicester. The debate revolves around the competition introduced under the previous Government and the introduction of couriers through the outsourcing of transportation. There is also the issue of the apparent mismanagement at Bicester, which the right hon. Gentleman suggested could be on an industrial scale and with the purpose of fattening up the organisation for a sell-off to the private sector.

Clearly, what has happened must be urgently reviewed given the seriousness of what has been said, and particularly given that the Government will want to be able to take their logistics commodities transformation programme forward as planned. Failure to answer some of the questions that have been raised could lead to uncertainty about the plans for the Bicester site.

One such question is just how open the discussion of the options has been. Will the Bicester distribution centre be revamped and become much larger? Could it disappear altogether and become a housing estate? Such questions have been, and are indeed being, asked, and they lead to insecurity and uncertainty for those still employed at Bicester. Are there other options, perhaps including Donnington or Marchwood, which my hon. Friend the Member for Telford (David Wright) mentioned?

[David Wright]

The key point is that the presentation of the data leads people to take strategic decisions, so we must make sure that the data the MOD presents on Bicester, Donnington and other sites are comparable.

[Alison Seabeck]

My hon. Friend makes a good point, which I will come back to later.

The Government must be concerned that other factors, such as the drop in land values, are not helping their decision making, and nor is the fact that parts of the Bicester site are contaminated. Such factors have contributed to the MOD’s apparently defensive mindset over the future of the site and the work that goes on there. However, there appears to be much more behind such concerns, as we have heard today.

As the hon. Member for Banbury made clear, we need evidence, so transparency is hugely important. We need transparency in the relationship between the civil service and Ministers. Obviously, there are constraints regarding commercially sensitive material, and there are wider security concerns. However, one or more whistleblowers have come forward, and the right hon. Gentleman has asked written questions.

[Tony Baldry]

The “whistleblowers” do not come from Bicester; indeed, they would not need to be whistleblowers. I can assure the hon. Lady that if those working at Bicester thought there was a concern, they would be on the telephone to her, as fellow members of the Labour party, explaining that something was wrong.

[Alison Seabeck]

The hon. Gentleman has a fair point: if such people were trade union members, they might well have come to members of the Labour party. However, I do not know who has spoken to the right hon. Gentleman, and I assume the hon. Gentleman does not know either. I am talking generally about people who feel they have seen something in their workplace that is inappropriate or that constitutes extreme waste. Clearly, the right hon. Gentleman, from his perspective, has not had adequate answers to the written questions he tabled. This process started more than a year ago, and these issues were highlighted a year ago, so why do some of these things appear to have been pushed under the carpet?

[Peter Luff]

indicated dissent.

[Alison Seabeck]

The Minister shakes his head.

[Peter Luff]

Obviously, I will check what the right hon. Gentleman said, but I think he did not get the statistics he asked for because they went back to 2005, and we did not have them. I think that will be the reason, but I will check. However, I reject the claim that there was any lack of transparency.

[Alison Seabeck]

The Minister is a decent man, and I take his response absolutely at face value. However, it would be helpful if he could check. No one takes becoming a whistleblower lightly, so if somebody felt strongly enough to become one, it is important that their allegations are fully investigated.

In written answers to the right hon. Gentleman over the past year, the Minister has indicated that savings had been achieved or were expected to be achieved at MOD Bicester. However, as we have heard, the right hon. Gentleman feels that those figures are inaccurate, and they are being seriously questioned. Indeed, inefficiencies such as Government trucks turning up at the same time as outsourced vehicles cannot be right, and I ask the Minister what monitoring is, or could be, undertaken to check on such things so that we can take action if there are, in fact, discrepancies.

How much duplication has there been? Have costs been inflated? Those are perfectly reasonable questions, and they deserve an answer. I assume the Minister is confident of the veracity of the information he has received. We need to have confidence in the data we are given. When Ministers make decisions—this reinforces the point made by my hon. Friend the Member for Telford—the data they base them on should be factually correct.

My next question is slightly tangential. Has there been any Cabinet Office involvement in this matter, given that it concerns civil servants and data? There is a Cabinet Office responsibility in there somewhere, particularly if a civil servant is involved in whistleblowing. As I say, that is a small point, but I would be interested to know the answer.

There is an issue here that transcends Governments; it was a problem for the Labour Government, and it is clearly an ongoing problem for the current Government. Waste and cost overruns happen, but Ministers—of whatever party—have a duty to the public, as well as to those they work with, to ensure that we understand how they happen.

The Government’s role as a client is also important, and there is the issue of how goods and services are procured. The Minister knows better than most that he is working towards a procurement strategy. I hope—I am sure the Chief of Defence Matériel wants this, too—that there will be a degree of openness and transparency to ensure that value-for-money benchmarks, which look attractive at first sight, actually deliver the savings the Government want further down the line.

I could go on about worries about loss of experienced civil servants and skills in the Department, but that would be extremely tangential to the points made by the right hon. Gentleman. We want to avoid a reoccurrence of the concerns that he raised. Therefore, in closing, apart from reiterating the importance of transparency, I want to ask the Minister what processes the Department will now follow to ensure that the evidence is gleaned from the right hon. Gentleman, if he has it, and that it is properly investigated. We need to find out why and how information appears to have been distorted through the process in question, and whether that was by accident or intent. It is important to understand it, and I hope that the Minister can offer us not only an explanation but some reassurance.

15:19

[The Parliamentary Under-Secretary of State for Defence (Peter Luff)]

I congratulate the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) on securing the debate. He was kind enough to say some generous things about me, and I say them back to him. He is a gentleman whom I respect very much, and we have worked together for many years in the House—for more than 20 years, to be precise. All that I would say to him is that I think there is a scandal in logistics, but it is not the one that he thinks. I shall come on to that.

I reject the right hon. Gentleman’s underlying assumption. He sees a conspiracy where there is none. The suggestion of fattening up for some kind of killing is just wrong. We had an opportunity to discuss these matters yesterday, but he pulled that meeting, having had a meeting with Neil Firth and colleagues. I think that he has misrepresented what he was told at that meeting, although I was not there, so I cannot be sure. From what I heard, he got a very different story from the one he has reported to the House today.

[Mr Llwyd]

I do not accept that. I had a note-taker with me, and I referred to the notes taken.

[Peter Luff]

In that case, I will make the specific rebuttal now. It is true that the right hon. Gentleman was told that mistakes are likely to be made. There are 8,000 deliveries a day across the logistics operation. If 99% of them go right and 1% go wrong, that is 80 a day that go wrong. That is a lot of anecdotal attacks to make on an organisation that is basically being well run. He was told that mistakes are inevitably made, but against a background of 8,000 daily deliveries, it is unfair to assert some kind of systematic error, inefficiency or corruption. That is the problem that we have.

I will study the detailed assertions made by the right hon. Gentleman. I will not be able to respond to them all during the debate. I shall write to him and to the other hon. Members who have participated in the debate, as best I can, as I look at the matters individually, though I think that I shall be able to satisfy him on all questions—at least if he is prepared to be open-minded about the answers. I assure him that if any company or Ministry of Defence official has acted inappropriately, it will not be tolerated, and action will be taken. We have a zero-tolerance policy on those matters, as I know from several occasions during my two years in my post.

I would say to the hon. Member for Plymouth, Moor View (Alison Seabeck) that there is an inefficiency and fraud hotline at the Ministry of Defence, so that anyone with a concern about inefficiency or fraud can ring up, completely securely—whistleblowing is entirely encouraged in the Ministry of Defence—and make the allegation. I am aware of no such allegation of impropriety in the logistics organisation being made on the hotline. If someone has gone to the right hon. Gentleman with specific allegations that is their democratic right—I do not want to stop them doing that—but I wish that they had come to me through the fraud hotline and enabled me to address such concerns sooner, if they exist.

[Alison Seabeck]

Did the Minister, before today’s debate, ask specifically whether any calls had been put into the fraud hotline on this matter?

[Peter Luff]

To be fair to the hon. Lady, I did not ask. I will check that, but I am sure that they would have been drawn to my attention had they been made. It is a fair question to ask, and I cannot give her a guarantee. There has been no Cabinet Office involvement, though; I assure her of that.

I will not arbitrate on Donnington and Bicester today. I have been to Bicester. I shall go to Donnington in July. I shall be even-handed, entirely, I promise both the hon. Member for Telford (David Wright) and my hon. Friend the Member for Banbury (Tony Baldry). I shall not be arbitrating there. I think that I shall be able to give the hon. Member for Plymouth, Moor View the reassurance that she wanted on all the fundamental points she made in her speech, because this is a bipartisan issue.

Successive Governments over decades have dealt with problems with logistics, which is often the Cinderella of defence, and to which insufficient political attention is often given. That is one reason why I welcome the debate. It is good that the subject should be exposed in the House, and good to have the opportunity to record some of the remarkable achievements of people who work in logistics, often in adverse circumstances.

I think that I detected in the speech of the right hon. Member for Dwyfor Meirionnydd—if I am wrong I apologise to him straight away—an underlying hostility to the role that the private sector can play in delivering defence outputs more effectively. We, like the previous Government—it is a bipartisan policy—have found that using the private sector appropriately enables significantly better outcomes to be achieved for defence. Many of the things that we are doing in the logistics operation build on decisions made by the previous Government. We understand the role that the private sector can play.

I assure the right hon. Gentleman that no information that it is proper to put in the public domain, within the limits of commercial confidentiality, has been concealed. Detailed information is available, for example, on each and every contractor involved—I think that 17 are on the list—including exactly how much money they are paid and exactly what they do. I have written to members of the Public Accounts Committee with that information. I have the schedule here, and if we have time before the Division in the House is called, I may even read out all 17 names, what the contractors do and how much they were paid in 2010-11. I shall make sure that the information is available to the right hon. Gentleman after the debate.

No information is concealed. Indeed, the National Audit Office rightly goes over logistics regularly, and another NAO report is due out in the fairly near future. If the NAO has not spotted such things as the right hon. Gentleman is concerned about, and all the information is genuinely available, I am frankly suspicious about whether the allegations have any foundation. However, I will double check. Question after question has been answered, and nothing that it would be improper to conceal will be concealed. Some information, as the hon. Member for Plymouth, Moor View was kind enough to note, sometimes must be kept private for reasons of commercial confidentiality. That is frustrating for politicians and democrats, but sometimes it is important. However, we shall be as open as we possibly can.

I listened carefully to the right hon. Member for Dwyfor Meirionnydd and will address some of his points in my speech—I have already done so in part; but I want to explain a little more about logistics commodities and services at Bicester, and the wider operation, to put his remarks in context. The organisation provides remarkable support to the UK armed forces, particularly to those serving on deployed operations, not just in Afghanistan but particularly there. LCS Bicester is one of three main storage and distribution depots for non-explosive stores, operated by Defence Equipment and Support. The other two are LCS Donnington, in Shropshire, in the constituency of the hon. Member for Telford, where I am going in July, and LCS Dulmen, in Germany. The role of those sites is to receive, store, maintain, issue and distribute non-explosive matériel on behalf of the UK armed forces and other Departments.

Last year, the National Audit Office published a report called “The use of information to manage the logistics supply chain”. In that report, the NAO—it is not I, a Minister, saying this, but the NAO—acknowledged the improved performance of the MOD’s supply chain and its effectiveness in supporting our forces in Afghanistan. In particular, the NAO’s report noted that the operational supply chain is more complex than the standard industry supply chain, which is not something that people often acknowledge.

To pick up on the comments made by my hon. Friend the Member for Banbury, the UK’s delivery performance is comparable with that of commercial operators. We are doing as well as the commercial sector, which is a great tribute to all those involved, and a significant achievement. That is why I am suspicious about the allegations made by the right hon. Member for Dwyfor Meirionnydd.

The defence equipment and support logistics commodities and services operating centre, of which MOD Bicester is a part, is key to the successful delivery of those services. The defence inventory is huge, complex and comprehensive. As at 31 December 2011, the gross book value of the inventory, excluding explosive stores, was about £29 billion. That represents 500,000 different line items, covering everything from clothing to medical supplies and engine parts. Those items are distributed to approximately 3,500 sites across the UK and around the world. Up to 8,000 issues are sent every day—some 1.2 million every year—ranging from small washers to aircraft wings. That is indeed a huge and complex operation. Given the sheer volume of items moved by the organisation—I am in no way complacent, because we do not tolerate error, either—it is inevitable that some mistakes will be made.

Turning to one mistake in particular that the right hon. Gentleman has made much of in the past, there is an appropriate saying: a lie is around the world while the truth is getting its boots on. Let us look at those boots once more. An item that should be routinely requested is sometimes marked as urgent by the unit itself; or items may be sent individually when they could be packaged together. That is normally the fault of the requesting unit.

In the specific case of the boots couriered to a unit in Northern Ireland, which the right hon. Gentleman raised at Prime Minister’s questions, that is exactly what happened. The unit used the wrong process to order the boots. It realised the mistake too late. I am not going to allow civil servants to override front-line decisions and say, “We do not think that is urgent. The officers in charge might think it is urgent, but we disagree.” That would not be right. The responsibility lies with the unit to use the appropriate requesting process.

What happened in this instance was a regrettable mistake, which the unit tried to correct too late. It was not corruption; it was not fraud; and it was not improper. It was a straightforward human error. I hope that the right hon. Gentleman will not repeat his assertion. I am entirely satisfied that there was no fraud involved at all. The mistake was made by the Army, which it regretted and tried to correct.

I cannot guarantee that such mistakes will not happen again—we are all human beings who have feet of clay and who make mistakes—but I am absolutely confident that this is not a systematic problem. The right hon. Gentleman made that assertion in his speech, but I dissent from that view firmly and absolutely.

LCS Bicester is a well-run operation, which I am sure is also true of Donnington. The restructuring of the former Defence Storage and Distribution Agency—DSDA, of which LCS Bicester was a part—has produced significant savings. The FDSCi—future defence supply chain initiative—report, which followed the DSDA restructuring, was published in November 2009 by the previous Government and presented to the House, and I would be happy to send the right hon. Gentleman a copy. It forms the basis of my remarks today and represents more information in the public domain, which I hope will reassure him.

Between 31 March 2008 and 31 March 2012, the operating costs of DSDA and its defence equipment and support units fell from £285 million to £231 million a year. That represents a reduction of nearly 20% over four years. When calculated on a like-for-like basis, taking into account inflation, the cost of improved service and other exceptional one-off costs, the saving is 26%. That is an impressive achievement for which the hon. Member for Plymouth, Moor View should take her fair share of credit, on behalf of the previous Government, who initiated some of the changes.

Similarly, the cost of transporting MOD equipment has fallen by 21% over the same five-period period. I repeat that I have the detailed information on the use of companies and couriers that I would be happy to share with the right hon. Member for Dwyfor Meirionnydd. I will resist the temptation to read them all into the record, because it is a long list. I am surprised that he highlighted Palletways in particular. I assure him that there are people on the distribution list who get paid more than Palletways. Again, on a like-for-like basis, allowing for the impact of inflation and so on, the saving on the transport costs is 29%. It is 29% cheaper in real terms, which is a big achievement. A key performance is the average cost per transaction—the processing of an issue of receipt. The equivalent cost has fallen from £103 per transaction for the financial year ending 31 March 2008 to £79 per transaction in the year ending 31 March 2012. That is an increase in efficiency of 23%. Those are good and impressive figures.

Over the same period—I appreciate that this is a good news, bad news story—manpower numbers have reduced by more than 2,100 posts and the service to the customer has significantly improved. The average customer wait time—this is a really impressive statistic—has fallen from about 49 days to four days. That is an important figure, considering that our armed forces are heavily committed in operations in, for example, Afghanistan. I pay an even-handed tribute to both Bicester and Donnington in that respect. The operation of LCS Bicester and the two other main storage and distribution depots is a genuine success story. If there were an hon. Member for a German constituency and if they were present, I would congratulate him or her as well, although storage and distribution represent only one element of the management of our equipment.

We are proud of the spares and equipment availability in operational theatres such as Afghanistan, as it ensures that commanders are not constrained in conducting their missions. The same could be said for the manner in which we supported Operation Ellamy in Libya, which was another success for a logistics operation. Support for such operations must be our first priority.

Nevertheless—this is the scandal to which I alluded in my opening remarks—there is no disputing the fact that the defence inventory is, and has been for many years, too large in both value and volume and that any avoidable delay in reducing it will create many future challenges. We have to deal with the issue. There are a number of reasons for this situation. Many items are bespoke and have been purchased in bulk, based on an estimate of need stretching across several years, even decades in some cases. Other items are purchased with a view to ensuring that sufficient stocks are available to deal with a sudden surge for a short-notice or large-scale military deployment. However, that is far from the whole story.

There is a legacy—I am not making a point about the previous Government—of under-investment in the information systems to track and manage stores. The truth, as I said during my opening remarks, is that logistics is the Cinderella of defence, and that is manifest in this case. It does not seem to be a priority for investment, but it should be. Too often, the Department is unable to locate with confidence what it holds. It thinks and is reasonably sure that it has something, but it just cannot prove it to accounting standards quality when it should be able to. Moreover, it has often held too much just in case something happens.

I visited some of the warehouses in Bicester recently—I met my hon. Friend the Member for Banbury immediately before I saw them—and they are jaw-dropping. Stuff is being held that simply should not be held and it should be disposed of. The £29 billion stock holding is far too high. Too much inventory is stored for too long and at too great a cost to the taxpayer.

This is not just a British problem. Army surplus stores exist around the world. The situation seems endemic to defence, but we must cope with it. The inventory is large and it is growing, and we are determined to tackle it head-on. We have not been idle. The Department is making progress in improving inventory disposal through the stock transition programme, which was set up to meet Treasury targets to reduce inventory holdings in our main storage and distribution depots. We have arrested the rate of growth—it is still growing—in the defence inventory as a result of those disposal measures, and we are committed to bringing purchasing activity under much stricter control.

In December 2010, I announced to the House the introduction of the future logistics information services project, which represents a step-change improvement to the quality of logistics information available to the armed forces. It will ensure the long-term delivery of operationally essential logistics information to both the MOD and industry, and the significant financial efficiencies will contribute to the Government’s strategic deficit reduction programme, without reducing operational capability.

One of the logistics information systems that will be managed under FLIS is the management of the joint deployed inventory, or MJDI—I love these acronyms—which is now up and running and has reached its initial operating capability. MJDI will bring huge improvements, enabling the entire deployed inventory—the inventory that is overseas on service—to be seen on one system. It will encourage better use of stock, which in turn will lead to reduced repeat demands, lower stock levels and saved costs in storage and transport, all generating improved operational performance. Importantly, it will enable operational commanders to make informed decisions based on accurate and timely information.

To give a specific and important example, a four-year Bowman radio equipment asset management improvement programme was introduced in 2010. Since then, we have made good progress and a coherent and auditable inventory baseline has been established. It is not rocket science, but it is hugely important and we are doing it. Process improvement in the way in which the data are captured and managed will in future enable the Department to identify and track assets more effectively. This is really important stuff.

We recognise the importance of having a comprehensive corporate strategy to tackle the myriad complex issues, and have commissioned the development of a strategic plan for the management of the defence inventory. It is intended to deliver the correct conditions to incentivise and mandate improved inventory purchasing and disposal behaviours. We have a lot of attics at the MOD, and they are too full of stuff. We need to get rid of stuff, as well as acquire stuff more thoughtfully. The strategic plan is a significant piece of work and it has just completed phase 1 of its milestone.

The financial savings and efficiencies secured by LCS Bicester and all the storage and distribution sites over the past five years are impressive, but, as I have already said, there is a long way to go if we are to provide the best possible support to military operations and maintain the agreed quality and service to our armed forces.

In response to the hon. Member for Plymouth, Moor View, in August 2010, I announced that DSDA would renounce its agency status and that a new organisation, the logistics commodities and services operating centre, which brings together the key commodities purchasing, storage and distribution elements of the Department into one organisation, had been created. LCS Bicester is part of the LCS operating centre. The primary role for LCS is to provide support to military operation and force generation by undertaking procurement and inventory management of all non-explosive commodity items, including food, clothing, fuel and medical supplies; the storage and distribution of those commodity items, together with all other non-explosive stock across defence; the disposal of surplus MOD equipment and the operation of the British Forces Post Office.

LCS is currently developing a transformation project, which aims to consider how we can improve further our inventory management and stock control, rationalise current stock holdings—we are trying to thin them down, rather than fatten them up—and improve and rationalise storage infrastructure. That will include releasing surplus for disposal, which will be of interest to the hon. Member for Telford and my hon. Friend the Member for Banbury. The project will also seek to improve commodity procurement and logistic processes, and optimise the size of the LCS organisation itself. The storage infrastructure requires investment to improve its condition and to rationalise the numerous dispersed locations.

Should the programme be taken forward—frankly, I expect that it will be—the first step will be to initiate an assessment phase, to explore the alternative delivery models available and whether they represent value for money, which I think addresses one of the questions asked by the hon. Member for Plymouth, Moor View. The work would explore two options for delivering support in the future: industry integration and an in-house developed value for money benchmark. That review will consider all existing facilities. I emphasise that it is far too early to say what the implications will be for individual sites and that no decisions have been made.

In advance of the work at Bicester, however, a planning application for the retained footprint and for the sale and development of surplus land has been submitted to Cherwell district council, to prepare the way to the approach to defence logistics and to secure the value of the surplus land.

We must not forget that it is the people who work at LCS Bicester, Donnington and the other sites associated with it who make logistics operations succeed. The efficiencies and improvements that have been implemented at those sites are testimony to the quality of the people whom we employ, and I am grateful to them for what they do. I have met many of them and know that they are focused on providing the best support to our service personnel deployed on operations. I fully understand the vital role that they play. They are rightly proud of what they have achieved, and they continue to achieve a great deal.

I am enormously grateful for the commitment and dedication of all those who work to ensure that our armed forces receive the best logistics support possible. It is our job to ensure that the right framework is in place to make it work. That challenge has been ducked for too long—for decades, not just in recent years. Indeed, arguably we are addressing decades of neglect in these issues, and it will take time to deal with them. The change will come, but it will come slowly and incrementally. I am determined that we should improve the way that we do things.

If the criticisms made by the right hon. Member for Dwyfor Meirionnydd contain any significant truth, I will, of course, want to address them very honestly and frankly. We need to do the best we possibly can to ensure that our armed forces can fight and defend our freedom as effectively as they have done in the past.

[Mr Dai Havard (in the Chair)]

I suspend the sitting until 4 o’clock or until such time as we can reconvene if Divisions take place in the House.

15:40

Sitting suspended.

High Speed 2 (Scotland)

Wednesday 18th April 2012 Westminster Hall

16:19

[Lindsay Roy (Glenrothes) (Lab)]

It is a pleasure to serve under your chairmanship for this short debate, Mr Havard. I thank hon. Members for their attendance this afternoon and for their possible participation but, given the short time, I hope there will be only a few interventions.

To assist, I will briefly set out what I plan to cover. First, I will make a short reference to progress made in other countries, but principally I will put forward a case for the extension of High Speed 2 to Scotland, highlight some of the underpinning issues and, finally, pose some fundamental questions to the Minister.

High-speed rail is almost 50 years old, having been initiated in Japan in 1964, from Tokyo to Osaka. In its first year it carried 23 million passengers. Thirty years ago, France, Spain and Germany followed suit with HSR connections between and within those countries. There has been a quantum modal shift from aviation to rail, which has brought economic and environmental benefits. In those countries, passenger percentage to rail has increased dramatically and overall numbers have mushroomed. In addition to addressing capacity shortages successfully, new HSR demonstrated what can be achieved with economic growth and regeneration. In France, for example, HSR not only supported growth in already highly competitive cities such as Lyons, but improved the economic potential of previously declining urban centres such as Lille. There has been a big dividend to those cities and to Paris itself, and expanded tourist travel to Mediterranean countries.

Throughout that period, sadly, the UK seems to have existed in some kind of time warp, which beggars belief. The UK seems to have suffered from a condition called simultanagnosia, more commonly referred to as vision blindness or, as we say in Scotland, “cannae see the wood for the trees”. Despite the undoubted success of HSR in many countries over the past 30 years, successive UK Governments have been reluctant—indeed, remarkably resistant—to grasp the opportunities and undoubted dividends that HSR can bring. The only UK investment in HSR is the 69 miles from London to the channel tunnel.

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

The fact that the UK has been so slow to adopt more high-speed rail is surely a strong argument for starting to plan work for HS2 to Scotland. If it is left somewhere down the line for planning to start in 15 years, it will be the end of the century before HS2 goes to Scotland.

[Lindsay Roy]

I thank my hon. Friend for his intervention. I could not agree more with his sentiments. There is huge potential in opening up the gateway to continental Europe, but we have failed so far to fulfil that potential.

It was refreshing to read in the coalition’s programme for government in May 2010:

“We will establish a high speed rail network as part of our programme of measures to fulfil our joint ambitions for creating a low carbon economy. Our vision is of a truly national high speed rail network for the whole of Britain.”

I emphasise the words “truly national network”. I welcome the belated commitment by the Government, and not just the present Government, to the programme, but the current programme seems to lack ambition in both the extent of the network and the time scale for implementation. As my hon. Friend said, now is the time to be bold, decisive and determined to deliver a high-speed rail service that meets the needs of the whole UK, not just south and middle England. Vision without action is sometimes described as daydreaming, so let us be clear that the vision is of an inclusive, first-class, high-speed rail service for the UK as a whole and in a much tighter time scale than has been proposed.

[Jim Shannon (Strangford) (DUP)]

I am grateful to the hon. Gentleman for giving way. I spoke to him before the debate. He has proposed a powerful case for HS2 to Scotland, and the need for a connection to Stranraer. That is important because it would provide a connection to Northern Ireland from Stranraer via Larne. That high-speed connection would be an advantage for everyone in the United Kingdom.

[Lindsay Roy]

I thank the hon. Gentleman for his helpful intervention. The Minister will no doubt want to respond to his suggestion, because high-speed rail should be for the whole UK, not just part of it.

Any interim measures to speed up conventional transport links on the west coast main line will be welcome, but high-speed rail north of Manchester must be a priority. The second-class hybrid system that was mooted recently will not meet the key objectives of increasing capacity, reducing congestion and reducing passenger travel times to just over 2 hours. Routes to and from Scotland are already significantly constrained, and running hybrid trains will not improve that. Furthermore, if Scotland is not included, Glasgow and Edinburgh will be comparatively further away than their main competitors, which will be served by truly high-speed lines. As the Minister said,

“If we sit back and fail to deal with the capacity time bomb set to explode within the next 10 to 20 years, we will do lasting damage to our economy.”—[Official Report, 2 November 2011; Vol. 534, c. 319WH.]

[Sheila Gilmore (Edinburgh East) (Lab)]

I congratulate my hon. Friend on obtaining this debate, and I take on board fully his point that a hybrid system is wholly inadequate. Nevertheless, there are some issues, particularly for those of us on the east coast, because the suggestion seems to be that in the first phase the hybrid trains would run from Birmingham up the west coast. I am interested in his views on that. Would it be reasonable to reroute services to the east coast via that route because even a 30-minute reduction would make a substantial difference to some of the environmental choices that people make between rail and air?

[Lindsay Roy]

I thank my hon. Friend for her comment, and no doubt the Minister will want to pick that up. My view is certainly that we must consider not just the west coast main line option, but the whole UK. The case for high-speed rail is central not peripheral, and is overwhelming. US Vice-President Joe Biden reminded us recently that

“Public infrastructure investment raises private sector productivity”.

[Graeme Morrice (Livingston) (Lab)]

I congratulate my hon. Friend on securing this important debate. I agree that extending high-speed rail to Scotland is central and not peripheral. Indeed, I have made similar comments in the House. It is a UK project, and we are in a United Kingdom, so we have the critical mass to ensure that we can deliver it and that it reaches into Scotland to Edinburgh and Glasgow. Does he share my fear that if we ever faced the prospect of Scotland being separated, this UK project would not happen, and we in Scotland could lose out?

[Lindsay Roy]

My hon. Friend anticipates part of my argument. I will cover that later.

Turning to public sector infrastructure, there has been criticism about Scotland being overdependent on the public sector. Surely a high-speed link to Scotland would enhance the opportunities for the private sector and provide a greater balance within the economy. In essence, if we want to shape the future, we must create it. There is certainly unanimity in Scotland that high-speed rail that reaches the parts that others cannot reach must be a priority—I believe that is called the Heineken factor.

When the Government announced that HS2 would go ahead, a commitment was given to work with the Scottish Government and others on how to improve capacity between north and south. There is overwhelming consensus for HSR in Scotland across the political spectrum, including transport bodies, local, national and multinational businesses, civic society, trade unions and environmental groups. That unity of spirit and purpose stems from clarity about the perceived benefits.

Fundamentally, high-speed rail will bring three dividends to Scotland. First, there is capacity: as well as providing new services for passengers, it will free up space on traditional lines for freight and local passenger trains, reducing delays and congestion. Increased pressure on capacity is already impacting on service reliability and punctuality. Despite the welcome improvements that might be made, there will not be radical improvement on the existing framework. Secondly, high-speed rail would offer huge environmental benefits, because the modal shift from air to rail will dramatically reduce carbon emissions. It would also ensure adequate air slots for planes from the more peripheral parts of the UK, at a time when our airports are experiencing further congestion. In written evidence to the Transport Committee, Transport Scotland and Network Rail stated, significantly, that

“our evidence indicates that the extension of HSR to Scotland would significantly improve the benefit to costs ratio.”

There therefore appear to be huge dividends for the UK as a whole, and a high-speed rail link would also reduce our unhealthy overdependence on oil fuelled transport—a welcome strategic shift that would reduce relative transport costs.

Thirdly, HSR would contribute significantly to stimulating Scotland’s economy and promoting new business growth and regeneration. It would attract inward investment to Scotland, stimulate industry and be a further catalyst to tourism. The central belt contains more than 3.5 million people, a population similar in magnitude to that of the west midlands and Manchester. High-speed connectivity with other major population centres in the UK will be vital to sustain economic activity and promote growth.

Edinburgh is the second most popular destination for tourists from overseas after London, and it hosts a vibrant financial services sector that is the seventh most competitive in Europe. The area is home to a wide array of innovative companies that are investing in research and new technologies such as biotechnology, electronics and renewables. The economy of the Glasgow region accounts for 36% of Scottish exports. Glasgow is the second most popular city in the UK for inward investment, and contains the second largest retail sector. It retains a strong manufacturing base in aerospace, defence and marine industries, and accounts for one in three jobs in the tourism, food and drink and construction sectors.

High-speed rail could play a vital role in making innovative developments in Scotland and ensuring that we champion the business opportunities that we could expect within a new framework. Evidence clearly indicates that the case for high-speed rail in the UK is stronger when Scotland is included. The Scottish Partnership Group, which has representatives from across business, trade unions and the transport industry, reinforces the economic dividends. Iain McMillan from CBI Scotland notes the positive business case for ensuring Scotland’s inclusion in HSR:

“Good transport links and external connectivity to principal markets are vital to Scotland’s economic success. We are encouraged by the report’s focus on ensuring the development of this key infrastructure project, conscious of Scotland’s physical position on the periphery of Europe and the greater consequential need to provide key links to hubs and markets.”

Colin Borland from the Federation of Small Businesses indicates that

“productivity will increase and it will help Scottish businesses to compete.”

Liz Cameron from the Scottish chamber of commerce emphasises that

“we must be beneficiaries, not victims of HSR.”

A host of highly respected companies have added their unqualified support to the extension of HSR to the central belt. They include Dell, Siemens, Barclays and Sistemic, to name but a few. Some 75% of businesses that were recently canvassed were strongly in support of the extension of HS2 to Scotland.

High-speed rail would bring huge economic and environmental benefits to Scotland and the UK, but although there is a strong consensus on the need for HSR, there is, regrettably, huge uncertainty about the future of such a rail link to Scotland. There has been some support for the idea of starting a high-speed link from Scotland at the same time as building from London as a sign of good faith and commitment, but there is a major stumbling block because if Scotland voted for separation, HSR would surely remain on the drawing board. Even if an independent Scotland were to find the resources to finance HSR from Edinburgh or Glasgow to the border, who would pay for the high-speed link from Manchester to Carlisle and beyond? There would be no economic imperative for the UK taxpayer, and no political incentive for UK MPs to extend HS2 beyond Manchester.

[Graham Evans (Weaver Vale) (Con)]

I congratulate the hon. Gentleman on securing the debate and I agree with every word he said. What concerns me is what will happen if the Scottish National party gets its way in Scotland. As a Conservative and Unionist politician, I want a national UK rail network. Is this not a real opportunity for us all to work together? We have had many debates on HS2 in the House, and this is an opportunity for us to ensure that it goes ahead from London to Birmingham to Manchester and to Leeds, and indeed up to Scotland.

[Lindsay Roy]

Absolutely; I could not agree more. HS2 should be a phased programme, hopefully with an accelerated time scale.

The Scottish Minister for Housing and Transport, Keith Brown, is right about the need for HSR to reach Scotland, but he is clearly stronger in economics than in politics. By implication, he concedes that Scotland would become an economic backwater if it becomes a separate nation, and that it could not deliver a vital link to our biggest export market.

Does the Minister accept that political certainty—in so far as that can ever be achieved—is essential to ensure that any future HSR development comes to fruition as quickly as possible? Completion of HS2 is likely to span the lifetime of several Parliaments, and achieving the vision of a high-speed network will require cross-party political support, a clear commitment from the Government about their intention to proceed north of Manchester, and clarity about Scotland’s position on whether it is to become a separate state or remain within the UK. The key question for the UK Government is whether they would invest beyond Manchester and Leeds if Scotland were to become a separate nation.

What recent discussions has the Minister had with the Scottish Government about high-speed rail? Does she accept the various research findings that indicate clearly that connectivity to Scotland would make the UK business case for HSR stronger rather than weaker, because the maximum dividends would occur with the potential modal shift from air to train? Does she agree that HS2 will bring significant economic benefits to Scotland in particular in terms of inward investment, regeneration and tourism? A two-hour journey time from Edinburgh or Glasgow to London is attractive, particularly in terms of the effective use of precious time.

I have already mentioned the view that without HS2 Scotland could become an economic backwater, and I reinforce the point that although upgrading the west coast main line would be helpful in its initial stages, it is not an overall solution to the problems in the system. Indeed, some would argue that that would be merely tinkering with the system and a token gesture.

To conclude, does the Minister agree that what is now required is a commitment and the tenacity to achieve the preferred network in as short a time as possible? That will strengthen our international economic competitiveness, reduce carbon emissions, transform our internal strategic network and meet capacity demands. For too long we have suffered from what I would call vision blight, and we need such a commitment to take things forward. Surely it is not beyond the wit of the UK Government and businesses to work together with other political parties and businesses to turn into reality the vision of an interconnected high-speed rail network that encompasses Scotland and other areas, and provide a commitment to achieve that well before 2033. Given the weight of evidence, I trust that the Minister will confirm her commitment to considering the extension of HS2 in a more appropriate time scale.

16:38

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

It is a pleasure to serve under your chairmanship for the first time, Mr Havard, and I congratulate the hon. Member for Glenrothes (Lindsay Roy) on a thoughtful and well informed speech on an important topic. I, too, thank other hon. Members for attending the debate. I agreed with almost everything the hon. Gentleman said, in particular that successfully delivering a high-speed rail network is in large part assisted by and dependent on maintaining cross-party consensus. We are grateful for the consensus that we have seen on this matter to date, and the attendance at today’s debate demonstrates the support for high-speed rail across parties and in different parts of the United Kingdom.

The ability to travel quickly and efficiently between the UK’s productive centres is vital for commerce to thrive and for businesses to create jobs and invest in our country. High Speed 2 is a core element of the Government’s vision for a transport system that is an engine of economic growth, as the hon. Gentleman highlighted. A new national high-speed rail network will deliver massive benefits in capacity, connectivity and reliability, which will help to underpin prosperity right across Britain and leave a lasting legacy for generations to come.

I fully recognise that there is tremendous support for high-speed rail in Scotland. As the hon. Gentleman highlighted, recent evidence for that is provided by the “Fast Track Scotland” report of the Scottish Partnership Group, which comprises a wide range of business groups, local authorities and the Scottish Government. We all share a vision for faster journeys that bring the constituent parts of our island closer together.

The hon. Gentleman focused strongly on the need to take high-speed rail to Scotland as soon as possible. The coalition agreement makes it clear that our ultimate goal is a genuinely national network, with high-speed services from London to the midlands and the north, including Scotland. We see phases 1 and 2 of the High Speed 2 project as the best way to make progress towards that goal. If we look back over our transport history—we can look at the construction of the first railways, the London underground or the motorway network, for example—we see that major networks have invariably been delivered in phases over a number of years. For high-speed rail in Britain to be an affordable and manageable proposition, the only viable option is a phased approach. Our priority is therefore delivery of the Y network, with London to the west midlands as the first phase.

However, the day after we announced our decision on phase 1 of the network, the Under-Secretary of State for Transport, my hon. Friend the Member for Hemel Hempstead (Mike Penning), was north of the border at a meeting arranged by Transport Scotland to outline the details of the announcement and to discuss the next steps with key Scottish stakeholders; and last month, my right hon. Friend the Secretary of State attended a round table with Scottish businesses. She also had very constructive discussions with Keith Brown, the Minister for Housing and Transport in Scotland. She has agreed that the two Governments will step up their engagement on this issue, with a view to establishing an appropriate division of responsibility and putting the necessary governance in place to work through potential solutions.

Working with the Scottish Government, we hope to develop a mutually agreed timetable over the summer for our plans to consider progressing HS2 further. Officials from the two Governments are due to meet within the next few weeks to start that new strand of work. Care is needed in considering the case for extensions. All relevant evidence and options need to be properly assessed. It would be in no one’s interest if work on possible extensions slowed down progress on the Y network. Moreover, it will be difficult to look seriously at the route of potential extensions until we are much closer than we are now to a decision on routes to Manchester and Leeds—something on which the Government have only just received the advice of HS2 Ltd.

Undoubtedly, therefore, there are some practical constraints on the extent of the work that can be done at this stage, but I assure the hon. Member for Glenrothes and others attending the debate that those practical considerations do not mean that the Government will sit back until the full Y network is completed before looking seriously at how high-speed services could be extended.

[Sheila Gilmore]

We are all very conscious that the Government have come in for criticism. People have said, “Why bother taking high-speed rail to Birmingham when it will lop such a small amount off journey times?” Given that the real benefits, both economic and environmental, will come when we get the extension to Scotland, is there not a great deal of value in progressing those plans as quickly as possible, because that will reinforce the argument for the first part of the scheme?

[Mrs Villiers]

As I have said, we are certainly prepared to start considering the future development and expansion of the network while still in the process of delivering the initial phases. The question has often been asked, including by the hon. Member for Glenrothes today, about who would pay for what were there to be extensions. It is too early to start to design funding packages, although I am sure that hon. Members will be aware that the devolution settlement gives the Scottish Government the responsibility for funding rail infrastructure that is north of the border.

The hon. Gentleman also expressed concern about the impact that a vote for separation and division of our nation would have. I agree that such a huge constitutional change would make it much more difficult to deliver major improvements to our transport network, if only because of the distraction that it would cause. If the entirety of the Government machine is focused on separating itself from the rest of the United Kingdom, that will inevitably have a detrimental effect on efforts to stimulate the economy and to improve the transport infrastructure.

We have already begun work with partners north of the border to ensure that Scotland gets the most out of our current plans for HS2, as well as to explore fully Scotland’s future aspirations for even faster connectivity. We should not underestimate the benefits that Scotland will get from the Y network, which we are already taking forward. It is a fact that the benefits of HS2 will extend far beyond the cities directly served by the Y network. HS2 Ltd’s estimate of the £44 billion economic boost that high-speed rail could produce is a cautious one, and the boost will be felt in Scotland and the north of England as well as in the south.

HS2 will increase capacity and enhance connectivity all the way to Scotland by relieving pressure on the most congested, southern end of the west coast line. The seamless transition of trains on to the east and west coast main lines from the Y network will deliver faster journeys to destinations the length of Britain. Completion of the Y network is expected to slash the journey time between Edinburgh and Glasgow and London to about three and a half hours. That will deliver very significant connectivity and economic benefits. We want those benefits to be delivered as soon as possible—a number of hon. Members mentioned the time of delivery—which is why we are exploring options for bringing forward formal public consultation on phase 2 of the Y network. We will set out our proposed timetable later this year.

[Lindsay Roy]

The evidence indicates quite clearly that a quantum modal shift from air to train would be achieved if the journey time could be two to two and a half hours. With a journey time of three and a half hours, there would still be a propensity to go for air transport.

[Mrs Villiers]

I am not sure that I agree with the hon. Gentleman on that. Given the experience with high-speed rail in the rest of Europe, I think that a journey time of three and a half hours will make rail a very attractive alternative to flying, particularly when one factors in the increased time at either end of an air journey. There is quite an intense debate on the issue of an air-to-rail switch, but experience in the rest of Europe shows that a high-speed rail journey of three and a half hours is generally an attractive alternative to the plane.

The claim by opponents of HS2 that better, faster transport between north and south will see economic activity pulled into London and away from the UK’s other great cities is misguided. I have every confidence that bringing Edinburgh and Glasgow closer to London with the Y network—a journey time of three and a half hours—will be a real boost for those cities, as well as for the cities of the midlands and the north of England. That confidence is based on the evidence from our European neighbours, who began their high-speed rail journey a generation before we had even started arguing about the first 67-mile stretch of track from the channel tunnel. The hon. Gentleman expressed concern about how slow Governments have been to take up that challenge.

Faster journeys will see more extensive modal shift between air and rail as the train becomes the mode of choice for more travellers, countering the allegation made by opponents that HS2 is not green. High-speed rail is already greener than flying, but the difference between the two modes will widen as we clean up our sources of electricity generation.

A crucial point to underline is that we are not pursuing HS2 just because of the positive benefits that we believe it will generate. The case for HS2 also rests on the pressing need to head off big problems that are heading towards us and will affect the whole of Britain. The simple fact is that the demand for inter-city transport capacity is growing strongly and has been for many years. If we fail to deal with the capacity pressure that we will face in future years, we will do lasting damage to our economy and competitiveness.

I emphasise that HS2 does not mean that we will stop investing in and improving our current transport networks. We fully recognise the importance of continuing to enhance our existing rail network, and that includes improving links between England and Scotland, not least because of how determined we are that the benefits of the Y network must be felt well beyond the cities that it serves directly. We have therefore embarked on a major programme of rail improvements, including the inter-city express project, which will create new jobs in the north-east and deliver a new fleet of trains for the east coast line. Those trains will start operating in 2018, offering faster, greener, higher-capacity and better-quality services, boosting fast-line capacity from Scotland into King’s Cross and cutting journey times.

On the west coast route, the long-awaited new Pendolino carriages have started service on the Birmingham-to-Scotland corridor. The Manchester-Scotland route is also due to get new trains, with delivery complete by May 2014. The new east coast timetable introduced last May increased the number of through-services between—

[Mr Dai Havard (in the Chair)]

Order. The time for this debate has been exhausted. Thank you very much.

Flood Defences

Wednesday 18th April 2012 Westminster Hall

16:50

[Neil Carmichael (Stroud) (Con)]

It is a great pleasure to be holding this debate under your chairmanship, Mr Havard. We are running slightly late because of the Divisions in the main Chamber, but such is the way of parliamentary life. I thank the Minister for making such progress on the issue of flooding in my constituency. He has brokered a useful dialogue between the Environment Agency and the various communities in the area, particularly those along the Severn estuary, and we are immensely grateful to him for that achievement.

Before I put one or two questions to the Minister, I want to talk about three aspects of flooding: consultation on the policy drivers behind the actions being proposed along the Severn estuary; the implementation of flood attenuation in the valley in my constituency; and, finally, insurance.

Stroud is a beautiful place, but it is vulnerable to flooding, especially in the vale, which is flat, and along some of the valleys, which are quite steep. Indeed, we have a variety of characteristics that can cause flooding. We must bear in mind the issues relating not just to Severn estuary flooding but to surface water flooding, which is a problem in my constituency.

Let me turn first to the Severn estuary. With localism in mind, it is important that villagers, farmers, property owners, dwellers and anybody who will be affected by the changes proposed by the Environment Agency should feel that they have had their say, that they are being fully consulted, that they are part of a dialogue and that their concerns are being properly covered. As I have already said, the Minister’s actions have led to such a consultation.

None the less, there are policy drivers behind this complex issue which interest many of my constituents. Not least of course there is the issue of the habitat and the scale of the need for it, which is effectively conditioned by various policy drivers. Concerns have been expressed in my constituency about the new information, new changes and new facts that are now on the table. People would like more clarity and consistency in how the Environment Agency operates. That is not to say that the Environment Agency has not been extraordinarily helpful in many ways, and I personally have a good relationship with its team. I also know that it has honoured its commitment to have people effectively working as communications officers, keeping the local community informed. The Environment Agency has also answered a number of questions posed by the action group, Severn Voice, about the concerns.

Let me stress though that there is a need for the Environment Agency to be absolutely clear about its understanding and interpretation of the policy drivers behind some of the actions being proposed. It is well understood that sea levels might well rise and that measures have to be considered and planned. However, it is equally important to recognise that owners of farmland, houses and so forth need to be treated properly and fairly in the overall scheme of things.

We have an obvious and persistent problem with Slad valley. Water comes streaming down the valley and ends up in Stroud, causing difficulties and hardships for owners of a small number of properties. A group called Vision 21, which is led by Julian Jones, is working hard on the issue of attenuation. It has proposed using various old mill ponds further up the Slad valley as storage areas for when there is a lot of water. The water can thus be dealt with in a managed way without allowing it all to collect at the bottom and cause mayhem. Coupled with that is the proposal for better irrigation and better land use management. Various landowners have expressed interest in such schemes not just because they would prevent flooding in Stroud and Stonehouse but because they would improve drainage and irrigation further up the valley.

It is worth noting here that there would be the opportunity for small-scale hydro power developments, which we have already managed to achieve in one or two parts of my constituency, and that is excellent. There would be further opportunities for such developments if we had a flexible way of dealing with water storage and so forth.

I ask the Minister to encourage the Environment Agency to be less controlling and less directive and a little bit more open-minded about the possibilities that exist in the Slad valley so that flood attenuation can be properly implemented. Such a scheme would be a useful and valuable experiment in this important area. Moreover, it would provide a good example of working with the environment and with the history of Slad valley, with all its mills. The area has all the characteristics of a fantastic place.

We must combine the empowerment of local people with careful planning, which should be conducted through the auspices of the Environment Agency, as interesting, new and innovative measures to deal with water management and flood control are introduced.

[Priti Patel (Witham) (Con)]

I have a similar situation in my constituency. Landowners would like to have the flexibility to do more to protect local sea walls. I completely agree with my hon. Friend that we need flexibility and that much of this matter needs to be resolved by the Environment Agency. I urge the Minister to see what he can do to remove some of the barriers that prevent landowners and local residents from taking the actions that my hon. Friend has highlighted.

[Neil Carmichael]

My hon. Friend is right. Removing barriers to deal with other barriers is an interesting concept, but it is absolutely right and quite in line with my approach to the conduct, behaviour and plans of the Environment Agency. It is also in line with the general feeling that the Environment Agency does not always get down to the local level and respond to local needs and local requirements in a flexible enough way.

I will move on to the third issue that I want to talk about, which is home insurance. We have a real problem, because the flood maps available on the Environment Agency website sometimes suggest that people’s homes will be flooded when actually they will not. Also, the maps do not reflect the consequences of natural barriers and, even more importantly, man-made barriers. There are one or two areas in my constituency that prove that point quite well. People could look at a flood map and think to themselves, “Well, the whole place is doomed”, but actually it is not doomed because there are canals and other barriers that will prevent flooding. In fact, the areas that I have in mind, such as Frampton on Severn, have not been flooded in that way, so the flood maps need to be up to date and homeowners need to be assured that they are devised in such a way as to reflect what will actually happen and to show a proper understanding of the type of flood defences that I have just described.

Flood maps are a key issue. I have discussed them with the Association of British Insurers, which has also noted that it is important to keep them up to date. I have suggested that the Environment Agency might like to be more thorough in updating its maps and that it should do so more often—that is effectively the message that I have received—and if it did so, it would be of great assistance. It is also very important for individual insurers to have access to the correct information, so that people who need to gain access to home insurance can do so on the basis of information that is indeed accurate.

That brings me to the new approach that is needed following the statement of principles on flood insurance, which I know is coming to an end. Clearly, that issue is exercising both the insurance industry and, obviously, homeowners. They need some information, guidance and encouragement on how that process is going and where we can expect to be in terms of home insurance in flood areas. That information and guidance would be extremely useful.

In essence, what we are looking for is more transparency and more accuracy in flood mapping, so that home owners, insurers and anybody else who is interested can have more confidence in the maps that they are looking at.

Those are the three key issues. First, it is basically a question of communication and ensuring that people are involved and included. Secondly, it is a question of being innovative and confident about the options that are available, including encouraging the Environment Agency to set those things in motion or at least to allow them to happen. Thirdly, it is a question of having more information for everybody concerned, to give them confidence and comfort as appropriate.

Having made those three points, I will end my remarks by reiterating my thanks to the Minister, both for being here today in Westminster Hall and for the work that he has already done in the interests of people in my constituency who are vulnerable to flooding. I also reiterate that I fully intend to pursue this matter and ensure that we get some solutions that are lasting and worth while.

17:03

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

I congratulate my hon. Friend the Member for Stroud (Neil Carmichael) on securing this debate and on proving, yet again, that he is one of the most assiduous of our colleagues in raising such issues on behalf of his constituents. I am very keen to respond to the points that he has made, but before I do so, I want to touch on those made by another assiduous colleague, my hon. Friend the Member for Witham (Priti Patel), who talked about the Environment Agency and the sea defences in Essex.

I assure my hon. Friend that that is a matter of real interest to me. I want to ensure that all interested parties work extremely closely together on those defences and that any perceived or actual difficulties in securing and protecting farmland and properties are overcome. A protocol is in place to ensure that the National Farmers Union and the Country Land and Business Association work closely with the Environment Agency.

My hon. Friend has had meetings with all concerned, but I want to keep in touch with her and ensure that every effort is being made. I came across difficulties further north from her constituency when I came into this job. A few months later, I found a completely different attitude that was based on the concept of total environment but that was really just close working together of the parties involved. I give her the assurance that I will visit her constituency in the future if I can do so, so that I can see things for myself and try to take matters forward.

With sea level rises, climate changes and extremes of weather, we will have a lot of these debates in the House and I want to ensure that everything is being done as properly as it can be, that any protocols that exist are working and that we work closely together to resolve these issues, because they are of fundamental importance to the lives of our constituents.

My hon. Friend the Member for Stroud, who secured this debate, represents one of the most special parts of this country and one that I have some familiarity with. I find the Severn estuary, including the area of his constituency that is adjacent to the Severn estuary, to be one of the most mystical and beautiful places, with some wonderful farmland. There is no doubt that there are some communities in that area that look at issues such as climate change and sea level rises with a degree of concern for their future. I remember the village of Arlingham, which is surrounded on three sides by the River Severn. We have in mind communities such as the one in Arlingham when we try to plan for the future. I understand that we have to get the language right and that we do not create undue concern, or even undue scares, but at the same time we have to address the real issue of sea level rises and the impact that it is having.

My hon. Friend made a very sensible point about the rational view that most people have about these matters. They just want to ensure that all forms of government are doing what they can, when they can, to assist them. I hope that what I am about to say will give them the necessary reassurance. I will go on to talk about the Slad valley and the concerns about insurance that he raised.

Work on the Severn estuary flood risk management strategy is ongoing at community level. A draft strategy was prepared and put to the public for consultation last year. The aim was to establish the most effective and sustainable way to manage flood risk in the estuary during the next century. The Environment Agency is currently reviewing and assessing all responses to its consultation on the draft strategy. It will not implement the strategy as it stands. Instead, it is actively involving the local community in considering the future options for managing flood risk in the Severn estuary. As part of that approach, it regularly meets Gloucestershire NFU to ensure that landowners are involved in developing the strategy for the area.

Where the Environment Agency can no longer justify maintaining the current standard or line of defence, it will work with those affected to consider the other options, including landowners maintaining their own defences. Also, in circumstances where managed realignment or habitat creation could be an option, the agency will seek to work with those affected and implement schemes with their agreement. In the future, the agency plans to go to public consultation again. It will take forward the draft strategy for the Severn estuary once the proposals have been discussed in detail.

I should say that the current defences and planning are based on perceived sea level rises, but they are designed in such a way as to be extended as time goes on and if sea levels rise faster than expected. That is a really important point for my hon. Friend’s constituents; the approach is called adaptive management. What concerns people is when they see arbitrary lines drawn on maps that reflect perceived sea level rises that might or might not occur. We have already seen some variation in the predictions of sea level rises that were made some years ago; those rises have not happened. We want to ensure that we base the information on sound knowledge and evidence.

My hon. Friend has raised some important points about the Slad valley. Flood defences form a major element of how we manage flood risk, but they are only part of the solution. As my hon. Friend knows, 1,602 properties in his Stroud constituency are at risk from river and tidal flooding. There is currently no cost-effective way of further reducing the risk at the community level by way of major schemes, but the Environment Agency is still keen to take an active approach to managing flood risk in the community. On average, £190,000 a year is spent on maintaining the existing system of culverts and mills in the Slad valley to make the most use of the existing assets.

The Environment Agency was this very week removing vegetation and fallen trees, which could have caused blockages, from river channels. A considerable amount of ongoing river channel and culvert maintenance work takes place to keep the river systems flowing effectively, and that work is supplemented by individual property protection and resilience grants, which have been made available to the communities along the Slad brook and in Bridgend. So far, 10 properties from Slad have taken up the offer, which is still open.

A further proposal is being developed by the Slad brook action group, to which my hon. Friend referred, which is working closely with local authorities, the Environment Agency and a local water environment group—Water21—to encourage and construct land management measures upstream of Slad to reduce and slow down water run-off. By slowing down water in certain circumstances, we can protect a great many properties. I listened carefully to what my hon. Friend said about using existing assets, some of which were created more than a century ago, in a modern and innovative way to ensure that we provide cost-effective defences for people’s homes. We must never forget that we are talking about the most important asset in people’s lives—the roof over their head.

The Environment Agency has £300,000 of local levy money to implement land management measures. It is also working closely with the local authority on development planning to address flood risk management in the Slad valley on an incremental basis. I can assure my hon. Friend that the Environment Agency will continue to work with local people and groups, and with him as their local representative, and that we will consider any measure that we can fund with others, or that we can assist any organisation in providing, to protect people for the future.

I hear what my hon. Friend says about using such areas to test innovative ideas that can be used elsewhere. There is good cross-working in the Environment Agency, and we have an understanding of how to deal with the kind of flash floods that are now a feature of our lives because of changes to the climate. We must be aware of the fact that no one is a repository of all the wisdom here, and I can assure my hon. Friend that we will work closely with his constituents to use best practice and come up with new ideas that may assist us with the problem.

My hon. Friend raised the important point of insurance. I recognise that insurance for properties in flood risk areas is of concern to many people. The Government have continued to listen to, and closely involve, organisations that represent insurers and communities at flood risk. We are in the advanced stages of developing a new shared understanding, which sets out more clearly what individual customers can expect from their insurers. An announcement will be made in the near future to reflect the continued responsibility of the Government and insurers and their commitment to ensuring that insurance for flood risk remains widely available.

We are actively exploring value-for-money ways to target support at households that might struggle with premium increases. It is also worth putting on record that the Government’s prime responsibility here is building flood defences, whether for coastal erosion or for surface water or fluvial flooding. We must continue to invest, and we are spending a lot of taxpayers’ money— £2.13 billion over this spending period—to protect people’s homes from flooding. There are many things that we can do with insurers, and we are working closely with them to achieve those aims.

The debate has raised important issues. Engaging with local communities, developing innovative solutions to flood risk management and protecting the most vulnerable from flooding, whether through new defences or insurance, are key principles of our new partnership funding system. The reforms provide improved transparency and greater certainty for communities about the potential funding from the general taxpayer for every flood and coastal defence project. They also allow local areas to have a bigger say in what is done to protect them. Therefore, over time, local ambitions for protection no longer need to be constrained by what national budgets can afford, and innovative, cost-effective solutions will be encouraged, in which civil society may play a greater role. With contributions under the new funding system, combined with efficiency savings, the Environment Agency and other risk management authorities are on course to exceed their goal to better protect 145,000 households by March 2015.

My hon. Friend referred to flood maps, and I want to get this on the record as well. The Environment Agency updates flood maps every three months. The data are provided to all local authorities and to the Association of British Insurers, and they are on the Environment Agency’s website. We are considering new approaches to communicating the information. I understand the frustration that many constituents feel—mine included—when they are wrongly assessed, usually over the telephone and often on a postcode basis, as being at flood risk, when the insurance company or the broker has access to the information. We are not talking about national secrets; we are proud to share the information, particularly when new assets are constructed. We must find better, more innovative ways to ensure that we inform people. Some insurance companies are good at uploading the information but others are not, and we are working closely with a number of organisations to achieve a better result for people at flood risk.

Managing the risk of flooding to communities remains an absolute priority for the Department for Environment, Food and Rural Affairs, and we do it not only by trying to minimise the chance of flooding in our communities, but through reducing the impacts should flooding occur. Our new approach to funding allows local communities to have greater control over how flood risk is managed in their area. Maintaining existing flood risk management systems, as well as investing in improved protection, reduces the chance of floods affecting our communities. Flood insurance is an important element in reducing the impacts of floods on communities and in giving reassurance and peace of mind to those at risk. The Government remain committed to ensuring that cover for flooding remains widely available once the statement of principles agreement with the insurance industry comes to an end next year.

I shall end where I began, by assuring my hon. Friend that I will continue to work with him to ensure that the issues that he has raised are worked through and that we can face the future, which is uncertain because of weather patterns and sea risk, on the basis of the best knowledge available through open and clear consultation. In that way, we can achieve the best result for his constituents.

Question put and agreed to.

17:10

Sitting adjourned.

Written Ministerial Statements

Wednesday 18th April 2012 Written Statements

Wednesday 18 April 2012

Interim Guidelines for Prosecutors on Assessing the Public Interest in Cases Affecting the Media

Wednesday 18th April 2012 Written Statements

[The Attorney-General (Mr Dominic Grieve)]

The Director of Public Prosecutions (DPP) has today launched a public consultation on his interim guidelines for prosecutors on assessing the public interest in cases affecting the media. The DPP undertook to produce the guidelines when he gave evidence on 8 February 2012 to the inquiry being conducted by Lord Justice Leveson into the culture, practices and ethics of the press. The guidelines set out the additional considerations which are relevant when prosecutors assess whether a prosecution is required in accordance with the code for Crown prosecutors. Each case will be considered on its own facts and on its own merits before a decision is made on prosecution. Such decisions are also likely to be finely balanced as prosecutors must carefully consider the public interest served by the journalist when set against the overall criminality.

The guidelines have been issued on an interim basis as they are the subject of a public consultation exercise that will last for three months. The DPP will publish his final guidelines later this year, once he has considered the responses to the consultation, and any cases that have fallen to be considered by prosecutors during the period in which the interim guidelines have been in place will be reviewed in the light of the final guidelines if changes have been made. Copies of the interim guidelines will be placed in the Libraries of both Houses.

Informal ECOFIN

Wednesday 18th April 2012 Written Statements

[The Chancellor of the Exchequer (Mr George Osborne)]

The informal Economic and Financial Affairs Council (ECOFIN) was held in Copenhagen on 30-31 March 2012. Ministers discussed the following items:

Co-operation between the euro area and EU as a whole

During the working lunch, Ministers discussed how euro area member states and EU-27 could improve co-operation with each other.

De-brief from Eurogroup and economic outlook

The chair of the Economic and Financial Committee (EFC), de-briefed Ministers on issues discussed at the Eurogroup including agreement on the euro area firewall. I intervened to make it clear that the UK would want to take a decision on IMF resources alongside other G20 members. The presidency then invited EU institutions to give presentations: Andrea Enria, Chairman of the European Banking Authority, updated Ministers on the bank recapitalisation exercise; and Ollie Rehn, Commissioner for Economic and Monetary Affairs, gave a summary of the economic outlook. The presidency summarised the discussion, noting that the financial markets were calmer and the economic outlook was better, but that member states would need to continue with fiscal consolidation and growth-enhancing reforms.

Multi-annual financial framework (MFF)

The Commission presented their proposal for the next MFF, for the years 2014-2020. I rejected the Commission’s proposal. A large increase in the MFF could not be justified to Parliament and the British public at a time of fiscal consolidation. I also made it clear that the abatement was not for discussion and that the UK did not support any new EU taxes to fund the EU budget. The presidency summarised by noting that a number of member states had insisted that the MFF proposal must be lower and would set out this position in a letter to the chair of the General Affairs Council.

Financial Transaction Tax (FTT)

During a restricted session before dinner, the presidency asked Ministers for a political steer on the FTT proposal. I intervened to say that the UK did not support the Commission proposal for an EU FTT, as it would drive business to other financial centres outside the EU. The UK believes that the financial sector should make a fair contribution and that this is currently achieved in the UK through our bank levy. The presidency concluded that work would continue to proceed on the Commission proposal, but noted that several member states expressed dissatisfaction with the proposal and agreed that consideration should also be given to alternatives.

EU crisis management framework

The presidency introduced the work on an EU crisis management framework and invited several institutions to present, including: Yves Mersch, co-Chair of the Financial Stability Board regional group for Europe; Christian Clausen, President of the European Banking Federation and President and Group CEO of Nordea Bank; and Klaas Knot, President of the Dutch Central Bank. Commissioner Barnier, outlined the work that the Commission had undertaken so far, and was hopeful that further dialogue devoted to the “bail-in” tool would be completed within the next four weeks. The UK intervened to welcome the imminent publication of the EU crisis management framework. The UK also raised its scepticism of resolution funds and stated that the first line of defence for financial institutions in times of financial stress should be higher capital requirements, and the second should be a crisis management framework with “bail-in” tools. The presidency concluded by noting the complexity of the issues and the need for proposals to be tabled soon.

Credit rating agencies directive and regulation (CRA3)

The presidency asked Ministers for political guidance on two outstanding issues on CRA3: rotation (whether there should be a limit on the period of time that an issuer can engage a particular credit rating agency) and the endorsement regime (whether the regime for allowing the use of third-country ratings in the EU, initially set out CRA1 and CRA2 and updated in CRA3, should be reopened). The Commission suggested that rotation would enhance competition between CRAs, and that the endorsement regime was already agreed upon in CRA1 and 2 and therefore should not be reopened. Alongside other member states, the UK intervened to disagree with the rotation proposal and to note that the third-country equivalence regime had caused unnecessary disruption in the past. The presidency noted the concerns that had been raised on rotation and on third-country ratings, and that the rules would not be reopened, but they would look carefully at how the rules were interpreted in practice.

Preparation for IMF spring meeting and G20 Finance Ministers meeting. 19-21 April 2012

The presidency gave a brief summary of the issues for discussion and outline of the upcoming meetings in Washington.

Any Other Business: extraordinary ECOFIN

The presidency anticipated that there would be an extraordinary ECOFIN early in May, to discuss the capital requirements directive 4.