House of Commons

Wednesday 20th March 2013 Commons Chamber

Wednesday 20 March 2013

The House met at half-past Eleven o’clock

Prayers

Wednesday 20th March 2013 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Wednesday 20th March 2013 Commons Chamber

The Minister for the Cabinet Office was asked—

[Michael Fabricant (Lichfield) (Con)]

1. What estimate he has made of the potential savings to the public purse from the digitisation of public services; and if he will make a statement.

[Rehman Chishti (Gillingham and Rainham) (Con)]

2. What estimate he has made of the potential savings to the public purse from the digitisation of public services; and if he will make a statement.

[The Parliamentary Secretary, Cabinet Office (Mr Nick Hurd)]

By introducing new digital services and redesigning old ones, we expect to save the taxpayer and service users around £1.2 billion by 2015, and at least £1.7 billion a year thereafter. Of course, that is not just about saving money; it is also about the opportunity to change totally the way the public engage with the Government and radically improve that experience.

[Michael Fabricant]

What services does the Minister see being digitised in the near future, when does he think that will happen, and how will we get people who do not have experience of computers using those new services?

[Mr Hurd]

We are reviewing more than 600 central Government transactions. My hon. Friend will be aware that seven Departments are responsible for around 90% of those. Those Departments have committed to redesigning three significant series each, all the details of which are in their departmental digital strategies. This is a live process, and the Student Loans Company went live in October. He is entirely right to remind us that no one should be excluded from the process, which is why the Government remain committed to an assisted digital service.

[Rehman Chishti]

The latest figures for Medway show that nearly 90% of people there have accessed the internet. What support are the Government providing to allow more people to access public services through the internet?

[Mr Hurd]

We are making it easier to access broadband and have supported, and continue to work closely with, valuable networks such as Go ON UK and UK online centres, because my hon. Friend is right that there is still a big opportunity to help more people, small businesses and charities to access the benefits of the internet.

[Helen Goodman (Bishop Auckland) (Lab)]

As I am sure the Minister knows, 11 million people in this country have never used the internet, and at the moment his Department is spending no money on digital inclusion. Is its real way of saving money on public services to make them completely inaccessible to those who need them?

[Mr Hurd]

No. As I said, we are clear that no one must be excluded from this process. That is why significant assisted digital provision is still in place, and we will shortly make available details of how that will work. There are digital inclusion projects across Government and we are actively reviewing, with partners such as Go ON UK, what more we can do.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

I look forward to reading the real figures on fullfact.org, which had to correct the Minister’s overblown assertions last time. The Opposition know that ICT can make government more accessible and save money, but the Government have abandoned the universal broadband pledge and failed on digital inclusion, so 75% of over-75s and a third of people with disabilities are still not online. In those circumstances, is digital by default not simply digital exclusion by diktat?

[Mr Hurd]

I will take no lectures from the Labour party on wasting money on ICT, because the processes we inherited in that regard were absolutely scandalous. I repeat what I said: we see a big opportunity in digital by default. It is a chance to transform the way people engage with the Government. We can see significant savings, which I do not think have been overstated at all. As I said, we have an active commitment to assisted digital, the details of which will come shortly, and to continued activity to support digital inclusion.

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

3. What steps he is taking to utilise innovative design to increase the effectiveness and quality of public service delivery.

[The Minister for the Cabinet Office and Paymaster General (Mr Francis Maude)]

The Government are implementing an ambitious programme of public sector reform. From welfare to education, we are changing the way services are delivered to the public. We are opening up policy making, ensuring that policy is made with implementation in mind. To improve the quality of public services, we are backing new delivery models, such as public service mutuals, and redesigning services to be digital by default.

[Mr Sheerman]

Is the Minister aware that too many people still think that good design means a beautiful table or chair or a new piece of architecture, such as the Shard? There is a whole body of expert design capacity in this country that could help design services, particularly public services. Will he, his Department and the Government wake up to the fact that good design, as shown in a new publication from the Design Commission, could help recovery in this country?

[Mr Maude]

I agree with everything that the hon. Gentleman says except his assumption that we are not already doing this. I know he is a member of the Design Commission, which produced that excellent publication; it is in fact very complimentary about a number of initiatives that the Government have taken, including the creation of the Government Digital Service, which is committed to ensuring that as we reform the delivery of public services, they are designed around the needs of the user rather than, as has far too often been the case, designed to suit the convenience of the Government.

[Mr Gary Streeter (South West Devon) (Con)]

Given that all public services are going to be under financial pressure for the next few years, is my right hon. Friend happy that enough sharing of best practice is taking place to find new, innovative ways to do more with less?

[Mr Maude]

No, I am not happy that we are yet doing enough, but we are doing more. We are establishing a series of What Works organisations that will exist to share best practice and experiences. We have also set up the commissioning academy, an unexpected by-product of which is that it brings together public service deliverers from all over the public sector who network and share experience, which is already proving extremely beneficial.

[Jon Trickett (Hemsworth) (Lab)]

On the subject of innovative public service design, the Minister abolished the Central Office of Information and sacked hundreds of staff while simultaneously increasing the number of spin merchants in his Department and others. Meanwhile, he put the Government Information Service out to tender, with contracts valuing £520 million, millions of which then went to a company which he himself had chaired in the past, although I accept that he took no part in letting that contract. There are many ways of describing this chain of events. Does he agree that intelligent design is not one of them?

[Mr Maude]

We did dismantle the Central Office of Information, which was overloaded with 750 people who were not doing enough useful work. We cut down massively on the previous Government’s gross overspend on marketing and advertising, which was throwing money out of the back of a lorry wholly ineffectually. We therefore needed a lot fewer people in the Government communication service. Our own press and media operation in the Cabinet Office is smaller than what we inherited from the previous Government despite the fact that it has to service the Deputy Prime Minister as well as other Ministers and the Prime Minister.

[Anas Sarwar (Glasgow Central) (Lab)]

4. What recent steps he has taken to address barriers to small and medium-sized enterprises participating in Government procurement.

[Simon Kirby (Brighton, Kemptown) (Con)]

5. How he plans to ensure that small and medium-sized enterprises secure a larger proportion of Government contracts.

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

8. What progress he has made on engaging small businesses in public procurement.

[The Parliamentary Secretary, Cabinet Office (Miss Chloe Smith)]

It is this Government’s policy to dismantle the barriers facing small companies to ensure that they can compete for contracts on a level playing field and that they can better grow. Direct spend with small and medium-sized companies across Government has steadily increased since 2010 as a result of the steps we have taken, and we have required all Departments to put in place plans to ensure that their spend with SMEs continues to increase.

[Anas Sarwar]

Does the Minister think that it is acceptable for large multinational companies to receive millions of pounds in Government grants while avoiding paying a single penny in corporation tax? If not, what changes will she make to procurement legislation to ensure that we stop this bad practice and instead increase opportunities for small and medium-sized enterprises?

[Miss Smith]

I think that the hon. Gentleman will find that much of what he seeks is covered in debates later today. We have recently announced measures to ensure that the companies we deal with as a Government pay their fair share of tax, and rightly so.

[Simon Kirby]

I would like more businesses in Brighton to have contracts with the Government. Will the Minister make data available on a constituency level regarding which businesses do business with the Government?

[Miss Smith]

Since the general election Government have become much more transparent about the business they do, and all contracts over £10,000 are now published online at Contracts Finder. My hon. Friend will also find pipelines covering infrastructure and Government construction that will help him with a lot of data. Although we cannot yet release these data specifically at constituency level, I am very keen to make them available, and I look forward to working with him to make that a reality.

[Julian Smith]

The Minister has done a lot of excellent work on fair payment, but how do we make it easier for our smallest businesses, and our smallest service businesses, to win Government contracts?

[Miss Smith]

Central Government policy is to pay undisputed invoices within five days and to pass 30-day payment terms down the supply chain as a condition of contract. That has earned this Government the title of fair payment champion, which is very important. We encourage small and medium-sized enterprises to use the mystery shopper service to “shop” poor practice where they find it. My hon. Friend will also know that we have streamlined the procurement process, removed bureaucracy and increased transparency. We are challenging the traditional ways of buying and are ready to be held to account for that.

[Keith Vaz (Leicester East) (Lab)]

Does the Minister agree that if a company fails to deliver on a contract, it should be put on a list and not allowed to bid for any future contracts?

[Miss Smith]

As I noted in my previous answer, we believe in accountability and in being able to “shop” those examples where that occurs. We take action on every such example and I am confident that that will cover what the right hon. Gentleman seeks.

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

Does my hon. Friend agree that the sheer cost inflicted on smaller businesses trying to bid for public contracts is prohibitive? What are the Government doing to reduce the cost of bidding for public contracts? Unless we reduce the cost, they simply will not bid.

[Miss Smith]

My hon. Friend is absolutely right. We have streamlined the procurement process by introducing faster and simpler procedures. We have removed bureaucracies such as pre-qualification questionnaires for contracts below the European Union threshold. We are also continually finding ways to help SMEs and others to navigate their way across Government. We look forward to continuing to work with my hon. Friend’s Committee to do more of that.

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

What progress is the Government making with the SME sector’s representative bodies in addressing barriers?

[Miss Smith]

I will answer that by quoting evidence submitted to the Public Administration Committee by the Market Research Society, which said that it

“applauds the activity of the Crown’s Representative for SMEs…and the ‘Mystery Shopper Scheme’ enabling SMEs to report examples of good and bad practice”.

Those are ways in which we are holding our own systems to account. We want to do more and it is vital to get SME representatives around the table to do so. I shall be doing more work on that this afternoon.

[John Pugh (Southport) (LD)]

6. What his policy is on the use of teleworking and working from home in Government Departments; and if he will make a statement.

[The Parliamentary Secretary, Cabinet Office (Miss Chloe Smith)]

In order to deliver services that meet the needs of the public, the civil service—just like comparable private sector employers—needs a flexible and dynamic workforce. We recognise that remote and home working can bring significant benefits, such as increased productivity, business resilience, work-life balance and well-being. Business units in every Department will need to make such decisions according to business need.

[John Pugh]

Does the Minister recognise that young working mothers are the principal beneficiaries of teleworking, and will she do more to keep this pool of talent in the civil service?

[Miss Smith]

My hon. Friend makes an excellent point. This Government are doing plenty to help that group and we made child care announcements yesterday and today. The benefits of flexible working can also be seen on a much broader level: research recently suggested that British businesses could save £34 billion by taking on such an approach.

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

7. What recent assessment he has made of the adequacy of Government funding for women’s voluntary organisations.

[The Parliamentary Secretary, Cabinet Office (Mr Nick Hurd)]

The Government recognise the tough conditions that all voluntary organisations face at present while we open up new opportunities for them. With limited resources we are helping the sector build its resilience and ability to take up those opportunities, including more than £107 million-worth of transition funding, some of which has been accessed by women’s organisations such as Birmingham and Solihull Women’s Aid.

[Kate Green]

What discussions has the Minister had with Ministry of Justice colleagues to ensure that the excellent work done by women’s organisations to meet the specialist needs of women offenders will be protected in a payment-by-results system?

[Mr Hurd]

I share the hon. Lady’s concern that, for example, the upcoming commissioning process for reform of probation and rehabilitation services is sensitive and sympathetic to, and makes full opportunity of, the voluntary sector, including the many organisations that do incredibly valuable work with women offenders. We are working very closely with the Ministry of Justice to make sure that happens.

[Bob Blackman (Harrow East) (Con)]

Local authorities across the country have been determining what they will do with Government grants. Does my hon. Friend agree that it is disgraceful that local authorities have been cutting grants to voluntary organisations that provide services to the weak and vulnerable?

[Mr Hurd]

I should inform my hon. Friend and fellow Harrow MP that I had a meeting with Harrow charities recently to discuss the response to cuts in their grants from Harrow council. I pointed out the contrast with neighbouring Conservative-led Hillingdon council, which, having managed its public finances excellently over many years, is continuing to invest in front-line charities, rather than cut the grants to them.

[John Glen (Salisbury) (Con)]

9. What steps his Department is taking to encourage growth in the social market in the UK.

[The Parliamentary Secretary, Cabinet Office (Mr Nick Hurd)]

We are cutting red tape for charities and investing to encourage social action. We are recognised as a world leader in developing the social investment market. We are opening up opportunities for the social sector to help us deliver better public services.

[John Glen]

Does the Minister agree that the Cinnamon Network community franchising model is proving an excellent stimulus that is enabling the big society to flourish? Will he commend the work of Simon Redmill and Salisbury city church, who are using a grant from the Cinnamon Network to launch a job club in Salisbury next Monday?

[Mr Hurd]

It will not surprise my hon. Friend that I totally agree with him. I am delighted that through the social action fund we have invested more than £1 million to help the Cinnamon Network and Tearfund support church-led community projects around the country. Through him, I congratulate Salisbury city church and wish it every success.

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

Does the Minister agree with the Federation of Small Businesses and the Forum of Private Business that the three problems for small businesses are the set-up costs for tendering, the difficulty of getting on to lists, and the fact that they do not get their payments in time, which means that they have great problems with cash flow?

[Mr Hurd]

I recognise that there are all kinds of challenges for small organisations and, in particular, for small voluntary groups and charities in competing for public service contracts. We are opening up many more opportunities for them than there were under the previous Administration. We are working actively through things like the commissioning academy and new master classes around the country to tool up small organisations so that they can compete more effectively for such contracts.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

11. What steps his Department is taking to reduce the level of late payment by public sector contractors to small and medium-sized enterprises.

[The Parliamentary Secretary, Cabinet Office (Miss Chloe Smith)]

As I have noted, Government policy is to pay undisputed invoices within five days and to pass 30-day payment terms down supply chains. The Crown representative team in the Cabinet Office is encouraging prime contractors to do that more quickly on a voluntary basis. We have tasked Departments to manage their contracts to ensure that prime contractors pay sub-contractors within 30 days.

[Debbie Abrahams]

I am glad that the Government are now taking seriously late payments to small and medium-sized enterprises, after I received such a dismal response on the issue in 2011. When are the Government going to ensure that public sector contractors have the need to pay SMEs in their supply chain promptly in their contracts?

[Miss Smith]

I congratulate the hon. Lady on the award that she has won in connection with her work on this matter. My previous answer covered what the Government are doing. We are extremely keen to see good practice pushed throughout the supply chain. We are ensuring that more business goes to SMEs, which is good for growth. All told, that is a good thing and something of which the Government can be proud.

[Jonathan Ashworth (Leicester South) (Lab)]

T1. If he will make a statement on his departmental responsibilities.

[The Minister for the Cabinet Office and Paymaster General (Mr Francis Maude)]

My responsibilities are the public sector Efficiency and Reform Group, civil service issues, the industrial relations strategy in the public sector, Government transparency, civil contingencies, civil society and cyber-security.

[Jonathan Ashworth]

I thank the Paymaster General for his answer. When I talk to voluntary organisations across Leicester, many of those that took part in the future jobs fund tell me that it had a positive impact. Today, we have seen unemployment across Leicester rise again. The chief executive of the National Council for Voluntary Organisations recently called the Work programme

“a slow motion car crash”.

When are we going to have a scheme to get our young people back to work that truly harnesses the expertise of the voluntary sector?

[Mr Maude]

It would have been nice to hear the hon. Gentleman celebrating the rise in employment and the fact that since the election 1.25 million new jobs have been created in the private sector. It would be very good if he and his colleagues would occasionally support that.

[Karen Lumley (Redditch) (Con)]

T2. Will my right hon. Friend assure me that the residents of Redditch will not suffer too much today from the strike action by the Public and Commercial Services Union?

[Mr Maude]

I am happy to be able to tell my hon. Friend that the latest numbers suggest that fewer than 95,000 civil servants went on strike today. The leadership of the PCS, who are not serving their hard-working members at all well, claimed this morning that 250,000 civil servants were on strike. That was simply untrue—it is fewer than 95,000.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

On 5 March, Sir George Cox published his independent review into “Overcoming Short-termism within British Business”. The report concluded, among other things, that Cabinet Office-led procurement in the public sector is failing, with long-term strategic issues for the UK Government not a part of Government procurement thinking. When does the Minister plan to put that right?

[Mr Maude]

We inherited a position that was exactly as the hon. Gentleman describes from the Government of whom he was a member. We have already improved matters significantly by publishing forward pipelines in a number of sectors so that British suppliers can tool up to bid effectively. We have cut procurement times and costs dramatically so that it is easier and cheaper for businesses to bid and win that business. It is a very great pity that his Government did not get on and do some of that themselves.

[David Rutley (Macclesfield) (Con)]

T3. Can my right hon. Friend confirm that the big society awards help highlight the important work of community groups, just as the 2012 award did for the Street Angels initiative, which helps make night life safer in Macclesfield and in hundreds of towns and cities across the country?

[The Parliamentary Secretary, Cabinet Office (Mr Nick Hurd)]

I can certainly confirm that the big society awards are there to throw a spotlight on and celebrate outstanding community-led initiatives, such as the Street Angels initiative that has done such good work in Macclesfield and has now spread to more than 70 towns across the UK. I encourage colleagues on both sides of the House to think about nominating community initiatives to the big society awards through the No. 10 website.

[Graeme Morrice (Livingston) (Lab)]

Can the Minister explain why his Government have failed to bring forward robust proposals for a statutory register of lobbyists given that the public want one, the lobbying industry wants one and the Government promised one?

[Mr Maude]

An announcement will be made shortly, but it is worth pointing out that the hon. Gentleman’s party was in power for 13 years and did the square root of nothing on this.

[Stephen Phillips (Sleaford and North Hykeham) (Con)]

T5. What services have been affected by the PCS strike today? Does my right hon. Friend agree that responsibility for the strike lies exclusively with the PCS leadership?

[Mr Maude]

That is exactly right. I can confirm that there has been minimal impact on public services and that the public will have been inconvenienced to a very small extent by today’s strike. The borders at the airports and ports have been properly manned, queues have been minimal and I am delighted to say that at Birmingham airport alone, there have been significant seizures of illegal drugs to the benefit of protecting the public.

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

T4. Today’s shambolic, reactionary Budget will put the Labour party another step closer to government. Now that we have a fixed-term Parliament, will the Minister lay out a proper timetable for Opposition access to the civil service so that we can clear the mess up?

[Mr Maude]

I am afraid that I did not hear a single word that the hon. Gentleman said—[Interruption.]

[Mr Speaker]

Order. In the remaining couple of minutes, let us have a courteous audience for Mr Halfon.

[Robert Halfon (Harlow) (Con)]

T6. Does my right hon. Friend agree that local trade unions are very much part of the big society? Does he support the vital work of USDAW, which is fighting for fair pay and conditions for Tesco workers whose jobs are under threat following the announcement of the closure of the Tesco depot in Harlow?

[Mr Maude]

Of course, responsible trade unionism has a proper role to play in Britain’s big society. What we object to is the irresponsible leadership of unions such as Unite, Labour’s biggest donor, which is taking strike action today in support of the wholly unrepresentative PCS leadership, whose sway with its members has fallen to the extent that the turnout in the strike today has been the lowest at any time since the election.

[Ann McKechin (Glasgow North) (Lab)]

T7. It has been reported that half of charities are planning to cut their work force or expenditure in the next 12 months. What real steps will the Minister take to help those charities to carry out the valuable work that they do throughout our country?

[Mr Maude]

The hon. Lady will know that, to give one example, my right hon. Friend the Justice Secretary is proposing to open up the whole of rehabilitation services so that particularly charitable and voluntary organisations and social enterprises will be able to bid on a payment-by-results basis to win that business. We have created a growing social investment market, supported by big society capital, which will enable those groups to get for the first time access to capital to fund those projects.

The Prime Minister was asked—

[Philip Davies (Shipley) (Con)]

Q1. If he will list his official engagements for Wednesday 20 March.

[The Prime Minister (Mr David Cameron)]

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

[Philip Davies]

Does the Prime Minister agree that today we need a blue collar Conservative Budget which cuts taxes for people who work hard, do the right thing and want to get on; which stops spending billions of pounds that we do not have on overseas aid; and in which we source the cheapest energy for people, helping them with their costs of living, rather than sourcing the greenest energy?

[The Prime Minister]

First, I thank my hon. Friend for giving me the opportunity to remind people that even before this Budget, in two weeks’ time there will be a tax cut for 24 million people in our country as we raise the amount of money someone can earn before they pay tax. We will have taken more than 2 million people out of tax altogether; we have frozen council tax; we have cancelled fuel duty increase after fuel duty increase; and we are legislating to put customers on the lowest electricity tariff. I can also tell my hon. Friend that we are not going to carry on with the proposal made by the previous Energy Secretary, which was to put £179 on everybody’s bill. We have decided to scrap that.

[Edward Miliband (Doncaster North) (Lab)]

I want to ask the Prime Minister about the situation in Cyprus. Will he update the House on what is being done to protect British nationals, including our armed forces, who have deposits in Cypriot banks?

[The Prime Minister]

The Leader of the Opposition raises an extremely important issue at a very sensitive and difficult time for the Republic of Cyprus. First, we have absolutely guaranteed that anyone who is in Cyprus because they have been sent there by the British Government, and the armed forces, Ministry of Defence or the Foreign Office, will not lose out in any way in terms of their earnings or their savings. That is the first thing to say. We have also made sure that money will be available, which is why a plane with money was sent to Cyprus last night.

In terms of British citizens in Cyprus, of whom there are many thousands, of course we cannot insure them against any losses in Cypriot bank accounts, but we can make sure that they get safely the pensions and benefits to which they are entitled. We have frozen those payments for the time being until the situation becomes clear, but everyone should know that they will get those payments.

[Edward Miliband]

On Monday, the City Minister said that the UK Government have

“intelligence about what went on”—[Official Report, 18 March 2013; Vol. 560, c. 620.]

in discussions among eurozone members who negotiated the plan. Will the Prime Minister tell us what the Government knew in advance, and what eurozone members said about that plan?

[The Prime Minister]

First, as we are not in the euro, we do not join the discussions about eurozone bail-outs. That is important, and it is worth noting that because of the deal I did in Brussels, getting us out of the bail-out fund, we will not be contributing to what would otherwise, under the previous Government’s plans be perhaps up to £1 billion. Obviously what we are doing is waiting to see the action that the Cypriot Government and the Eurogroup agree, and ensuring that we do everything to help British citizens in the weeks ahead.

[Edward Miliband]

The point I make to the Prime Minister is that this is a matter not just for the eurozone but for other European economies, because it goes to trust in the banking system. I think it should have been obvious to everyone that a sudden levy imposed on ordinary savers would undermine basic trust and confidence in banks. Will the Prime Minister send a clear message from the Dispatch Box that any negotiated bail-out that is subsequently agreed with the Government of Cyprus needs to rebuild trust in the banking system and not undermine it further?

[The Prime Minister]

We have made our views very clear to the Cypriot Government. In our view, when there are deposit protection schemes—as we have in this country; as all of Europe put in place after the crash of Lehman Brothers—those deposit protection schemes should be respected. That is the whole point; that is why they are there for small savers.

[Harriett Baldwin (West Worcestershire) (Con)]

The civil service union has chosen today to go on strike, but the country does not seem to have ground to a halt. Does the Prime Minister agree that that probably indicates that there is a bit more room to save in terms of public sector spending, so that we can clear up Labour’s debts and get this country back on track?

[The Prime Minister]

My hon. Friend raises an important point. It is important to recognise that we should do everything we can to save and find efficiencies in public spending in order to help hard-working families and keep their tax bills down. That is exactly what this Government will continue to do.

[Dame Joan Ruddock (Lewisham, Deptford) (Lab)]

Q2. On 9 January, the Prime Minister told me there would be no hospital reorganisations unless they had the support of the local GP commissioners, proper public engagement and an evidence base. Will he now admit that not one of those tests is met in the case of Lewisham hospital, where he proposes to close down half the services and sell off two thirds of the land to bail out a neighbouring failing trust? Can anyone trust this Prime Minister on the NHS ever again?

[The Prime Minister]

It is worth remembering who set up the PFI deal that has meant that this action has had to be taken. The apology over what is happening at the South London Healthcare trust should come from the Labour party, because it was responsible for creating this situation. As the right hon. Lady knows, £1 million a week is being lost from front-line care. No change is not an option, but the Health Secretary’s plans have ensured that Lewisham will retain an A and E with senior medical emergency cover.

[Gordon Birtwistle (Burnley) (LD)]

Today, the FTSE index is just under 6,500; in 2008, it was just under 3,500. Does my right hon. Friend agree that the real investors in this economy agree with the coalition Government’s economic policy, contrary to the policies delivered by the Labour party?

[The Prime Minister]

My hon. Friend makes a good point. It is a difficult and hard road that we are travelling to turn this economy round after the huge mess made by Labour, but when we look at the facts—just this morning, we have seen that an extra 131,000 are in work—we see the changes necessary to start the rebuilding of our economy.

[Edward Miliband]

Last weekend, the Foreign Secretary said that there was a strong case for lifting or amending the arms embargo on Syria in the months ahead. Given that no decision was taken at the EU Council, does it remain the Prime Minister’s intention to seek a relaxation of the EU arms embargo?

[The Prime Minister]

First of all, let us look at what we have already achieved in terms of amending the arms embargo. We asked specifically for it to be changed so that we could give technical support to the opposition. We have achieved that, but the French President and I discussed at the European Council looking for further changes to the arms embargo, which will be discussed by Foreign Affairs Ministers this weekend. The reason for that is twofold. First, that the arms embargo still applies pretty much equally to this hateful regime and to the opposition, who we now recognise as legitimate representatives of the Syrian people, sends a peculiar message. Secondly, the French President and I are concerned that we should not be restricted for months and months ahead when we do not know exactly what could happen in Syria—there are very worrying reports of the use of chemical weapons.

[Edward Miliband]

I thank the Prime Minister for that answer. Obviously, everybody is appalled by the actions of the Assad regime, but the Prime Minister will know that there is not only a lack of unity among Syrian opposition groups, but the known presence on the ground in Syria of al-Nusra, the al-Qaeda backed terrorist organisation. Does he therefore understand the widespread concern that remains about the idea of seeking to supply weapons to the rebels?

[The Prime Minister]

The Leader of the Opposition puts the point absolutely rightly. There is widespread concern about the nature of the opposition. The argument we must engage in is this: are we more likely to help the good elements of the opposition by standing back, or are we more likely to help by getting in there and shaping and giving that technical assistance, so that we can play a part in building up the Syrian opposition, so that they are a legitimate and credible alternative to this hateful regime?

It is worth recalling—we should all recall it—the fact that current policies are not working for the people of Syria. Seventy thousand people are dead and this hateful regime is still in place.

[Edward Miliband]

The Prime Minister is absolutely right that the current situation is terrible; we just must not make it worse with the actions that we take. The spokesman for the UN Secretary-General has said that the introduction of more weapons into Syria is “counterproductive” and will not lead to a solution. Special Representative Brahimi recently called for a renewed diplomatic initiative to bring the warring parties to the negotiating table. Will the Prime Minister set out what steps the UK Government, specifically, are taking to support the UN in advancing that initiative?

[The Prime Minister]

We are taking specific steps to help the UN with this vital initiative. Trying to achieve a diplomatic solution, with transition at the top of the regime, is worth while. That is why we have had detailed talks with the Russian Foreign and Defence Ministers in the past week. I would just make one other point about the arms embargo. Sitting in the European Council chamber, I felt that there was a slight similarity between some of the arguments being made about not putting more weapons into Syria and the discussions we had on Bosnia, with the appalling events that followed. In my view, it is better to be engaged and working with the Syrian opposition and trying to bring this conflict to an end.

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

Q15. Traveller numbers on the coastal railway line running through my constituency are growing fast. Given its importance to local tourism in Dawlish and Teignmouth, can the Prime Minister assure me that urgent investment plans are in hand to repair recent flood damage and to create a long-term sustainable future for this railway line?

[The Prime Minister]

I can give my hon. Friend that assurance. I know that the Transport Secretary will shortly be visiting her constituency. Investment is going into the whole of the line that serves her constituency, including major investment that will shortly be completed at Reading station, which will help capacity all down the line.

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

Q3. The Prime Minister will be aware of the growing disquiet across the UK regarding his Government’s welfare reform proposals—great disquiet, because the proposals are deeply unfair and will, I predict, lead to administrative chaos. Does the Prime Minister agree with me that, in terms of his legacy, welfare reform will be his poll tax?

[The Prime Minister]

I do not agree with the hon. Lady at all. I find that there is strong support for the housing benefit cap, so that we no longer fund homes in the capital of our country by up to £100,000 a year. There is strong support for the welfare cap, and, indeed, there is strong support for universal credit, which will make sure that in every case people are better off in work and better off when they choose to work extra hours. That is what we want: a welfare system that supports enterprise, work and aspiration.

[Mr Henry Bellingham (North West Norfolk) (Con)]

Q14. Is the Prime Minister aware that seven people have died on Norfolk’s roads in the past week? Furthermore, eight have died on the A47 in the past 10 weeks. Does he share my concern about this tragic loss of life? Is he aware of the campaign being run by me and other hon. Members, such as my hon. Friend the Member for Broadland (Mr Simpson), to improve the A47? Norfolk people understand the current budgetary constraints; they simply want a fairer share of resources.

[The Prime Minister]

I am grateful to my hon. Friend for bringing me up to date with this important campaign that he and others are leading in Norfolk. We have a much better record on road safety than we have had in recent years, but we should never be complacent and should continue to work on it. Money has been made available for road schemes in Norfolk, the A11 chief among them. I can see from the Minister of State, Department for Transport, the right hon. Member for Chelmsford (Mr Burns) nodding vigorously behind my hon. Friend that there may be more to come.

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

Q4. Does the Prime Minister agree with Lord Heseltine that people are suffering under the recession, and that it would be the wrong politics at this time to remove the 50p top rate of tax? Will he now cancel next month’s tax cut for millionaires?

[The Prime Minister]

The point I make to the hon. Lady is that after the start of the financial year the top rate of tax will be higher than in any year when Labour was in office, and I am sure that that is something with which Michael Heseltine would fully agree.

[David Mowat (Warrington South) (Con)]

Today is the 20th anniversary of the Warrington bombing. The Prime Minister will recall that more than 20 people were killed and injured, among them a 12-year-old boy, Tim Parry. Will he join me in congratulating Tim’s parents, Wendy and Colin, on how they have worked tirelessly for peace over the past two decades, and particularly on the establishment of the Foundation for Peace, which brings help to victims of conflict around the world?

[The Prime Minister]

I certainly join my hon. Friend in praising that family for the incredible bravery they have shown. When someone suffers such a tragedy, it must be so much easier to try and put it behind them and forget about it, but to go on and campaign for peace and to bring together the people of Warrington as they have done shows enormous character and fortitude. They have the backing of the whole country.

[Jonathan Ashworth (Leicester South) (Lab)]

Q5. Has the Prime Minister had time to consider the remarks of the leader of his MEPs in the European Parliament, who said of the decision to cut the 50p rate that it was“one of the biggest mistakes that we’ve made so far in this parliament”and “disastrous to do so in a recession”.Is Mr Callanan right or wrong?

[The Prime Minister]

When the hon. Gentleman’s party put the top rate of tax up, millionaires paid £7 billion less in taxation. We are having a lower tax rate that will raise more revenue. That makes pretty good sense.

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

Just a few weeks back, my right hon. Friend became the first serving British Prime Minister to visit Amritsar in Punjab. As a British Sikh, may I say how warmly his visit was received? More importantly, will he congratulate Her Majesty’s Government on the pioneering work they have done in searching the Sikh turban at European airports? It shows that we can have a proactive relationship with Europe, rather than a reactive one.

[The Prime Minister]

I thank my hon. Friend for all the work he does in this area and for how he consistently raises issues about the British Sikh community, the immense contribution it makes to our country and the respect that we should show it. I also thank him for accompanying me on that trip to the Golden Temple—something that I will never forget. It gives me the opportunity to say, on behalf of the House, how much British Sikhs give to Britain and how much we thank them for it.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

Q6. My constituent Jordan Kingston found himself homeless aged just 17. He was offered social housing and is now studying for his A-levels, determined to improve his situation through education. From his £56 weekly benefit, he will lose £14 in the bedroom tax and £3 in council tax, leaving just £11 per week to live on after utilities. Based on the Prime Minister’s experience of hardship, what advice does he have for Jordan?

[The Prime Minister]

First, the Government are investing in social housing, and the hon. Lady will hear more about that in a moment. Secondly, when housing benefit costs £23 billion a year, we simply have to reform it. There is a basic issue of fairness: why should someone living in private rented accommodation not receive a spare room subsidy and someone in social housing should? There is a basic issue of fairness, and that is why it should be put right.

[Lorely Burt (Solihull) (LD)]

Unlike the hon. Member for Shipley (Philip Davies), I am proud of our coalition for sticking to the 0.7% aid target—[Interruption.]

[Mr Speaker]

Order. The hon. Lady’s question must be heard. People should not jeer before they have heard it.

[Lorely Burt]

Thank you, Mr Speaker.

We set an example to the world, and later on this month, the Prime Minister goes to Bali to co-chair the high-level panel to discuss the next set of millennium development goals. Will he use his leadership to press for a stand-alone goal on gender equality and women’s empowerment?

[The Prime Minister]

I will look very carefully at what the hon. Lady says about the importance of gender equality in terms of the new millennium development goals. The point I would make to anyone who raises the issue about our aid commitment is that I do not think we should break our promises to the poorest people in the world. Our key aim ought to be to eradicate the extreme poverty that people sometimes still face, living on less than $1.25 a day. That is what we are talking about, and I think that we should be proud of the fact that we are keeping our promises.

[Diana Johnson (Kingston upon Hull North) (Lab)]

Q7. As a money-saving tip on Budget day, and in line with what the Education Secretary wants for teachers, could the Prime Minister put his Chancellor and the Cabinet on performance-related pay? How much does he think it would save?

[The Prime Minister]

It is this Chancellor who has seen the deficit come down by a third since he became Chancellor and has seen the creation of over a million private sector jobs. He is getting the country out of the hole that we were left in by Labour.

[Richard Fuller (Bedford) (Con)]

Will the Prime Minister welcome the successful launch in Bedford last week of the country’s first local enterprise fund? People who care about Bedford have raised £400,000 to invest in businesses in Bedford, encouraging enterprise and securing employment? Does he agree that in this respect, as in so many others, where Bedford leads, the rest of the country should follow?

[The Prime Minister]

I am sure my hon. Friend is right about Bedford’s leadership in all things. He makes an important point, which is that we need to see more small businesses start and more enterprise. We have seen in Britain over the last three years the fastest rate of new business creation in our history, but we need to see more of it to keep the private sector going.

[Alex Cunningham (Stockton North) (Lab)]

Q8. Rising unemployment remains an issue in my Stockton North constituency. Is unemployment and recession, which grind hard-working families and the most vulnerable into the ground, a price worth paying for next month’s obscene tax cut for millionaires?

[The Prime Minister]

If the hon. Gentleman looks at the figures today, he will see that there are 131,000 more people in work over the last quarter. We have seen 600,000 more people employed compared with a year ago. That is what is actually happening in terms of employment. I have to say, when we look at the mess we were left by Labour, being given advice on economics on Budget day from Labour is like asking Enron for accountancy advice.

[Mr Marcus Jones (Nuneaton) (Con)]

In less than a fortnight’s time, this Government will have taken 3,168 of my constituents out of paying income tax altogether. Does that not show that this Conservative-led Government are on the side of hard-working, low-paid people?

[The Prime Minister]

My hon. Friend makes an important point, which is that we have consistently lifted the personal tax allowance—the amount of money that people earn before they start paying tax—starting at around £6,000 and now rising all the time, so that over 2 million people have already been taken out of tax altogether. If he is sitting comfortably for the next half an hour, he may hear some further news.

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

Q9. Does the Prime Minister agree with his hon. Friend the Member for Hexham (Guy Opperman) that his Government’s focus should be on looking after people who are struggling to pay their mortgages, rather than protecting those in £2 million houses?

[The Prime Minister]

We should be helping people who are paying their mortgages, and that is why it is so vital that we stick to our plans. We have low interest rates in this country because we have a plan to get the deficit down. That is absolutely key. The other point I would make to the hon. Lady is that if we look at the funding for lending scheme from the Bank of England, it has now successfully reduced mortgage rates and also made sure that people who do not have access to a large deposit are able to look at buying a house. We are making progress, but there is a lot more to do.

[Gavin Williamson (South Staffordshire) (Con)]

Q10. This month we have had the wonderful news that Jaguar Land Rover is going to create a further 700 jobs in South Staffordshire, bringing its total investment to over £500 million. Last year we saw the creation of 70,000 manufacturing jobs in the UK. Does my right hon. Friend not think that this is a stark contrast to the 1.7 million manufacturing jobs destroyed under the last Labour Government?

[The Prime Minister]

My hon. Friend makes an important point. Jaguar Land Rover has been a massive success story for our country, and I would praise all of those who have invested money in that business, all those who work in it and all the apprentices who are being trained in it. It is part of a recovery of our automotive sector, which has, for the first time in 30 years, seen a surplus in the number of cars that we export overseas, and it is part of a picture where Nissan, Toyota, Honda and other automotive businesses in the sector are doing well, and we support them.

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

The Prime Minister will be aware that this week marks the bicentenary of the birth of Dr David Livingstone—born in Blantyre in my constituency, buried in Westminster abbey—which was marked by a service attended by President Joyce Banda last night in the abbey. He will know that one of Livingstone’s proudest achievements was the drive to abolish slavery in east Africa. Given the bicentenary, does the Prime Minister agree that it is now time for his Government to take the lead to end the scandal of the 2.5 million people in modern-day slavery or prostitution as a result of people trafficking?

[The Prime Minister]

The hon. Gentleman makes an important point, and he gives me the opportunity to praise President Banda for what she is doing to lift people out of poverty in Malawi, and to thank her for visiting Britain and Scotland this week. The hon. Gentleman makes an important point about slavery, because there is still modern-day slavery and we still need to take action to combat it at European level, at national level and at local level with the police. This Government will continue to take that action.

[Duncan Hames (Chippenham) (LD)]

Q11. Whatever further changes the Chancellor announces today, the payslips of ordinary working people will show a tax cut next month as a result of the personal allowance rise that the Liberal Democrats called for. It represents the largest single income tax change in this Parliament. What does this say about the priorities of my right hon. Friend the Prime Minister’s coalition Government?

[The Prime Minister]

This is an important priority that we have taken action on in Budget after Budget, even in difficult times, saying to people, “We are on your side. We want to cut your tax bills.” In just two weeks’ time there will be a tax cut of over £200 for 24 million people in our country—each and every taxpayer. At the same time, we are lifting over 2 million people out of tax—they will not pay any income tax at all. This is real progress and it is on the side of the people who work hard and want to get on.

[Gloria De Piero (Ashfield) (Lab)]

Q12. What is the Prime Minister planning to spend his millionaire’s tax cut on?

[The Prime Minister]

When the top rate of tax was put up, millionaires paid £7 billion less. That is the sort of incompetence and inefficiency that the hon. Lady left the sofa of GMTV to support. [Interruption.]

[Mr Speaker]

Order. When a question is asked, Members should not shout their heads off when the Prime Minister is giving an answer.

[Dr Julian Lewis (New Forest East) (Con)]

Given that SAS Sergeant Danny Nightingale has had his conviction quashed following the quashing of his military prison sentence last year, does the Prime Minister agree that it would be totally against the public interest, and against the interests of the SAS Regiment, for Sergeant Nightingale to have to face a fresh trial when others are benefiting from the weapons amnesty that was rightly introduced by the Secretary of State for Defence as a result of the Nightingale case?

[The Prime Minister]

My hon. Friend raises an important point. Let me say how strongly I support all those who serve in our special forces. As Prime Minister, I have the privilege of meeting many of those brave people and seeing that they are some of the finest and most courageous people in our country. I do not, however, want to get into any trouble with my right hon. and learned Friend the Attorney-General, so I will leave the issues of the courts to the courts.

[Hugh Bayley (York Central) (Lab)]

Q13. The money that the Government have set aside to help people who are hit by the bedroom tax will not cover a fraction of the really hard cases, such as that of my paralysed constituent who receives round-the-clock care from his wife. There is an acute housing shortage in York, and they have nowhere to move to. So will the Prime Minister do one more U-turn on the bedroom tax, and scrap it altogether?

[The Prime Minister]

First, let me remind the hon. Gentleman that only the Labour party could call a welfare reform a tax. It shows how little they understand how tax and benefits work. We are making available a discretionary fund that is there for the hard cases, but we are also recognising that there is a basic issue of cost—about £23 billion is spent on housing benefit every year—and a basic issue of fairness, not just between the private sector and the social sector but in recognising that there are 1.8 million people on housing waiting lists who would love to have a bedroom.

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

Is my right hon. Friend aware that the Business Location Index has just cited Milton Keynes as the best place in the country to do business and that, with more than 2,000 business start-ups in the past year, it is Milton Keynes that is rebuilding our economy?

[The Prime Minister]

I was aware of that statistic, because my hon. Friend helpfully reminded me of it when we were in Milton Keynes together recently, talking about what a fantastic location for business it is, about how it is encouraging business start-ups and about how it is leading to a growth in employment in the region.

[Andy McDonald (Middlesbrough) (Lab)]

Given that the Chancellor has joined Twitter this morning, will the Prime Minister remind him and the House what too many tweets make?

[The Prime Minister]

I have made a number of remarks about Twitter over the years, most of which I have had to withdraw because I am now tweeting, too. I look forward to the first tweet after the Budget this afternoon. What is clear is that the hon. Gentleman could tweet even now that we are cutting taxes in two weeks’ time for 24 million working people, taking 2 million people out of tax. Tweeting that would certainly not cause any dangers for the hon. Gentleman.

[Mr Shailesh Vara (North West Cambridgeshire) (Con)]

Recently, the shadow Home Secretary admitted that when the Labour party was in government it got its immigration policy wrong. Does the Prime Minister agree with me that across the breakfast table, she should persuade her husband to make a similar admission on Labour’s economic policy.

[The Prime Minister]

I think my hon. Friend makes a very good point. We inherited a complete shambles in immigration—a system completely out of control. We have sort of had apologies for that; what we have not had is any sort of apology for the borrowing, the spending and the debt—the mess that the Labour party left us.

[Caroline Lucas (Brighton, Pavilion) (Green)]

It has been estimated that for the cost of just one nuclear reactor, 7 million households could be lifted out of fuel poverty through energy efficiency and conservation. Hinkley is expected to come with an eye-watering £14 billion price tag and a strike price of getting on for double the current price of electricity. If that does not make nuclear unaffordable, can the Prime Minister tell us what would?

[The Prime Minister]

I am afraid that I just do not agree with the hon. Lady. Our fleet of nuclear power stations is coming to the end of its life, and I think it is important that we work hard to replace some of that capacity. That is what Hinkley is about; that is why I think my right hon. Friend the Secretary of State for Energy and Climate Change was absolutely right to give it the go-ahead. It will be an important provider of carbon-free electricity in the years ahead.

Reopening of Middlewich Station to Passengers

Wednesday 20th March 2013 Commons Chamber

Fiona Bruce (Congleton) (Con)

- Hansard - - Excerpts

I rise to present a petition from the Middlewich rail link campaign, supported by more than 2,000 residents from people in the towns of Middlewich and Sandbach in my constituency and from Northwich, in the constituency represented by my hon. Friend the Member for Weaver Vale (Graham Evans), who is in the Chamber and also supports the petition. The petition asks for the reopening of the Sandbach to Northwich branch line and the reintroduction of passenger services at Middlewich station along the line.

The humble petition of the Middlewich rail link campaign and its supporters says:

The Petition of residents of Middlewich and the surrounding area,

Declares that the Petitioners call for and fully support the reopening of the Sandbach to Northwich branch line to passenger traffic and the vital reopening of Middlewich railway station.

The Petitioners therefore request that the House of Commons urges the Department for Transport to consider the reopening of the Sandbach to Northwich branch line to passenger traffic and the reopening of Middlewich railway station.

And the Petitioners remain, etc.

[P001158]

Human Rights in India

Wednesday 20th March 2013 Commons Chamber

Heather Wheeler (South Derbyshire) (Con)

- Hansard - - Excerpts

I rise to present a petition on behalf of 1,100 residents of South Derbyshire regarding human rights in India.

The petition says:

The Petition of residents of the United Kingdom,

Declares that the Petitioners believe that the UK Government, together with the UN and EU, should encourage the Indian Union to take immediate action to stop human rights abuses facing minorities in India and that India should sign and ratify the Rome Statute of the International Criminal Court and the UN Charter against torture and other cruel, inhumane or degrading treatment or punishment which encompasses the death penalty and thus India should abolish the death penalty as it is a cruel, inhumane or degrading form of punishment; further declares that the UK Government should campaign to stop Balwant Singh Rajoana's death sentence and have him released from jail as he has served 17 years in custody and that the Indian Union should release all prisoners facing the same situation and those who have been imprisoned without trial.

The Petitioners therefore request that the House of Commons urges the Government to appeal to India for the above actions to be taken, and request that the Government bring these issues to light in the European Union and United Nations.

And the Petitioners remain, etc.

[P001165]

Ways and Means

Wednesday 20th March 2013 Commons Chamber

Financial Statement

Wednesday 20th March 2013 Commons Chamber

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Before I call the Chancellor of the Exchequer, it is convenient to remind hon. Members that copies of the Budget resolutions will be available in the Vote Office at the end of the Chancellor’s speech. It may also be appropriate to remind hon. Members that it is the norm not to intervene on the Chancellor of the Exchequer or the Leader of the Opposition.

12:32

[The Chancellor of the Exchequer (Mr George Osborne)]

This is a Budget for people who aspire to work hard and get on. It is a Budget for people who realise there are no easy answers to problems built up over many years—just the painstaking work of putting right what went so badly wrong. And together with the British people, we are, slowly but surely, fixing our country’s economic problems. We have now cut the deficit not by a quarter, but by a third. We have helped business create not a million new jobs, but one and a quarter million new jobs. We have kept interest rates at record lows.

Despite the progress we have made, there is much more to do. Today, I am going to level with people about the difficult economic circumstances we still face and the hard decisions required to deal with them. It is taking longer than anyone hoped, but we must hold to the right track. By setting free the aspirations of this nation, we will get there.

Our economic plan combines monetary activism with fiscal responsibility and supply-side reform, and today we go further on all three components of that plan: monetary, fiscal and supply-side reform. We also understand something else more fundamental. Our nation is in a global race, competing alongside new centres of enterprise around the world for investment and jobs that can move anywhere. What was the response of those who came before us? It was to expand the state in a way that we could not afford; to drive businesses overseas with taxes that became more and more uncompetitive; to let schools fail; to deplete our skills base; to let a bloated welfare system pick up the human casualties and assume that an uncontrolled banking boom would pick up the bill. To win in the global race, we are doing the exact opposite. We are building a modern, reformed state that we can afford. We are bringing businesses to our shores with competitive taxes. We are fixing the banks. We are improving our schools, our skills—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Obviously the country is waiting to hear the Chancellor. I certainly want to hear the Chancellor, and I am sure that most people in the Chamber also want to hear the Chancellor. Please let us hear the Chancellor.

[Mr Osborne]

For years people have felt that the whole system is tilted against those who did the right thing: who worked, who saved, who aspired. Those are the very people whom we must support if Britain is to have a prosperous future. This is a Budget for those who aspire to own their own home, who aspire to get their first job or to start their own business. It is a Budget for those who want to save for their retirement and provide for their children. It is a Budget for our aspiration nation.

The forecast from the independent Office for Budget Responsibility today reminds us of the economic challenge at home and abroad, but it also—[Interruption.]

[Mr Deputy Speaker]

Order. Let us start as we mean to go on. The shadow Chancellor may not have been the Chancellor, but he should observe the courtesies, and should know better. [Interruption.] We want no advice from the Government, and they should know better than to display it. I do not wish to see it. That is not a good position to put us in. Let us continue, and let this not become the circus of the day.

[Mr Osborne]

Since the autumn statement, the OBR has again revised down its forecast for global economic growth, and has sharply revised down its forecast for world trade. Growth in the United States and Japan was flat in the last quarter, while the eurozone shrank by 0.6%. That was the largest fall since the height of the financial crisis. The problems in Cyprus this week are further evidence that the crisis is not over, and the situation remains very worrying. I can confirm that, as the Prime Minister said, people sent to Cyprus to serve our country, in our military or Government, will be protected in full from any tax on their deposits.

The OBR today sharply revised down its future growth forecast for the eurozone, and expects it to remain in recession throughout this year. In its words, “the underlying situation” in the eurozone “remains very fragile”. I will be straight with the country: another bout of economic storms in the eurozone would hit Britain’s economic fortunes hard. Forty per cent. of all we export, we export to the eurozone. There is a huge effort across the Government to grow Britain’s trade with the fast-growing parts of the world, and exports to Brazil, India and China are up by almost two thirds. United Kingdom firms now export more goods to non-European Union countries than to EU countries. This is the first time that that has happened in over two decades. However, we are still very exposed to what happens on the continent. Indeed, last year domestic demand was actually stronger than forecast, but it is the weakness of net trade that helps to account for much of the weakness in GDP. As the OBR makes clear,

“the unexpectedly poor performance of exports is more than sufficient on its own to explain the shortfall”.

GDP for last year has turned out to be a little higher than the OBR forecast in December, but this year its output forecast is reduced to 0.6% growth. Despite the recession in the eurozone, the OBR’s central forecast today is that we will avoid a second quarter of negative growth here in the UK. While it is less than we would like, our growth this year and next year is forecast by the International Monetary Fund to be higher than that of France and Germany. That is a reminder of the fact that all western nations live in very challenging economic times.

The OBR expects the recovery to pick up to 1.8% in 2014, 2.3% in 2015, 2.7% in 2016, and 2.8% in 2017. Crucially, jobs are being created. Indeed, in the words of the OBR, the picture on employment

“continues to surprise on the upside”

in this forecast.

When we started the unavoidable task of reducing the size of the public sector work force, some in the House expressed doubts that the private sector would be able to make up the difference. I am glad to report to the House that their lack of confidence in British businesses has been misplaced. It is a tribute to the energy and enterprise of British companies that for every one job lost in the public sector in the last year, six jobs have been created in the private sector; the employment rate has been growing faster than in the US and three times as fast as in Germany. So, despite the weaker GDP, at this Budget the OBR has now revised up further its forecasts for employment. Compared with this time last year, the OBR now expects 600,000 more jobs in 2013, and there will be 60,000 fewer people claiming unemployment benefit. We have seen more people in work than ever before, including a record number of women; there are a quarter of a million fewer workless households than two years ago; and the unemployment rate is lower than it was when we came to office.

The deficit continues to come down. Three years ago, the Government were borrowing £1 for every £4 they spent—that was completely reckless and unsustainable. We have taken many tough decisions to bring that deficit down, and we will continue to do so. The deficit has fallen from 11.2% of GDP in 2009-10 to a forecast of 7.4% this year—that is a fall of a third. It will then fall further to 6.8% next year, 5.9% in 2014-15, 5% in 2015-16 and 3.4% the following year, reaching 2.2% by 2017-18. Those numbers all exclude the transfer of the Royal Mail pension fund to the Government, which reduces the deficit still further for this year alone. It is sometimes asserted in this House that borrowing has gone up under this Government—[Interruption.] As we have just seen again. The facts show the opposite to be true. The previous Government borrowed—[Interruption.]

[Mr Deputy Speaker]

Order. We cannot have one side being told without the other. It is not a competition of who can shout the loudest. Let us hear the Chancellor. If you don’t want to hear your own Chancellor, I am sure your constituents would understand if you were to leave the Chamber. I suggest that nobody wants to leave the Chamber, so let us continue to hear the Chancellor of the Exchequer.

[Mr Osborne]

As I was saying, the facts show the opposite to be true. The previous Government borrowed £159 billion in their last year in office and this year this Government are forecast to borrow £114 billion. So that is not more borrowing—it is £45 billion a year less borrowing. Borrowing then falls from £108 billion next year, and falls again to £97 billion in 2014-15 and to £87 billion in the last year of this Parliament, before falling again to £61 billion and £42 billion in the following two years. To ensure complete transparency, the OBR publishes the numbers without the asset purchase facility cash transfers. They show that on that measure, too, borrowing is just forecast to fall.

We committed at the start of this Parliament to a fiscal mandate that said we would aim to balance the cyclically adjusted current budget over the following rolling five years. I can confirm that the OBR says we are on course to meet our fiscal mandate—and meet it one year early. However, the likelihood of meeting the supplementary debt target has deteriorated. Public sector net debt is forecast to be 75.9% of GDP this year, 79.2% next year, 82.6% the year after, 85.1% in 2015-16 and 85.6% in the year after, before falling to 84.8% in 2017-18.

In response, there are those who would want to cut much more than we are planning to and chase the debt target. I said in December that I thought that with the current weak economic conditions across Europe that would be a mistake. We have got a plan to cut our structural deficit. Our country’s credibility comes from delivering that plan, not altering it with every forecast—and that is why interest rates remain so low. Our judgment has since been supported by the International Monetary Fund, the OECD and the Governor of the Bank of England, and I do not propose to change that judgment three months later.

I have also had representations at this Budget for measures that would add £33 billion a year extra to borrowing on top of the figures I have announced. That is from people who seem to think that the way to borrow less is to borrow more. They would return us to the double-digit deficits of the last Government and give us far and away one of the highest deficits in the western world. That would pose a huge risk to the stability of the British economy, threaten a sharp rise in interest rates and leave the burden of debts to our children and our grandchildren. I will not take that gamble with the future of this country, especially when those representations came from the very same people whose previous gamble with our economy led to the mess that we are clearing up in the first place.

The spending reductions that we promised have been more than delivered. Welfare reforms have been legislated for and are taking place, and here is a clear sign of progress: the proportion of national income spent by the state has fallen from 47.4% three years ago to 43.6% today; and it is on course to reach 40.5% at the end of the period. We have set out the deficit plan, and we are delivering that plan. Taken together, the measures that I will announce today are fiscally neutral overall. Ask the British people and they will tell you: our problem as a country is not that we are taxed too little, but that the Government spend too much. I agree with them. So the tax cuts in this Budget are not borrowed; they are paid for. That is our way, and it is the only responsible way to lower taxes.

It is the central plank of our economic plan that a tough and credible fiscal policy creates the space for an active monetary policy. Recovering from the financial crisis has exposed the shortcomings of conventional monetary tools. We in Britain have had to innovate and develop new tools; so have other countries. I confirm today that the asset purchase facility will remain in place for the coming year. We are now actively considering with the Bank of England whether there are potential extensions to the successful funding for lending scheme that will boost lending still further. We are also setting out our plans for lending from our new business bank, but I want to make sure that an active monetary policy plays a full role in supporting the economy, so I am today setting out an updated remit for the Monetary Policy Committee. Alongside it, we are publishing a review of the monetary policy framework.

This Budget confirms the primacy of price stability and the inflation target in Britain’s monetary policy framework. The updated remit reaffirms the inflation target as 2% as measured by the 12-month increase in the consumer prices index. The target will apply at all times, but as we have seen over the last five years, low and stable inflation is a necessary but not sufficient condition for prosperity. The new remit explicitly tasks the MPC with setting out clearly the trade-offs that it has made in deciding how long it will be before inflation returns to target. To ensure a fuller communication between the Bank and the Treasury, I am changing the timing of the open letter system, so that when inflation is above target the Governor will write to me on the day the minutes of the next MPC meeting are published to allow for a more substantive exchange of views.

The new remit also recognises that the Monetary Policy Committee may need to use unconventional monetary instruments to support the economy while keeping inflation stable, and it makes it clear that the committee may wish to issue explicit forward guidance, including using intermediate thresholds in order to influence expectations on the future path of interest rates. For example, that is what the US Federal Reserve has now done, making a commitment to keep interest rates low while unemployment is high, provided that inflation is not expected to rise too much. This can help the economy because it gives families planning their futures, and businesses wondering whether to invest, more confidence that interest rates will stay lower for longer. So I am asking the Monetary Policy Committee to provide an assessment of how intermediate thresholds might work in Britain, and to give that assessment in its August 2013 inflation report. That report will be the first issued under the governorship of Mark Carney. Whether intermediate thresholds are used will be an operational matter for the independent MPC. I can confirm that Mervyn King and Mark Carney have both seen the new remit and they have both agreed to it.

Active monetary policy can only operate freely when securely anchored by credible fiscal policy. That is the next component of our economic plan. We have instituted new public spending controls in government. When money is short, we make no excuses for the rigorous financial management we have run across Whitehall. Let me be clear with the House: that is one of the reasons why we have got forecast borrowing falling in this year and next. The traditional splurge of cash by Departments at the end of the financial year, just to get the money spent, has to be curtailed. And thanks to the tough financial control of my right hon. Friend the Chief Secretary, Government Departments are forecast to underspend their budgets by more than £11 billion this year. If you want to bring borrowing down, you have to control spending, and that is what we have done.

Now we want to ensure Departments have budgets that are more closely aligned to what they actually spend. So both next year and the year after, we will reduce resource departmental expenditure limits by the equivalent to a 1% reduction for most Departments. The schools and health budgets will remain protected, because our promise to our NHS is a promise we will keep. Local government and police allocations for 2013-14 have already been set out and will not be affected. We will also deliver in this coming year on this nation’s long-standing commitment to the world’s poorest to spend 0.7% of our national income on international development. We should all take pride, as I do, in this historic achievement for our country. As previously, the Department for International Development budget will be adjusted to ensure we do not spend more than 0.7%.

Departmental budgets have yet to be set for the year 2015-16, which starts before the end of this Parliament. This will be done in the spending round that will be set out on 26 June. I said last autumn that we would require around £10 billion of savings from that spending round. I confirm today that we will instead be seeking £11.5 billion of current savings. We have got to go on making difficult decisions so that Britain can live within its means. And because we make those decisions, we can get our deficit down and focus on our nation’s economic priorities.

Total managed expenditure for 2015-16 will be set at £745 billion. How the savings will be achieved will be a matter for the spending round, but existing protections apply. We are also taking steps to help all Departments to achieve the savings required. Together, my right hon. Friends the Chief Secretary and the Minister for the Cabinet Office have indentified that a further £5 billion of savings in efficiency and cutting the cost of administration can be made. This will go a huge way towards delivering the spending round in a way that saves money but protects services.

So too will action on pay. The Government will extend the restraint on public sector pay for a further year by limiting increases to an average of up to 1% in 2015-16. This will apply to the civil service and work forces with pay review bodies. Local government and devolved Administration budgets will be adjusted accordingly in the spending round. We will also seek substantial savings from what is called progression pay. These are the annual increases in the pay of some parts of the public sector. I think they are difficult to justify when others in the public sector, and millions more in the private sector, have seen pay frozen or even cut. I know that is tough, but it is fair. In difficult times with the inevitable trade-off between paying people more and saving jobs, we should put jobs first.

Today is also the 10th anniversary of the start of the Iraq war. The awarding of a posthumous Victoria Cross to Lance Corporal James Ashworth this week reminds us of the courage and sacrifice that all who serve in our armed forces are still making to defend our country. We will exempt our military from changes to progression pay. We are also accepting in full from 1 May this year the armed forces pay review body's recommended increase in the so-called X factor payment made to military personnel to recognise the particular sacrifices they make. And I can also announce that further awards from the LIBOR banking fines have gone to good military causes, with money for Combat Stress to help veterans with mental health issues and funds for Christmas boxes for all our troops on operations this year and next. Those who have paid fines in our financial sector because they demonstrated the very worst of values are paying to support those in our armed forces who demonstrate the very best of British values.

Ultimately as a country we will not be able to spend more on the services we all value, from our NHS to our armed forces, or invest in our infrastructure, unless we go on tackling the growth of spending on welfare budgets. The public spending framework introduced by the previous Government divided Government spending into two halves: fixed departmental budgets and what is called annually managed expenditure—except in practice it was annually unmanaged expenditure—and it includes almost the entire welfare budget as well as items like debt interest and payments to the EU. I can tell the House that according to the OBR forecast today, the European budget deal secured by my right hon. Friend the Prime Minister has saved Britain a total of £3.5 billion. We will now introduce a new limit on a significant proportion of annually managed expenditure. It will be set out in a way that allows the automatic stabilisers to operate, but it will bring real control to areas of public spending that had been out of control. We will set out more detail on how this new spending limit will work at the spending round in June. All decisions, on welfare, pay and Departments are tough, and they affect many people. But if we did not take them, what is a difficult situation for them and for the whole country would be very much worse.

Active monetary policy and a responsible fiscal policy are two components of our economic plan. We also need supply-side reform, to throw the full weight of our efforts behind the entrepreneurial forces in our society. Our fundamental overhaul of the planning laws are now helping homes to be built and businesses to expand. Our reform of schools, universities and apprenticeships is probably the single most important long-term economic policy we are pursuing. Our support for European free trade agreements with India, Japan and the US is a priority of our foreign policy. And we are building the most competitive tax system in the world. But now we need to do more.

First, we can provide the economy with the infrastructure it needs. We are already supporting the largest programme of investment in our railways since Victorian times, and spending more on new roads than in a generation. We are giving Britain the fastest broadband and mobile telephony in Europe. And the Treasury is now writing guarantees to major projects from supporting the regeneration of the old Battersea power station site to building the new power stations of tomorrow. We have switched billions of pounds from current to capital spending since the spending review to mitigate the sharp decline set in train by the last Government. But on existing plans, capital spending is still due to fall back in 2015-16, and I do not think that is sensible. So by using our extra savings from Government Departments, we will boost our infrastructure plans by £3 billion a year from 2015-16. That is £15 billion of extra capital spending over the next decade, because by investing in the economic arteries of this country, we will get growth flowing to every part of it. And public investment will now be higher on average as a percentage of our national income under our plans than it was in the whole period of the last Government.

In June, we will set out long-term spending plans for that long-term capital budget. And we will use the expertise of Paul Deighton, the man who delivered the Olympics and who now serves in the Treasury, to improve the capacity of Whitehall to deliver big projects and make greater use of independent advice.

The second thing we can do to support enterprise is to give our great regional cities and other local areas much greater control over their economic destiny and to back sectors that are a global success. Businesses have created more jobs in areas such as the west midlands in the first three years of this Government than they did in the first 10 years of the Labour Government. Private sector employment has been growing more quickly in the north-east, the north-west and Yorkshire than across the whole country.

But we can do much more, so I accept Michael Heseltine’s excellent idea of a single competitive pot of funding for local enterprise. I also fully endorse the report of Doug Richard to make the most of our apprenticeships. We have the second largest aerospace industry in the world. For the first time in 40 years, we manufacture for export more cars than we import, and our agritech business is at the global cutting edge. We are backing international successes like those with £1.6 billion of long-term funding for the industrial strategy that my right hon. Friend the Business Secretary launched this week.

Today we build on our new tax reliefs coming in this year for the creative industries such as high-end television and animation with new support for our world-class visual effects sector. To help small firms, we will increase fivefold the value of Government procurement budgets spent through the small business research initiative. We will fund the proposal to make growth vouchers available to small firms seeking advice on how to expand. We are putting new controls on what regulators can charge and giving the Pensions Regulator a new requirement to have regard to the growth prospects of employers.

A vital sector for our economy, and a cost of doing business for everyone, is energy. Creating a low-carbon economy should be done in a way that creates jobs, rather than costing them. The granting of planning permission yesterday at Hinkley Point was a major step forward for new nuclear. Today, with the help of my hon. Friend the Energy Minister, we are also announcing our intention to take two major carbon capture and storage projects to the next stage of development. We will support the manufacture of ultra-low emissions vehicles in Britain with new tax incentives. The hon. Member for Stoke-on-Trent Central (Tristram Hunt) has argued passionately, and on this occasion in a non-partisan way, about the damage that energy costs are doing to his city’s famous ceramics industry. He has persuaded me, so from next year we will exempt the industrial processes for that industry and some others from the climate change levy.

In the spending round, we will provide support for energy-intensive industries beyond 2015. For the North sea, we will this year sign contracts for future decommissioning relief, the expectation of which is already increasing investment there. But I also want Britain to tap into new sources of low-cost energy such as shale gas, so I am introducing a generous new tax regime, including a shale gas field allowance, to promote early investment. By the summer, new planning guidance will be available alongside specific proposals to allow local communities to benefit. Shale gas is part of the future, and we will make it happen.

We can help companies grow and succeed by building infrastructure, backing local enterprise and supporting successful sectors, but nothing beats having the most competitive business tax system of any major economy in the world. That is what this Government set out to achieve. That is what we are delivering. The accountants KPMG does a survey of investors that ranks the most competitive tax regimes in the world. Three years ago we were near the bottom of that table; now we are at the top. But in this global race we cannot stand still, so today we step up the pace. Our seed enterprise investment scheme offers generous incentives to investors in start-ups. My hon. Friend the Member for Braintree (Mr Newmark) and David Young have done a great job helping to promote it across the country. They have asked me to extend the capital gains tax holiday, and I will.

Employee ownership helps create an enterprise culture, so we are making our new employee shareholder status more generous, with national insurance contributions and income tax relief, and we are introducing capital gains tax relief for sales of businesses to their employees. Companies that look after their employees and help them return to work after periods of sickness will also get new help through the tax system, and we will double to £10,000 the size of the loans that employers can offer tax free to pay for items such as season tickets for commuters. That is a great idea from my hon. Friend the Member for Witham (Priti Patel) and I am happy to put it into practice. My hon. Friend the Member for Enfield North (Nick de Bois) and others have put forward proposals to help investment in social enterprises, and I have listened. We will introduce a new tax relief to encourage private investment in these social enterprises.

Research and development is absolutely central to Britain’s economic future, so today I am increasing the rate of the above-the-line R and D credit to 10%. Along with our new 10% corporation tax rate on profits from patents coming in next month, that will help make us one of the most internationally attractive places to innovate.

I also want Britain to be the place where people raise money and invest. Financial services are about much more than banking. In places such as Edinburgh and London we have a world-beating asset management industry, but they are losing business to other places in Europe. We act now with a package of measures to reverse that decline, and we will abolish the schedule 19 tax, which is payable only by UK-domiciled funds.

Many medium-sized firms and start-ups use the alternative investment market to raise funds to help them grow. Many observers of the British tax system complain that it has long been biased towards debt financing over equity investment, so today I am abolishing altogether stamp duty on shares traded on growth markets such as AIM. In parts of Europe they are introducing a financial transaction tax; here in Britain we are getting rid of one. From April next year, that will directly benefit hundreds of medium-sized UK firms, lowering their cost of capital and supporting jobs and growth across the UK.

We also set out to compete with the world in our headline rate of corporation tax. In Germany, the corporate tax rate is 29%; in France it is 33%; in the United States it is 40%. Here in Britain we have cut corporation tax from the 28% we inherited to 21% next year. But I want to go further. Today I want us to send a message to anyone who wants to invest and create jobs here that Britain is open for business, so in April 2015 we will reduce the main rate of corporation tax by another 1%. Britain will have a 20% rate of corporation tax, the lowest business tax of any major economy in the world. That is a tax cut for jobs and growth. We will have achieved in one Parliament, and in these difficult times, the largest reduction in the burden of corporation tax in our nation’s history, and with it we will achieve major simplification of our business tax system. By merging the small company and main rates at 20p, we will abolish the complex marginal relief calculations between them and give Britain a single rate of corporation tax for the first time since 1973. As with previous reductions in the corporate tax rate, I do not intend to pass the benefit on to the banking sector, so I will offset the reduction by increasing the bank levy rate next year to 0.142%.

Britain is moving to low and competitive taxes, but we should insist that people and business pay those taxes, rather than aggressively avoiding or evading them. That is the right way to succeed in the global race. Under Labour, we had the worst of both worlds: uncompetitive tax rates that were not paid. When the 50p rate was introduced, tax revenues fell by billions of pounds as the wealthy paid less. That is the wrong way round. Under this Government, the tax rates are more competitive and the wealthy pay more tax. That is the right way round. Here is an inconvenient truth for the Opposition: in every year of this Parliament the rich will pay a greater proportion of income tax revenues than in any one of the 13 years of the previous Labour Government. During those 13 years, too many people were allowed to get away with aggressive tax avoidance and abuse. They boasted that they were paying less tax then their cleaners, and Labour Members lauded them for it. We have stopped that, and that is what I call fair.

Today I am unveiling one of the largest ever packages of tax avoidance and evasion measures presented at a Budget. The details are set out in the Red Book. They include agreements with the Isle of Man, Guernsey and Jersey to bring in over £1 billion in unpaid taxes and new rules to stop the abuse of partnership rules, corporate tax losses and offshore employment intermediaries. That is another £2 billion. This year we are giving Britain its first ever general anti-abuse rule, and we will name and shame the promoters of tax avoidance schemes. My message to those who make a living advising other people how to aggressively avoid their taxes is this: this Government will not let you get away with it. This year we are leading international action on tax avoidance through our presidency of the G8 and with the OECD and the G20. We want the global rules governing the taxation of multinational firms to be updated from the 1920s, when they were first written, and made relevant to the global internet economy of the 21st century. This is the right and fair thing to do.

A tax system where people and businesses pay what is expected of them is part of the glue that holds our society together. So too is the expectation that those who work hard, who play by the rules, who save for their future and try to be independent of the state are not undermined but supported. So to the working parents struggling with the costs of child care, and the mother wondering whether it makes financial sense to get a job, we offer this: tax-free child care. The plans were set out yesterday: new tax-free child care vouchers for working families, with 20% off the first £6,000 of your child care costs for each child, and increased child care support for those low-income working families on universal credit.

For those who aspire to put aside money for their retirement, we offer this: a simple, flat-rate pension accessible to everyone and worth £144 a week. Any one pound you save will be a pound you can keep. We are bringing forward the introduction of the new single-tier pension to 2016. It will help the low-paid, the self-employed, and millions of women most of all. Of course, if there is no longer the old state second pension, there is no longer anything to contract out of. For employers, that means paying the same employer national insurance as those without defined-benefit schemes. Private sector employers can adjust their pension benefits to accommodate the extra cost; public sector employers will have to absorb the burden, as is always the case with tax changes. Any spending review in the next Parliament will of course take the £3.3 billion cost into account.

As we have already made clear, public sector employees, and the relatively small number of private sector employees in defined benefit schemes, will from 2016 pay more national insurance then they do today. They will pay the same rate of national insurance as the rest of the working population, and in return they will get a larger state pension than before. For example, someone who is 40 years old when the single-tier pension is introduced, and who has always been contracted out, will pay an extra £6,000 in national insurance over the rest of their working life—and in return get an extra £24,000 in state pension over the course of their retirement. That is a fair deal, and it is a progressive pension reform. We have also made it clear before that the extra £1.6 billion raised in employee national insurance will not be kept by the Treasury.

There is another group of savers I want to talk about today. I am proud to have been part of a Government who have helped to compensate the policyholders of Equitable Life, who have suffered a great injustice. But we have not extended help to those who bought their with-profits annuity before 1992. Now we can. I would like to acknowledge the work of my hon. Friend the Member for Harrow East (Bob Blackman) on behalf of these people. We will make ex gratia payments of £5,000 to those elderly policyholders, and we will make an extra £5,000 available to those on the lowest incomes who are on pension credit. We are not doing this because we are legally obliged to; we are doing it because, quite simply, it is the right thing to do.

Helping with aspiration also means helping those who want to keep their home instead of having to sell it to pay for the costs of social care. That is what our new cap will deliver, as Andrew Dilnot recommended. It will also come in in 2016. It will be set to protect savings above £72,000, and we will raise the threshold for the means test on residential care from just over £23,000 to £118,000 that year too. For decades, politicians have talked of doing something for savers and those who have to sell their homes to pay for care, and yet nothing has been done—until this week.

I want to do much more, for unless we fire up the aspirations of the British people—light the fires of ambition within our nation—we are going to be out-smarted, out-competed and out-performed by others in the world who are prepared to work harder for success than we are. So this Budget makes a new offer to our aspiration nation—and what symbolises that more than the desire to own your own home? Today I can announce Help to Buy. The deposits demanded for a mortgage these days have put home ownership beyond the great majority who cannot turn to their parents for a contribution. That is not just a blow to the most human of aspirations: it is a setback for social mobility, and it has been hard on the construction industry too. This Budget proposes to put that right—and put it right in a dramatic way.

Help to Buy has two components. First, we are going to commit £3.5 billion of capital spending over the next three years to shared equity loans. From the beginning of next month, we will offer an equity loan worth up to 20% of the value of a new build home to anyone looking to move up the housing ladder. You put down a 5% deposit from your savings, and the Government will loan you a further 20%. The loan is interest free for the first five years. It is repaid when the home is sold. Previous help was available only to those who were first-time buyers and who had family incomes below £60,000. Now help is available to all buyers of newly built homes on all incomes: available to anyone looking to get on or move up the housing ladder. The only constraint will be that the home cannot be worth more than £600,000—but this covers well over 90% of all homes. It is a great deal for homebuyers; it is a great support to home builders; and because it is a financial transaction, with the taxpayer making an investment and getting a return, it will not hit our deficit.

The second part of Help to Buy is even bolder and has not been seen before in this country. We are going to help families who want a mortgage for any home they are buying, old or new, but who cannot begin to afford the kind of deposits being demanded today. We will offer a new mortgage guarantee. This will be available to lenders to help them to provide more mortgages to people who cannot afford a big deposit. These guaranteed mortgages will be available to all homeowners, subject to the usual checks on responsible lending. Using the Government’s balance sheet to back these higher loan-to-value mortgages will dramatically increase their availability. We have worked with some of the biggest mortgage lenders to get this right; and we are offering guarantees sufficient to support £130 billion of mortgages. It will be available from the start of 2014 and run for three years. A future Government would need the agreement of the Bank of England’s Financial Policy Committee if they wanted to extend it.

Help to Buy is a dramatic intervention to get our housing market moving. For newly built housing, Government will put up a fifth of the cost; and for anyone who can afford a mortgage but cannot afford a big deposit, our mortgage guarantee will help them to buy their own home. That is a good use of this Government’s fiscal credibility.

In the Budget Book we also set out more plans for housing—plans to build 15,000 more affordable homes; plans to increase fivefold the funds available for building for rent; and plans to extend the right to buy so that more tenants can buy their own home.

People also have the aspiration to keep more of what they earn. That is a difficult aspiration for any Chancellor to help with when economic times are tough and money is short, but we are doing the hard work to reduce current spending. We have set out a tough package to raise money from tax avoiders. That means that with this Budget we can stick to the path of deficit reduction, increase capital spending, and still find ways to help families.

Let me turn to duties. We inherited a fuel duty escalator from the previous Government that would have seen above-inflation increases in every year of this Parliament. We abolished the escalator and we have now frozen fuel duty for two years. This has not been easy. The Government have forgone £6 billion in revenues to date, but oil prices have risen again, family budgets are squeezed, and I hear those who want me to do more to help them get by. My hon. Friend the Member for Harlow (Robert Halfon) has again spoken up for his hard-working constituents. He has been joined by many other hon. Friends, like the hon. Member for Argyll and Bute (Mr Reid). We have all listened to the people we represent. Today I am cancelling this September’s fuel duty increase altogether. Petrol will now be 13p per litre cheaper than if we had not acted over these last two years to freeze fuel duty. For a Vauxhall Astra or a Ford Focus, that is £7 less every time you fill up.

There is another duty escalator that we also inherited from the previous Government—the annual 2% above inflation increase in alcohol. We are looking at plans to stop the biggest discounts of cheap alcohol at retailers, but responsible drinkers in our pubs should not pay the price for the problems caused by others. The sad fact is that we have lost 10,000 pubs in the UK over the past decade. Many hon. Members, such as my hon. Friend the Member for Bristol North West (Charlotte Leslie), have raised their concerns with me, and my hon. Friend the Member for Burton (Andrew Griffiths) in particular has been a committed champion of the famous brewing industry that employs many of his constituents.

I intend to maintain the planned rise for all alcohol duties, with the exception of beer. We will now scrap the beer duty escalator altogether, and instead of the 3p rise in beer duty tax planned for this year by the previous Government I am cancelling it altogether.

That is the freeze people have been campaigning for, but I am going to go one step further and cut beer duty by 1p. We are taking a penny off the pint. The cut will take effect this Sunday night and I expect it to be passed on in full to customers. All other duties will remain as previously announced.

Of course, freezing petrol duty and cutting beer duty will not transform the finances of any family, but it helps a little to have some bills that are not going up. [Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. May I say to Back Benchers and to a couple of Members in particular that the panto season is not for another nine months, and if there are auditions could they take place outside the Chamber?

[Mr Osborne]

It helps a lot to be able to keep more of the money you earn before you pay tax on it. The Government support people who work hard and want to get on.

When we came to office the personal income tax allowance stood at under £6,500. In two weeks’ time, the allowance will reach £9,440, with the largest cash increase in its history. Twenty-four million taxpayers will see their income tax bill cut by an extra £200. More than 2 million of the lowest paid will be taken out of tax altogether.

In this Budget, the Government reconfirm their commitment to raising the personal allowance to £10,000, In fact, we go one better. We said we would raise the personal allowance to £10,000 by the end of the Parliament. Today I can confirm that we will get there next year. From 2014, there will be no income tax at all on the first £10,000 of your salary—£10,000 of tax-free earning. That is £700 less in tax for working families than when this Government came to office. Almost 3 million of the lowest paid will pay no income tax at all. It is a historic achievement for this Government and for hard-working families across the country.

I am aware that the concept of a 10p tax rate has caused problems for Labour Members. First, they introduced it before deciding that introducing it was a mistake and that it ought to be abolished. Then they decided that abolishing it was a mistake and that they ought to introduce it again. To put them out of their misery, we are going to turn their 10p band into a 0p band, so they do not have to worry about it any more. Every person who is paying at the 10p rate that Labour doubled will now pay no income tax at all.

There is one final tax change that I want to tell the House about. It is about jobs. In the end, aspiration is about living in a country where people can get jobs and fulfil their dreams. The ending of contracting out that I talked about generates extra employee national insurance revenues for the Exchequer. I want to put those revenues to good use. I want to support jobs and the small businesses that create them, and I want to do it with a reforming tax cut. In fact, it is the largest tax cut in this Budget.

The cost of employing people is a burden on small firms. It is a real barrier to taking an extra person on. To help create jobs and back small businesses in this country, I am today creating the employment allowance. The employment allowance will work by taking the first £2,000 off the employer national insurance bill of every company. It is a tax off jobs. It is worth up to £2,000 to every business in the country. It will mean that 450,000 small businesses—one third of all employers in the country—will pay no jobs tax at all.

For the person who has set up their own business and is thinking about taking on their first employee, a huge barrier will be removed. They can hire someone on £22,000, or four people on the minimum wage, and pay no jobs tax. Ninety-eight per cent. of the benefit of this employment allowance will go to small and medium-sized enterprises. It will become available in April next year, once the legislation has passed. We will also make it available to charities and community sports clubs. The previous Government’s answer to Britain’s economic problems was to propose a tax on jobs. We stopped that and today this Government are taking tax off jobs.

A new employment allowance that helps small firms, a 20% rate of corporation tax and a £10,000 personal allowance are major achievements delivered by this Government in difficult times.

We understand that the way to restore our economic prosperity is to energise the aspirations of the British people. If you want to own your own home, if you want help with your child care bills, if you want to start your own business or give someone a job, if you want to save for your retirement and leave your home to your children, and if you want to work hard and get on, we are on your side. This is a Budget that does not duck our nation’s problems; it confronts them head on. It is a Budget for an aspiration nation. It is a Budget that wants to be prosperous, solvent and free, and I commend it to the House. [Interruption.]

[Mr Deputy Speaker]

Order. If Members want to debate the Budget, we had better make some progress.

Provisional Collection of Taxes

Wednesday 20th March 2013 Commons Chamber

Motion made, and Question put forthwith (Standing Order No. 51(2)),

That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:—

(a) Alcoholic liquor duties (rates) (Motion No. 50.)

(b) Tobacco products duty (rates) (Motion No. 51.)—(Mr George Osborne.)

Question agreed to.

[Sir Bob Russell (Colchester) (LD)]

Let’s all have a drink.

[Mr Deputy Speaker]

Only if you’re buying.

I now call upon the Chancellor of the Exchequer to move the motion entitled “Amendment of the Law”. It is on this motion that the debate will take place today and on the succeeding days. The remaining motions will be put at the end of the Budget debate next week.

Budget Resolutions and Economic Situation

Wednesday 20th March 2013 Commons Chamber

Amendment of the Law

Motion made, and Question proposed,

That,—

(1) It is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.

(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

(a) for zero-rating or exempting a supply, acquisition or importation;

(b) for refunding an amount of tax;

(c) for any relief, other than a relief that—

(i) so far as it is applicable to goods, applies to goods of every description, and

(ii) so far as it is applicable to services, applies to services of every description.—(Mr George Osborne.)

13:30

[Edward Miliband (Doncaster North) (Lab)]

This is the Chancellor’s fourth Budget, but one thing unites them all: every Budget, when he comes to this House, things are worse, not better, for this country. Compared to last year’s Budget, growth last year is down, growth this year is down, growth next year is down and growth in 2015 is down. And all he offers is more of the same: higher borrowing, lower growth and more—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I expected the Chancellor to be heard and I expect the Leader of the Opposition to be given the same courtesy.

[Edward Miliband]

Government Members do not think that growth matters, but people in this country do.

All the Chancellor offers is more of the same. It is a more-of-the-same Budget from a downgraded Chancellor. Britain deserves better than this.

The Chancellor almost need not have bothered coming to the House, because the whole Budget, including the market-sensitive fiscal forecasts, was in the Standard before he rose to his feet.

[Hon. Members]

Resign!

[Mr Deputy Speaker]

Order. I cannot understand an Opposition who do not want to hear their own leader. [Interruption.] Order. Just as when the Opposition did not want to hear the Chancellor, the one thing that I can guarantee is that people in this country want to hear what the right hon. Gentleman has to say.

[Edward Miliband]

To be fair to the Chancellor of the Exchequer, I am sure that he did not intend the whole of the Budget to be in the Standard before he rose to his feet. I hope that he will investigate and report back to the House.

What did the Prime Minister declare late last year? He said

“the good news will keep coming.”—[Official Report, 24 October 2012; Vol. 551, c. 917.]

What did the Chancellor tell us today? Under this Government, the bad news just does not stop. Back in June 2010, he promised in his Budget a “steady and sustained” recovery. He was wrong. We have had the slowest recovery for 100 years. Last year, he said in the Budget that there would be no double-dip recession. He was wrong; there was. He told us a year ago that growth would be 2%. He was wrong; now he says that it will be just 0.6%. He told us that next year, growth will be 2.7%. Wrong again; it will be just 1.8%.

“Wait for tomorrow,” the Chancellor says, “and I will be vindicated.” But with this Chancellor, tomorrow never comes. He is the wrong man in the wrong place at the worst possible time for the country. It is a downgraded Budget from a downgraded Chancellor. He has secured one upgrade this year: travelling first class on a second-class ticket from Crewe to London. [Interruption.]

[Mr Deputy Speaker]

Order. I do not want to keep repeating myself. I expect, and the public expect, to hear the Leader of the Opposition. Government Members must also listen to the Leader of the Opposition.

[Edward Miliband]

The only time when the country has felt all in it together is when the Chancellor was booed by 80,000 people at the Paralympic games. I have some advice for the Chancellor: stay away from the cup final, even if Chelsea get there.

Who is paying the price for the Chancellor’s failure? Britain’s families. In his first Budget, he predicted that living standards would rise over the Parliament, but wages are flat, prices are rising and Britain’s families are squeezed. What the Chancellor did not tell us is that the Office for Budget Responsibility has already confirmed that the British people will be worse off in 2015 than they were in 2010. It’s official: you’re worse off under the Tories. Worse off, year after year after year.

Was there not an extraordinary omission from the Chancellor’s speech? There was no mention of the triple A rating. The Prime Minister called it the “mark of trust” and told us that it had been “secured”. The Chancellor said that it would be a humiliation for Britain to be downgraded. So he is not just a downgraded Chancellor, but a humiliated Chancellor too.

What about borrowing? The Chancellor made the extraordinary claim in his Budget speech that he was “on course”. Even he cannot believe this nonsense. Debt will be higher in every year of this Parliament than he forecast at the last Budget. He is going to borrow £200 billion more than he planned.

What did the Chancellor say in his June 2010 Budget? He set two very clear benchmarks:

“we are on track to have debt falling and a balanced structural current budget by”

2014-15.—[Official Report, 22 June 2010; Vol. 512, c. 168.] He called that “our four-year plan”. This was the deal that he offered the British people. These were the terms: four years of pain, tax rises—[Interruption.] The Prime Minister says from a sedentary position, “Borrow more.” He is borrowing more. He just needs to look down the Bench, because his own Business Secretary said that they are borrowing more. I would keep quiet if I was him.

These were the terms: four years of pain, tax rises and spending cuts, and the public finances would be sorted. So today, the Chancellor should have been telling us, “Just one more year of sacrifice. In 12 months the good times will roll. Job done. Mission accomplished. Election plan under way.” But three years on, what does he say? Exactly what he said three years ago. We still need four more years of pain, tax rises and spending cuts. In other words, after all the misery, all the harsh medicine and all the suffering by the British people—three years, no progress, deal broken, same old Tories. And all the Chancellor offers is more of the same.

It is as if the Government really do believe their own propaganda that the failure is nothing to do with them. We have heard all the excuses: the snow, the royal wedding, the jubilee, the eurozone. Now, they are turning on each other. The Prime Minister said last weekend:

“Let the message go out from this hall and this party: we are here to fight.”

They are certainly doing that. The Business Secretary has turned on the Chancellor, the Home Secretary has turned on the Prime Minister and the Education Secretary has turned on her. The whole country can see what is going on: the blame game has begun in the Cabinet.

The truth is that the Chancellor is lashed to the mast. Not because of his judgment, but because of pride; not because of the facts, but because of ideology. Why does he stay in his job? Not because the country wants him, not because his party wants him, but because he is the Prime Minister’s last line of defence. The Bullingdon boys really are both in it together. They do not understand that we need a recovery made by the many, not just a few at the top.

It is a year now since the omnishambles Budget. We have had U-turns on charities, churches, caravans and, yes, on pasties. But what is the one policy that the Government are absolutely committed to? The top rate tax cut. John the banker—remember him?—has had a tough year earning £1 million. What does he get? He gets a tax cut of £42,500 next year—double the average wage. His colleague—let us call him George—has done a little better and brings home £5 million a year. What does he get as a tax cut? I know that the Prime Minister does not like to hear what he agreed to. He gets a tax cut of nearly £250,000.

At the same time, everyone else is paying the price. The Chancellor is giving with one hand and taking far more away with the other. Hard-working families are hit by the strivers tax. Pensioners are hit by the granny tax. Disabled people are hit by the bedroom tax. Millions pay more so that millionaires can pay less.

The Chancellor mentioned child care in his speech. He wants a round of applause for cutting £7 billion in help for families in this Parliament and offering £700 million of help in the next. What are the families who are waiting for that child care help told? They have to wait more than two years for the help to arrive, but the richest in society need to wait only two weeks for the millionaires’ tax cut to kick in. That is David Cameron’s Britain.

Of course, the Prime Minister still refuses to tell us, despite repeated questions, whether he is getting the 50p tax cut. He is getting embarrassed now, we can see. He has had a year to think about it and he must have done the maths. Even he should have worked it out by now, so come on. Nod your head if you are getting the 50p tax rate—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The House must come to order. Let us hear the Leader of the Opposition.

[Edward Miliband]

I am not getting the 50p tax rate; I am asking whether the Prime Minister is. He should answer—after all, he is the person who said that sunlight is the best disinfectant. Let transparency win the day.

Let us try something else. What about the rest of the Cabinet? Are they getting the 50p rate? Okay, hands up if you’re not getting the 50p tax cut. Come on—[Interruption.]

[Mr Deputy Speaker]

Order. We are all right; as some hon. Members want to take a cup of tea, we might be a little more silent.

[Edward Miliband]

I was just asking those in the Cabinet to put their hands up if they are not getting the 50p tax cut. They do not like it, do they? At last, the Cabinet are united with a simple message: “Thanks, George.” He is cutting taxes for them while raising them for everyone else.

The Chancellor announced some measures today that he said would boost growth, just like he does every year—and every year, they fail. I could mention the national loan guarantee scheme that he trumpeted last year—

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

Rubbish!

[Mr Deputy Speaker]

Order. Mr Mosley, I think your voice might be better saved for Chester FC this weekend. As they are top of the league, I think you would be better off cheering them on.

[Edward Miliband]

The Chancellor trumpeted the loan guarantee scheme, then he abolished it just four months later. There was the funding for lending scheme, which he said would transform the prospects for small businesses, and the Work programme, which is worse than doing nothing.

Today, the Chancellor talked a lot about housing. When the Prime Minister launched his so-called housing strategy in 2011, in his own understated way he labelled it

“a radical and unashamedly ambitious strategy”.

He said it would give the housing industry a “shot in the arm” and help 100,000 people to buy their own homes. Eighteen months later, how many families have been helped? Not 100,000. Not even 10,000. Just 1,500 out of the promised 100,000. That is 98,500 broken promises. For all the launches, strategies and plans, housing completions are now at their lowest level since the 1920s and 130,000 jobs have been lost in construction. It is a failing economic plan from a failing Chancellor.

The Chancellor has failed the tests of the British people—growth, living standards and hope—but he has not just failed their tests. He has failed his own as well. All he has to offer is this more-of-the-same Budget. Today, the Chancellor joined Twitter. He could have got it all into 140 characters: “Growth down. Borrowing up. Families hit. And millionaires laughing all the way to the bank. #downgradedChancellor.”

More of the same is not the answer to the problems of the last three years. More of the same is the answer of a downgraded Chancellor in a downgraded Government. Britain deserves better than this.

[Several hon. Members]

rose—

[Mr Deputy Speaker]

Order. I remind hon. Members that there is a 10-minute limit on speeches.

13:44

[Mr Andrew Tyrie (Chichester) (Con)]

Before I start my speech I shall give colleagues an opportunity to get to their lunches. The slot while they are shuffling out seems always to fall to me.

There is a lot more to digest in this Budget than many—not least those people sitting in the Chamber this afternoon and around the country—thought there would be. The Treasury Committee will have a great deal to consider, particularly the changes to the inflation remit, the employment allowance and the policies on housing and corporation tax.

For many years, and certainly since 2008, Britain has been living beyond its means and the Chancellor’s most immediate priority has been and should have been to sort that out. An equally important task has been to find ways to improve the long-run performance of the economy and supply-side reform.

Ultimately, politicians can do little more than create the conditions that release the energy of others. The future of the economy will depend on the millions of people in small businesses in our constituencies and on our releasing their energies.

[Robert Halfon (Harlow) (Con)]

Does my hon. Friend agree that this is a cost of living Budget, freezing fuel duty, cutting beer taxes, helping people with child care costs and raising the threshold for lower earners?

[Mr Tyrie]

Yes. My hon. Friend did not mention fuel duty, which rather surprised me—[Interruption.] Oh, he did? I am terribly sorry, I thought he missed it out. I shall discuss energy in a moment, if I get a chance.

Let me say a few more words about the macro decisions before I move on to the supply side.

[Dr Julian Huppert (Cambridge) (LD)]

When I was leader of the opposition on Cambridgeshire county council we had an approach of presenting an alternative budget so that it could be scrutinised by the scrutiny committees and select committees. That approach is carried on by Councillor Kilian Bourke, the current leader. Does the hon. Gentleman agree that it would be helpful if there were an alternative Budget for him and his Committee to consider in order to check whether it all added up?

[Mr Tyrie]

If anybody wants to produce one, we will certainly take a look at it.

The Chancellor has not fundamentally altered the macro-economic stance in this Budget. The big shift in direction of Britain’s fiscal policy in response to the crisis came not from this Chancellor but from his predecessor. More than two thirds of the fiscal adjustment announced by the Chancellor in the 2010 Budget had already been signalled by the right hon. Member for Edinburgh South West (Mr Darling). In 2010, the OBR estimated that the economy would grow about 4% more than it has and the key question for the Chancellor has been how much policy should be altered to take account of that—what he should announce this afternoon and what adjustments he should make in response.

It is important to be clear that policy has already been altered a great deal, something that seems to be lost in the brouhaha in this place. Both the Government and the Bank of England have implemented massive policy changes to stimulate the economy. Fiscal policy has been loosened a great deal. The so-called automatic stabilisers—the falls in tax receipts and rises in public expenditure that come with lower growth—have been allowed to kick in. No one knows their full value, but I note that the Institute for Fiscal Studies used to think that they were worth about £100 billion and said yesterday that they were worth £140 billion. No one knows the full effects of QE—quantitative easing—either, but we know that since 2010 £175 billion of QE has been pumped in, bringing the total to £375 billion in all.

Both QE and automatic stabilisers are delivering colossal extra sums to the economy—they are massive policy changes—and the Chancellor has exercised great flexibility in response to the downturn. He does not always seem happy to acknowledge the fact that there has been that huge adjustment, so I thought I would put the points myself after his speech.

I want to say a few words about growth and the supply side, but before I do I want to refer to the greatest single blight on the prospects for the economy, which is the eurozone. Eurozone demand has remained very weak, as the Chancellor pointed out. There could not be a more vivid illustration of the eurozone’s capacity for self-harm than its chronic mishandling of the Cypriot financial crisis over the past few days. What on earth possessed policy makers to play with fire by doing the very things most likely to trigger a run on the banks? I just do not know, but it beggars belief. We cannot influence policy in the eurozone directly, but we can—and should—speak truth to incompetence. That is in Britain’s interest, as well as that of the eurozone, and I urge the Government to do that and ignore what will undoubtedly be bleatings from the Foreign Office asking them to desist.

On the supply side we cannot, of course, do much about the eurozone, but we can do something to improve the micro-economy. For nearly three years, the Treasury Committee has been calling for more coherent and tougher supply-side reforms. The Chancellor has had such an agenda for at least 18 months, but implementing it in a consistent way is proving difficult. The Chancellor has done what he can on tax reform and simplification—a big ask given the lack of fiscal room—and I pay tribute to him today because he has managed a substantial cut in corporation tax and its simplification in one go. That is both simplification and reduction, despite the lack of fiscal room.

[Andrea Leadsom (South Northamptonshire) (Con)]

rose—

[Mr Tyrie]

I will give way one last time.

[Andrea Leadsom]

Does my hon. Friend agree that that simplification makes it much easier for the Chancellor to generate tax and ensure that people pay it so that we do not get the fiddling about at the margins that we saw in the past under the previous Government’s policies?

[Mr Tyrie]

I will not add any comments because I do not get any more injury time after a couple of interventions, but I agree with my hon. Friend.

Reforms are going ahead in the labour market, and quite big reforms are being pushed through on the planning side. That is controversial but, I think, necessary. However, I have been arguing for some time that we must concentrate on those areas where policy is pulling in conflicting directions. The agenda might be right, but the execution is not always right:

“There has to be a drive to make the UK competitive in motorcars and engineering...we are saddled by a high cost of energy”

compared with our counterparts in Europe, and certainly in Asia. UK environmental policies are causing “dangerous distortions” to energy prices. Those are not my words but those of Tata Steel’s head of European business operations.

According to Government figures, energy prices for the average business consumer have more than doubled since 2004. Those figures also show that in 2011, almost one fifth of a medium-sized business user’s bills were due to climate change policies. Britain is going it alone with many of those policies, for example by introducing a carbon floor. That unilateralism is rendering parts of our manufacturing industry increasingly uncompetitive, and we are exporting jobs in manufacturing right now.

The Chancellor is well aware of that and has announced an important tax allowance to support the development of indigenous shale deposits. That will certainly help to level the playing field. We really need, however—this is difficult for the Government, not least a coalition Government—to address the contradiction caused by the current high subsidies to renewables. Those subsidies are so high that today the Chancellor has been forced to introduce subsidies for shale gas, just to get it going. As the American experience has shown, shale gas can be highly competitive given a balanced renewables policy. American natural gas prices have dropped by more than two thirds since 2008, which must be a reason—perhaps a major reason—why US manufacturing is doing much better than in recent years.

I also have reservations about aspects of the infrastructure policy. I strongly welcome the extra money being put in, but I wonder whether we are right to put what will amount to at least £34 billion into HS2—which, at best, is carrying a doubtful economic return—but not building much-needed extra capacity for a London airport. We must get to the point where airport capacity in London can be allowed to grow.

I will conclude by discussing briefly the other big obstacle to growth: the dysfunctionality of the banking sector. Again, that is something we can control—unlike the eurozone—although it is difficult for the Government to get to grips with. Britain’s economic recovery will depend to a large extent on a return to growth in the small business sector, and I strongly welcome the crucial measures announced today by the Chancellor to help the small business sector, but the plain fact remains that small and medium-sized businesses in our constituencies cannot get the funding they need from the banks. Banks lack the confidence to lend to them, and businesses lack the confidence to borrow from banks on the terms offered. The SME sector cannot fully recover until the partly state-owned banks return to more normal lending behaviour, and until we introduce greater competition into an over-concentrated market.

The Banking Commission, which I chair, has heard a good deal of evidence in recent months to suggest that until more of the impairments on bank balance sheets are cleaned up—in other words, until those balance sheets are in much better order—banks simply will not return to normal lending. Without that normal lending, SMEs will not recover. How to address that issue during this crisis has been one of the abiding concerns for policy makers, and a matter that the Banking Commission has considered carefully over the past few months. We have given a great deal of thought to the issue, and will be making some proposals in May.

I began by talking about SMEs, and I will end my contribution with that thought. When small businesses have the confidence to borrow and invest, and when banks have the financial strength and competitive need to do so, that is when our economy will recover and that recovery will take root.

13:56

[Mr John Denham (Southampton, Itchen) (Lab)]

It is a great pleasure to follow the Chair of the Treasury Committee.

There must have been at least some Government Members who, however much they wanted to cheer publicly, were wondering privately why no progress has been made in the past three years, and why so much of the promise, as set out by the coalition Government, has failed to achieve what they thought it was going to achieve. I have no doubt that three years ago the Chancellor, the Prime Minister and other members of the Cabinet believed that the measures they were planning were going to work. If we are to understand why we have made no progress, despite the fall in the living standards of an average family of £1,200 a year and the loss of public services, we must look not only at the statistics, but understand why things have gone so badly wrong.

[Steve Rotheram (Liverpool, Walton) (Lab)]

Does my right hon. Friend agree that the Chancellor is becoming the Baldrick of British politics? He thinks he has got a cunning plan, but everybody else can see that it is doomed to failure.

[Mr Denham]

There were certainly points in the Chancellor’s speech when he seemed to be living in a completely different world from the one in which I am living. For example, he made a throwaway remark that reforms to the planning system mean that houses are being built, yet there were fewer housing starts last year than at any time over the past few years. It is nonsense to claim something that is patently untrue, which brings me to my central point about the danger in politics and government of believing one’s own rhetoric.

[Paul Farrelly (Newcastle-under-Lyme) (Lab)]

Will my right hon. Friend give way?

[Mr Denham]

No, because I need to make some progress. In 2010 when the Conservative and Liberal Democrats got together, they agreed on a political strategy that was to blame everything on the previous Labour Government—it was to be their profligacy, their debt and their fault. Never mind that all parties had agreed on Labour’s spending plans right up to the banking crisis; never mind that the banking crisis was global and not national; and never mind that, although the failure of the banks owed a lot to failures in regulation, the Conservative party had consistently called for less regulation. Those facts were not going to get in the way of a clear political strategy of blaming it all on Labour. The political strategy has had some effect—the polls, which people such as Lord Ashcroft tell us are the only glimmer of hope the Conservatives have, tell us that—but the disastrous mistake for Britain is that the Government believe their own rhetoric. They believe that, because the strategy seems to be effective politically, it means it is true and that they should act as though it is true. That is what lies behind the disaster facing the British people.

[Sheila Gilmore (Edinburgh East) (Lab)]

Will my right hon. Friend give way?

[Mr Denham]

No—I would like to make progress.

If the rhetoric were true, the policies pursued by the Government would have worked. If it had been true that all that needed to be done was to get the deficit down as quickly as possible because the problems were simply a matter of overspending, the strategy would have worked. The strategy did not work, because the analysis of what was wrong was fundamentally flawed.

In the first year of the Government, the rhetoric of doom and gloom shattered business and consumer confidence before the first tax increase or the first cut began to bite. It was so important to the Government politically to tell everybody how bad things were going to be that people behaved accordingly. The VAT increase and the cuts then began to bite in the real world. The pessimism deliberately spread by the Government for political reasons began to bite and have an effect—a real reduction in demand.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

The House has great respect for the right hon. Gentleman, but he must remember the situation Europe was in on the date the coalition was formed, the crisis in Greece, and the fears that we would not be in a good position. Some of us have always made it clear that a combination of the outgoing Government, the banks and the international financial situation was the cause of the crisis and warned against it for many years.

[Mr Denham]

I am tempted merely to say, “I rest my case.” Throughout the 2010 election campaign, the right hon. Gentleman and all members of the Liberal Democrats said how disastrous it would be to adopt the policies that they later supported. He makes precisely my point. He adopted a position that was absolutely factually wrong and damaging to the country for the political convenience and advantage of the Liberal Democrats—he sanctioned with his own words what happened later.

The Government’s strategy on cutting too far and too fast was bad enough—it shattered confidence and took demand out of the economy—but it was compounded by catastrophic failures in policy. Because the Government convinced themselves that the only thing that needed to be done was cutting the deficit fast, they abandoned many of the tools available to them to stimulate growth. It was interesting today to hear of a single pot for cities to bid for from the Government who, within two months of coming to office, abolished the regional development agencies and the whole development infrastructure. They recognise, three years later, that that was a disastrous mistake, as Lord Heseltine has told them, but at the time, they did not believe that getting rid of those strategies mattered.

The Government also created massive uncertainty in the wider economy. The truth is that there is no absolute shortage of money that could be used to rebuild the British economy. The cash balances of giant companies are huge, but they will not invest, because there is so little business confidence in Britain as a place for investment.

The responsibility for that goes much wider than the Government, because Conservative and Liberal Democrat Back Benchers have spent three years creating uncertainty about wind power, nuclear power, HS2 and the future of airports policy. For everywhere that business might look to invest in this country, Conservative and Liberal Democrat MPs have, for the narrowest of marginal constituency political interests, conspired to create the maximum business uncertainty. It is therefore unfair to blame all the uncertainty on the Chancellor’s misguided policies. Much of it comes from a misunderstanding by Conservatives and Liberal Democrats of what needs to be done—long-term investment and long-term certainty in Government policy to create investment.

For example, such uncertainty is why investment in renewable energy—the Chancellor mentioned green investment—halved between 2009 and 2011. That is a conscious, clear effect of chaos in Government policy and the narrow interests of Conservatives and Liberal Democrat Back Benchers. For all those reasons, unnecessary damage has been done to investment in our economy.

[Caroline Lucas (Brighton, Pavilion) (Green)]

Will the right hon. Gentleman give way?

[Mr Denham]

I will not give way because my speech is time limited—I would give way if I had more time.

The Chancellor did not mention a number of things in his speech. For example, he did not mention the march of the makers. Whatever happened to that and our desire to build up an advanced manufacturing industry to lead the way in exports? Perhaps the march of the makers was in an early draft of the Budget speech, but last month’s worst industrial output figures for 20 years probably put paid to the idea of mentioning it today.

There are areas of success—the Government have wisely continued the Labour Government’s policies for the motor industry and reaped the rewards for the country as a whole—but, in too many areas, there has been no coherent policy. In my part of the country, the leisure boat industry, including well known global companies such as Sunseeker and Oyster Yachts and many smaller manufacturers, is a small but world-leading industry. To foster such an industry, we need coherence in Government policy, but what do we find? We find that the banks are not lending coherently as they once did to businesses in the luxury yacht and leisure boat industry; that it is hard for dealers to get finance to trade up and down in the second-hand vessels that need to be sold; and that the Home Office makes it impossible for wealthy buyers from Russia, China or elsewhere to get into the country to see the boats on sale at our boat shows. There is a complete lack of interest in vast parts of the Government in successful strategies to promote successful parts of the economy.

My final point is to agree broadly with the Chancellor on one point. He said that

“unless we fire up the aspirations of the British people…we are going to be out-smarted, out-competed and out-performed by others in the world who are prepared to work harder for success than we are.”

I agree with him in this sense: a country in a disastrous economic position such as ours will recover only if there is a shared patriotic commitment to rebuilding our country, and a shared case in which everybody in the country feels that they have a stake and a role, and that they will benefit from success. That is why the millionaires’ tax cut and other divisive policies that have been pursued against the poorest in our country are so damaging. Those policies are not only socially unfair and morally reprehensible, but because they divide our country and make it clear that there is no common cause and nothing to be gained from pulling together, they undermine the effort needed to build a one nation economy that genuinely works for all people in this country.

That is the problem once again. The political rhetoric cannot be faulted, but the policies needed are entirely missing.

14:10

[Mr Andrew Mitchell (Sutton Coldfield) (Con)]

It is perhaps not surprising that as a former Chief Whip, albeit one of relatively short duration, I rise to support the Budget set out by the Chancellor of the Exchequer, but that is what I do.

It is a considerable tribute to the strength of the Government’s purpose that the measures the Chancellor has announced today will be enacted. The Budget takes place against an extraordinarily difficult background. I cannot remember, in 26 years on and off in this House, a more difficult set of circumstances in which a Chancellor has had to craft the Budget, nor such a heavy volume of advice across all media, much of which has been contradictory. The article in last Saturday’s Financial Times by Terry Leahy, which set out the case for the morality of low taxation, is well worth reading and sets out an argument that we do not hear often enough in this House. The article was blessed with a cartoon that showed the Chancellor in a trench surrounded by mud, blood and barbed wire, and wearing a tin hit. He may well feel, after the past few days, that that is not a bad summation of where he stands.

[Sheila Gilmore]

Does the right hon. Gentleman really think that that is a good image with which to portray his Chancellor, since the squaddies were in the trenches and the first world war generals kept sending them out to be killed? Surely that is not an image that the right hon. Gentleman wants to portray.

[Mr Mitchell]

That was not my image, but the image in the Financial Times. Nor was it of a general, but of a soldier serving in the trenches.

Hemmed in as the Chancellor is, he steers between the Scylla of debt that must be paid down and the Charybdis of growth that must be fought for and secured. I believe that today he has made the right decision in the long-term interests of the country, and I want to focus on those two key issues in my brief remarks.

In terms of the Charybdis of growth, I think he has picked up on the excellent work done by Lord Heseltine, particularly in its reference to Birmingham, and on what we can do in local economies to ensure that growth is boosted.

[Paul Farrelly]

Today, the Chancellor announced an extra £3 billion of annual public sector investment, but in the 2010 spending review public sector investment was cut by £9 billion a year. Does the right hon. Gentleman agree that in hindsight the Business Secretary was right and that those drastic, immediate cuts were a mistake?

[Mr Mitchell]

I do not agree at all, and I will come on to address the substantial part of what the Business Secretary said in a moment.

I was talking about the importance of engendering growth in the economy through local activity, and mentioned specifically the work that Lord Heseltine has done in respect of Birmingham. He underlined the importance of the local enterprise partnership and the importance of stimulating growth in an area that remains at the heart of this country’s industrial base. I am reminded that it was only three years ago that I visited the Jaguar factory just outside my constituency in Castle Bromwich. At that stage, two of the three production lines were lying idle and employees were unable to continue to secure work. Now, just three years later, all three production lines are in operation. We see a company that is storming ahead and cannot produce enough cars to satisfy market demand. Last year, it exported more than £10 billion-worth of cars made in Britain and paid in to the Exchequer more than £1 billion of taxation. That real transformation offers hope at a very difficult time in the area of the country I represent. The announcement that we will have a single pot of central money to support local initiatives is enormously important, as is the emphasis that Lord Heseltine places on more effective governance to address the fragmentation and lack of coherence of the business voice, which he has been loud in commenting on.

On the stimulation of growth nationally, today we have heard the Chancellor announce the excellent news about cutting taxes on jobs. I can think of few measures that could be more effective. Prioritising the changes that make growth easier, cutting business taxes—not easy, and not the popular thing to do—and facing down the vested interests that the Chancellor has to wrestle with every day, are all important measures if we are to ensure that growth is supported nationally. Making life easier for entrepreneurs and businessmen is not the route to easy popularity, but it is the route to long-term economic success and growth.

The way the Government have sought, with single-minded emphasis, to boost trade with the BRICs—Brazil, Russia, India and China—and the other countries with growing economies has had a significant effect. I wonder whether my right hon. and hon. Friends on the Treasury Bench think that all the lessons from around the world on how to boost growth and entrepreneurialism have been learned. Encouraging entrepreneurship, improving links between schools and business, and making sure that all the lessons from these emerging markets are learned are all very important. For example, I wonder whether there is more to learn from Singapore, Sweden, Finland and the Netherlands, which consistently top the global competitiveness report issued by the World Economic Forum. I wonder whether the lessons from New Zealand, Denmark and Canada, which are consistently identified as the best countries in which to do business, have been learned, or whether there is more that we can learn from the Nordic and Asian economies that have been so successful in harnessing information and communications technology for economic growth. The Chancellor deserves great credit for the brave steps he has taken today to secure growth.

The Scylla of debt has hung around our neck, and hangs around the economy’s neck, for the reasons that are well known across the House. Anyone who doubts its scale and the anxiety it causes, as my hon. Friend the Member for Chichester (Mr Tyrie) set out, needs only to look at the absurd proposition, coming out of the crisis in Cyprus, that one can confiscate arbitrarily people’s deposits. That underlines the extraordinary difficulties that overweening levels of debt, which we and other countries face, cause.

It is irksome to repeat so regularly the irresponsibility of the previous Government in the levels of debt they left and the measures they took during the good times, but that needs to be repeated so that people understand the sheer scale of what happened. I remember studying the papers on the National Security Council when we were conducting the defence review, and noting that there was, allegedly, from the previous Government a £38 billion black hole in their accounts. I was unable to believe that that was possible and sent back the papers on the assumption that there was a decimal point in the wrong place. But no, it was confirmed on the Monday morning that there was indeed, under the previous Labour Government, a £38 billion black hole in the defence budget. We should never allow them to forget the appalling difficulties that their stewardship of the economy and their legacy have left for the coalition to clean up.

[Penny Mordaunt (Portsmouth North) (Con)]

Will my right hon. Friend give way?

[Mr Mitchell]

I am afraid that I will be out of time, if my hon. Friend will forgive me.

It is difficult to confront the welfare budget, as the Government have done. We still spend £23 billion on housing benefit. In looking at the welfare budget, which I urge my right hon. and hon. Friends to continue to do, they should of course be guided always by the principles of fairness and decency. It is enormously difficult to cut the welfare budget. People blithely say that we can cut £1 billion off the welfare budget, as that is just 0.5% of that budget. However, cutting £1 billion would take £1,000 off 1 million people, or £100 off 10 million people. That underlines the scale and the difficulty, and the essential need to tackle welfare budget commitments, curtail expectations, and determine the sort of welfare system we will have as a society in the next 30 or 50 years and that we can afford. It is essential that our reforms do that.

In conclusion, I wish to praise the Government and the Chancellor’s courage and wisdom in continuing the international development budget and ensuring that next year we meet our historic pledge of spending 0.7% of GDP on development. Of course, the special protection for this budget is justified only by the results it achieves and the effect it has, and we should never forget that this hard-earned taxpayers’ money has to be justified. Every pound we take off the taxpayer must deliver 100p of value on the ground. This is a huge investment in our country’s future prosperity and security and in the prosperity and security of our children and grandchildren, which is why the Government are absolutely right to stand by the commitment, ensuring that the coalition delivers on that historic pledge.

I have spent much of the past eight years of my life trying to work out the most effective use of public money and the most effective way of doing something about the colossal discrepancies in opportunity and wealth that scar our world and that our generations, for the first time ever, have a real chance to address. That is why I am pleased that the Government are standing by our commitment, that every day they continue to underline the effectiveness of development and that they are maintaining the implicit bargain with the public to spend the money well. I hope to hear far more from Ministers about why the development budget matters to our country. I want to hear all of them making that case, so that the sceptics outside can hear why it is important for our country’s economic and political future.

14:21

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

In a spirit of agreement, I endorse the final comments from the right hon. Member for Sutton Coldfield (Mr Mitchell) about the preservation of our aid budget, which has support across the House, and about how every pound of taxpayers’ money should be spent efficiently and effectively to deliver for our constituents. I fear, however, that that might be where the agreement ends.

The Budget was not only disappointing but unsurprising, given that, as my right hon. Friend the Member for Doncaster North (Edward Miliband) said, it was leaked to the newspapers in unprecedented detail. I want to concentrate, however, on three issues key to my constituency and, I believe, the future of our country and families and households throughout the land: child care, lending for business, and housing.

First, the Government—the same Government who removed child benefits from those earning more than £50,000 a year, reduced tax credits and watered down child care by increasing children-to-carers ratios—are offering a giveaway: £1,200 per child, per year off child care costs, but that is two and a half years away. It is jam tomorrow for parents up and down the country who have been feeling the pain for months and years.

[Jessica Morden (Newport East) (Lab)]

My hon. Friend is making the valid point that the Prime Minister has just taken child benefit from parents who are already struggling to pay massive child care costs and who now learn that the Government will not be softening the blow until their children are in school. Does she not think we ought to be doing much more now?

[Meg Hillier]

I completely agree with my hon. Friend. It is tough being a parent, especially in the early years up to age five, so although any support is welcome—all parties have to welcome any support, however inadequate, for children—this is not the sort of thing Labour should be promising at the next election. It is vital that we get cross-party agreement about the importance of families and of parents getting into work.

There is still no promise on the supply of quality child care, however. Supply is a key issue. The Under-Secretary of State for Education, the hon. Member for Crewe and Nantwich (Mr Timpson), who has responsibility for children, has been tinkering, finger in the wind, hoping for more child minders but not more child care in child care settings. There are important and detailed questions that I hope Ministers will consider and that I will follow up for a proper response. Will the child care tax break only apply to Ofsted-regulated child care? If so, how does that chime with the children’s Minister’s desire for lighter-touch, or no-touch, regulation by that very important body? Does the £2,000 national insurance break for small businesses also apply to anyone employing child care directly, as well as the promised tax break? We could see a double subsidy for the higher income earner, who can afford to employ a child carer in their home, and much less help for those at the lower end of the scale.

When only one parent is working, much more difficult issues arise. Low-income parents have higher marginal costs. I think of two women I met at a recent roundtable I organised in one of my child care centres: one was a chef who, because of her working hours, found it much harder to access the sort of child care that would get the subsidy the Government have waved in front of us today; and the other was herself a child carer working for a private nursery on £15,000 a year who could not afford to pay for child care herself and whose employer, shockingly, would not allow her to work part-time. How will those women be helped by what the Government have offered today? We need more detail and to ensure that we make this work for working parents. In a spirit of co-operation, I want it to work—I am not just carping—but I do not see how the proposals will work as planned.

I turn now to lending for businesses. I am proud to represent Shoreditch. It is a borough of thriving small businesses, but there are issues with lending. Merlin’s magic wand has not delivered loans from local banks. The reduction in loan interest has not helped businesses, which tell me that one of their big worries is banks removing overdrafts at a moment’s notice. I want to see—I am disappointed that the Budget did not touch on this—better support for peer-to-peer lending to help interesting nascent businesses.

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

Does my hon. Friend agree that, given the failure of the funding for lending scheme to get money into small businesses via the main clearing banks, which appear to be using it to reinforce their capital position, the Government should consider using the scheme to help other sources of financing for small businesses?

[Meg Hillier]

My hon. Friend, who does good work on the Business, Innovation and Skills Committee, speaks clearly on this issue. It is vital that we do what he suggests. The funding for lending scheme has effectively been supporting more buy-to-let landlords, which was not really what it was intended for, while businesses in Shoreditch—businesses visited regularly by the occupants of No. 10 and No. 11 Downing street—are losing out.

It is interesting that the Labour Front-Bench team, even in opposition, are encouraging local government to consider investing in one of the peer-to-peer lending vehicles, Funding Circle, representing an important part of the difference in ethos between the Government and the Opposition. We want local money invested in local business and creating local jobs—a break from the distant lenders that have no connection to the business models and economies to which they lend. We cannot say that the banks have stood up well to the test. They have let the side down. They overextended themselves with risky lending and brought the world financial system to the brink of collapse, and the rest of us, including local businesses in my area, have been paying the price.

One way to cut the banks out is to have better approaches to peer-to-peer lending. The Government have said that they will channel £100 million to small businesses through alternative mainstream, but we do not have the detail. The key issue about peer-to-peer lending is that, although it is for profit, there is no necessary prior relationship between borrower and lender. The lender, who buys into the model and will believe in the business, can choose the loan recipients, but there is no protection from the Financial Services Compensation Scheme and no full regulation.

The first peer-to-peer lending company, Zopa, was founded in February 2005, but we now have others: RateSetter, the Funding Circle, ThinCats and MarketInvoice. Between them, they expect to provide about £200 million this year alone in funding to businesses with innovative models that are struggling to get money from the banks, which, if they are not familiar with a business model, think it a risk and do not lend, resulting in a vicious circle of not being able to fund a business.

Despite the low level of regulation, there is a good case for peer-to-peer lending organisations receiving more support even as they are. Zopa says that bad debts account for just 0.84% of the £200 million it has loaned over the last seven years, compared with 3% to 5% for traditional banks, so I think the banks are missing a trick and the Government most certainly are. The average increase in employment after a Funding Circle loan was 25%. If we give businesses the tools to get on and build their businesses, we see jobs created. The Chancellor talks the talk on this issue, but he could have done more to help the industry. The problem is that the industry is barely regulated and lenders have to absorb the losses. Where was the discussion today—or even a hint—that the Government might be looking at better regulation? Where were the changes to taxation, for example, to offset losses through bad debtors against tax, which would encourage more people to lend through such models?

My party is strongly supportive of peer-to-peer lending, as it can help small businesses such as those in Shoreditch and Hackney to obtain access to funding that would otherwise not be available—something on which the Government have failed to date. In the current climate there is a lack of access to funding—often to very small pots of funding. Indeed, the owner of Lock 7 cycle shop in Hackney—the first cycle café to open in the country—took out a personal loan to get her business started. She did that because it was quicker and easier than trying to put her innovative business model—a café that sells coffee and fixes bikes—to the banks. Actually, it is not that innovative—I give her credit for being the first, but it is hardly a risky business, given that both sides of the business are likely to do well—but the banks would have been slow, had they even coughed up. To take the chance, she took another route. The Government need to be fleeter of foot if they really mean what they say about supporting businesses.

Finally, I must touch on housing. There is much of promise in what the Chancellor said, but I suspect there will be a lot in the detail, which we have yet to see. The interest-free loan is for all buyers, not just first-time buyers, so it could be a licence to print rent for potential buy-to-let landlords and others looking to invest in second homes. From what the Chancellor said, it is not clear whether this will apply only to first homes.

[Paul Farrelly]

Does my hon. Friend share my concern that the measures announced by the Government today tilt the financial incentives more towards new build than improving the existing housing stock? Home improvements attract the full rate of VAT; new build does not. One of the imperatives in her area, like mine, is to incentivise the improvement of existing housing.

[Meg Hillier]

My hon. Friend makes a good point.

We do not have full details about the exact implications of the measure for overseas owners—albeit perhaps those with a tax footprint in the UK—or whether they can benefit from an interest-free loan. There are many questions about the measure, which I simply pose at this point, because it does not seem to do anything in particular to target those in greatest need. We see nothing for the growing number of private renters who struggle to pay high rents in areas such as mine, who will effectively be paying the mortgages that many borrowers may take out under this proposal.

We have a promise of more housing supply, but in my area we have seen many properties sold over a weekend to investors from Hong Kong or Dubai. They might be good landlords in that they are not cowboys, but they are after the rental yield, so we see a high turnover of population. These are not local homes for local people. We have also had the announcement of an increase in the right to buy discount, to £100,000. My area has been ravaged because people have, obviously understandably, taken the opportunity to buy their homes, yet within a few years they are inherited by people paying high rents or purchased by those who could have purchased other properties, thereby reducing our valuable—and so far not replaced—affordable housing stock.

This is the same Government who want all new affordable housing to be let at 80% of local private rents, which in my area and many others will put it out of the reach of ordinary working people. We see a Government wanting to cleanse areas such as Shoreditch and Hackney, along with other high-price areas, of people on lower incomes and also provide more housing, but for those at the higher end of the scale. Overall, we see muddle. This is also the same Government who have a Department—the Department for Communities and Local Government—that wanted offices in Shoreditch converted into fancy loft apartments, not homes for local people, instead of the kind of business space that is so often visited by the occupants of No. 10 and No. 11. We will lose business but not get the homes we need. The Chancellor has woefully failed to tackle the housing crisis in this country.

14:34

[Mr John Redwood (Wokingham) (Con)]

It is important first to understand what the Government strategy is, because there have been a number of misleading interpretations of it. Some have said that the reason the economy did not grow last year and is still growing very slowly is that there have been massive public spending cuts that have reduced national output. There is a helpful table on page 53 of the Office for Budget Responsibility report which shows that growth was indeed only 0.2% in real terms last year. However, it shows that the Government sector made a positive contribution of 0.6%, which is far more than overall growth, and that growth was reduced by disappointment in private sector housing investment, changes in stocks in private sector companies, reflecting an absence of confidence, and a poor performance on trade. A similar position is reported in forecasts for the current year, in which it is assumed that the Government sector will still make a positive real contribution to a rather low rate of growth, while it is hoped that the private sector will not have as disappointing a performance this year as it did last year.

The strategy was never about massive cuts in public spending overall; it was about modest growth in public spending. The idea was to get the deficit down through some very large tax rises. Unfortunately, as the latest documents reveal, the 50p and the other income tax changes were especially damaging to revenue. A loss of more than £7 billion has been recorded by those on the Front Bench. The overall figures imply that it was probably even more than that. In the most recent year, tax revenues from income tax overall are down on the previous year, not up. The strategy has not miscarried because it cut too much or because the Government overspent compared with what was planned—they have done a rather better job this year of controlling spending. Rather, the strategy miscarried because the big increase in tax revenue that had been forecast did not come through. That was partly because tax rates were set that did not work, such as the high rate of income tax. Also, the capital gains tax rate is too high, so we will get less in capital gains tax receipts this year than in the previous year. The reason is also partly that growth in the economy was very disappointing.

[Charlie Elphicke (Dover) (Con)]

Does my right hon. Friend agree that it is important to have capital gains tax rates that are lower and more competitive, particularly for business assets?

[Mr Redwood]

I entirely agree. There would be much more activity if people could free some of those assets by taking profits and moving them on to people who could use them better and build on land, for example. I hope my right hon. Friend the Chancellor will think about that in due course, because it would make him revenue and help to grow the economy.

Nor has there been any lacking in flexibility by my right hon. Friend the Chancellor in applying his strategy. He has been flexible over the deficit; indeed, we see in the latest figures that he plans to borrow £48 billion more in 2013-14, £60 billion more in 2014-15 and £67 billion more in the following year than in the original plans. He has reflected the fact that the economy has not performed well in the way that the independent forecasters assumed and the fact that tax revenues had a big wobble because of wrong rates and low growth, and he is allowing the state to borrow more to try to pick up the slack. I therefore welcome the fact that in this Budget he is concentrating on things that he can do to promote growth in the areas that subtracted from our growth in the most recent year.

The Chancellor is right to look at ways of trying to promote more housing activity. Many of us represent constituents who would love the opportunity to buy their first flat or house. They have been priced out of the market by the boom and now they are kept out of the market by an inadequate supply of mortgage finance and tough conditions. We need to be careful, because we do not want to fuel another housing bubble, but we also need to recognise that the banking system is not delivering finance for many of our constituents at the moment, and there are people who could borrow prudently and sensibly to buy their first home. I do not want to live in a society where people have to be in their late 30s before they can own their first home. I think we need to do better than that.

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

My right hon. Friend says that we do not want to fuel another housing boom, but is it not the case that in this country, unlike the US, the boom was largely in prices and, to a degree, transactions? There was never a boom in supply. What we may see today are measures aimed at boosting the supply of new housing.

[Mr Redwood]

My hon. Friend is absolutely right. These measures are targeted with that in mind. We need to study their details, but they are clearly well intentioned and I wish them every success. I am sure that we shall look carefully at them in Committee and on the Floor of the House when they come before us in physical form.

The next area in which we need to help is promoting more industry and commerce to deal with the net trade deficit. I am glad that that Chancellor has recognised in his speech that one of the big drawbacks to doing business in Britain now is expensive energy pricing. This is something that we share with the European continent, compared with the American continent. The United States of America is playing a blinder with its very cheap gas and much cheaper energy generally. I welcome the idea that certain businesses and industries will be taken out of the climate change levy altogether.

[Caroline Lucas]

I do not expect the right hon. Gentleman to agree with me, but I must point out that experts ranging from Ofgem and BP to the International Energy Agency and the CBI have all pointed out that investment in shale gas in the UK will not result in lower energy prices. Why cannot he therefore agree that it makes no sense to go all out for shale gas through tax breaks in the Budget, and that the money would be much better spent on renewables, which would get emissions and fuel bills down?

[Mr Redwood]

I am delighted that the hon. Lady has made her own case. She is the cause of the problem. She is pricing people out of the market. She is destroying jobs. She is the reason that people cannot heat their homes at a sensible price. She is the deliberate architect of dear and scarce energy, and now she presumes to lecture us and to say that if we generate more energy, it will be dearer and not cheaper. I suggest that she consult her constituents to find out how angry they are about the cost of heating their homes and their inability to get jobs in industry. She might also like to consult a reputable economist to find out what happens to prices when we produce more of something. I think she will discover that the price normally falls.

[Dr Huppert]

Will the right hon. Gentleman give way?

[Mr Redwood]

I am sorry; I have no more injury time left, and I have more to say. I am sure the Government will be delighted about that.

The Government need to look at the problem of electricity generation. I would like them to go to our partners in the European Union and say that there is no way in which we can close down all our coal-powered stations and still produce enough sensibly priced power in the near future, and that we need a stay of execution and longer transitional arrangements. I believe that the Germans are going to generate a lot more electricity from coal, and they seem to have found a way around the European regulations. I would urge my right hon. and hon. Friends on the Front Bench to do the same, because we need to keep our homes warm, keep the machinery of industry turning and keep the lights on in the offices and shops of this country. We are pricing ourselves out of our ability to do that. We are also running the risk of not having enough electricity, full stop, because of the delays and the problems that the previous Government had in coming up with an energy policy, and because of the present Government’s problems in trying to get an energy policy through, given all the European Union restrictions and complications that are placed in their way.

The most important thing that the Chancellor will need to do in the weeks ahead, in addition to the Budget, is ensure that the banks can now create sensible amounts of credit to power the recovery. This is not just about mortgages for homes, important though they are; it is also about loans for bigger items such as cars and domestic appliances. People need to be able to renew their stock of capital, or get their first capital items when setting up a new home, using finance that is available and affordable.

Above all, this is about ensuring that much better finance is available for stock, work in progress and capital equipment in our small and medium-sized enterprises. The banks say that there is no demand for loans from the SMEs—or, at least, no demand that they are not meeting. We all know that our constituents do not think that that is the case, and we have seen many cases that imply the opposite. Let us be charitable to the banks, however. I know that most of my colleagues here are not, but I wish to be, because I think that banking is an important source of export earnings and income. Many good people work in banks, and we need to support them as well. We need to understand that the banks are now charging so much and imposing such tough terms on loans—they are doing so because they are under a regulatory cosh to lend less and hold more capital, relative to the amount of their lending—that people are simply not bothering to ask their bank manager for a loan because they assume that none will be available. Also, businesses sometimes do not foresee increases in demand ahead and, wrongly, lack the confidence to go out and borrow money.

Of course it is not easy for the United Kingdom Government to rebuild confidence when we are part of the European Union and live close to the continent of Europe, and when we can see the spectacular crash that the EU is designing, thanks to the way in which it is mishandling its single currency and common banking arrangements. I can scarcely believe that we are meeting today against a background of part of the European Union having its banks closed for days on end and unable to carry out transactions to give the business life in Cyprus an air of normality or allow the people in Cyprus to withdraw their hard-earned money.

This is happening within the European Union because it has got its system of bank management wrong and it cannot decide who should pick up the bill when there is a crisis in one part of the eurozone. The Germans say that it is not their problem and they are not going to lend more money. They think that Cyprus ought to be taught a lesson. Cyprus says that it is under EU and eurozone control and that it built a big banking sector that now needs recapitalising. It requires money on a scale well beyond the ability of the Cyprus people to pay, so we have an impasse.

I shall give the House a flavour of the numbers involved. We have heard from a Minister in a recent statement that the proposed bank deposit tax represents 33% of Cypriot national output and income. In UK terms, that would be like saying that we had to impose a one-off levy of £500 billion on people’s bank accounts to put the position right. [Laughter.] Everyone here is laughing nervously. I do not think that many of us would be up for voting that kind of thing through, and I am not surprised that the Cypriot MPs did not vote their measure through.

We are now seeing a desperate idiocy in part of the European Union. Germany thinks that it can ring-fence the situation, and I hope it can, but if we are not careful, it will spread. That would undermine confidence in banking deposits in other parts of the eurozone and drive them deeper into recession. It would do more damage to our export market and, yes, there could even be a little collateral damage to our much better funded banks because of their relationships with EU banks. We need to be in there saying, “For goodness’ sake, sort it out and come up with a fair way of recapitalising those banks, so that the Cypriot people can to return to a normal economic life.” Meanwhile, our Government are right to say that we need to export more and more outside the European Union. With all this going on, and with a forecast of a deep and long recession on the continent, there will be no relief from the European markets through our exports.

Our banking resolution, which is making progress, needs to be speeded up. I urge the Chancellor of the Exchequer to revisit the issue of RBS. I do not believe that RBS is a natural unified bank. It is far too big, and it has far too many businesses in it. We should split it up, sell it on and make it more competitive. We need more competitive banks on the British high street that are capable of financing our recovery. We are trying to build the private sector-led recovery with weak, broken banks in the state sector and not enough banks outside in the private sector. We are also trying to do it under European regulation, which does enormous damage to banking and energy costs, and therefore to industry. Britain is partly free of that regulation, but please, Government, make it freer and get on with the task of creating the jobs and the growth that the British people rightly expect.

14:48

[John Healey (Wentworth and Dearne) (Lab)]

It is a pleasure to follow the right hon. Member for Wokingham (Mr Redwood). He has become something of a regular fixture on the first day of the Budget debates during the years I have been in the House. I shall start by agreeing with him about the importance of certain exemptions from the climate change levy. I have the honour of representing a steel area in Rotherham. Steel is one of this country’s strategic industries, and the Chancellor’s announcement today will be very welcome in my constituency. It will help to secure the industry for the future, and I hope that it will also help to secure extra investment from Tata Steel.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

Will the announcement not also help important ceramics industries such as Naylor Industries in Barnsley, and Hepworth’s?

[John Healey]

It will indeed. This is a result of strong cross-party campaigning by Members including my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) and me.

I also welcome the Chancellor’s decision to axe the beer duty escalator. I pay particular tribute to the Economic Secretary to the Treasury for his hand in that. In fact, the escalator was introduced in 2008 for a four-year term. It should have ended last year, but instead of ending it, the Chancellor extended it. I am glad that he has seen sense and realised that we have hit the revenue maximisation point at which the tax rate had gone up, but the tax take had started to go down. I welcome that: it will be a boost for the brewing industry, which is a great British industry, and it will be a boost for the pubs, too.

[Greg Mulholland (Leeds North West) (LD)]

I would like to thank the right hon. Gentleman and all the other members of the parliamentary save the pub group for their support in this campaign. I would also like to echo what was said about the Economic Secretary being a Minister who listened—I warmly thank him for that. Does the right hon. Gentleman agree that this shows that the Government are listening and realised that the beer duty escalator was damaging investment and growth opportunities? Hopefully, we will see growth coming back to the brewing sector, which will have a knock-on effect for pubs.

[John Healey]

That was exactly the case that I, the hon. Gentleman and others were making—that the escalator was damaging investment, damaging jobs, damaging pubs, damaging the British brewing industry and that it had even started to damage tax revenues. This afternoon’s decision is therefore sensible and welcome.

The right hon. Member for Wokingham made an important point in the middle of his speech, when he said that the problem of tax revenues was at the heart of the Chancellor’s fiscal problem. The right hon. Gentleman acknowledged that it was partly about growth. It certainly is, and I would argue that he underestimates the extent to which it is about growth. The big gap in the Chancellor’s record to date—and, to an extent, the Budget announcements today—remains that we have a growth crisis without having a growth plan.

When the Chancellor first took office nearly three years ago, unemployment was falling, the economy was recovering and we had had growth of 1.9% in the final year of the last Labour Government. That is the baseline from which the Chancellor has now given us four Budgets, four fiscal reports, four economic forecasts—with each one worse than the last. Since his first Budget plan in June 2010, debt is up, borrowing is up, we have lost our triple A credit rating, the economy has flatlined and we have had the first double-dip recession for 40 years.

Five years after the recklessness of bankers brought the global financial system close to collapse and drove a worldwide downturn and three years after this Chancellor took control, our UK gross domestic product is still 3% lower than it was at the start of that global crisis. So, our economy is smaller, weaker, making less, earning less and contributing less in revenues to the public finances. Other major countries such as Germany or the US have made up the ground they lost during that global financial crisis—we have failed.

[Meg Hillier]

Does my right hon. Friend agree with me that it is entirely perverse for the Department for Communities and Local Government to suggest that offices should become homes and thereby not provide space for businesses to grow, which would help to boost the economy in the way we agree is needed?

[John Healey]

I have to say to my hon. Friend that there is sometimes a case for changing the historical land use, but that is a decision that very much needs to be taken locally. It will certainly not work if it is dictated by the Department for Communities and Local Government.

To deal with a deficit, which is what we face—whether it be for a country or a family—we must control spending, as the Chancellor said, but if we cut income at the same time, that makes it much harder to close that gap. That is why growth is so vital to a proper balanced plan for the country’s finances. That is why the Chancellor is now further from his fiscal targets than he was before the Budget.

The Prime Minister has tried to claim that the depressed growth has nothing to do with the Government. The independent Office for Budget Responsibility, he told us, is

“absolutely clear that the deficit reduction plan is not responsible; in fact, quite the opposite.”

Next day, a letter from the chairman of the OBR indeed confirmed the opposite, saying

“for the avoidance of doubt”

that the OBR operates

“the widely held assumption that tax increases and spending cuts reduce economic growth.”

In other words, the Chancellor has cut too far, too fast, killed the recovery and choked off growth.

There is good reason to believe that the OBR has underestimated and is underestimating the impact of fiscal policy on growth—the fiscal multipliers. Its estimates to date have been based on the International Monetary Fund figures, which estimate a 0.5% fiscal multiplier, 0.3% for changes in personal taxation and 1% for infrastructure and capital spending. The IMF has recently changed its estimates—up from 0.5% to a range between 0.9% and 1.7%. In other words, the impact of fiscal policy, the potential of the fiscal multiplier and of Government action and Government investment might be much greater than we have been led to believe.

At a time when consumer and business confidence is rock bottom and companies and households are cutting back and not spending, the Government must be ready to do more. They must be ready to invest alongside the private sector and they must, yes, be ready to borrow to help the country through tough times. Borrowing is bad when the repayments are not affordable or if it is done to cover day-to-day spending or indeed a shortfall between income and expenditure. That is why the Government’s planned borrowing bill has been ballooning, but borrowing can be good. It is good if it is for investment to improve infrastructure or the productive capacity of the economy or if it is to create jobs, revive growth and generate the tax revenue that is so sorely lacking.

Companies would borrow to take advantage of an opportunity to increase their earnings and profitability. Companies would never say, “We can borrow to invest only if we can cover the cost entirely by cutting the cost of our operations.” Households would do the same thing if, for example, borrowing to buy a car meant that it was possible to take up better-paid work, or if taking out a mortgage was cheaper than paying a private rent. In those circumstances, households would be daft not to borrow.

[Mr Redwood]

Given that this Government are planning to borrow £120 billion a year for each of three years, or £10 billion a month, how much extra does the right hon. Gentleman think it would be a good idea to add to that amount?

[John Healey]

There is an interesting example of a proposal, which I have backed, to allow local government to borrow more by removing the cap from the newly localised housing revenue account. We have heard about families borrowing prudently, but local government does borrow prudently, as its average level of debt is less than 5%. The Chancellor told us that the national Government’s net debt is 75%. We are talking about £7 billion, loosening the cap, and 15,000 new council homes—not just for this year, as the Chancellor has announced, but every year for the next five years. That is the sort of borrowing we could do to invest, to promote jobs, to promote growth and to bring in tax revenues, helping to deal with the deficit in a proper and balanced way.

If we want to move the dial on GDP growth when the economy is weak, it is Government investment—not simply private sector investment—that is needed. When the economy is weak, we need more public investment; yes, it will increase debt, but it will also increase output and growth. Even the Chancellor recognised, when he delivered his first Budget, that the last Tory Government had cut capital investment too far, yet the Office for Budget Responsibility has shown that for the first three years of this Parliament, capital spending fell year on year—it is now £12.8 billion lower than Labour planned. Even the £3.5 billion of extra investment that the Chancellor has announced today will not be for this year or next year, but in three years’ time—too little, too late.

I would argue that, after three years of economic policy failure, the balance of economic advantage lies decisively in Government borrowing to invest and build. Borrowing for those purposes can be good borrowing. There is a difference: not all borrowing is bad borrowing. Interest rates on public debt are at an historic low, so now is exactly the right time for government, both national and local, to borrow for that investment. An open advocacy of the means, not just the ends, is overdue.

The Chancellor has confirmed in his Budget that his economic plan is failing, but he has also confirmed that he is sticking to that plan. We need a change. We need a change of policy, we need a change of Chancellor, and yes, we need a change of Government.

15:00

[Stephen Williams (Bristol West) (LD)]

Liberal Democrats will look back on our record in government and on every Budget that the coalition Government have delivered, and will judge them according to our values and our principles. We will judge them according to whether we have, together, built a stronger economy and a fairer society that enables everyone to get on in life.

The Chancellor has recognised that building a stronger economy in today’s turbulent world conditions is an extraordinarily difficult thing to do. The Office for Budget Responsibility has said that our export markets have been suppressed, and that that alone accounts for suppressed rates of growth. It is right for us to recognise the extraordinary achievements of businesses in our economy in producing 1.25 million extra private sector jobs since the first quarter of 2010. However, it is also right for the Government to give businesses a helping hand to enable them to go that one step further.

The Liberal Democrats are delighted by the announcement in the Budget of a £2,000 employers’ national insurance credit which will enable every business to take on new employees. A business could take on four adults on the national minimum wage and see absolutely no increase in its employment costs. As a result of this measure, 450,000 small businesses will make no national insurance contributions whatsoever. That will provide a further boost for the recruitment of apprentices, in respect of which the Government already have an extraordinarily good record.

The Government need to do more to get growth in our economy going. Liberal Democrats both inside and outside Government have called for that growth to come from extra capital spending, which is why I am pleased that the Budget contains a further switch to finance more of it. It is worth noting that over the decade since the Government came to office, our capital expenditure will be higher than it was throughout the 13 years of the last Labour Government. However, most capital expenditure does not come from Government; it comes from the private sector and, in particular, from housing. For some time, many of us have been calling for a boost to be given to house building, especially the building of affordable homes, so that young people can get their foot on the housing ladder for the first time.

The Government announced two housing initiatives today. Under the Help to Buy scheme, which will start in just two weeks’ time, they will put a fifth of the equity in a new home on the table for those who can put down 5% themselves. There is also our mortgage guarantee to free up the mortgage market. There are planning permissions for various sites in all our constituencies, but, as we know, they have been frozen for some time. House builders have received the message that they have been waiting for, which will enable them to make a start on those sites, to give people new homes, and to provide new jobs throughout the land. However, growth needs to come from other sectors as well.

[Dr Huppert]

Has my hon. Friend seen a report about green growth which was published last year by the Confederation of British Industry? It said:

“The business response is definitive and emphatic: green is not just complementary to growth, but is a vital driver of it.”

The CBI said that green business could

“roughly halve the UK’s trade deficit”

by 2014-15. It also said:

“With a smarter approach, green business could add £20 billion to the UK economy by 2014-15. This is an opportunity we cannot afford to miss.”

I know that Liberal Democrat Ministers are pressing for such action. Will my hon. Friend encourage them to go further, and try to persuade the Chancellor of the business benefits of green growth?

[Stephen Williams]

I entirely agree with my hon. Friend. There is, perhaps, a tension in the coalition Government between the Chancellor and the Department for Energy and Climate Change, and, if we are honest, within the Department itself, when it comes to whether sustainable growth from green technologies is desirable. I emphatically believe that it is desirable, and I want investment in wind farms in particular to go ahead. We said at the time of the 2010 general election that we wanted to rebalance the economy, and green growth is certainly one of the things that we had in mind.

What I have in mind particularly at the moment, however, is a major industry in which Britain is a world leader, especially in the south-west of England, and its centre is in Bristol. I refer to the aerospace industry. The Government are working on industrial strategies for 11 critical sectors of the economy, so I was delighted when the Deputy Prime Minister came to Bristol on Monday and announced a £2.1 billion investment in an aerospace technology institute. I would say that the best place for that is, indeed, in Bristol.

We also need to introduce reforms to help local economic growth in all our city regions. I am pleased that the Government have accepted 81 of Lord Heseltine’s recommendations, and especially pleased that they have accepted the recommendation of a single growth fund bringing together investment in skills, housing and transport. The Liberal Democrats have long believed that our economy needs to be rebalanced, away from London and the south-east, and centred on city regions such as Leeds and Bristol.

[John Healey]

The hon. Gentleman has said that he welcomes a single pot. Is that not exactly what the regional development agencies had, including the south-west RDA? They had a single pot with no strings attached from the centre, and decisions on the spending of that pot were made in the regions, for the regions. Was it not a mistake to abolish the RDAs and then to wait three years before reintroducing that important flexible funding arrangement?

[Stephen Williams]

The right hon. Gentleman is one of the most thoughtful Members of the Opposition, but on this occasion I must respectfully disagree with him. My experience in Bristol suggests that no one misses the south-west regional development agency, but everyone in the greater Bristol area recognises the extraordinarily good work done by the West of England local enterprise partnership. [Interruption.] I hear a chorus of agreement from my west midlands colleagues, including my hon. Friend the Member for Solihull (Lorely Burt). It seems that the experience is the same in that area.

We want to rebalance the economy, away from the south-east and to our city regions, and also—as was pointed out by my hon. Friend the Member for Cambridge (Dr Huppert)—to decarbonise the economy. I want to raise an issue that has not been the subject of much comment, but which I know is tucked away among the Budget details. I think that we should consider how we can provide further incentives for the setting up of social enterprises around the country in order to produce sustainable micro-growth in all our communities, and devise innovative ways of bringing people into business on a not-for-profit basis. That would contribute to a fairer society as well, but the biggest contribution to a fairer society that any Government can make is putting more money into people’s own pockets and purses, so that they can decide for themselves how to spend the money for which they have worked so hard.

At the last general election, all my Liberal Democrat colleagues stood on the basis of their No. 1 priority: the delivery of £10,000 of tax-free pay by whatever Government we were to become a part. That promise will have been delivered in full by April 2014. During his speech today, the Leader of the Opposition urged people to put their hands up in favour of a different tax measure, but 24 million people around the country will be able to put their hands up and say, “I am receiving a tax cut because of this coalition Government, and, in particular, because of the Liberal Democrat participation in that coalition Government.”

Since we came to office, the personal allowance has risen by £3,525. That is an increase of more than 50% in the amount of money that people can take home without income tax being deducted from it. A total of 2.7 million people will have been taken out of tax altogether, and £700 of extra income will land in the pockets and purses of 24.5 million workers up and down the country. That is an extraordinary achievement on the part of the coalition Government, and I am very proud of the role that my own party has played in developing a tax change that is a landmark in the history of our country.

A young person working on the minimum wage has already been lifted out of the income tax net altogether. Members should contrast that with the lamentable record of the Labour party, which introduced the 10p tax rate and then abolished it in order to fund a tax cut for people who were earning much more. Despite what Labour Members say now, Labour’s record in office was one of cutting taxes for the wealthy and raising them for the poorest. The coalition is doing the reverse of that.

We are also delivering further help for families up and down the country who are trying to balance their budgets. Many of my colleagues, particularly those representing rural seats—the Chancellor referred to my hon. Friend the Member for Argyll and Bute (Mr Reid) earlier—will welcome the fact that a fuel duty increase planned by the previous Government has been cancelled, yet again. I say, speaking for myself, that we cannot go on doing this indefinitely; I would prefer us to be much more radical and to scrap fuel duty altogether. It is an extremely blunt instrument of taxation that is long past its sell-by date, and a more economically sensible system of road-user pricing in the long term should replace it.

In pubs and clubs up and down the country, including the Prince of Wales in Gloucester road in my constituency, people will be raising a glass to the Chancellor tonight for the cancellation of another duty escalator—that on beer. I pay tribute to my hon. Friend the Member for Leeds North West (Greg Mulholland), who has badgered me and everyone else involved in this area for the past two and a half years to try to do something to get rid of it.

[Greg Mulholland]

People will indeed be raising a glass to this Government for this. Does my hon. Friend agree that we now need to hear from the large pub-owning companies? They need to say clearly today that they will pass on the 1p reduction to their licensees, who can then pass it on to their customers.

[Stephen Williams]

My hon. Friend makes a vital point. We all know that when the global oil price fluctuates all over the place we do not necessarily see a cut in the price at the pump. I would expect every major beer company to pass on this reduction in full to its customers.

The other significant help that the coalition Government have announced this week for families up and down the country is the increase in our assistance with child care costs—£1,200 per child, to be delivered by 2015. However, our entire structure of taxes works only if people actually pay what we in this place decide should be assessed, so I am delighted that this Government have announced another huge package of anti-avoidance measures. Let us not forget that in 2013 we will see the country’s first general anti-abuse rule. So this is the second largest set of anti-avoidance measures that any Government have introduced—the largest was also introduced by this Government, back in 2011. This Government have done more to tackle egregious tax avoidance and evasion than any of our predecessors, but it is also worth mentioning that tax avoidance is a problem abroad.

Some of us will have been startled yesterday to see 500 masked Osbornes outside Parliament promoting the Enough Food for Everyone IF campaign. We should be proud that this coalition Government are delivering the 40-year-old promise of having 0.7% of our income go to the less-developed parts of the world. I am pleased that some of that increased aid budget is going on a tax capability-building unit, thus making developing countries able to stand on their two feet by collecting their own tax revenues and royalties.

This Budget, over time, will be remembered for that promise of delivering £10,000 of tax-free pay. We have cut the taxes on people in work. We have cut the tax that is a barrier for people entering work. We have given a boost for housing. We have given help with the costs of raising a family. We are indeed building a stronger economy and a fairer society, where everyone is able to get on in life.

15:13

[Sammy Wilson (East Antrim) (DUP)]

I am grateful to be called so early in the debate.

I start by welcoming some of the measures in the Budget. Although there has been a 1% reduction in departmental spending, as a result of the top-slicing, the way in which the Barnett formula works means that Northern Ireland will actually benefit over the two years by about £59 million of additional spending. I do not think the Chancellor meant that to happen; I do not think it was deliberate. Of course it helps to replace some of the 40% reduction in capital spending announced at the very beginning of the Budget period when the Government took over.

Also, I welcome Northern Ireland’s exemption from the carbon price floor and put on the record how much work the Chief Secretary to the Treasury did on that. We took the point to him, saying that this measure was going to devastate all the electricity producers in Northern Ireland and leave them uncompetitive. We said that it was going to add to the costs of generating electricity in Northern Ireland—£20 million this year, rising to £45 million—which would have affected household bills by about 15% and made us dependent on producers in the Irish Republic. The one thing I want to say is that when a case is made to the Government, they do respond. It would have been churlish of me not to acknowledge that in the House today.

Some other measures will have a positive impact on Northern Ireland: the change in the threshold for income tax will benefit 7,000 families; the employment tax exemption will benefit 25,000 small businesses in Northern Ireland; and fuel duty not going up in September will benefit motorists.

[Mr Nigel Dodds (Belfast North) (DUP)]

What effect will that have on motorists in Northern Ireland? This is particularly relevant, given that Northern Ireland’s petrol and diesel prices are the highest in the UK and higher than most in the European Union.

[Sammy Wilson]

For an average haulier, this will mean an annual saving of about £750 per vehicle and for the average motorist it will mean a £25 saving per year. Again, that is a good thing for the hard-pressed motorist.

The Chancellor made much of the monetary measures that he has introduced, especially the funding for lending scheme. Unfortunately, given the state of the banking industry in Northern Ireland and the fact that most of the banks there are not even part of the scheme, this is likely to have very little impact. However, positive impacts are being felt, and it would be right to start by acknowledging that. It is easy in opposition to criticise when we do not have to make the decisions. We can be the armchair economists who see everything that is wrong, what should be done and what one would do if one were sitting on the other side. However, there are some issues that the Chancellor has got wrong.

First, we have a Budget that he has said is fiscally neutral. That comes at a time when the economy needs some form of stimulus. He has admitted in his speech that it is not coming from consumer spending, because consumers do not have the money to spend or the necessary confidence. It is not coming from business spending, because businesses are trying to contract their loans and deleverage during the recession. It is not coming from exports, because our deficit is actually increasing. The only source of that stimulus therefore has to be what the Government can do in a practical and sustainable way.

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

Does the hon. Gentleman agree that there is an ever-increasing need to stimulate our economy, particularly in Northern Ireland? Our unemployment figures came out today and they are the highest in the past 15 years, with the level at about 23%. Wearing his other hat, as well as his hat in here, does he have any thoughts as to how the local economy should be stimulated?

[Sammy Wilson]

I thank the hon. Lady for her intervention, which leads me to a point that I wanted to make. We have a Budget that, as the Chancellor has admitted—in fact, boasted—is fiscally neutral. Although it contains good things—I have highlighted some of the impacts of the decisions—it moves the existing money around and does not mean an increase in the total level of demand. If that is not coming from exports, from consumers or from industry, because of a lack of confidence, it has to come as a result of properly targeted Government initiatives.

Although I sit on the Opposition Benches, I do not have a vested interest in Government failure and a failure of economic policy, and nor does my party. I want the Government’s policy to succeed, as it means more jobs for people in Northern Ireland and a better standard of living for them. It means that we can balance our economy. However, it is not a policy that is designed for success; it simply tries to continue the fiscal position that the Government are in at the moment. Indeed, if we look at all the targets that the Chancellor has set himself, we see that he wanted to increase confidence in the economy, yet we have seen low demand from consumers, and firms have not taken up loans—the right hon. Member for Wokingham (Mr Redwood) mentioned that—either because they cannot get money from the banks or do not believe that there is any point in investing at the moment. Firms are running down their stock levels, because they see no prospect of additional sales in future.

The Chancellor also set himself the objective of keeping Britain’s credit rating, but that is slipping because the people who make the assessments are looking at the state of the British economy and asking when we are going to get out of the downward spiral of debt. If there is no growth, we cannot pay off the debt.

[Andrea Leadsom]

rose—

[Sammy Wilson]

I do not have any additional time, but as I have not yet accepted an intervention from a Government Member, I give way to the hon. Lady.

[Andrea Leadsom]

I am grateful to the hon. Gentleman. Does he accept that the ratings agency said that if we did not stick to our fiscal deficit plans, it would downgrade us still further, so the reduction in the triple A rating is an incentive to do more to cut our deficit, not less?

[Sammy Wilson]

Indeed. I am glad that the hon. Lady has raised the matter, because I want to come on to that.

The Chancellor set himself the objective of reducing debt, yet the Red Book shows—this is since the autumn forecast in 2012, so a period of six months—that by 2015, or the end of this Parliament, Government debt will increase from 80% to 85% of gross domestic product. The hon. Member for Chichester (Mr Tyrie) gave us the reason for that: the automatic stabilisers are kicking in. We are spending the money on benefits, or paying people to be on the dole, instead of spending it—this is the point I want to come on to—on the things that would stimulate growth, increase the capacity of the economy and enable us to pay our way out of our debt, while at the same time giving people the dignity of having a job and making a positive contribution to the economy.

That is why I think the Chancellor has got this wrong. There has never been a better time for him to borrow. The 10-year price of bonds is down 2%, and it is now cheaper to borrow than it has ever been. Borrowing for those things that will stimulate growth and increase infrastructure in the economy can be very useful.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does the hon. Gentleman accept that the issue, as he has said, is the ratio of debt to GDP? There are two ways of confronting it: reducing debt or increasing GDP. If we had growth, that ratio would go down, but growth has been completely ignored.

[Sammy Wilson]

The hon. Gentleman is quite right. One reason why debt has increased as a percentage of GDP is that GDP has fallen while spending has had to go up to pay for a policy that has failed anyway.

If the Government wish to borrow, what kinds of things should they do? I shall give just two examples of infrastructure projects in Northern Ireland on which tens of millions of pounds have been spent, but which have already begun to have an impact on the economy. First, there has been investment in the broadband infrastructure as a result of the Chancellor’s initiatives in previous Budgets. Project Kelvin and broadband infrastructure around Belfast and Londonderry have helped us to grow the financial services industry in Northern Ireland, which employs nearly 30,000 people, and it has helped us to grow the film industry there too. Both industries need connectivity to north America, and there is faster connectivity to north America from Northern Ireland than there is from the west coast of north America to the east coast. That has stimulated a range of other investments, and it makes sense when it comes to infrastructure investment.

In our tourism industry, we spent nearly £100 million on two signature projects— the Titanic signature project and the Causeway project—which were supposed to generate over half a million visitors in one year. In the first six months, they nearly doubled that estimate, in business for hotels in Northern Ireland and business for restaurants, taxi drivers and so on. The hon. Member for Swansea West (Geraint Davies) made the point that there is good borrowing and bad borrowing. Bad borrowing is paying to keep people at home on the dole; good borrowing is paying to have infrastructure development, which helps to increase the capacity of the economy. I think the Chancellor has missed a trick. Instead of having a financially neutral Budget, he ought to look to the future and ask what we can do and how we can raise money to spend on projects that, in the long run, will generate more tax and jobs, give us growth, and bring down the deficit.

While I welcome the things that I mentioned at the outset, and I acknowledge the way in which the Chancellor and the Treasury have responded to some of the points that we have made from Northern Ireland, for the country as a whole there are things that could have been done that have not been done, which we will live to regret and which will probably result in the Chancellor standing at the Dispatch Box next year saying, “I forecast this, and unfortunately I’m downgrading those forecasts again.”

15:27

[Mr David Davis (Haltemprice and Howden) (Con)]

May I give the Government two sets of thanks? First, may I give them unreserved of thanks for the fact that I do not have to discuss VAT on caravans this year? More seriously, may I give them unreserved thanks for the action on Equitable Life pensioners which, while a little overdue, is morally right and exactly the proper thing to do?

With respect to the Government’s economic strategy, a number of Members have pointed out the difficult circumstances surrounding the Budget from various points of view. The Government clearly have a difficult deal to handle regarding the inheritance from the previous Government. Obviously, there is the borrowing, but it is not just that. The structural deficit passed on by the previous Government was much bigger than anyone understood at the time, and that is just economists’ technospeak for a society that has too much welfare dependency throughout, including even the middle classes, and too much inefficient—costly and expensive—delivery of public services, which are properly needed but badly delivered.

The second part, which is extremely important and has been alluded to slightly by a few Members who have spoken so far, is the international backdrop with which the Government have to deal. We are in a circumstance where world growth is probably about 6%, but that divides sharply into two sectors. The far east, the BRICs—Brazil, Russia, India, China—Vietnam, Indonesia, and so on, have growth rates approaching 10% or thereabouts. In the developed world, of which we are obviously a part, the growth rate on average is nearer to 1%. So we are in a 1% world, and the reason for that is pretty straightforward: it is the dramatic change in competitiveness between ourselves and the far east and other developing countries. That does not mean that it is inescapable, but it means that competitiveness has to be at the centre of the strategy that we undertake—competitiveness, pure and simple. Everything else, all the other macro-economic tricks, frankly do not work.

In that respect I am addressing the comments of the hon. Member for East Antrim (Sammy Wilson). If I may say so—and I do not mean to be rude—he talked very much like a classical Labour Member. He talked about stimulus, and about this being a balanced Budget. It is about £100-odd billion off being a balanced Budget. There is a vast amount of deficit finance in there. But my point is that, if we look at the historic examples of countries that have been knocked off the historic growth rates—3% or 4%—down to something lower and at what has been done with them, there are clear examples of success and failure. Let me tell him, just for a second, about the biggest failure in modern times, which was Japan some 20 years or so ago, which went from a 4% growth rate, pretty much for all the post-war years, to a 1% growth rate after a financial crisis not unlike our own. What did it try? It tried Keynesian expansion. It now has pretty much the biggest public debts in the world, with an annual deficit of 10% of GDP in recent years. Did it work? No, it did not. It also tried monetary activism. I hope that those on the Treasury Bench listen to this, because it had effectively zero interest rates for a decade. Did it work? No, it did not. It also went in for infrastructure spending—the fashionable item this week—on a grand scale. It spent 40% of its Government budget on infrastructure investment, more than was spent to build the entire Panama canal—in one year. Did it work? No, it did not. I am afraid that those macro-economic polices that people love because the arithmetic seems to work are a dangerous allure. We must focus first and last on competitiveness, because without that we will not be able to earn our way in the world.

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

My right hon. Friend is saying something that should be blindingly obvious. When a Government borrow some money and spend it, once it is spent it is gone. It does not create economic growth. Once they have spent that money, it might have a little bit of effect in the economy, but then it is over. What we need to generate is what the right hon. Member for Morley and Outwood (Ed Balls) used to call endogenous growth, because that is what comes from within the economy itself instead of being stimulated by Government spending.

[Mr Davis]

My hon. Friend is right. I shall not give him the response to the endogenous growth of the right hon. Member for Morley and Outwood (Ed Balls) that Michael Heseltine gave at one party conference, which my hon. Friend might remember, but—

[Stephen Pound (Ealing North) (Lab)]

“It’s not Brown.”

[Mr Davis]

Exactly.

The simple truth is that this is a blinding glimpse of the obvious in many respects. But this is not impossible to put right. Other countries managed to get back to a 3% growth rate, or thereabouts, so it can be done.

[Sammy Wilson]

The right hon. Gentleman seems to be saying that anyone who talks about putting money into the infrastructure and the economy is a Keynesian. Would he not accept that the monetarist argument is that the supply side of the economy is very important, and to stimulate the supply side of the economy often the Government need to spend money on capital injections to increase the capacity of the economy to produce more goods? It is not a Keynesian view, it is a monetarist view, with which I would have thought he identified.

[Mr Davis]

I will come back to the detail in a minute, but the point I am making—it is a serious point—is that we can do what Keynes said and pay someone to dig a hole and then pay someone else to fill it in, and that creates employment. So long as we avoid that and talk about the real value, we are on the same side. I will come back to the real value issue in a moment.

The problem with actions to promote competitiveness is that they are not always politically popular. Very often, they are politically unpopular, and I will elaborate on that in a second. The other element about growth—everyone in the Chamber today agrees that growth is necessary—is that it is also important to the deficit reduction policy. In effect, if 1% is taken off the growth rate, the OBR’s rule of thumb says that within a year or so that adds £10 billion to the deficit every year thereafter—not once, but every year thereafter. So growth is fundamental to the central fiscal policy as well. While we are talking about growth, we have had much talk about double and triple-dip recessions, but judging by the employment numbers, we have not had real recessions; we have had bouncing around zero to 1% growth, and that will show up when the numbers are corrected, as will be done in a few years.

There are six key elements to ensuring the economy’s competitiveness, and they are all pretty straightforward. I agree with what the Government are doing on some of them, but on others I think that they should go further. The first is straightforward: the Chancellor is absolutely right not to hesitate or flinch in the deficit reduction programme. That is absolutely essential. Canada, Germany and Sweden, which are all successful examples—Japan is not—managed their deficit reduction unflinchingly, and in all of them it delivered 3% plus rates of growth within a few years. Indeed, Canada had the fastest growing economy in the G8 when it carried through. The simple fact is that, even with the deficit reduction programme, we will be £600 billion more indebted at the end of this Parliament than we were at the beginning, and that is a devil of a burden for any country to carry. Clearly we cannot hesitate on deficit reduction.

The second key element is the one on which I and my right hon. Friends on the Treasury Bench might have a difference of view. One of the critical drivers of competitiveness is tax policy. I wholeheartedly welcome the actions announced today on corporation tax and national insurance, although I would like them to go further. The simple truth is that expensive, complex and high levels of tax returns are very damaging to a country’s economic competitiveness. We should be looking hard at the tax categories that are most responsive to lower rates. We have heard today, even from the Labour Benches, about a couple of measures—on beer, I think—that will deliver more money for the Exchequer, not less, so even Labour Members recognise dynamic tax strategy. We certainly want to see lower national insurance contributions for employers. I would like to see the employment allowance scheme that we put together extended considerably. Capital gains tax must come down. At 28%, we are collecting much less money than we would if it was somewhere between 15% and 20%. There is a series of other taxes, including corporation tax, on which action could be taken. Again, the examples to look to are Canada, Sweden and Germany.

The third key element, which we did not hear much about from the Chancellor today—perhaps we have not heard much because we are yet to go through the detail of the Budget—is deregulation. The most successful recovery in Europe in the past decade was Germany’s. The Germans took it upon themselves to dramatically deregulate their employment market for small companies. That is key, because small companies are the biggest employment creator in the economy, bar none. The Germans effectively removed employment law for companies with fewer than 10 employees and created mini-jobs and other mechanisms to reduce the bureaucracy and legislation surrounding employment. That is massively important. It is one very effective way of creating new employment, and it is something we should undertake as dramatically as we can.

Another item that was raised earlier—the hon. Member for East Antrim raised it with respect to Northern Ireland alone—was the question of carbon tax and carbon floors. In the next month or so, the changes that are being introduced will give us a disadvantage of £10 a tonne, and not against China or India, but against Germany, Holland and France. We will see a transfer of heavy industry from this country to Europe. There will now be an exemption for ceramics, but frankly there are many other businesses—they employ about 600,000 people—in the energy-intensive industries. We need to address that. The previous Government were very happy to deliver golden rules of one sort or another. I would like to suggest a rule for us on environmental and energy policy: we should not introduce any environmental policy that is not matched by our European colleagues. That would ensure that we do not do ourselves huge harm.

Let me move on to infrastructure. The hon. Member for East Antrim made a perfectly sensible point about broadband, and I agree with him. What I do not want to see is massive expenditure for its own sake in the expectation or hope that that will simply generate employment by itself. The Japanese experiment demonstrates that that does not work. What we want to see is de-bottlenecking of our railways and road systems and underpinning of things such as broadband. The Government can make some good claims in that area, but we need to do more. That is what will fundamentally allow growth to take off in Britain and get us back to the 3% level of growth.

The last item I want to speak about is bank reform. A number of colleagues, including my right hon. Friend the Member for Wokingham (Mr Redwood) and my hon. Friend the Member for Chichester (Mr Tyrie), who chairs the Treasury Committee, have talked about bank reform. Bluntly, we have been too slow—[Interruption.] I am out of time—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order.

15:39

[Mr David Lammy (Tottenham) (Lab)]

I am very grateful to follow the right hon. Member for Haltemprice and Howden (Mr Davis). I agree with part of what he said about competitiveness, and I will come back to that.

On today’s announcements, I think that most Labour Members would want to welcome the changes made to national insurance contributions, in particular, and the help for employers. Changes to personal allowances are valuable for the poorest in our society. Clearly, the scrapping of the fuel duty escalator and lower beer prices will help considerably.

Beyond that, I want to concentrate my remarks on rebalancing the economy, which the hon. Member for Bristol West (Stephen Williams) talked about. I felt that the Chancellor should have emphasised that, but we heard very little about it. As we saw in the figures published last week by the Office for National Statistics, a fifth of our economic output is attributable to London. One could draw from that the conclusion that Londoners are twice as productive as people in other regions of the country. The hon. Gentleman, in talking about his region, wanted to emphasise that London and the south-east are getting a bigger share of the pie than they should be. I want to challenge that basic assumption.

Underlying much of the Chancellor’s analysis—certainly my constituents would want to communicate this—is the question of whose London we are talking about. Should we be entirely preoccupied with those in the City of London, with an elite arriving from Russia, China or the middle east, or with the very many Londoners who did not see sufficient for them in the Budget that he described? The north-east and east of London, as a sub-region, is ranked 113th in terms of economic activity, and there are only 139 sub-regions across Britain. Of the 20 constituencies with the highest number of unemployed people, seven are in London. Of the 20 constituencies with the worst child poverty, nine are in London. This is not a London that feels as though it is benefiting considerably from economic growth; it is a London that is really struggling. We needed to hear from the Chancellor a whole series of announcements that could meet the challenges of unemployment and child poverty, and a London that does not feel as though it is working for Londoners.

The Chancellor could, then, have had more to say about infrastructure here in this city. He could have announced that the Government would bring forward a hybrid Bill on Crossrail 2, which will benefit hugely the transport infrastructure of London—and it will be in need of such benefit after High Speed 2 is complete and we have extra people in London’s transport system, which is creaking from the point of view of someone who is on the tube in the peak hours early in the morning or going home late at night. All we have heard about so far from the Mayor and the Chancellor is a small extension to the Northern line, when in fact we needed to hear something big and major. We hear hon. Members pooh-pooh the need for greater investment in infrastructure; HS2 was that, but we heard nothing more from the Chancellor today.

We heard a huge boast about how planning changes are generating growth in house building, but house building has fallen to a level unseen in this country since the 1920s, and that was during the depression. The situation is absolutely dire. Some 59% of Londoners are renting—the highest proportion since before the second world war. There was a settlement in London whereby people could rent, get a council property and be part of the social housing fabric of this country, or own, but that has gone backwards—59% of people are renting.

Although I will look at the detail of the housing policy announced by the Chancellor, I am concerned that the proportion of people renting will increase as a result of buy-to-lets. Like my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier), I want to see the detail to see whether the measures will extend to those who want to buy homes in order to rent them out. I do not think that that will ease the situation.

What we needed to hear was a Government commitment to house building, which would be a far more responsive approach to local government in particular. Local governments in London have between them committed £1.6 billion to house building in London. It is not sufficient, but that is their commitment. Islington hopes to complete its target of about 1,600 homes by 2014, and Southwark wants to complete, I think, 1,000 homes by 2020. As my hon. Friend has said, a small change to how the Treasury allows local authorities to borrow against their assets, with changes to the Treasury’s prudential rules, would allow for a huge expansion in local government house building. London local governments estimate that 54,000 new homes could be built over this next period, which is a significant amount that would go some way to meeting the needs of those currently in temporary housing.

A statement on infrastructure and Crossrail 2 and a big announcement on house building, not just house-purchasing—particularly for those who want to buy to let—would have been acceptable.

I am also hugely disappointed that the Chancellor did not once mention youth unemployment, which is having a devastating effect on every single region, town, village and major city throughout the country. He said nothing about it. The Work programme is not working and the Youth Contract is shaping up to look like the old youth training scheme. We need real growth for our young people, but we have heard nothing about it from the Chancellor. He boasted about 55,000 extra apprenticeships in London, but 40,000 of those apprentices are over-35, which is an indication of how much trouble we are in.

We needed to hear more about what a balanced economy looks like. Margaret Thatcher made a deal in the 1980s. [Hon. Members: “Hear, hear!”] Government Members are applauding, but what was that deal? It was to base our economy on two sectors, namely the financial sector—look where that has led us—and the service economy, which is largely retail. Retail alone is not sufficient for our young people and we should have learned more about what a balanced economy looks like.

[Alison McGovern (Wirral South) (Lab)]

Does my right hon. Friend agree that he is describing precisely the inequality that must be tackled before young people in this country really get a chance?

[Mr Lammy]

Absolutely. To have a Budget that places no value on our young people is extraordinary at this time. It is a Budget that is content that the growth in apprenticeships has come largely from retail and administration. The growth in apprenticeships has seen just 210 of the higher-level apprenticeships that we need, but 30,000 level 2 apprenticeships. A Budget that does not acknowledge that is deeply problematic.

It is only by having something to say on infrastructure, house building and construction that we can begin to get back to the balanced economy that this country has so dearly lost and that is necessary if we are to get back to growth.

Let me end on the importance of local government. We did not hear enough in the Budget about local government. We know from the pre-Budget report that there are further cuts to come in local government. We know that adult social services will be under immense strain over the coming months, as council leaders have to make difficult decisions. We know that things such as child protection will be under immense strain as councils make those decisions. It is wrong for the Government to cut 8% of their own spending, but to expect some London authorities to cut 33% from their budgets.

We needed to hear a Budget with investment in local government, something on infrastructure, something on housing and something for young people, but we did not.

15:49

[Adam Afriyie (Windsor) (Con)]

The economic strategy adopted by the Chancellor is the right one. On the one hand, we must deal with the massive deficit left by the Labour Government. On the other, we must kick-start the economy. With a budget deficit of £120 billion that is mounting by the day, it would be utterly reckless to borrow more. That is the road to ruin and we must avoid it at all costs.

I am optimistic about the future. I am optimistic that with sound economic policies, we can get our country back on its feet. Only British businesses have the power to lift our country out of the economic legacy left by the previous Government. I chose to come into politics from the world of business. Anyone with experience in business will say that it is tough and that it is really hard work. That work is made tougher by unnecessary regulations and the bizarre tax on jobs that is called employers’ national insurance. I therefore welcome the measures in the Budget that will tackle regulation and reduce the burden of tax.

I want our nation to be back on top. I want it to be on top of the world competitiveness tables, on top of the productivity tables and on top of the world trade tables, but at the bottom of the world taxation tables.

[Geraint Davies]

The hon. Gentleman mentioned being at the top of the productivity tables. Does he accept that as an extra 1 million people are in jobs and we are producing no more, productivity has gone down? That is a complete disaster.

[Adam Afriyie]

Opposition Members have a real cheek in raising cheap points like that. This Government are doing everything they can to dig this country out of a hole of Labour’s creating. Labour Members should remember that and should be ashamed of such comments.

My hope for our nation is that we will feel proud and self-confident; that it will be a nation where enterprise, employment and economic growth are highly valued. Why? Because that is the only way to afford the well-funded public services and caring society that we all want. It is the only way to have a decent health service that takes care of us. It is the only way to fund a world-class education system that is open to everyone. It is the only way to pay for strong defence through our armed services. It is the only way to generate wealth to help others. Above all, it is the only way to secure social mobility.

I come from a pretty tough background, as do many people. It was not easy growing up in a single-parent household in social housing as a mixed-race kid in the 1960s and 1970s. But I was one of the fortunate few. I was born in Britain at a time when it was possible to make it in a lifetime. I want the opportunities that I enjoyed to be available to every single British citizen. It seems to me that it has become even more difficult for people to forge their way in life. My heart is with the least well-off in our society and with all those people, especially our young people, who want to make something of their lives. That is why we must back British enterprise. We must give British businesses the support they desperately need. We must help them to regain their confidence and competitiveness, because this country needs a thriving, dynamic and competitive business environment. In a competitive business environment, there will be failures, there will be successes, but, above all, there will be opportunities for everyone to work hard and to achieve the type of life that they would wish to achieve.

I made my way by working hard at school and eventually starting a business. I remember being exhausted in the early hours of the morning, filling in Government forms and tax returns, and the stress of trying to meet the payroll—yes, and sometimes failing—and the agonising over whether to take on new employees. I can remember the fear of never being quite sure whether the businesses would make it. It is the same today for millions of small business owners around the country.

I was one of the fortunate ones; the risks and the hard work paid off. For many, they do not. It seems to me that our political elite are nervous about talking about success. There is a tendency to view wealth creation as somehow distasteful or a bit dirty. We love it when young people set up businesses, but we become suspicious if our businesses become too successful.

My message today is this: get over it. Backing British businesses is not only the way to escape our dire economic situation but the way of securing social mobility. We must trade our way to a balanced budget and we must trade our way to a trade surplus. Business is the engine of our economy; it generates the jobs, the livelihoods and, yes, the taxes that make for a good society. Only by embracing enterprise with every ounce of our being can we secure economic growth.

Economic growth can come from nowhere else. Governments cannot do it, but our tradesman, entrepreneurs, business owners and hard-working employees can. They are the lifeblood of our economy and it should be obvious to us all that enterprise is the only route to success. In business, people must get results. If they do not, they are out of business. That is the harsh reality that businesses face every single day and it is about time that our political class adopted those real-world principles. We must learn to like business—to love business—and to take a more business-like approach in government. We must learn to love the process of wealth creation. Government must make life easier for businesses to invest and hire new staff.

[Meg Hillier]

I agree with the hon. Gentleman that investment in business is a good thing and that growth in business is a good thing. Would he like to comment on the efficacies of the Government’s efforts so far to increase lending to, and other forms of financing for, business?

[Adam Afriyie]

I think the Government have been doing an incredibly tough job in incredibly difficult economic circumstances. The funding for lending scheme should work in time, but the deficit and the troubles we have today have all been caused by the Opposition. I will give way to anybody on the Labour Benches who will stand up and apologise to Britain for putting us in this huge hole. I am happy to give way to anybody—will they apologise?

I believe that it is the primary responsibility and duty of Government to create the environment in which enterprise can flourish, and that means unashamedly celebrating business success. Next time we hear of a British company making huge profits, I want to hear the House cheer. Even now I can feel a little shudder from Opposition Members. The reality is that, under Labour, the little guy stays little and the little guy cannot grow. In Labour’s time in office, it bred in this country a culture of state dependency, a trap not just for the least well-off but for the middle classes.

Labour politicians should be ashamed of themselves and the Labour leadership should be ashamed of itself for digging this hole. This is why I am a Conservative. This is why I believe the Conservative way is the best way forward for this country. We want, and I want, enterprise to bloom and succeed so that opportunities are available for everyone in our society.

Turning to the Budget, I welcome the reduction in corporation tax; it makes Britain a more impressive and attractive place in which to invest. I welcome the increase in the tax-free threshold that will allow lower earners to keep more of their money and encourage people off the benefits that Labour created and into meaningful work. I also welcome the capital gains tax relief that will encourage further investment in business and create more jobs. Above all, I welcome the reduction in employers’ national insurance for smaller businesses that are taking on new employees. The direction of travel is good, and we will look forward to digesting the details and examining the implementation in months to come.

In conclusion, I want to see our nation self-confident and at ease with itself, and my vision is of a Britain where people can succeed through hard work. Whether someone is first, third or 300th generation British, I want them to know that the Government are on their side. Business is the engine of the economy and social mobility, and a path to a better life. It gives people the chance to better themselves and forge a better future for their families.

[Jim Shannon (Strangford) (DUP)]

The Conservative party agreed to putting a married tax allowance in its manifesto and in the Budget, and the Democratic Unionist party wrote to request that as well? Does the hon. Gentleman feel some concern and disappointment that the Conservative party, and the Chancellor, have failed to deliver on the married tax allowance that they said they would introduce?

[Adam Afriyie]

The coalition Government and the Conservative Chancellor are doing the best they can to make life better for families in Britain, and the deficit reduction and other measures we have heard about today work towards that goal. I wholeheartedly support the Conservative part of the coalition in delivering those good things for Britain.

Business gives people the chance to better themselves and forge a better future for their families. A competitive job market cannot discriminate on the basis of gender or skin colour. I believe we have a moral, social and economic duty to embrace wealth creation. If we can learn to love wealth creation, I believe that Britain, once again, has a bright future as a world-leading nation.

16:02

[Stewart Hosie (Dundee East) (SNP)]

I apologise to the House for having to leave the Chamber for a short time earlier.

I welcome one or two of the things in the Budget statement—the changes to national insurance are very sensible, and the reiteration of the general anti-avoidance rule will be important in time. The announcement of flexible inflation targeting for the Bank of England could be significant in how the economy is managed in the future.

First, however, I would like to talk about tax. The Government are right to try to take as many people on low and modest wages out of tax as possible, and the savings so far of £326 a year for basic rate taxpayers, whose personal allowance rose last year from £6,475 to £8,105, makes sense. However, if we are “all in it together”, a saving of £326 makes rather less sense when we are persevering with a tax cut for millionaires who might consider a £326 saving no more than a decent lunch.

It is welcome that the Government are taking people at the bottom out of tax, but we should look at what they are doing to those in the middle, who have seen tax relief before the 40% band kicks in fall from £37,400 in 2010 to £34,370 last year. Therefore, for every £326 saved at the bottom on the 20p rate, people have had to shell out an extra £560 at the 40p rate. I welcomed the announcement that the basic rate tax threshold will increase to £9,440 and then £10,000, but the Chancellor has pulled the same trick with that as he did previously because relief for the 40p band will shrink again to £32,010, as announced last year. Importantly, that means that in the three years before today’s announcement, the Government have increased the number of taxpayers paying 40% tax from 10% to 13% of all taxpayers—a whopping 670,000 extra people. In the past 25 years—this is instructive—the number has doubled. Some 2.1 million extra people pay tax at 40%. The rate used to be for the rich, but the people paying it are not rich or wealthier.

It is not as if the economy has come out of the austerity period—the UK teeters on the brink of a triple-dip recession. People feel poorer because they are poorer. Last year, the Office for Budget Responsibility changed its forecast by reducing household disposable income every year from 2013 onwards. It has done the same for this year’s Budget. People are poorer for many reasons. In the 2010 Budget, child benefit was frozen, and later removed entirely for many people, costing families £2.5 billion a year. Households are and feel poorer because their wages have been frozen or capped while inflation has been higher than forecast. For pensioner households, notwithstanding the much vaunted triple lock, the pensions calculation has gone from the retail prices index to the consumer prices index.

What do the Chancellor’s previous decisions mean? The 1% benefit cap hits 1 million households in Scotland to the tune of, on average, around £165 a year; the tax credit changes hit 110,000 families in Scotland to the tune of around £700 a year; and the child benefit changes hit 91,000 families to the tune of, on average, around £1,400 a year.

I should explain that lesson in recent history. Last year’s Red Book told us that the Government’s discretionary fiscal consolidation—tax rises and cuts—would rise to £155 billion a year every year from 2016-17 onwards. I checked the Red Book today to find out the scale of the increase in the discretionary consolidation—tax rises and cuts—only to find that there is no 2017-18. Indeed, the Government have taken out 2016-17. They are hiding the future. The one thing we know from this year’s Red Book is that the Government continue to be determined to change the ratio of cuts to tax rises to 4:1.

We therefore know precisely where the Government’s priorities lie, and it is not with people, jobs or growth, as we have seen with the announcement of another £11.5 billion of cuts, the detail of which we will get in June. That tells us—the Chancellor is the only one who does not see this—that plan A has failed. He has failed according to his own metrics. The net borrowing requirement, which was meant to be £126 billion last year, falling to £92 billion for 2012-13, has been increased to £121 billion. The national debt—this should worry everybody—was due to peak at 92.7% of gross domestic product, or £1.36 trillion, in 2014-15 on the treaty calculation. It is now expected to peak at more than 100% of GDP—100.8% of GDP—on the treaty calculation by 2016-17. That means a national debt of £1.58 trillion. The Chancellor has therefore failed by his own measures.

On the fiscal rules that the structural current deficit should be in balance in the final year of a five-year rolling programme, and that debt should fall as a share of GDP, the objectives were highly dependent on GDP growth, which, as we have noticed in previous Budgets, is massively dependent, according to the OBR, on incredible, unbelievable, unmet and unmeetable rates of business investment. In 2010, the Government suggested that business investment had to grow by between 8.1% and 10.9%. By the time we got to the OBR’s fiscal outlook the next year, growth in business investment had turned negative. So it went on year after year. The Chancellor is at it again today, forecasting future business investment rates of 6.4% to 10.2% from 2013 onwards. These will not be met either, and the Chancellor will be back at the Dispatch Box making more excuses for why the failure is not his fault.

The biggest disappointment is that although the Government announced a modest stimulus of £3 billion a year in capital investment, it will not be immediate. The crisis is with us here and now. This is a delayed reaction Budget—it does not kick in until 2015-16—and implies a fiscal stimulus in capital expenditure terms of less than 0.25% of GDP. The benefits of that, if there are any, will almost certainly be offset by the other cuts, the details of which we will get in June.

We have an immediate crisis of huge proportions: the national debt is forecast to reach 100% of GDP; all the other metrics have failed; and the much-vaunted triple A rating has gone—that was not mentioned today. The Government’s response is a 0.25% of GDP capital expenditure stimulus, most of which will be gobbled up by cuts made elsewhere. That is a timid, weak and inadequate response. What should have been a bold demand to go for growth instead locks us into austerity. To be frank, it risks a decade of austerity and a decade of stagnant growth to go along with the Government’s failure to invest when it was necessary, and when they could, to get the growth in the economy that we all want.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. To accommodate as many Members as we can up until 7 pm—just to remind you, there are no wind-ups, so we will go right up to the wire—the time limit is now eight minutes.

16:11

[Mr James Clappison (Hertsmere) (Con)]

It is a pleasure to follow the hon. Member for Dundee East (Stewart Hosie). I do not agree with his overall analysis, but he deployed statistics in a careful, if selective, way. I disagree with the fundamental direction of travel that he indicated for the Government; he falls into the trap of allowing immediate difficulties to deflect the Government from the long-term commitment to maintaining financial control and dealing with fiscal consolidation.

It is against that background that I want to commend the Budget statement by my right hon. Friend the Chancellor, in particular for the commitment he expressed to fiscal consolidation and to maintaining control of public expenditure. The Chancellor set out the position clearly and frankly. It is refreshing to have such frank Budgets, particularly in comparison with the first 10 years of the previous Government, when we found out about undesirable developments later on by consulting the Red Book. I urge the Government to maintain a tight control of public expenditure.

Of all the statistics presented today, the most important is the trajectory of debt consolidation and dealing with the financial deficit—one to which I do not think the hon. Member for Dundee East alluded. Although he chose to refer to the national debt, he did not refer to the fiscal deficit, which is an important determinant of the national debt. As the Chancellor rightly said, the deficit has been falling. It has fallen by a quarter, and has now fallen by a third. The trajectory set out by the Chancellor was encouraging: falling by 6.8% next year, 5.9% in 2014-15, and down to 2.2% by 2017. Cyclically adjusted, as I understand from the Red Book, that would amount to 0.6% in 2017, and that is very important.

The Leader of the Opposition gave a disappointing performance and missed an opportunity to set out his plans for the future. He was very keen to draw attention to the downgrade by Moody’s. The hon. Member for Dundee East said that that had not been mentioned—I am mentioning it now. The downgrade took place, and people can make of the ratings agency what they want, but it would be instructive to refer to what was actually said by Moody’s at the time and the reasons it gave for the downgrade, particularly the weakness in the eurozone. On the long-term trajectory, Moody’s stated:

“The stable outlook on the UK’s Aa1 sovereign rating reflects Moody's expectation that a combination of political will and medium-term fundamental underlying economic strengths will, in time, allow the government to implement its fiscal consolidation plan and reverse the UK’s debt trajectory. Moreover, although the UK’s economy has considerable risk exposure through trade and financial linkages to a potential escalation in the euro area sovereign debt crisis, its contagion risk is mitigated by the flexibility afforded by the UK’s independent monetary policy framework and sterling’s global reserve currency status.”

On the last point about our ability to set an independent monetary framework, therein lies another tale, as far as the Leader of the Opposition is concerned. The Opposition say that they are not committed to joining the euro at the moment, but I have not heard them rule out joining it at any stage. I believe that the benefit of an independent monetary framework is a permanent, not just a temporary one, as has been proved over the last decade.

[James Wharton (Stockton South) (Con)]

Does my hon. Friend think that there will long be a euro to join?

[Mr Clappison]

I was one of those who joined the crusade led by my right hon. Friend the Member for Richmond (Yorks) (Mr Hague), now Foreign Secretary, against the euro. Some of the comments made at the time about that crusade, which has been of lasting benefit to this country, have come back to haunt those who made them.

The Leader of the Opposition missed the chance today to set out his plans in detail. He said that the Government had been downgraded and he referred to borrowing, but he did not say how much more borrowing he would undertake, how it would be spent, how it would affect the economy, what effect it would have on our international credit rating or how those who take business and monetary decisions would view this country. We need to hear much more detail from the Opposition. We heard a lot about the millionaires’ tax cut. I do not think that Opposition Members are going to get much more mileage out of that. We all remember that the 50p tax rate was put in place in the last five minutes of the previous Labour Government.

The Opposition’s rhetoric runs the risk of creating an anti-business and anti-success environment and of deterring investors from investing here and earning rewards. That contrasts with the policies we heard from the Government today. I commend their priority in giving help to business, particularly in reducing the rate of corporation tax, which I think is an achievement and will give us a good rate compared to our competitors. I also applaud the employment allowance, which is an imaginative proposal that will help many people and small businesses. Of course, I also applaud the help being given to hard-working families through the tax-free child care, the fuel duty freeze and the beer duty cuts, which will be of particular interest to many of my constituents who have lobbied me from the real ale society. I also welcome the Government’s plans to help more people to buy their own homes. I agree with the priorities the Government have set, with the funds available, within this tight fiscal framework and given the desire not to make unfunded tax cuts. They have struck the right balance in first helping business and hard-pressed families with the pressures they face.

For future reference—this is not intended as a criticism now—I would urge the Government to consider the position of, and to give some assistance to, savers, as the Conservative party committed to doing in a previous manifesto. The savings environment is not the best for small savers, particularly older people looking to supplement their pensions with interest on their savings. They have been hard hit by a combination of the interest rates offered by the financial institutions and the effect of inflation. We need to look carefully at its effect and what more can be done to help savers.

Over the past week or so, we have heard a lot about the effects of the savings levy on Cyprus, but I understand from a calculation that the House of Commons Library made for me that a basic rate taxpayer saver, having obtained the best possible current easy access account, with the forecast rate inflation in the country, at the end of four years will have seen their savings lose in value the equivalent of the 6.75% levy on Cyprus savers. That is the hidden effect of inflation on savings. We know that inflation has been rising and that savers cannot obtain high rates of interest from any of our financial institutions. Very few if any will beat the rate of inflation, and certainly not if one is a basic rate taxpayer.

I urge my right hon. Friends to look carefully at that issue and, in particular, at helping savers with individual savings accounts by giving more flexibility to ISAs. That could be done by increasing the limit for cash ISAs—this point has been made in many circles—up to the same as that for stocks and shares ISAs, to give people the opportunity to save £10,000 tax-free in cash, and also by giving people the opportunity to convert stocks and shares ISAs into cash ISAs. People cannot currently do that—although they can do it the other way around—yet it is something that some in retirement or approaching it may wish to do. ISAs are the most democratic form of saving, if I can put it that way. If future help is to be made available, I would urge the Government to ensure that it goes to our savers.

I applaud the choices we are making for today’s purposes in the Budget. It is right to help hard-pressed families and businesses for the future. This is a business-friendly Government who are taking the decisions to lay the foundations for successful businesses in this country in difficult economic circumstances.

16:20

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

It was in June 2010 that the Chancellor presented his emergency Budget. He said then that the measures he was announcing had

“set the course for a balanced budget and falling national debt by the end of this Parliament.”—[Official Report, 22 June 2010; Vol. 512, c. 180.]

However, today our economy is flatlining. We have a cost-of-living crisis, borrowing is increasing and we have lost our triple A credit rating. Since the last spending review the economy has grown by just 0.7%, rather than the 5.3% that was forecast, and last year the country went through a double-dip recession. Instead of the books being balanced by 2015, as the Chancellor promised, national debt as a percentage of GDP is not predicted to fall again until 2017-18. The whole country can see that, when judged by actions not words, this Government have failed every test they have set themselves. It is people up and down the country who are paying the price for their failure—families hit by the mummy tax; part-time workers who have lost tax credits; the 250,000 people in this country who have had to access emergency food aid or visit a food bank last year so that they did not go hungry; and the 200,000 more children who will be pushed into poverty as a result of this Government’s assault on support for families.

Today was a chance to change course—a chance to put right the mistakes of the past 33 months and correct a failing economic strategy. Instead, all we got was more of the same from a Chancellor and a Prime Minister who, despite all the evidence, refuse to accept that their plan simply is not working. In 17 days, millionaires will get a tax cut, so why do my constituents have to wait more than 900 days for help with child care?

[Angela Smith]

It has emerged today that £38.5 million of shares have been given to nine top executives by Barclays bank. Does not that underline the point my hon. Friend is making about how millionaires seem to be faring much better under this Government than people on low pay or middle incomes?

[Luciana Berger]

It is incredibly insensitive that that announcement was made today. People up and down this country will rightly be shocked by it. In a moment I will reference the fact that we are seeing the gap between the richest and the poorest in our society widen. The Government should be doing everything to ensure it is closed.

I acknowledge and welcome the extra money we have heard about today for infrastructure projects, but I note that the majority of it will not be delivered until 2015-16, while work on many of the projects is not expected to begin for years. We must not forget that the Chancellor has spent £12 billion less on infrastructure over the past three years than under the plans he inherited. What is needed is a plan to get our economy growing and to create more jobs across the country right now. The fact that we have a chronic shortage of jobs was reinforced to me last week when I held a jobs fair in my constituency, which was attended by 66 companies. They ranged from local businesses such as the Liverpool Dental Spa and Davey’s Chemists to big global companies such as Nutricia Danone. On the day, more than 500 different job and apprenticeship opportunities were on offer.

My jobs fair last Friday was a great event, with more than 2,000 people coming through the door. That far exceeded my expectations; we had printed only 1,000 welcome packs. Despite what the Chancellor would have us believe, I did not meet anyone whom he would describe as a shirker. That point was also made in a letter to the Liverpool Echo this week from Bernie Hunt of Kensington Fields, a section of which I want to share with the House. Bernie said:

“What a surprise I had on March 15. I called in at the Wavertree Jobs Fair…half expecting to have the car park to myself as Mr Cameron’s Welfare State dependents were supposed to be too busy watching daytime TV recovering from the dole fuelled bender from the night before. What I actually found was those desperate for the chance of a job, or even training for a job, packing the place to the rafters.”

The fantastic turnout reinforced the fact that people who are out of work are not shirkers, but the real problem is that there are not enough jobs. Even if we filled every one of those 500 job and apprenticeship opportunities available at the jobs fair, three quarters of those who attended would still have missed out.

We have learned today that 2.52 million people are still out of work, with youth unemployment at almost 1 million again. There are still more than five people chasing every job vacancy, and even those who can find work still have to accept lower living standards.

[Alison McGovern]

I hope that my hon. Friend will also comment at some point on apprenticeships and on the fact that part of the reason for the shortage of jobs in her constituency, and the mismatch of Government spin, is the rebadging of existing jobs as new apprenticeships. Does she not think that the Government should come clean about that?

[Luciana Berger]

I have spoken on a number of occasions on the issue of youth apprenticeships, particularly those for people under the age of 19. We have seen a decrease in the number of such apprenticeships. As my hon. Friend says, there is also the issue of the rebadging of different types of jobs. The House will have heard many a representation from the Labour Benches about the Government’s consistent claim to have created 1 million jobs in the private sector, but we know that many of those jobs are simply public sector jobs that have been rebadged.

There has also been a shift in the kind of jobs available. The number of people working in full-time jobs fell in the last quarter. It is now down 378,000 since the beginning of the 2008 recession, while the number of people in part-time work has risen by 572,000 in that period. Since the general election, people have taken an average £1,200 pay cut because jobs are so hard to come by.

[Charlie Elphicke]

If jobs are so hard to come by, why does the hon. Lady think that the Office for Budget Responsibility is predicting that 600,000 more jobs will be created next year, and why have we seen 1 million more private sector jobs since the election?

[Luciana Berger]

I thank the hon. Gentleman for his intervention, but I refer him to the comments that I have just made about the rebadging of public sector jobs. Many fact checks have been done to determine what those jobs actually are, as the intervention from my hon. Friend the Member for Wirral South (Alison McGovern) highlighted. Many of them are now apprenticeships. We also know that many of the assessments by the OBR have had to be downgraded because its estimates have often been too optimistic.

It is in the context of this maelstrom of frozen wages, rising prices and reduced opportunity that the Government are making some of the most draconian cuts to our public services and welfare, despite the fact that the OBR has said that those cuts are reducing growth in our economy. The cumulative impact of the cuts has been to widen the gap between the richest and the poorest, and to ask the most vulnerable and disadvantaged in our society to pick up the bill for the Chancellor’s mismanagement of the economy.

Today should not have been about more of the same; it should have been about changing course. If this had been a Labour Budget, we would have acted to boost confidence, create jobs and support struggling businesses. We need to bring forward long-term infrastructure investment in schools and transport, and we need to use the money raised from the 4G mobile spectrum auction to build thousands of affordable homes—getting builders back to work, creating the homes we need and strengthening our economy for the future. Alongside that, we would have cut VAT temporarily, including to 5% on home repairs, maintenance and improvement, which would have helped the energy efficiency side of our economy. The result would have been a plan for a steadier and more balanced pace of deficit reduction with measures that support our economy and create jobs now.

Government Members say that we cannot do that because it would mean more borrowing. They neglect to mention that it is their policies that are already leading to much higher borrowing. The Government and this Chancellor are already borrowing £212 billion more than they said they would to plug the holes in our public finances caused by a flatlining economy and a higher unemployment bill. The Government argument seems to be, “We will not borrow to grow the economy, but we will borrow to shrink it”. Instead, the real question is not whether we should borrow or not, but what we are borrowing for. Are we going to continue to borrow to pay the cost of the Tory Government’s economic failure and to keep people at home out of work or are we going to act to support those small businesses that want to invest in new equipment, to kick-start house building, to support research and development and investment in low-carbon energy and high-tech manufacturing with a proper plan to get people into work? In other words, we need a real plan for jobs and growth, which would be fairer, more successful in getting the deficit down and make Britain better off for the future.

[Mr Iain Wright (Hartlepool) (Lab)]

On a point of order, Mr Speaker. It says on page 93 of the Red Book:

“The Government will…publish the Business Bank’s first business strategy”

this coming Friday, on 22 March. Given that you, Mr Speaker, have been very clear that important announcements should be made first to this House, and given that it is my understanding that the Secretary of State for Business, Innovation and Skills will open tomorrow’s Budget debate, can you give me any guidance about the powers you have either for the publication to be brought forward to tomorrow to allow hon. Members to question the Secretary of State when he is at the Dispatch Box during the debate or to provide for an oral statement to be made to the House on Friday morning? Mr Speaker, how can we question the Government on this important topic?

[Mr Speaker]

I am grateful to the hon. Gentleman for his point of order. I do not have formal powers in this regard and have only just had notice of what the hon. Gentleman sought to raise. What I would say to him is as follows: first, the Secretary of State will have heard—or will soon hear—of the point of order, and it is perfectly open to him to adjust his plans accordingly if he judges it appropriate to do so. Secondly, my sense is that this is a matter that can reasonably be expected to be raised in the debate, and the versatility, not to mention the indefatigability, of the hon. Gentleman as a parliamentarian, suggests to me that he himself is likely to do so. As to whether a statement or a publication intended for Friday will be brought forward, I cannot say, but Ministers will have heard what the hon. Gentleman has said, and I will keep an eye on the matter.

16:33

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

I am very pleased to catch your eye in this debate, Mr Speaker, and I ask you and the House to forgive me for breaking the usual convention in that I beg leave to leave the Chamber immediately after this speech because I have to chair a Committee upstairs. I would normally stay to listen to the following speaker.

I commend my right hon. Friend the Chancellor for his Budget, particularly for getting the macro-economic situation right. I would like to quote again from the Library note cited by my hon. Friend the Member for Hertsmere (Mr Clappison), who is no longer in his place. He quoted figures showing that the deficit is already down by a third and that net borrowing as a percentage of GDP is set to fall to 5% in 2015-16 and 2.2% in 2017-18. Those figures are taken from the Red Book. What is absolutely staggering is the fact that the last Labour Government inherited a figure from us of just 0.7% in 1997, which rose to a whopping 11.2%—this is contained in the Library note—in 2009-10. If there were ever any doubt about the fact that the last Labour Government—under the stewardship of the shadow Chancellor—were at the root of all our present economic problems, those figures would prove it to be the case. In absolute terms, our borrowing rose from £5.8 million a year to £158.9 million in the last year for which Labour was in office.

I believe that, surprisingly, the current employment situation shines a bright light on our economy. It was interesting to hear the Chancellor say this afternoon that the private sector was creating six jobs for every job lost in the public sector. We have already created more than 1 million jobs in the private sector in the two years since the last general election. It was also useful and, indeed, heartening to hear the Chancellor estimate that 600,000 jobs would be created in the next year alone. We are creating more jobs than France, the Netherlands, Japan and the United States, and we are outstripped only by Germany in this respect.

[Lindsay Roy (Glenrothes) (Lab)]

It is welcome that there are additional jobs in the private sector, and we commend that, but has the hon. Gentleman any idea how many jobs have been lost in the private sector?

[Geoffrey Clifton-Brown]

I think someone is telling me that 400,000 jobs have been lost in the private sector. However, I am talking about net job creation, which amounts to just over 1 million. That is the important figure. Of course, in a dynamic economy some jobs will always be lost and some will be gained, but as long as more are being gained than lost, we are on the right side of the argument.

The Chancellor mentioned that the eurozone had contracted by 0.6% in the last quarter. That, of course, is one of the reasons why our economy is so difficult to repair. As the Red Book makes clear, 42% of our exports go to the eurozone and 16% go to the United States. Both the eurozone and the United States are experiencing little growth, and the economy of the eurozone is contracting. However, there are some bright spots. Between 2009 and 2012, our exports of goods to Brazil, Russia, India and China increased by 49%, 133%, 59% and 96% respectively. Last year, indeed, we were the only country in Europe that managed to increase its exports to China. The international markets have endorsed the Chancellor’s policy in the form of our 10-year bond yields, which, according to the table in the Red Book, would be virtually the lowest in the eurozone, outstripped only by those in Germany.

I am struck by the fact that, according to KPMG’s table, Britain is the best place in which to do business—better than Switzerland, the United States and France. However, I must issue a small caveat to my hon. Friend the Exchequer Secretary. I fear that we are in danger of losing some of our foreign direct investment, the inward investment that sustains 40% of our GDP. Until recently we were in a fortunate position, in that 70% of all the European corporate headquarters were based within 75 miles of Heathrow, but owing to our current indecision about where our major hub airport should be located, we are losing those corporate headquarters by the day. I think that we should persuade all parties to agree that whatever Sir Howard Davies comes up with in relation to the hub airport should be implemented as soon as possible after the next election, so that we do not lose that international place. Let me also say that, while I fully support High Speed 2, our most expensive engineering project ever, the route should not be designed in isolation from the location of our major hub airport.

I warmly welcome some of the factors that KPMG identifies as making Britain one of the best places in which to do business. I particularly welcome the Chancellor’s announcement today that all corporation tax, whether on large or small companies, is set to fall to 20%. I think that that is a huge achievement, and I think that it will continue to encourage companies to come to this country. I also welcome the fact that the first £2,000 of national insurance will be left in the pockets of the companies themselves. I welcome the fact that the small business rate will be continued and that the Chancellor is abolishing the fuel duty rise this autumn. All those are seen as welcome steps to encourage employment. I particularly welcome the fact that well over half a million new apprenticeships have been established this year, including 570 in my constituency—that is a 63% increase on the figure for the year before.

I welcome my right hon. Friend the Prime Minister’s initiative at the G8 and G20 to make sure that although we lower the rate of corporation tax, we require companies that make profits in a country to pay a reasonable rate of tax on the profits in that country. Our measure will help not only this country, but countries in the third world, which often have difficulty collecting corporation tax from big multinational companies on profits made in them. As the Chancellor said today, these rules—these international tax treaties—were written in the 1920s, and their updating is well overdue.

Let me deal with some more domestic issues. As chairman of the all-party group on wine and spirits, I welcome the Chancellor’s announcement that the beer duty will fall in this Budget. However, his announcement that the 2% alcohol escalator will continue will mean that wine duty will have increased by 50% since 2008, while the duty on spirits will have increased by 48%. The industry supports 2 million jobs, many of them for young people in the hospitality industry, and it contributes £16 billion-worth of duties. There are signs that that is beginning to decline because of the rise in the duty escalator. Alcohol consumption has fallen by 13% since 2004 because of the responsible measures the industry has taken. Until now, the duty on beer and wine per unit of alcohol has been broadly taxed the same. In 1983, the European Court of Justice warned the UK that it is illegal for the UK to tax wine and beer at different rates, because they are seen as competing products. There must now be a real risk of a legal challenge, and I ask the Exchequer Secretary to consider this matter seriously to see whether something can be done about it before the Finance Act is introduced.

In conclusion, there are many things to welcome in this Budget. For individuals who want to work hard and keep more of their own money, I warmly welcome the fact that anybody earning less than £10,000 will not pay tax. We are helping people to buy their own house, and I have only one thing to warn the Exchequer Secretary about on that. As he and others will have realised, house prices in central London are rising very fast—they are literally increasing by the day—and I hope that these measures will not lead to a housing boom in London. We are also helping people with the cost of living, helping people with their pensions and their retirement, and helping people to keep their hard-earned life savings from being removed to pay for the cost of their elderly care. There is a huge amount to welcome in this Budget, but it has not been welcomed by the carping Labour party, which caused many of our economic problems in the first place.

[Mr Speaker]

I must say to the hon. Member for The Cotswolds (Geoffrey Clifton-Brown) that it is deeply irregular for a Member to toddle out of the Chamber immediately upon the conclusion of his speech in expectation—and anticipation, no doubt—of a very important engagement. I dare say that he is leaving the Chamber in order to chair the Committee of Selection meeting at 4.45 pm. It is true that that is a most burdensome and important responsibility, but had I known that he would be doing that immediately afterwards, I would not have called him. I put it to him politely that there is a much greater responsibility upon him to sit in the Chamber and listen to the hon. Member for Great Grimsby (Austin Mitchell). If he does have to go, I suppose that we will have to tolerate it, but I hope he will toddle back immediately afterwards.

[Geoffrey Clifton-Brown]

I did actually mention this to the Deputy Speaker when he was in the Chair before you, Mr Speaker. I said that I would be more than happy to be called at any time later in the evening. So I will be guided by whether you want me to stay or to go to chair the Committee, Mr Speaker.

[Mr Speaker]

The hon. Gentleman has acted in good faith and that is respected. If his colleagues are expecting him, so be it. What I politely ask, because the tradition in the House is an important one, is that if he feels able he comes back to listen to other parts of the debate, as that would be appreciated by the House. We do not wish to detain him now if his colleagues are waiting for him, and we recognise that he meant well by the House. The hon. Member for Great Grimsby will have one fewer member of his audience.

16:44

[Austin Mitchell (Great Grimsby) (Lab)]

I was rather upset when I found that I need not have bothered coming to listen to the Chancellor’s petulant prose because I could have read it all in the Evening Standard, stayed in bed and not suffered the indignity of coming along early. I remember—few will—that the last Chancellor who spilled the entire contents of a Budget to the Evening Standard was Dr Hugh Dalton in 1947. He promptly resigned, which is an example that I commend to the Chancellor, as it deserves to be followed.

As I decided to come to the Chamber, I was rewarded by seeing the Chancellor excel himself in some ways. All the trailers and the headlines in the newspapers said that the Budget was going to be boring, mean, “bleak”—the Financial Times said that—with no change, and grim. In fact, it lived down to all those trailing adjectives: it was a no-change Budget in a declining economy. The main cause of anxiety among Labour Members is the fact that the Chancellor has obstinately adhered to a set of policies that have not worked—conspicuously so—and which have damaged the country’s prospects. It is a Budget proposed for a nation in comparative decline. We have missed out on 4% of GDP—the economy has shrunk that much since 2008—and we have missed out on all the normal growth that would have occurred since then. That is a huge loss in the economy: a smaller economy is bearing a heavier burden of debt. It is difficult, in that situation, for an economy to keep the standards, the services, the social welfare and the spending of a decent society.

Moreover, that economy cannot pay its way in the world. We have a huge and, until the current recession, escalating balance of payments deficit. In such cases, people either have to borrow overseas to finance the deficit, or they have to sell assets at home. We have been selling assets apace in this country: we have sold companies—we must be the most colonised industrial economy in the world as a result of foreign takeovers, which earn fees for the City. We have sold farms, houses and anything that moves. We have set ourselves up as “Tax Haven on Thames”, and international capital and funny money—the funny funds and their manipulators—have been encouraged to come here on the promise that they will pay low taxes. They can go in for all sorts of tax evasion schemes, such as those that the Public Accounts Committee has unearthed, with only soft-touch regulation. In fact, all that companies that come to the UK to fiddle their taxes have to fear is my right hon. Friend the Member for Barking (Margaret Hodge) and the Public Accounts Committee, which has unearthed what has been going on. That must induce terror in them, but the Government have not done anything about it.

Even today’s measures are small beer compared with the scale of the problem of tax evasion and avoidance. We are an economy hung down with debt, and that is true of the state and of companies, particularly those that have been taken over by private equity and loaded down with debt, and of individuals. People are not spending on the high street, and there is no demand so the shops are closing. Who is going to invest in an economy in that state, when there is no prospect of profit because demand is so low? Who is going to buy houses in an economy in that state, as people do not have any prospect of keeping their job for a long period? Uncertainty creates the problem.

The banks are not lending, and we have relied on the Bank of England to do the heavy lifting by effectively printing money, but that money has all gone to the banks, which stash it away in their reserves and do not loan it. The Bank of England’s monetary policy cannot replace fiscal policy: the Government must bear their share of the heavy lifting, and not leave it all to the Bank of England. I am glad to hear that the rubric of the Bank of England is going to be changed, and I hope that it includes economic growth and competitiveness. Too much has been left to the Bank, and too little has been done by the Government.

That is the economy today, and it is a disastrous situation, as confirmed by the report by the Institute for Fiscal Studies. We are bumping along the bottom, and we are heading for a triple-dip recession. That is the picture that the Chancellor should have dealt with, but he failed to do anything. The good things that he did were postponed to 2014 or 2015 in many cases. The Budget is not adequate to deal with the problem.

What we need to do is spend. That is the only way out of a recession like this. A litany of how we must not borrow more and that borrowing is evil is all very well, but borrowing for public purposes is very different from borrowing for private purposes. Borrowing to spend for public purposes creates an economic stimulus and stimulates growth, and that is what we have to do. It is the only way out of the present situation. I am sorry to go on about it, but to Government Members’ taunts about whether we would borrow more, I say yes, we must borrow more. We must borrow to spend to do things to stimulate the economy, to stimulate the animal instincts, as they are called, of the cautious capitalists in this country, to get growth going. Once we get growth going, the problem solves itself. We can only pay off debt in an economy that is growing, as Labour did in our first two or three years of office. We paid off an enormous amount of debt because the economy was growing. We can do that again, but only with growth. We cannot do it by deflation, because deflation increases debt. Deflation means we have to pay for unemployment: we receive fewer taxes and have to cover all the costs of companies going bust and all the weaknesses of the economy. There is an increase in debts from deflation, but there is an increase in the ability to pay off debt from expansion. We therefore have to borrow to expand.

I welcome the Chancellor’s measures on housing, but they are all about owner-occupiers. The big need at present is to provide houses for the two fifths of our population who cannot afford to buy them and to whom the banks will not lend. The mortgages are not forthcoming in any case, but those people are so impoverished that they need public housing to rent. That is what we need to build primarily. Why not have a massive housing programme—300,000 houses over two years? We are already building 100,000 houses fewer than this community needs, and it is those who cannot afford to buy, and who particularly need housing, who are suffering the pain of the housing crisis and the present housing shortage. Borrow, spend, build houses, invest in the future, invest in green energy, which like ICT in the ’80s is the coming future; borrow and spend, stimulate and grow—that is the only way out, but the Chancellor proposed none of that and that is why the Budget is such a failure.

16:52

[Gavin Williamson (South Staffordshire) (Con)]

It is always a great pleasure to follow the hon. Member for Great Grimsby (Austin Mitchell) with his candour and honesty in saying that Labour would always want to spend more. Many of my constituents and most of the country recognise that Labour always wants to spend more. I always found it most unusual when, before entering the House, I used to listen to the Budget statements of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) who professed his devotion to prudence. On the Floor of the House he would constantly hammer home the importance of prudence, and how it was central to everything that he did. If he loved prudence that much, he must have been cheating on prudence with someone who was very reckless, as all the money was spent. The destruction that he has wrought on the economy has been vast.

The Chancellor has aimed to set out a plan to continue to support British business and British families. It is not possible to create an economy overnight that has business confidence. It is not possible to build an economy overnight where there is a massive investment in technology and engineering—it has to be done over time. That is why we should all welcome the Chancellor’s continued moves to bring down corporation tax, from 28% to 21% last year, and 20% going forward.

The constant drive to lower corporation tax will build confidence across the globe that Britain is a place in which to invest. Page 41 of the Red Book shows the dramatic change in business confidence in the UK. In 2007 it was rated at just under 30%, and as recently as 2009, it was rated at under 20%, whereas if we look at comparator countries, such as Ireland, the Netherlands and Switzerland, we see that the percentage ratings were between the mid-80s and the mid-70s. That confidence has totally changed how people view the United Kingdom’s tax competitiveness. Indeed, we have seen the growth of confidence that Britain is a good place to invest as a tax competitive area: it moved from below 20% in 2009 to above 70% in 2012.

Only the other day I met representatives of Caterpillar, a major investor and employer in the United Kingdom. They said that what international businesses need is certainty. They need confidence that the tax regime will not constantly change and that if they invest in this country, their investment will be safe. They reported that that confidence is starting to return, because it is quite clear that the Government want to deliver a low rate of corporate taxation, and it is not going to go down one year and then up the next; the trend is to reduce it continuously. That is what international business wants and that is what will benefit Britain.

Another measure that I do not think has been commented on so far, but which will be of great value to all businesses, especially those in engineering and manufacturing, is the increase in R and D tax credits by up to 10%. Members in all parts of the House talk passionately about the need to promote and encourage engineering and manufacturing. If we want to do that, we must promote and encourage the R and D that is so vital for their success. We in the Chamber—on both sides, I believe—recognise that technology and the people going into those industries are absolutely vital to rebalancing our economy, and so too are the changes to R and D tax credits, both in the way they are accounted for and the amount of money that companies can get back.

In South Staffordshire, we are fortunate enough to have had a great amount of economic success, with rapidly falling unemployment, and major investment coming into the area. Over the past three years we have had announcements of £550 million of investment in the constituency, half a billion of which is coming from Jaguar Land Rover. We see that manufacturing success not only in South Staffordshire but right across the west midlands, and it is being driven and supported not only by R and D tax credits but by the Government’s approach to apprenticeships, taxation and the regional growth fund, which is creating key incentives not only for businesses currently domiciled in the UK but for those that want to invest in Britain or in the European area.

I firmly believe that the measures that have been taken on R and D tax credits are to be welcomed. I also think that the work that is being done on the Technology Strategy Board is making a solid difference by helping businesses of varying sizes, whether they employ a few hundred people or many thousands, to access universities and different areas of funding in order to take the risk and develop the ideas and products that will make Britain more competitive in future.

The issue of financing has been touched on. The hon. Member for Hackney South and Shoreditch (Meg Hillier) talked about lending, particularly to small businesses. I have to say that she and I are, to a certain extent, in agreement on one thing she mentioned. She touched on the Government’s strategy of funding for lending. Currently, that is available to banks, but we should be looking at how we can make it much more widely available, because it would be easy to expand it to all financial institutions.

In my constituency, many businesses are served by the Black Country Reinvestment Society, a mutual that helps many small and medium-sized businesses to get the funding that they would not otherwise get from banks. I think that by changing the funding for lending scheme we would be able to help many similar organisations right across the country.

[Charlie Elphicke]

Does my hon. Friend think that in this country we do not make enough of mutual finance providers and that we should make more of them?

[Gavin Williamson]

My hon. Friend is absolutely right. We need to be more imaginative in how we get finance to the small businesses that want to grow.

A little less than a year ago, I had an Adjournment debate on the need to get rid of the beer duty escalator. I am incredibly pleased that the Chancellor has reduced beer duty by 1p. It might not sound much, but it will make a real difference to the 83 pubs in my constituency and to the three small breweries in Kinver, Enville and Essington that are employing people in my constituency. I hope that this will act as a stimulus not only to the brewing industry but to the pub industry right across South Staffordshire, across the west midlands, and across the country. It is my firm belief that this Budget has not only been good for brewers, manufacturers and business, but good for Britain.

[Mr Speaker]

It is a pleasure to welcome the return of the Chairman of the Committee of Selection; I thank him for coming back to the Chamber so quickly. I call Alison McGovern.

16:59

[Alison McGovern (Wirral South) (Lab)]

Thank you, Mr Speaker. I am pleased to have caught your eye in this debate on today’s Budget.

I want to talk about three issues: interest rates, under-employment and the place of young people in our economy. Before I do so, let me be clear that in today’s Budget we heard conclusively that the Government have failed on every economic test they set themselves. We heard the Chancellor having to announce those debt figures. How he must feel he has let himself down, but he has not just let himself down; he has let the whole country down. He is not just the downgraded Chancellor; he has now had to come and tell us how much more he is borrowing.

The Bank of England has kept interest rates at a historic low. The Chancellor had more to tell us about the framework within which the Bank of England operates. When he was talking about the arrangements for setting interest rates in the Monetary Policy Committee, I noticed that some Government Members’ eyes were glazing over slightly, so let me give them a warning. The Prime Minister has lauded the low interest rates, and he is right to do so, because, frankly, it is the only thing that has gone right. In fact, the Government’s saving grace of low interest rates has resulted from the use of the one economic tool that is not under their own management. While the Governor of the Bank of England has got his foot to the floor in holding interest rates low to try to support the economy, the Chancellor keeps slamming on the brakes. Is it any wonder that we are seeing such poor growth? Under the Chancellor’s stewardship, we should have had growth of about 5.5%; in fact, it has been less than 1%.

It is important that the Bank of England uses its economic tools properly. What the Chancellor said about having a broader remit and taking the long-term view on interest rates is extremely important, and I welcome that discussion. But let us be clear that using monetary policy in this way will not help rebalancing; in order to achieve this, we need serious investment. Government Members need not take my word for it; they need only listen to the Business Secretary, who has clearly been listening to the shadow Chancellor, because they seem to be in agreement that we need a different plan. When the Chancellor made his announcement about the national insurance position of small companies, I wondered whether he had taken a leaf out of the shadow Chancellor’s book and it was an announcement about the Government’s commencing our five-point plan. The Minister is giving me a tentative smile, and being a cheerful soul I will take that positively. Before Government Members talk in too-positive terms about the Budget and the level of income tax, they should worry about food prices, house prices, housing costs, and the real value of the money in people’s pockets.

The Government must address under-employment. Sadly, unemployment has gone up today, but we should be grateful that, despite the fallout from the crash, it has not reached the extreme levels of Greece and Spain. Some people say that they cannot understand why unemployment is not worse when growth is next to zero. In fact, the Chancellor said today that it continues to be a surprise. I do not know why he thinks that, because what is going on is under-employment. People cannot get the hours they want.

I have asked Ministers about under-employment on three occasions in the past month and they have not provided an answer. I have asked the Minister of State, Department for Work and Pensions, the hon. Member for Fareham (Mr Hoban), and the Leader of the House, and on 25 February the Chancellor dismissed out of hand my concern about under-employment. Nobody in government seems to accept that it is a problem. They talk about their 1 million new jobs, but I believe that up to a fifth of them could be the result of reclassification.

On the growth in part-time work, my constituents tell me that they cannot get the hours they want. I hope that I have made it abundantly clear to Ministers that this is a massive problem.

[Luciana Berger]

Has my hon. Friend, like me, heard stories of local supermarkets receiving more than 30 applications for increased hours in order to meet the new requirements for tax credits? The unavailability of those hours means that people are struggling to get by as a result of the decrease in tax credits.

[Alison McGovern]

Of course I have. I thank my hon. Friend for flagging up the issue of the changes made to tax credits, which mean that people now have to work for 24 hours, rather than 16 hours. That alteration has added insult to injury and disintegrated work incentives.

All Ministers need to do is look at their own labour force survey, which shows that between 2008 and 2012 under-employment went up from just over 2 million to just over 3 million. Do Ministers read the labour force survey? They should do so if not. Spare capacity in our economy is causing real problems. Not only does it hold back our economic development, but it causes real unhappiness.

Hon. Members may remember the Prime Minister talking about a general well-being index when he came into office, but I dread to think what its results would be given people’s misery at not being able to get all the hours they want at work in order to put food on the table for their family.

On the subject of unhappiness, I must mention youth unemployment. Just under 500,000 young people are claiming the dole. Treasury Ministers need to speak to people at the Department for Work and Pensions and find out what on earth is going on. They cancelled the successful future jobs fund in favour of the failed Work programme; the Government’s claims about apprenticeships are, as has been said, simply a rebadging exercise; and the DWP itself knows that its policies are failing. I have asked questions about the Department’s business planning projections, which show that the number of people under 24 to whom it will have to pay the dole before the end of this Parliament is going to increase. That is a disaster for our country. We need a better policy to help young people get into the labour market.

In the time remaining, I want to say what I think that policy should be. We have hammered local authorities despite the fact that it is basic economics to understand that unemployment forms in clusters. Specific localities face significant unemployment, especially among young people, who want a place in the labour market.

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

Is my hon. Friend as concerned as I am that the areas that will be hardest hit by local government cuts are those that tend to have the highest levels of unemployment?

[Alison McGovern]

That is precisely my concern. In fact, there is a correlation between the level of unemployment in a particular local authority area and the extreme nature of the cut it faces—the more people out of work, the bigger the cut. That makes no sense at all when we all know that some of the most successful back-to-work programmes have been led not by central Government, but by local authorities, which understand much better than Whitehall the barriers that people face in getting into work.

I cannot emphasise enough how the hammering of local authorities has impeded our ability to get young people into work. That is especially true of Merseyside. The biggest barrier to the economic development of Merseyside and the Liverpool city region is the skill level. We need a positive, proactive, local approach to improve people’s skills and help them get back to work. We heard nothing from the Chancellor about that problem in his Budget.

If the Chancellor were here, I would ask him whether he realises the damage that he is doing. I hope that the Exchequer Secretary will pass on that question. Constituent after constituent comes to my surgery despondent about their chances of getting a decent job. They want desperately to work more hours, but are not able to get them. I ask Ministers to come with me to Jobcentre Plus in Bromborough and meet the people there who are depressed and despondent. I ask Ministers to think about whether they could have done better today. They are already adopting some of Labour’s five-point plan. Could they not adopt some of our other policies too? I think that they could have done better today. My constituents deserve a lot better.

17:11

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

We have heard significant news today that we had not heard before. The first piece of news is that the deficit has been cut not by a quarter, but by a third. We know that the conditions are tough, but that is further proof that the Government are making progress with clearing up the absolute mess that we inherited from the Labour party.

We also heard that the economy has created not just 1 million net new private sector jobs under this Government, but 1.25 million. That is six extra private sector jobs for every job that we have unfortunately had to lose in the public sector. We learned that in the west midlands, more private sector jobs have been created in the three years of this Government than were created in the last 10 years of the Labour Government. When Opposition Members talk about unemployment, which Government Members are desperately concerned about, they should recognise that this Government are delivering jobs in the face of considerable economic adversity.

It is this Government who understand that we need to be an aspiration nation. Some Opposition Members laughed when the Chancellor used that phrase in his Budget speech, which was desperately sad. Government Members understand that nations rise when people rise. We are in a global race and no one owes us a living. That is why we have to make ourselves competitive in the world markets.

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

I am very impressed with the hon. Gentleman’s whipped speech. What is aspirational about the situation of a constituent of mine who has just been made unemployed, has gone out and got himself a part-time job in a local petrol station, and will be hit by the bedroom tax?

[Andrew Selous]

The Government have created 1.25 million net private sector jobs. The hon. Gentleman’s constituent will probably be able to do two extra hours a week at the minimum wage to deal with that situation. He could also let out his room or downsize to an appropriate sized property. There are a number of things that his constituent is able to do.

I praise the Government hugely for abolishing stamp duty on AIM and ISDX shares. I do not believe that any other Member has mentioned that. Members from all parts of the House talk about the difficulties that businesses have in raising loan finance. We all recognise that, but that is only one of the two ways in which businesses can get money to grow. The other is to get share capital. Every school knows that if it has a good nursery underneath it, it will have a good supply of children. Exactly the same is true of stock markets. If we can help our small and growing companies, which provide so much job creation, to raise share capital, which means that they do not have to pay back money in a fixed period and can decide when to pay as well as the level of dividends to pay, that is hugely helpful, so the change for AIM and the junior ISDX market is incredibly important and very welcome. The stock exchange estimates that there will be between 40 and 50 initial public offerings in high-tech businesses as a result of the move and Deloitte has estimated that that will create some 38,000 jobs.

The second measure for which I want to praise the Chancellor is that on ultra-low emission vehicles. In just one small sentence in the Budget speech, the Chancellor said that he would support the manufacture of ultra-low emission vehicles with new tax incentives in this country. That is absolutely right. We make the Nissan LEAF in this country, in Sunderland, but the Vauxhall Ampera is made in the United States. I want electric vehicles and other ultra-low emission vehicles to be made in this country to help British workers stay in jobs. I do not think anybody in this House anticipated the scale of the change as we move to ultra-low emission vehicles. I want those jobs in this country and do not want to see the industrial advantage going to China, Denmark, Israel or any of the other countries that are making major moves in this area.

I hugely welcome the announcements on shale gas. It is disappointing that in the time it has taken Cuadrilla to get one exploratory rig up and going in Lancashire, 72 have been got going in Argentina. I know that the excellent Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for South Holland and The Deepings (Mr Hayes), who is on the Front Bench, understands that and will drive the policy forward with the passion for which he is well known and well regarded across the House.

The Government understand the importance of business competitiveness. As I said, no one owes this country a living, which is why I hugely welcome the decrease in corporation tax. Is it not good to look through the Budget book and see that the United Kingdom will have the lowest rate of corporation tax of all our major G20 competitors? By 2015, it will be lower than that of South Korea, Germany, France, China, India, Brazil or the United States of America. That is exactly what we need to do to keep business successful in this country.

The employment allowance that the Chancellor announced at the end of his speech is unbelievably well targeted. It will take off the tax on jobs, which the Opposition, had they been elected at the last election, would have increased. Think of the damage that would have done. It is the Government who understand that we get more people into work if we tax jobs less, so that move is to be welcomed. My colleagues on these Benches have mentioned the KPMG report that said that this country is the most competitive in the world in which to set up, start and run a business. That is hugely to be welcomed.

The measures in the Budget on home ownership are excellent and hugely to be welcomed. Government Members understand and support the desire of people to own their own homes. That is a thoroughly Conservative aspiration and it is one we want to see extended to as many of our constituents as we possibly can. The Help to Buy scheme and the mortgage guarantee scheme are excellent in that regard and I am pleased that my local authority, Central Bedfordshire council, is rising to the challenge and looking to build some 6,000 houses to the north of Houghton Regis in my constituency. That is exactly what it should be doing.

I am hugely pleased to see the Chancellor support the proposals in the Heseltine review. The document contained 89 proposals, 81 of which are being supported by the Government. That is excellent. Local authorities have a lot to add in this regard, as do local further education colleges and university technical colleges. I am proud to have one of those colleges in my constituency. For example, Central Bedfordshire council has worked out where unemployment is slightly higher and where the new jobs are and will be setting up transport between the two with the wheels to work scheme. It will not just leave it to bus companies and so on but will take practical measures to get unemployed people to where the jobs are further to drive down unemployment. I am pleased that unemployment is lower in my constituency than it was at the general election.

My constituents will also hugely welcome the significant increase in the personal allowance to £10,000, brought in by a Conservative Chancellor. It is hugely welcomed by Government Members. It clearly makes sense: rather than taxing people and giving them back some of their own money in tax credits, we believe in letting people on low incomes have more dignity by letting them keep more of the money that they earn in the first place. That is absolutely right.

The measures on fuel duty will be hugely welcomed and I refer the House to what I said earlier about ultra-low emission vehicles. I know that pubs in my constituency will be delighted with the measures on beer duty.

The one area to which I would like the Government to attend before too long is the transferable tax allowance, and I will conclude with a quote from the Prime Minister:

“What is so backward looking in a country where we have social breakdown and social problems of saying that committed relationships, encouraging people to come together and stay together is a bad thing? Of course it isn’t, it’s not outdated if you look around the European Union, if you look around the OECD, we’re almost alone in not recognising marriage in the tax system. And why do we think, why do we think that with our appalling record of family breakdown that somehow we are in the right position and everyone else is in the wrong position…they’ve got it right and we have got it wrong.”

We need to change that. The Prime Minister was right then, and he is right now.

17:20

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

I think I could summarise the Budget with a slightly nautical metaphor: the message from the bridge to the economic engine room is, “Steady as we sink.” The Budget does not recognise the scale of this country’s problems, and although some of the measures that have been announced may be good in a micro sense, they are totally inadequate to combat the macro problems that we have.

Let me go back to the months immediately after the May 2010 general election and the emergency Budget. Although under the Labour Government we had had economic growth, the budget deficit and inflation were falling and employment was rising, and we were told that that was extremely dangerous. The Chancellor conjured up an apocalyptic vision of an economy that was about to be devastated by a reduction in our triple A rating.

Three years on, we have lost our triple A rating, the economy is at best stagnating and at worst falling, we are having to borrow more and inflation is rising, yet we are told that it is all so good that we must have it for several more years. I feel that the electorate—like me—are beginning to doubt the credibility of that argument. I recognise that the carefully choreographed political narrative that was built up after 2010 had some traction, but that traction is going as a result of the incompetence and lack of vision displayed by the Chancellor since then.

[Andrew Selous]

Does the hon. Gentleman recognise that the Government’s borrowing costs have fallen since we lost our triple A rating, precisely because the international markets believe in the credibility of the Government’s economic policy?

[Mr Bailey]

I think those costs have dropped by 0.15%, which the public might think—well, shall we say that they have had to bear a huge sacrifice for a minimal improvement and drop in interest rates? I am concerned—this point has not been mentioned by anyone in the House, including those on the Front Benches—that the Government’s current predictions are based on December figures from the Office for Budget Responsibility. We might think that that is okay, but since May 2010 the OBR’s predictions have been conspicuously inaccurate and over-optimistic. If its predictions for the next two years are equally inaccurate and over-optimistic, we are in real trouble. That may not be the case, but if we look at the Library research papers, most other independent commentators and assessors of our economic position predict a lower rate of growth than the OBR. That is of concern and underlines the Chancellor’s failure to put in place measures to combat that issue.

On the opportunities available currently in the economy, the emergency Budget, in order to be successful and meet the Chancellor’s targets, was predicated on an assumption of exceptionally high investment and exports. Since then, the eurozone has had problems. It takes 47% of our exports but is the lowest-growing export market.

[Andrew Gwynne]

My hon. Friend is right to mention the May 2010 indicators. One crucial indicator before the emergency Budget showed that investor and consumer confidence were returning to the economy.

[Mr Bailey]

Absolutely—as I have said, the Chancellor’s apocalyptic utterances frightened many people into paying off their debts and not spending, which had an impact on consumer spending and subsequently on business.

If our largest export market is stagnating, we look abroad to Brazil, Russia, India and China. The Government have done good work on expanding our exports to the BRIC countries, but they are less than a tenth of our exports to Europe. Anyone who has the idea that we can transform our economy simply by expanding our exports to BRIC countries is living in cloud cuckoo land. I do not mean to say that expanding our exports to BRIC countries is not necessary, but it will not in itself turn the economy around.

We have heard a lot in the debate about the impact of corporation tax and making this country an attractive place for inward investment, but the reality is that investment is stagnating. Industry tells me that, above all, it wants a coherent, co-ordinated and focused Government response. The Prime Minister went, with his entourage of business men, to China, Brazil, India and so on to bang the drum for Britain—I am glad he did so—and the Chancellor has announced the lowest rate of corporation tax for companies investing in this country. However, those things are no good if, at the same time, the Home Secretary—we recognise that the Prime Minister has his problems with her—implements a visa regime that deters people from those countries who want to invest here. That is totally incoherent and economically illiterate.

I welcome some measures, such as those on construction, but the Government’s current construction programme is only a fraction of the Labour Government’s programme. The Government’s programme will take a long time to materialise in terms of economic growth and consumer expenditure.

I also welcome the Government’s investment in the Technology Strategy Board and the catapult centres, which have enormous potential. That leads me to a debate that the Government should have but are not having on how best to invest our scarce resources. All the evidence I get from industry, and particularly from manufacturing industry, says we need more money to be spent on high-quality research and development and implementation. Catapult centres would do that, and we need more money spent on them.

However, we also need more money to be spent on investment allowances rather than on corporation tax. It bothers me that the Government believe almost as an article of faith that a reduction in corporation tax will stimulate inward investment, but they are not considering whether there is a better way of spending that money on alternative ways of investing in British companies. Manufacturers say that investment in R and D is a much more attractive and economically beneficial way of stimulating the investment we need in this country. A large amount of money will be forgone with the reduction in corporation tax. Would that money not be better spent by providing better investment allowances, which will enable British companies to invest, employ and export more, and generally to contribute to the economy? A lot of companies that invest here do not pay much tax anyway, and those that might come could as equally be attracted by an attractive investment allowance regime as a reduction in corporation tax. So far, the evidence in favour of a reduction in corporation tax is not strong, which is why we are not seeing the level of investment that the Government had hoped for.

Low-carbon vehicles are important to the north-east and to my own area in the west midlands, and the motor industry is investing in them. I welcome the Chancellor’s announcement of a commitment to that. However, previous announcements in previous Budgets, particularly on company car taxation and the write-off threshold, have caused confusion and actually delayed investment in this area. I hope that in the Budget and in the Red Book there are indications that that will change, and that we will have the level of commitment and certainty that will encourage our motor industry to continue its investment in this area and become a world leader in an expanded market.

17:31

[Charlie Elphicke (Dover) (Con)]

I welcome the Budget, which is a continued step in the right direction. To understand the road that has been travelled, we need to understand where we have come from. There seems to be more than a whiff of denial from the Opposition regarding the difficulties facing the country.

I should start by saying that at first, the Labour Government ran the economy along broadly sensible lines and stuck to the previous Conservative Government’s spending plans. Until about 2001, everything was going well and the economy was being run responsibly. Overspending and excessive borrowing began from that time onwards, and that is where the rot set in. The former Chancellor—and later Prime Minister—the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), had the opportunity to have his way and pursue his economic policies, and that is where things went wrong. There was too much debt. Too much growth was illusory and too much borrowing took place. When the music finally stopped in 2008, it hit this country very hard.

[Mr Kevan Jones]

The hon. Gentleman was not in the House at the time, but if he stops listening to central office party propaganda and remembers the history, he will know that the former Chancellor actually paid down debt, for example, through 3G licences. At no time in opposition did the hon. Gentleman’s party argue for less public expenditure in a single area.

[Charlie Elphicke]

The hon. Gentleman is right about the 3G licences, but the taps were then turned on and public spending rose. We had a structural deficit and we were seriously exposed when the crisis struck in 2008. We can see that from the statistics relating to the previous Parliament. We inherited a structural deficit of 11.2%—an enormous level of borrowing. We inherited a massive rise in unemployment, as measured by the claimant count—it went up by 80%. Youth unemployment went up by 78% under the jobseeker’s allowance claimant count. Those were staggering rises and real concerns. It is all very well for the Labour party to say that there is a continual problem with unemployment. It is, of course, a concern to us all in our constituencies, but youth unemployment has been coming down. Unemployment has stabilised and we have not seen the rise that we saw under the previous Government.

Let us look at what this Government have achieved: 1.25 million new private sector jobs and 1 million new apprenticeships. The deficit is now down by a third. Rather than the structural deficit of 11.2% that we inherited, it is down to 7.4% of GDP today and moving in the right direction. We have had record low borrowing costs. The Opposition’s idea that we should borrow more to borrow less will take us one way and one way only—to higher interest rates. The hard-won fiscal credibility that this Chancellor and this Government have achieved is greatly valued by every mortgage holder in this country.

[Luciana Berger]

Will the hon. Gentleman remind the House how many more billions the Chancellor is borrowing on top of what he said he would?

[Charlie Elphicke]

I thank the hon. Lady for reminding me to point out that the Institute for Fiscal Studies said that the Labour party, under its plans, would be spending £200 billion more, so she should be careful before indulging in fantasy economics.

We also need to look at the Government’s welfare reforms, which will do more to make work pay, and education reforms, which will help Britons get the skills they need to compete in the global race. The Government are right to help those who want to work hard, get on and do really well. We hear from Labour Members about the difficulties faced by, and the squeeze on, many hard-working families, but they forget to say that this is nothing new. According to the Office for National Statistics’ family spending survey, disposable income in real terms was £600 in 2000-01 and was £600 at the last general election—it has not moved in real terms for about a decade. The challenge is that families have been squeezed for quite some time. The Labour party forgets that the economy was shielded by the boom of borrowing and debt and that, as a result, those difficulties were glossed over for too long.

It is right that the Government are now getting the house in order and doing more to help hard-pressed families and households. For example, council tax in Kent has been frozen for three years, whereas under Labour it doubled; fuel duty is now 13p lower than Labour planned; and as a result of the £10,000 personal allowance to be introduced next year, many will pay £700 less tax than under Labour’s plan, which will help average families and take 2.7 million out of tax altogether. I also welcome the axing of the beer duty escalator and the 1% outright cut in beer duty. The Government have got the right priorities and are moving in the right direction. Their plans for child care will help families up and down the country who, with the rise of joint working over many years, have found things very difficult.

On business, we need to get the country growing as quickly as possible, but we get growth and jobs not from Government, but from the private sector, enterprise and businesses. The Government have done the right thing in giving an awful lot of help to small businesses, but I want us to go a bit further. We have had the new employment allowance and the seed investment allowance, but I would like us to consider a “get set and grow” scheme, under which somebody could set up a new business and have a two-year holiday from all company filings, corporation tax and employers’ national insurance, light or no employment law and other measures. That way, somebody setting up a business could focus on running it, rather than on ticking boxes, filling in forms and dealing with paperwork. That kind of change would provide real assistance to people who want to get going and do really well.

Studies by the OECD, particularly the “Fostering Entrepreneurship and Firm Creation as a Driver of Growth in a Global Economy” in 2004, show that enterprise formation, growth and entrepreneurship are strongly linked. I hope that the Chancellor and the Government will look more closely at measures to make it easier to set up a business to a certain turnover threshold or certain period of time. As I said, the new employment allowance and the massive national insurance reduction for many businesses are a big step in the right direction, but I would like us to go further.

I also welcome the measures to deal with tax avoidance. Too much corporation tax avoidance has gone on for too long. It grew up over many years. Tax law was not kept fit for purpose in the internet age, and the Government have taken the right action through their general anti-avoidance provisions and their work on the international tax system.

Personally, I would like us to go further and see whether we can reduce corporation tax still more by restricting tax reliefs, which would put our home businesses and multinational businesses from overseas on a much clearer, more level playing field. We should look at minimising deductions for interest and royalties, along with other deductions that are available in the tax system, and restricting transfer pricing. We should also look at the rules on tax presence and whether there is a branch or establishment in the UK, and say to companies such as Amazon, “You’re not really abroad; you’re trading in the UK and you should be taxed as such,” and the international rules should be changed accordingly. That would be the right direction of travel, because we would have an even lower rate of corporation tax than we do today or than we plan to have, and a level playing field for businesses at home and those from overseas.

The last thing I want to say—this will surprise Opposition Members—is how much I agreed with capital gains tax being at 10% for businesses. That was a real spur to entrepreneurs and perhaps the only policy of the former Prime Minister that I agreed with. I regret that the rate has become 28%. We ought to look at how we can foster entrepreneurship, so that entrepreneurs can not only set up businesses and get them going, but sell them and get new businesses going. It is the serial entrepreneurs who are the real wealth creators in this country—the people who drive small businesses, job creation and enterprise creation. The more we can get the tax system to be their friend—to be on their side and support them in what they do—the more we will drive the economy forward and create more jobs for the future.

17:39

[Angela Smith (Penistone and Stocksbridge) (Lab)]

It is a pleasure to follow the hon. Member for Dover (Charlie Elphicke).

We heard a lot in today’s Budget statement about the “aspiration nation”, but back in 2010 we were told that we could judge the Chancellor by his record and his economic tests. I agree with the Chancellor: we should judge him by his own economic tests, especially now that he has been in his job for three long years. Back in 2010, he told us that he would ensure macro-economic stability by maintaining the UK’s triple A rating. Well, we all know what happened to that, with Moody’s downgrading the Government’s status last month. Back in 2010, he also told us that he would rebalance the economy, creating the conditions for higher exports. A quick look at the statistics shows exports falling in monetary terms and the balance of trade deficit increasing as a percentage of GDP. Quite clearly the UK’s trade with the rest of the world is no success story, despite the 25% devaluation of sterling.

Another promise was that the Chancellor would get people working and reduce youth unemployment. Unfortunately for the blighted lives of the young, he has completely failed on that, too. There are now almost 75,000 extra young people out of work compared with 2010. Worse still, although the Government make a virtue out of the fact that overall unemployment remains static, they need to consider the fact that, without growth, it means that more people are creating less wealth and the country is becoming less productive.

[Mel Stride (Central Devon) (Con)]

The hon. Lady is quite right to focus on employment. Will she congratulate the Government on arriving at a position where we now have around 30 million people in employment, which is the largest number on record?

[Angela Smith]

But the country is becoming less productive. In fact, productivity has declined by 2.4% over the last year, storing up massive problems for the future.

On borrowing, the Chancellor told us that national debt would be falling as a percentage of GDP by 2015-16 and that he would bring down the deficit. It is no secret now that he will miss the first target by a mile, with the OBR saying that debt will not start falling as a share of GDP until at least 2017-18. As for borrowing, it was 6.6% higher for the first 10 months of the 2012-13 financial year than for the same period in 2011-12.

[Alison McGovern]

Is my hon. Friend as worried as I am that so far the Chancellor does not have a very good record at hitting the OBR forecasts? Let us not rely on him for hope.

[Angela Smith]

I completely agree with my hon. Friend. Indeed, when it comes to growth, the Chancellor stood at the Dispatch Box in 2010 and confidently told the House that by this financial year the economy would be on the mend, with growth forecast at 2.8%, but we now know that his forecast was out by 2.5 %. Today, he had to downgrade growth for this year yet again, to 0.6%.

We have a downgraded Chancellor who has sucked demand out of the economy with his ill-thought-through VAT hike and his draconian cuts to public spending. Those cuts have gone too far, too fast. If the latest estimates are right, spending cuts have so far wiped 1.4% of growth out of the economy, and the biggest cuts are yet to come. But at least the millionaires of Sheffield and Barnsley will have extra money in their pockets this April when the 50p tax rate is abolished.

The measures that the Chancellor has introduced today will go nowhere near to addressing the problems that he has caused. Instead of plan B, we have inadequate measures that do not even go halfway towards addressing the problems facing the country. The child care package announced yesterday, for instance, is designed to help hard-pressed working families, but unfortunately it will not come into operation until after the next general election. Once again, it is jam tomorrow. There is not much on offer for the parents and families struggling with the costs of child care today.

There is no doubt that house buyers might be thankful for the help being offered today, but a quick look at the Chancellor’s record on housing does not bode well. This is the same Chancellor who, in 2011, unveiled what was termed a “radical and unashamedly ambitious” strategy to give the housing industry a “shot in the arm”. My right hon. Friend the Leader of the Opposition referred to this earlier. At the heart of that strategy was a scheme which the Chancellor claimed would help 100,000 to people to buy their own homes. To date, just 1,500 people have realised that dream. That is a 1.5% success rate, which is almost as bad as the Work programme—or as good, depending on which way we look at it.

A year later, we had what was described as the Government

“rolling its sleeves up and doing all it can”.

That included introducing a £10 billion guarantee scheme which, while welcome, has yet to deliver a single penny of support for house building. It took the Government six months to release details of the scheme, and it will not be open to receive bids until April this year. Last year, housing starts fell by 11% to below 100,000, which is less than half the number required to meet housing need, and I am not convinced that the help announced today will kick-start the stagnant housing market.

Then we come to infrastructure. The £3 billion a year—£15 billion over the next decade—is nowhere near what we need to invest in roads, schools, transport and housing if we are going to get the economy growing again and build for our economic future. If, as now seems possible, we are entering the third recession in as many years, we needed to see something much more dramatic today. However, the Chancellor has failed to deliver.

Let us take VAT as another example. The Opposition have said that he should temporarily reverse his VAT hike, because consumers need help and they need it now. Reversing the hike would have alleviated some of the pain they are feeling, and it would have helped the pound in their pocket go a little further.

[Ian Swales (Redcar) (LD)]

Will the hon. Lady give way?

[Angela Smith]

No! [Interruption.] I have given way twice and I am not giving way again. I do apologise.

The Chancellor should also dramatically reverse the cut he made to the last Labour Government’s capital spending plans, given that spending is now £12.8 billion lower, year on year, than Labour planned. At a time when the economy is barely moving forward, we need the Government to invest. We need to get the builders back to work, to create the homes to give first-time buyers the future they are looking for. In the process, we need to strengthen our economy. For every 100,000 homes built, 1% is added to our gross domestic product, but this is about more than that. There are millions on council waiting lists, there are first-time buyers who cannot get on to the housing ladder, and homelessness has rocketed. Building houses is good not only for the economy but for society, too. Before it is too late, we need to prevent another lost generation from being scarred by unemployment, by guaranteeing every young person who has been out of work for a year or more a job, funded by the tax on bank bonuses that I mentioned earlier.

It is never too late for this Chancellor to change course. Consumers need to be given confidence to spend again; companies need the confidence to invest again; banks need to lend again to small companies that desperately need finance to invest. The country is in desperate need of infrastructure investment. High Speed 2 is welcome, but we are not going to get HS2 for some time yet. We need that infrastructure now. There are many other road and other transport schemes, and how many primary schools do we need? We know that in every part of the country, pressure on places is increasing; we need to get those schools built. By doing that, we could help to kick-start the economy. The Government need to increase their tax receipts to pay for quality, efficiently produced public goods and services.

Unfortunately, this Chancellor seems to be stuck in a rut—a self-defeating ideological rut of austerity piled on austerity. It is a rut that could, I believe, mean many years of sub-normal growth, with the economy settling at a level much lower than its potential would allow. For ordinary people, that will mean living with high unemployment, falling living standards and the continual deterioration of many of the public services on which our constituents depend. The Chancellor should change course now—decisively and with confidence—before the damage being inflicted on the UK economy becomes even more deeply entrenched and damages us permanently.

17:51

[Sir Tony Baldry (Banbury) (Con)]

I welcome the fact that this Budget is a continuation of this Chancellor’s five-year plan and not a rupture. I welcome the fact that the Chancellor has succeeded in reducing public spending, whereas total state spending under Labour rose by an extraordinary 60%. I welcome the fact that, notwithstanding the broader economic challenges, whatever way one looks at the statistics, they tell us that the private sector under this Government has been steadily creating new jobs as fast—indeed, faster—than the public sector has been shedding them. I welcome the fact that under this Government the deficit is down by a third and businesses have created more than 1.25 million new jobs.

I welcome the proposals in the Budget to enhance competitiveness. There is little point in solving today’s problem if one is not preparing for tomorrow’s future. We all have to recognise that Britain is in a global race with countries such as China, Brazil and India and that we have to become more competitive if we wish to remain ahead and among the leaders in the global race—a point very well made in Lord Heseltine’s report “No Stone Unturned”. I welcome the Government’s response to his proposals and his report, which made far-reaching recommendations for stimulating economic growth and engaging the private sector and the spirit of enterprise in the great cities and regions of our countries. As Lord Heseltine put it in the foreword to his report:

“Huge infrastructure demands and hungry institutional funds—link them. Excellence in industry, commerce, academia—extend it. England’s cities pulsing with energy—unleash it.”

I think we would all support that.

May I point out to the House that Lord Heseltine is 80 today? As he was a long-standing and distinguished Oxfordshire Member of Parliament, I am sure the whole House would want to wish him a very happy birthday. If we all have as much energy at 80 as he does, we will be doing very well indeed.

I welcome the Chancellor’s proposals to bring forward infrastructure spending and to spend substantial amounts on speeding up important infrastructure projects. Targeting infrastructure spending, of course, helps boost economic growth. In my constituency, projects such as the east-west rail link, rail electrification, the upgrading of junction 9 of the M40 have already been announced; importantly, an extra £3 billion a year is being invested in infrastructure projects across the country.

I welcome what the Government and the Budget are doing to give support for house builders, for first-time buyers wanting to get mortgages and also for “second steppers” wanting to move up the housing ladder. The news on building construction is extremely important. Housing is key to growth, and builders are not going to build houses unless they can sell them, so I welcome the fact that the Government are allocating more than £3.5 billion to support those who want to get on, or move up, the housing ladder. The Government will provide up to 20% of the equity to help anyone who wants to buy a new-built home, and for three years from January next year, they will also provide a new guarantee to help lenders offer more people 80% to 90% loan-to-value mortgages. All that is good news for house builders, and will help more people to move on to and up the housing ladder.

As I pointed out on Monday to the Secretary of State for Communities and Local Government, in my constituency we want more houses to be built. We want people to be able to build their own homes, we want more social housing, we want more building on the former Ministry of Defence brownfield land at Bicester, and indeed we want Bicester to become a new garden city.

I welcome the support for small and medium-sized businesses. I am glad to say that my constituency is part of a dynamic economy, but it consists largely of successful small and medium-sized businesses. Small companies want to grow, but they often identify their lack of access to finance and long-term capital as a key barrier to their growth. They will benefit not only from the fact that corporation tax is already due to fall to 21% next year—with the result that Britain is now at the top of the list in surveys of desirable places in which to do business—but from today’s announcement that it will fall to 20% in April 2015, which means that the United Kingdom will have a lower business tax rate than any other major economy in the world. That will help to fulfil the commitment to make Britain the most attractive tax regime for business in the G20.

I welcome the fact that the Government are cutting the jobs tax of every business, and the fact that businesses will be able to hire one extra person on a salary of £22,400 or four people working full time on the minimum wage without paying any national insurance. That means that 450,000 small businesses—a third of all employers—will pay no jobs tax at all.

[Mr Jenkin]

What does my hon. Friend make of the fact that Ireland has a 12% corporation tax rate, although it has had to inflict on itself far more austere economic policies than we have had to inflict on ourselves because it is in the euro? Should we not be emulating Ireland?

[Sir Tony Baldry]

I think that we are making very good progress in reducing the burdens on businesses. I hope that my hon. Friend will applaud that, because I believe that it will enhance the UK’s competitiveness.

[Mel Stride]

May I point out, in a slight rejoinder to that last intervention and to be fair to the Chancellor, that corporation tax is 40% in the United States, 31% in France and 29% in Germany? I think that the fact that it is heading down towards 20% represents quite an achievement.

[Sir Tony Baldry]

I have learned over the years not to spend too long “rejoinding” to my hon. Friend the Member for Harwich and North Essex (Mr Jenkin). The whole House knows that he is generally trying to tease. When we can get him on message, the Chancellor will be doing really well.

I welcome the fact that the Chancellor is fast-tracking existing plans to raise the personal allowance of taxable income to £10,000, and that that will now happen next year. It means that 2 million of the lowest earners will not pay tax once the target has been reached, and that is good news for all our lower-paid constituents.

I welcome the scrapping of the fuel duty rise that was scheduled for the autumn, Pump prices will now be 13p per litre lower than they would have been if Labour’s plans had been implemented. I think everyone acknowledges that, while the Chancellor needs to raise some revenue duty, fuel duty is a “tax on everything”, and imposes a significant burden on small business owners and rural families. This is a welcome move for everyone.

I welcome the fact that the Chancellor has scrapped the beer duty escalator which would have increased the price of a pint of beer by 3p next month, and is cutting beer duty by a further 1p. That means that beer will be 4p a pint cheaper than it would have been following the implementation of Labour’s plans. It is excellent news for every village and community pub in my constituency, it is good news for brewers such as Hook Norton, and it is good news for beer drinkers.

We should bear in mind that—quite rightly—the richest 20% in the nation are making the greatest contribution to budget deficit reduction. Indeed, in every year of the current Parliament, the richest will bear a larger share of our nation’s tax revenues than they did in any one of the 13 years of the last Labour Government. So the Chancellor is ensuring that fairness is at the heart of this Budget.

This Budget is intended to help people who want to work hard and to get on. It will rightly continue the painstaking work of getting right what went so badly wrong in the British economy. Obviously, everyone is frustrated that that is taking longer than any of us hoped. Although there are no easy answers, I think every fair-minded person would acknowledge that we are making progress and that this Budget will help to keep Britain on the right tracks.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am going to try to get everyone in, but if there are interventions, I will have to reduce the time limit. I do not want to do that, so let us try to hold back on the interventions, as that will help other Members.

18:00

[Geraint Davies (Swansea West) (Lab/Co-op)]

This is very much more a fudge-it than a Budget. It is a fiscally neutral programme that just takes money from the poorest and gives it to the squeezed middle in a somewhat cynical way. It is part of the Tory journey to a weak and divided Britain. This Budget does contain a few good things, such as the mortgage deposits idea. I would probably support that, although we need to build more houses as well as helping people to get mortgages. I would also support an employment allowance. Apart from that, this Budget falls within the general envelope of economic failure. The debt to GDP ratio is set to rise from 55% in 2010 to 85% in 2015, and that is why we have lost our triple A rating. The way to get rid of such a debt to GDP ratio is to reduce the debt, which is what is happening, with the poor being hit hardest, and/or to increase the GDP—the growth. There has been a marked failure by this Tory Government to generate any growth at all.

In sharp contrast, the Labour party had a great 10 years of unprecedented growth between 1998 and 2008—GDP grew by 37%. It is no wonder the debt to GDP ratio was falling. That was a fantastic economic record of growth, but we then hit the 2008 financial sub-prime debt tsunami from the United States. We ended up with a deficit, moving into 2010, two thirds of which was from the bankers and a third of which was from our pump-priming—investing more than we were earning. Obama and the previous Labour Prime Minister provided the fiscal stimulus, which avoided a world depression. We had a shallow recession which was moving into fragile growth, but then the new Chancellor came along and announced half a million job cuts, consumer demand fell through the floor and we have had zero growth since. It has been a complete catastrophe.

The Government say, “Oh, we have an extra million jobs”, yet there is no overall production growth. That implies that productivity per person has fallen. That is the great economic failure. Why is it falling? It is because we are not investing sufficiently in skills and productive capacity. If we ask any sensible business person, he or she will tell us that to grow we have to invest—in skills, in capacity, in products and in sales—rather than cutting everything all the time. There is a difference between borrowing to invest in productive capability and capacity, and borrowing simply to fund more and more people on the dole, which is the old Tory story. Debt is going up and it is the cost of failure, not the cost of success. What we need is investment in skills, infrastructure and housing—the Mayor of London mentioned that.

If we look abroad at the great emerging economies that are hurtling forward as we are bobbling along at the bottom, we see that Brazil is investing $5.3 billion in biotech and renewable energy. We see a much bigger amount coming from China’s development bank. That is because China is bigger, but again this is patient money being rewarded in economic growth and economic success. The case is the same for public sector research and development in the United States. When we do the analysis of where the global players will come, we find that they will come to clusters of research and development and skills. I am glad that the European Investment Bank is investing in a second campus in Swansea to bring investment there. I hope that the Government will invest in super-connectivity for Swansea, and a lot of businesses have written to the Chancellor about that.

What certainly will not make a difference is changing the rate of corporation tax from 21% to 20%. That simply takes out 5% of the income from corporation tax. If, as has been said, the United States has a 40% rate, Germany’s is 29% and France’s is 33%, we already have a competitive advantage. This move is just giving away money when it should be invested in focused research and development capacity that might get international capital and jobs to migrate here. This approach is completely farcical. That deals with the economy.

As regards society and fairness, we are just punishing the poor for the bankers’ errors. As a result, cuts are hitting the poorest hardest. There is a welfare freeze; council tax rebates have been cut; and the bedroom tax has been introduced, as well as universal credit and the Work programme: 890,000 people have been forced to pretend to work, and if they do not turn up because their child is ill they are sanctioned, they do not receive any income for weeks on end, and they end up at a food bank. That is the direction of travel: punishing the poor hardest for being poor.

The bedroom tax is not going to work. In Swansea, they are already thinking about knocking down walls so that people are not decanted into the private sector, which costs more, leaving empty public sector houses. It makes no moral or economic sense. We do not seem to care about the poorest, given the situation regarding child poverty and the knock-on effect in schools, crime and so on. The Government are going to pay tenants who must pay their housing benefit directly to landlords. There is little money so it will mean arrears. We are asking people to access universal credit online, when a quarter of people are functionally illiterate. They cannot even follow the “Yellow Pages”, so they will not be able to get their money. Two thirds of people subject to the bedroom tax are disabled, so the measure is cruel, callous and unthinking.

We know that the poorest spend most and are more likely to create growth, so that leads to a difficult situation. We all welcome the fact that the tax threshold has been increased to £10,000, which will give people £13.70 a week, which is about the same as the £14 that people subject to the bedroom tax will lose as a result of that tax. One measure costs £12 billion; the other will allegedly save half a billion pounds, so it will not really save anything.

We are moving money to the squeezed middle, but meanwhile millionaires are getting away with it. They will move their money into the next tax year, which is why the Prime Minister gets up on his hind legs and tells us, “A 50p tax would raise less”, as he knows that his millionaire mates will move their income into the next tax year. What is most despicable is the fact that this cynical divide and rule between workers and shirkers, between strivers and skivers—the undeserving poor, Victorian values, the workhouse—is the new Tory party in action, not delivering a future that works and cares but a future that does not work and does not care: a divided and weak Britain, rather than a united, strong Britain with one nation in mind, which is what we need in future.

18:07

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

The speech by the hon. Member for Swansea West (Geraint Davies) reminded me of the cartoon in Private Eye called “Great Bores of Today”. He recited a litany of all the clichés that we expect from the Labour party. I would simply say that the Labour party’s determination to oppose the abolition of the extra room subsidy paid by the housing benefit system shows that it is determined to make sure that there should be no reform of the welfare budget whatsoever. It opposes every single measure to try to restrain expenditure on welfare, which takes up over a third of Government spending. [Interruption.] I notice, Mr Deputy Speaker, that it is getting rather noisy on the Opposition Benches; I shall try not to provoke them any further.

I rarely remember, if at all, a Chancellor rising to deliver his Budget statement against a background of such dire and low expectations about what he could achieve. I am pleased to reassure my hon. Friend the Member for Banbury (Sir Tony Baldry), who has just left the Chamber, that I am happy to commend the Chancellor’s Budget statement. He had incredibly little flexibility at his disposal, but the Budget contains a number of really imaginative measures, particularly the supply side reforms that always help to stimulate economic growth. In whatever economy they are tried, such measures prove to be effective. The reduction in corporation tax is another step in the right direction; the abolition of employers’ national insurance for small employers is a huge step in the right direction; and the limitation on capital gains tax for business is a very good step in the right direction.

I also very much welcome the substantial implementation of the Heseltine review. The Select Committee on Public Administration, which I chair, took evidence from Lord Heseltine, who gave a very good account of many of the things that could and should be done to make the use of public money much more effective away from London, as well as championing things like swifter decisions on infrastructure, such as airport capacity. I commend the review, and I hope yet that the Government will speed up the decision about airport capacity, which is so vital for the health of London as a global city.

My right hon. Friend’s statement also reflected an extraordinary determination to follow through and to continue what he started, and not to be diverted by those who somehow think it would be easier and more effective for the Government to start borrowing more money and spending more money, as though that was a painless way of reviving the economy. It is extraordinary that we have to go back to the lessons that we thought the Labour party had learnt in the 1980s—that we cannot spend our way out of trouble. It has forgotten all the lessons that made it electable under Tony Blair, and I suspect that that makes it unelectable now.

The real question at the heart of the Budget was raised not by the Leader of the Opposition but by a number of right hon. and hon. Members, including one or two Members of Her Majesty’s official Opposition, but not from the Front Bench, and that is growth. The real question that hangs over the Budget is whether we believe the growth forecast. Hitherto, we have been disappointed, and that is because energy costs are so high; it is because of excessive banking regulation pouring out of the EU on to the City of London, which happens to be our biggest export earner and our biggest generator of tax revenue; it is because the banks are not lending because the Government have increased the capital ratios for banks when they should perhaps have been reducing them; it is because quantitative easing might make bank lending cheap for the Government, but it does not necessarily make it easier for the banks to rebuild their balances; and it is because of the burden of high taxation.

I commend the Budget for its consistency and determination, but the question is whether the pace of economic reform that my right hon. Friend is introducing is fast enough. It may yet prove beneficial and necessary to accelerate the spending reductions, the reductions in taxation and the supply side measures, and accelerate even further the infrastructure investment that is so necessary to get the economy to grow. If we find ourselves once again set back by economic forecasts that have not been delivered, we will have to begin to ask ourselves not how we just let ourselves off the lead and start spending money that we have not got and borrowing even more money that we cannot afford to borrow, placing the burden on future generations, but how we start taking additional pain now to avoid greater agony in the future and greater agony for our children and our children’s children.

I remind the House that it is not just that the Government inherited a very difficult situation. I commend chart 1.8 on page 21 of the Red Book. At the peak of the economic cycle in 2007, the structural deficit was more than 5%. As soon as the economy went into reverse after the crash, it quickly became apparent that the previous Government had vastly overextended themselves and had vastly increased public expenditure beyond what we could afford, so that public expenditure peaked at over 50% of GDP, the previous Government having inherited public spending at below 40% of GDP. It was that expenditure that was unfunded, even at the peak of the economic cycle, which is why we now face such a dire economic situation. I commend the Chancellor of the Exchequer for taking this as seriously as he has and setting it out to the House so truthfully. I hope that his forecasts will be delivered.

18:14

[Alison Seabeck (Plymouth, Moor View) (Lab)]

I preface my remarks with my usual declaration of an indirect interest.

It is always a pleasure to follow the hon. Member for Harwich and North Essex (Mr Jenkin), although I do not agree with much of his analysis, other than the fact that things are not happening as quickly as they should be. I think that the Chancellor has probably had a number of sleepless nights leading up to today’s Budget statement, with the nightmares of Budgets past haunting him—grannies, churches and caravans swirling around in the dead of night. He should also be worrying about the men, women and children whose lives are affected by every tax change and spending cut that he and his Government have introduced and the effects they are having on the public at large. They are certainly giving me sleepless nights—nights disturbed by e-mails at 2.30 am from people desperately worried about how they will make ends meet.

The Chancellor gave a number of excuses for the dire position the country finds itself in, all of which we have heard before and none of which is terribly convincing. However, the one finger of blame he did not point was the one that could be pointed at his boss, the Prime Minister. He is the man whose failure to manage his Cabinet colleagues’ behaviour, announcements or policy direction has left the Chancellor desperately seeking changes to support the grand plan, plan A—A for austerity or for agony, as the hon. Member for Harwich and North Essex mentioned.

There is the failure of the Secretary of State for Work and Pensions to get a grip of welfare reform, because he did not carry out a proper evidence-based assessment of the implications, which is costing the Treasury dear and causing untold misery. There is the failure of the Secretary of State for Communities and Local Government over the past two and a half years to push through any effective policy on the affordable homes we desperately need. There is also the failure of the Department for Transport to deliver infrastructure to get the country moving. All those failures are contributing in one way or another to the lack of growth in the UK economy.

Indeed, the Red Book’s section on infrastructure states:

“The Government will reform its approach to infrastructure delivery, including creating an enhanced central cadre of commercial specialists”.

It states that by the summer of 2013 the Government will get around to

“establishing new infrastructure capacity plans for key government departments.”

It really is surprising that by later this year, more than three years into this Parliament, they might just about get around to developing a plan.

All those failures are contributing to the lack of growth, growth that was there in 2010 when the Chancellor took the reins of office. Yes, it was fragile, but the Government’s decision to come in and, like a bull in a china shop, smash everything that was in place before, regardless of whether or not it was delivering, was just plain stupid and, frankly, arrogant.

Plymouth city council, because of its strong local leadership—it is now Labour-led—has now grasped the nettle and is delivering on its promise to find jobs for our young people through the 1000 Club. That is local government working closely with local businesses to achieve a shared aim. They are acting in the face of a loss of income of around £16 million a year, money that is being taken out of our economy because of the cumulative effect of the cuts in the tax and benefits systems. Of course tackling abuse in the system is important, but devastating local economies because of a rigid commitment to austerity is not.

We will see a wider impact of cutting family incomes in such a deep and devastating way: local shops closing and other businesses struggling. Poor people spend their money locally, so removing millions of pounds from cities and towns across the country will do absolutely nothing to boost growth. These changes are not just damaging growth; we have also seen a fall in average weekly earnings, as set out clearly in the OBR’s report.

It would be churlish of me not to welcome yet another attempt to kick-start the housing market and get it moving, but it is oh so very late. All the other myriad schemes we have seen have failed, and I think that this, too, risks failing to deliver, as my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) pointed out. Given that the Kickstart scheme was working under the previous Labour Government, why did the incoming Government see fit simply to wipe it out? Why did they not look at the problems facing the housing market and accept that some schemes were helping? Any proposal needs to be de-risked for the developer; then we will genuinely see things pick up and more houses built. Developers do have the capacity to build, and that is exactly what we saw under Labour’s scheme.

My hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) expressed reasonable concerns about the nature of these schemes, however, and she was right to do so. We will need to ensure that the Help to Buy scheme is absolutely watertight against people who are trying to buy en masse, and there is a whole range of other questions on which we will need to look at the detail. I would certainly welcome an attempt to get second-steppers off and moving. We also need to think about the impact on house prices in general and whether there will be some unsettling of the market as a result of this scheme. The Federation of Master Builders—we must remember that smaller builders generally deliver about a third of all new homes, often in rural areas—has welcomed the scheme but does not think that it goes far enough or will help them to deliver energy efficient homes. Like Labour Members, it believes that a VAT cut would have been much more effective in revitalising home repair and maintenance, and the energy efficiency market.

In the south-west, we have been pressing for infrastructure projects in road and rail to support our local economies, plus investment to maintain Plymouth’s vital air link. We have seen little progress, despite the rhetoric. Of course, the news about Hinkley is welcome; at last that seems to be making progress. The British Chambers of Commerce has already said today that the developments in this Budget are too little, too late. We need this work now, not in 2016, 2017 or 2018. In so many ways, this Budget is a case of “This year, next year, some time, never.” Working families with children will not really benefit. The tax break on child care is likely to be of greater interest to people on higher incomes. So many decisions are being shoved back, towards and beyond the next general election.

The Government’s economic policy is not making sense. We need a steady and more balanced plan in which the cuts that have to be made are seen to be fair and proportionate and the same rules apply to tax breaks. Fairness in adversity is something that people understand; what they do not understand is why some sections of our community are getting such a kicking from this Government.

18:22

[Penny Mordaunt (Portsmouth North) (Con)]

I start by paying tribute to all the businesses in my constituency, and up and down the country, for all the jobs and opportunities they have created in the past few years. To have created six jobs in the private sector for every one lost in the public sector is one hell of an achievement. When the coalition came to power, in my constituency there were eight jobseeker’s allowance claimants per vacancy; now there are fewer than two per vacancy. Today’s announcements on cutting corporation tax to the lowest level in the G7 and on the employment allowance, which will see 450,000 business pay no jobs tax at all, are very welcome. Welcome, too, will be the measures the Chancellor announced on the cost of living—particularly, for my constituents, fuel duty. We have spent an enormous sum on holding duty levels down. A litre of petrol is 13p cheaper under this Government than it would have been under the previous Government. That has been money well spent for families and businesses.

I welcome the help on child care costs that has been announced in the past few days. Usually when the word “vouchers” is mentioned I come out in a rash, as vouchers tend to favour Sir Humphrey as opposed to the people who are most likely to benefit from them but are perhaps least likely to be able to navigate their way through a complex bureaucratic system to obtain them. I am very pleased about the care that has clearly been taken in assessing many different ways of administering this scheme, and I am very optimistic about it.

I want to concentrate on the measures we are introducing to help those on low incomes and those most in need. In 2009 the Prime Minister highlighted the plight of a single mother of two earning £150 a week who kept only 4p of every additional pound she earned due to the withdrawal of benefits and the additional taxes that she would suffer. Visibly angry, he told a Conservative party conference:

“Labour…have the arrogance to think that they are the ones who will fight poverty and deprivation…Who made the poorest poorer?... No, not the wicked Tories…you, Labour”.

The Prime Minister’s critique captured how we all felt. We were exasperated not only at Labour’s economic incompetence, which had disadvantaged the poorest, whether they were single mums taxed at 96%, baffled pensioners not collecting their credits or parents driven into poverty by working tax credit maladministration, but that Labour was doing it while hypocritically proclaiming itself to be the monopolistic guardian of the most vulnerable in our society. Its self-congratulation despite the misery of the demographic it proclaimed as its social constituency was insulting on so many levels. That outrage was also felt outside the conference hall, in my constituency and across the country.

In government the Conservatives have delivered. Some £30 billion has been saved from the welfare budget and the amount that used to be doled out in error and fraudulent claims will be spent on something useful—getting people back into work—and those who do work will not be penalised like that single mother.

Our values are right. If we do not believe that the poorest are best served by our policies, we might as well give up and go and do something else. The next time Labour Members line up to ask the Prime Minister or one of his colleagues to look at a particular casualty of the spare room subsidy, he should demand to know what the hell those MPs have done to assist their constituent. Have they tried to obtain a share of the locally administered £30 million, which has been set aside to ensure that those with a qualifying need for a spare room get one? How did that go? The “bedroom tax” label deployed by Labour and, I am afraid to say, the class war displayed in the Leader of the Opposition’s speech today, say more about Labour than about us. Labour is still to engage with any serious thinking about the challenges facing this country or how we can help its most vulnerable citizens in particular.

By contrast, we are reforming welfare, tackling the abuses perpetrated by payday loan companies, simplifying the tax system and taking millions out of paying tax altogether. I am particularly pleased with the Chancellor’s announcement to increase the income tax threshold to £10,000, which will lift 30 million people out of paying tax altogether. Given that the average wage in my constituency is £22,000, there will be a lot of delighted people there. Those on the minimum wage will pay less than half the tax they paid under the Labour Government.

Wearing my hat as the chair of the all-party group on ageing and older people, I also welcome the new flat-rate pension and the cap on social care. The Chancellor is right to protect pensioners, who are often wrongly portrayed as rolling in it. The older someone gets, the more their cost of living increases. I am also delighted that we have been able to do more for the victims of Equitable Life. The Chancellor was correct in saying that that is the right thing to do. I am also very pleased that Combat Stress will benefit from the LIBOR fines. It is a wonderful organisation that does very important work.

In the brief time I have left, I want to say something about the Evening Standard. I feel obliged to say it because its editor is a former hack at The Portsmouth Evening News and, in my view, a person of great integrity. I think that a mistake has been made by the Evening Standard today and to claim otherwise does it a great disservice. The editor issued an apology to Mr Speaker, the House and the Chancellor while he was still on his feet. However, given that Opposition Members are still exercised about it, I shall finish by mentioning a tweet sent today by Charlie Whelan, who was salmon fishing while following the Budget. He said that even if it was a leak we should not worry about it, because he used to do it all the time.

18:29

[Barry Gardiner (Brent North) (Lab)]

Socrates called it eudaemonia—living well. He thought of it as the ultimate arete or virtue. In some respects, that is what Budget day is all about: how we can allocate the nation’s resources so that more people can live well. However, when Socrates spoke of eudaemonia, he would never have confused it with prosperity. He thought of it as a state of human flourishing. The Chancellor clearly thinks of it as mere human affluence.

Well-being may be a function of economic activity, but if so, it is not a direct or simple one. One need only reflect that a specific loss of income is much more damaging to well-being than the corresponding gain is beneficial to it. The bedroom tax that reduces my constituents’ incomes has a far greater impact on their well-being negatively than a corresponding tax credit would have positively. That is because other concepts such as security, equality and justice really do matter. For human beings to live well—to flourish—we require all of those.

Our economy must therefore be structured to provide not just so-called flexibility of the labour force, but security of employment. It must minimise the inequality between the bankers’ million-pound bonuses and the savers at risk of losing part of their life savings to bail out Mediterranean countries. It must explain the justice of someone earning £150,000 still getting £1,200 per child in child care, when a mother in my constituency who cannot find more than 15 hours of work a week gets none.

A good Budget is not just about the distribution of national wealth; it is about the management of society’s resources to enable its citizens to flourish as one nation. On that measure, today’s Budget has failed. Today’s Budget is the Budget of a Chancellor who has painted himself into a corner and then run out of paint. He has been wedded to austerity so obstinately and for so long that when he finally is seduced by the noble Lord Heseltine to share an illicit tryst with growth, he lacks the wherewithal to invest properly.

This Chancellor has been wedded not to prudence, but to patience. Year on year, we have been told that the prospect of economic growth and recovery has receded once more over the horizon, always remaining just four years away. In 2010, he forecast that by today, the economy would have grown by 5.3%; it has grown by just 0.7%. In 2010, he forecast that his austerity plan would stop us going into a double-dip recession; we have been teetering on the brink of a triple dip. In 2010, he told us solemnly that austerity was the only way to avoid losing our triple A rating; we now know that it has helped us to lose it.

Believe no one else about this Chancellor. Judge him by his own words. Judge him by his own U-turns. Growth is lower, real wages are lower, public sector net borrowing is £212 billion more than he forecast and debt as a percentage of GDP is up to 76.8%, when he forecast that it would be 69.7%. The Government’s target of debt reduction by the end of this Parliament is now absolutely unachievable.

The real trouble with the Budget is not that it will fail to achieve its growth objective over the five-year cycle of the political process; it is that the five-year cycle itself bears scant relation to the cycles of the resources that we must manage if we are to create sustainable well-being for our citizens. The Chancellor has engaged in a civil war in this Government against any understanding of true stewardship of our natural resources. Oh yes, he can spot a domestic credit bubble in our housing market, but he is incapable of seeing the far greater danger of an annual global consumption of natural resources that it takes our planet one year and four months to replace. That is a credit bubble of terminal proportions not just for our economy, but for our species.

By the time a child born on this Budget day is eligible to vote, the world will require 45% more energy, 30% more fresh water and 50% more food. This child will be part of the generation that will see the global population move from 7 billion to 10 billion. How do we enable this child to flourish? Do we become the most selfish generation of the most selfish species in our planet’s history, or do we become the generation that understood that justice and sustainability are essentially the same thing? If we want peace in the world, we must create justice. If we want justice, we must live sustainably.

This Chancellor’s old mantra was cut, tax and grow, so what if he has changed it for Heseltine’s grow, tax and spend? If he has not learned that growth must be sustainable, it will all end up in the same mess. In a world of 7 billion people, growth can be sustainable only if it is predicated on advances that bring increased productivity and greater efficiency in the use of resource. For the world to continue to achieve a 3% per annum growth target and to maintain a trajectory that keeps carbon emissions below the 2° threshold, we must increase our productivity per tonne of carbon emitted 15 times over, yet this is the Chancellor who has fought tooth and nail to stop us having a decarbonisation target in the Energy Bill.

The Chancellor is oblivious to the argument, regardless of who makes it—friend or foe, politician or industry. Two weeks ago, six of the largest multinational investors in the UK infrastructure wrote to him. Mitsubishi, Alstom, Doosan, Gamesa, Vestas and Areva have interests that span gas, clean coal, carbon capture and storage, nuclear and renewables. They told the Chancellor of their strong support for the early introduction of the 2030 decarbonisation target and warned:

“We are already close to the point where lack of a post-2020 market driver will seriously undermine project pipelines.”

They explained that supply chain investment decisions depend on reasonable assurances from manufacturers that a production facility built this decade at a cost of millions will have an adequate market for its products well into the 2020s. They told him:

“Postponing the 2030 target decision until 2016 creates entirely avoidable political risk. This will slow growth in the low carbon sector, handicap the UK supply chain, reduce UK R and D and produce fewer new jobs.”

The hon. Member for Chichester (Mr Tyrie), who chairs the Treasury Committee, began the debate from the Back Benches with the extraordinary claim that low-carbon policies are exporting jobs and that green measures are adding 20% to our fuel bills. He should know that energy efficiency measures cost 15%, not 20%, of our energy bills and that the low-carbon sector has provided one third of all economic growth in the UK and is our fastest growing sector, creating thousands of new jobs. The Chancellor and his friends need to begin to recognise that green growth is the surest way through our economic problems, not the contributor to them. Fundamental to that is an understanding of sustainability. Last year, the EEF manufacturers’ body sounded a warning about the risk—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order.

18:37

[Neil Carmichael (Stroud) (Con)]

It is a pleasure to follow the hon. Member for Brent North (Barry Gardiner).

The Budget is first and foremost a Budget for the global competition that Britain is in. It equips Britain to compete properly with our partners and the rest of the world, including the BRIC economies. The second important element of the Budget is that it is about aspiration and the people who want to participate in that competition, as signalled by some of the measures on small and medium-sized enterprises. I want to talk first about the fiscal challenge and how it looks now before I move on to monetary activism, which is an appropriate phrase.

On the fiscal challenge, I welcome the fact that the NHS, Department for International Development and education revenue have all been protected. That is absolutely right and how things should be. Of course, it means there will be cuts elsewhere and a different state will emerge as regards our priorities in two or three years’ time, but that will prepare the ground for the entrepreneurial private sector growth that is so urgently needed in the immediate future.

On monetary activism, it is good that the Monetary Policy Committee has a new role in inflation, interest rates and growth. That will give us a lot of hope and the ability to think ahead more as we hear news and announcements vis-à-vis the inflation and interest rates. Linking them together is welcome.

The third really important issue, and the one I want to talk about most, is the supply side, which is so important to the prospects of the real economy. First, however, let me welcome the reduction in beer duty, the increase in the personal tax allowance to £10,000, and the measures to encourage people to buy their own houses. All those things are part of the aspiration that I mentioned.

On the supply-side argument, there is a test: we have a lot of problems, but does the Budget help those problems and come up with solutions to make them less significant, or even turn them into solutions? Our first problem is that we are not exporting enough. We have exported a large number of cars and produced 1.5 million of them, yet only 30% of those cars are constructed in Britain—they are assembled here, but their parts are often imported. My first question is whether the Budget will improve the supply chain by ensuring that it is more localised and therefore forms a greater part of the economic growth needed by the economy. I think the answer to that is yes, because measures such as the business bank and so on add up to appropriate support for small and medium-sized enterprises.

My second question is about credit—tooling-up for new projects is an expensive activity, especially for SMEs that need to get their hands on appropriate money. High street banks are not always the best place for that, and I like the idea that the business bank will effectively reinforce and assist new forms of investment in SMEs from private and innovative areas. That will give a huge boost to an SME’s ability to get the investment necessary to develop its products. The answer to my second question is yes.

We also have a problem with regional underperformance. That is a significant issue for Britain and Lord Heseltine’s report focuses on it well. His idea for local enterprise partnerships to have core funding is powerful and will mean that they can really focus on areas that are of interest to them and which they know about. I think we will be seeing much more forensic activity at that level, and around our cities and other areas where there are local enterprise partnerships. In Bristol, which is near Gloucestershire, or even in Gloucestershire itself, I can see how that would be useful. Such a measure is a recognition of regional underperformance, so again the answer is yes, the Budget actually helps.

Another area of concern is the profile of SMEs, which I have been thinking about for a long time. We have a large number of SMEs, many of which are extraordinarily small. They perform an important role in innovating and inventing but do not always have the critical mass to tackle large supply-chain issues. We must encourage smaller firms to become bigger ones. Does the Budget help with that? Yes, I think it does. Changes to corporation tax and basically having one rate may, I think, encourage small firms that in the past have seen the advantage of using two different forms of corporation tax to come together. Other reasons why firms might enlarge or unify include the industrial strategy, which is already part of our overall plans to boost aerospace. I would like to see that move into the automotive sector, which needs the same sort of treatment.

The final point that bothers me is that, although we have already found jobs for one and a quarter million people in the private sector—a fantastic achievement—our productivity has not increased by as much as we had hoped. The Bank of England’s report on inflation from February 2013 makes that point well. We must worry about how to improve the skills available to our work force—those already working and those who are going to start working—so that we get that extra boost to productivity. The Budget does good things in that respect. For example, it introduces the Technology Strategy Board and boosts sector councils. Both measures, and the Government’s strident determination to improve skills in our colleges and schools, are excellent.

Lord Heseltine was right to recommend that the Government make a huge effort to ensure that we have high standards and good quality courses that demand academic achievement in our colleges. That is what will encourage people to do the work and decrease the productivity gap, which has plagued our economy for too long.

In summary, the Budget is good for Britain and good for those problems.

18:45

[Diana Johnson (Kingston upon Hull North) (Lab)]

I was hoping that the Budget would produce a plan for jobs, growth and investment. I was hoping that it would help areas such as mine, and help to rebalance the economy between the south and the north. I was hoping that it would address the problems of my constituents in Hull North and the problems that are becoming far too apparent in other areas of the country. We are becoming “food bank” Britain. That sits badly with other policies the Government are pursuing, such as giving tax cuts to millionaires and fighting hard in Europe to protect bankers’ bonuses.

Jobs are the key issue in my constituency. The latest statistics available show that more than 40 jobseekers go after every vacancy. Today’s figures show that there is 12% unemployment in my constituency against a national average of just over 5%. Young people are particularly hit by unemployment problems. Despite the good work that the local council does with the private sector to try to get young people into work, it is proving difficult to do that. The Work programme has a success rate of 0.83% in my constituency. Jobs are the key to ensuring that my city has a future.

The Chancellor said that 1.25 million private sector jobs have been created, but in my area in the past few months, more than 1,000 private sector jobs have gone from big names such as Kimberly-Clark and Seven Seas. There were job losses in Hull following the underspend on the Warm Front scheme—Hull was one of the bases for the scheme. We need policies that will work throughout the country and not just in specific areas.

The Chancellor said that, for every public sector job that had gone, six private sector jobs were created, but those jobs are often temporary, part-time or zero-hour contracts. A part-time job in Poundland is not the type of job we want in our economy. We want high-skilled, good-quality jobs. I am told that more people will be employed in “McJobs” at McDonalds than in the British Army. That says we are not getting our priorities right.

The Government’s response is the idea that employers have a national insurance contribution reduction of £2,000. That is welcome—the idea is similar to ideas in the five-point plan, which the Labour party has been talking about for many years. However, the managing director of PAT Testing Expert Ltd in Hull has said that the measure is a reduction, not a cut, which is what he was hoping for. The business community is saying that the measure is not quite what they were hoping for.

Overall, the Budget has failed. There is nothing on the skills agenda, which is so important in ensuring that our people have the skills they need to get the jobs for the future. Last night, the caravan industry told the BBC in my region that it needs help in getting investment. The Minister will know jolly well that, come April, there will be 5% VAT on caravans, which was part of the deal that had to be cobbled together after the omnishambles of the previous Budget. The industry is getting no help.

There is nothing in the Budget about business rates. There is nothing on roads or the work that needs doing in my area on the A63—I note that, in the autumn statement, work was planned for the port in Thurrock, which is in the south. The money available for infrastructure is all post-2015. There will be £3 billion, but it will be too little, too late.

The Budget contains no support for the renewables industry, which is where the real potential for growth lies. In my city, we have been trying desperately to get Siemens to build and manufacture wind turbines, so that lack of support is very disappointing.

While there is much in the Heseltine report that it is important to commend, it is disappointing that the Government have not accepted some of the recommendations on the need to protect British innovation and enterprise. As I understand it, there is nothing about the commitment to strengthening local chambers of commerce, which are important organisations for local economies. I am concerned that the single pot might not become available until 2015. Again, that is too late: we need the help now.

On overseas students, our universities’ export of quality education has been vital, with potential for further growth. However, the Government need to get their act together. A lot of overseas students are put off coming to this country by the messages the Government send out on immigration. That is a great shame. The university of Hull has a large number of overseas students and wants to see more of them. It is disappointing that the Government seem to be facing both ways on this issue.

On housing, although I welcome some of the initiatives the Government have brought forward, there are a lot of questions to ask about how they will work and not be abused. More importantly for my constituents, there was absolutely nothing in the Budget about flood insurance. If flood insurance is not available after the summer when the statement of principles comes to an end, that could blight the housing market in large parts of the country. There has been no agreement. As I understand it, the Treasury is standing in the way of an agreement between the Association of British Insurers and the Government. It will not ensure that money is available in the first few years of any new scheme and underwrite it if there are bad floods, such as those in Hull in 2007. That is shameful. My constituents are finding it very difficult to get house insurance now. If they cannot get house insurance after the summer, the housing market in Hull and in other parts of the country that have suffered from flooding in recent years will be in dire straits. The Government need to address this situation urgently. It will become a powerful issue if it is not addressed properly.

The Government talk a lot about how they want the economy to start to improve, but it is clear that growth has been downgraded, there is more borrowing, unemployment is starting to go up—3,000 of the 7,000 rise in the number of job losses announced today were in Yorkshire and the Humber—and millionaires are getting a tax cut in just a few days’ time. The Government have got their priorities wrong.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. The last speech is by Emma Reynolds. Emma, I will not put the clock on you, but if you are still speaking at 7 pm, I will you interrupt you as gently as I can.

18:53

[Emma Reynolds (Wolverhampton North East) (Lab)]

It is an honour and pleasure to follow my hon. Friend the Member for Kingston upon Hull North (Diana Johnson). I want to start my speech by welcoming one element of the Budget, but then I want to set out why I think it fails three key tests of economic competence, fairness and equality. Let me start with the positives.

As the chair of the all-party group on aerospace, I welcome the announcement made earlier this week, and in the Budget today, that the Government, alongside industry, are creating the aerospace technology institute, which will support investment in vital areas of R and D. Aerospace is a long-term industry, and it takes 15 years to develop a product. It is crucial that long-term sustained investment and cross-party support is in place, so I welcome today’s announcement. Another important factor for the industry is our continued membership of the European Union. If the UK were to leave the EU, it would be disastrous for the aerospace industry, and many other industries throughout the country.

In addition to the aerospace cluster in Wolverhampton, there is another chink of light and optimism on which I want to comment. Jaguar Land Rover has already committed to substantial investment on the edge of Wolverhampton and has just announced that it will almost double that investment, which is a real shot in the arm for the city and will create 1,400 jobs directly and many more in the supply chain and wider economy. That demonstrates the strategic foresight of the regional policy and the regional development policy during our time in government. Had it not been for Advantage West Midlands investing in and decontaminating that site and designating it as a strategic investment site, the Jaguar Land Rover investment, and the many other investments in that site, would not be benefiting constituents in the city.

That said, however, I remain deeply concerned about the local economy in Wolverhampton. The Government’s economic policies fail three key tests. Will they kick-start the economy? Will those with the broadest shoulders bear the greatest burden? Will their economic policies lead to a more equal society? First, it is clear to me and many millions of people that the Government are failing the test of economic competence. They destroyed consumer and business confidence, sucked demand out of the economy and failed to tackle the crisis in living standards. I welcome some of the announcements—for example, on the cancellation of the beer duty escalator and the fuel duty—but this is simply too little, too late.

Inflation is high and rising, wages are falling in real terms and, as a result, firms do not have the confidence to invest and are sitting on big surpluses. There is no growth, very little investment and exports are disappointing. I know that Government Members moan about the eurozone, but France and Germany are outperforming our economy. In the past two years, Germany’s has grown by 3.6% and France’s by 1.5%. The Government have choked off the recovery, the economy is stuck in a rut and the Government seem powerless to do anything about it. This bizarre notion of expansionary fiscal contraction has not worked. They need to think again, but unfortunately they are not.

The changes to take place in 11 days demonstrate that the Budget will fail the fairness test. Some of the poorest people in Wolverhampton, many of whom want to move to smaller council properties, will lose, on average, £728 a year. The Government have ignored the fact that there is very little alternative accommodation available and that the ties people have to their local communities are incredibly important. Many other changes will entrench the inequalities not only in Wolverhampton, but in the rest of the country. In Wolverhampton, for every mile someone travels from the west of the city to the east, they lose a year in life expectancy. The difference between the poorest street in my constituency and the richest street in the country is incredibly stark, but the gap will only get wider, because the Government were incredibly arrogant in last year’s Budget in cutting taxes for the richest people in the country, essentially giving 13,000 millionaires a 100% tax cut.

The third test is of inequality. It is not just that deepening inequality is a bad thing in and of itself—one reason I came into politics was that I wanted to live in a more equal society—but Richard Wilkinson has compellingly argued that unequal societies also perform worse than more equal societies on many other fronts. For example, they have better life expectancies, less childhood obesity and lower crime levels. For that reason, the Government’s economic policies are bad not only in respect of unequal outcomes, but for the quality of life of everyone in the country and for our future.

I regret to say that the Government’s economic policies fail the tests of economic competence—more of the same simply will not work—of fairness and of whether they will create a better and less unequal society. I am very disappointed with the Budget.

Ordered, That the debate be now adjourned.—(Karen Bradley.)

Debate to be resumed tomorrow.

Business without Debate

Wednesday 20th March 2013 Commons Chamber

Finance and Services Committee (Amendment of Standing Orders)

Ordered,

That Standing Order No. 144 (Finance and Services Committee) be amended as follows:

(a) in line 3, after ‘services’, leave out ‘for the House’ and insert ‘provided from the Estimates for the House of Commons’;

(b) in line 4, leave out ‘Board of Management’ and insert ‘Management Board’;

(c) line 7, at the end, add ‘(b) with the assistance of the Accounting Officer, to prepare the Estimates for House of Commons: Members for submission to the Members Estimate Committee;’;

(d) in line 10, leave out from ‘Commission’ to the end of sub-paragraph (c) and insert the words ‘and the Members Estimate Committee or the Speaker on the financial and administrative implications of recommendations made to them by other Committees of the House.’; and

(e) line 25, at the end, add ‘or the Members Estimate Committee as appropriate.’—(Karen Bradley.)

House of Commons Members Estimate Committee (Amendment of Standing Orders)

Ordered,

That Standing Order No. 152D (Members Estimate Committee) be amended as follows:

(a) line 8, at the end, add ‘(a) to agree the Estimates for the House of Commons: Members;’;

(b) line 10, leave out ‘and the Guide to Members’ Allowances known as the Green Book’; and

(c) line 24, leave out sub-paragraph (e).—(Karen Bradley.)

House of Commons Members Estimates (Pre-Paid Envelopes and Stationery)

Resolved,

That with effect from 1 April 2013 the cost of Members’ pre-paid envelopes and stationery, currently a charge on the House of Commons: Administration Estimate, shall be a charge on the House of Commons: Members Estimate.—(Karen Bradley.)

Business of the House

Ordered,

That at the sitting on Tuesday 26 March, notwithstanding paragraph (4) of Standing Order No. 14, consideration of any Lords Message that may be received shall have precedence over the business determined by the Backbench Business Committee.—(Karen Bradley.)

Petitions

Wednesday 20th March 2013 Commons Chamber

19:00

[Fiona Bruce (Congleton) (Con)]

I rise to present a petition from the Middlewich rail link campaign, supported by more than 2,000 residents from people in the towns of Middlewich and Sandbach in my constituency and from Northwich, in the constituency represented by my hon. Friend the Member for Weaver Vale (Graham Evans), who is in the Chamber and also supports the petition. The petition asks for the reopening of the Sandbach to Northwich branch line and the reintroduction of passenger services at Middlewich station along the line.

The humble petition of the Middlewich rail link campaign and its supporters says:

The Petition of residents of Middlewich and the surrounding area,

Declares that the Petitioners call for and fully support the reopening of the Sandbach to Northwich branch line to passenger traffic and the vital reopening of Middlewich railway station.

The Petitioners therefore request that the House of Commons urges the Department for Transport to consider the reopening of the Sandbach to Northwich branch line to passenger traffic and the reopening of Middlewich railway station.

And the Petitioners remain, etc.

[P001158]

19:02

[Heather Wheeler (South Derbyshire) (Con)]

I rise to present a petition on behalf of 1,100 residents of South Derbyshire regarding human rights in India.

The petition says:

The Petition of residents of the United Kingdom,

Declares that the Petitioners believe that the UK Government, together with the UN and EU, should encourage the Indian Union to take immediate action to stop human rights abuses facing minorities in India and that India should sign and ratify the Rome Statute of the International Criminal Court and the UN Charter against torture and other cruel, inhumane or degrading treatment or punishment which encompasses the death penalty and thus India should abolish the death penalty as it is a cruel, inhumane or degrading form of punishment; further declares that the UK Government should campaign to stop Balwant Singh Rajoana's death sentence and have him released from jail as he has served 17 years in custody and that the Indian Union should release all prisoners facing the same situation and those who have been imprisoned without trial.

The Petitioners therefore request that the House of Commons urges the Government to appeal to India for the above actions to be taken, and request that the Government bring these issues to light in the European Union and United Nations.

And the Petitioners remain, etc.

[P001165]

Justice for Tamils

Wednesday 20th March 2013 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Karen Bradley.)

19:03

[Mr Lee Scott (Ilford North) (Con)]

I would like to start by thanking Mr Speaker for allowing this debate on justice for the Tamil people. I would also like to say in the first instance, on my own behalf, but also, I am sure, on behalf of many hon. Friends, that we are sorry, because what we are talking about is trying to get justice for innocent victims who lost their lives—who were raped, who were murdered, who were imprisoned. We cannot bring those lives back, but we can try to get justice.

I am the chairman of the all-party parliamentary group on Tamils, and the group recognises that accountability is paramount for a sustainable peace and a meaningful reconciliation for the whole island of Sri Lanka, and for addressing the issues that have arisen not only during and after the conflict but going back many years, all the way back to 1948.

It is now four years since the end of the conflict in 2009, yet I and others believe that there has been no real accountability or mechanism for achieving it, and no meaningful settlements have been put in place. We need to look at the root cause of the conflict in Sri Lanka, in memory of those who lost their lives and for the sake of the children who lost their parents and of the people who even today have not been accounted for. I want to ask the Minister a number of questions on that point. I accept that he will not be in a position to answer some of them, but I want to put them on the record none the less.

At the end of the conflict, many babies and young children disappeared. I fear that I know what happened to them, but their relatives in the diaspora and in Sri Lanka deserve some answers. I have asked the high commission for those answers, and the Minister might be interested to know that it contacted me yesterday, after many months, asking to meet me. I would be happy to do that, as long as it will answer the questions that I and Members in all parts of the House have been asking for many years. We want meaningful answers and we want justice.

I was recently honoured to speak at a United Nations conference on this issue in Geneva. I issued the same apology that I gave the House tonight, not because I feel that this was my fault but because although I and Members of all parties in the House raised the matter with the Government of the day when it was happening, we should all, alas, hang our heads in shame that nothing was done to try to stop the loss of life. Now the United Nations has admitted that it let people down, and that the defences were not in place to stop the atrocities happening.

Different numbers are cited, but we are talking about tens of thousands of innocent people. Those are numbers that we just cannot comprehend. I cannot comprehend innocent women and children being taken out and shot. I cannot comprehend it because it is just not in our psyche; it is not how we would behave and we are not used to seeing others behave in that way. I cannot comprehend the fact that decades after the liberation of the camps following the holocaust, women and children would again be sent to camps. And God forbid that I ever should be able to comprehend it.

I am asking for a meaningful international investigation to be carried out. It is not for me to apportion blame, but somebody is guilty. Somebody committed those atrocities, and people must be brought to justice. Until that happens, it will be difficult to talk about reconciliation and peace. The extra-judicial and arbitrary killing of civilians has continued, people have disappeared, people have been raped and whole areas have been resettled. It is not me saying that; it is the United Nations saying it.

I am not saying who has committed these crimes, but we have seen programmes such as “Sri Lanka’s Killing Fields”, for which I commend Channel 4, and the images of soldiers killing innocent people were also on people’s mobile phones. Those images were there for all to see; they were not invented. I had hoped that there would have been some accountability by now, but I fear that the Government of Sri Lanka are trying to fudge the issue. They appear to be saying, “It’s not me, guv.” Over the decades, we have heard people saying that they were only obeying orders. We all know what that is an echo of, and it is unacceptable.

At this point, I am going to put my speech down. To be honest, some things are so emotional that I do not want to read out a prepared speech. As I said, our minds cannot comprehend some of the atrocities that took place. I keep on talking about justice, and I keep on talking about accountability because those are the necessities of what must be brought forward. To achieve that, I know there is a motion going forward at the United Nations in Geneva, either as we speak or tomorrow. I would like to see that motion made stronger. I know that it is not a motion being put by the Government of Britain. I have every confidence that we will support the motion, but I would like to see it strengthened so that the Sri Lankan Government are held to account.

I must raise the issue of the Commonwealth Heads of Government meeting that is due to take place later this year. I know that the Government have made no decision on that, but I ask the Minister to look very carefully at whether the Sri Lankan Government are fit to hold such a meeting. My view is that I do not believe they are.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I thank the hon. Gentleman for initiating further debate on this important subject. Does he agree that the difference between the responsibility of Governments and that of others who are not in government is that Governments take on a responsibility to honour their national and international obligations by virtue of being elected to their posts? Although it is clear that there were abuses of power on both sides in what was effectively a civil war in Sri Lanka and that both sides should be held to account, when it comes to the rights of the future citizens in Sri Lanka, it is the Government who ultimately have to answer for their responsibilities—both in their own interests and those of everybody else.

[Mr Scott]

My right hon. Friend is totally correct. There is a responsibility on any country that calls itself a democracy or on any country that has elected officials to honour international law and the law of their own country and to address these concerns, which my right hon. Friend, I and others in all parts of the House have raised for many years.

It may interest you to know, Mr Deputy Speaker, that because I have spoken up for justice on this matter, I have been accused on some websites of being “a white tiger”. That is interesting because anyone who knows me knows that I am by nature a coward—it has never let me down—so that is not one of the many things of which I can be accused. Equally, I would find it difficult to fulfil that role because I have never set foot in Sri Lanka; I have fought for the rights of the Tamil people from outside. I have been asked why I have not been to Sri Lanka. Until such time as I would be allowed to visit where I wish to visit, see what I want to see in any area, unfettered and unhindered, there would be no point in my going. I do not want to go on a Government-sponsored trip to see what they want me to see; I want to see the people who are in need of my and others’ assistance, but I do not believe that would happen.

Let me make it as clear as possible that I condemn any acts of terrorism by anybody. However, in looking for justice and reconciliation and looking at the list that the United Nations—again, not me—has provided, it needs to be said that it is very hard to get justice when people are already dead. We have seen on television footage of what the Government of the day did and we have seen clear-cut evidence taken on mobile phones, including by the troops. This evidence is not phoney; it cannot be argued with; and somebody was responsible for it.

[Gavin Barwell (Croydon Central) (Con)]

I think my hon. Friend has just identified the key point. All of us want to see a process that leads to people who have committed atrocities on either side of the conflict brought to justice. Given how the conflict ended, however, it seems highly possible that people in positions of power in Sri Lanka today were involved, so if anyone is to have confidence in the authorities and the Sri Lankan Government, those people need to be brought to justice.

[Mr Scott]

My hon. Friend is absolutely right and we continue to raise those points. In 12 months’ time, I do not want to be having the same debate in the same Chamber about the same tragedy of innocent people being killed. I want the journey along the road to reconciliation, the road to justice, to begin. If that is to happen, however, various issues need to be addressed.

I could read out a long list of all the matters that need to be investigated, but I am not asking the British Government—my Government—to investigate those matters. I am asking for an international investigation. I do not believe that there is any chance that the Sri Lankan Government will investigate themselves, and I have great fears about that, because I think that there will be a fudge. If, as the Sri Lankan Government have said, they are not guilty of anything, they have nothing to fear from an international investigation, because that will be its finding. I was told that they would not want Britain to be involved in such an investigation, but there is no need for Britain to be involved. There are many countries in the world that could conduct the investigation; it does not need to be conducted by Great Britain.

I will end my speech shortly, because I want to give the Minister an opportunity to respond to some of the questions that I have raised, but let me first make a few requests. If the United Nations motion could be stiffened— and it may be too late—it would send a clear message to the Sri Lankan Government, which would be extremely helpful. I also think that we should think very seriously about our attendance at the Commonwealth Heads of Government meeting in the autumn.

However, the most important point is that, for the sake of the thousands and thousands of women, men and children who have lost their lives, we cannot just stand by and do nothing. I know that we have tried to do something, and I know that the Minister cares passionately about this. I am merely asking whether we can go that little bit further, in order to secure justice for people who are no longer alive to secure justice for themselves. That, surely, is the duty of this Parliament.

19:16

[The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Alistair Burt)]

I congratulate my hon. Friend the Member for Ilford North (Mr Scott) on securing the debate. His tireless work to raise the profile of human rights issues in Sri Lanka and to seek accountability for events that took place during the war is well known to the House. His speech demonstrated his passion and commitment to the cause. I do not know what his definition of a coward is, but he does not conform to my definition. We are all aware of the way in which he approaches his work in the House. I also thank other Members for their contributions to the debate.

Having visited Sri Lanka last month, I am grateful for the opportunity to update the House, and to hear Members’ views about a country with which the United Kingdom has long-standing and deep ties. Our relations have been cemented through trade, tourism and education, as well as through the diaspora community in the UK. We value those links, which reflect the strong bond that our countries continue to enjoy. I am sometimes asked why the United Kingdom is so interested in Sri Lanka, and why the issue arises time and again. I think that the reason is a combination of that background of relationships and the real pain that we all feel—the sense that following the tragedy that was this conflict, everyone in Sri Lanka deserves something rather better to look forward to. There are so many unanswered questions; we just feel that more could be done.

The United Kingdom’s long-term interest is in a stable, peaceful Sri Lanka, free from the scourge of terrorism, where the human rights of all Sri Lankans are protected, but as the House is well aware in a different context, certain things need to happen to enable a country to rebuild itself after a tragedy. That is one of the reasons why we feel so much for Sri Lanka, and why we talk in the way that we do about the opportunities that exist. There must be a balance; there are issues to be considered on all sides.

As my hon. Friend observed, the debate comes at an important moment. Later this week, the UN Human Rights Council will consider a motion on the human rights situation in Sri Lanka. As my noble Friend Baroness Warsi made clear in her statement to the high-level segment of the Human Rights Council, the United Kingdom supports the motion. Let me reply to my hon. Friend’s query by saying that all international resolutions of this kind are composites, and are put together in a manner designed to create the greatest possible support for them. That sometimes means a degree of compromise on language. The United Kingdom felt that the most important thing was that the demonstration of a significant number of countries with concern about Sri Lanka was better than having a motion that some might have felt unable to support. We wanted to give a clear indication, as we gave last year, of the importance of these issues to many nations, which is why the resolution is drafted in the terms it is. We think it is still firm and meaningful.

The text reflects widespread concern that, in simple terms, the Sri Lankan Government, having won a brutal war, are not winning the peace. There should be no doubt about the fact that it was a brutal war and about the importance of defeating terrorism, but the brutality of the terrorism of the Liberation Tigers of Tamil Eelam is not sufficient, in itself, as an answer to questions about actions taken at the end of the war.

As I have previously made clear to the House, progress has been made in Sri Lanka in a number of areas—it is still important to say this—including de-mining, the reintegration of child soldiers and the resettlement of an increasing number of internally displaced persons. Considerable investment has also been made in infrastructure, as I saw during my visit in January. However, as the resolution highlights, progress is lacking in other areas fundamental to the reconciliation and long-term stability that all Sri Lankans deserve after almost 30 years of armed conflict.

As hon. Members are aware, the Sri Lankan Government took steps to address the root causes of conflict by establishing a Lessons Learnt and Reconciliation Commission, which reported in 2011. Despite gaps on accountability, the recommendations of the LLRC were, contrary to some opinion that had been expressed beforehand, constructive and far-reaching. Regrettably, however, the July 2012 plan of action for LLRC implementation covers only about half the recommendations, and for many the actions were scheduled to begin only in 2013.

I have repeatedly encouraged the Sri Lankan Government to implement all the recommendations, making it clear that the real test of the LLRC’s recommendations is in their implementation. I stress that these concerns and commitments made from outside Sri Lanka are absolutely based on the desires of Sri Lankans themselves, as their Government have expressed, to give effect to reconciliation and the pathway to it. All people from outside who are concerned about the future of Sri Lanka are asking for is that the Sri Lankan Government implement the things they have said are necessary to be brought forward if true reconciliation is to be achieved among all the people. The Foreign Secretary was assured in a letter from Foreign Minister G. L. Peiris just last week that all the LLRC recommendations will be implemented. I warmly welcome that assurance, but we urge the Sri Lankan Government to ensure swift implementation of all the recommendations. Many, such as that for a national day of remembrance for all those who died in the war, can be implemented relatively easily and quickly, if the political will exists.

[Mr Scott]

Does my hon. Friend agree that it might be helpful if the Sri Lankan Government would start to involve the Tamil diaspora from around the world in some way, engage them and start working with them so that some of these questions, fears, desires and aspirations can be addressed?

[Alistair Burt]

That is a question for the Sri Lankan Government. In short, it can only be helpful if members of the diaspora in the UK are clear about their desire to be engaged in the Sri Lanka of today and to work for the future of Sri Lanka, as well as about concerns about accountability and issues in the past. There are strong and deep feelings on both sides. I cannot see, given my knowledge of everyone involved, that everyone is going to come together on this, but it is true that elements in the diaspora community in the UK do want to be engaged in that work and that is very important. There needs to be an open door on both sides to try to engineer something that will be of assistance for the future.

The United Kingdom’s calls for the swift implementation of the LLRC recommendations are not unrealistic. The UK has never suggested or expected that reconciliation after sustained armed conflict would be instant. We realise that the LLRC recommendations cannot all be implemented immediately and that a credible process of accountability takes time. However, to make progress in the long term there needs to be a sense of urgency and a positive trajectory. This is particularly the case in areas that require agreement between various parties, changes to legislation and negotiated solutions to complicated issues such as land rights. From our own experience of reconciliation in Northern Ireland, we know well that these processes are complex and require a long-term approach, tenacity, co-operation and, if I may say so, political leadership.

We know too that delay serves only to make the process more difficult and widens the circle of those affected. At present, our view is that a number of key LLRC recommendations have not been tackled at all, or have been tackled in name only. First, the military presence in many areas may be less invasive than at the end of the conflict, but armed forces continue to occupy significant areas of civilian land, which are now classified as high-security zones or military cantonments. Secondly, military involvement in civil and commercial activities has reduced in some areas, but involvement in reconstruction work, and in the wider economy, including the tourism sector, remains widespread and a source of tension.

When I was in Sri Lanka, in the northern area, it was noted that I was not alone. I was accompanied not only by UK officials and officials from the high commission, but by a significant military presence, some uniformed and some non-uniformed. It is not uncommon for a Minister visiting someone else’s country to be protected and supported by the military in those areas, and I raise no issue about that. I felt safe, and it was only appropriate for the Government to do that. However, the extent of military involvement was noticed by others, who were keen to pick out the non-uniformed individuals who were there, which raises a significant matter.

Our observation is that military intrusion in the north is significant. There are too many stories of people in the area who, if they speak to non-governmental organisations or western journalists, are immediately interrogated by non-uniformed military personnel, and an oppressive sense of intrusion was reported by those who were able to report it. People commented on my visit and said how foolish I was. They said, “Don’t you know that no one will be able to speak to you honestly?” Trust me, Mr Deputy Speaker, I knew that full well, and I made no judgment in relation to what was said to me. However, my going on that visit, on which people could see how I was treated, made, I think, its own point, and I would ask that in future perhaps there would not be quite as much intrusion. That is something that needs to be recognised in the area.

Thirdly, not only has there been no agreement on political settlement, but a recent Bill in the Sri Lankan Parliament has restricted existing devolution by repatriating budgetary powers to the central Government. Fourthly, there is no reliable information on the missing, and families are unable to establish whether their relatives are among those still detained. Finally, there has not been, even as we see new footage that has been released, an independent investigation into the Channel 4 footage, as recommended by the LLRC.

One area not adequately covered by the LLRC is justice, or accountability, for the alleged violations of international humanitarian law by both sides in the war. As I said in a Westminster Hall debate on justice in Sri Lanka earlier today, all Sri Lankans deserve access to fair and transparent justice, yet for many Sri Lankans, Sinhala and Muslim as well as Tamil, the military defeat of the Tamil Tigers in 2009 has not been followed by an accounting for the events that they experienced during the war. The independent, thorough and credible investigations into alleged violations that the UK and many other countries have called for have not taken place.

A transparent, independent, Sri Lankan-led investigation with full access to witnesses would be a significant step in delivering justice. If Sri Lanka is unable or unwilling to deliver that, the calls for an international alternative will only increase. As hon. Members know, the concerns of the British Government are not simply related to the period of war. We have expressed concerns recently about the impeachment of the chief justice, and the intimidation of the media, opposition politicians and human rights defenders over the past 12 months. We remain seriously concerned about widespread impunity for sexual assault, rape and domestic violence in Sri Lanka—a concern that we are seeking to tackle by working with Sri Lankan non-governmental organisations.

We are very much aware that this year there is a period of intense international scrutiny of Sri Lanka, not just in the Human Rights Council session, but in the Commonwealth Heads of Government meeting. In September, the Sri Lankan Government plan to hold long-awaited northern provincial council elections, in which a free and fair process would send a strong signal of progress. In November, the Commonwealth Heads of Government meeting is scheduled to take place in Colombo and, whatever the formal agenda, and whoever attends, the spotlight will be on Sri Lanka, and it will either highlight progress or focus attention and pressure on the lack of it. As my hon. Friend said, our attendance has not been decided. We look to Sri Lanka to uphold Commonwealth values, including on good governance and human rights.

The Sri Lankan Government have in CHOGM an opportunity to demonstrate their commitment to Commonwealth values and progress in carrying out the actions necessary for long-term reconciliation and stability. The United Kingdom urges them still to seize this opportunity with the support of the international community. This is a society that we want to see succeed. No matter what the difficulties have been, there is still an opportunity to fulfil the recommendations that the Sri Lankans have announced themselves for their future.

I thank hon. Members for their continued interest. I am sure that we will be meeting again.

Question put and agreed to.

19:30

House adjourned.

Westminster Hall

Wednesday 20th March 2013 Westminster Hall

Wednesday 20 March 2013

[Mr Peter Bone in the Chair]

Government Policy (Kenya)

Wednesday 20th March 2013 Westminster Hall

Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Randall.)

00:00

[Eric Joyce (Falkirk) (Ind)]

It is difficult to overstate the importance of Kenya to the United Kingdom and, indeed, the wider international community. Perhaps first and foremost, Kenya is at the centre of international efforts to ensure the security of our own citizens. Citizens of Kenya have played a high price for that role and for their pivotal location in the world in recent years, from the US embassy bombing in 1998 through to the al-Shabaab attacks of last year, yet that is rarely reflected in public discourse here in the UK.

It is not necessary to go into detail about the way in which Kenya has co-operated magnificently with her allies, because a good deal of that information is public. However, much of it, by necessity, is unknown by those who are not directly involved. What is a matter of considerable public knowledge is Kenya’s leadership role in stabilising its northern neighbour, Somalia. Authorities, from the UN Secretary-General to the leaders of all the major states involved, have officially recognised that Somalia is where it is today—fragile but, I hope, on the road to recovery—because of the efforts of Kenya’s servicemen and women in defeating al-Shabaab and securing Mogadishu. What is more, Kenya has done that while showing restraint and ensuring the appropriate UN and African Union mandates are complied with, such as by re-hatting Kenyan troops as African Union Mission in Somalia—AMISOM—troops.

Kenya’s role extends well beyond military action, too. Virtually all humanitarian efforts in Somalia are mounted from Kenya, and they have saved the lives of hundreds of thousands of Somalis. Experts are in universal agreement that Kenya has deployed only appropriate force to assure its territorial integrity and that it has gone far above and beyond the call of national duty to help developed nations, such as the UK, to secure the safety of their citizens—here in the UK and abroad.

Anyone who has served in the British Army knows, like many others, how important Kenya has always been to our military capacity. The unrivalled training facilities that Kenya has always provided so freely have been a fundamental component of the UK’s capacity to launch military operations, including, for example, in our defence of the Falkland Islands just over 30 years ago. Many British servicemen regarded Kenya as the reason why we were able to mount that operation, given the personal and unit training capacity. Anyone who goes on the British Army’s website will read about the UK’s continuing reliance on, and gratitude for, Kenyan facilities, notably in respect of Operation Herrick in Afghanistan, but also in respect of British Army operations around the world.

Beyond military and security considerations, I have recently spoken to private equity investors who are interested in projects in Mogadishu, which is testimony to how astonishingly quickly Governments and investors can act together to build much needed infrastructure and services, following even the direst of civil collapses. That has been made possible by Kenya, first and foremost. It will be some time before we can be sure that Somalia is unstoppably on the road to proper reconstruction, but when it is, we will have Kenya to thank for that.

Communications in Kenya are also fundamental to investment throughout the region. I have visited Africa many times over the past dozen years, and virtually every time, I have travelled through Nairobi. It is a simple fact that Kenya is Africa’s pre-eminent junction for flows of trade and investment, people and, inevitably, information. From a trade and investment perspective, Kenya has many buoyant businesses, and it is the world leader in mobile payment systems. The Minister will be well aware of the UK’s early role in facilitating M-PESA. Off the top of my head, I believe that the former Commonwealth Development Corporation—now the CDC—was involved in seedcorning that project in Kenya.

M-PESA is a payment system that utilises the Safaricom network and harnesses microfinancing principles to deliver a superfast and highly effective means of bill payment. It has been so successful that conventional banking institutions have made significant efforts to become involved, through the Government, in the regulation of such systems. That is because mobile platform providers such as Safaricom enjoy confidence among local consumers at a higher level than that for the banks. Although Kenya, unlike many African states, has a relatively mature local banking system, I understand that almost 20 million Kenyans—it has population of just over 41 million—have M-PESA accounts. That enables them to make payments and transfer cash. It involves trading in what we would view as relatively small amounts, but those amounts fit the size of the domestic markets that small traders are accessing.

M-PESA has also been successfully extended into Tanzania. One of the critical aspects of the system is that in Kenya, and across Africa, the mobile infrastructure is developed, but fixed-line infrastructure is undeveloped, so services are jumping ahead. In the UK, we are looking at 4G and considering how we might be able to access new services through mobile platforms, but people in Africa really have no choice. The sophistication of mobile platforms such as M-PESA is remarkable, and in that way Kenya leads the world.

About 15 or 16 months ago, I attended the Internet Governance Forum in Nairobi, at which many of us were privileged to meet a number of senior Kenyan Government Ministers. It is clear that Kenya takes its role in internet governance very seriously, because it makes an enormous investment in new media technologies.

I said that Kenya is a junction for people and information within Africa. I know people who arrange to meet African colleagues and potential clients from across the continent in Kenya. I know people who go on holiday there, and I also know people who, a few days ago, helped to secure the release of 25 mariners from the Somali pirates who were holding them hostage. Of course, the UK Government are wary of that detail, but I will say a word or two about it, because it is pertinent to Kenya. The whole business of security in relation to piracy off Somalia involves significant reliance on Kenya, and such security is another area of activity that has saved the lives of many people.

Kenya suffers the consequences of—if I can call it this—non-terrorism related piracy. I know that we might call all Somali piracy terrorism, but there is a clear distinction in my mind, because while it is all done for money, some people are highly motivated by simply the commercial gains, whereas others, such as al-Shabaab, are motivated by what they can spend the money on. Nevertheless, piracy continues, and Kenya helps to do everything that it can to help to fix the problem at the macro level and, more significantly, in very practical ways that, for good reason, are rarely discussed.

I should say, perhaps as a side note, that while it is in vogue for some non-governmental organisations to say that they do not negotiate with hostage takers, responsible employers ensure that their employees are properly insured in case they are taken captive, particularly in dangerous areas of the world. That insurance is almost invariably taken out on the London markets, and the unsung people who get on with negotiating and sorting immediate crises are almost invariably British. Indeed, the overwhelming majority of people and companies involved in ship security for anti-piracy work off Somalia are British. Britain has an enormously important role to play, and Kenya sits at the core of things, because during an arrest operation, pirates are often taken to Kenya and then the Kenyan justice system endeavours to deal with the situation, which is clearly a contentious issue in itself. The Kenyan Government have handled things responsibly, and there is clearly a close relationship between the various navies of the developed nations and the Kenyan Government, because invariably such people could end up—and in some cases do end up—on trial in Mombasa.

Having stressed some aspects of our crucial mutual relationship with Kenya, I would like to move on to recent events regarding the Kenyan presidential election and the International Criminal Court. Media reports are still reporting the result of the Kenyan presidential election as “razor-thin”. In fact, President-elect Uhuru Kenyatta won by almost seven points on an 86% turnout in an election that was regarded by observers as fair and free, and was, thank God, peaceful. Prime Minister Raila Odinga, the losing candidate, has observed the law and rules, and lodged a court appeal, which will be considered in due course.

Going into the election, there was a perception in Kenya that the UK and US Governments, as well as some others, were not wholly impartial. It was said that UK diplomats had sought to encourage an Odinga win and that they had made comments during the tallying process that had seemed to work towards enabling a second-round run-off, which might have disbenefited Kenyatta, the first-round winner. I have scoured all the sources I can—as you know, Mr Bone, our resources in this place are very good for scouring the international media—and I also have many contacts and friends in the media across the world and in theatre in Kenya, but I can find no source whatsoever that serves as reasonable evidence of such a public bias. I could find no example whatever of a public comment by a UK diplomat or Minister anywhere. We can draw, in this place at least, our own conclusions about that.

There is a well-known quote by a senior US official that is now said everywhere in Kenya. I do not know the exact context in which he said it—it might have been in a speech—but that comment is “choices have consequences”. It is certain that the comment was made, although I would not wish to put it in the wrong context, and whether it is accurate or not, it did, in itself, have consequences. As I think the Minister will know, the quote was taken by some in Kenya as an implied threat that if Kenya did not vote for the developed world’s preferred candidate, there might be a price to pay in one way or another.

As you will be well aware, Mr Bone, I am not an academic expert. I was not present on the ground during the election period on this occasion, and of course I do not claim the expert knowledge of our diplomats and Ministers. However, I think that it is fair to say that there was a strong perception in Kenya that powerful nations were threatening Kenyans against voting for Kenyatta, who is now the President-elect, but that made them more likely to do just that—why would it not?

Going into the election, analysts were suggesting that Prime Minister Odinga perhaps had a two or three-point lead. I was never particularly convinced of that, and such a lead would be more or less within the margin of error in any case, but the vote was clearly very tight. However, I believe that a significant element of Mr Kenyatta’s margin of victory came in the form of a statement by Kenyans that if they were required to choose between sovereign self-determination and the patronage of foreign powers, they would always choose the former. It seems to me that it would be best if Kenyans did not feel—whether there is any foundation to this or not—that they needed to make that choice ever again.

The situation is ongoing, however, owing to the still-live International Criminal Court indictments of Mr Kenyatta and Deputy President-elect Ruto. I know that the Minister will wish to be measured and careful with his words on that subject, as he is with all his words. Although it is essential that we respect the processes of the ICC—Kenya is doing precisely that at the moment, as are the President-elect and Deputy President-elect—it is important to understand the political nature of the ICC. I am aware that the UK and other international Governments are seized of the situation’s trickiness, to say the least, but it is important to put these matters on record.

Two years ago, I had the privilege of spending several hours discussing the nature and processes of the ICC with its then chief prosecutor, Luis Moreno Ocampo. He was incredibly generous with his time, and I left his office with a far greater understanding of, and much more good will towards, the ICC than I had had when I entered it. My concern was that although the role of the ICC is of great importance and its writ runs across the world—a country does not need to have signed up to and ratified the ICC, in the admittedly unlikely event that it is referred to it by a full member of the UN Security Council—everyone who had been indicted was African. All 30 people who have been indicted to date are African. At the time, the number was a little less than that—perhaps 15 or 20. However, the fact remains that all 31—I shall come to the one shortly—who have been indicted by the ICC are African.

When I went to see Luis Moreno Ocampo, I was unsure of the sense of indicting a Head of State, in the form of President Bashir of Sudan, and I had doubt about the case of Jean-Pierre Bemba of the Democratic Republic of the Congo, who was indicted over allegations regarding incidents in the Central African Republic. However, I was struck by the fact that to the untrained eye, to put it mildly, the ICC was keeping away from countries that might have implications for powerful nations such as China, Russia, the United States and ourselves, and focusing all its efforts on less powerful African states. As Mr Ocampo convinced me, two wrongs do not make a right. There is, of course, evidence that major abuses have taken place in Africa, and the ICC should of course be able to investigate those cases and, if necessary, indict people. Nevertheless, the fact that all 31 indictments to date have been against Africans conveys the clear impression that the likelihood of an ICC indictment depends on a country’s strategic importance.

To cut to the chase, I have no idea—I am not a lawyer, and I am certainly not an international lawyer—about the merits of these cases. I do not even endeavour to look at the legal processes in the ICC. I am not an expert, so I would not wish to argue the merits or otherwise of the indictments in respect of Deputy President-elect Ruto and President-elect Kenyatta. The violence after the 2007 Kenyan election was of course serious, yet none of us can have any doubt that far more serious events have taken place in other parts of the world.

More to the point, there is strong face-value evidence that the ICC acts when it thinks that it can have a benevolent effect—I mean that in the broadest sense. For example, although the cases of Liberia and Sierra Leone were not ICC ones, it is clear that the violence there came to an end, and people were brought to account, because of the combined effect of careful and decisive military intervention followed by a due process of international justice. Indeed, that is the purpose of the ICC, although I stress that the Sierra Leone case and the Liberia case, involving Charles Taylor, were not under the ICC. The principle is very clear. It does follow, however, that sometimes it is more sensible and effective for the ICC to allow other mechanisms to take priority.

In theory, or in practice, the ICC is quasi-independent or quasi-autonomous—call it what you will. Ultimately it can be answerable to the UN Security Council, but its judicial and investigative processes are entirely independent. I am sure, Mr Bone, that you love quasi-autonomous bodies in the UK, and non-departmental bodies in theory act independently—and often, one might say, unaccountably—of Government. The processes of the ICC are robust and must be independent, but in the end it is a political organisation. I believe that the oversight is political, and that political oversight needs some kind of expression.

This week, the ICC has been considering the cases of Mr Kenyatta and Mr Ruto. Although those cases are technically separate, Mr Kenyatta’s co-accused has now been discharged, and many experts say that much of the evidence that there apparently is against Mr Kenyatta comes from a compromised source. Although, of course, the Minister cannot comment on the legal processes of the ICC, I simply flag up to him that it would be unconscionable if, for a considerable period, a cloud or a pall hung over the President of Kenya and the Government of Kenya, and indeed our relationship with Kenya, which is of such fundamental importance. This is not something that we can simply leave to technicalist and—I mean this in the nicest possible way—bureaucratic processes in The Hague that, even if they are legal, are disconnected from a wider political process.

You will be pleased to hear, Mr Bone, that I am drawing my remarks to a conclusion. At the weekend, another alleged war criminal who has been indicted, Bosco Ntaganda, who has been on the run for some time from the eastern Congo, surrendered himself to the Rwandan Government. I do not know the merits of the case against Bosco Ntaganda, although I do know the case quite well. It seems to me that the ICC exists precisely to deal with the fear that is created in places such as the eastern Congo by rampaging bandits and the rape and murder that frequently accompany them, rather than to deal with what are essentially matters of state. However we have arrived at this situation, this really cannot be up to the ICC and its processes. Governments cannot stand by and say, “It’s a process that has nothing to do with us,” when it comes to something as fundamental as our relationship with Kenya.

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

Does the hon. Gentleman agree that it is important to distinguish between the ICC process, which he has outlined at length, and what we hope will be the long-term strategic stability of the Kenyan nation in Africa, and its connection and relevance to the UK in terms of our investment and assistance in aiming to ensure that a peaceful, prosperous and corruption-free Kenya is the legacy for the future?

[Eric Joyce]

The hon. Gentleman is absolutely right. We all agree with the international rule of law and we see that the ICC has a role, but we also understand that there is an even larger public benefit at play across the world. It is for politicians to fix this. We benefit enormously as a nation from our relationship with Kenya, so this is not entirely altruistic, but those of us who care about African states, as all of us do, and particularly the importance and pivotal significance of Kenya, need to get the balance right. The hon. Gentleman will be aware of particular cases when we have to say, “This is an overall objective.” It is about peace and strong relationships, and ensuring economic growth and development, and the protection and security of our citizens. We somehow have to make international justice work where it can.

There is a degree of symbolism in the ICC. The US and China have not signed up to it and Russia has not ratified the treaty. In each case, I understand why that has happened. I remember vividly our debate in the House 10 or 11 years ago when we passed the Act that implemented the treaty. There was genuine concern on both sides of the House that the ICC could be misused. Those three major states and India stayed out of it because they were concerned that it would not dovetail well with how they saw the world, which I can appreciate—that, in itself, is an indication of the political aspect of the ICC. That is not to be cynical, but apportioning strategic importance to countries, and thereby excluding them from the ambit of the ICC—in effect, that is done by indicting only Africans—is a significant issue. If we choose to do that, we need to recognise that Kenya is far too important to be treated as if it were a minor and strategically unimportant state, although of course the UK Government would not treat anyone as if they were unimportant.

It might be strange if I were to make a speech about President-elect Uhuru Kenyatta without referring to what some might call our post-colonial legacy, although I will not bang on about it—I do not have a PhD in post-colonialism. His father was president of Kenya at an important time. People feel strongly attached to his father’s legacy for the nation of Kenya now. I am of course talking about President Jomo Kenyatta. Britain has played with an entirely straight bat. To be honest, I think that there has been a little bit of hubris because one American diplomat made one unfortunate comment, although it might have gone beyond that—I really do not know.

When it comes to African states, it is always possible that internal politics reflect the possibility of external post-colonial influence by a misguided British Government, and that be can be reflected in the conduct of internal politics, as to some degree has been the case. The current and previous Governments dealt with that well. Frankly, however, President-elect Uhuru Kenyatta saw an opportunity, as any proper politician would, to jump all over it, thinking, “This is an opportunity to establish my own credentials as a defender of the nation and our national integrity.” He is, of course, also his father’s son, which helped enormously. He was already a strong candidate, but that all helped his campaign. Any politician would have done the same in that situation.

The risk for the UK is that it is seen as trying to impose “white man’s justice” by going to Africa to tell those nice black folk how to get on and run their countries. Countries across Africa will rebel immediately against that, and that will become part of their internal politics. We can see it in Zimbabwe. There is a tiny risk in Zimbabwe that we sometimes look as though we are on one side, when we need to be very careful to be right down the middle. That is not to say that we should have the same international detachment to international justice as the Russians and Chinese—I understand why they do it; they have very different political systems. The risk for the UK is that we look as though we are reflecting past traditions, as I am certain that Ministers and officials know.

Britain needs to play the whole Kenyan situation with a straight bat—I am a Scotsman, so I have no idea of the rules of cricket; I just use the metaphor—and to be seen as doing so by the Kenyans. We should do whatever we can from now on to facilitate an absolute normalisation of our relationship with Kenya.

[Mr Peter Bone (in the Chair)]

It might be helpful for Members to know that nobody has indicated to the Chair that they want to speak. If those who wish to contribute would stand, it would be helpful.

09:55

[Martin Horwood (Cheltenham) (LD)]

It is a pleasure to serve under your chairmanship, Mr Bone. I apologise to you and other Members, because I must leave before the end of the debate. I commend the hon. Member for Falkirk (Eric Joyce) on securing the debate and on the well-informed way in which he introduced it. He was right to warn in his closing remarks against a patronising neo-colonial attitude, and yet it is right to praise Kenya for being, in many respects, a model of stability over many decades, a sometimes patchy but none the less committed democracy in east Africa, and for the stability it has helped and attempted to bring to the rest of the region. He was right to refer in his opening remarks to Kenya’s important contribution in relation to Somalia, both in African Union forces on the ground and in anti-piracy operations, for which the whole international community has good cause to be grateful.

Kenya is an important and overwhelmingly democratic member of the Commonwealth of nations. It has strong cultural, political and other links to this country. I am probably not alone in having strong constituency links to Kenya; Cheltenham is twinned with Kisumu. The strong civic, educational and voluntary organisation links between Kisumu and Cheltenham extend to youth conferences, through the charity Global Footsteps, which operates in both Kenya and the UK, and are an example of the strong links between the two countries. Nevertheless, Kenya has faced challenges, many of which the Department for International Development has highlighted.

Although absolute poverty has declined somewhat, it remains high in Kenya. DFID figures show a decline from 52% in 1997 to 46% in 2006, which is progress, but not great progress. They also highlight the fact that inequality remains high, that about 25% of Kenyans do not have enough income to meet their basic food needs, and that progress on the millennium development goals has been patchy and especially weak on issues such as maternal and child health. New approaches to providing basic services, such as health and education, are needed if the millions of poor Kenyans are to prosper. I entirely endorse that view.

DFID also highlights the political risks. Kenya’s image as a stable democracy faced great challenge at the time of the previous elections. The violence and issues with the ICC that followed pose a risk to not only Kenya’s reputation, but its progress. It is striking that the one year in which an otherwise incredibly impressive economic growth rate was not achieved was that which followed the election violence.

Kenya’s level of corruption and transparency, and the impunity that still exists, are difficulties. It is sad to note that Kenya is ranked 154 out of 182 countries on the Transparency International corruption perception index. Important parts of British Government policy towards Kenya are directed towards what might be termed the more traditional forms of aid and development support, but strong emphasis is also rightly placed on governance. The DFID programme stretches to work on health—HIV/AIDS, in particular—education, humanitarian aid and social protection, but it also includes trade growth, private sector development and a deliberate programme on governance.

That programme has included making people aware of the importance of their right to vote and how to register, which resulted in 12.7 million voters, 49% of whom were women, registering for the referendum not long ago on Kenya’s constitution. UK aid has also been used to increase the transparency and accountability of Parliament by opening parliamentary committees to the public and showing live debates on TV—something to which I am sure we can all relate. It has also provided support for organisations independent of Government that investigate corruption and monitor how taxpayers’ money is spent. For example, the National Taxpayers Association monitors Government use of taxpayers’ money. That emphasis on governance is absolutely right and important.

We have just seen a presidential election, and I suppose that it is absolutely right to congratulate Mr Kenyatta on his victory, but at the same time it is right to point out that he has in the past bravely said that he will comply with the International Criminal Court process. His commitment is welcome, and I hope very much that he maintains it. Kenya is a party to the International Criminal Court, and that is a matter of pride for Kenya. I am not sure whether the hon. Member for Falkirk was implying criticism of the International Criminal Court process—a process I consider extremely important—but he mentioned that it sometimes seems to go light on countries such as China. Unfortunately, and regrettably, China is not a party to the International Criminal Court.

[Eric Joyce]

I do not intend to be critical of the ICC per se. I referred to the fact that the ICC’s remit effectively covers the whole world, because permanent members of the Security Council can refer cases to it whether or not the country involved is a member. Technically, therefore, the ICC covers China, Russia and anywhere else, but those countries might not consider it in their interest, and I can understand that.

[Martin Horwood]

I take that point. It is important that, as far as possible, all countries comply with, take part in and support the International Criminal Court process. It is a matter of pride for this country and for Kenya that we have been parties to the International Criminal Court system and that we support it, and I hope that Mr Kenyatta continues to support his country’s participation in the process.

Some interesting comments were made during the election campaign, particularly the references to the British high commissioner and the implication that there was undue influence on behalf of the British Government in the election. That was an unwise accusation, which I am sure is rejected absolutely by the British high commissioner, Christian Turner, who has a very high reputation. We ought, perhaps, to approach that with humility; we all sometimes say things in election campaigns that we regret. Once in a position of responsibility, however, we need to move on, and the same should apply to Mr Kenyatta. He should now swiftly bury the hatchet and move on to building much better relations with the British Government, because there is a potential benefit for both parties.

I have referred to Kenya’s growth rate. It has achieved a rate of 5% over most years in the past decade, which is something I suspect the Chancellor of the Exchequer would give his eye teeth to be able to report about the UK later today. Kenya’s economy is the largest and most diverse in east Africa, and the country is potentially a very valuable economic, trading and political partner for this country. I think that we would all want to see a process whereby Kenya moved from being an aid recipient, and came out of that post-colonial mentality and relationship entirely, into a relationship in which Britain and Kenya regarded each other as friends, and economic and political partners. That should be the future for Kenya, and I hope that British Government policy towards Kenya will do its utmost to make that a reality.

09:59

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to make a small contribution to the debate.

I want quickly to comment on the importance of Kenya and the United Kingdom and their role together, and also to comment on the opportunities that I have had in Kenya and in my interaction with some Kenyan citizens with British passports who live in my constituency. The hon. Member for Falkirk (Eric Joyce) and others have talked about the importance of Kenya, and it is good to come to this Chamber to speak on the issue and to underline the importance of the United Kingdom of Great Britain and Northern Ireland and Kenya, and of where we can go from here.

Question marks over the election have been well illustrated by other Members, and I do not intend to dwell on them. I agree with the hon. Member for Cheltenham (Martin Horwood) that it is important to move on, realise where we are and take advantage of opportunities. The importance of the link between us and Kenya is well known because of the colonial relationships we have had over the years. We have become very interdependent, and the strong traditional and historical links between that nation and ours are important, as are the links today as Africa changes. The economic links are also important, and perhaps the Minister will comment on that in his response. I am always impressed with the Minister, and I do not say that in a condescending way, because when it comes to the issues that I and others feel in our hearts, he recognises them too, and that is the important thing when it comes to responding and encapsulating what we are all thinking. We look forward, therefore, to his response.

Economic links with Kenya are important, and we already have them in place. Traditionally, those links have been more important for the United Kingdom than for other parts of the world, but we must be aware that other countries are now equally interested in taking advantage of them. I had the opportunity of being in Kenya last year, and China’s presence there was very apparent. China was deeply involved in massive road building, and I would like to have the tarmac or the cement contract for that because it would last for ever.

We have people skills in this country, and yesterday my right hon. Friend the Member for Belfast North (Mr Dodds) spoke on the importance of the UK’s links with other countries. We have people skills and construction skills, and the ability to take people from here to Kenya to help. We should be doing that sort of construction work in Kenya. No disrespect to the Chinese, but why are we not there? That is the very point that many Members made in this Chamber at this very time yesterday morning. Whether or not it is the direct responsibility of the Minister, I would like to see some ideas about how we can build on that.

Something that did not come up in yesterday’s debate was the importance of water. Water in all parts of Africa is important, and we have many capable companies in the United Kingdom that could be given the contracts to improve accessibility to clean water right across Africa, and in particular in Kenya. Perhaps the Minister will give us an idea of how we can do that. We have very strong health and medical contacts with Kenya as well, and that is important because we want to increase the life span of people there. Tourism is important, not because of the programmes on TV that we have all seen but because it is an opportunity to see Kenya’s potential and its preservation of wildlife so that, rather than taking advantage, we can enjoy what there is in Kenya.

As I mentioned, the presence of China in Kenya is obvious. They are active everywhere in the country, and they are in every country in Africa. They are a major influence in the continent, and we do not want to lose our influence in any part of Africa, especially not in Kenya, to other countries. When it comes to mining, industry and the economy, what are we doing as the United Kingdom of Great Britain and Northern Ireland to help?

I have been involved with helping some Kenyan citizens in my constituency with immigration and personal issues, as all Members will have done as society across the whole United Kingdom becomes more cosmopolitan than ever before.

In the past two years I have been a member of the armed forces parliamentary scheme, which has given me the opportunity to go to many parts of the world. One place I went to last year was the British Army Training Unit in Kenya—BATUK—of which the hon. Member for Falkirk spoke. Our training camps in Kenya are vital, because they train our soldiers before they go to Afghanistan. As the sphere of war and our influence decreases in Afghanistan and the possibility of other spheres of conflict in Africa increases, BATUK is more important than ever. The British Government have spent a lot of money on their training camps in Kenya. We were there last year, when they were spending more money on a new training camp. That again underlines the important role that, for many reasons, we in this country have with Kenya. We need stability, and it is very important to have that over the next period.

I want to comment on the importance of Kenya and its stabilising role in the area. As other Members have said, Kenya contributes 2,000 troops to Somalia. Kenya is a very stabilising country in east Africa, but other countries, including Somalia, are very destabilising. It is important for this country and for Africa as a whole that Kenya is stable, and that it can use its influence in other countries in the area to ensure that peace reigns and that the destabilising influences of Muslim jihadist and other terrorist groups are diminished. That comes off the back of Kenya, backed by us and the United States of America, playing a very clear role.

Piracy off the east coast of Africa has been touched on by other Members. I believe that we can play a bigger role, as can Kenya, in addressing that issue. Perhaps it is time for the Foreign Office to have an officer in the embassy whose role would be to work with other countries to ensure that the piracy issue is addressed at the highest levels. There is a diplomatic role, as I have said, but there is also a military role, and perhaps that officer in the embassy in Kenya might, if at all possible, co-ordinate and improve such matters.

To conclude, Kenya’s role is critical to the future of Africa, but the relationship of the United Kingdom of Great Britain and Northern Ireland with Kenya is also critical to that, because Kenya alone cannot achieve the stabilisation that is needed. It is time to move on from the elections and to grasp the future for all the people in Kenya. Whether people are religious or not, I was very impressed to be informed on my travels in Kenya that no other place has as many churches per 100 yards. I have never seen as many churches in my life—Presbyterian, Elim Pentecostal, Jehovah’s Witness, Roman Catholic, Methodist, Church of Kenya—and they were incredible. That tells me that the people have a wish to do better and have an interest in each other. It is in our interests to play our part for Kenya, through this Government, as well as through this Westminster Hall debate.

[Mr Peter Bone (in the Chair)]

Before I call the shadow Minister, it might be helpful to say to the Minister, because I appreciate that he does not have a Parliamentary Private Secretary here, that inspiration from his officials should come via the Doorkeeper.

10:13

[Ian Lucas (Wrexham) (Lab)]

It is a pleasure to appear before you today, Mr Bone, and to take part in this debate. I commend my hon. Friend the Member for Falkirk (Eric Joyce) for initiating it, because this is an appropriate time for us to reflect on Kenya’s position. It is such an important country in east Africa, as has been conveyed by all the speakers. This is a time for us to reflect on the elections and think about our relationship with Kenya. It is a crucial country in Africa, with huge opportunities and strategic importance, and we need to work with it in the years ahead.

My hon. Friend raised the continuing issue about the International Criminal Court, which I will come on to, and spoke about such economic issues as communications in Africa, which are quite extraordinary. It is striking how we regularly hear from Back Benchers in this House about the frustrations of broadband delivery within walking distance of town centres in their constituencies because, from my experience of visits to Africa, the innovative approach to communications and the development of mobile technologies—from Morocco to even the Congo—is quite extraordinary. As in so many areas, we must not assume that we have nothing to learn from innovative progress in Africa. We need to engage much more closely with countries such as Kenya to learn about such matters.

The hon. Member for Cheltenham (Martin Horwood) made an important point about the neo-colonialist background. As we have heard, comments were made in the heat of the election campaign and, as he rightly said, that sometimes happens in Britain. A letter was delivered to me on election day by my Liberal Democrat opponent, who suggested that he might take me to court because of my election leaflet, but fortunately that never happened—[Interruption.] As the Minister says, that was clearly a misunderstanding.

Things said in election campaigns should be reflected on, but we then need to build relationships and move forward. I am sure that the approaches of the diplomatic representatives from the United Kingdom were entirely appropriate. Like my hon. Friend the Member for Falkirk, I have combed the records, and I struggled to find—in fact, I did not find—anything inappropriate about any observations made by Her Majesty’s Government on the elections, so it is entirely right to move forward.

The hon. Member for Strangford (Jim Shannon) referred to the armed forces parliamentary scheme, which is so important in enabling us in this House to appreciate the continuing work of our armed forces across the world. Kenya is important in that regard, as my hon. Friend the Member for Falkirk said.

The debate has been interesting and important. I have listened to all the speakers, and I think that reflection and looking forward is now the order of the day. Given the elections, Kenya has been the focus of international attention, and many of us held our breath about the elections over the past month. Thankfully, there has not been a repeat of the scale of violence that the people of Kenya witnessed following the elections in December 2007, which, it is worth reflecting, left 1,000 people dead and 600,000 people displaced. There was a real concern about the breakdown of government at that time, which fortunately has not been repeated.

Not everything went smoothly in the recent elections. On polling day, a separatist organisation raided a police station in Mombasa, resulting in 15 deaths. The situation was tense, but we have moved through that. As we know, following the 2007 elections, the President-elect and the Vice-President-elect were brought before the ICC to answer charges of crimes against humanity relating to post-election violence. That still continues and, as the hon. Member for Cheltenham said, we must respect the role of the International Criminal Court. International principles of justice and democracy must apply and be carried forward.

It is clear from this debate that there is a great deal of sympathy and solidarity with, as well as passion for, the people of Kenya. What I have learned in my role as shadow Minister for Africa is that there are enormous Kenyan communities within the UK, who make a very valuable contribution to British life. I have met individuals and groups with a concern for Kenya, who felt great sadness and frustration around the time of 2007 and 2008, and who also felt that there was a lack of political and legal accountability in connection with the 2007 violence. So, the pending legal challenge at the ICC has been an important process, but it has of course been a slow process, as so many legal proceedings are, and a painful one. We in the UK always have to be aware of our connections with Kenya.

[Mr Nigel Dodds (Belfast North) (DUP)]

The hon. Gentleman referred to the frustration that some people feel when looking at the situation in Kenya, particularly those of Kenyan origin who are here in the United Kingdom. I was in Kenya in 2002 and visited polling stations during the presidential election then, and the optimism at the election of President Kibaki at that time was palpable—it was a change. Unfortunately, things deteriorated in the 2007 election and in the violence afterwards. Does the hon. Gentleman share my sense of frustration, and that of Kenyans who I have talked to, that things have not moved forward, that the optimism has not been capitalised upon and that the great potential of Kenya has not been realised for its people?

[Ian Lucas]

That is intensely frustrating. What has struck me on the visits I have made to different African countries is the passion for democracy and the passion to vote, which was reflected in the 86% turnout in the recent election in Kenya. There is a thirst for democracy and progress, so the fact that progress has not been made in the last decade is a great source of disappointment. I hope that, even though the ICC proceedings are taking place, we will now be able, given the acceptance of the parties in the election of the result of the election although there may be legal challenges involved, to make some progress—both political and economic—in a way that has not happened in the past decade.

We must tread very carefully. The Minister knows that in our dealings with many, many African countries, they are very well aware of our colonial past. We have a role that, of course, respects the principles of self-determination and of elections within African countries, but different African countries always have a particular relationship with the United Kingdom, which is similar to the relationship of some African countries with other countries, such as France, that have also played a role in the continent in the past. That relationship is different from African countries’ relationship with countries such as China, which have not played the same role in Africa in the past.

However, we should give credit for the peaceful and determined spirit with which the recent election in Kenya was conducted for the vast majority of people. It was conducted in the right spirit and with the right principles. We need to respect the authority of the Independent Electoral and Boundaries Commission, and of other Kenyan institutions, to deliver this election. The disputes that are under way at the present time should be dealt with by the courts, which is the appropriate place for any disputes to be dealt with. In terms of governance, we should emphasise that our commitment is to international principles of democracy and justice, and it is not—in any sense—to interfere in any particular state. We have a proud tradition of democracy in this country, which we want to be shared everywhere.

We have heard that Kenya has, of course, an extremely important strategic location and role within the region, and that it has been very helpful indeed in achieving the steps—the tentative steps—towards progress in Somalia. My hon. Friend the Member for Falkirk mentioned the piracy issue. The EU has done much good work on that issue, and it has worked with Kenya to improve the piracy situation during the past few years. I commend the Government for the important role that that work has played in the region.

In addition, Kenya is an important economic power, as we have also heard. The Department for International Development has recently teamed up with the CBI to campaign for growth in emerging economies, especially in sub-Saharan Africa and south Asia. I would be very interested to hear what specific steps the Government are taking with UK Trade and Investment to work with British business in Kenya—in the new context of a new, stable Government—to build good governance and good business structures within the country that can deliver prosperity, not only to Kenya but to British businesses that work there.

It is very important that we continue with our co-operation programmes in this place through the Inter-Parliamentary Union and the Commonwealth Parliamentary Association. Recently, we have had visits to the UK from Kenyan groups, including a delegation of Kenyan women parliamentarians, and it is extremely important that those visits continue. It is also important that the development of the structures of democracy continues, such as committee work and all the grind that we get used to in this place and that is such an intrinsic and fundamental part of an effective democratic process. Again, we benefit hugely from contact and liaising with our African colleagues. It is very important that in this new phase in Kenyan politics we work hard on deepening and strengthening those contacts.

I believe that the EU, in connection with the recent election in Kenya, carried out an observation mission and I would be interested in hearing the Minister’s reflections on that mission, and on what assessment the EU has made about the election itself. Clearly, there are some matters relating to process, which have been raised by the losing candidate for the presidency, but I would be interested to hear about the EU’s reflections on that matter.

I know that the British Government have provided support for Kenya through the EU, including support for the Independent Electoral and Boundaries Commission, voter education, independent election observation and security reform. Again, any reflections that the Minister can provide on our role—what we did well, what we did badly—would be very helpful. If he cannot provide them today, I would certainly be grateful if he could provide them in the weeks ahead.

In recent months, Members from across the House have been very concerned by violent clashes between the Orma and Pokomo groups in the Tana River district. I am pleased that the Kenyan Government have responded by adding 1,000 police officers to the officers in the area, and that the disarmament programme and mediation efforts are continuing. However, I would be grateful if the Minister could provide an update and a report on the position on the ground in that district at the present time.

I hope that the Minister can address these questions. It is important, now that the election in Kenya is behind us and the parties there have accepted its outcome, that we develop and build our relations with the new Kenyan Government; that governance is strengthened in Kenya; and that in our Parliament we work hard with our Kenyan friends to develop effective governance. Also, following on from yesterday’s debate in Westminster Hall about the importance of UKTI and economic exports from the UK to different parts of the world including Africa, which some Members who are here today also attended, it is very important that we support and make effective economic progress with partners such as Kenya. We should be looking ahead; we are in a new phase in Kenyan-British relations. We need to work hard to ensure that that new phase is a positive one, which will be of benefit to the people of Kenya and the people of Britain.

10:19

[The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Alistair Burt)]

It is a pleasure to be here and to serve under your chairmanship, Mr Bone.

May I begin with an apology to colleagues? One is never quite sure with an aeroplane malfunction—in the case of my flight from New York last night, a back-up generator on the starboard engine of the aeroplane was not working—whether to be annoyed at the loss of three fairly vital hours, or grateful at the skill of the pilots and engineers in recognising something that might have caused the passengers harm. On balance, I think it is best that I say that I am very appreciative of being here, but I am also very grateful for your courtesy, Mr Bone, and that of all colleagues in the Chamber for appreciating my dilemma.

[Mr Philip Hollobone in the Chair]

It was, however, not very long after the start of the debate that I got to the Chamber, so I was able to hear the majority of the speech made by the hon. Member for Falkirk (Eric Joyce). I thank him for securing the debate, for his continued interest in Africa, which he has demonstrated on a number of occasions, and for his courtesy in informing my office of the general topics that he wanted to raise today. That enabled the preparation of advance briefing that I could read while I was in the US and on my way back, which proved to be fairly beneficial.

I thank all hon. Members who participated in the debate for their contributions. The tone of the debate—the hon. Member for Strangford (Jim Shannon) was kind enough to mention that I sometimes pick this up—has been very much one of support and encouragement. We have heard of personal knowledge from visits and a sense of moving on, with hon. Members recognising that few states are completely free of difficulties and political clashes. However, it is important to move on, and all the opportunities are there for Kenya, with which we have a deep and abiding relationship. If hon. Members will allow me, I will take a little extra time to say a bit about that relationship and to reflect on the comments that they made.

This is an historic moment for Kenya, as it prepares for only its fourth President since independence, so this is a timely moment for the House to take stock of how the UK’s relationship with Kenya has changed since independence. At the outset, let me be clear about the United Kingdom’s perspective on the relationship. Although we are often still thought of as the former colonial power, the modern-day relationship between the United Kingdom and Kenya is one of partnership. We are bound together by strong commercial, security and personal links that benefit both our countries, not least of which, as the hon. Member for Wrexham (Ian Lucas) said, is our growing parliamentary link through the IPU, the CPA and the parliamentary armed forces scheme. From my work around various countries, I have seen how valued those parliamentary links are by people who are building democracy, who are always searching for ideas. Equally, I have seen how we benefit, as the hon. Gentleman said, from swapping ideas with newer democracies, some of which are doing innovative work that it is more difficult to do in a more established Parliament such as ours. We all benefit from that.

Let me say a little about the general relationship before turning to the specifics that the hon. Member for Falkirk mentioned, particularly the elections and the ICC. The United Kingdom is the largest commercial investor in Kenya and home to half the top 10 tax-paying companies in the country. More than 200,000 British nationals visit Kenya every year—the largest number of visitors from any country. As colleagues have mentioned, the tourism industry is vital. A similar number of Kenyans live in the United Kingdom, and the benefits include the remittances sent back to the Kenyan economy. We are the second largest bilateral donor to Kenya, contributing more than £100 million a year, and I will say a little more later about the development matters that the hon. Member for Cheltenham (Martin Horwood) mentioned.

The British Army trains 10,000 British soldiers in Kenya every year, to the benefit of the Kenyan armed forces, as well as the wider local economy. Let me say a little more about that because it was mentioned, in particular by the hon. Member for Strangford. The British military has trained in Kenya for decades, and we have an excellent, long-standing relationship with the Kenyan armed forces and the local communities surrounding the training areas. Kenyan troops are also trained at the MOD base, and Kenyans are routinely welcomed to attend training courses at staff colleges in the United Kingdom. The relationship is a partnership, and it is governed by a memorandum of understanding that was signed by both sides in 2010. When issues arise, we always seek to resolve them through discussion. We will continue to have a strong shared interest in working together on important security issues, starting with Somalia, which a number of colleagues mentioned, where Kenyan troops still play an important role in pushing back al-Shabaab.

The hon. Member for Strangford mentioned piracy off the east coast. Kenya is, indeed, an important partner in dealing with piracy. I recently had the opportunity to visit Northwood, where all the east coast of Africa’s maritime operations, involving 27 countries, are co- ordinated. I also recently had the opportunity to visit the area to see some of the work being done. All states in the region play a vital part in that work, which is partly political and partly military. There have been no successful hijackings over the past year or so of vessels carrying an armed guard, and we now have 80% fewer hijacking cases, although four ships and 108 hostages are still being held. That dramatic success has been due to a lot of hard work by the various countries involved, skilled leadership, in which the United Kingdom has been heavily involved, and the application of resources. We must continue that work so that the piracy issue does not arise again, because it is far from solved. Of course, development efforts on the ground are also crucial in giving some of the young people sent by the ringleaders to do the hijacking at least the possibility of an alternative occupation.

I was recently in the Seychelles to open the new criminal prosecution centre, which the United Kingdom has paid for. It will deliberately target the ringleaders—there are expected to be about a dozen in the area—who cause so much damage to so many people. That is a measure of the commitment to dealing with this issue, and Kenya is, indeed, a key player. Dealing with piracy is a priority for our Nairobi mission and our Somalia embassy, and their work is well resourced. However, I will look at the issue again, as the hon. Gentleman asked me to, just in case there is anything further that can be done.

It is clear that Britain and Kenya matter significantly to each other. The Government therefore look forward to building on our substantial shared agenda in our partnership with the next Kenyan Government.

The March elections were a key aspect of the remarks made by the hon. Member for Falkirk. As Members will have seen, the Minister for Africa, my hon. Friend the Member for Boston and Skegness (Mark Simmonds), made a statement following the announcement of the results by the Kenyan electoral commission. Two things stand out for us. The first, which colleagues have mentioned, is the determination of the Kenyan people to express their sovereign will, as was demonstrated by the impressive turnout and the way in which many Kenyans waited patiently for hours to vote. The second is the largely peaceful conduct of the elections, which was in stark contrast to the violence of 2007-08.

Kenyans everywhere, including civil society, religious groups and Kenya’s youth, have spoken out for peace. We welcome the important role played by Kenya’s leaders, from all parties, in urging their supporters to exercise their democratic right peacefully, to show restraint and, above all, to refrain from violence. We welcome, too, the way in which those who have been unsuccessful in the various elections have accepted defeat or, in some cases, taken their disputes to court for peaceful resolution. That is the clearest sign that Kenya has learned lessons from the appalling violence that followed the elections in December 2007, which led to more than 1,000 deaths and to hundreds of thousands people being displaced. The Kenyan people should be proud of the message they have sent to the world about their determination to exercise their democratic right peacefully.

I am proud, too, that the UK has played a role in supporting the democratic process in Kenya, including by providing £16 million in funding to support free and peaceful elections, much of which was delivered through the United Nations Development Programme’s election basket fund. Our support helped to put in place a more accurate voter register and an independent parallel vote-counting system, and thus to ensure that more than 14 million Kenyans were registered to vote and had greater confidence that their vote counted.

However, the election process is not yet complete. The Coalition for Reform and Democracy has challenged the presidential result, and its petition is being considered by the Kenyan Supreme Court. That is an important part of the checks and balances put in place by the new constitution to ensure that disputes are taken to the courts, not the streets. We continue to urge all sides to show restraint and to wait patiently for the court’s ruling. The United Kingdom’s position is consistent and clear: it is for the Kenyan people to elect their leaders and for the Kenyan courts to resolve any disputes. In that context, we need to be even more careful than usual in our public statements that we do not unintentionally influence or prejudge what the courts will say.

The hon. Member for Wrexham mentioned the EU, but it is too soon for us to have received its report. We are collating the information. We will observe the challenge in the Supreme Court, but it is a little too soon to say anything further. However, my remarks about the way in which we have been able to play a part in the election process, and the way in which that has been received in Kenya, suggest that the influence of supporters from outside has helped the Kenyan people in their determination to ensure that the election process is good and strong.

We utterly reject any allegations of interference by the British Government or the British high commissioner. I am grateful to hon. Members for their comments made in relation to Christian Turner. We have always said that this election is a choice for Kenyans; it is for them alone to decide. We did not endorse any one candidate over another. It is for the electoral commission and courts to resolve any disputes.

Looking ahead, some people have expressed concern that the UK will reduce its co-operation with Kenya because of the charges pending against President-elect Uhuru Kenyatta at the International Criminal Court. That assertion is not based on facts. We are motivated by a desire to respect Kenya’s sovereignty and to ensure that the Kenyan court is able to do its work free from interference. We are confident that it will adjudicate swiftly and fairly, and we call on all sides to respect its independence. Irrespective of who emerges as the confirmed winner, I am confident that the UK will want to continue working with the next Government in Kenya; to continue supporting a reduction in poverty; to continue helping UK companies looking to invest in Kenya in support of Kenya’s Vision 2030; and to continue working together on security and stability in Somalia. Fundamentally, both our nations have a strong interest in working in partnership in pursuit of these shared goals.

The International Criminal Court proceedings regarding Kenya are, of course, a controversial topic, on which I am happy to clarify the UK’s position. Kenya and the UK share the same values of justice and peace. As the Foreign Secretary said in July last year,

“We have learnt from history that you cannot have lasting peace without justice, accountability and reconciliation.”

That is why we continue strongly to support the International Criminal Court’s work around the world, including its efforts to provide justice for the victims of the 2007-08 violence and to help Kenya move on from the past.

The ICC is an impartial, independent court. Alongside Kenya, 121 other countries are states that are party to its founding Rome statute, and there are more states that are party from Africa than from any other region. To respond to the concern expressed by the hon. Member for Falkirk about whether there is unfair bias against Africa, and whether the ICC pitches its cases against the less powerful rather than the more powerful, I have to say that we reject that suggestion. The ICC, an international independent organisation, is a court of last resort providing for the primacy of national jurisdiction. It steps in only when a country cannot or will not investigate and, when necessary, prosecutes fairly the most serious crimes in the international community. It puts victims at the centre of its work. Accusations to the effect that the ICC has focused solely on Africa are understandable, as all 15 cases formally under investigation are from the African continent, but the ICC itself is conducting preliminary examinations outside Africa, including in Afghanistan and Colombia.

We understand that civil society in Africa strongly supports the work of the ICC and the justice that it can and will deliver for many Africans. In every African situation in which the court has been involved, either the country in question—or, when relevant, all African states on the United Nations Security Council—have supported its involvement. Fatou Bensouda’s appointment as prosecutor, by consensus of all states that are party to the agreement, is a clear indication of Africa’s important role in the court. We hope that that will go some way to addressing the concern expressed by some African states that their voices are not being heard.

[Martin Horwood]

Does the Minister agree that there are other international judicial processes, such as those relating to the former Yugoslavia, where the ICC has not been necessary, because an effective international judicial process has been available and has been rigorously pursued?

[Alistair Burt]

My hon. Friend makes a fair point.

The focus on Africa is due to the number of cases, as has been mentioned, but it is unfair to infer from that that there is an unfair bias. The support of African nations and states for this work, which adds an essential element of transparency and accountability for some of the issues of the past, should not be neglected. It is important, as hon. Members have said, that the net is spread fairly and widely to catch those who have been most active contrary to the law.

Polls have consistently shown a strong desire for justice among the Kenyan people. In Kenya, the ICC became involved only after the Kenyan Parliament’s decision not to establish a special tribunal. We judge that that has helped to challenge the culture of impunity and to show there is no place for hate speech or incitement to violence in the new Kenya. Consequently, we continue to urge the Kenyan Government and all those facing charges to co-operate with the ICC. We welcome the co-operation that has already been provided, which marks Kenya out as a country that wishes to respect its international obligations. We are equally clear that a defendant is innocent unless proven guilty by a court of law. It is not for the UK, nor anyone other than the court, to pass judgement.

[Eric Joyce]

It is not my intention to be overtly critical of the ICC. Indeed, the Minister will be aware that Rwanda has successfully taken custody of Bosco Ntaganda, and Rwanda, like Kenya, regards the ICC as important. The processes are not exactly as we would understand them in the UK, and it would be a mistake to think that they were in all respects. For example, it is possible to be held by the ICC for five years before trial and then acquitted. Jean-Pierre Bemba’s case is under way, and he has been at The Hague for five years, but his case is far from over.

[Alistair Burt]

I understand the hon. Gentleman’s point. Of course, the ICC’s processes are independent of the UK. I am sure that concerns have already been, and will continue to be, expressed. When taking on such an extraordinary responsibility on behalf of nations that are states party to the agreement, it is essential that the functions of the ICC are performed fairly, efficiently and quickly. Justice delayed is justice denied, as all hon. Members recognise, and I am sure that the hon. Gentleman’s concerns will have been heard.

I stress that, despite media reports to the contrary, the UK has never threatened sanctions against Kenya on this issue. The charges are being made against three individuals, not against Kenya as a whole. The people of Kenya should not be arbitrarily punished for the alleged crimes of their leaders.

A number of colleagues mentioned the important issues of trade and development. The UK remains the biggest cumulative investor in Kenya and the second largest training partner after Uganda, and trade is in Kenya’s favour. The hon. Member for Strangford made an important point about the sort of engagement that takes place with the UK and the way in which we hope that we conduct business. It is noticeable that, in winning contracts abroad, a key part of the offer of many big UK companies is capacity building and training, which is in stark contrast to others who seek contracts with the aim of maximising profit, sometimes to the exclusion of local workers. UK companies are urged by UK Trade & Investment, although many do it naturally, to ensure that their offer for winning a contract is supported by efforts on further education, vocational training and capacity building, so that something long-term and sustainable is offered to those places in which the contract is being run. That is one reason why total trade exceeds £1 billion. UK exports rose by 38% from 2010 to 2011, and a substantial number of the largest tax-paying companies in Kenya are from the UK.

The hon. Member for Falkirk is right that a more secure Kenya means a more secure United Kingdom. Increased trade benefits both countries, so we will continue to take an interest.

On the growing influence of China, naturally the UK welcomes competition and free trade. We are determined to meet the challenge. As the hon. Member for Wrexham said, UKTI is active in Kenya, and it covers the region as well from Nairobi. Further efforts are being made to secure our trade and commercial interests. As all hon. Members have suggested, the relationship is deep and it is supported by long-standing ties and the recognition that growing trade is in our mutual interest.

Finally, on the development issues that were raised by my hon. Friend the Member for Cheltenham and touched on by other colleagues, UK aid is supporting the Kenyan Government’s Vision 2030. We are the second biggest bilateral donor after the US and our budget is growing. We will be spending up to £150 million in aid a year by 2014, which is a doubling since 2011, to tackle conflict, to increase stability and to improve education, health outcomes—particularly in relation to malaria—and the livelihoods of the poor. We are focused on helping the poorest Kenyans and we are definitely here for the long haul.

Water is, of course, vital, as the hon. Member for Strangford said. The Department for International Development provides significant funding for water projects, and Kenya is part of its humanitarian climate change work, so we continue to work with the private sector and other donors on efforts there. Those of us who support charities such as WaterAid know how extraordinary the commitment is.

I was delighted by what the hon. Gentleman said about the importance of faith in Kenya and the number of churches per 100 yards. That was a remarkable statistic to hear from someone from Northern Ireland who knows his faith well, and I thank him for providing that context.

In general, the debate has demonstrated hon. Members’ wide interest in Kenya and their understanding of its contemporary problems and issues, as well as their wish to look ahead and ensure that those will be overcome by fair and impartial courts that are able to deal with concerns that arise and by the Kenyan people’s belief that that is the way to resolve their disputes. We look forward to the resolution of disputes and to a long and growing relationship with Kenya. I am grateful for colleagues’ interest and how they expressed themselves, and particularly grateful to the hon. Member for Falkirk for raising the matter as he did.

[Mr Philip Hollobone (in the Chair)]

Even though the issues are serious, it is always nice to talk about sunny places on a cold, damp day in Westminster.

10:51

Sitting suspended.

Design and Technology Curriculum

Wednesday 20th March 2013 Westminster Hall

10:58

[Peter Luff (Mid Worcestershire) (Con)]

I am grateful for the opportunity to debate the draft design and technology curriculum and to hear the Minister’s response.

I shall sum up the issues that are worrying people in three themes, which an academic suggested to me. The first is that there is a narrowing of focus. The draft programme of study for design and technology returns to a 1950s DIY curriculum with an emphasis on basic craft and household maintenance skills. It places at risk the creative, challenging learning in design, engineering and technology that is part of the present design and technology curriculum.

Secondly, there is a lack of rigour and challenge. The published draft programme of study for design and technology lacks academic or technical rigour, challenge or ambition. It is completely out of step with the needs of our advanced industrial economy and sophisticated labour market. It will undermine routes into further and higher education for talented students by failing to provide the skills and knowledge that they need to progress, or to inspire students to pursue careers in the creative industries, design, engineering, manufacturing and technology. Thirdly, there is a reduction in value, status and popularity. The draft proposals will further reinforce the perception that applied subjects are less valuable, which in turn will lead to academically gifted young people being discouraged from choosing technical and creative subjects at GCSE.

So, what the Minister decides on the design and technology curriculum will be every bit as significant for our country’s competitiveness as what the Chancellor announces in his Budget speech in an hour or so, so I hope the Minister’s voice lasts during her response. I am sure she understands the importance of getting it right, and I am sure the Department’s current consultation is genuine and could lead to meaningful change. I hope she will regard my speech as a constructive submission to that consultation. I apologise for any unintentional plagiarism in my remarks. I have been deluged with advice, for which I am grateful, and I will endeavour to attribute all my quotations and points.

I am here today primarily because of a constituent, Sue Wood-Griffiths, a lecturer at the university of Worcester, who recently came to see me in my constituency surgery to express her concerns. A phrase in the e-mail that Sue sent me yesterday sums everything up nicely:

“We should acknowledge that we are educating children today for a world that they will live in in the future and not the one we used to live in.”

That is why I was so encouraged to read the Minister’s speech from Monday, when she said,

“we will fall hopelessly behind in the global race if we do not equip successive generations with contemporary skills.”

My constituent, the Minister and I are in profound agreement.

I am also here because of my deep concern about the serious shortage of engineering skills. I now advise Northern Defence Industries, a defence and aerospace supply chain organisation, and I am a non-executive director of a small advanced manufacturing business. I am learning directly about the challenges that employers are facing. I conclude that the two greatest avoidable threats to our prosperity and security are, first, the deficit, which I am sure will feature largely in the Chancellor’s Budget speech, and secondly, science, technology, engineering and maths—STEM—skill shortages. That is what makes our debate so important. I want to see people studying to become skilled engineers so that they can maintain and sustain the F-35, which will shortly be based at RAF Marham in the Minister’s constituency. STEM skills are important to our security.

Engineering UK estimates that we have to double the education system’s output of engineers. That means increasing engineering graduates from 20,000 to 40,000 each year, and the same is true of apprentices. If new technologies make new demands—and the history of the human race suggests that is exactly what will happen—we will need many more engineering graduates and apprentices.

As I am sure the Minister knows, the low participation rate of women in engineering is a particular scandal, and I believe the design and technology curriculum can help to address that. I suggested a package of solutions in a ten-minute rule Bill last month. My first objective in that Bill was to give schools, from at least key stage 2, a duty to provide pupils with a meaningful experience of modern science, engineering and technology. I believe that objective can be met through a well structured design and technology curriculum in which the business community participates enthusiastically.

As the Minister will be aware, academics and teachers are expressing great concern about the draft design and technology curriculum. That is no plea of simple self-interest from producer groups. Industry, which is the end user of the skills provided to our children at school, is also very worried. James Dyson’s brilliant Times article of 11 February, “Grilling tomatoes won’t train new engineers,” explains that clearly and praises the changes made in the computing and maths curriculums, but it expresses deep concern about the design and technology curriculum. Yesterday, he told me:

“We need more engineers but the E from STEM is missing in our schools. Design & Technology should rank alongside maths and the sciences in importance—helping future engineers understand their practical applications.”

I talked to Steve Holliday, chief executive of the National Grid Company, about all that on Monday. Steve has a profound understanding of, and involvement in, skills issues. He, too, is deeply worried about what the draft curriculum could do to the future flow of engineers and technicians. He has just sent me this remark:

“D+T is today beginning to bring to life science and provide inspiration to tomorrow’s engineers who are so critical to our future.”

I strongly agree with Steve.

“Design and technology” is perhaps an unhelpful phrase that can mislead those outside teaching. In design and technology pupils design, test, make and evaluate innovative, functional products and systems with clear users and purposes in mind. They use a wide range of tools, equipment, materials and processes, including leading-edge, industry-standard computer-aided design and manufacturing, such as laser cutters and 3D printers. They also integrate electronics and computer programming into their designing and making, and they produce intelligent products. In fact, there is real scope for getting local small and medium-sized enterprises to run their businesses from those well equipped school workshops. They could take advantage of modern equipment used to teach design and technology that is used only for a few hours each school day. That would bring into schools welcome direct business engagement and experience of what technology can do. I know of at least one school where that is already happening, but the Government are right to propose changes to the current curriculum.

Education for Engineering, E4E, says in its excellent recent report that

“the subject is in need of reform to bring it in line with current Design thinking and modern technologies”.

The report proposes

“a new model for the D&T that realigns the subject with the original progressive vision proposed when it was introduced in 1989 while making it relevant for the 21st century.”

The report has this to say about the subject:

“D&T is one of the very few opportunities for pupils to partake in a technical, practical education. It plays an important role in providing young people with a hands-on, creative experience and develops a practical identity and a capability for innovation. The subject provides opportunity for collaboration, team working and communication—skills that are essential for future employment.”

Women have those skills in abundance. The report emphasises that design and technology

“is the closest subject to engineering in the National Curriculum.

D&T is not a vocational subject. It is a general academic subject, and has its own fundamental body of knowledge, principles and concepts which are not provided elsewhere in the curriculum.”

Design and technology is now leading-edge stuff that has changed beyond recognition in the years since I was at school, but the draft curriculum does not reflect that.

In a letter to The Times, Sir John Parker, president of the Royal Academy of Engineering, said:

“The original D&T curriculum brought in by Kenneth Baker 20 years ago was more progressive than what we have now.”

Although I worry about curriculum overload, it is right to include food technology in the design and technology curriculum because it suits many of the concepts that should be included, but it is surprising to see cooking given absolute primacy:

“The National Curriculum for design and technology aims to ensure that all pupils: understand food and nutrition and have opportunities to learn to cook.”

The draft curriculum lists the subsidiary objectives of the curriculum with these introductory words, and I note the word “also”:

“It also aims to ensure that, working in fields such as materials (including textiles), horticulture, electricals and electronics, construction, and mechanics”.

The list then begins with a series of rather mundane objectives compared with what we ought to expect from the curriculum.

Dr Paul Thompson, rector of the Royal College of Art, wrote to me:

“We need our young designers to be focused on problem solving, market analysis, proof of concept, user interface and user experience, materials technology, visual literacy and aesthetics, sustainability, commerciality, and so much more. I really cannot see how home economics fits with this discipline at this particular level.”

Dr Marion Rutland of the university of Roehampton made a strong case to me for including food technology, but not cooking, in the curriculum. She differentiates between the two key issues underpinning the teaching of food in schools:

“One is the perceived importance of pupils learning to cook as a ‘life skill’ and the second is the potential contribution of food technology in design and technology to include academic rigour and contribute to the pupils’ overall learning. Ofsted has noted a lack of clarity regarding the nature of food technology and a need for a more intellectually challenging curriculum with more in-depth nutritional knowledge and greater scientific understanding and technical rigour.”

She went on to suggest that cooking may be more suited to the personal, social, health and economic education curriculum or to cooking clubs.

My principal concern, though, is that the whole draft curriculum is written in a way that retreats from the combination of rigour and inspiration that the Department is rightly seeking in other areas of study. The curriculum should be encouraging creativity in its students, offering them choice on how to approach problems and giving them as much autonomy as possible in their approach.

Students need to experience the reality of STEM in the modern world to understand it, and they need real project work and real industry partners to bring all that to life and to make design and technology fun, relevant and stimulating. Instead, the draft curriculum prepares its students for a low-technology past, not for a high-technology present and future.

[Mr Robin Walker (Worcester) (Con)]

I congratulate my hon. Friend and neighbour on his excellent speech. He mentioned earlier that he was approached by a constituent who happens to work in my constituency at the university of Worcester. I have been approached by a constituent who is a senior lecturer at Birmingham City university, and she strongly supports my hon. Friend’s point. She said that there is concern that the current draft of the curriculum appears to hark back to the past by trying to create a “make do and mend” culture. If we are looking for phrases from the past that ought to be relevant to our design and technology curriculum, perhaps we should be looking to “the white heat of the technological revolution,” rather than “make do and mend.” Does he agree?

[Peter Luff]

I am glad to hear Harold Wilson’s words spoken on this side of the House for a change. I strongly agree with my hon. Friend. The phrase “make do and mend” will feature later in my speech. His constituent makes a powerful point that goes to the heart of the issue that we need to address. I pay tribute to the university of Worcester for teaching design and technology so well to design and technology students and teachers.

Speaking to a conference at the Royal Academy of Engineering a couple of weeks ago, Dick Olver, chairman of both BAE Systems and E4E, contrasted the experience of the computing and design and technology curriculums. He said that with design and technology

“we seem to have a problem. Again, the Royal Academy of Engineering, along with the Design and Technology Association and the Design Council, provided advice to the Department for Education on new programmes of study for the subject.

This time however, it seems our recommendations have been completely ignored. Instead of introducing children to new design techniques such as biomimicry, we now have a focus on cookery. Instead of developing skills in Computer Aided Design we have the introduction of horticulture. Instead of electronics and control we have an emphasis on basic mechanical maintenance tasks. In short, something has gone very wrong.”

The introduction to the subject content of the draft curriculum begins depressingly:

“In Key Stages 1 to 3 pupils should be taught progressively more demanding practical knowledge, skills and crafts”.

Contrast that with the well-crafted phrases in the purpose of study for the computing curriculum which, ironically, comes immediately before D and T in the consultation document:

“A high-quality computing education equips pupils to understand and change the world through computational thinking. It develops and requires logical thinking and precision. It combines creativity with rigour: pupils apply underlying principles to understand real-world systems, and to create purposeful and usable artefacts. More broadly, it provides a lens through which to understand both natural and artificial systems, and has substantial links with the teaching of mathematics, science, and design and technology.”

My request to the Minister is a simple one. Will she please devise a D and T curriculum that follows the excellent example of the computer curriculum, and perhaps look at what her opposite numbers are doing in the widely praised Scottish curriculum for excellence?

I welcome the Minister’s emphasis on the need to avoid excess prescription in the curriculum, and to allow schools to be as free as possible in what and how they teach, but the words in the draft curriculum will direct what teachers do. The Design and Technology Association says:

“The core knowledge in the D and T proposals will not encourage teachers to develop exciting and stimulating lessons. It marks a radical and regressive departure from current practice. The language of the draft is utilitarian and uninspiring”.

It refers to “common” practical skills, “common” materials, “common” ingredients, “common” tools and techniques, “straightforward” recipes, “straightforward” skills, “simple” techniques and “everyday” products. DATA says:

“It will not inspire teachers to use their professionalism and expertise to motivate and engage pupils.”

Why does this matter so much? As I said, the UK has a desperate shortage of engineers and technicians. I loved abstract maths and physics, but there was no D and T at my grammar school and metalwork and woodwork were for the less academically able. I did well in maths and physics, but I never really understand what I could do with them, and that is probably why I am not an engineer today. A good D and T curriculum helps students to appreciate the uses of maths and physics and will inspire many young people—especially girls, I suspect—to pursue careers in science, technology and engineering. Some students might not have thought of that because they thought that sciences were not for them, but D and T made science relevant.

Worryingly, DATA also says:

“The draft proposals will further reinforce the perception that applied subjects are less valuable, which in turn will lead to academically gifted young people being discouraged from choosing technical and creative subjects such as D and T. We need our very brightest young people to be creative and able to focus their talent on real-world challenges. Design and innovation are widely identified as drivers of economic growth and the basis of Britain’s long-term competitive advantage. If subjects like D and T are marginalised, where will this innovation come from?”

The irony is that the UK has been leading the world in its understanding of the issue, and our competitors are catching up. An academic wrote to me:

“Research into D and T education over the last 20 years has been world-leading. Other countries look to ours for the lead in how to teach Design and Technology. The works of Richard Kimbell, David Barlex, Kay Stables, Marion Rutland, Eddie Norman, David Spendlove, Frank Banks which build upon earlier higher education research by Ken Baynes, Bruce Archer and Phil Roberts leads the world in this area.”

He continued:

“Their research has led to what is modern D and T, and while there is of course a place for practical work and skills, this should not be the main focus of any argument for the defence of the subject.”

Can sustainable growth ever return if we are rejecting the knowledge economy in favour of simply training up young people for manual jobs? The draft curriculum suggests that the intended direction is to equip operatives for middle-sector manual jobs, or empowering people to be able to make do and mend. Where then will the next generation of designers and engineers come from? Another insidious influence that affects the brightest students, both boys and girls, is that both sexes are often turned away from STEM careers due to a totally mistaken belief that they offer only technician-level activity: oily rags and machine shops. We need more technology in schools, not less, to show the exciting reality of modern science, engineering and technology. In the days when technical drawing, woodwork, metalwork, electronics and engineering were taught and respected in schools, Britain produced some of the most successful inventors, designers and engineers on the planet.

A modern D and T curriculum would be concerned with learning about today’s world of design and technology, and its economic and social value. It would use real projects that are relevant to students to show how maths, science technology, design and engineering work together; it would use modern methods and project management tools to manage deadlines and resources; it would teach safety and precision; it would teach how to develop and refine products to meet real needs; and it would straddle materials, components, systems, electronics, data and services to create high-quality outcomes. It would do that using a range of technologies, including food and textiles, but not to the exclusion of all those other technologies of the future that it should encompass.

As the Minister reminded us in her speech on Monday, the Prime Minister rightly says that we are in a global race, and he did not mean a pancake race. To win that race, we need to foster our creativity and innovation. To extend the metaphor, our young people must learn not just how to cook pancakes, but to search constantly for better pancake ingredients, recipes and design, and to build better stoves to cook them on.

Keeping the “e” in STEM silent, to use James Dyson’s brilliant phrase, means that the draft curriculum will stifle innovation and deter talented young people from careers in technology and engineering. With the same vision that underpins the computing curriculum, our young people could ensure that our country wins that global race. At the Queen Elizabeth prize for engineering award ceremony on Monday, one speaker said that engineers are the poets of the practical world. My plea to the Minister is to help them to keep on writing that poetry.

11:15

[The Parliamentary Under-Secretary of State for Education (Elizabeth Truss)]

I am grateful to my hon. Friend the Member for Mid Worcestershire (Peter Luff) for raising this important subject. His speech was funny and well researched. I particularly liked the reference to the “white heat of technology”. I think that was the first time I have heard a Conservative quote Harold Wilson, and perhaps the first time I have heard Harold Wilson quoted in this House, which is interesting. I agree with much of what my hon. Friend said. Design and technology is an extremely important subject, which builds on this country’s long history of leading the world in design, innovation, engineering, manufacturing and architecture. The chain of British world-class achievements stretches from the giants of the industrial revolution, such as Watt and Brunel, to household names of modern high-tech design, such as Sir Jonathan Ive and Sir James Dyson.

Design and technology has a vital role to play in inspiring young people. Unlike my hon. Friend, I did design and technology at school and very much enjoyed it. It taught me a lot and has been helpful in my later life. It bridges theoretical and practical education, encourages the application of mathematics and science to engineer solutions to real practical problems, and delivers vital practical skills. My hon. Friend captured some of the tensions in the subject—its domestic, industrial and commercial application—but we need to address all those issues because it is important that our young people can do things in their own homes as well as apply them more widely. In counties such as Norfolk, the catering and horticultural industries are high-tech and require young people with specific skills in those areas.

We have retained design and technology’s place in the compulsory national curriculum. We have funded the Design and Technology Association to deliver high-quality continuing professional development to teachers with a focus on computer-aided design, manufacturing, electronics and communications technology. However, we have made changes in the new national curriculum, and there has been a broad welcome for the strengthened place of food and cooking in particular. One issue with the previous curriculum was that it tried to shoehorn food and cooking into a design process. It has its place in industry, but also has a place in teaching young people about where food comes from, nutrition and the ability to cook. We want more young people to be able to do that. The Department of Health is very interested in how we address Britain’s obesity problem. There has been a warm welcome for what we have done with food and cooking.

We have sought in our draft curriculum to broaden what schools may teach and to give them more freedom to inspire young people, which is why subjects such as horticulture are included but are optional. If schools have leading horticultural centres nearby, they may want to develop that subject. The approach in our national curriculum is to focus on what schools do rather than how they do it. We expect teachers and head teachers to develop their curriculum and professional development much more, so that they can inspire young people.

I was pleased that my hon. Friend mentioned developments in the maths, computing and physics curriculum. I agree that it is important to note the need for many more engineers and so on in this country. We need the subject to be inspiring for girls and boys. Such subjects depend on maths, physics and computing, and we have received strong support for our reform of those curricula. I welcome my hon. Friend’s help in pushing the agenda for getting more 16 to 18-year-olds doing maths, and the Secretary of State’s long-term goal is for all students to be doing that within 10 years.

Design and technology is important, but it is part of a broader range of subjects that will encourage young people to go into particular industries. There is a strong case for saying that subjects such as mathematics and physics also need to be able to point to their practical application. For example, we have included a greater financial element to mathematics so that young people understand its practical application and can apply it to their domestic circumstances as well as to any future work. It is tricky to ensure that the subject of design and technology is both aspirational and rigorous, and that students are able to apply it to their domestic, commercial and industrial lives, but that is the task we must fulfil.

It is not appropriate for a subject such as cookery to be in personal, social, health and economic education. Instead it should be part of design and technology. However, it was not a deliberate act on our part to give food and cooking a position of primacy in the curriculum. Indeed, improvements could certainly be made to the curriculum, and I take on board my hon. Friend’s suggestions. I recently had a meeting with representatives from the Design and Technology Association, who said that they will come back with further suggestions on how we might improve the language and make the subject as aspirational and as rigorous as possible while not losing the breadth and the flexibility that we are trying to give teachers.

Teachers could continue to teach the existing material under our proposed new curriculum. I agree that we need to make it clear that the subject is both rigorous and important. We want young people to study it and be inspired by it. I am very happy to take forward this discussion with my hon. Friend and other hon. Members over the coming months to ensure that the final curriculum is absolutely right and is supported by leading chefs, such as John Vincent and Henry Dimbleby from the LEON restaurant chain, who are involved in our school food programme. It must also be supported by our leading engineers, such as Sir James Dyson. I want to get to a point where we have something that is widely supported by industry and by people who want to see an improvement in the abilities of students in food and nutrition, and where it is understood by schools that the subject is very important.

I am grateful to my hon. Friend for raising the issue and bringing it to my attention. It is a matter that we have already been working on, particularly in relation to how we link it better to the other curricula that are being developed. He has kindly made some positive comments about the computing curriculum, and a few of the issues he mentioned in relation to design techniques, such as computer-aided design, cross over both subjects. It is important to understand how those subjects are linked, so that we can see, for example, which part of technology is in design and technology and which part is in the new computing curriculum. The whole point of the new computing curriculum is that it is much more related to programming and to understanding how computers work, so that more young people will be inspired to enter our important IT sector.

[Peter Luff]

Before the Minister finishes, and in order to help her save her voice for a second or two, may I say how encouraged I am by her response? Her remarks take us very much in the right direction of travel, and I look forward to engaging with her on this process, as she has so kindly suggested.

[Elizabeth Truss]

I thank my hon. Friend for his comments and for handing me a glass of water. I am afraid that I have a rather croaky throat today. We want to get the curriculum right, and we are very involved in a consultation; I have made that very clear to the Design and Technology Association.

I will not hide the fact that in this particular curriculum, we are trying to do a lot of different things; we are trying to prepare students for life so that they are capable citizens who can carry out practical work in their own homes. We also recognise the importance to industry of having people who are inspired from an early age. I hope that the flexibilities within the curriculum will enable local schools to work more closely with industry to make the subjects as relevant as possible and to give students as much practical experience as possible early in their school career, so that rather than becoming politicians, more of them will be inspired to become engineers.

11:25

Sitting suspended.

Biomass Power Generation

Wednesday 20th March 2013 Westminster Hall

[Mrs Anne Main in the Chair]

14:30

[Nigel Adams (Selby and Ainsty) (Con)]

It is a pleasure to serve again under your chairmanship, Mrs Main. I am delighted to have secured this topical and important debate. I fear that other distractions in the House might limit the number of participants, but I am pleased that hon. Members have taken the time to attend. It is particularly important as we debate the Energy Bill, which will shape our country’s energy profile for decades to come, as well as the emerging biomass industry and the entire UK renewable sector.

My constituency is home to two of the country’s largest coal-fired power stations, Drax and Eggborough; I refer hon. Members to my entry in the Register of Members’ Financial Interests. Between them, they supply 11% to 12% of the UK’s electricity supply or, to put it in terms that most people would understand, enough power for 9 million homes. They are essential national assets, with the flexibility to provide dispatchable electricity—electricity when it is needed—which is critical to the nation’s security of supply. Both stations have well-developed plans to convert some or all of their generating units to burn sustainable biomass over the next few years.

It is crucial to appreciate the difference between biomass and biofuels, which one or two journalists who have written articles recently do not seem to understand. Arguments laying concerns about the destruction of rain forests at the feet of the biomass energy industry are simply inappropriate and wrong and have no part in the biomass industry either now or in future. Those arguments relate to liquid biofuels, which should not be confused with solid state biomass, which has robust sustainability criteria. To imply that protected rain forest wood can be used for power generation is simply wrong. Woody biomass, which is made into the more energy-dense and transport-efficient pelleted form used as fuel by stations such as Drax and Eggborough, is sourced mainly from residues, thinnings and less marketable wood, which is not of sufficient quality to be used for other, higher-value applications.

Bioenergy is a relatively new market, and the demand is welcomed by those in the hard-pressed global forest products industry, particularly where more traditional markets are in decline, as it provides the additional income that they need to continue investing in sustainable forestry management. Growing and harvesting trees provides family-supporting jobs for millions of men and women. Aside from the economic and social aspects, work in forests brings environmental benefits.

I will focus on the role of biomass in UK energy security. I know that energy security is a subject close to everybody’s heart, including that of the Energy Minister. The regulator Ofgem’s recent warning of a capacity crunch—we could have a capacity margin of only 4% as early as 2015—should set alarm bells ringing. It could have disastrous impacts on the cost and reliability of electricity for consumers, particularly the fuel-poor and businesses that are already struggling to remain competitive. Due to other regulations, approximately 12 GW of existing coal and oil-fired plant will be retired. One third of our coal-fired generation will close by 2016, and potentially more in the second half of this decade as further legislation and taxes start to bite.

In readiness for the impact of the closures, there is an urgent need to bridge the capacity gap. Even given the welcome announcement yesterday concerning Hinkley Point, new nuclear projects will not start generating until the 2020s, nor will offshore wind on any scale. Consequently, the low-cost solution of converting our existing coal-fired grid-connected plants to renewable, sustainable biomass can and should play an important role in keeping the lights on in the short to medium term.

In the next few weeks, Drax will convert its first unit to burn sustainable biomass rather than coal, and within the next few years, three of Drax’s six units will have been converted to burn sustainable biomass. I welcome the recent announcement in the Budget that £500 million will be invested in carbon capture and storage at Drax, in partnership with Alstom. The news is incredibly welcome in my constituency, and we look forward to seeing how the trial works. I thank the Minister and the Secretary of State for all their efforts to ensure that Drax had the project.

[Graham Stringer (Blackley and Broughton) (Lab)]

I congratulate the hon. Gentleman on securing this important debate. He has twice used the word “sustainable” to describe biofuels. “Sustainable” is only accurate if one discounts how much carbon dioxide is released from the soil when the trees and vegetation are moved and how many significant journeys will be made to take the biomass from North America to this country. Does he accept that?

[Nigel Adams]

Yes. The biomass that we use must come from sustainably managed forests, by which I mean forests where growth is at least equal to harvest. Nobody is saying that biomass is carbon-neutral; it is low-carbon. We must ensure a neutral, or ideally a positive, growth-drain ratio. The hon. Gentleman makes a particularly good point, to which I shall come later in my remarks.

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

I am a bit alarmed by the comments that seem to be against biomass. There is another issue of sustainability, of course—sustainability of jobs. It would be worse for our constituents if the conversion to biomass did not proceed, and those constituents of ours who work at dirty coal-burning power stations were suddenly thrown out on to the unemployment register. Sustainability is not just about what we burn; it is also about jobs.

[Nigel Adams]

I could not agree more with my hon. Friend and neighbour. We are fortunate in our neck of the woods; unemployment has fallen considerably in the past couple of years. Funnily enough, as it happens, I had a meeting yesterday with Shepherd Building Group, one of the main construction partners helping Drax convert its biomass plant, and Shepherd told me that more than 1,000 jobs are being generated or safeguarded by the project, and more than £700 million in investment is being made to realise it. We must bear that in mind. The hon. Member for Blackley and Broughton (Graham Stringer) makes a valid point, but we must remember that people’s livelihoods and jobs are on the line.

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

I congratulate the hon. Gentleman on securing this debate, which is important to my constituents because an application is in train for a new biomass plant in Davyhulme. One issue is that not all the biomass that will be used is necessarily virgin forest. In the case of the Davyhulme plant, it is proposed to recycle already-used woods. Does he accept that if those woods have been treated with varnishes and paints, it creates a rather different picture for the potential carbon impact?

[Nigel Adams]

Yes, that is a fair point. I will make a number of points later in my remarks about the sustainability of the raw material.

[Andrew George (St Ives) (LD)]

While the hon. Gentleman is covering the issue, it would be interesting to hear his comments and advice, because I know far less about it than he does. To achieve the capacity that he is describing, what proportion of source would be imported? Has he seen any comparisons involving the wide range of organics that might be introduced into anaerobic digestion, as an alternative to the materials that he has described?

[Nigel Adams]

Drax and Eggborough power stations, if their plans are realised, will need 15 million tonnes of that material, the majority of which, it is fair to say, will come from abroad in a pelletised form. The UK simply does not have the forestry or the raw material. It is worth pointing out, however, that those are coal-fired power stations and that the vast majority of the coal—in fact, every bit of coal going into Eggborough—is imported.

Eggborough, as the Minister knows, is in the final stages of some detailed talks with the Department of Energy and Climate Change. The project is shovel-ready for full conversion of all four of its 500 MW units; the first unit could start generating exclusively from biomass in late 2014, if we get things right. Can the Minister reassure us that he will monitor and facilitate the progress of the second conversion project, which is important for my constituency and the UK, as it passes through the internal DECC processes? Over the next few years, as a result of the projects, the predominantly coal-fired stations will become predominantly sustainable biomass-fired stations, providing a significant contribution to the UK’s targets for renewable energy, protecting thousands of jobs, as mentioned by my hon. Friend the Member for Brigg and Goole (Andrew Percy), and enabling hundreds of millions of pounds of investment in the stations, as well as the enormous investment and job potential in the upgrading of our ports and railways to facilitate them.

Sustainable biomass is an essential part of our renewable energy mix: it is low cost, low carbon—if sustainably forested—and, importantly, it fuels reliable, predictable and dispatchable generation. Its availability is not exposed to the day-to-day vagaries of the Great British weather, so it can provide electricity when needed rather than when the weather permits. Also, unlike almost all other renewables, biomass does not require us all to pay for stand-by fossil fuel capacity for the times when the sun does not shine and the wind fails to blow.

By now Members will have gathered that I am immensely proud of and pleased with the progress we have made on biomass in Selby and Ainsty, which will soon be the renewable energy capital of Europe, as I am sure all will agree. We will have the potential for more than 4 GW of renewable generation in a five-mile radius, which is equivalent to some 8,000 of the large 2 MW onshore wind turbines or, put another way, to more than double the total realistic output of all the onshore wind turbines built in the UK by the start of this year.

I am, however, confused by some of the inaccuracies that tend to creep into the debate, often from those who should know better. To be clear, and as I mentioned earlier, biomass is not a zero-carbon technology but a low-carbon one. Emissions are associated with the harvesting and transport of biomass, and they must be extremely closely monitored. I fully support the Government’s efforts to ensure that mandatory sustainability standards are applied, as do Eggborough and Drax, which already insist on robust sustainability standards and criteria.

Most large-scale biomass generation in the UK will use wood, often by-products of other industries, such as forestry and sawmill residues together with non-commercial timber from thinning and forestry management operations. None of those sources cause land use change, which cannot be said of those used for biofuels such as palm oil; none of them results in lost opportunities for food production; and all of them generate substantial overall carbon savings.

[Andrew Percy]

Biofuels are important to the Humber, which has two bioethanol plants. May I encourage my hon. Friend to split biofuels into biodiesel and bioethanol, because the bioethanol production on the Humber is entirely sustainable and also provides an animal feed by-product? If he separates the two, we on the Humber will see that as helpful.

[Nigel Adams]

I hope that I have done so by making the point about the completely different product to be used to generate electricity at the power stations in my constituency.

The very process of managing a sustainable forest increases its ability to act as a carbon sink. Most of the biomass used for energy production in the UK will come from abroad, but it should and will come only from sustainably managed forests. In north America alone, the forest products industry harvests more than 500 million tonnes of timber per year, but demand for its products is declining. Unless the forests of the south-eastern USA get new production outlets, the health of those forests will decline.

We should note the scale of what we are discussing. I repeat: in north America alone, more than 500 million tonnes of wood is harvested every year. In only three selected regions of north America—the south-east, eastern Canada and British Columbia—it is conservatively estimated that a further 120 million tonnes could be sustainably harvested and utilised annually. Those figures put into some perspective the 30 million tonnes of wood that Drax and Eggborough need to produce the 15 million tonnes of pellets required.

In Canada, by providing a commercial use for the vast area of beetle-killed boreal forest—an area the size of England and growing year on year—we can help to turn what is currently a huge emitter of harmful greenhouse gases into a new carbon sink through clearance and Government-controlled replanting. Furthermore, the pelletising process enables us to ship the wood safely to the UK without any risk of importing disease, a subject that has been mentioned previously.

Some Members are aware of the so called carbon debt argument: because a tree burns in seconds but grows in years, there is somehow a carbon debt until a new tree has grown. The Department’s bioenergy strategy considered carbon debt in detail, however, and was explicit in its conclusion that, in situations where new forests are created, or existing forests have been under long-term management for production of timber and/or biomass, the harvesting of wood does not incur a carbon debt.

The biomass that Drax and Eggborough will use is to come from sustainably managed forests, which, as I said in response to an intervention, means that the growth must be at least equal to harvest, ensuring a neutral or ideally positive growth-drain ratio. In short, the sustainable management of trees in a productive forest means that they absorb more carbon than they would have done had the forest not been managed. In effect, such trees are building up a carbon credit as they grow. Can the Minister therefore reassure the House that the sustainability criteria for biomass, when the Government confirm them, will be based on the concept that a sustainably managed forest has a stable or increasing carbon stock, meaning that biomass from sustainable forest is at least carbon neutral?

Let me provide a few more basic facts about biomass generation. It is the only renewable technology able to supply base load renewable power at any scale. It is flexible and stable, and it has a continued role in balancing the grid with low-carbon generation. It is an essential part of the low-carbon energy mix and one of the only deliverable and affordable alternatives to the second dash for gas in which we might have to engage. Excluding biomass from the energy mix would significantly increase the cost of decarbonising our energy system. The Department estimates that sustainably sourced bioenergy could contribute around 11% to the UK’s total primary energy demand by 2020 and significantly more by 2050. Even taking into account the energy used to grow, transport and process the fuel, biomass-generated electricity produces substantially fewer emissions than are produced when fossil fuels are used.

Closer to home, I am mindful of the need to respect the effect of using biomass as a renewable fuel on other UK industries. The wood panel industry in particular is concerned about the impact on the historically low wood prices it has benefited from recently, but it should not have to worry because the wood that my power stations will use will come overwhelmingly, if not entirely, from markets in which it does not operate. The biomass industry relies on wood that no one else has a use for, certainly on that scale. It cannot pay the prices that the wood panel, paper, construction and furniture industries can pay, so instead of representing a threat to those industries, it provides a market for much of their previously unusable by-products that would previously have been burnt or put in landfill where they would degrade and emit carbon dioxide or, even worse, methane.

What about the benefits of biomass not just for electricity generation, but for the economics of the country as a whole? I am of the opinion that the biomass industry could generate infrastructure spending over the next three to four years alone of significantly more than £1.5 billion, leaving a lasting legacy of improvements to our ports and rail infrastructure while supporting thousands of jobs in the supply chain throughout the UK. That investment is needed now and should form part of the Government’s growth strategy.

I will come to a conclusion so that the debate can be opened to other hon. Members who have dragged themselves away from the Budget debate. I have stressed, perhaps overly, the conversion of my constituency’s two large coal-fired power stations to burn biomass, but that is just the first chapter, not the whole story, of the future of biomass. The conversion of existing fossil fuel plants is a speedy, low-cost first step in the transition from the use of carbon-intensive fuels to a greener alternative. It is an important part of what I see as a continuum in the use of biomass as a fuel source, which will also see new build, higher-efficiency power stations fuelled by a robust and sustainable fuel supply chain. Converting our coal-fired stations will not only see the country through an important transitional period, but will create a bridge to keep the lights on at the lowest possible cost. I suggest to hon. Members here today that on the grounds of electricity supply security, benefits to the economy and, most of all, emissions, sustainable biomass has a growing and valuable role and is a vital energy source for all our futures.

14:52

[Ian Swales (Redcar) (LD)]

I congratulate the hon. Member for Selby and Ainsty (Nigel Adams) on not only securing the debate, but his comprehensive review of the industry, and its opportunities and issues. My speech will be short because I was aware that, given his expertise, he would cover many of the points that I might make.

There is no doubt that biomass should be an important part of our energy mix. It is the fourth largest energy resource in the world after coal, oil and gas, and of course none of those is renewable, so it is the largest source of renewable energy in the world. However, this is yet another area in which the UK is playing catch-up. The Renewable Energy Association estimates that the industry employs about 2,000 people in the UK, compared with 60,000 in France and 68,000 in Germany. The technology is well established and many countries are exploiting it fully.

My constituency is in the Tees valley and, rather like the hon. Gentleman’s, it is becoming something of a Disneyland for green technology. Specifically on biomass, the advanced manufacturing technology centre, the Centre for Process Innovation and the Department of Energy and Climate Change are part-sponsoring anaerobic digestion research there, and Northumbrian Water has built a £60 million anaerobic digestion plant in the constituency. We have the largest bioethanol plant in Europe working on wheat. At the large Wilton chemicals site, Sembcorp has converted its power station to burn mostly timber. Across the river, Air Products is building a gasification of waste plant and is already planning its next one to make biofuels and even chemicals.

This morning, I was at the Department for Business, Innovation and Skills meeting Korean investors, including Jang Do-soo, the president of Korea South-East Power, which wants to invest in a 300 MW biomass power plant at Teesport. That will involve spending £500 million and follows the signing of a memorandum of understanding in Seoul some months ago, which was attended by a Foreign Office Minister and the UK ambassador. So far, so good, but we keep hearing inconsistent messages from DECC.

I could not attend the meeting of the all-party group on biomass on 26 February, but I was very impressed by the comprehensive notes arising from it—that is another compliment to the hon. Member for Selby and Ainsty, who chairs the group. At the meeting, the Minister repeated his belief that a new-build dedicated biomass plant is more likely to use domestic rather than imported biomass, yet at the same meeting, he referred to 700 million acres of forest in the US alone. The meeting was attended by the Virginia Secretary of Agriculture and Forestry, who is keen for exports. I have been lobbied by the US industry, which is desperately looking for greater use of its commercial timber plantations, as we heard earlier. Surely there is a place for efficient port-based biomass investment to support our base load of electricity in this country. I accept that that might be limited, but surely we should have one or two such facilities.

Some commentators do not seem to understand that wood is a crop just like any other. Sustainable forestry is no different from any other sort of farming; it simply has longer time scales. The industry needs sustainable supplies, because if it puts a substantial amount of capital on the ground, it cannot go round the world looking for spot purchases. A sustainable operation needs a source of sustainable feedstock because the investment is very long term.

I am disappointed about today’s announcement on carbon capture and storage. Teesside came third on a list of two in the CCS competition, but I still believe that it will eventually get a network.

[The Minister of State, Department of Energy and Climate Change (Mr John Hayes)]

I appreciate my hon. Friend’s disappointment, but I assure him that while we have taken two projects forward, we remain extremely committed to carbon capture and storage generally. I had a meeting this morning specifically to look at how we can work with the other projects involved. There must be a feeling among all those involved in CCS that everyone is a winner.

[Ian Swales]

I thank the Minister for his intervention, which is exactly the sort of response that the Teesside consortium is looking for, so I am sure that his comments will be noted. I thought that the weight of process industry on Teesside was unlikely to be given due regard in the competition, because that was not one of the criteria, but as we have 18 of the largest 30 carbon emitters in the country, excluding energy, a Teesside project should go ahead at some point. I am pleased by the Minister’s response and I believe that there will be another meeting on the matter with his Department on Friday.

CCS leads me to talk about something that I do not think the hon. Member for Selby and Ainsty mentioned. Biomass with carbon capture and storage is one of the very few technologies that can sequester carbon dioxide from the atmosphere for carbon-negative power. If we think about the problems we have in the world, how big a prize is that? We should seriously consider that combination of biomass with CCS, and the resulting sequestration.

I know that the Minister wants investment in infrastructure, which is a key aspect of current Government policy. The Teesport biomass plant is shovel-ready—I met the investors again this morning. I hope that it will receive his full support, but if his Department wants to cap such investments, will it please provide absolute clarity to investors so that time is not wasted, and we can all move on and think of something else to do? I repeat that the investors in such projects are receiving mixed messages.

14:59

[Jackie Doyle-Price (Thurrock) (Con)]

It is a pleasure to serve under your chairmanship this afternoon, Mrs Main. It is also a pleasure to follow excellent, well-informed speeches by two strong advocates for biomass and its potential for power generation.

I have long felt that biomass was the Cinderella of renewable energy. Although lots of subsidies have been thrown at wind and solar, the development of biomass capacity has been rather left to flourish by itself. As a good Conservative, with a clear understanding of the limits of Government, I feel it is probably better off for that. However, I am really grateful to my hon. Friend the Member for Selby and Ainsty (Nigel Adams) for securing the debate, as it is high time that the potential of biomass generation is fully recognised by Government, so that sufficient effort can be made to secure a regulatory environment with the certainty that my hon. Friend the Member for Redcar (Ian Swales) referred to, which facilitates its expansion.

I know the Government believe that biomass can play an important role in the future UK energy mix, and that is set out in the bioenergy strategy. They recognise that it is a dispatchable technology that has the ability to produce low-carbon energy quickly and, as my hon. Friend the Member for Selby and Ainsty pointed out, in response to demand—that is, it is not dependent on weather conditions that can affect other renewable technologies, such as, most notably, wind.

I am proud to represent Tilbury, which is in my constituency and has what is currently the world’s largest dedicated biomass power station. The history of Tilbury is interesting, because the power station was until very recently coal-fired, and it has been generating sufficient power for the whole of Essex for the past 50 years. However, the large combustion plant directive finished off Tilbury as a coal-fired power station, and I know that my hon. Friend the Minister will be very aware of how much impact the directive is having on our power generation capability. That really brings into stark relief the need for more certainty around the regulation and future environment for biomass, so that we can unlock investment in what is a very good technology for generating low-carbon power.

At its peak, Tilbury employed 750 people—today it employs 250, all in very highly skilled jobs—and it generated more than 1,000 MW, which is enough to power 1 million homes. In its 50 years of operation, it never breached its environmental licence. That prompts the question, although we implement EU directives with very good intentions, in terms of reducing emissions, when we look at the detail of the impact, are we really hitting the right things when we are looking at tackling climate change and environmentalism? I just put that out there. It is not unusual for the European Union to get things very badly wrong. As I said, the directive had the effect of finishing off Tilbury, despite the fact that Tilbury only ever breached its emissions limits when the A13 was full of traffic, which tells us exactly where the air contamination was coming from.

Faced with the need to close the plant, RWE npower—the owners—decided to be imaginative, and instead of running on coal until they had to close, they decided to make the groundbreaking decision to explore the potential for conversion, so that they could learn by doing and transfer that learning to developing biomass in future. What they did was not only groundbreaking but risky, and they deserve congratulations for their pioneering work on developing the ability to convert coal-fired stations to biomass. As a result of that conversion, Tilbury is now the world’s largest dedicated biomass power station, having burned coal for the last time in March 2011. I lament the departure of coal, but it is still exciting to witness what has been happening at Tilbury.

The station burns wood pellets, and in response to the intervention by the hon. Member for Blackley and Broughton (Graham Stringer), those pellets come by ship from America. That is, as he will probably recognise, a sustainable way of transporting them. As my hon. Friend the Member for Redcar mentioned, where we have power station infrastructure located at portside and the ability to transport by ship, it makes that method of power generation very sustainable.

The remainder of the hours that Tilbury has under the large combustion plant directive means that it can only generate from biomass until next year. It seems crazy that, having converted from coal to biomass, we still have to close the plant. However, RWE has big ambitions and wants to invest in a new facility to replace the existing station, having learned many lessons from the conversion. We are hopeful that the necessary permissions will be achieved and that the project can go forward, so that Tilbury can continue to keep Essex’s lights on.

It is fair to say that the conversion is less efficient than coal, but it is still pretty efficient. As I said, under coal-fired generation, the plant generated more than 1,000 MW, and now it generates 750 MW. That is a significant contribution to the national grid, and much more than the wind turbines that my hon. Friend the Member for Selby and Ainsty referred to. The conversion has, however, had a significant environmental impact, with a 70% reduction in greenhouse gases. That illustrates just how powerful converting existing infrastructure could be in terms of meeting our objectives on climate change.

During the conversion, RWE was faced with many challenges—technical, operational, and health and safety—but much has been learnt and the company would be very happy to share its expertise with the Government and more widely. The operation of Tilbury to run on sustainable biomass has had a big impact on the UK’s ability to meet its targets. That illustrates the potential of biomass generation to give a new lease of life to existing power stations, which, without conversion, would have to be decommissioned, but are sitting on top of connections to the national grid. As we look at further investment in energy capacity, connections to the grid are an important expense to deal with.

With over a third of our existing generating capacity due to close by the end of this decade, clearly, more investment in renewable and low-carbon technology is required—and quickly—so that, in future, we have a secure energy supply, a lower-carbon energy supply and, as my hon. Friend the Member for Selby and Ainsty said most eloquently, an affordable energy supply. That is why we need to unlock the supply challenges quickly, because without increasing supply, the impact will be on price, and our most vulnerable consumers will be hit. We need, therefore, to tackle the problem.

As I mentioned earlier, the beauty of Tilbury as the location for a dedicated biomass station was its suitability for transporting the wood pellets by ship, as that made it particularly sustainable. As my hon. Friend mentioned, there has been a lot of misinformation about the sustainability of biomass generation, with much scaremongering that burning wood pellets will mean the end of our forests. However, nothing could be further from the truth. I have had conversations with representatives of the forestry industry in the United States, and they are very excited and keen to satisfy the demand that this country might have for further biomass generation. It was suggested in some briefings only this week that Government plans would involve the burning of up to six times more wood than the entire UK forestry harvest, but that is totally misleading, because we are looking beyond our tiny island for supply. It can be achieved in a very sustainable way.

The ability to tap into that demand has given sustainable forestry a whole new lease of life. As we have increased the recycling of paper, the demand for forest products has altered, which means that there is a desire to look at new sources of demand. Over time, that will only accelerate, so I really do not believe that the wood panel industry has anything to worry about, in terms of the future of its supply.

[Ian Swales]

My hon. Friend is making an eloquent case regarding sustainability. Does she agree that it is interesting that even the Royal Society for the Protection of Birds is now saying that properly managed sustainable forests are valuable ecosystems in themselves and should be encouraged?

[Jackie Doyle-Price]

Yes, the RSPB’s comments are welcome, but it really needs to join things up. As we know, a little knowledge is often a dangerous thing, and it does not take much investigation to realise that some of the fears put out by the so-called environmental lobby, once they are unpicked—

[Mr Hayes]

I am grateful to my hon. Friend for raising the issue of wood panels, as other Members have. I am determined to do right by the wood panel industry. The Government are engaged with the industry and I shall say a little more about that, but it is right that we listen to the industry, take into account its circumstances and ensure that our policy has no unintended consequences. However, as far as the other people that my hon. Friend mentioned are concerned—I sometimes describe them as bourgeois liberals, do I not?—their malevolent, malign, mischievous opinions will be isolated by this Minister.

[Jackie Doyle-Price]

I thank the Minister for those comments. I agree that we need to take the wood panel industry with us. I suspect that, with more understanding and dialogue, it will come with us, because the case has been made that we can supply the demand for biomass without impacting the industry’s supply unduly.

[Guy Opperman (Hexham) (Con)]

I apologise for arriving late for the debate, Mrs Main. I congratulate my hon. Friend the Member for Selby and Ainsty (Nigel Adams) on securing it, and thank my hon. Friend the Member for Thurrock (Jackie Doyle-Price) for taking my intervention. I should declare an interest as a member of the all-party group for the wood panel industry, and I have an employer in the industry in my constituency. I absolutely endorse all the points that have been made thus far, but I would make two points to my hon. Friend. The first is that the timber price has gone up by well over half—

[Mrs Anne Main (in the Chair)]

Order. I remind the hon. Gentleman that interventions must be brief.

[Guy Opperman]

Will my hon. Friend comment on the fact that the timber price has gone up by at least half since we have had the domestic subsidy?

[Jackie Doyle-Price]

All I can say is that RWE is planning on making a significant investment, and it has invested in its supply chain. The issue that my hon. Friend raises really will not impact on its ability to run the dedicated biomass facility in Tilbury. I would also point out that timber is not the only commodity that has gone up in price in recent years. I really do not think, therefore, that the issue that my hon. Friend raises will be any impediment to further exploitation of this technology.

I look forward to Tilbury rising again and reopening with new permissions and with a brand-new facility. I hope the Minister will look at coming to visit in due course to see how plans are progressing. I am really pleased that RWE remains committed to Tilbury and that, despite having to close its existing facility, it still wants to invest in power generation on the site.

I know the Minister does not require too much encouragement in this regard, but I would like to highlight how much this issue illustrates what happens when Governments fail to fight our corner in Europe. I can see a situation coming down the track very quickly where we will be forced to buy more and more electricity from France, in particular, because the regulatory system has favoured nuclear over coal. We all want cleaner, greener energy, but we need to keep the lights on, and we need to make sure that people can afford to heat their homes. For our own energy security, therefore, we need to make the most of the potential of biomass as an energy source, given its generating potential, and given how much more of our domestic demand we will be able to supply.

I implore the Minister to make every effort to ensure that rapidly deployable capacity, in the form of biomass conversion, comes on stream as quickly as possible. In that respect, I cannot add much more to what my hon. Friend the Member for Selby and Ainsty said in his opening remarks.

I want to make a final point about investment. As a country we rely heavily on private capital to achieve the investment in power generation that we need to meet our energy needs after 2015. As my hon. Friend the Member for Redcar said, to achieve that, industry needs long-term certainty to encourage investment, particularly in a world where capital is finite and the market environment very competitive. In addition, we are dealing with energy companies that are global in their reach, and they can easily go and invest their capital elsewhere.

It is telling that coal-fired power stations are being built in Germany, when we have made coal completely uneconomic in this country. When we are dealing with private investors and expecting them to invest billions of pounds so that we can keep our lights on, we must recognise that they are not in it for charity, and we must enable them to facilitate that investment in the best way we can. To put it bluntly, the Department has, hitherto, been not enough about energy and rather too much about climate change. I believe that really has to change, and I know that if anybody will facilitate that change, it is my hon. Friend the Minister.

15:09

[Graham Stringer (Blackley and Broughton) (Lab)]

I want to make a few general points. First, I congratulate the hon. Member for Selby and Ainsty (Nigel Adams) on initiating this important debate. If I was in his situation and had in my constituency two major coal plants that would shut if they were not converted to biomass, I would take exactly his position.

I want to take a step back and give a slightly wider perspective on what is happening, in line with what the hon. Member for Thurrock (Jackie Doyle-Price) said about energy and climate change. I can think of no country in history that remained competitive while it had higher energy costs than its competitors. At the base of our present energy policy is a huge gamble that gas prices will increase and that therefore the investment that the Government are making will make alternative energy competitive. At the moment, however, it is not competitive, and we need to bear that in mind, particularly given the worldwide increase in shale gas.

The second point I would make about the conversion to biogas is that it has two drivers: one is bonkers and counter-productive, while the other should not be implemented. One is the 2020 directive from Europe, which is an attempt to achieve a 20% reduction in carbon dioxide emissions by 2020. On one level, that would be fine, but the measure deals with only one side of the equation—emissions. It does not deal with consumption, and the reason why the carbon budget in Europe and this country is going up is that we are importing machines and other products from elsewhere, which is why the amount of carbon dioxide in the atmosphere is increasing generally. The policy is not working and it is counter-productive—it is a deindustrialisation policy disguised as an environmental policy.

The other problem, which the hon. Lady mentioned, is the large combustion plant directive. I do not understand why this country must implement the directive by a particular date. In that respect, the Minister, who I think is excellent—I rather prefer his interpretation of the country’s energy policy to the Secretary of State’s—owes me, unusually, a letter. I asked him why we had not applied to extend the deadline for implementing the directive, which is allowable under its provisions. Perhaps he will tell us in his response.

There is a subsidy and a cost to biomass. The hon. Member for Selby and Ainsty made a good case, and he gave two reasons for using biomass. One was jobs; as I said, I would make the same argument if I was in his situation. However, when we give an industry a subsidy, as is the case for biomass and the rest of the alternative energy industry, there is a cost elsewhere, as the hon. Member for Thurrock said. That subsidy could be costing jobs elsewhere, even though it may not be necessary.

The second reason that was cited related to security of energy supply, which I would always put at the apex of energy policy. One can argue about price and how energy is made, but if we do not have any, we have nothing to argue about. I remind the hon. Member for Selby and Ainsty that, in times of difficulty, whether that is to do with energy or anything else, an energy supply that comes across the north Atlantic is not totally secure.

[Nigel Adams]

The hon. Gentleman should consider where the fuel comes from now. We buy millions of tonnes of coal to fuel our power stations. It comes across in ships, and I imagine it is extracted through open-cast mining. That has been going on for years, so this is not a new phenomenon. Of course we must get the biomass from somewhere.

[Graham Stringer]

The hon. Gentleman makes a valid point. The trees and forests of this country certainly could not be a sustainable supply, given the level of burn that there would be.

I am reminded a bit of Aneurin Bevan’s comment that we live on an island made out of coal and surrounded by fish, and it would take fools to damage our food or energy supply. I do not know what has happened in the past 30 or 40 years.

[Ian Swales]

The hon. Gentleman makes an interesting counter-argument. Previous speakers in the debate have cited north America as an example, but he will be aware that the paper and pulp industry has long imported biomass, mainly from Scandinavia. The power project to which I referred in my speech is in detailed talks with the Finnish industry as one of its main suppliers.

[Graham Stringer]

In a stable world economy, crossing the Atlantic or the North sea is not a problem, but a secure energy supply really means being able to do things here, and there is a risk to our energy security from moving from fossil fuels, of which we have hundreds of years’ supply, to biofuels. I just want to make that simple point.

Another point that has not come out much in the debate is the problem of toxicity. I have tabled several parliamentary questions on the matter in the past year or so. According to an answer of 23 May 2012, at column 701W, the burn of biomass in 2010 added to the atmosphere 160 tonnes of chromium, 130 tonnes of arsenic and 16 tonnes of hexavalent chromium, all of which are damaging to health and likely to reduce people’s life expectancy, although the figures are not completely available.

[Kate Green]

My hon. Friend puts his finger on the concerns of people in my constituency. Does he agree that in addition to the emissions and their possible impact on air quality, there is concern about incinerator ash and a sense that that, too, should be treated as hazardous waste?

[Graham Stringer]

I know from my hon. Friend’s constituents, who have written to me, that there is great concern about these problems in Stretford and Trafford, so I wanted to bring that to hon. Members’ attention, because it has not yet been discussed.

Finally, I think that the carbon debt is slightly greater than the hon. Member for Selby and Ainsty said, partly because some new trees will be used. Interestingly, to hit the European 2020 targets, the carbon must be back in a tree by 2020, so if we are dealing with trees that take 10 or 20 years to grow, biofuels should not count towards the target, because that will not have happened. I think there is a bit of a fiddle going on.

[Ian Swales]

The hon. Gentleman is repeating one of the great fallacies about the industry, on which I think that the hon. Member for Selby and Ainsty (Nigel Adams) touched. Let us say that there is 20-year cropping of a stand of trees, with a 20th taken out and replanted. All the evidence shows that the overall carbon in that stand of trees at the end of the year will be the same, or will even have increased, despite the cropping, because all the other trees will have become bigger. The idea that when one tree is taken out—

[Mrs Anne Main (in the Chair)]

Order. I ask for brief interventions because we are short of time.

[Ian Swales]

Thank you, Mrs Main.

[Graham Stringer]

It is a complicated equation, although I accept what the hon. Gentleman says. There is also the question of the carbon that comes out of the earth, however, and the black carbon, which is a product of the combustion and also leads to global warming. It is a very complicated equation, so it is simply wrong to say that the process is carbon-neutral.

Although I have the greatest respect for the case made by the hon. Member for Selby and Ainsty, we are dealing with a subsidised industry that would not have been established without two European directives, one of which is counter-productive, while the other is deindustrialising the country. People’s health is being damaged and, in the round, the policy is not a good one.

[Several hon. Members]

rose—

[Mrs Anne Main (in the Chair)]

Order. I remind the two hon. Members who wish to speak that the winding-up speeches will start at 3.40 pm. I hope that that will be taken into account so that they both can be accommodated. I call Glyn Davies.

15:21

[Glyn Davies (Montgomeryshire) (Con)]

I shall try to limit my speech to five minutes, Mrs Main. Will that be within the time limit?

[Mrs Anne Main (in the Chair)]

I am sure that the hon. Gentleman will be able to say all he wants to say.

[Glyn Davies]

Perhaps I will take even less time.

Whenever I hear that there is to be a debate about energy, I feel an almost irresistible force within me demanding that I rant about the desecration that onshore wind will cause in my constituency. I am sure that you, Mrs Main, and the Minister will be pleased to hear that I do not really want to do that today, although I will say that that power forces me to take a great interest in all other forms of energy, because one cannot be just against things.

I want to raise two constituency concerns about biomass, but that is in the context of my huge support for it in general. The first matter has a great constituency impact and comes into the category of unintended consequences. There are two anaerobic digestion plants in Shropshire that use maize, and they are devastating Montgomeryshire dairy farmers’ ability to access maize land, so their traditional way of farming will have to change. Those farmers have dairy herds and have either rented land to grow the maize, or have bought the crop wholesale to feed their stock. They can no longer afford that, because they are being driven out of the market by plants that burn maize crops in England. When we consider biomass use, we must be careful about the unintended consequences for other important industries. Of course, the ability to feed the nation is a huge part of what must always be Government policy in Britain—indeed, the same thing would apply throughout the world.

My second point relates to a constituent, Mr Clive Pugh, of Bank farm in Mellington, who is a huge enthusiast for biomass. Twenty years ago, he built an anaerobic digestion plant on his farm. It uses waste, and for 20 years it has been profitable and successful, but now he finds that because he has a payment subsidy through renewables obligation certificates, the support he gets is nothing like what it would be under the feed-in tariff regime. There are competitors all over Shropshire, in brand new plants, who probably get 11p or 12p a kilowatt-hour for the energy that they produce. Many of them are producing that energy from products that can be used for other purposes, but Mr Pugh simply uses waste products—and nothing but waste products. That helps the fertility of his land, which does not need so much fertiliser, and it does not even need so much weed killer because the process kills the weeds. However, he is being driven out of business.

When I wrote to the Minister about that, I received the reply that someone such as Mr Pugh really should have asked for his payment regime to be transferred before 2011. However, small business people such as Mr Pugh do not realise that, and now he finds that he is no longer able to transfer—there was a cut-off date. New plants are going ahead elsewhere, and Mr Pugh will be driven out of business, but he is the pioneer. He was the man who established the examples and showed us how the process could work, yet he is the one who will be driven out of business.

[Mr Hayes]

I shall deal with this matter through an intervention now, if I may, to save time later. I will ask my Department to look at the particular case of Mr Pugh, which my hon. Friend has done a great service to the House by raising, and that of others like him. Clearly we need to do something that is consistent and coherent. None the less, my hon. Friend has raised an important matter and I will ask for it to be dealt with.

[Glyn Davies]

I had reached the conclusion of my speech, but I am very glad that I took that helpful intervention.

15:30

[Guy Opperman (Hexham) (Con)]

Everyone here would agree that the fundamental concept of biomass is a good thing. There can be no objection by any Member of Parliament or any constituent to the fundamental principle and support for it. However, as always with Government policy, including in the three years that I have been in the House, the consequences are not always what we would wish to see. I am faced with a situation—this is the third Minister in three years whom I have addressed in relation to biomass subsidy—whereby, on the one hand, the standard person who is buying timber, whether it is a furniture maker, someone doing wood panelling, a caravan maker or any other person using timber in any way, shape or form in this country to run any kind of business whatever, buys at a price that is unsubsidised by the Government. On the other hand, energy companies that wish to purchase timber in this country for use in a biomass energy plant are subsidised to a large and significant degree by the Government.

The consequences are very clear. First, the timber price goes up. Secondly, the energy companies have a competitive price advantage, which allows them to purchase timber at a cheaper rate than all other purchasers in the country. Every single person, save for an energy company, gets a different price. That, from a Conservative coalition, I find illogical and hard to believe, given that we are meant to be a free-market-based organisation. The reality is that the subsidy is distorting the market, raising the price of timber and, I regret to say to my hon. Friend the Minister, posing a severe threat not just to the wood panel industries, but to any utiliser of wood in this country.

[Nigel Adams]

I have the utmost respect for my hon. Friend. I just wonder whether he can tell me of a significant power generator in the country that is buying its timber to be pelletised from sources within this country.

[Guy Opperman]

In accordance with the time-honoured traditions of the House, I shall be delighted to write to my hon. Friend and give him chapter and verse. The honest reality is this: I cannot give him chapter and verse right now. However, he will be fully aware that there are only two places where a biomass energy company can purchase its timber product. It can come from this country—we have 12 million tonnes of timber, and a large proportion is going to British-based energy companies—or it can be obtained from overseas. My hon. Friend is making faces from a sedentary position along the lines that he disagrees with me. I manifestly do not accept that. In fact, I will definitely make the case—I would be interested if the Minister could comment, because he is very informed—that if there is in reality no energy company in this country creating biomass that is utilising—

[Nigel Adams]

rose—

[Guy Opperman]

I will not give way any more. The situation surely is this. On any interpretation, if there is no energy company in this country that is utilising domestic wood—

[Nigel Adams]

Significant.

[Guy Opperman]

If there is none or no significant one, why is a subsidy needed? If there is no utilisation, that is all the more reason why the Minister should take the dramatic point of view that we should get rid of the subsidy. With no disrespect, the energy companies cannot have it both ways. They cannot say, “We need a subsidy to buy timber in this country; that subsidy is to help us,” and, alternatively, “We don’t use it, so we don’t need the subsidy.”

[Julian Sturdy (York Outer) (Con)]

Will my hon. Friend give way?

[Guy Opperman]

On this occasion, I will.

[Julian Sturdy]

Can my hon. Friend say where this Government energy policy or renewable energy policy generally would be without subsidy? I am struggling to understand, because surely all energy policies attract subsidy. The question is whether it is good or bad and how far it goes. Renewable energy policy attracts subsidy across the board.

[Guy Opperman]

I accept that. We all understand that to kick-start energy policy, there must be subsidy—no one disputes that—and there has been, in a multitude of different energy fields over a long time, under successive Governments, that process. However, just as the Government have reviewed the subsidy that exists in relation to solar or other types of energy production, so the Government have an obligation to review the extent to which they subsidise domestic wood. I shall go further than that and say this. In this context, it is having an impact on jobs. There is no question in my mind about that. It is also having an impact on the consumer, because as with all energy, there is a degree of subsidy, and that subsidy is coming from the consumer. The consumer is paying, through Government subsidy, for the consequences of the energy production. Therefore, to say that it is without any adverse consequences whatever would be simply wrong.

[Jackie Doyle-Price]

The area that my hon. Friend is opening up now—the impact on consumers—is a very important one across the wider perspective of energy policy. The reality is that we need to invest in generating capacity, and biomass will be an important ingredient of that. If we do not do that, the price of energy for consumers will go up, because we will be having to buy that power on the open market.

[Mrs Anne Main (in the Chair)]

Order. I remind the hon. Gentleman that the winding-up speeches will start in just under four minutes.

[Guy Opperman]

Mrs Main, I take everything that you say very seriously and most particularly the fact that I have two minutes and 54 seconds in which to finish. It comes down to this. The Minister is a free-market economics guru. He is a robust embracer of his brief. However, I remain to be convinced of why we subsidise one item for one particular organisation, while we do not subsidise on the other hand. I am told by my hon. Friend the Member for Selby and Ainsty (Nigel Adams), who is both a friend of mine and very eloquent in the way he puts his case, that there is no effectual usage of domestic wood in this country—yet we still subsidise it. With respect, that is totally illogical. Either the subsidy is required to continue for domestic wood, or it is not. Mrs Main, I thank you.

15:37

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

It is a pleasure to speak under your chairmanship, Mrs Main. I congratulate the hon. Member for Selby and Ainsty (Nigel Adams) not just on securing the debate, but on the comprehensive way in which he dealt with the issues in relation to biomass. To start with, he is right to make the distinction between biomass and biofuels. The Minister, I am sure, will recall that on 6 March we engaged in the discussion on the Renewables Obligation (Amendment) Order 2013. Certainly the hon. Member for Brecon and Radnorshire (Roger Williams) was present as well. I do not know whether anyone else here was. Possibly the hon. Member for Redcar (Ian Swales) was; I am not sure. The debate touched on a range of issues, but it focused particularly on biomass and biofuels, and I did reflect that there was sometimes in that discussion a degree of confusion and overlap between what people were talking about, so the hon. Member for Selby and Ainsty was right to make the distinction between the two at the outset of today’s debate.

This debate is important. I am conscious of the time and I do want to give the Minister time to respond to the wide range of points that have been made during the debate—some specifically on biomass and some slightly more wide-ranging—but I just want to reflect on the point that the hon. Member for Selby and Ainsty made in relation to the perhaps liberated comments made by the soon-to-be former chief executive of Ofgem when he talked about the capacity crunch recently. While not wishing to disrespect that opinion, I am sure that he will be aware that there are a number of different views about what the level of capacity will and will not be. That is one scenario, but it is important to highlight that similarly expert commentators have painted other scenarios. We need to reflect on them all, to see where we are going with our wider energy policy.

The hon. Member for Redcar referred to the decisions announced today on carbon capture and storage. I was interested to hear the Minister’s response, particularly on the two projects that were not included in the announcement in the Budget today. If we are serious about CCS, we need to ensure that we get the long-term support regimes—such as those we are discussing in the Energy Bill, which is awaiting its Report stage—right. That will ensure that those two projects—and the Hatfield project, which was not successful in the New Entrants Reserve 300 funding scheme, because it did not get the go-ahead for match funding from the Treasury—are not completely lost and that we do not lose opportunities in those areas and in the export potential of our technological and academic lead in the industry.

The hon. Member for Thurrock (Jackie Doyle-Price) talked about the power station at Tilbury, the impact it has had and its contribution to the national grid since its very recent conversion. She also made an important point about the cost of grid connections. It is about not only the financial cost, but the time it takes energy sources to be connected to the grid, particularly in the less populous parts of the British isles. There are complications, and concerns about the time some sources take. Her important points add to the case for making biomass part of the balanced mix, particularly because, as is sometimes described, it can be used during a transitional phase, while other sources are developed further. I do not think that biomass is completely ideal, but we do not live in a completely ideal world and we have a significant energy challenge to meet over the next few years.

The hon. Members for Hexham (Guy Opperman) and for Montgomeryshire (Glyn Davies), who do not necessarily have negative perspectives, drew attention to some areas of concern with biomass. They both pointed out that they are not opponents of biomass, but they wanted to draw the House’s attention to some of its consequences. I shall pick up from where the hon. Member for Hexham left off. I do not do so as some sort of “bourgeois liberal”, “chi-chi” commentator or whatever other phraseology the Minister uses to keep those behind him happy in debates, but from the serious perspective of the potential consequences for other industries. I am sure that the Minister will recall that I touched on the specifics when we discussed the topic in Committee.

I discussed some of the consequences with my right hon. Friend the Member for Stirling (Mrs McGuire), who is a colleague of the hon. Member for Hexham on the all-party group on the wood panel industry. The issue is what is, and is not, waste. We hear a different interpretation of waste when we talk to the wood panel industry, as opposed to when we talk to other industries, such as the furniture industry. There needs to be a decent level of engagement between the Government and the industry, because they have different data that show very different things—the impact on price is just one factor that needs to be explored properly. The Minister said earlier this afternoon that he intended to ensure that there was that level of engagement. It is important because anyone’s starting point with biomass is that it needs to be sustainable and focused on genuine waste products—products that cannot be used in any other meaningful way, such as in furniture or in the wood panel industry, which can use lower-grade wood than the furniture industry. I am sure that he is well aware of those points.

[Ian Swales]

The hon. Gentleman is right to flag up the differences in data. Is he aware that the Renewable Energy Association says that there has been a 15% fall in wood prices in real terms since 1996?

[Tom Greatrex]

Indeed, and I was about to quote from its figures. The hon. Gentleman is right and he makes the point about the different interpretations. In debates about different aspects of energy policy, sometimes differences of view are over-interpreted and elaborated on by people with an ideological objection, which is regrettable. In this case, if we go into the detail of the different sets of data, to establish exactly what the impact is, it would be good for the industry and good for the energy supply going forward.

The last time we discussed this, in a Committee, I asked the Minister some questions. He gave a commitment, but he did not answer other questions precisely or completely, so I would like to give him the chance to do so, because there is a slightly different audience this afternoon. When he met the all-party group, he agreed to write to generators requesting information on their biomass sourcing intentions for the next five years. I want to press him again on whether the correspondence has begun and whether the information is back from the generators. They are important data, particularly, as he knows, in relation to the differentiation between imported and indigenous supply, which brings us back to the points the hon. Member for Hexham made about the industry.

The Minister said that he will look again at the option of differentiating support for imported and indigenous products. Will he come back to that point? He also said that he would establish a working group with the wood panel industry and that the letters would go out before the end of the month. We are not quite, but almost at the end of the month, and he made the commitment at the beginning of the month. Has he been able to do it yet?

[Mr Hayes]

I have indeed written to the large-scale users of biomass for information about the kind of product they use. My Department is analysing that information and will follow it up in the way I said I would. In addition, my Department has been in touch with the wood panel industry to arrange a date for the workshop I want to put on, to ensure that we are comparing like with like and that the data we have received are in line with the industry’s data. I take the hon. Gentleman’s point about mismatch and the difficulties of definition.

[Tom Greatrex]

I thank the Minister for that response. I am sure that those who have expressed concerns will welcome his clarification. I do not have an objection to biomass, but it needs to be employed properly, which is about sustainability and transparency in sourcing.

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

I have listened carefully to the discussion today, most of which has been about large-scale operations. The BSW Timber sawmill in my constituency uses waste to kiln-dry material for use in gardens and other facilities. With no transport costs, keeping it local adds to the sustainability of biomass and carbon reduction.

[Tom Greatrex]

I thank the hon. Gentleman for making that important point, which I neglected to make in the time I have available. I shall finish my speech shortly. The use of biomass in combined heat and power and the links with industry are important aspects of it being able to be used.

In conclusion, biomass should be sustainable and focused on waste. If we can get those things right, I do not think there will be any genuine objections to biomass, because it will deal with some of the genuine, as opposed to ideological, concerns. In the energy debate, although people have the right to hold a completely different view, we should always differentiate between addressing genuine, legitimate concerns and accepting an ideological difference for what it is, rather than getting too hung up on it.

15:49

[The Minister of State, Department of Energy and Climate Change (Mr John Hayes)]

It is a great pleasure to serve under your chairmanship, Mrs Main, and I congratulate my hon. Friend the Member for Selby and Ainsty (Nigel Adams) on securing this important debate on a topic that, as we move to a large proportion of our energy needs being met by renewables, is vital. John Ruskin said that it was always

“more difficult to be simple than to be complicated”.

An aim of the debate on energy strategy and policy is to make it more straightforward, for when we make it esoteric, we not only confuse most of the public, but I suspect we may confuse ourselves.

My mission is to bring a straightforwardness to energy policy, and at the heart of that straightforwardness, as the hon. Member for Blackley and Broughton (Graham Stringer) said, is that there is no imperative more significant than that of energy security—ensuring that supply meets demand. All the other considerations may have value, and some may have great significance, but unless a Government, though Governments do not do it all themselves, of course, can bring about a set of conditions and establish a framework in which that can be assured, they are failing, which is why biomass, and particularly coal conversion, is so important. It is, as my hon. Friend the Member for Thurrock (Jackie Doyle-Price) argued, a reliable, predictable and secure means of helping to ensure energy security. It is as plain—in Ruskin’s terms—and simple as that, but the debate deserves more than that, and I want to talk a bit more about the detail.

I recognise that there are many pros and cons involved, and to balance them the Department has set out four guiding principles for our biomass energy policy. They are that biomass must be sustainable, that it delivers genuine greenhouse gas savings, that it is cost-effective and that its unintended consequences on other industries are minimised. All those issues have been mentioned during the debate. The hon. Member for Stretford and Urmston (Kate Green) talked about sustainability, the hon. Member for Blackley and Broughton raised the issue of greenhouse gas savings, and my hon. Friend the Member for Brigg and Goole (Andrew Percy) and others mentioned cost-effectiveness. I see my role as ensuring that the principles are applied pragmatically and consistently.

I would like to set out why I believe biomass is an important part of the energy mix.

[Kate Green]

Does the Minister agree that it is important that there is absolute transparency about whether the principles are being complied with, particularly when there are anxieties about the environmental impact of plants?

[Mr Hayes]

We should not underestimate that. It is important that it is properly considered. The hon. Lady will know that the Government are committed to sustainability in those terms. If I have time, I will say more about that, but if I do not, I would be more than happy to write to her with the detail.

The hon. Lady is right that it would be wrong to be cavalier about that, just as it would be wrong—and I say this to my hon. Friend the Member for Hexham (Guy Opperman), who is a great champion of the wood panel industry, and rightly so—for us not to take into account unintended consequences. The unintended consequence for farmers, as my hon. Friend the Member for Montgomeryshire (Glyn Davies) mentioned, can also be profound, and it is about straw too. Pigmeat farmers, for example, are concerned about the effect on straw prices of its use in biomass. My hon. Friend raised the issue of dairy farmers. I take that point, and we will consider the matters. It is important that there is no displacement effect. The unintended consequence is as significant as the virtue of what we are trying to achieve.

But the virtue is a profound one. We are talking about a proven source of energy. At the end of the third quarter of 2012, the total electricity generating capacity of biomass electricity generating stations was 3.5 GW, which was an increase of more than 900 MW over the previous year. It may not be known that landfill gas is 1 GW of that capacity. For many years it has been an important source of energy, predating some other technologies that get more airtime, perhaps because they are perceived to have greater glamour.

With the right criteria in place, by 2020 as much as 11% of the UK’s total primary energy demand—for heat, transport and electricity—could be met from sustainably sourced, biologically derived biomass. Most of it would be from wood, and our analysis indicates that that can be done without significant effects on food production or the environment. Biomass can, therefore, play a greater role, but I am mindful of displacement and sustainability. Biomass also offers controllability and predictability, as I suggested earlier, so it can provide both base-load generating resource and peak power energy as required.

It is important to recognise that biomass conversion is a cost-effective and quick means of decarbonising our electricity supply. In July last year we announced our revised levels of support for biomass under the renewables obligation and set out new bands to support the conversion of coal-powered stations, as we have heard. I recognise the challenge of Tilbury and I am happy to work, along with my officials, with my hon. Friend the Member for Thurrock to ensure that we do what we can to facilitate the process. There is, of course, a commercial decision at the heart of that, as my hon. Friend well knows, but the Government will do what they can to ensure that the process is as equitable as possible. I appreciate that my hon. Friend has been a great champion of Tilbury because she knows that the issue is not only about energy; as so many hon. Members have reported, it is about jobs and skills too.

My hon. Friend the Member for Selby and Ainsty made that perfectly clear in respect of his constituency. My goodness, I have met him a number of times to talk about this subject, including about Eggborough and Drax. I am pleased to say that my Department has recently written to Eggborough power station, as he knows, and set out the process by which it can take its ambitions further forward. I hope that that has been helpful; it has certainly added clarity to the circumstances the station is in. There are further steps to be made, and I assure my hon. Friend that they will not be unduly lengthy and that they will be clear to Eggborough. We will advise and support the process that he is so passionate about ensuring comes to a happy outcome. I am grateful to him for giving me the opportunity to put all that on the record.

I am also grateful to other Members, including my hon. Friend the Member for Redcar (Ian Swales), for allowing me to say a brief word about carbon capture and storage. I want to affirm what I said in an intervention, which is that taking forward the CCS projects, with the £1 billion competition, will do so much to change our assumptions about future energy—CCS can give a long-term future to gas, of course, and to coal I hasten to add. I want to make it clear that the projects that have not made the final two are of considerable interest to us and that we will maintain a dialogue. I will speak to my hon. Friend personally about some of the details later today.

Sustainability matters too though, and we have put in place demanding criteria for the supply of fuel. The hon. Member for Stretford and Urmston has emphasised sustainability a number of times and the shadow Minister, the hon. Member for Rutherglen and Hamilton West (Tom Greatrex), was right to draw it to our attention in reference to the renewables obligation statutory instrument that we debated a week or two ago. It is right that we look at the supply of wood and that we take account of the definitions of what waste wood really is. I have already said that that work is ongoing, but I am very happy to share it with the House at all opportunities and to continue to an outcome with which the wood panel industry, in particular, is happy.

The work we are doing on sustainability requires ongoing consultation. The sustainability controls that we have put in place are still the subject of further discussion. Many hon. Members have raised that matter with me when we have debated such things in the House, and I can confirm that we are tightening our thinking in this area. We intend to ensure that we can move ahead with confidence, because we think that biomass is so important.

Biomass must, however, also be cost-effective. We make no apologies for insisting that we must deliver value for money for the energy bill payer, maximising the amount of renewable energy and carbon reduction we receive for our investment. Coal conversions offer, perhaps, the best means of ensuring that value for money, and using waste to generate electricity also provides a cost-effective route, as long as we can accurately define what waste is. Let me just say this on waste: it seems that the location of this kind of biomass plant should be close to the source of supply, and ideally close to the source of demand, too. They are industrial plants with an industrial purpose, and I want to emphasise that.

I thank my hon. Friend the Member for Selby and Ainsty again for drawing this matter to the House’s attention. I confirm that the Government are entirely committed to biomass and to its role in our energy mix. I am glad that we have had the opportunity to talk about this, and while I am the Minister, and while I am driving the policy, Ruskin’s advice, about being straightforward about our objectives, will be not only my view, but the Government’s view.

Rail Disruption (Cleethorpes and Doncaster)

Wednesday 20th March 2013 Westminster Hall

15:59

[Martin Vickers (Cleethorpes) (Con)]

As always, it is a pleasure to serve under your chairmanship, Mrs Main.

The reason why I asked for this debate is the closure of the main rail line out of my constituency—the line from Cleethorpes to Doncaster, Sheffield and on to Manchester—as the result of a landslip at Hatfield, between Scunthorpe and Doncaster, early last month. I welcome the Minister to his place and thank him for the help that he and his colleagues in the Department have given to date, through the influence that they have brought to bear.

I should set the scene by pointing out that the main Cleethorpes to Manchester line is the main route out of Cleethorpes and, importantly for the tourist trade, it is the main route into Cleethorpes—[Interruption.] It is the premier resort of the east coast, as my hon. Friend the Member for Brigg and Goole (Andrew Percy) reminds me. The alternatives are less than adequate, it has to be said. There are three lines out of Barnetby, the junction about 15 miles west of Cleethorpes, all of which go to Doncaster, Sheffield and Manchester, but the line through my hon. Friend’s constituency—through Brigg, Kirton Lindsey and Gainsborough to Sheffield—is, in part, a single track and passenger services are provided only on Saturdays. There is an alternative route to the east coast main line, with a connection at Newark, via Lincoln, but the service on that route is intermittent to say the least, and it is not a reasonable alternative.

The main operator on the Cleethorpes to Manchester line is First TransPennine. I have to say that it provides an excellent service and has done an excellent job in recent years to build up the patronage on that service. Of course, First TransPennine is also suffering, although there are compensation arrangements such as from Network Rail. As it pointed out in an e-mail to me, it is losing 25% to 30% of its customers from Grimsby and Cleethorpes, which equates to 2,500 a week. Clearly, many of those people might be permanently lost to First TransPennine.

Those people who wanted to come to Cleethorpes at Easter and into the summer season, for a day or a few days in the resort, will be completely lost to the tourist trade. The inconvenience is not only to individual travellers, including Members of Parliament I have to say, but more importantly to people accessing leisure services. It has a real impact on the local economy, and that is particularly relevant with the approach of the Easter weekend, which is the traditional start of the tourist season.

I met Network Rail and First TransPennine on Friday, and I acknowledge the difficulties that they face. The first priority is to get the line clear and to get at least a limited service up and running. At a conservative estimate, that will take another 12 to 16 weeks. As Network Rail pointed out to me, there are still considerable unknowns. I understand that Network Rail needs only three to four weeks to replace the track, but it does not yet have access to the track, because it has to move the slag heap that caused the slip and ensure that it is safe for the workmen.

I have already mentioned alternative routes. I accept that one priority must be getting freight from Immingham docks to the power stations. In the main, that uses the alternative Brigg and Gainsborough line, but there is some limited access and First TransPennine is training its drivers with the necessary route knowledge to run on that line. That is proving difficult, but I understand that it is ongoing, although it will take six weeks. First TransPennine is halfway through that process, so there is hope that a skeleton service might be provided on that line by mid to late April. As I have mentioned, Northern Rail operates a Saturday-only service. It would surely not be beyond the wit of man to use those particular slots, at least on Saturdays, and those available on Sundays, when there is less freight traffic, to provide direct services. At least getting people there for the weekend would be a boost to the tourist trade.

It is worth pointing out that one of the alternatives is the East Midlands route via Newark, which, as I have said, is an intermittent service. It is one of the faults of the present franchising system that there does not seem to be an incentive for East Midlands to take advantage of the lack of trains on the other route by providing additional trains. I recognise that, as I know from correspondence about its normal daily services, there are problems. Anyone who has travelled on peak-hour services—most noticeably, for example, the 17.23 from Lincoln, via Market Rasen, through to Grimsby—will know that the rolling stock is totally inadequate, being provided by a single unit. East Midlands readily says—I have quite a bit of correspondence about this—that the rolling stock is simply not available. Clearly, if rolling stock is not available to provide existing services, there is very little scope for it to provide additional services.

Through First TransPennine, I have asked whether East Coast, which provides most east coast main line services, would consider deregulating some of the ticket restrictions that currently operate, at least to allow people to leave London and get back to Cleethorpes by train, by changing at Newark. In the evening, that unfortunately means having to leave before the 7 pm cut-off at which cheaper tickets begin. East Coast told First TransPennine that it was not prepared, in more or less any circumstances, to do that. I subsequently wrote to East Coast, but, sadly, it has not as yet bothered to reply. It does not seem unreasonable to request that, for the 18.03 from King’s Cross to Newark, which has a good connection through to Grimsby—not to Cleethorpes, unfortunately, but at least people can get to Grimsby—it could provide a derestriction to allow passengers to Barnetby, Habrough and Grimsby to use that service.

The main concern now is clearly to get services up and running, but I think questions need to be asked, although the Minister does not have direct responsibility for most such areas.

[Nic Dakin (Scunthorpe) (Lab)]

I congratulate the hon. Gentleman, who is my parliamentary neighbour, on securing this important debate about a significant event in our part of the world. Does he agree that, at the same time as addressing the issues that he quite properly raises, Network Rail has an opportunity to look at bringing forward its upgrades to the line? My constituents in Scunthorpe, who are being significantly disadvantaged, would then get a future advantage through improvements to the railway.

[Martin Vickers]

The hon. Gentleman makes a good point. At our meeting on Monday, Network Rail told me that it intends to schedule some of the works on other parts of the line while it is closed, which is obviously a sensible move. There is therefore some hope in that respect.

I want to move on to the actual incident, why it happened and who, if anyone, was responsible. The slippage of the slag heap may have simply been the result of movement in the earth—one of those terrible things that, although it blocked a railway line, thankfully did not cause any loss of life. However, I know from Network Rail that it has had discussions with the Environment Agency, the Health and Safety Executive and the mines inspectorate. I am in the process of corresponding with those agencies to see what their response is. It is worth mentioning in this debate—I hope the Minister will convey this to other Departments—who, if anyone, is responsible for monitoring the safety of the slag heaps. Agencies such as the HSE moved in after the event, but was anyone other than the operator of the site responsible? The operator, which was Hargreaves Services, only owned 10% of the operation; the rest was owned by foreign investors. Do the HSE, the Environment Agency and the mines inspectorate have responsibility—

[The Minister of State, Department for Transport (Mr Simon Burns)]

If it helps, it is the HSE.

[Martin Vickers]

I thank the Minister for that and I look forward to hearing from the agency. It is important that it is able to confirm what, if any, responsibility it had before the incident and whether it discharged those responsibilities in the proper manner. I do not want to indulge in scare stories, but a train could have been on that section of track when the incident took place. I hope that the matter is taken extremely seriously.

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

I congratulate my hon. Friend on securing this debate. He has made a fantastic case for all our constituents and commuters on the south bank of the Humber, but my constituency will experience a double whammy in that the Hull, Goole and Doncaster line is also affected. I had to use the bus replacement this week. [Interruption.] Will my hon. Friend confirm that there is a risk of a triple whammy coming our way, because there will be closures on the Hull, Selby and Doncaster line in a few weeks, and we need an assurance from the Minister that that will not be allowed to happen until the works have been completed?

[Martin Vickers]

My hon. Friend makes an extremely important point. I know that both his constituency and other constituencies on the north bank of the Humber are extremely concerned that they may be effectively cut off from the rail network.

[Nic Dakin]

The hon. Gentleman has said a lot about passenger services, but he will know that 20% of the freight coming into the UK goes through Immingham. Will he say something about the impact on freight services?

[Martin Vickers]

The hon. Gentleman is quite right. In fact, it is more than 20%; 25% of freight tonnage moved by rail starts or ends in Immingham. It is a vital hub, especially for the movement of coal to power stations.

I understand from the train operators and Network Rail that they are able to manage the freight operations using alternative routes, but it is a particular concern, and the hon. Gentleman is right to mention it. His own constituency, which encompasses Scunthorpe and the steel works, is a vital part of that freight network.

In conclusion, will the Minister address my key points in relation to alternative TransPennine routes via Brigg or Lincoln, and an improved rail service on East Midlands Trains, perhaps with some joint working with TransPennine? I presume there are surplus units at the moment that we might be able to use.

The Minister will know that my neighbouring colleagues and I are pushing hard for a direct rail service between Grimsby, Cleethorpes and London. At the moment, there is an East Midlands train that goes from Lincoln to King’s Cross in the morning and King’s Cross to Lincoln in the evening. It would be a golden opportunity to test the market for a future service if that route could be extended to Cleethorpes for a short time. Let us see some entrepreneurial activity by East Midlands Trains pushed on by the famous entrepreneurial Minister. I hope for a positive response in that respect. One final matter for the Minister is the ticketing regulations on the main line, which must be a simple thing to deal with. I look forward to hearing his response.

16:15

[The Minister of State, Department for Transport (Mr Simon Burns)]

It is a pleasure to serve under your chairmanship, Mrs Main. It is a particular pleasure for me because it is of course the first time that I have had that privilege and honour. I congratulate my hon. Friend the Member for Cleethorpes (Martin Vickers) on an important and pertinent speech concerning the response to the natural disaster that has so adversely affected the railway lines and his constituents, and also the constituents of my hon. Friend the Member for Brigg and Goole (Andrew Percy) and the hon. Member for Scunthorpe (Nic Dakin). I fully appreciate the importance of rail services to people in Cleethorpes, Grimsby and Scunthorpe and the significant inconvenience that the collapse of the spoil heap is causing to people wanting to travel from those towns and others wanting to travel to them.

I congratulate my hon. Friend the Member for Cleethorpes on the efforts that he has taken with meetings and lobbying to secure the best services for his constituents in respect of the disruption. I welcome the work that the industry has done to mitigate the disruption caused to both passengers and freight operators following the incident, which, as all hon. Members will accept, is beyond the control of the railway.

First TransPennine Express operates an hourly service from Cleethorpes to Manchester airport via Scunthorpe, Doncaster and Sheffield. Northern Rail provides local services between Doncaster and Scunthorpe and between Doncaster and Goole. The collapse of a spoil heap at Hatfield colliery, which was initially noted on 9 February, destroyed the adjacent railway line that links Doncaster with Scunthorpe and Goole. The subsidence did not cease until the end of February, which has compounded the problem. The collapse was not just a one-off incident on 9 February; it continued for almost another three weeks, resulting in a clear-up problem of enormous size and magnitude.

On 15 March, Network Rail advised that clearance of the spoil had commenced. However, it now anticipates that the reinstatement of the railway will be in early July rather than in June, as it had previously advised. Network Rail hopes that there is no further slippage and that it will continue to make progress to achieving restoration. Network Rail cautions that any date is subject to revision in the light of uncovering further problems as the work progresses, or the recurrence of movement in the spoil heap.

Train services have been replaced by buses. Buses between Scunthorpe and Doncaster are running every 30 minutes. Additional buses serving local stations are operating each hour. Northern Rail is providing limited stop buses and rail replacement buses serving all stations between Doncaster and Goole. Northern Rail express trains linking Sheffield, Doncaster, Hull and Bridlington have been re-routed via the east coast main line and Selby.

Northern continues to provide three trains between Sheffield and Cleethorpes via Brigg on Saturdays as required by its franchise agreement. Those services offer people the opportunity of a day out in Cleethorpes, and therefore are maintaining a direct rail service in support of the local tourism industry in Cleethorpes. East Midlands Trains provides seven trains on weekdays between Grimsby Town and Newark North Gate. Those trains connect with East Coast trains for passengers travelling to London. To extend the existing service to Cleethorpes would require additional resources, including additional rolling stock, as my hon. Friend the Member for Cleethorpes mentioned in his remarks. It would be for EMT to determine the business case for sourcing any additional rolling stock. I know that EMT has increased the capacity on trains between Grimsby and Newark North Gate on Saturdays, when it has rolling stock available to do so, so as to meet this short-term problem.

As my hon. Friend is also aware, management responsibility for the removal of the spoil falls to the colliery operators, Hargreaves. Network Rail is responsible for rebuilding the railway once the spoil has been removed. During the period that the railway is closed for reconstruction, Network Rail is investigating options for bringing forward investment work that is due in 2014. The removal of lineside vegetation has already commenced. Further options for expediting future improvements are also being considered. This may help to reduce the number of times that engineering work causes future disruption to passengers.

As my hon. Friend mentioned, it is estimated that it will take between 16 and 18 weeks to reopen the railway. Around 1 million cubic metres of spoil will have to be removed before Network Rail can commence reconstruction. Work has started to remove the considerable amount of spoil and to restore the railway, and I welcome the considerable effort that Network Rail and others are making to expedite the task. Network Rail’s mining team is carrying out a review of other sites around the network with built spoil heaps, and no cause for concern has been identified.

My hon. Friend mentioned Selby swing bridge; I think that my hon. Friend the Member for Brigg and Goole also mentioned it. The bridge is due for renewal between 28 July and 9 September. Network Rail is currently planning that the investment in that historic bridge will go ahead as scheduled. In the event that the work at Stainforth is still under way, that will limit the diversionary routes available to passenger services. Network Rail is working with the train operators to identify alternative arrangements if they are required.

On the question of Immingham port, which is in the constituency of my hon. Friend the Member for Cleethorpes, he knows as well as I do that it is one of the busiest ports in the country, and both he and the hon. Member for Scunthorpe mentioned it in their contributions. It receives 55 million tonnes of freight annually, including around 20 million tonnes of oil and 10 million tonnes of coal. These considerable fuel supplies are sent by rail, there being more than 250 rail movements at Immingham each week. Coal trains run from Immingham to power stations in the midlands, including West Burton and Ratcliffe power stations, and to Eggborough power station in North Yorkshire. Immingham also supports the UK economy in landing container traffic, animal feed and forestry products.

It has been suggested that passenger trains be rerouted via the Brigg line. Following the loss of the railway via Scunthorpe, Network Rail has rerouted a considerable number of freight trains via Brigg and via Lincoln. Given its strategic importance, Network Rail rebuilt sections of the Brigg line for freight traffic in 2009. The line is currently being used by around 120 freight trains a day, rather than the usual number.

To maintain fuel supplies and other deliveries, freight trains are now running every few minutes in both directions throughout the day along the 12 miles of single track between Gainsborough Central and Kirton Lindsey, and along a further single line between Brigg and Wrawby Junction. Although there are no immediate plans, or ability, to run passenger trains via Brigg, it is for First TransPennine Express and Northern Rail to work with Network Rail to assess whether there are any available train paths for passenger trains via that route, or whether amendments to the times of freight trains might be possible in the future. I certainly urge my hon. Friend, in the light of what I have just said, to go back to the companies and suggest that they contact Network Rail again to discover if there are any opportunities along those lines that might help—up to a point—in alleviating part of the problem that his constituents are facing at the moment. However, I also advise him that operating passenger trains via the Brigg line does not benefit passengers travelling from Cleethorpes and Grimsby to Scunthorpe and Doncaster as it does not serve either place. There are also fewer connection opportunities at Retford.

Around 15% of passengers from Cleethorpes and Grimsby travel to Scunthorpe and Doncaster—more than travel from Cleethorpes to London. Noting previous comments by my hon. Friend, it would be for East Coast to assess any options there may be for extending its Lincoln to London services to serve Grimsby and Cleethorpes. To do so, East Coast would require time to amend train diagrams and crew rosters. It would also have to follow industry processes to assess whether the trains used are suitable to run east of Lincoln. If this were achieved, East Coast would then have to release members of its train crew from other duties to learn the route between Lincoln and Cleethorpes.

I appreciate the concern that my hon. Friend has expressed about the disruption to rail services in Lincolnshire and the knock-on effect in South Yorkshire, which have been caused by the collapse of the spoil heap near Hatfield and Stainforth. I welcome the efforts that the rail industry has made to reduce disruption to passengers and freight traffic, including advising passengers of changes to train services and taking an opportunity to bring forward maintenance work where that is possible.

However, I also appreciate the impatience of my hon. Friends the Members for Cleethorpes and for Brigg and Goole, and of the hon. Member for Scunthorpe, to have the very best for their constituents. The problem facing us all is that this slippage was an act of God, so to speak, and because of the sheer scale of the slippage the problem cannot be solved overnight, despite everyone’s best intentions to find a solution as quickly as possible. That does not help the hon. Members’ constituents, because obviously they want the service restored as quickly as possible, but I know that their constituents are reasonable people and that they appreciate that we cannot solve a problem of this scale overnight, or with the click of a button. Nevertheless, I hope that they are reassured by the considerable amount of work that has been done and that is still being done, not least by my hon. Friends and the hon. Gentleman in the way that they have engaged with the rail companies and Network Rail to try to limit any potential delays, and in their exploration of all possible avenues to try to find a solution that minimises the disruption to their constituents at the present time.

In conclusion, I can only say—

[Martin Vickers]

Will the Minister give way?

[Mr Burns]

I will give way very briefly, because I am almost out of time.

[Martin Vickers]

I thank the Minister for his response, and I appreciate the work that Network Rail and the operating companies are doing. May I just ask him to see if he could pass on to East Coast my comments about the issue of ending the restrictions on its tickets?

[Mr Burns]

I am grateful to my hon. Friend for that intervention. I certainly listened very carefully to what he said. As he will appreciate, the rules and regulations governing tickets are a matter for the train operators, but it would give me considerable pleasure to get in touch with them and draw to their attention the comments that he has made during this debate, and I will ask them if they will look at this issue to see if there is some way, and some flexibility, that might help to make life easier for some of his constituents, and for some of the constituents of my hon. Friend the Member for Brigg and Goole and of the hon. Member for Scunthorpe.

Before I sit down, I can say that no one is more anxious than I or my hon. Friends the Members for Cleethorpes and for Brigg and Goole and the hon. Member for Scunthorpe to see this matter resolved as quickly as possible, so that normal, effective, efficient services can be restored to the local communities that all three hon. Members represent so well.

Sri Lanka

Wednesday 20th March 2013 Westminster Hall

16:29

[Simon Danczuk (Rochdale) (Lab)]

It is a delight to serve under your chairmanship, Mrs Main. I pay tribute to the person behind this debate, my late constituent, Khuram Shaikh. Khuram was a Rochdale Red Cross worker who worked in some of the most dangerous parts of the world, helping people who had lost limbs from bombs, land mines and disease. The terrible irony is that he was killed not in the crucible of war, but at a holiday resort in Sri Lanka, where he was supposed to be recuperating before leaving for his next mission in Cambodia. It was not a land mine in Gaza that killed Khuram Shaikh; it was a group of thugs, running amok in the tourist resort of Tangalle.

Khuram spent his working life in harm’s way, but when he was killed, he was sitting in a luxury hotel near a beach in an idyllic setting. I looked at the hotel in a glossy brochure the other day and no one could imagine a safer place to be, but the holiday brochures do not warn people about the depraved gangs that stalk the tourist areas in Sri Lanka, looking for trouble.

My constituent died in appalling circumstances, trying to defend his partner from a horrific attack by a group of political thugs who continue to walk free in Sri Lanka. I want to concentrate on two things today; the failure of the Sri Lankan justice system to properly investigate the killing of a British tourist and the wider failings of that country’s justice system, which is rightly coming under more international scrutiny in the lead-up to the Commonwealth Heads of Government meeting that Sri Lanka is due to host this November.

I want to set out the facts about the failure of the Sri Lankan justice system to investigate the death of my constituent. The nature of Khuram’s death was brought home to me in the most appalling way possible, as I was presented with crime reports by the head of the Sri Lankan criminal investigation department. I am now certain that Khuram died trying unsuccessfully to protect his female partner from a horrific and sustained attack, the details of which would make anyone sick and are simply too distressing to repeat here.

After Khuram was killed on Christmas day 2011, Sri Lankan Ministers moved into overdrive, initially worried at the damage that might be done to the country’s growing tourist sector. The Minister responsible for economic development and tourism at the time said:

“Those who committed this crime will be severely dealt with even if a ruling party politician is involved. The government will not protect those involved in this crime.”

Eight men were immediately detained, including a local politician, who was suspended from the ruling party, and police informed Khuram’s family that they had sufficient evidence to make sure that the case moved swiftly to trial. Then, when the media attention died down, everything ground to a halt. Eventually, the eight suspects were quietly released on bail and the local politician was allowed back into the ruling party. Any pretence of justice went out of the window.

On the anniversary of Khuram’s murder—Christmas day just gone—media attention returned and the Sri Lankan Government went through the same routine of claiming that justice was taking its course and that it was normal for suspects, even those suspected of serious crimes, to be out on bail. Inquiries were taking longer than expected, we were told. Khuram’s family was quite right not to be satisfied, and their wish to see justice and experience some sense of closure at a terrible tragedy for them was understandable.

To assist in the process, I agreed to fly out with the brother of Khuram to seek answers. Earlier this month, I spent 40 hours with Naser Shaikh in Sri Lanka, meeting Ministers, senior civil servants, Members of Parliament, journalists, police, diplomats and lawyers to try to find out why the case had stalled and to press for justice.

At this point, let me put on record my thanks to the British high commission in Sri Lanka. Its help and support was extremely good, and it is a credit to the Foreign and Commonwealth Office and our country.

While out there, I was emphatically told by countless Sri Lankan people that politicians are immune from prosecution in such cases and that the local politician suspected of killing Khuram was protected by the President. I was also told that some politicians were out of control and running riot in many parts of the country. While I was there, it was reported that two more British tourists had been hospitalised after an attack by another local politician. As I boarded the plane to return to the UK, I picked up a copy of The Island, a popular Sri Lankan newspaper. The front page ran a story of our visit and underneath it was a cartoon of a man explaining how “political goons” had killed hundreds of Sri Lankan people.

If this was not horrifying enough, the lax attitude towards the case by senior Sri Lankan civil servants was even more worrying. The permanent secretary at the Foreign Office told me that, if politicians had good lawyers, they could find a way to escape justice. When I put it to him that he could not guarantee the safety of British tourists, he shrugged and said their system needed more teeth. The permanent secretary at the Ministry of Justice told me that they could not take foreign witness statements regarding the case, because it would be too much trouble to get them to travel to Sri Lanka for the trial. When I suggested they use video evidence, she said Sri Lanka was unable to use such sophisticated technology. Later, the head of police investigating the case directly contradicted her and said that they should use video link technology.

[Jim Shannon (Strangford) (DUP)]

The hon. Gentleman is giving an impassioned account of what took place. Does he feel that the fall-down in this has been the police investigation, or has it been political influence? Does he feel that the assistance of police in this country might help the police out there to do a full investigation, so enabling the right people to be tried, convicted and put in prison?

[Simon Danczuk]

The hon. Gentleman raises an interesting point. I am convinced that it is about political interference. The police out there have done a relatively reasonable—quite a good—job investigating. I will come back to some of those points in my speech.

Worse still, the permanent secretary at the Ministry of Justice added that the accused would be able to choose the trial that he wished. It would be unlikely that he would want a trial at bar in Colombo, and the likelihood is that it would be a trial by jury in Tangalle, where he has a fearful reputation and where jury members are likely to be easily intimidated. With most of the country’s media in Colombo, the trial would pass without a great deal of scrutiny. This case has reached a sorry pass when it seems the best that we can hope for is a sham trial.

Police have told us that they have 12 witness statements identifying the main suspect and that they are only awaiting DNA tests, which have been delayed for the best part of a year. Whenever we question the delay, we get the same response: “the tests will be ready in a few more months.” Although I accept that the Sri Lankan justice system moves slower than ours, I remain convinced that political interference is putting the brake on any efforts to move things forward. In a country that can impeach its chief justice in a matter of weeks but see little progress in 15 months on the death of a British tourist, serious questions need to be asked about not just the independence of Sri Lanka’s judiciary, but also its ability to stop further crimes like this happening.

The Minister will be aware that the Foreign and Commonwealth Office travel guidance on Sri Lanka warns of an increasing number of sexual offences being committed and gangs being known to operate in tourist areas. My concern is that although British Airways promotes Sri Lanka as its No. 1 destination for 2013, many tourists do not know of the potential dangers that they face.

We all know of the vast Chinese investment in Sri Lanka’s tourism sector, but making Sri Lanka open to the world requires a lot more than just hotels; it requires a commitment to the shared international values of democracy, human rights and justice. More than ever, that commitment should be on display to the world right now, as Sri Lanka gears up for the CHOGM.

President Rajapaksa has talked of the “true Commonwealth spirit” that the summit will embody, but against a backdrop of the continued denials of human rights abuses, the sacking of its chief justice for daring to make a decision that the Government found inconvenient and the abandonment of the rule of law, it is hard to see where the true Commonwealth spirit is in Sri Lanka. For Rajapaksa’s regime to continue flagrantly to ignore key Commonwealth values, while assuming the position of chair-in-office of the Commonwealth later this year, makes a mockery of the Commonwealth and winds back the clock on 60 years of progress.

There is a growing chorus of opposition to Sri Lanka hosting such a prestigious event, and I hope the Minister is attentive to those legitimate concerns. Geoffrey Robertson, QC, has argued:

“A visit to Sri Lanka by the Queen, as the head of the Commonwealth, would provide a propaganda windfall—a royal seal of approval—to the host president after his destruction of the country’s judicial independence.”

A former Foreign Secretary, the right hon. and learned Member for Kensington (Sir Malcolm Rifkind), has said that it would be a mistake for Sri Lanka to host the meeting, which he likened to Pretoria hosting a Commonwealth summit while South Africa was under apartheid. Another former Foreign Secretary, my right hon. Friend the Member for South Shields (David Miliband), has said that the notion of the Queen attending the meeting in Sri Lanka is “grotesque”. Although I share his sentiment, I would use even stronger language to describe my reaction to the possibility of Her Majesty coming face to face with the chief suspect of the cold-blooded and cowardly murder of my constituent.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I thank the hon. Gentleman for initiating this debate. I share his view that Sri Lanka ought not to host the CHOGM. Will he join me in asking the Minister to consider whether it might be reasonable to set up an organisation under the auspices of the Commonwealth, or to commission a body such as Justice or the International Commission of Jurists, to go to Sri Lanka to carry out an objective report on the country’s legal situation? Not only is there the hon. Gentleman’s case, but many others that need investigation where Sri Lanka has fallen far short of any acceptable Commonwealth standard.

[Simon Danczuk]

I thank the right hon. Gentleman for his intervention. Any suggestions or proposals that would improve the situation in Sri Lanka are welcome. I am interested to hear the Minister’s response.

It has been reported that the main suspect, Sampath Chandra Pushpa, is to be invited to the CHOGM in an official capacity, which makes an absolute mockery of the Commonwealth secretary-general’s statement that the meeting is an opportunity to find “paths to peace”. Values, as we all know, can only be demonstrated by action, or as Gandhi put it:

“Your words become your actions. Your actions become your habits. Your habits become your values. Your values become your destiny.”

In Sri Lanka’s case, we are yet to get beyond warm words. Ministers seem to think that soothing rhetoric will be enough to reassure us that justice will happen one day.

My point is that paying lip service to the key principles of human rights and the rule of law is neither here nor there. The leaders of 54 countries will not be heading to a country that embodies the shared values and principles of the Commonwealth this November; they will be travelling to what is fast becoming a pariah state that embodies neither Commonwealth values nor Commonwealth goals.

Of course, some people will say that the attack on my constituent and his partner is an isolated incident, but that is not true. Attacks on European tourists are increasing and there is grave concern among diplomats about the safety of foreign nationals, particularly women travelling alone. Equally disturbing are the attacks on journalists. In the past month, the British journalist Faraz Shauketaly, who works for The Sunday Leader, was shot in his own house by unidentified gunmen. A few years before, the editor of that newspaper, which is known for its exposés of corruption in the country, was killed. Too many Sri Lankan journalists have been killed or have gone into exile, and the country has a terrible press freedom record, languishing near the bottom of the press freedom index compiled by Reporters Without Borders.

The purpose of the debate is not only to shine a light on how the Sri Lankan justice system is failing properly to investigate the murder of a British tourist, but to honour the memory of Khuram Shaikh, who was a well respected member of our community and a valuable and committed member of the International Red Cross and Red Crescent Movement. Understandably, his death has caused untold grief for his family, and I know that his father makes the trip to his grave every day.

Although Khuram achieved a lot in his life and tributes have been paid to him from across the world, he was only 32 when he was killed, and he should have had many years ahead of him. His death has left a huge gap in the lives of those who knew him, and I am grateful to have had the opportunity to introduce a debate that adds to the tributes for Khuram. I am sure the Minister will agree that every necessary step must now be taken by the British Government and others to press Sri Lanka to do more to protect tourists, so that others do not meet the same fate.

16:46

[The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Alistair Burt)]

It is a pleasure to serve under your chairmanship, Mrs Main.

I congratulate the hon. Member for Rochdale (Simon Danczuk) on securing this debate and on conveying to us the human tragedy and agony behind the statistic of the murder of a UK national abroad. I also pay tribute to the force and the manner of his description of the case, the circumstances of which make for powerful listening and reading. I hope his speech gets wide distribution. I am also grateful for the contributions of the hon. Member for Strangford (Jim Shannon) and my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes).

I applaud the long-standing commitment of the hon. Member for Rochdale to securing justice following the brutal murder of his constituent, Khuram Shaikh, in 2011, and I welcome the opportunity to bring attention not only to that tragic case but to the wider circumstances that have been described. It is no secret that the United Kingdom has a number of concerns about progress in Sri Lanka, a country with which we have long and very strong ties but about which we have everyday worries that are shared by a number of other nations. One of our dearest wishes is that balance and equilibrium are restored to our relationship with Sri Lanka by those issues’ being addressed, but that is not what we currently see.

It is important to note that we have a long-standing and strong relationship with Sri Lanka. Our close ties are formed through history, educational links and culture, as well as the Sri Lankan community in the United Kingdom, which contributes so much to our rich and diverse culture. We value those links, which we are determined to maintain.

A key link, of course, is tourism. UK citizens accounted for more than 10% of tourists visiting Sri Lanka last year. Even in these tough times, tourists are making a significant contribution to the Sri Lankan economy. Together with Sri Lankan citizens, they deserve to know that they can rely on the Sri Lankan authorities to keep them as safe as tourists in any other part of the world. They also deserve a swift investigation, with the perpetrators being apprehended and brought swiftly to justice in a fair and transparent trial, should any crime be committed against them.

Unfortunately, the events highlighted by the hon. Gentleman today have served to undermine that trust. The horrific murder of Khuram Shaikh has gone untried for 15 months, bringing further grief and frustration to those closest to him. Of course, justice can take time, which we all understand, but in this case we were encouraged by the quick arrest of the suspects and the Sri Lankan Government’s early assurances that such a brutal crime would be investigated quickly and thoroughly, and that all guilty parties would be sentenced appropriately.

No trial has yet started, and the suspects, the most prominent of whom is a local politician, have been released on bail, which is extremely disappointing. There is a growing perception that the guilty parties may escape justice due to political connections, despite repeated pleas from Khuram Shaikh’s family and the British high commission in Colombo. I welcome the recognition of the work of our high commissioner and his team. It will be reported back to him. There is a sense, 15 months after this heinous crime, that those who deserve to be put on fair trial for their actions might escape justice. We sincerely hope that that is not the case, and that the accused will soon face a swift trial, free from political interference.

I was able to raise Khuram Shaikh’s case with the Sri Lankan Foreign Minister during my visit to the country in January, as well as in a meeting with the Sri Lankan high commissioner in London on 23 January. During my meeting with the high commissioner, I was advised that progress would be made within three months. I trust the high commissioner and the Foreign Minister, and expect to hear soon of progress on the case. The British Government, along with my right hon. Friend the Secretary of State, will monitor closely the progress of investigations in the coming weeks, in the hope that those assurances will lead to the justice that the Shaikh family so deserve. It is unfortunate that senior members of the Sri Lankan Government did not meet with the hon. Member for Rochdale or with Khuram Shaikh’s brother, Nasir Shaikh, during their recent visit to Sri Lanka to press the case further.

We are concerned about the possibility of increased attacks on and threats to our tourists abroad. Our travel advice recognises an increase in sexual and gang violence in Sri Lanka. We condemn all instances of violence. They must be investigated, and those responsible brought to justice with a swift and fair trial. We advise any visitor abroad to read the travel advice on the Foreign and Commonwealth Office website. It is kept up to date. It is accurate, factual and not used for any political purpose; it honestly describes the situation there. It will change to reflect circumstances and the UK Government’s concerns about UK citizens travelling abroad. The hon. Gentleman is right to draw attention to it. We draw the attention of tour operators and others to our travel advice, and we hope that people accept it and understand what it implies.

Turning to wider issues mentioned by hon. Members, Khuram Shaikh’s tragic case is, regrettably, not our only concern about justice in Sri Lanka. Hon. Members have spoken eloquently about other concerns. We are clear that judicial independence should be a principle at the heart of all free countries. Since the impeachment of Sri Lanka’s Chief Justice in January, many feel that that principle has been fatally compromised, which is why we and others, such as the International Commission of Jurists and the UN, have expressed deep concern at the impeachment. We are disappointed that the Sri Lankan Government continued with the process despite objections from Sri Lanka’s highest courts and outcry from its own citizens.

The Sri Lankan Government have defended the impeachment, stating that the process was constitutional and followed due procedure, but many eminent legal authorities, in Sri Lanka and overseas, have given a contrary view. We also note that when the legal experts of the International Bar Association’s Human Rights Institute planned to visit Sri Lanka to investigate the impeachment, they were denied visas by the Sri Lankan Government. Such actions do not inspire confidence in the claims that the process would stand up to further scrutiny.

Of course, our concerns about the situation in Sri Lanka do not end with justice issues. The long conflict in Sri Lanka ended in 2009 with the defeat of the brutal Liberation Tigers of Tamil Eelam. After such a devastating period in their history, we believe that all Sri Lankans deserve lasting peace, justice and reconciliation. Following the end of the conflict, the 2011 report by the UN Secretary-General’s Panel of Experts on Accountability in Sri Lanka found credible allegations that both sides violated international humanitarian law during the conflict. More recent work such as the Human Rights Watch report and footage from a new documentary about the final days of the conflict have also brought to international attention important information supporting allegations of abuses.

We have consistently called for an independent, thorough and credible investigation into the allegations. Until such an investigation takes place, it will be difficult for the Sri Lankan people to move forward. We are clear that all allegations must be investigated, whether committed by the LTTE or Government forces, and that those responsible must be brought to justice. We believe that fully addressing and condemning events of the past is crucial to ensuring that justice is done and that Sri Lanka can begin to look forward, not back, but so too are wider measures recommended by Sri Lanka’s own Lessons Learnt and Reconciliation Commission. In order to ensure that the dividend of peace can be enjoyed by all Sri Lankans, it is vital that the Sri Lankan Government make concrete progress in implementing the recommendations, which include investigation of alleged extra-judicial killings and disappearances and implementation of a mechanism to resolve land disputes impartially.

We recognise that the path to justice and reconciliation, particularly after such a bitter conflict spanning generations and affecting so many, will be long. It is also important for us to recognise that the Sri Lankan Government have made some progress. I saw the situation for myself during my visit to Sri Lanka in January. Infrastructure had been rebuilt, and I saw roads being repaved in the northern area. I also heard from non-governmental organisations about extensive de-mining work done in former conflict zones. We recognise and welcome such progress. We also recognise that there are obstacles to progress in some areas, and that the way forward will never be clear of stumbling blocks. Much more work is needed to guarantee a stable future for Sri Lanka and ensure justice for all its citizens. The appropriate application of the rule of law is clearly a key factor.

[Simon Hughes]

Will my hon. Friend give way?

[Alistair Burt]

I am just about to come to the Commonwealth Heads of Government meeting. The United Kingdom has still not made a decision on our attendance at CHOGM. We look to Sri Lanka to demonstrate the Commonwealth principles of good governance, respect for human rights and adherence to the rule of law.

The spotlight will be on Sri Lanka, and will inevitably highlight either progress or lack of it. It was decided at CHOGM 2009 that Sri Lanka should host the meeting in 2013. I remind the House that to reopen that decision would require the consensus of all member states. We will look to Sri Lanka to demonstrate its commitment to upholding Commonwealth values. We must also be sure that the emphasis at CHOGM will be on the Commonwealth. That is what it is about. Bearing in mind the location, however, there is a risk that attention will be drawn to other factors. We are working strenuously with other partners to ensure that Sri Lanka recognises its opportunity to demonstrate its values; also, in the run-up to that period, questions are being asked, exemplified by the individual circumstance raised by the hon. Gentleman that is reflective of wider concerns. We have similar questions, as do other members of the Commonwealth, and other concerns are being aired this week at the Human Rights Council in Geneva.

As I mentioned at the beginning, our relationship with Sri Lanka is long and deep. We recognise the bitterness and difficulty of the conflict that came to an end and the brutality of terrorism and the importance of seeing it ended; if there is to be proper reconciliation and justice, however, there has to be a recognition of accountability for what has happened, as well as looking forward to the opportunities available for all the population in Sri Lanka. All that the friends of Sri Lanka and its people are doing is to draw attention to the need to reconcile the statements of the Government of Sri Lanka about justice and reconciliation with actions on the ground to deliver that. Government statements about implementing the Lessons Learnt and Reconciliation Commission’s recommendations are emphasised because that is what Sri Lankans themselves expected to see happen to deliver the justice and reconciliation that the Government talk about.

Those outside are asking for no more than for the Sri Lankans to live up to what they themselves said was needed to ensure reconciliation for the future as well as justice for the past. Adherence to the rule of law and the ability to deal with the sort of issues raised by the hon. Gentleman and others in this Chamber this afternoon are a key part of that process. The United Kingdom is keenly aware of the concern about such issues and of the need to look at them extremely carefully in the months ahead.

Question put and agreed to.

16:59

Sitting adjourned.

Written Ministerial Statement

Wednesday 20th March 2013 Written Statements

Wednesday 20 March 2013

EU Environment Council

Wednesday 20th March 2013 Written Statements

[The Secretary of State for Energy and Climate Change (Mr Edward Davey)]

My noble Friend Lord de Mauley, Parliamentary Under-Secretary for Resource Management, the Local Environment and Environmental Science, and I will attend the EU Environment Council in Brussels on 21 March. Paul Wheelhouse, Minister for Environment and Climate Change in the Scottish Government, will also attend.

Following the adoption of the agenda and the approval of the list of “A” items, the presidency will hold an orientation debate on a proposal relating to biofuels and indirect land use change. The presidency have suggested questions to frame the discussion and encourage views on the effectiveness of the proposal. The UK supports the introduction of indirect land use change factors into the renewables directive and the fuel quality directive, which would allow all emissions attributable to a given biofuel feedstock to be taken into account when determining which biofuels should be supported. This was discussed at the Energy Council in Brussels on 22 February.

The next orientation debate will be on a proposal to amend the directive on the assessment of the effects of certain public and private projects on the environment (known as the EIA directive). The European Commission adopted its proposal to amend the EIA directive on 26 October 2012. The intended purpose of the new proposal is to streamline the environmental impact assessment process and to introduce provisions which will reduce the number of environmental assessments that are undertaken unnecessarily. The orientation debate will seek a ministerial steer on proposals for a one-stop shop for assessments under different European legislation, the use of accredited experts, and mandatory scoping of the content of environmental reports.

Over lunch, Ministers will have the opportunity to exchange views on the Commission communication “A Decent Life for All: Ending poverty and giving the world a sustainable future”. This communication proposes a common approach to the implementation of the millennium development goals, the post-2015 development agenda, and the implementation of the Rio+20 outcome document. These issues were considered at an informal meeting of Development Ministers on 11-12 February.

In the afternoon, there will be an orientation debate on the “Access and Benefit Sharing of Genetic Resources” file. The presidency have proposed two questions to steer further work. Ministers will discuss the balance of obligations on users of genetic resources and how effectively the proposed regulation will fulfil the requirements of the Nagoya protocol.

The Commission will then present its report on the broad-based review of the REACH regulation, published in February 2013, and its communication on the second regulatory review of nanomaterials, published in October 2012. This will be followed by an exchange of views on the main findings of the Commission’s reviews. It is expected that the debate will focus on ways of reducing the regulatory burden on SMEs, the early signs of benefits accruing to human health and the environment, and the extent to which REACH provides an adequate regulatory framework for nanomaterials.

The following topics will be covered under “any other business”:

Information from the presidency and the Commission on international meetings and events.

Information from the Commission on EU ETS/aviation.

House of Lords

Wednesday 20th March 2013 Lords Chamber

Wednesday, 20 March 2013.

15:00

Prayers—read by the Lord Bishop of Bristol.

Housing: New Housebuilding

Wednesday 20th March 2013 Lords Chamber

Question

15:07

Asked By

[Lord Bates]

To ask Her Majesty’s Government what assessment they have made of the effectiveness of measures introduced to stimulate new housebuilding.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)]

The Government monitor the rate of housebuilding very closely. For example, we completed 58,000 affordable homes in 2011-12, a third more than the average delivery of affordable homes in 10 years. We are investing more than £8 billion of public funding to support housing, including £4.5 billion investment in new affordable homes, and we remain on track to deliver 170,000 in this spending review period.

[Lord Bates]

I am grateful to my noble friend for that very encouraging Answer. When added to the tremendous boost to home ownership that the Chancellor announced in the Budget today, it will be widely welcomed. However, does she share my concern that recent research has shown that the average age of a first-time buyer in the United Kingdom is now 35 compared with 28 10 years ago and 24 in the 1960s? Does she agree that there are immense social as well as economic benefits to home ownership? Will she ensure that there is no let-up in extending home ownership to all people, particularly the young?

[Baroness Hanham]

My Lords, I congratulate my noble friend on managing to put down this Question on the day when there have been such helpful announcements in the Budget about home ownership. I agree with what he said about the difficulty for younger buyers in the market. I also agree that the aspiration of home ownership is extremely high and that is why I am particularly delighted that the Chancellor announced the £3.5 billion housing package, which includes an equity mortgage scheme, Help to Buy, as well as important changes to the right-to-buy scheme, all of which will help not only those mentioned by my noble friend but others in general.

[Lord Bichard]

In the light of the Select Committee report Ready for Ageing published last week, does the Minister accept the need for the Government to do more to encourage the more diverse provision of housing for older people, not just for the benefit of older people themselves but as a way of reducing costs to the public purse?

[Baroness Hanham]

My Lords, we have had a couple of debates in this House on the essential nature of getting proper housing for older people. I agree with the noble Lord that that would be helpful. It is up to local authorities to make their own plans and strategic decisions about the property that they need, which will of course include that which is necessary for older people so that they can either downsize and use their homes or have new build for them.

[Baroness Maddock]

My Lords, I am sure that my noble friend is aware that the various housing benefit changes are affecting the income forecasts for many social landlords. As a result, some social landlords are finding it difficult to borrow against those forecasts for new social housing. Can my noble friend tell me how the Government are responding to this, given that we have made a commitment to build more social homes for rent? Can she also say whether any of the announcements made in the Budget today will assist in this regard?

[Baroness Hanham]

My Lords, the announcement supporting privately developed housing will certainly assist. We are also very supportive of housing for rent and we have invested in it quite heavily over the past months and years. There is a complete recognition that housing for rent is essential. There is £10 billion of support for the delivery of new private rented housing as well as a further grant of £300 million for affordable housing. The Government are moving as far as they can to invest in the areas mentioned by the noble Baroness.

[Lord McKenzie of Luton]

My Lords, as has been said, today we have heard announcements of more generous discounts and shorter qualifying periods for the right to buy, but these are being made at the same time as the bedroom tax is about to kick in. Do the right-to-buy discounts apply in full whether or not the property is under occupied?

[Baroness Hanham]

My Lords, the regulations related to the right to buy are as they are at the present time. I do not believe that they have changed and therefore the noble Lord will know how they apply and that they are going to carry on as before.

[Lord Swinfen]

My Lords, my noble friend mentioned affordable homes in her first Answer. What is the Government’s definition of an affordable home?

[Baroness Hanham]

My Lords, an affordable home is one that in previous circumstances my noble friend might have known as social housing. It is provided by social landlords in the form of local councils or housing associations.

[Lord Best]

My Lords, can the noble Baroness tell us whether there is more news to come from the Chancellor or from her department on the subject of local authorities being able once more to build council housing, preferably retirement housing? Building bungalows and flats for older people would release some of their family housing.

[Baroness Hanham]

My Lords, the noble Lord will know that, by and large, housing is now provided by registered social landlords—housing associations—and that any money is passed to them. He will also know that the new homes bonus, which is made available to local authorities once they have completed extra housing, also helps. Under the new homes bonus scheme, some 400,000 properties have already been added.

[Baroness Hollis of Heigham]

My Lords, following the question of the noble Lord, Lord Bichard, about housing for the elderly, does the Minister agree with us that, as a result of the bedroom tax, pensioners who would like to downsize will not be able to because those of working age who do not want to downsize are being forced to do so?

[Baroness Hanham]

My Lords, I do not accept what the noble Baroness says. Pensioners are not affected by what she is pleased to call the bedroom tax, but which by everybody else’s standards is called the spare room subsidy measure—I thought that would trip lightly off my lips and would help the noble Baroness enormously. Pensioners living in houses will not be affected by these regulations.

[Lord Naseby]

Does my noble friend agree that the most important thing in relation to this question is to get new housing moving? As I understand it, my noble friend said 170,000 was the figure in the current year. On top of that, we have two incentives from the Budget—the equity loan and the mortgage guarantee—plus the right-to-buy provisions. Does that not all suggest that, whereas the previous Government had the princely total of 113,670 new houses built in their last year, we look like being not far off doubling that in the year to come?

[Baroness Hanham]

My Lords, there is a great emphasis, as my noble friend knows, on providing new housing. The initiatives which have already been taken by the Government for first-time buyers give support for that. The NewBuy Guarantee, which gives access to 95% mortgages for new-build homes, FirstBuy equity loans, the right to buy, and the Bank of England’s Funding for Lending scheme all indicate that this Government are very supportive of housing and recognise that it helps not only people get their homes but helps the construction industry, which is necessary to get growth.

Legislation: Data Retention

Wednesday 20th March 2013 Lords Chamber

Question

15:16

Asked By

[Lord Redesdale]

To ask Her Majesty’s Government whether they will require Ministers to report on the financial and carbon consequences of any data retention requirements included in any future legislation.

[The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach)]

My Lords, it is government policy to conduct an impact assessment, including analyses of the economic and carbon consequences, for any regulation that affects the private sector or civil society, or significantly affects public services. The Government published the draft communications data Bill in June 2012 and it has undergone intensive pre-legislative scrutiny. We intend to bring forward revised legislation in due course, which will be accompanied by an updated impact assessment.

[Lord Redesdale]

My Lords, is the Minister aware that sending an e-mail with an attachment can cost about 4 grams of carbon for each e-mail? If you scale that up for the amount of data that the Government are asking to be retained over the next few years, the cost runs into the tens or hundreds of millions of pounds for each piece of legislation we pass. This also causes a massive problem in the amount of electricity that is needed in data centres. Considering that the country is facing an energy shortage, do the Government not agree that perhaps an impact assessment in respect of the data that are required to be retained should be published on the face of each Bill?

[Lord Taylor of Holbeach]

I will just make it clear that the Bill does not provide for the storing of the content of a communication, including the attachments to an e-mail. That would be interception, which is governed by a separate set of rules. Although we will seek to require providers to retain more data under the Bill, the amount of physical space and the electricity required for these data stores will be relatively low, particularly as providers may well take the opportunity to update to newer technology.

[The Earl of Erroll]

My Lords, as the Government are going to keep the address of every single website that someone visits, and where they are from, should the assessment not be talking about exabytes or yottabytes of data, not just the smaller amounts that the Minister is talking about, as I understand that they will have to be retained in such a way that they can be accessed by various services?

[Lord Taylor of Holbeach]

The noble Earl gets to the heart of what the communications data Bill is about. It is about who was communicating, when and from where, and how and with whom. It is not about the content of the communication, which CSPs will not be required to retain. To emphasise why this material is required, it is used in the investigation and prosecution of a broad range of crimes, including terrorism. CD has played a role in 95% of all serious organised crime prosecutions and every major security or counterterrorism operation over the past decade.

[Lord West of Spithead]

My Lords, does the Minister agree that this is about just the envelope and not the letter, that this material has always been available and it is merely that different ways of charging will mean that it stops being available? It is not anything new.

[Lord Taylor of Holbeach]

The noble Lord is very knowledgeable on this subject as he was responsible for it in the past. What he has said is absolutely true.

[Lord Redesdale]

My Lords, if the Minister will forgive me, my Question was about the actual carbon cost of the data, not of terrorism legislation. If you take the storage that is already covered by legislation from the Department for Work and Pensions and the Ministry of Justice—we are doing the figures at the moment—it seems that the electricity cost is greater than that of some small African countries. This is a growing problem that does not seem to have been addressed by any government department; it is not about a specific piece of legislation.

[Lord Taylor of Holbeach]

I come back to my noble friend by saying that I did address this issue. In seeking to require providers to retain more data, technical experts who have advised me and other Ministers in this matter say that the amount of physical space and electricity required for these data will be relatively low. We do not expect a significant carbon footprint or any notable impact on the British carbon commitment as a result of these proposals.

[Lord Phillips of Sudbury]

My Lords, I suspect that I am not the only Member of this House to find this discussion way over my head, yet it sounds of potentially great public importance. Will my noble friend the Minister consider sending round a sort of fool’s guide to these issues?

[Lord Taylor of Holbeach]

Unfortunately, we do not have a PowerPoint facility in the Chamber. Noble Lords will know that I am very keen that, when this Bill is introduced, we should have every opportunity to inform Peers of its implications and what it is seeking to do. I will take every opportunity to communicate with all Peers on this issue.

Prisons: New Prisons

Wednesday 20th March 2013 Lords Chamber

Question

15:22

Asked By

[The Lord Bishop of Liverpool]

To ask Her Majesty’s Government what plans they have to ensure that all new prisons are environmentally sustainable.

[The Minister of State, Ministry of Justice (Lord McNally)]

My Lords, the Building Research Establishment environmental assessment method—BREEAM—sets the standard for best practice in sustainable building design, construction and operation, using recognised measures of performance set against established benchmarks. All new prisons are required to be BREEAM-assessed to a standard of excellence.

[The Lord Bishop of Liverpool]

My Lords, I thank the Minister for that very encouraging reply. Does he recognise that sustainable prisons, with productive gardens, workshops and even small farms, can help with rehabilitation and reduce reoffending, especially among the very high proportion of prisoners with mental illness?

[Lord McNally]

My Lords, the right reverend Prelate is correct, and that is why new prisons are designed to be able to facilitate opportunities for work, education, training and rehabilitation. That is the benefit of a new-build policy.

[Lord Beecham]

My Lords, will the Minister ensure that in addition to being environmentally sustainable, new prisons are located in places that are not too far removed from the places whence the prisoners have come and where they might find jobs after their release?

[Lord McNally]

My Lords, as part of the rehabilitation revolution we are looking at a release programme for prisoners whereby they can be located in a prison that gives them a chance for suitable training and, as I think I have mentioned before, with an emphasis on “through the gate” support after they leave prison, if possible in locations close to where they are going to live thereafter.

[Viscount Bridgeman]

My Lords, can the Minister assure the House that the new building programme will eliminate or reduce the problem of churning, which causes such distress to prisoners’ families?

[Lord McNally]

If we can get a secure, stable estate and a prison population that is not overcrowded, certainly. A lot of attention is given by prison management to locating prisoners close to families. As my noble friend will appreciate, there are other matters that have to be taken into consideration in ensuring that each prison is stable and well managed.

[Lord Patel of Bradford]

My Lords, with an ever increasing prison population—there are more than 84,500 men, women and young people in our estate—and with 46% of adult prisoners having 15 previous convictions or cautions, it is clear that prison is not working. Rather than building new prisons, what action are the Government taking to divert people from the prison estate in the first place?

[Lord McNally]

Indeed. I have drawn attention before to the very high number of people in prison. While we are building new prisons, we are also closing old prisons. Our older prisons are ill equipped for rehabilitation. I hope that the proposals that we will be bringing forward on the rehabilitation and management of offenders will address some of those issues. I could not agree more that there are better ways of spending taxpayers’ money than on circulating repeat offenders through our prison system.

[Baroness Trumpington]

My Lords, may I stretch the words of the Question a little further to include farming? Farming was formerly part of a prisoner’s range of choices, particularly with a view to future jobs and a lifestyle. Apart from that, the meat that they provided from pigs and cows was fed to the prisoners and was perfectly delicious, as I know from Pentonville prison.

[Lord McNally]

I think it was possible to have prison farms in the past. My noble friend is right about both the sustainability of such regimes and the benefit to prisoners. I am not sure that present circumstances would allow that, but I recently visited a prison in the north-west that had opened up a section of the land to develop an under-glass market garden. That was being very well used by the prisoners, who had gained great benefit both from the training that they received there and the personal satisfaction that such work gave.

[Lord Elton]

My Lords, my noble friend acknowledged the value of rehabilitation. Will he acknowledge the even greater value of people being prevented from getting into crime and say what plans there are to start skewing the budget away from punishment and towards prevention?

[Lord McNally]

The Government’s whole policy is to try to divert people from crime. We are looking to develop many more mentoring schemes to enable people who are vulnerable to be helped with their addictions and problems in a way that will divert them from crime.

[The Earl of Listowel]

My Lords, can I ask the Minister from the Cross Benches whether he is aware of the excellent example set in this regard by Wetherby young offender institution, where the young men have dug out a pond, tend their animals and can fish? It seems an excellent achievement by that institution.

[Lord McNally]

I am aware of that scheme, although I have not had an opportunity to visit it. However, it illustrates the wisdom of the right reverend Prelate’s follow-up point: that in the environment there are many possible solutions to reoffending and for rehabilitation.

[Lord Marks of Henley-on-Thames]

My Lords, does my noble friend the Minister agree that a great deal of international experience supports the right reverend Prelate’s point? In Hong Kong, there is a new 1,400-bed women’s prison, and a large number of units in the United States. Initial evidence shows that in such prisons there are important human, behavioural and social benefits as well as the obvious financial and environmental ones.

[Lord McNally]

I agree with my noble friend. Despite what the reports say in certain sections of our media, there is a far better chance of rehabilitating people in decent and humane conditions than in antiquated and inhumane ones.

Armed Forces: Pay

Wednesday 20th March 2013 Lords Chamber

Question

15:30

Asked By

[Lord Craig of Radley]

To ask Her Majesty’s Government why they did not approve the 0.5 per cent increase in the X-factor supplement recommended by the Armed Forces Pay Review Body in its 2013 report (Cm 8571).

[The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever)]

My Lords, earlier today my right honourable friend the Chancellor announced in the other place that we would fund an increase in X-factor, so this recommendation will now also be accepted. This will be welcome news for service personnel and their families who should receive the increase with their May pay. This positive response to the Armed Forces Pay Review Body recommendation also emphasises the importance and the respect that the Government accord to the views of the review body.

[Lord Craig of Radley]

My Lords, that is of course very welcome news, although I think it would be a shade fanciful to think that a topical Question could so rapidly change the Government’s mind. Nevertheless, because there has been a delay, can the Minister assure the House that the pay uplift will be made available on time in April, or will it be delayed and have to be backdated? I hope that the Government will do everything they can to ensure that it does not have to be backdated. Will this additional pay be available to full-time mobilised reservists as well as to service personnel?

[Lord Astor of Hever]

My Lords, service personnel will receive the increase from 1 May onwards. I understand that it is the general policy of all Governments not to backdate, to avoid adding complexity and risk to normal administrative operations. The noble and gallant Lord asked if the uplift in X-factor will be paid to mobilised reservists. X-factor is paid at the full level—currently 14%—to all ranks up to and including lieutenant-colonel or equivalent in the Regular Forces, full-time reserve service personnel on full commitment and mobilised reservists.

[Lord Rosser]

My Lords, the Government have made as nifty a U-turn as a London taxicab on implementing the X-factor supplement recommendation. Yet the contract for the chairman of the Armed Forces Pay Review Body, Alasdair Smith, is not being renewed. He said that, because of the late decision and the time needed to make another appointment, his successor will miss the first half of the year’s programme of work, including all the visits to members of the Armed Forces that are a hugely important part of the role. That statement indicates that this was a sudden decision by the Government, made following receipt of the pay review body’s recommendations at the end of January, since just over two weeks later Alasdair Smith was told that he would be finishing at the end of this month. In view of their hasty U-turn, will the Government now offer Professor Smith a further term as chairman? After all, he will have the confidence of members of the Armed Forces since he upheld the independence of the pay review body—or is that the problem?

[Lord Astor of Hever]

My Lords, there is no link between the Prime Minister’s decision not to reappoint Professor Smith and the increase in X-factor. The Prime Minister’s decision not to extend Professor Smith’s appointment represents broader government policy regarding no automatic right to reappointment to non-departmental public bodies such as the pay review body. The decision is in line with the Commissioner for Public Appointments’ Code of Practice for Ministerial Appointments to Public Bodies. An interim chair, John Steele, has been drawn from the remaining members of the AFPRB until a formal replacement can be appointed.

[Lord Palmer of Childs Hill]

My Lords, from these Benches I also welcome the inclusion of the uprating in the X-factor payment. However, what remit did the Government set for the Armed Forces Pay Review Body before it started work on its most recent report?

[Lord Astor of Hever]

My Lords, the remit for the 2013-14 pay round and the Armed Forces Pay Review Body’s terms of reference are contained within its 2013-14 report, copies of which are available in the Library of the House. The report also includes a letter to the body from the Chief Secretary to the Treasury in which he provides details of the Government’s approach to public sector pay for the 2013-14 pay round.

[Lord Magan of Castletown]

My Lords, will my noble friend explain to us in detail what exactly the X-factor supplement is?

[Lord Astor of Hever]

My Lords, the X-factor was introduced in 1970 and is paid as an addition to base pay. It is paid to reflect the relative disadvantage between the conditions of service experienced by members of the Armed Forces over a full career and conditions in civilian life that cannot be taken directly into account in assessing pay comparability. Those factors include danger, discipline, turbulence, separation and liability for duty at all times.

[Baroness Farrington of Ribbleton]

My Lords, I listened carefully to the noble Lord’s reply to my noble friend’s question. I heard him explain that it was perfectly within normal procedure for a contract not to be renewed, but I missed his answer as to why the contract had not been renewed in this case.

[Lord Astor of Hever]

My Lords, I said that the decision is in line with the Commissioner for Public Appointments’ Code of Practice for Ministerial Appointments to Public Bodies. The Government believe that the habit of automatically renewing those appointments has to stop. We need to bring fresh blood into jobs such as these.

[Lord West of Spithead]

My Lords, I congratulate the Minister on the Government’s decision to send HMS “Daring” to Australia for the centenary of the Australian Navy. That leaves us with 18 escorts for the rest of the world. Does not the Minister agree that 18 is far too few and that we need to get going on the order for the Type 26 ship?

[Lord Astor of Hever]

My Lords, the noble Lord has used great imagination to bring HMS “Daring” into this Question. I have been preparing for the X-factor this afternoon, not HMS “Daring”.

[Lord Ramsbotham]

My Lords, during the passage of the Armed Forces Bill last year, we discussed the question of the Armed Forces covenant. We were given to understand that the Statement made by the Secretary of State for Defence each year on the covenant would be taken in this House, giving us an opportunity to ask questions about it. That did not happen. I suspect that if it had, my noble and gallant friend’s Question could have been put earlier. Will the Minister undertake that in future years the Statement on the Armed Forces covenant will be taken in this House?

[Lord Astor of Hever]

My Lords, I am always ready to come to this House for any Statement. It is not always our call; in many cases it is the Opposition’s decision whether to accept the Statement.

Business of the House

Wednesday 20th March 2013 Lords Chamber

Motion on Standing Orders

15:38

Moved by

[Lord Hill of Oareford]

That if the Jobseekers (Back to Work Schemes) Bill has been read a second time, Standing Order 46 (No two stages of a Bill to be taken on one day) be dispensed with on Monday 25 March to allow the Bill to be taken through all its remaining stages that day.

[The Chancellor of the Duchy of Lancaster (Lord Hill of Oareford)]

My Lords, I beg to move the Motion standing in my name on the Order Paper.

[Lord Foulkes of Cumnock]

My Lords, I thought that at least in moving the Motion, the Leader of the House would have the courtesy to explain why Standing Orders are being dispensed with, particularly as we have so many Cross-Benchers here today to listen to the debate on what is a very controversial Bill, and as we have plenty of time—or at least we would have, as I said last Thursday, when the Leader of the House was not present, if he had not decided summarily and without any consultation to send us off for an extra week’s holiday. I am sure that we would be better served here looking at this Bill properly and in detail rather than having that extra week. I hope that the Leader of the House will have the courtesy to explain to the House why he is moving this Motion.

[Lord Hill of Oareford]

My Lords, there are two separate issues. One is the need for emergency legislation, the other is to do with the timing of the Easter Recess. I know that there is a lot of strong feeling in the House about the timing of that. I recognise that. A number of noble Lords have made that case to me directly. In these circumstances, the usual channels, just as was the case when the noble Baroness, Lady Royall, was Leader of the House and, before that, Chief Whip, do their best to give the House notice and to order the business in such a way that we can land things when we aim to. We do not always succeed. We do our best, and in doing so we have to strike a balance between the business before us and the costs—the best part of £500,000—of this House sitting for a week.

With regard to the emergency legislation, we have set out the case for that in the Explanatory Memorandum to the Bill. In essence, there is an urgent need to legislate to save £130 million of taxpayers’ money.

Motion agreed.

Criminal Justice Act 2003 (Conditional Cautions: Code of Practice) Order 2013

Wednesday 20th March 2013 Lords Chamber

Amendments to Schedule 6 to the Tribunals, Courts and Enforcement Act 2007 Order 2013

Transfer of Tribunal Functions Order 2013

Motions to Approve

15:40

Moved By

[Baroness Anelay of St Johns]

That the draft orders laid before the House on 9 January and 11 February be approved.

Relevant documents: 16th and 20th Reports from the Joint Committee on Statutory Instruments, considered in Grand Committee on 12 March.

Motions agreed.

Local Authorities (Contracting Out of Tax Billing, Collection and Enforcement Functions) (Amendment) (Wales) Order 2013

Wednesday 20th March 2013 Lords Chamber

Motion to Approve

15:40

Moved By

[Baroness Randerson]

That the draft order laid before the House on 6 February be approved.

Relevant document: 20th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 12 March.

Motion agreed.

Immigration and Nationality (Fees) Regulations 2013

Wednesday 20th March 2013 Lords Chamber

Motion to Approve

15:41

Moved By

[Lord Taylor of Holbeach]

That the draft regulations laid before the House on 25 February be approved.

Relevant document: 20th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 18 March.

Motion agreed.

Neighbourhood Planning (Referendums) (Amendment) Regulations 2013

Wednesday 20th March 2013 Lords Chamber

Non-Domestic Rating (Levy and Safety Net) Regulations 2013

Motions to Approve

15:41

Moved By

[Lord Ahmad of Wimbledon]

That the draft regulations laid before the House on 14 and 25 February be approved.

Relevant documents: 20th and 21st Reports from the Joint Committee on Statutory Instruments, considered in Grand Committee on 18 March.

Motions agreed.

Growth and Infrastructure Bill

Wednesday 20th March 2013 Lords Chamber

Report (3rd Day)

15:41

Clause 27 : Employee shareholders

Amendment 49C

Moved by

[Lord Flight]

49C: Clause 27, page 35, line 28, at end insert—
“(12) Shares issued or alloted under subsection (1)(b) up to a value of £25,000 will not be treated as a benefit for the purposes of the Income Tax (Earnings and Pensions) Act 2003.”

[Lord Flight]

My Lords, I have always been a strong supporter of employees owning shares in the companies that they work for, particularly smaller companies. In my own history, virtually everyone had shares in the company that I built up in the 1980s and 1990s. Obviously, the principle is observable in groups like John Lewis. It is self-evidently very positive, not just commercially but when people feel part of the business for which they are working.

Anyone is being blind if they do not perceive that employment law has strayed across the boundary of discouraging employment. There are good reasons for much employee protection, a cause that has been fought for over almost 200 years. However, we are now in an area where—dare I say?—there would not have been just 1 million new jobs created over the past year; if employment law was not so discouraging of taking on new people, there might have been 2 million new jobs. Again, in my own history I have seen too often how people are put off by the costs and risks involved. This House is slightly out of touch if it does not perceive that employment law actually discourages us in succeeding economically and producing more jobs.

15:45

I have to say that when the scheme was proposed, I was somewhat sceptical. I did not quite see the logic of tying the two together, but I am by nature a contrarian and as the great and the good were all frightfully critical, I thought the scheme deserved better investigation and consideration. On balance, I think it is a perfectly sensible and reasonable trade off. It is obviously not suitable for everybody; it is not going to be of any interest to individuals who, candidly, are just working for the pay and are not involved in or supportive of the enterprise for which they are working but, as I have said previously, it will be of great interest to those who are ambitious, who have confidence in their own ability and who want to work hard and make a success of the business they are working for. Why should they not have a worthwhile stake in that? It will also be of interest to those who have worked for a business for a number of years and become part of its woodwork. In both cases, the key point is that people have the self-confidence to believe that what they contribute to the business is that which ensures their employment.

[Lord Martin of Springburn]

The noble Lord mentioned John Lewis. We all know that everyone working in John Lewis is a partner and therefore a shareholder but, to my knowledge, John Lewis has never asked anyone to give up their statutory employment rights.

[Lord Flight]

I am sure the noble Lord is correct. The employees who had shares in the company I built did not give up their employment rights, albeit that at that time they were not quite as discouraging of employing people as they are today. The point I was making was that I believe hugely in employees owning shares in their business. On the other hand, it is blind not to see—I understand where the noble Lord comes from, and very decent it is—that employment law has strayed across the boundary to where it does more to discourage new jobs than to protect people.

The point I was working my way towards and commenting on was that the proposals in Clause 27 are clearly not of interest to or appropriate for a lot of people; they are appropriate for certain categories of people, above all, for people who feel that their contribution to their business is such that they do not need to be gold-plated by the extent of the employment protection laws that we currently have.

We now come to the rub, where I hope to encourage the Government further, albeit that it is Budget day today. The limit of only 2,000 shares on which you do not pay tax is too low. There is complete misthinking by the Treasury. Without this legislation, there would be no additional tax whatever because no one would have any more shares to pay any tax on, so it is not a question of losing tax revenues, but of the potential for forgone tax revenues that would not exist if the scheme did not exist.

On the forgone bit, the issue is that if people have worthwhile equity—£20,000 or £30,000—if they are going to have a tax bill of £10,000 or £15,000 including national insurance, they will not be able to afford to do it. People will not have that sort of money lying about in the bank to pay that sort of tax bill. To borrow money to acquire shares in a relatively high-risk small business is not a particularly wise thing to do because it may not succeed and you may be left with the money you have borrowed and no asset against it. The Government ought to think again about the tax position of shares under the employee shareholder scheme. I repeat that I think the starting point is wrong. It is not a tax cost, but how much tax will be forgone as a result of this scheme. The point is simple: unless there is a larger amount with no tax and national insurance liability, people will not take it up so there will be no tax revenue anyway.

The logic is pretty clear. Imagine working for a smaller business, which might employ 10 to 100 people and may be in a new area. One of the great things about success in this country is the number of businesses growing in new, high-tech areas, but it is a tough, competitive world with American businesses trying to out-compete you and products coming in cheaply from China. Not all these businesses are going to succeed. If you are enthusiastic, you can certainly say, “I really want to make this succeed. I would like to take advantage of this scheme. I candidly think that my existence in this company is not about employment protection law, but is due to my working my butt off to make a success of it”. People will want to take advantage of it. However, if they are going to be given a large tax bill, they will either not be able to afford it or the risk-to-reward ratio will not be right.

I encourage the Government to think again about the tax position as part of my genuine support of the proposal. Dare I say that many in this House have not really thought it through? They have not been entrepreneurial. They have not worked for a small business. It is an attractive opportunity for people. Well may they take the risks, succeed and build up some value in the company for which they are working. I ask the Minister to go back to the Treasury and reconsider a greater degree of fiscal generosity. I beg to move.

[The Earl of Erroll]

My Lords, I will speak only to this amendment. We will have the debate on whether employees should give up rights for shares when we deal with the next amendment. I restrict myself purely to the tax issue here. It is a serious point, because I have hit this when I have been offered share options. Because you receive the benefit, theoretically, you are meant to pay income tax on it in that year. You do not really have any money to pay it with because you have not yet been paid. If you are rich, you can use these benefits and invest in start-up companies using the SEIS: the Seed Enterprise Investment Scheme. However, you must have some other income against which to offset it, so taking this up is of no interest to the average employee. They have no other outside income. They will have nothing to pay the tax with because of the cash flow: they are being forced to pay a tax when they have not yet received the money. It is therefore complete lunacy, for the logic of this clause, not to accept the amendment of the noble Lord, Lord Flight. It makes this clause work.

Whether it should exist is a separate issue that we are about to discuss in the debate on Amendment 50. I accept that entirely. However, if the clause is to stay in the Bill, the amendment improves it greatly. The clause will then achieve its purpose of trying to get employees involved in the running of the company and the drive to make that company succeed. However, if they cannot afford to take up the shares because of the tax regime, and there is an anomaly in it and it will just fail anyway—in which case, Amendment 50 will be redundant, because no one will bother with the scheme.

[Lord Forsyth of Drumlean]

My Lords, very unusually, I find myself in disagreement with my noble friend Lord Flight. Normally, we are at one on these matters. I have considerable respect for his experience in the City, and I understand what has motivated him to table the amendment.

I do not propose to talk about Clause 27 until we come to the amendment in the name of the noble Lord, Lord Pannick. Frankly, I am surprised that this clause has survived so long. The scheme is ill thought through, confused and muddled. I will develop those arguments when we come to the next amendment.

This amendment, however, is an absolute open goal to allow the setting up of a huge tax-avoidance scheme. There is no restriction on people changing from being an employee to an employee shareholder. Therefore, they could get £25,000 from their employer as a tax-free sum. On the shares they could make tax-free gains of £50,000. This is therefore a handout of £75,000 to people who just choose to change their employment status. I find that very difficult to justify as a measure.

I have grave reservations about Clause 27. It confuses two desirable things: one is having sensible employment protection legislation, and the other is having sensible proposals for encouraging employee share ownership. My noble friend Lord Younger of Leckie, who I think will be responding to this debate, sent me a very helpful letter that sets out some of the concerns that have been raised about the scheme as a whole. I will concentrate on the issues that arise from this particular amendment.

The first point—and here my noble friend Lord Flight has not shown his normal attention to detail—is that there can be no question of anyone purchasing the shares. It is a condition of the scheme that the shares are given for free. In effect, we are producing a tax-free handout. One of my worries was how, in an unlisted company, perhaps a start-up company, you value the shares. The employer might have a particular view of the value of the shares, as might the employee. The expense and difficulties involved in valuing these shares would be considerable.

I hope my noble friend Lord Younger will not mind me reading out what he says in the letter about the tax treatment of the shares: “When an individual receives shares as part of an employment agreement, these are usually subject to income tax in the same way as that person’s salary”. That is correct, and it is what my noble friend Lord Flight is trying to address. However, he goes on to say: “In some cases income tax will be chargeable on the value of the shares at the time that the employee receives them. However, where certain conditions are attached to the award of shares, for example a requirement to stay in the job for a period, or a no-sale requirement, any income tax that would otherwise be chargeable on the award of the shares may be reduced or removed. In such cases, income tax would be chargeable on the shares at a later date. The precise detail of how the tax rules will apply to an employee shareholder depends upon the type of shares that are awarded. An employer should be able to confirm to an employee shareholder what type of shares they have received”.

This is a complete muddle. Are they shares which they hold, shares that vest at a later date, or shares that have to be sold back at a particular value? You need to have clarity on that before you even begin to consider the tax treatment. The normal tax treatment in employee share schemes is that the shares given usually vest over a period of time, and it is the point at which they vest that tax becomes payable. It is very unclear how that would work in the context of my noble friend’s amendment. Would the £25,000 apply when the shares were vested, and if they are simply options, or the ability for shares to vest subject to particular conditions, how does this offer the employee, who is giving up employment rights, any kind of security?

I entirely understand why my noble friend has tabled the amendment. He has seen that the scheme is not particularly attractive from the employee’s point of view, and the tax rules are certainly unclear. However, this would be used by people. The dead-weight cost of this amendment would be enormous, because anyone working for a company who had no possibility of being fired would want to avail themselves of what would be a huge, tax-free gift.

[Lord James of Blackheath]

My Lords, I feel mounting concern as a result of what I said in Committee about this clause in a discussion on the financial assistance Act. What we have just heard makes my original anxiety even greater. I asked the Minister at that time whether he would give an opinion as to the application of the Act to this clause. I think the situation has got even worse. Where there is in effect a deal between a company and the Inland Revenue to give somebody a tax advantage, or at least a complicit arrangement whereby they co-operate for it, surely there is a breach of the laws that were brought in at the time of the Guinness and Blue Arrow fraud cases and that prohibit any company from giving financial assistance to any employees for the purchase of its own shares. This seems to me to be exactly what is occurring here. It is highly dangerous. We cannot have a scheme that criminalises companies and their employees accidentally and at the same time.

16:00

[Lord Stewartby]

My Lords, I will not follow in detail what my noble friend Lord Flight said in his excellent introduction to this debate, because he said most of what I would like to say, but much more eloquently than I could. What comes out of this debate, despite the various points that have not yet been cleared up, is that this is a voluntary activity. Employee shareholders would come about only if the shareholders wanted them to and voted for them without coercion. It is an experimental proposal, and although I do not share the doubts that some have about its merits I do think it is potentially a somewhat complicated arrangement.

The best thing to do when you have a proposal of this kind is to test it out. If you do not pass the legislation, you will never have a chance to see whether it works. My own view is that the demand for this type of opportunity will become more evident as time goes on. It is very suitable for high-risk, rapid-growth businesses. Of course, there will be failures and shortcomings, as there always are in speculative areas of investment, but this belongs to the area of high-risk reward, and I would like to see it given a chance to show its form.

The Bill in effect constructs a new type of relationship between shareholders and members of a company and adds a new status, giving it a certain novelty. This proposal is sensible, as my noble friend has said, and the way ahead will not emerge until the thing is given a chance. The proposal is imaginative and innovative, and I think it would be a good thing if we put it on the statute book.

[Lord Adonis]

My Lords, I am sorry to disagree with the noble Lord, Lord Stewartby, but to my mind when you have a totally mad idea like the one before us the best thing is not to test it out but to kill it at birth, and I hope that is what we are going to do in the debate that is to follow.

In response to this amendment I should say that never in my life, at least knowingly, have I been in such agreement with the noble Lord, Lord Forsyth—and we look forward to his contribution in the debate that follows. As he says, Clause 27 is ill thought through, confused and muddled. The amendment proposed by the noble Lord, Lord Flight, achieves the remarkable feat of making it even worse, on which I congratulate him. However, I think that the mood of the House is that we should get on to the substance as soon as possible, and I hope that we can now do so.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)]

My Lords, I thank my noble friend Lord Flight for raising this matter, and for his general support for the principle of the clause.

I would now like to speak to Amendment 49C. As noble Lords have said, we will have a chance to debate the fuller aspects of the clause under the next amendment. In effect, this amendment calls for up to £25,000 of share value received by employee shareholders to be free of income tax and national insurance contributions. I note my noble friend’s considerable knowledge of this area from his time shadowing Treasury Ministers and from his chairmanship of the Enterprise Investment Scheme Association, but on this occasion his proposals are not in tune with the underlying aims of the policy. The employee shareholder status is not a new tax-advantaged employee share scheme or an investment incentive, although it may be used alongside existing reliefs in these areas.

In practical terms, the cost to the Exchequer of pursuing this amendment would be prohibitive. A tax relief of that sort of magnitude would make it necessary to attach a great many prescriptive rules to ensure that benefits were targeted and to prevent abuse: for example, by businesses using it as a means of transferring taxable income into employee shareholder shares. I acknowledge that my noble friend Lord Forsyth of Drumlean made these points rather eloquently. This would have the effect of introducing considerable complexity to the new status, working against our stated aim of offering a new option that is flexible and accessible to a wide range of companies.

Of course, tax policy has a part to play in this new employment status. We have listened carefully to concerns that the income tax position could be a significant disincentive for some individuals. We recognise that this could be an issue for a very few and have addressed it. It is a long-established fact, and certainly not unique to employee shareholders, that when a person receives shares as part of their employment, they may be liable for income tax and national insurance contributions on those shares. This is a consequence of the normal tax rules and the way in which income gained from employment is taxed. We must also remember that when an employee shareholder sells their shares, gains from the first £50,000 of shares given to an employee shareholder will be free from capital gains tax, which is part of the wider aspects of the scheme.

I informed the House that the Government were considering an option which would allow the first £2,000 of shares to be given to employee shareholders without incurring income tax or national insurance liabilities. The Chancellor announced in his Budget earlier today the decision to proceed with that option. This means that, typically, if an employee shareholder were to receive shares worth £2,000, no income tax or national insurance contributions would be chargeable when they received them. If they received £2,500 worth of shares, any tax would be due on the £500 excess.

The Finance Act contains several measures that will prevent misuse of the employee shareholder employment status.

[Lord Forsyth of Drumlean]

Will my noble friend give way? I apologise for interrupting.

[Viscount Younger of Leckie]

If I may, I am about to address some points that my noble friend made concerning the tax status.

For example, we do not want directors to manipulate the new status by making fake jobs for family members, which may have been in the mind of my noble friend Lord Forsyth when he made his earlier comments. We want this employment status to be attractive to a whole range of people. If we allow that no income tax or national insurance contributions are payable on the first £25,000 of shares, we think this will create only a disproportionate tax benefit for higher earners. This is about a new employment status that is open and attractive to a range of prospective users.

My noble friend Lord Forsyth asked a number of questions relating to how different types of shares would be treated and what this meant in tax terms for individuals in employment. When a person agrees to become an employee shareholder, the employer should be able to tell them what type of shares they will receive. The types of shares an employee shareholder receives may vary, as I think my noble friend indicated. First, they could be non-restricted shares. These are shares awarded without any ongoing conditions, limitations or requirements that affect their market value. If an employee shareholder holds non-restricted shares, they are usually in the same position as an external investor in the company.

Secondly, restricted shares are shares awarded with conditions, limitations or requirements attached that reduce their value. For example, an employee shareholder may not be able to sell their shares for a certain period or, if they leave the company, they may not be able to retain their shares. The employer may agree to buy the shares back from the employee shareholder.

Thirdly, forfeitable shares are restricted shares awarded on the basis that within a certain period of time, or on the occurrence of certain events, the employee shareholder may have to forfeit them and in return will receive less than their market value. When the tax is payable on these shares will depend on the type of shares that are offered. As my noble friend Lord Stewartby said, this is a voluntary arrangement, under which the individual will go into an agreement with the employer, and the type and status of the shares will be decided with their agreement. That will then lead, by agreement, to the point when the tax will be payable.

[Baroness Brinton]

Does the Minister accept that the flexibility for employees to negotiate the terms of any restrictions in shares will itself be restricted if a number of employees are being offered shares, because the capacity within the company to vary terms will be extremely difficult? In practice, the employee will have no flexibility at all to negotiate.

[Viscount Younger of Leckie]

My noble friend is taking rather a negative view. We need to look at the opportunities that the whole scheme offers. The employee shareholder could decide not to accept any shares or such a role if the situation that my noble friend mentioned applied. It may not suit them; they need to get advice and go into this scheme with their eyes open.

[Lord Forsyth of Drumlean]

Is my noble friend saying that the scheme will work for restricted stock that is subject to conditions? He seems to be saying that restricted stock will be treated in the same way as tradable shares, to the extent that they can be tradable. Perhaps I should declare an interest in that I have been given shares in the form of restricted stock on the condition that if I left the company or was dismissed the shares would be forfeited. Could conditions that effectively took away people’s employment rights be applied to restricted shares? How would that be defined? If it is just something to be negotiated between the employer and the employee, could an employee not find that he gives away his employment rights for some shares that he would lose if he was sacked?

[Viscount Younger of Leckie]

The discussions will take place before the employee shareholder goes into an agreement. If they are at all unsure, they have the right not to do so. Different types of shares and share schemes beyond those that I have highlighted today may be applicable. That, as my noble friend said, will remain a matter for discussion between the employer and the employee shareholder.

[Lord Forsyth of Drumlean]

I apologise for interrupting again—

[Baroness Garden of Frognal]

My Lords, I remind Members of the rule that on Report no Member should speak to an amendment more than once, unless it is to seek brief clarification.

[Lord Forsyth of Drumlean]

That is precisely what I am doing. I am seeking clarification on an important point. If someone comes to work for a company that has a scheme involving restricted shares that you would lose if, for example, you were dismissed, how can that person negotiate when they are told, “This is the job and these are the terms”? What is their negotiating position if 100 people have already signed up? If the Minister is correct, does that not drive a coach and horses through the benefit, limited as it is, that applies to the employee?

[Viscount Younger of Leckie]

That takes me back to the question raised by my noble friend Lady Brinton. If there are too many employee shareholders to make this work, there may indeed be no room for another employee shareholder. I say again: the opportunity is voluntary and the terms are to be agreed between the employer and the employee. That is all that needs to be said. It is exactly why we are not being too prescriptive with this system. We are providing an opportunity for employers to take up this scheme and for employees to share in its risks and rewards.

[Lord Flight]

My noble friend Lord Forsyth makes a fair point. If tax is to apply, it is difficult to determine how the value of the shares in question is to be assessed, given that they may have certain characteristics. However, I will turn that point on its head, in that it is an argument for there being no tax bill at all because the problem goes away if there is none. My basic point is that common sense states that no one will be much interested in a deal whereby you give up your employment rights for just £2,500 of equity. There should be potential for much greater gain. Something like seven out of 10 smaller businesses in this country tend to fail as a result of taxation being too high and the public sector too large. The situation is not like that in Hong Kong, which is much more successful.

The equity element would be of high risk for people in SMEs. I repeat my point: it is not a question of the Government losing revenue; they will not get any revenue under the clause as it stands because not many people will take advantage of it. Therefore, the Government will not lose any revenue. If they believe in the principle, which I believe in very strongly, there has to be an attractive risk/reward ratio. To my mind, one way or the other, that requires the value of shares on which there is no tax charge to be more than £2,500, although my figures are essentially for illustration.

16:15

I repeat that I am disappointed that this House is overly negative on something that I think should be given a try. It has some powerful arguments in its favour but, if it is to work, there needs to be a sensible number of shares that is worth having and is not subject to a tax charge. People are thinking about this in the wrong way. It is not just a question of the principle. If you are a youngish man or woman granted, say, just £10,000 of shares and you have to find £5,000 in order to take them up, that is a lot of money. You will not have that sitting around in the bank; you will have to borrow it against an asset, but a bank would not lend you the money because it is too high a risk. Even if you find someone who will lend you the money, you run the risk of the asset you borrow the money for, sadly, becoming valueless. Therefore, it is not a particularly attractive deal.

That is the point of principle but, going back to the first issue, I have looked at the variance of shares and how their value might be assessed, and it is a bit like dying when you own shares in an unlisted company. They are quite hard to value, although it is possible to do so. However, it is much easier if the problem does not exist in the first place.

This amendment is intended to urge the Government to rethink, late in the day though it is with the announcement having been made in the Budget today, because the thinking is in the box whereas it should be out of the box as regards the tax issue. I beg leave to withdraw the amendment.

Amendment 49C withdrawn.

Amendment 50

Moved by

[Lord Pannick]

50: Clause 27, leave out Clause 27

[Lord Pannick]

Your Lordships now come to whether Clause 27 should stand part of the Bill. As noble Lords have heard, the clause allows for an agreement by which an employee can receive shares worth £2,000 or more at the date of issue and then lose his or her rights to claim unfair dismissal, statutory redundancy pay and other employment rights.

Clause 27 was very heavily criticised in the debates in Committee. There was—I put it as moderately as I can—very little enthusiasm indeed for it on the government Benches or on other sides of the House, with the conspicuous exception of the noble Lord, Lord Flight, whose main argument in defence of the clause, if I understand him correctly, is that the deal will not be very attractive and therefore not many people will take it up.

There are four main objections to Clause 27 that the Government failed adequately to answer in Committee. One could identify many more objections but I will confine myself to four. The first is that the clause is objectionable because the employment rights were created—and have been protected by all Governments, Conservative and Labour—precisely because of the inequality of bargaining power between the employer and the employee. To allow these basic employment rights to become a commodity that can be traded by agreement frustrates the very purpose of these entitlements as essential protections for the employee, who lacks effective bargaining power.

The second objection concerns the jobseeker. Under the clause, an employer will be able to refuse to offer employment to applicants who decline to enter into a Clause 27 agreement. The irony, of course, is that the worse the job market for employment, the more willing the applicant will be to give up his or her employment rights in order to take the job, and the worse the job market, the greater the employee’s need for these basic protections against unfair dismissal and redundancy.

The application of Clause 27 to the jobseeker is particularly indefensible because the Government have now issued guidance, which was promised at Committee stage but which we did not have, that makes it very clear that a person will lose their jobseeker’s allowance if he or she refuses to take a job offer on Clause 27 terms; that is, they will lose basic employment rights. The guidance says that the terms and conditions under which the job is offered are not a good reason for refusing to apply for the job. There is a very limited exception which refers to the financial implications of receiving the shares, to which I will come in a few moments.

The absence of protection for the job applicant means that Clause 27 does not simply allow for an agreement to give up employment rights. In practice, it imposes on the jobseeker considerable pressure to take employment on Clause 27 terms. Clause 27, read with the guidance, will mean that the jobseeker is being made an offer which he or she cannot refuse—an offer that they must give up their employment rights. That is the second objection.

The third objection to Clause 27 was explained in Committee by a number of Peers from the government Benches—I stress, the government Benches—who have business experience. They said that the provision would be positively damaging to industrial harmony and would not be used by any sensible employer. Since this is Report stage, perhaps I may briefly report to the House what noble Lords from the government Benches said. The noble Lord, Lord Vinson, stated that,

“the whole point of wider industrial shareholding”—

with which we all, I apprehend, agree,

“is to try to create a sense of common purpose”—[Official Report, 6/2/13; col. 269.]

in the workplace. Clause 27 will do precisely the opposite. To deny industrial rights to employees will negate trust rather than enhance it. The noble Lord, Lord Strasburger, made a similar point at col. 272.

Perhaps I may quote the noble Lord, Lord Deben, who has considerable experience in small businesses. His words are so important and I could not possibly improve on them. He said:

“I cannot imagine any circumstances whatever in which this would be of any use to any business that I have ever come across in my entire life”.—[Official Report, 6/2/13; col. 293.]

I hope that it is appropriate for me to say that I have spoken to a number of noble Lords on the government Benches since Committee. Many of them share the sentiments of the noble Lord, Lord Deben—some of them in language even stronger than his, and even stronger than the helpful language that we have heard this afternoon from the noble Lord, Lord Forsyth of Drumlean.

As the Minister well knows, there is not simply a lack of enthusiasm for Clause 27 but a degree of opposition to it on the Minister’s own Benches that makes the Government’s commitment to it incomprehensible. To use the word of the noble Lord, Lord Deben, in Committee at col. 294, the Government’s approach is “mystifying”. In Committee, at cols. 298-300, the Minister told the House that the Government calculated that 6,000 companies would be interested in Clause 27. The noble Lord promised the Committee that he would provide the evidence that supported that statement, but I have received no such evidence and I do not believe that any other noble Lord has seen it. Therefore, I ask the Minister: does the evidence exist? If so, why has it not been provided? If it does not exist, will he please withdraw the statement that 6,000 companies are interested in acting under Clause 27?

My fourth and final objection to Clause 27 is that the employee and the prospective employee will not be given the minimum necessary protection to understand what they are being asked to give up. The Government have refused to accept that statutory rights should be lost only if the agreement is in writing and if the individual has received legal advice on the consequences of the agreement from an independent adviser. Parliament has specified such conditions in Section 288 of the Trade Union and Labour Relations (Consolidation) Act 1992 in the context of a compromise agreement to settle particular employment disputes and tribunals. However, no such protection will apply here.

I recognise that the Government have published general advice to employees, but that is really a poor substitute for specific advice to employees from an independent adviser in their particular circumstances. The need for advice is particularly important when the value of the shares when issued may well be higher than their value later on and when there are tax implications for the employee of receiving the shares if they are worth more than £2,000. As I understand it, the employee or prospective employee who enters into an agreement to give up his employment rights for shares with, say, a nominal value of £3,000, will get a nasty surprise when he or she receives their next month’s pay packet. In the real world, the jobseeker and the employee need to know the implications.

The noble Lord, Lord Flight, said that Clause 27 may not be appropriate for all types of employee. The problem of course is that Clause 27 applies to all types of employee, with all the detriments I have mentioned. For all those reasons, I ask the House to reject Clause 27 and I very much look forward to the debate on this issue. I beg to move.

[Baroness Brinton]

My Lords, I am grateful to the noble Lord, Lord Pannick, for so eloquently outlining the case against the proposals in Clause 27 and I was happy to add my name to the amendment, which your Lordships' House has discussed at considerable length at earlier stages of the Bill’s passage.

I remain bemused with the basic philosophy behind the clause. We are told that the scheme is aimed at small businesses that want to grow fast and motivate their workforces. We have heard that employees will take a significant reduction in their employment rights and face tax and NI demands on the free shares that they have been given over £2,000 as they receive them.

I assume that the minimum of £2,000 is for ordinary shares, but given the interchange on the previous amendment I am not convinced that they would necessarily be ordinary shares. In a number of years, possibly with a following wind, they might increase in value, although the House should note that the majority of micro and small companies do not make large returns for their shareholders in the early years. That rarely takes less than eight years or a decade. Worse than that, while the employee currently in a firm can choose not to take part, the applicant on jobseeker's allowance would have no such luxury—a point clarified in the letter from the Minister on 13 March. Either a scheme is voluntary or it is not. It is clearly not for those on jobseeker's allowance. This provision is supposed to encourage growth. We need to go back a step to the coalition agreement’s commitment to growth. With such a key strategy in mind to help SMEs, we should do all that is within our power to assist them. Clause 27 would do the opposite. If an employee has the choice between a company that offers the usual employee benefits and another that exchanges these rights for shares in the company, the evidence suggests that employees would rather maintain their benefits, especially in the current recessionary climate. That was corroborated by my own experience speaking with employees working for high-tech SMEs, who are bemused that they would want to demotivate their staff during the very difficult early days of a company when it is developing products and just beginning to enter the marketplace and unlikely to be making a profit, let alone anything that they could distribute to shareholders.

16:30

Directors have told me that this does not set the relationship off on the right footing. Morale is important because while the shares in an SME are unlikely to yield high returns in the first few years, if any at all—most do not become the superstars implied by the capital gains tax mentioned in the Bill—after a company is founded, especially during this period of low consumption and investment, it has to find ways of motivating employees to help get the business off the ground. It might offer flexible working hours and shares without links to a cut in employment rights. The founders of such firms have been offering shares without any removal of rights for years, and it works. Why would they take up a proposal that destabilises the employee and the company?

Additionally, should the question of unfair dismissal arise, the cost to a company could overwhelm it. Both the Law Society and the Solicitors’ Journal have expressed concerns about this. Clause 27 eliminates the use of unfair dismissal tribunals which help SMEs by placing a cap on the costs of discrimination claims. Without the benefit of these tribunals, the courts could become clogged with costly discrimination suits that may drain the funds of the very businesses we are trying to support. The clause is then doubly debilitating. It removes employment rights that protect the employee from discrimination and at the same time it leaves SMEs vulnerable to very expensive discrimination claims, should an employee feel the sting of the loss of basic rights such as statutory redundancy pay and rights to training and flexible working. The example given by the noble Lord, Lord Forsyth, in the previous amendment of an employee being sent up the blind alley of having to accept terms that meant that they would be forced into redundancy, but the contract saying that the shares would be lost if the employee was made redundant, absolutely exemplifies the point. I believe that a court would want to hear this argument and I do not believe that it is what the Bill intends.

For many British workers, this lingering economic downturn has given them little choice when accepting jobs. There simply are not enough jobs out there for JSA claimants to have the luxury of choosing among several opportunities. With this clause, JSA claimants will be forced into taking jobs that sap their benefits in return for shares in the company. For those who may already have faced not just one but multiple redundancies through no fault of their own, that will not be attractive. I am grateful to the Minister for his letter which sets out the exact terms here, but I fear that it has in fact been unhelpful in that Jobcentre Plus decision managers will now not be able to accept an applicant’s reasonable and real fears about reductions in employee rights when considering a continuation of JSA if the applicant has turned a job down. Although this clause might intend to give employers a choice, it does so at a significant cost to employees. We must avoid creating a coercive environment for jobseekers, many of whom rely on these benefits to enhance their skills and improve their quality of life, lest we discourage job seeking, something the Government are trying to do the opposite of, and encourage reliance on welfare.

While it is important for an employee to feel that he or she has a real stake in the success of a company, this employee shareholder scheme will do little to benefit the average worker. The guidance provided by the Minister fails to invite employees to take legal advice or even employers to encourage them to do so. It only says, “Read about the shares and what they are and talk to the company about the type of shares”. A company trying to offer shares is not exactly going to say, “This is dangerous and you may well lose money”. Most employees will not be able to afford to pay the upfront costs of income tax and national insurance, and may not benefit at all from the capital gains tax exemption, given the current annual individual exemption limit of £10,600. This means that only the most senior employee shareholders on high salaries will benefit from this new scheme, not average workers. I thought that they were the ones who we were trying to attract into the scheme. Robin Williamson, technical director at the Low Incomes Tax Reform Group, put this more bluntly when he stated that employees will lose universally available employment rights for a tax relief from which they might never benefit.

The Government have taken many steps forward to help SMEs, but this is a step in the wrong direction. It asks the average British employee to give up his or her rights in the workplace in exchange for shares in a company that are likely to yield very little other than an income tax charge at the front and a possible blue skies capital gains tax many years in the future. It coerces claimants into accepting these terms as they have no options and hurts small companies by eliminating motivational tools that encourage long-term loyalty to the company and leaves them vulnerable to costly discrimination lawsuits.

The best the Minister has been able to say is that this scheme is not for very many companies, but I think that the figure of 6,000 is something of a finger in the wind. It may well be that no companies take it up at all, and I ask your Lordships’ House if this is a sensible way to proceed. This clause needs to be removed now, and faith and trust built up between employers and employees, with them sharing the risks and benefits of growth and success. Clause 27 is not the way to do it.

[Baroness Turner of Camden]

My Lords, I opposed this clause at Second Reading and in Committee, and I do so again. I support the noble Lord’s amendment to remove this clause. I believe this Bill to be one of a series of government Bills designed to remove employment rights from individual workers without seeming to do so. The clause seeks to get workers voluntarily to give up employment rights by pretending to make them part-owners of the company. We are told that it will be entirely voluntary to become an employee shareholder. Will it really, when there is so much unemployment and consequently high concerns about employment security? People will be told that it is in their interests to become employee shareholders and that it will offer better internal progress, possible promotion and security, so that they do not have to worry about these old-fashioned employment rights. It is a way of dividing the workforce as well: an end to collectivity, with no unions to represent or negotiate for workers or to press for higher wages.

This Government do not like employment rights. LASPO, which we discussed in this House last year, rules out legal aid on employment law and on welfare. This clause is another way of getting rid of employment rights which previous generations fought hard to establish. The Government want tame workforces, where employers can hire workers—cheaply of course—and get rid of them easily when no longer required; in other words, disposable people. It is really surprising why this should be regarded as modern when it takes us back about 120 years. I do not believe that people should ever be regarded as disposable. I oppose this clause because that is what it is all about. The possession of shares in no way compensates for the loss of employment rights such as the right not to be unfairly dismissed, the right to a redundancy payment in suitable cases; the right to flexible working, and the rights relating to constraints on the notice about maternity and parental leave. I do not really believe that it is intended to.

I do not think the Government will succeed with this. Good employers do not like it. Shareholding schemes already exist in some enterprises without workers having to give up employment rights in order to participate—the John Lewis Partnership is one such enterprise. This clause is backward-looking and dishonest. The Beecroft recommendations were widely opposed when pronounced and it was clear that they could not be introduced in quite that form, so we have Beecroft by the back door, to persuade workers voluntarily to give up employment rights to which they are currently legally entitled. We should throw out this clause. The TUC is against the clause and tells us that it has the potential not only to remove employment rights but to cause hardships to employees and their families. It can also open up damaging tax loopholes, to which reference has already been made. It is thoroughly unpleasant and should be thrown out by this House.

[The Lord Bishop of Bristol]

My Lords, I have put my name in support of this amendment to remove Clause 27 for two main reasons, one general and one specific. In preparing my thoughts on what I was going to say today, I am grateful to a number of family charities, including the Family and Parenting Institute, the Daycare Trust, Working Families and the Fawcett Society, for their efforts in making the case against what I sense many of us instinctively feel is a seriously flawed proposal, which will create many unintended consequences.

Permitting companies to purchase certain rights in this way seems ethically wrong in principle. It is foremost the precedent of allowing employment rights to be bought and sold like a commodity that I believe must be rejected. Basic safeguards against unreasonable employer behaviour should not have a price tag attached to them. To quote from Michael Sandel’s latest book:

“Such treatment fails to value human beings as persons, worthy of dignity and respect; it sees them as instruments of gain and objects of use”.

For example, the right to protection against unfair dismissal, through placing a responsibility on employers to act reasonably, discourages arbitrary behaviour and the sham redundancies that can be used as a cover for discrimination or to penalise whistleblowers. It is not enough to give employees who have such unfortunate experiences recourse to an employment tribunal; employment law must discourage the behaviour from taking place at all. Likewise, redundancy payments are a modest but important safeguard for employees, providing a minimum cushion to support people who have lost their jobs and have family and financial commitments. Employees acquire these rights only after two years of service and they represent a proportionate responsibility for employers whose employees have made a long-term commitment to their businesses.

These safeguards are particularly important because there is no provision for advice for jobseekers before taking up this kind of contract. This point has been well made. I expect therefore that many workers who find themselves in the employee shareholder category will be those who are most vulnerable to poor employment practice, where the imbalance in power and financial means between employer and employee is most marked. Employment law is effective precisely because it constitutes a coherent framework based on clear principles of fairness and responsibility. Allowing companies effectively to buy off those rights undermines the integrity of that framework.

More specifically, I am also very concerned that employee shareholder contracts are not family-friendly and could discriminate against women. Women, particularly those with caring responsibilities, are most likely to exercise the right to request flexible working and will be most affected by the requirement to give longer notice periods when returning from parental leave. They will find it more difficult to take up the employee shareholder status and may be indirectly discriminated against in the recruitment process as a result, either being overlooked by potential employers or pressured into accepting the status as a condition of a job offer. Whatever the take-up of this new employment status, it will create a new subset of jobs that are unsuitable for many parents and carers.

Furthermore, the proposal reinforces inaccurate perceptions among some of the business community that flexible working is a burden to be avoided if at all possible. I strongly believe that society as a whole shares with families a responsibility to support those with caring responsibilities. One way in which we express this collective commitment is through promoting the rights of parents and carers to work flexibly. Removing these protections for some workers sends a negative message about the value of flexible working rights, undermining the very real progress that has been made in this area in recent years.

As currently constructed, the proposed employee shareholder status is fundamentally flawed. It puts a price on employment rights that should never be up for sale and takes a step backwards in efforts to promote a more family-friendly employment culture. For these reasons, I hope your Lordships will support this amendment.

16:45

[Lord King of Bridgwater]

My Lords, I am delighted to follow my own Bishop, who represents a city in which for a considerable number of years I had the privilege to work in industry and to have considerable responsibilities for employment and factory management. I have found this experience extremely valuable in addressing some of the issues that are before your Lordships’ House.

As my noble friend may know, and as the noble Lord, Lord McKenzie, will know, I was very robust yesterday in supporting the Government’s main programme to restore our economic strength. Today, however, I have to say that I regret the approach which the Government are taking. I am a very strong supporter of employee share ownership. Indeed, the great company in which I worked in Bristol was exactly like John Lewis, and every single employee enjoyed substantial bonus arrangements at the end of the year in a profit share. It is a valuable way of building up employee relations throughout any workplace.

I recognise the real challenges for employers at the current time, the complexity of legislation as it has increased and the need to try to make sure that the legislation that we pass, often with the best of intentions, does not become a substantial block to employment. For example, I welcome the fact that the exemption period for the unfair dismissal arrangements has been changed from one year to two years. However, that is where my support stops. My noble friend will know my views on this because I made them very clear to him. I express my appreciation for the very courteous and diligent way in which he sought to respond to a number of the points that I and others have made. I am sorry, for reasons which I will give, that the Government have got us into this position.

I think that it was Field Marshal Lord Alanbrooke who said that Winston Churchill used to have some wonderful ideas and some very stupid ones as well, and that his job was to determine which was which and make sure that the former were pursued and the latter quickly dropped. When I had some responsibility for the reform of employment law under the noble Baroness, Lady Thatcher, a number of people came to me who fitted exactly into that category of having some very good ideas and some pretty stupid ones as well, and one had to try to distinguish between them.

As soon as I heard the announcement of this proposal and of the brief period of consultation which would take place on it—and I understand that 92% of those who responded to the consultation were against the proposal—I carried out my own consultation. I have not found anybody yet who is in favour of the proposal or who says that they think that they will use the provision. I accept that the noble Lord, Lord Flight, has a good point, because he has huge experience of the City of London. I can see that very bright people, anxious to be successful and to enjoy good financial reward, and who are confident in their own judgment, might be prepared to embark on this course. However, if one then looks at the generality of SMEs and at the range of industry and employees up and down the country, one sees that the balance is completely wrong.

The power is with the employer at a time when many young people are finding it hard to get jobs. In no way is it a fair balance to say, “You have an impartial opportunity to decide”. I just wonder what will happen to the poor job applicant who, when he is told what the terms are, says, “I will now go and consult my adviser”. In relation to the earlier amendment we discussed the complexity of the tax arrangements which might apply and the complexity around the type of stock being offered—whether it is stock that cannot subsequently be sold. Given the overall complexity of this, is it a fair arrangement that an applicant for a job can be told that he can either take the job on this basis or not take it? I know exactly what the employer will say—“Well, do you want the job or don’t you?”. With a queue of 25 waiting outside, nobody can be happy.

I am trying to say as forcefully as I can that I am a strong supporter of the Government. I hate standing up here in the presence of all your Lordships to criticise something, but I have a greater duty to the Government—to prevent them going down a track which would lead to some really unhappy consequences. The opportunity provided by Clause 27 could be used by some very dubious employers indeed, and a large number of their employees could be deprived of their employment rights. If that happens there will be a feast for lawyers. With the greatest of respect to the noble Lord, Lord Pannick, he will do himself out of some work if this clause is omitted, because lawyers would have a field day.

With the opprobrium that could return to the Government as a result of this proposal, my duty is to give to my noble friend and the Government the best advice that I can from my own experience. I cannot support this clause. It is not at all the right way to go forward. I strongly support any sensible measures to help employers, and I welcome and congratulate the Government on the significant increase in private sector employment, but I say to them: do not pursue this route; it is the wrong way to go.

[The Earl of Erroll]

My Lords, I will make a couple of quick points on this. I keep hearing this tale about how power lies with the employers. Noble Lords talk about large companies that have expensive and well staffed HR departments and lawyers who work on this full time. I am afraid that the SME world that I live in a lot of the time is not like that. There, you cannot afford it. When you employ one, two, three, four or even up to 25 people, you cannot afford expensive HR advice every time you twitch, move, open your mouth or anything. That is what we have got down to because people say that the power lies with the employer. It does not.

We are seeing more and more vexatious demands over discrimination. In employment law, cases of sex, race, disability and age discrimination immediately mean unlimited liability. That means that your house and everything goes. If you are not a company—you may be a sole trader as a small employer—you will lose everything and be out in the street. Everything will be taken from you. If you incorporate, you are now told you are doing it for tax avoidance or evasion purposes and the press have a go at you for that instead. So in what way are you supposed to protect yourself?

The power may lie with the large employers. I do not know. I am not in that rich and rarefied world of some of the Silks who sit here and can afford that. As a small businessman I, and people like me, cannot afford the noble Lord, Lord Pannick. It would be wonderful if we could because we might get some protection as employers. For once, he might not represent the employee. I fear that it would normally be the other way round and we know who would win when someone was confronted with his incisive way of thinking.

All I want to tell noble Lords is that the world is not how some people see it. There are everyday problems out there and they limit employment. At the moment, half the people in the country are employed by microbusinesses and small and medium-sized enterprises of up to 250 people—there are very few in the bracket above 25 to 40 and below 250. Those are the people who need protection from a lot of this and we are not giving that in employment law as it stands today. Whatever noble Lords say, it is not there.

The charity world is another case. I know a charity that needed to rejig some things and wanted to bring in someone with greater expertise. It therefore needed another someone to move on to something else. It thought that it had reached a compromise agreement with him but then this chap did not sign it. When it came to the point of the tenth or eleventh month, when the charity thought it was all about to happen, he said, “I have not signed it yet and I have just gone to see some lawyers”. He is now trying to plead all the discriminations. I cannot see how he can, and nor can anyone else, but the cost of fighting that will be phenomenal. The fear of everyone, particularly the trustees of the charity—who are terrified—is their exposed position if he wins because the case can be proceeded against them. That is the bit that noble Lords forget about. They live in a dream world where we have a fair legal system, tribunals think fairly and lawyers always act in the best interests of law and not of these people. It is not like that. Therefore, I would like to see Clause 27 come in so that at least some people might negotiate a different arrangement. It is there for small businesses not large ones.

[Lord Forsyth of Drumlean]

The noble Earl made a speech about employment protection being excessive. I am not sure I understand how Clause 27 would alter any of the things that he complained about, with the one exception of the request for flexible working, unfair dismissal and redundancy payments. All the issues that he referred to would still apply if Clause 27 went ahead.

[The Earl of Erroll]

Even better. Passing it does not matter then, but at least it would send the right signal and some people may relax. If, as the noble Lord says, it will not change the unfair dismissals process, we can all proceed happy that that continues. Why object? At the moment, I know that the law is biased in favour of the employee, not the other way round. With that, I will sit down. I would love to see other things tried. At the SME end, we need signals sent by the Government, and this is one.

[Lord Lea of Crondall]

My Lords, I think that it is fair to say that the noble Lord, Lord King of Bridgwater, has some of the best political antennae in the business. I therefore think that we can look forward with some interest to the response of the noble Viscount, Lord Younger of Leckie. In debate in Committee, precisely the proposition made by the noble Lord, Lord King—that in effect people could say, “You can only get this job if you sign up to the scheme”—was made. The Minister said:

“I have not seen the guidance”—

the 3,000-page guidance—

“but I do not believe that it will say that”.—[Official Report, 6/2/13; col. 289.]

Two questions arise. First, can the Minister tell us definitively this afternoon, before we vote, whether the noble Lords, Lord King of Bridgwater and Lord Pannick, are correct or incorrect: yes or no? I will not detain the House, but what baffles me, picking up the point made by the right reverend Prelate the Bishop of Bristol, is how on earth the Government got the idea that this was convincingly presentable as part of the moral platform for modernising capitalism. As I think that the right reverend Prelate said, straight out of the Bible we have the precept, which is probably in the Koran as well, that you do not sell your birthright for a mess of pottage—that was Esau, I recall. Let me dub this Esau’s clause. It is incumbent on the Minister to give us a brief reply on that question.

[Lord Forsyth of Drumlean]

My Lords, I think that this is a positively dreadful clause. Perhaps I should declare three interests as a former Minister of Employment, as chairman of a start-up run by my daughter and as someone who has set up a number of businesses in the past. I could not believe the clause when I read it. It seemed to involve two really good things. I have much sympathy with what the noble Earl had to say about the burdens placed on businesses and the costs of going to an employment tribunal, but that is an argument about the extent to which employment protection legislation should apply and the costs associated with sorting out whether there has been an injustice to employees.

Employee share ownership is a very desirable thing up to a point. It can go too far if your salary and your savings are tied up in the shares of the company that is your employer but, as a general principle, giving people a stake or encouraging people to take a stake in the business is part of being a good and successful employer. I very much agree with what my noble friend Lady Brinton had to say about creating a culture in a company where people can feel part of a team and motivated. The idea in this clause has all the trappings of something that was thought up by someone in the bath, taking these two ideas together and believing that they made for a great scheme. In fact, it is damaging to both. I do not propose to reiterate the careful and precise arguments that the noble Lord, Lord Pannick, made in moving this amendment, which I support and which I will vote for if he chooses to divide the House on it.

17:00

The most important thing in all this, leaving aside the details, which the Government have clearly not thought out, is the principle that employment rights, although the noble Earl may feel that they go too far, are enshrined in statute and are not negotiable. They give the employee a position where the employer cannot ask them to give up those rights, because they are enshrined in statute. What I find offensive about the clause is that it does not seek to argue, as I would, that the Government’s proposals to extend maternity leave are costly and unnecessary. I would not go down that track. If those rights are in place, it is essential that the employee is not put in a position where he is under pressure from the employer. The clause is an absolute gift to the Gradgrinds of this world because they will be able to use it to force people to give up employment rights, which are essential, although we might differ over what their extent should be. It is a foolish measure for that reason.

As for the practicalities of the clause, shares are not defined. I am not going to repeat the points that I made in our debate on the previous amendment about the difference between options, shares, shares that vest and the tax implications of that. As a Conservative, I am very proud of some of the employment legislation. The noble Lord, Lord Pannick, referred to the 1992 Act, which says that in seeking compromise agreements, advice is to be taken. Normally the employer pays for that advice up to a certain figure, which is normally up to £500 or £1,000. However, having to go through the whole business of valuing shares of over £2,000 and getting advice will at the end of the day cost more than £2,000. The valuation of shares in unquoted companies is extremely difficult, especially in start-ups where the employer might think that he has the next Google on his hands and that the shares are worth considerably more than the employee. How does one set about that valuation, and what are the implications of taxation?

In his letter, my noble friend Lord Younger says, “Oh well, this is something that would be put on the self-assessment form”. How would you reach a view on what the value should be? If I may switch sides for a moment, if I were an employer, why on earth would I want to give away shares in a company to employees who I had doubts about and thought I might want to sack? Why would I want to give away shares, which are a very expensive way of raising capital or rewarding employees, especially in a start-up, if I had doubts about the competence of the employee? You would not want to do that. If I were an employee in those circumstances, why would I want to take on these shares and give up my employment rights if I did not feel that my employer valued my contribution and that I was part of the team? Therefore, why would I want to give up these rights?

Another thing that I find extraordinary is the attitude of the Business Secretary, who led a great media campaign when the Beecroft proposals were put forward and talked about how outrageous it would be that people could be dismissed without cause. At least Beecroft did not take away the entitlement to redundancy payments. This proposal is worse than Beecroft from the point of view of the employee, yet for some mysterious reason the Business Secretary has obviously signed up to it.

This is not limited to high-tech start-up companies; it applies to all companies. Let us suppose that we have a high-tech start-up company, it does terrifically well and the founders of the company wish to IPO it and raise more capital to expand their business. What are they going to do when they have perhaps 20 or 30 former employees who they dismissed still hanging on to the shares and pretty angry about having been dismissed? The practicalities, costs and difficulties of making this work have simply not been thought through.

Then we have all the opportunities—you do not need to be a smart accountant or lawyer to start thinking about them—for tax avoidance schemes and the rest, but the final blow for me, if I had any doubts about this, was when the noble Lord, Lord Pannick, said that guidance had been issued, which should have been available to this House at an earlier stage and should certainly have been available to the other place, which says that if someone refuses to take this deal they are no longer able to obtain jobseeker’s allowance. That is absolutely unacceptable, and I am astonished that the coalition would even think of bringing forward such a measure. This is a very ill thought through attack on the employment rights of individuals that creates complexity for small businesses. That is not to say that I do not believe that there is scope for reducing the costs and burdens on small businesses in respect of employment, but this clause is not the clause to do that.

[Lord Morris of Handsworth]

My Lords, I rise to support the amendment removing Clause 27. Let me make it absolutely clear that I am a passionate believer in—and advocate of—the stakeholding society, the stakeholding community and, of course, the stakeholding workplace. Applied to the workplace, the stakeholder principle can deliver workplace harmony, increase productivity and change the culture. I want to see all British workers benefit from the success of their companies, but instead of a few shares that may benefit only a few who have given up their rights, why can we not have a more imaginative approach, for example a profit-sharing scheme through which everyone can benefit from the prosperity of their company while maintaining their rights?

I very much regret that at this critical point in our social and economic history we are still having a debate about the disempowerment of British workers. Frankly, Clause 27 does nothing to increase productivity, improve the quality of what we do or, above all, address issues around investment, research, plant and equipment, people and education. What is needed in the workplace is good industrial relations. Indeed, someone should tell the Chancellor that you cannot build a world-class economy by creating first-class and second-class workers. Under these proposals we would have two groups of workers: workers with rights but no shares, and workers with shares but no rights. What about those who work in the public sector: nurses, doctors, those who sweep our streets or teach our children? Where is their reward for good industrial relations? Where there is harmony in the workplace, Clause 27 is guaranteed to bring strife.

When will the Government understand that some things are not for sale? Workers’ rights are not for sale. They cannot be traded. Dignity at work is not for sale and cannot be traded. The fight against injustice is not for sale and cannot be traded. Clearly, the Government do not understand that there are some things that money cannot buy and that shares cannot put right: dignity at work, self-esteem and fundamental human rights. Clause 27 strikes at the very heart of these principles, which this nation holds so dear. It is sad that the Bill will do nothing to make the workplace more harmonious or productive. Indeed, Clause 27 undermines workplace harmony and I hope that the House will oppose it.

[Lord Vinson]

It is a privilege to follow such an impassioned speech, as well as the extremely logical speech of the noble Lord, Lord King of Bridgwater. I have spent a lifetime promoting wider share ownership, and was for 10 years chairman of the Industrial Co-partnership Association.

All the points that show this clause to be madness have been made. It is extraordinary, in view of the very sensible criticisms in Committee, that the Government have proceeded with this and have seemed to ignore every single comment that this House, with its great qualifications in this area, has put forward. I wonder who is on the receiving end of our help in trying to forge better legislation.

The noble Lord, Lord Flight, was perfectly right to say that legislation to safeguard employee rights has reached the point where it is now preventing jobs from being created. Far from protecting jobs, it has reached the point of job destruction. The right reverend Prelate raised the point about flexible working. Try running a small business, nursing home or anything you care to think of with everybody asking for flexitime. Who mans the ship? It is important that you have core staff working through, to more or less hold the thing together. Of course, there is a nice element of human relationships in small businesses, and they go out of their way to try to meet employee needs in that direction, but pretending that you can bring in a level of compulsion on flexible working would only be done by somebody who has never actually experienced the first-hand difficulties of a running small business.

In Committee I made the point, which has been cited today, that to encourage wider share ownership is good. To recognise that employee protection has possibly been overdone in a number of instances is also right. However, to muddle the two together, to make a quid pro quo in this way, strikes at the very heart of the trust and sense of common purpose that all businesses are trying to build up. Therefore, this clause must be resisted on all fronts.

[Lord O'Donnell]

My Lords, I support the amendment. On this Budget day, it behoves us all to think about how we stimulate growth. This particular clause would actually be very harmful to growth; I agree in particular with what the noble Lord, Lord Forsyth, and others said.

When I was in the Civil Service, the Government set up the Red Tape Challenge initiative. That was really important, and there is a second round of that in the Budget today. It is hugely important that we tackle the issues that are holding businesses back, but I am not sure that this proposal emerged from the Red Tape Challenge or that businesses came forward with it.

How does the proposal fit with the Government’s policy of pushing mutuals, which I strongly support? There is a technical point as well: what we economists call adverse selection. If an employer is offering this, they are probably the kind of employer that you do not want to go near. If an employee accepts it, it is probably because they do not really understand what they are doing. On those grounds, it is bad.

I also take the point of the right reverend Prelate and the noble Lord, Lord Morris, about the moral case. I expected to hear the biblical reference: we know that in the old days the price of slavery was 20 or 30 pieces of silver. Is it now £2,000?

17:14

[Baroness Wheatcroft]

My Lords, many noble Lords today have explained that this is not the way to get the workplace flexibility that we need, and I agree. This clause purports to construct a new class of employee shareholder, but there are already 3.5 million people who believe themselves to be employee shareholders, in more than 5,000 companies. It threatens to give the wrong idea of what employee ownership is all about.

Employee share ownership brings many good things, such as lower absenteeism, staff turnover and higher productivity. The Deputy Prime Minister is a fan. He is so enthusiastic about this concept that in January last year, in the City, he suggested that perhaps employee ownership was such a good thing that the Government should consider giving employees the right to ask for shares in their business. We seem to have turned that round in the most extraordinary way. I cannot believe that he envisaged a scheme whereby employees would have to give up their rights in order to become shareholders.

This proposal troubles me, as it did in Committee, because I fear that it will bring out the worst in business, and not the best. We have heard about so many things that are wrong with this clause. The original government consultation was responded to by 184 organisations. Only three said that they might consider adopting it. However, being told that probably very few will take it up is hardly a recommendation.

There are some supporters. The Institute of Directors has now come out in favour of the proposal, although when I asked if they had consulted their members, the answer was no. The chief executive of the British Venture Capital Association has also come out in favour. He says that in every start-up that he has ever been involved with, employees have been given shares. I am sure he is right, and I am sure that it has worked. Clause 27 might be more acceptable—I doubt it, but it might—if it were restricted to start-ups, where the rate of failure is obviously clear, and where the potential of gain, if one were lucky enough to be employed by Google or the like, would be an attractive alternative. However, the scheme is not restricted to start-ups or even small companies. Instead, it will appeal to those middle-sized and larger businesses that may see it as a way of becoming part of what is already being referred to as the “Gradgrind tendency”.

Let us imagine a group of employees who have sold their rights—for a mess of pottage, as we have heard—and another group who have not. The company falls on hard times and has to declare redundancies. Who will be first in the line for redundancy? I would hazard a guess that it will be those who have shown the most commitment to the business by becoming employee shareholders under the new scheme. That is the sort of perverse effect that we are likely to see if the clause goes through.

This legislation risks giving employee ownership a very bad name. I would not advocate the idea, suggested by the Deputy Prime Minister, that we should give employees the right to request shares in their company. However, to give those in larger companies the option of taking shares and giving up their right to request training seems extraordinarily perverse at a time when we need the best-skilled workforce we can get.

There are so many reasons why this clause should be opposed today. Much as it grieves me to speak against my Government, and much as I see many things in the Budget that should be applauded, this would end in tears.

[Lord Flight]

My Lords, as I suggested in our debate on the previous amendment, I accept that some improvements could be made to this clause, and it is unlikely that its take-up will be substantial if it goes ahead as it is. I also certainly agree with the principle that it has to be voluntary. If it was the case—I am not sure that it is, despite the advice of the noble Lord, Lord Pannick—that people lost their jobseeker’s allowance if they did not accept employment, I think that is wrong. But this House should listen a little more to the noble Earl, Lord Erroll, and those who really are engaged at the SME level. It is very interesting that nearly all those opposed to this clause had nothing to comment on the extent to which employment law has clearly become discouraging of employment and has, in a sense, gone too far in the protective direction, generating massive income for lawyers, with too many vexatious claims. This clause is, in some senses, no more than a perhaps not totally well thought out attempt at an experiment to see what happens and whether we can agree, with benefits to the employee, to have much less demanding employment law.

I am a little concerned that those opposing this Bill are, to me, today’s establishment from all sides of the House, and not the people at the coal face who are trying to promote small businesses. The clause could be polished up—I hope that it will be—before it is enacted, and some things may be wrong, but at least in an important way it accepts the point that many others do not seem to accept, which is that employment law in this country, particularly in the world in which we live today, is costing us jobs and prosperity, and something needs to be done about it.

[Lord Adonis]

My Lords, in my eight years in the House I have never witnessed a government policy with less support not only in Parliament but within the Government themselves. We greatly admire the stoicism of the noble Viscount, who will read out his brief in a moment, but it is no secret that his own Secretary of State, Vince Cable, does not support this clause. This is what he said when he vetoed the original Beecroft plan to scrap unfair dismissal rights:

“Britain has already got a very flexible, co-operative labour force. We don’t need to scare the wits out of workers with threats to dismiss them. It’s completely the wrong approach”.

Most Conservative and Lib Dem Back-Benchers clearly think that it is the wrong approach, too. Only two government Back-Benchers have supported this clause at any stage in our debates, and they have been not only outnumbered on their own Benches but massively outgunned, not least by the powerful speeches made this afternoon by the noble Baroness, Lady Brinton, the noble Lords, Lord Forsyth, Lord King, and Lord Vinson, and the noble Baroness, Lady Wheatcroft.

To remove this clause today would be an act of mercy to the Government, let alone to the employees adversely affected by it. Justin King, the chief executive of Sainsbury’s, who was on the Prime Minister’s business advisory group, said that trading basic employment rights for shares was,

“not what we should be doing”.

He went on to say:

“What do you think the population at large will think of businesses that want to trade employment rights for money? … Our agenda … should be making employing people easier and less costly”.

That is absolutely right.

We are talking here about the right to statutory redundancy pay, the right not to be dismissed unfairly, the right for parents and other carers to request flexible working, and the right to request training. The idea that depriving employees of these basic rights is somehow going to boost growth is not supported by a single employer I have met, let alone employee. Out of the 219 responses to the government consultation, only five welcomed the idea. The noble Lord, Lord Deben, summed up the mood of the business community and the House when he told us in Committee:

“I cannot imagine any circumstances whatever in which this would be of any use to any business that I have ever come across in my entire life”.—[Official Report, 6/2/13; col. 293.]

He might have added that protection against unfair dismissal and the restriction on contracting out from basic employment rights were introduced by Conservative Governments in the 1970s and 1980s.

Throughout our debates, I have emphasised that we on this side strongly support wider employee share ownership, and we backed proposals to that effect in the Nuttall report, published only eight months ago. However, that is entirely different from trading shares for basic rights in what is generally an unequal employment relationship, which is the very reason why employment rights exist in the first place and why they have been built up by Governments of all parties over many decades.

I stress that the Nuttall review did not so much as mention trading shares for rights, and the Minister has been quite unable to explain to the House why, if this proposal is such a good idea, it was not even considered, let alone endorsed, by the most comprehensive review of employee share ownership in recent years. Meanwhile, the Employee Ownership Association has said:

“There is no need to dilute the rights of workers in order to grow employee ownership”.

However, let me put these arguments of principle aside for a moment. The policy is internally flawed in two key respects. First, its key rationale is that it will promote growth by reducing employment law red tape for companies. In fact, as the Law Society argues cogently, it will create more red tape, not less, because it is bound to lead to costly litigation. In particular, it will lead to a rash of claims of discrimination because discrimination will be the only avenue for aggrieved employees to pursue once they have no rights to redundancy pay or unfair dismissal.

The second respect in which this proposal is internally flawed is that the Government claim—the noble Viscount repeated the claim in the previous debate—that this is an entirely voluntary new employment status, with no coercion on anyone to accept it. The problem is that on any fair assessment this claim is simply not true. There is no requirement in the Bill for employers to provide independent advice to those being offered these shares-for-rights jobs. It is therefore likely that individuals, particularly the more vulnerable and low paid, will not be properly aware, if they are aware at all, of the rights they are forgoing in return for shares worth as little as £2,000 at the time they are issued—shares that could easily be worthless by the time they come to sell them. That is why, in Committee, we supported amendments requiring independent advice to be made available before individuals sign shares-for-rights contracts, but the Government refused to accept those amendments. This being the case, Clause 27 stands condemned by the Equality and Human Rights Commission, which says in its advice to your Lordships:

“A failure to include effective safeguards in the proposals would make it strongly arguable that the proposals indirectly discriminate against those less likely to be able to make a properly informed or truly voluntary decision, for example, people whose first language is not English, those with learning disabilities, or young workers”.

Worse still is the position of individuals on unemployment benefits, who far from being given a voluntary choice about accepting no-rights jobs are being told by the Government that they stand to lose their income if they do not do so. In order to make it look as if they were sympathetic to these concerns, Ministers said that they would amend the guidance to DWP decision-makers in cases of appeal against loss of benefits so that decisions were taken on a reasonable basis. Despite months of badgering the noble Viscount and his department, we did not even see this revised DWP guidance until last week. I am very grateful to him for finally making it available to us. Now that we have it, I can see why the noble Viscount thought concealment the better part of valour, as the noble Lord, Lord Pannick, said so eloquently, for it states in terms:

“Employee shareholder vacancies should on the whole be treated in the same way as any other vacancy”.

In other words, if the jobseeker does not take a no-rights job, they are likely to lose their benefits. I cannot see what is voluntary about that transaction.

As Paul Callaghan, a partner of the respected legal firm, Taylor Wessing, puts it,

“shares-for-rights contracts will be optional to the extent that eating and drinking are optional”.

As if all I have said so far is not enough, there is another major and completely unacceptable aspect of this shares-for-rights proposal. The independent Office for Budget Responsibility has reported that it opens up a £1 billion tax avoidance loophole. During Committee, the noble Baroness, Lady Brinton, quoted the coalition agreement, which says that the Government will,

“make every effort to tackle tax avoidance”—

and,

“will seek ways of taxing non-business capital gains at rates similar or close to those applied to income”,

yet Clause 27 does precisely the opposite.

In his letter to me last week, the Minister confirmed that the first £50,000 of shares given to an employee shareholder will be free from capital gains tax when they are sold. It is for this reason that the Office for Budget Responsibility estimates that the scheme will cost the Exchequer £1 billion a year when it is mature. At this point, we enter the world of the surreal.

17:30

[Lord Flight]

I cannot see the argument that making shares free from capital gains tax is an act of tax avoidance or improper tax treatment, when one considers the other side of the coin, which is that a valuable employment allowance is being given up. It is not dissimilar to other situations where there are tax incentives to invest.

[Lord Adonis]

I am sorry that the noble Lord has difficulty in seeing the argument. This is creating a completely new branch of the tax avoidance industry. If that is not obvious, not many obvious statements have been made in the House this afternoon.

[The Earl of Erroll]

Excuse me, but I cannot let the noble Lord get away with that. It is the same as any other employee shareholding scheme; to suggest that it will create new tax avoidance, when the Government are trying to introduce tax-efficient schemes for investment purposes, is hammering people ridiculously.

[Lord Adonis]

My Lords, a new scheme is being introduced by this Bill. It is not an existing scheme. If that were the case, we would not be here debating it. It is the new opportunities that the scheme creates for efficient tax planning, if I may put it that way, that has led the Office for Budget Responsibility to say that it will lead to the Treasury forgoing up to £1 billion.

At this point, we enter the world of the surreal because we are debating a tax loophole that will add £1 billion a year to the deficit. The proposals are from a Chancellor of the Exchequer who tells us day in and day out—indeed, only a few hours ago in the Budget—that reducing the deficit is the nation’s overriding priority.

[Lord Flight]

My Lords—

[Lord Adonis]

My Lords, I have given away twice to the noble Lord. He has had plenty of opportunity to make his case.

[Lord Ahmad of Wimbledon]

My Lords, we are on Report. Only points of clarification should be sought, and I ask the House to respect the rules.

[Lord Adonis]

I am happy to give way to the noble Lord because every time he intervenes he maximises the vote in favour of the amendment.

[Lord Flight]

The noble Lord clarified my previous point that the scheme was a new scheme that did not create tax avoidance. If the scheme did not exist, there would be no tax revenue at all. The Treasury will therefore not lose tax revenue as a result of the tax arrangements; it will merely not get as much as it might otherwise get.

[Lord Adonis]

My Lords, who knows to what the funds would have been devoted before the scheme was created? That is the answer to the point about whether the scheme leads to more efficient tax planning of a kind that leads to real income being forgone, not just additional income that might be generated from these contracts.

To conclude, by removing this clause we will be saving the Chancellor from himself; we will be saving the Government from themselves; we will be doing our basic duty as a revising Chamber; but, more importantly than any of this, we will be protecting decent hard-working people from the unfairness and humiliation of being stripped of basic rights at work. Our duty is clear.

[Lord Razzall]

My Lords, I was hoping to precede the noble Lord, Lord Adonis, but he was too far out of his trap, and I am sure that he wanted to speak immediately before the Minister. It is not often that we have the perils of coalition government being laid as bare as it has been in the House this afternoon. It is particularly refreshing to see that the strains in the coalition are not just among the Liberal Democrats. I sometimes wish that the noble Lord, Lord Strathclyde, had been in his place this afternoon to see that it is not only the Liberal Democrats who cause problems within the coalition discussions.

[Lord Ahmad of Wimbledon]

My Lords, I have already indicated that there are specific rules on Report that need to be respected. I think it is the will of the House that we should now hear from the Minister.

[Lord Graham of Edmonton]

Good luck.

[Viscount Younger of Leckie]

My Lords, we have discussed the employee shareholder clause at length, and some Members of this House in Committee questioned the merits of establishing a new employment status. Several noble Lords raised concerns about who will use the new status, the quality of the guidance, to whom it would apply and when it would be available. Concerns were also raised about income tax and jobseeker’s allowance as it applies to those who are seeking employee shareholder status. I am grateful to noble Lords from all sides of the House for their contribution to the debate, and I want to take some time to address some of the main concerns about the new status—and it is a new status. I acknowledge the negative comments that have arisen today, but it is the Government’s belief that there is demand for a new employment status of employee shareholder, that it will be used, that it will benefit employers and individuals, and that, in turn, it will help the economy to grow.

We believe that the two existing employment statuses of worker and employee do not offer enough flexibility to employers or offer real opportunities for individuals who want to share the rewards of a growing business. There is support for this new employment status, and we have evidence of that from the Institute of Directors, the British Venture Capital Association, the Federation of Small Businesses, Stuart Rose and, at the other end of the scale, from the heads of many small businesses, including Will Butler-Adams, the chief executive of Brompton Bicycle Ltd, and Jamie Murray Wells from Glasses Direct. I could go on.

By creating a new employment status with fewer rights than employees have but more rights than workers have, we are providing a new contract type to give employers more flexibility and options in how they structure their workforce. This new employment status will support this Government’s ambition of securing a strong UK labour market where individuals can have greater and potentially more rewarding access to the work they want. Employers can secure the labour that they need at the right time in order to capture new markets and sell their products in an increasingly competitive global environment.

This new status is most likely to be attractive to young and growing companies, which will be able to share potential future growth with their staff. The employee shareholder status may tip the balance in favour of these types of companies as they seek to attract high-calibre people. This is because companies will be able to offer shares that will not be subject to capital gains tax, as we have heard today, and it is a radically new approach to taking people on.

We should be developing and supporting innovative ideas that give employers new tools to manage their workforce effectively and to succeed. This new employment status is one such tool and we should give employers the option of using it. Indeed, with the interest expressed, it would be an opportunity missed to deny them the use of this novel tool.

When we think of people working, we automatically have in mind employees with substantial employment rights. However, we must not make such assumptions. Not all individuals in the labour market are employees. Some are sole traders, others are self-employed and some are defined as workers. These individuals do not have a whole host of employment rights, as I outlined clearly in Committee.

Employee shareholders will have more employment rights than workers and they will own thousands of pounds-worth of shares in the company or parent company for which they work. Because these shares are exempt from capital gains tax, employee shareholders may be in an advantageous position. Of course, the risk remains that the shares held may decrease in value, emphasising the greater risk and reward-sharing that this employment status represents. I think that those points on the negative side have been made pretty clearly today.

I now turn to how the new status will work. We must all remember that before an individual can be considered to be an employee shareholder, paragraphs (a), (b) and (c) of new Section 205A(1) introduced in Clause 27 stipulate that three criteria must be fulfilled. This means that if an individual does not agree to be an employee shareholder, they cannot become one; it means that if an individual does not receive at least £2,000-worth of shares, they will not be an employee shareholder; and it means that if the company tries to charge for the shares or does not give fully paid up shares again, the individual will not be an employee shareholder. If the individual signs what looks like an employee shareholder contract without all three qualifying criteria being fulfilled and still works for the company, that person is likely to be an employee and will be entitled to all the employment rights associated with that status.

The new status confers more advantages than beneficial tax treatment alone. I intend to give a much more positive picture than that given by several noble Lords today, including my noble friend Lord Forsyth. Let us consider what this means for the employer of an employee shareholder. An employee shareholder is more likely to generate ideas for growing the company and will have a greater incentive constantly to strive to improve a product, effect a sale or streamline a system. Because the employer knows that the employee shareholder is an owner, the employee shareholder is more likely to be listened to. The employee shareholder status is more likely to encourage co-operation and cohesion between the employer and employee shareholder as their personal goals are more aligned. I listened carefully to my noble friend Lord King and was pleased that he conceded that this could suit certain companies and certain employees, which is precisely what we are saying.

Our companies are competing in a global race to increase their competitiveness and market share, and to create wealth. In turn, this will create new job opportunities. Employee shareholder status presents our companies with an additional option to employ people who will invest in the long-term success of the company, lowering labour turnover and associated costs.

Let me turn now to guidance. During our debate in Committee, guidance for employee shareholders was discussed at length. As promised, a full pack of draft guidance was laid in the Library of the House on 14 March. This has given your Lordships the opportunity to see what the employee shareholder guidance for individuals, companies, DWP jobcentre advisers and decision-makers will look like. It is something that we promised. It is in draft form. It will continue to be drafted. The plan is that in September it will be in its final form. I welcome comments to improve the guidance on all fronts.

We have designed the guidance in collaboration with other government departments, such as HMRC and DWP, and have worked hard to keep it as simple as possible so that it is easily understood by its target audience. Noble Lords will remember that in Committee I referred to a much larger document of 3,000 pages. This has produced a much more simple approach. The guidance is not final. We have tested the guidance with jobcentre advisers and are continuing to test it with the Employment Law Review Business Challenge Panel. Where needed, we will refine the guidance before the new status is used in September this year.

The draft guidance comprises three parts. The first part is guidance for individuals that will make it clear for people considering employee shareholder jobs what employment rights are associated with these jobs, the risks and rewards of being a shareholder and other factors that they may wish to consider before accepting, or otherwise, an employee shareholder role. Secondly, guidance for companies will help them understand the employee shareholder status, what it means for them and how they can use the status within their workforce. The third part is guidance for DWP Jobcentre Plus advisers and decision-makers to ensure that they understand the new employment status.

People in receipt of jobseeker’s allowance will be expected to consider employee shareholder jobs if they match the criteria agreed in their jobseeker’s agreement. This agreement would have been discussed and agreed with a Jobcentre Plus adviser on first attending a jobcentre and would set out the jobseeker’s job goals, availability for work, any agreed restrictions and what steps they will take to look for work. I will return to that in a moment.

I should like to pick up on a number of questions. There were quite a few and I may not be able to answer them all. The noble Lord, Lord Pannick, stated that no evidence was provided about the number of companies that might be interested. I believe he will know that last year the Government published an impact assessment. The background to how we came to the figure of 6,000 businesses is that there are a large number of businesses within the UK. In 2012 figures, it is estimated that there are about 4.8 million, not all of which will be able to use the employee shareholder status, as only companies can issue or allot shares. That is essential for the employee shareholder status to operate.

Just over 55% of all businesses in the UK are registered companies: that is, around 2.7 million. However, not all are estimated to have employees beyond the self-employed owner-manager of the company or a single employee director. This figure is probably less than 1 million. In 2010-11, around 9,000 companies were operating any form of approved tax-advantage share scheme in the UK. There will be more than this operating non-tax-advantage share schemes. Our approximate estimate, therefore, is that around 6,000 companies, as I said in Committee, may use the employee shareholder status, although I acknowledge that it could be more or less. Employee shareholders are a new option for companies, which they can choose to use when it suits their circumstances. It is not so much about whether the figure is 6,000, 4,000 or 7,000; the point is that the opportunity is there for companies to pick this up, or not, as is their wish.

17:45

I now return to the subject of the jobseeker’s allowance. The noble Lord, Lord Pannick, as I mentioned earlier, supported by my noble friends Lady Brinton and Lord Forsyth, questioned whether it was reasonable to require JSA claimants to take on an employee shareholder role. If down the road a jobseeker was seeking a job where benefits might be lost, it would be because they had reached the point when they were defined as a mandated jobseeker. It would be very unlikely and unusual, we think, for an individual to reach the point at which they were mandated, be offered an employee shareholder job and then turn it down. There may be one or two, but it is very unlikely.

Overall, the main point that I want to make is that, when it comes to jobseeker’s allowances, the employee shareholder role, as a new role, is being treated in the same way as that of employee and worker. We believe that it is just as important to move jobseekers into work at whatever level they are looking at.

[Baroness Brinton]

The guidance notes that we saw were quite explicit that the prospective employee shareholder applicant should be treated exactly the same as any other applicant, with the one exception of their financial resources being such that they could not pay the tax bill right at the start. If that is the case, the argument made by the noble Lord, Lord Pannick, myself and others is that, first, that penalises those who are concerned about losing their rights. Secondly—and this is the core question—is it voluntary? The Minister has emphasised right the way through the debates on the Bill that the scheme is utterly voluntary.

[Viscount Younger of Leckie]

It is indeed voluntary, but I would like to clarify that when it comes to a jobseeker seeking a job, they are treated in exactly the same way as other statuses. That is because we believe it is important to move jobseekers into work as quickly as possible, just like other statuses. Periods of unemployment, as we know, can have a most damaging effect on individuals’ long-term employment prospects and indeed earnings. That is why the jobseeker allowance regime focuses on moving claimants into any work as quickly as possible. This remains the case for the employee shareholder should they be mandated and reach the point when they are offered this particular position. We think it is right that they should not be treated any differently in this particular respect.

[Lord Adonis]

I am having some difficulty following the Minister's argument. He says that the acceptance of these posts is indeed voluntary, even though the individual in question stands to lose a substantial part or the entirety of their income if they do not accept the post. Could he explain to the House in what meaningful sense that is voluntary?

[Viscount Younger of Leckie]

It is voluntary in that the individual can decide whether he or she wants to take this particular role. If it has got to the point where they are mandated and there is an issue as to whether they take it or not, there are processes in place to work out how to go forward. That is the process that the noble Lord, Lord Adonis, will know is set as part of the guidance. The decision makers and the jobcentres know how to deal with it on a case-by-case basis.

[Lord Adonis]

This is a really crucial point in our deliberations. The guidance that the Minister circulated to your Lordships says:

“Employee Shareholder vacancies should be treated in the same way as any other vacancy. If a claimant … fails to apply for or accept if offered an Employee Shareholder vacancy … the DM”—

the decision maker—

“will consider a higher-level sanction in the normal way”.

It could not be clearer that those not accepting these posts will be subject to sanctions. Therefore, in any meaningful sense, their decision is not a voluntary one.

[Viscount Younger of Leckie]

I can only reiterate that employee shareholder status is being treated in the same way, and that if in a specific case an issue arises, that is down to the discussions and decisions made at the local level in the jobcentres and with the employees who are seeking work. It is not just work for an employee shareholder as it may be that they are looking at a number of other positions at the same time.

The noble Lord, Lord Pannick, asked why we do not compel legal advice such as compromise agreements. Again, in the same bracket, we would say that this is to do with individuals looking at and accepting employment; it is not to do with departure from employment. We do not wish to treat the entry into employment in a different way. That is where we are.

The right reverend Prelate the Bishop of Bristol raised a number of points concerning whether this scheme is morally wrong. I think he used the expression “the thin end of the wedge” and that it was the beginning of the end for employment rights. I would reiterate that this is a new employment status which offers a different set of rights and mandatory share ownership. The status is not compulsory for companies to use and it will be suitable only for those companies that want to share ownership with their workforce. We must remember that employee shareholders will retain the majority of employment rights, including, for example, automatic unfair dismissal rights and the right to be paid the national minimum wage. As I said earlier, we have been consistent that the new status will not suit all people or all companies, but for those who choose to use it, the employee shareholder status offers more flexibility and allows greater risk and reward sharing between people and companies.

The right reverend Prelate also asked about flexible working. The statutory right to request flexible working creates a structure for conversations between employees and employers about changes to the ways of working that will be mutually beneficial. Employee shareholders will have a greater interest in the performance of their employer as it is linked to the value of their shares. We consider that employee shareholders are more likely to request flexible working if they think it will help them and the company, and do not need the statutory right to request. Further, employee shareholders can still make non-statutory requests for flexible working.

The Government want a labour market that works for employers and individuals. We want flexibility so that it is easy for people to find work that suits them and we want to help employers manage their staff more effectively so that they can focus on running and growing their businesses. We want to give individuals more chances to share in the growth agenda and to own shares in their employer. It is the Government’s belief that with this new status we are offering companies more choice and more flexibility. It is a new way of attracting high-calibre talent to growing companies. It may provide a boon to companies and improve UK competitiveness. This status offers individuals something new: employment with favourable tax treatment.

We all recognise that this may not suit everyone, and I have listened carefully to all the comments this afternoon. However, we should not deny people the opportunity to use this status or deny companies in the UK that are striving to grow and are looking for innovative and modern ways of taking people on. We want the House to embrace the opportunity and flexibility that this new status presents, and I would therefore ask the noble Lords, Lord Pannick and Lord Adonis, my noble friend Lady Brinton and the right reverend Prelate the Bishop of Bristol to withdraw the amendment.

[Lord Pannick]

My Lords, I thank the Minister for his comprehensive reply. I sympathise with him because I am sure it was not in his bathtub that this foolish idea was dreamt up. I am very sorry that the Government have not listened in particular to the noble Lords, Lord King of Bridgwater, Lord Forsyth of Drumlean and Lord Vinson, and to the noble Baroness, Lady Wheatcroft. Between them they have years of experience as employment Ministers and in business. Their views echo those expressed in Committee by the noble Lord, Lord Deben, with his business experience, and by many others. They are views that reflect the opinions around the House, not just on the Government Benches but on all sides, on the implications of this unwise proposal.

As your Lordships have heard, concern about Clause 27 is not a partisan issue. It is a question of the damaging effect that this clause will have on employment relationships, on industrial harmony and through the power it will confer on bad employers. Since the Government have declined to listen, it is time for noble Lords to put Clause 27 out of its misery. I wish to test the opinion of the House.

17:54

Division 1

Ayes: 232

---

Labour: 148
Crossbench: 56
Conservative: 9
Independent: 5
Liberal Democrat: 3
Plaid Cymru: 2
Bishops: 1
Ulster Unionist Party: 1

Noes: 178

---

Conservative: 113
Liberal Democrat: 51
Crossbench: 10
Independent: 1
Ulster Unionist Party: 1

18:07

Amendment 50A not moved.

Clause 28 : Orders

Amendments 51 and 52

Moved by

[Baroness Hanham]

51: Clause 28, page 36, line 19, leave out “6(4)” and insert “6(5)”

52: Clause 28, page 36, line 28, at end insert—
“( ) Subsection (4) does not apply to an order under section 6(6).”

Amendments 51 and 52 agreed.

Clause 31 : Commencement

Amendments 53 and 54

Moved by

[Baroness Hanham]

53: Clause 31, page 37, line 9, at beginning insert “Section 1(1) so far as it inserts the new section 62B,”

54: Clause 31, page 37, line 9, after “8,” insert “14,”

Amendments 53 and 54 agreed.

Amendment 55 not moved.

Amendments 56 to 58

Moved by

[Baroness Hanham]

56: Clause 31, page 37, line 9, leave out “Schedule 2”and insert “Schedules 2 and 4”

57: Clause 31, page 37, line 11, leave out “14,”

58: Clause 31, page 37, line 11, leave out “, and Schedule 4,”

Amendments 56 to 58 agreed.

Enterprise and Regulatory Reform Bill

Wednesday 20th March 2013 Lords Chamber

Third Reading

18:08

[Baroness Anelay of St Johns]

My Lords, it is at this moment on some Bills when I have a duty, as government Chief Whip, merely to give indication of the Queen’s consent. It is only a procedural matter before we go into the Bill.

I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purpose of the Enterprise and Regulatory Reform Bill, has consented to place her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Clause 1 : The green purposes

Amendment 1

Moved by

[Viscount Younger of Leckie]

1: Clause 1, page 1, line 10, leave out “subsection (1)” and insert “this Part”

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)]

My Lords, the amendments in this group make consequential provisions on the clause that the House agreed on royal charters and make some minor and technical improvements. Following the Government’s acceptance of the amendment of the noble Lord, Lord Stevenson, earlier this week in relation to royal charters, we have brought forward a clause dealing with the extent of this provision. We have by that amendment limited the extent to England and Wales.

The Government have been clear that they respect the right of the Scottish Government and Northern Ireland Executive to consider how they wish to respond to the recommendations of the Leveson report. Only last week, the noble and learned Lord, Lord McCluskey, presented the report of his expert panel on how Lord Justice Leveson’s recommendations could potentially be implemented in Scotland. The body created by the royal charter would be capable of operating throughout the United Kingdom, including Scotland and Northern Ireland, should the devolved Administrations want it to. The Government have been clear that whether it does so is a matter for discussion with the Scottish Government and the Northern Ireland Executive. However, it is important that we observe the boundaries between our respective powers, and it is for this reason that the extent is limited to England and Wales. This is because the measures, were they to have UK-wide extent, would also prevent Scottish Ministers or Northern Ireland Ministers from exercising their royal prerogative to make recommendations to Her Majesty in Council in respect of these devolved matters. It is therefore an issue that should be discussed more fully with the devolved Administrations to allow them the opportunity to comment.

It is important to note that nothing in this clause prevents the charter from operating across the United Kingdom, if that is desired. If the Government are asked by the Scottish Government or Northern Ireland Executive to extend the provisions, we will consider doing so.

As the Prime Minister announced in the House of Commons on Monday, the Secretary of State for Culture, Media and Sport and the Advocate-General for Scotland will shortly have discussions with Scottish Ministers. Such discussions will also be held with Ministers of the Northern Ireland Executive. Those discussions will consider whether the extent of the new clause should be amended to go beyond England and Wales, during consideration of amendments in the other place. The amendments before us also amend the Long Title of the Bill to reflect inclusion of the new clause, and provide that the clause will come into effect on Royal Assent.

Amendments 1 and 2 are minor technical amendments relating to the UK Green Investment Bank which seek to improve the drafting of Part 1 of the Bill. Amendment 1 ensures that references to greenhouse gases throughout Part 1 of the Bill—not just in Clause 1(1), as previously—are given the same definition as in Section 92(1) of the Climate Change Act 2008. Amendment 2 clarifies that the activities referred to in Clause 5(2)(b) have the same meaning as those referred to Clause 5(2)(a).

Moving on to competition, Amendment 14 is a technical amendment to Schedule 4. It has two purposes. First, it will enable us to provide for the appointment to the CMA panel of individuals who have already served eight years on the Competition Commission panel but require temporary appointment to the CMA panel to see out an existing inquiry. Secondly, it will enable us to make clear that other Competition Commission panel members who are appointed to the CMA panel can subsequently be reappointed to the CMA panel to see out an inquiry which began when they were members of the Competition Commission panel. I beg to move.

[Lord Stevenson of Balmacara]

My Lords, I am grateful to the Minister for introducing these amendments. We are broadly happy with the majority of them. I have just a couple of points concerning the territorial issues he talked about in relation to the royal charter, which may have eluded me. I am sure that he will be able to put me right.

As I understand it, the royal charter will operate across the whole of the United Kingdom but the intention of government Amendment 12 is to restrict the effect of the entrenchment clause—which was passed in this House on Monday—to England and Wales. However, if it is subsequently decided that the measures should be enacted for Scotland and Northern Ireland, what are the Government’s intentions? I think the Minister said that he expected that these discussions would be concluded by the time we were in receipt of any comments that the House of Commons might want to make on the Bill. If my arithmetic is correct, that is only three or four weeks away so we are putting rather a tight timetable on it. In the unlikely event that these discussions continue beyond that date, can the Minister speculate on how it would be possible to amend the Bill once it has received Royal Assent, or does he have other plans that would allow us to take that forward?

My second point is a rather narrow one. We are dealing with royal charters and therefore the territories to which they apply. While Her Majesty has been gracious in allowing her prerogatives on this point to be surrendered to Parliament, what happens to other territories, such as the Channel Islands and the Isle of Man, where the royal charter will clearly have effect but the clause of the Bill will not run because it is limited to England and Wales specifically?

18:14

[Viscount Younger of Leckie]

I thank the noble Lord for those questions. It is anticipated that the discussions that are going on with the Scottish Government will be concluded within three weeks, or whatever the time period is. That is obviously not guaranteed but the talks are regarded as being urgent and are happening immediately. On what would happen if they were not concluded, it is a question of wait and see. I will certainly get back to the noble Lord with a reply. On the noble Lord’s second question concerning the extension of the royal charter to the Channel Islands, I will need to get back to him with a response.

Amendment 1 agreed.

Clause 5 : Accounts, reports and payments to directors

Amendment 2

Moved by

[Viscount Younger of Leckie]

2: Clause 5, page 4, line 9, leave out “its” and insert “those”

Amendment 2 agreed.

Clause 71 : Letting agents etc.

Amendments 3 to 6 not moved.

Clause 74 : Abolition of Agricultural Wages Board and related English bodies

Amendment 7

Moved by

[Lord Whitty]

7: Clause 74, page 67, line 26, at end insert—
“(5) Prior to the commencement, under section 98(3), of this section and Schedule 20, the Secretary of State shall publish and lay before both Houses of Parliament an updated impact assessment of the effect of the abolition of the Agricultural Wages Board on the agricultural economy and on the wages and conditions of those who work in that sector.”

[Lord Whitty]

My Lords, I make no apologies for returning to this subject. We have left the Agricultural Wages Board in a very difficult position. The substance of the matter was carried on 7 March and clearly the Government have the primary authority to abolish the board. In fact, they already had because it was in the Public Bodies Act. The difference is that the Public Bodies Act required a stringent and enhanced system of scrutiny to be followed before abolition could be implemented. We are now in the ludicrous position, after a very late amendment to the Bill, in which the only public body that is not subject to an enhanced scrutiny process—which this House insisted, after some very difficult and bitter debates, must apply to all public bodies—is the Agricultural Wages Board.

I am not sure if it is in order to cede the ground to the noble Baroness, Lady Gardner of Parkes. Clearly, her amendment preceded mine. I am getting a shake of the head from the Clerk at the Table. That is the procedure, I am afraid. I am sorry.

[Baroness Gardner of Parkes]

I thank the noble Lord for that. Unfortunately I had to wait for the lift and I got stuck getting here. Apparently there is no way we can go back to my amendments. Is that correct? Perhaps the Minister or someone else will answer. I had every intention—I had waited here all day specifically—to move these amendments.

[Baroness Garden of Frognal]

I am sorry to say to my noble friend that her amendments were called and not moved, so I am afraid that we have now moved on to Amendment 7.

[Lord Whitty]

My Lords, I apologise to the noble Baroness. We almost missed this amendment as well so I quite understand the hurry. This indicates the rigidity of our procedures because my original intention at Third Reading, given that we got a printed copy of the Bill that had the Agricultural Wages Board in it only yesterday, was to insist that an equivalent procedure be written into this Bill for dealing with the implementation of the abolition of the Agricultural Wages Board in the same way as that applied to every single other public body.

That is not in order for Third Reading and, obviously, I accept the advice of the clerks in these matters. I have therefore concentrated on a very narrow area which was not fully debated last time, although we touched on it in some detail. However, there was no amendment before us then that required a further economic assessment from the Government of the impact of the abolition of the Agricultural Wages Board.

The fact of the matter is that there was considerable confusion at the previous stage as to what the economic assessment was. The Government have not produced the kind of Explanatory Memorandum that is required under the Public Bodies Act, but there was a document called the “economic assessment”, which went with the rather curtailed consultation and clearly indicated that the main effect of this Bill would be a significant reduction in the aggregate income of agricultural workers by nearly £0.25 billion over the next 10 years. Those were the figures provided by Defra via the Minister and the impact assessment.

On the day that we last debated this matter, and having queried whether that was still the Government’s position, I received a letter from the Minister which said, “No, no, these figures were all got up”—I paraphrase slightly—“by the consultants”, and that the department did not believe a word of it. He said that the consultants had advised at the top end of the range, whereas the Government thought that the outcome would be at the bottom end of the range. That is not a very satisfactory position in any circumstances and it is certainly not satisfactory when we are abolishing a body which has existed for many years and is the only one in this cull of the quangos which specifically tries to protect the living standards of a group of rural workers.

In the debate that followed, all sorts of interpretations came on to the agenda. I tended to agree, because I am conventional sort of person, that what the department had told us was probably right. Therefore, I agreed with the statisticians who were advising Defra. The Minister had already indicated that he did not really agree with them; others of his supporters said various different things. Some, whom one might characterise, perhaps unfairly, as being of the landowning tendency, said that it would be all right because they already treated their chaps decently, which is fair enough; other people said that the international competitiveness of English agriculture—because the other parts of Britain do something different—was dependent on being able to cut wages. Some of those people were the very same people who argue rather the opposite when it comes to banking, but let us let that pass. Others—I think that the noble Lord, Lord Cavendish, was among them—argued that agricultural wages were excessive already and were greater than those of hotel workers. That seemed rather to prove my point, because the wages councils in the hotel and catering industries were abolished some years ago.

However, it was clear that there was no compatibility between the various interpretations of the best estimate of the outcome as compared with the Government’s own figures and as compared with the Minister’s position and my position. There are four or five different interpretations. That is not good enough.

I am therefore proposing a very modest amendment: the Government should come up with a new economic assessment before they trigger the commencement proceedings on this Bill. Surely everybody who spoke in that debate and everybody who has an interest in this area should be in favour of that, because we want a robust economic assessment. Whatever we may think about the abolition of the board and whatever opinion we may have about the need to raise, reduce or protect wages, we should get a better economic assessment before we do it. That is really all my amendment proposes.

It would have one other benefit for the Government: it would take a bit of time and it would be interesting to know what timetable the Government have in mind for the implementation of abolition. After all, discussions on this year’s round of wages have already started and would normally be for implementation in October. In effect, if the Government let that round go, the Agricultural Wages Board’s underpinning of wages would run until October 2014 at least.

The Government need a bit of time because there are a number of issues which do not relate to wages but are covered by the agricultural system. One of them is the situation relating to Wales, which wants a different outcome. The position on Wales is not resolved by the Government’s clauses as they now stand in the Bill, so they need a bit of time to sort out the Welsh situation. They also need to deal with the non-wage aspects of the agricultural wages order, in particular those aspects that deal with tied cottages for permanent workers and those that deal with adequate accommodation for migrant and seasonal workers. It is only the Agricultural Wages Board which provides that migrant seasonal workers are required to have one bed each rather than 20 of them sharing a six-berth caravan, as was the situation prior to it being regulated by the wages board. So those matters need sorting out. Some protection is needed in law or in regulation once the board goes.

I am doing the Government a favour by putting forward this amendment. The Minister has had a rough day so far, but I am offering him a way out here. So that we no longer argue about this—and subject to what the Commons say, because they have not seen this amendment yet—we need, before the Government implement this clause, a clear economic assessment which the House and another place can debate if necessary. That will also give the Government the time to sort out the other loose ends. I therefore assume that the Government will accept my amendment and that we can then move on and complete this Bill. I beg to move.

[Earl Cathcart]

My Lords, I farm in Norfolk. The noble Lord, Lord Whitty, argues his case well, as he always does. He calls for yet another impact assessment of the effect of the abolition of the Agricultural Wages Board on the agricultural economy and on the wages and conditions of those who work in the sector. I am afraid that I do not agree with his arguments, as I do not see the point of yet another impact assessment for three reasons.

First, average earnings in 2010 for full-time farm workers were 41% above the industry minimums set by the board. More recent data from the Annual Survey of Hours and Earnings, the ASHE, showed that more than 90% of workers employed in agricultural trades received gross pay above the agricultural wages order grade minimums. It is reasonable to conclude that the vast majority of farm workers are paid well above the agricultural wages order minimums already.

Secondly, current contracts will remain the same—that is, 41% above the wages board rates—so we are talking just about new contracts. The latest impact assessment states that if demand remains strong relative to supply, as evidence suggests is likely to be the case, wages are unlikely to be eroded as farmers will need to attract workers. The important point here is that if farmers want to attract workers, they will have to continue to pay at least what the worker might expect from comparable work outside farming, which is several thousand pounds more than the agricultural workers’ rate.

Thirdly, to assist farmers and employers, the National Farmers’ Union has agreed to publish a regular series of comparative indicators to help inform employers undertaking periodic pay reviews. These comparative indicators will take account of factors such as cost-of-living changes, the labour market, comparable industries and farm business conditions. They will also provide an opportunity to focus on regional differences rather than national, one-size-fits-all data, which is in keeping with the flexibility that we need in our industry.

The National Farmers’ Union has agreed to publish regularly all the data that the noble Lord, Lord Whitty, calls for in this amendment. Let us not duplicate the work. I do not see the need for yet another impact assessment.

18:30

[Baroness Donaghy]

My Lords, it is extremely regrettable that the confusion about the failure to move Amendment 3 meant that attention was distracted from the moving of this amendment. I have sympathy for my noble friend Lord Whitty: he nobly stood in quickly but that distracted attention from the seriousness of the subject matter.

The Minister will know that I raised this issue of impact assessments in Committee. We had already had two different impact assessments. I thought that was rather worrying, although we got a bit of an explanation as to why it happened. I want to take this slightly wider than just the issue of the impact assessment. My concern is what happens after the Agricultural Wages Board disappears. I am not as optimistic as the noble Earl, Lord Cathcart, that some paternalistic system handed down by the NFU will be an adequate substitute for an equal system—perhaps a joint industrial system. Wearing my hat as former chair of ACAS, I think it important that there is equality of status between farmers and farm workers when it comes to discussing conditions of service and, more importantly, training. That was one of the things that the Agricultural Wages Board did and, incidentally, that was strongly supported by the NFU. It is regrettable that these issues have not been dealt with.

I am not talking about a standard impact assessment. We all have our doubts sometimes about the reliability of those. I mean sitting down and talking about what the future will be. What can we do as Members of this Parliament to ensure that there is an equality of consideration between those who work in the farm industry and those who own the farms? It is quite wrong in this day and age to stand up and say that we can rely on the representatives of the farm owners to give us the statistics. That is not the age we live in.

[Lord Curry of Kirkharle]

My Lords, I have huge respect for the noble Lord, Lord Whitty, and I thoroughly enjoyed working with him when he was a Minister in Defra. I admire his tenacity as far as the Agricultural Wages Board is concerned. I do not want to rehearse the arguments we went over when discussing this issue a couple of weeks ago but I will comment on the proposed amendment. I declare an interest as a farmer in Northumberland but I am not a landowner. I also chair the Better Regulation Executive.

I want to deal with the process of the impact assessment. The Regulatory Policy Committee, the RPC, scrutinises all impact assessments as submitted and scrutinised this one. It is required to present the range of possible outcomes as a consequence of a decision such as this—I commented on this during my speech in Committee. It has to look at the worst-case scenario, which is that over time wages fall to the national minimum wage. The point I made in the debate was that that is absolutely unlikely to happen because of the demand there is for agricultural workers. The differential in wages that exists now, as referred to earlier, will continue and may widen because once you remove the Agricultural Wages Board the market will itself respond. In my view, farm employees will then be even better off.

[Lord Deben]

My Lords, I took part in the earlier discussions. I apologise to the noble Lord, Lord Whitty, for missing the first of his lambent sentences. I am concerned about what he asks for. The noble Baroness wanted it because she felt that somehow or other this would be a patronising view. The National Farmers’ Union is not being patronising; all it will do is produce the figures. There is nothing patronising in that. You cannot have a negotiation to produce the figures. They are the figures, they will be the figures and we shall know what they are. Rather like speeches I have heard from the noble Baroness on this sort of subject before, she talked about a world that, if it ever existed, has long passed.

It is that that concerns me about the proposals of the noble Lord, Lord Whitty. I live in the country and own some land there—not much, but around the house in which I live—and I know the farmers round about. I find it insulting that farmers are the only group of the population that cannot be allowed to run their labour relations within the general context of the national system. As a countryman, I find great annoyance at the way in which urban people talk about farming as if it was so alien to the normal practices of life, so divorced from the normal issues of the marketplace and so unconcerned with the future, comfort and family life of its workers that it needs a special arrangement that no one else needs and that everyone else has shuffled off as being part of a historic circumstance. Yet the farmer has to be left with it and I find that insulting. That is also an indication that the party opposite does not understand the countryside at all, wishing to impress upon it things that have nothing to do with our knowledge in the countryside.

In the countryside today, good farmers are extremely difficult to get hold of. They are significantly better paid than the minima produced by the Agricultural Wages Board. No farmer worth his salt trying to compete in the modern world is unwilling to pay a proper wage to somebody doing what is an increasingly technical and difficult job. The Agricultural Wages Board was set up at a time when there was a wholly different farming structure. I admit that when I was Minister of Agriculture I would have liked to have got rid of the Agricultural Wages Board—even then—but since then the arguments for it have become even less pertinent. Agriculture is not like it was even 20 years ago. It certainly is not like it was when the Agricultural Wages Board was set up. I very much hope that the Minister will refuse to ask for yet another investigation.

To end, the noble Lord, Lord Whitty, very charmingly suggested that he was helping the Government and very charmingly suggested that he was only doing them a favour. I very charmingly suggest that he is actually trying to put this off again. This is another mechanism within the rules of the House to try to revisit this particular subject. Frankly, when the Agricultural Wages Board has gone, nobody will remember that it ever existed because life in farms will continue. We will have rid ourselves of an unnecessary burden, an additional cost and something that is a hangover from the past. Now, I am a great believer in tradition. I love the traditions of this House and am very keen on conventions of that sort but this is a tradition that we can do without. It is not necessary. I hope that my noble friend will not give this any shrift whatever.

[The Duke of Montrose]

My Lords, I apologise for having missed the first few words spoken by the noble Lord, Lord Whitty, but I know where he was coming from. I cannot fully agree with my noble friend Lord Deben: I think it is actually the other way round. I employ a couple of agricultural workers and know the set-up as it now occurs up north. Of course, that is miles away from the historical situation that we used to have there, whereby agricultural workers had no security whatever. They had what the Scots termed a seeking-on day. If the farmer did not come and see you on your seeking-on day, you knew that you were leaving. That happened every six months.

The Agricultural Wages Board and other things came in and have satisfied that element. It has also covered a great many other things. The complaint on the other side should be that not enough agricultural workers have joined the union because the agricultural workers will be in a strong position when this is introduced. Admittedly, you get the awkward position, if there is a farmer who employs only one employee, that he could terminate his contract and immediately bring in something entirely new.

The Minister gave me a very good answer to my questions, which he was not able to provide in the debate, stating that there will be, on a new contract, no automatic right to special rates of pay, but if you sacked the only worker you had, you would immediately destroy any chance of an amicable way of working in future. Not only that, if you had to renegotiate the contract, the other side could say, “I’m going to get my union representative along, and he will make sure that you comply”. Presumably, the union will also produce its own rates of pay. Of course, we now have these various certificates that you can gain, and from that you can develop a hierarchy of pay. So I should have thought that the fear of loss, while looking obvious initially, will, as the noble Lord, Lord Curry, said, work out the other way round.

[Viscount Younger of Leckie]

My Lords, the amendment of the noble Lord, Lord Whitty, would require Ministers to publish and lay before both Houses of Parliament an updated impact assessment of the abolition of the Agricultural Wages Board prior to the commencement of the provision to abolish the board. The House has already debated the impact of the abolition of the Agricultural Wages Board at considerable length both in Grand Committee and at Report, and has voted in favour of abolition.

The best estimate of £250 million over 10 years, which includes the potential impact on wages, sick pay and annual leave, is based on empirical academic research, which looked at wage levels in the past.

As I have made clear previously, the impact on wages, which is the largest cost, would account for only 1% of the total agricultural wages bill over the 10-year period. However, the impact assessment makes clear that there is and will remain considerable uncertainty about the impact and that in fact there may be no reduction in workers’ wages or other benefits. That is because the reality of the impact will depend on the behaviour of employers of farm workers and a range of other factors, such as relative strength of supply and demand for agricultural workers and the need to be competitive with other employers in the same area—points made most eloquently by my noble friends Lord Deben and the Duke of Montrose.

Moreover, there are a number of reasons why the impact is likely to be smaller than that suggested by the external research. A majority of workers already receive terms and conditions above the agricultural minimum wage rates, so it is probable that their wages would not be affected if the board were abolished. The underlying market conditions suggest that there will be a sustained demand for agricultural workers. Research indicates that there is a shortage of workers with relevant skills in the agricultural sector, and that that shortage is higher than comparable shortages in other areas of the economy. The agricultural workforce is also ageing, with 55% of the sector workforce aged over 45, which, again, is higher than in other sectors of the economy.

Moreover, agriculture is a huge industry, with tremendous potential for growth to meet the challenges of feeding the world’s growing population. As I said in the debate on Report, £250 million over 10 years assumes that every agricultural worker would see a relative fall in their wages compared with what they would have been due. We think that that is a highly unlikely scenario given the evidence of the demand for workers—a point made most eloquently by the noble Lord, Lord Curry. However, we deliberately decided to adopt a cautious approach in the impact assessment, given that there is some uncertainty.

18:45

In the absence of the Agricultural Wages Board, agricultural workers will be fully protected by the national minimum wage, working time regulations and other, wider employment legislation applicable to all other sectors. Defra published an impact assessment as part of the consultation exercise on the future of the Agricultural Wages Board. Following the consultation exercise, the impact assessment was updated to reflect 2012 prices and to include a correction in the initial analysis by the independent researcher. The final impact assessment has been made publicly available on the Defra website.

We are satisfied that the impact assessment has been prepared with due care and diligence. As noble Lords will be aware, this is not an exact science. By its very nature, an impact assessment is bound to contain uncertainties, and that will not change, however many times it is updated.

I want to answer some questions raised. The noble Lord, Lord Whitty, said that he did not agree with the independent research and referred to a letter that I wrote to him.

[Lord Whitty]

No, my Lords, my assertion was that the Minister clearly did not agree with the independent research.

[Viscount Younger of Leckie]

My understanding was that the noble Lord was querying the letter that I wrote and I just want to clarify what I said in the letter. I said that,

“it did not take account of other factors which would have an effect on wages … for example, the supply and demand for labour, prevailing economic conditions and so forth”,

which are points that I have already made.

The noble Lord, Lord Whitty, questioned the position regarding Wales, which was also debated at some length in Committee and earlier. We have been clear throughout that we regard agricultural wages as a non-devolved matter tied to employment and wage setting. Wales Office and Defra ministers have had regular discussions with Welsh Ministers on the issue since the abolition was first proposed in July 2010. Those discussions will continue so that the transition from the Agricultural Wages Board is as seamless as possible for workers and farmers in Wales. I hope that, in part, that answers the question raised by the noble Baroness, Lady Donaghy, which concerns the need to look after the interests of farm workers during the transition.

The noble Lord, Lord Whitty, raised the issue of seasonal or migrant workers, who he stated would lose protection with the abolition of the Agricultural Wages Board. I remind him that it is the gangmasters licensing legislation that specifically protects migrant workers from exploitation, not the agricultural wages regime. General employment law provides for a high level of protection for all workers.

The noble Lord raised another issue which has been raised in the past which has no particular relevance to impact assessments. That is the issue of tied cottages. Workers in tied cottages will continue to be protected by the terms of their tenancy agreements and tenancy legislation. The Bill’s provisions will not alter the status of protected tenancies under the Rent (Agriculture) Act 1976.

We therefore do not see what purpose it would serve to publish yet another impact assessment. That point was made by my noble friends Lord Cathcart and Lord Deben. Therefore, I hope that the noble Lord, Lord Whitty, will feel able to withdraw his amendment.

[Lord Whitty]

My Lords, with due respect to the Minister, it might have been better had a Defra Minister replied to the debate, because some of the information that he has just given is not accurate—for example, on tied cottages and the provisions for migrant workers. The requirements under the agricultural wages order and related matters were set by the board. They are enforced by the gangmasters authority these days if they involve gangmaster labour. I think that the noble Lord needs to get back to Defra to clarify some of those things.

However, let us get to the main point. The noble Lord, Lord Deben, said that he thought that I was pushing the traditions of the House. One of the problems with this is that Ministers collectively have ignored what the House clearly decided in debate on the Public Bodies Bill only in relation to this quango. Whether we agree with its abolition or not, the Government have ignored what was clearly laid down two years ago after, as I said, bitter debate in this House and have not provided the House with adequate information or time to discuss this issue, as they have on all other quangos that they are abolishing, or else there has been a bit of new primary legislation.

That is why there is such a hoo-hah about the assessment; it is not good enough. The Minister has said that he does not agree with it. The assessment itself says that the estimate it contains was the best estimate, not, as the noble Lord, Lord Curry, and the Minister have said, the worst estimate. If we accept that Ministers have signed off on an impact assessment—this was all signed by the Minister—Ministers cannot then come to the House and say that they do not believe a word of it.

We have to start from that point. If the Government had gone through the normal procedure, we would have had a detailed Explanatory Memorandum and it would have gone through the enhanced scrutiny procedure under Section 11 of the Public Bodies Act. Instead, they have tried to cut corners. That is the problem.

That is why I do not apologise for raising the issue again. Yes, we are going over some old ground, but we are also hearing some of the old arguments. Under that procedure, what my noble friend Lady Donaghy has asked for—namely, a monitoring process so that when abolition occurs we can see what actually happens to agricultural wages—is required for other bodies that are being abolished, but it is not required here.

I find it difficult to understand those who argue that after this body disappears, nothing will happen to wages and no one will notice, as the noble Lord, Lord Deben, says. The noble Lord, Lord Curry, says that wages will probably increase. However, the only document that we have had says that although some people’s wages will go up, on average and on aggregate they will fall. That is why we need a better assessment.

This is a very minimal requirement. If we had gone down the route that the House agreed, the Minister would have been subject to far more detailed requirements and debates. He would have had to explain himself far more convincingly than he has today. All I am asking is that before we implement this measure, we get a document from the Government that does what they are required to do for every other body apart from the one that protects some rural workers.

That does not seem to be a position that the House of Lords ought to be taking in the 21st century, and it may be seen that way. Although the noble Lord, Lord Deben, says that no one will notice, there are some people who will. The noble Lord obviously has conversations with the grain barons of East Anglia and maybe they would not notice, but a lot of small farmers have objected to the abolition—in the West Country, the north and Wales—saying that this was a bigger problem. They will notice because they will have to engage in rather difficult negotiations with their one or two staff.

The people who will really notice, though, will be those who are employed relatively casually and seasonally by the element of the agricultural sector that is really pushing for this change—that is, horticulture. The people who will notice are probably not so much those who are paid above the minimum rate but those who are on the lowest wages, at the minimum rate or even below it. Those at the bottom end of the agricultural labour market are going to notice. If the Minister persists in resisting this today, we will not even be able to assess properly whether I or the Government were right. That does not seem to be a sensible position to adopt in the tradition of this House.

Although it is late at night and I do not expect to win it, I think that I need to test the position of the House so that it is quite clear and our Commons colleagues can at least look again at the arguments, because the other way in which we are breaking with tradition is that this measure has come in on Report and the House of Commons has not even had a look at it yet. I will test the opinion of the House, for what that is worth.

18:54

Division 2

Ayes: 110

---

Labour: 96
Crossbench: 7
Independent: 3
Ulster Unionist Party: 1
Plaid Cymru: 1

Noes: 207

---

Conservative: 124
Liberal Democrat: 56
Crossbench: 22
Ulster Unionist Party: 2
Independent: 2

19:06

Clause 78 : Power to reduce duration of copyright in transitional cases

Amendment 8

Moved by

[Viscount Younger of Leckie]

8: Clause 78, page 68, line 17, at end insert “, other than photographs or films.”

[Viscount Younger of Leckie]

My Lords, I begin by thanking noble Lords for the constructive and positive debates we have had on this clause. Responding to an amendment tabled by my noble friend Lord Clement-Jones on Report, the Government are introducing two further amendments to the clause. These amendments mean that some unpublished films and photographs will remain in copyright until 2039 at the earliest, as they do under the current law.

I acknowledged on Report that films can be commercially exploited without having been published. This is because of the legal definition of the word “published”. The same may be true of some unpublished photographs. Equally, there will be some film material and photographs in commercial archives that have yet to be commercially exploited in any sense. These archives may have built business cases on the basis that that material would remain in copyright until 2039 at the earliest and could be exploited until that point. Therefore, to provide some certainty to those businesses, the Government are exempting film and photographs from the clause.

However, a smaller proportion of unpublished films and unpublished photographs are affected by the 2039 transitional provisions than some think. Many films put on commercial release, including newsreels, will have been registered under film legislation, and the 2039 provisions do not apply to those films because they are regarded as published. With regard to photographs, only unpublished photographs taken between 1957 and 1969, whose author died during that period, are affected by the 2039 provisions. Photographs taken before 1957 were protected for 50 years from the end of the calendar year in which they were taken.

The second amendment means that regulations may provide for different provisions for work of different types and of different ages. This would mean that recent works, for example, could be treated differently from centuries-old works.

I hope that in the light of what I have said noble Lords will support these amendments. I beg to move.

[Lord Clement-Jones]

My Lords, I thank the Minister. If anything, what he has just said demonstrates the complexity of copyright legislation and the provisions of what is now Clause 78. One of the interesting things about this Bill is that when debating Part 6 we have continuously had to push our horizons forward. I think that when we started it was Clause 57 onwards, then it was Clause 66 onwards and it is now Clause 76 onwards, but we are very flexible and adaptable here. The amendment demonstrates not only the complexity of copyright law but the flexibility and willingness to listen that the Minister has demonstrated throughout our debate on Part 6. I welcome his response to the concerns, particularly of those in the news agencies and of photographers, about the possible impact of Clause 78, and I am delighted by the outcome.

If we were in Committee, we would probably want to probe the exact meaning of Amendment 9 to,

“make different provision for different purposes”.

However, as we are at Third Reading, I think we will let the Minister get away without too much debate on those words. They are quite wide, and the other place or whoever might wish to have a discussion about them.

[The Earl of Erroll]

My Lords, I add a slight note of dissent. I entirely agree with Amendment 9, which gives greater flexibility to,

“make different provision for different purposes”.

However, Amendment 8 paints the regulation-makers into a corner. I quite see the point of the noble Lord, Lord Clement-Jones, on the commercial stuff. This is his word as a commercial lawyer among the large rights holders and the people who make money out of this material. I see their point. They have invested heavily in some of this stuff, as in other cases, and they want a commercial return on it.

The trouble is with all the other stuff. This is not just about photographs sitting in commercial archives or produced for a commercial purpose. This is not about film sitting in a commercial archive, or from which, published or not, somebody is trying to make some money. It is everything. The sort of stuff that has ended up with genealogical societies around the country and in libraries’ photographic collections will all fall under this. I realise that this does not apply to pre-1957 photographs, so it will not affect people doing research on the Second World War, but you will suddenly have this strange cut-off point. It would have been wise to keep greater flexibility in this so that the Minister, using,

“make different provision for different purposes”,

could have introduced a definition of which kinds of photograph or film were covered. It would not have been difficult to do.

Therefore, Amendment 8 should perhaps be withdrawn because it can be covered in the rest of the provisions, which says that he can then go on to reduce the duration of copyright in existing works. It is made by regulations. If you can do different provisions for different purposes, I would have thought there would be the flexibility to be able to meet the concerns of the noble Lord, Lord Clement-Jones, and the perfectly valid commercial concerns, and also have done things for the libraries, universities, researchers and other people who want to do other things with the works where there was no commercial intent in the first place. Therefore, I would accept Amendment 9 for flexibility, and if I were the Minister, I would withdraw Amendment 8.

[Lord Stevenson of Balmacara]

My Lords, I echo the initial comments of the noble Lord, Lord Clement-Jones, on this. The Minister has again shown his willingness to listen to some of the concerns that have been expressed on this matter. I welcome the two amendments in this group, although I note the points recently made, which may bear further thought. However, the Government are in the right place on this. It is a question of sticking to where we are and recognising that.

We should also recognise that this has been a complicated journey through these legislative clauses. Copyright is never an easy issue to get into. I am sure that the noble Lord would recognise that; he has always looked a bit punch-drunk when we have had discussions on it but has come up smiling, which is one of his nice characteristics. However, there are a number of difficult and complex issues underneath this. They are not going to be resolved by what is in the Bill, although we have caught up in a number of areas and that is good. This is really about setting up discussions that we will have to have in this House and another place as the various changes that are being provoked by the Hargreaves report are brought forward as what are in generic terms called “copyright exceptions”. They of course deal with a large number of issues that could have been, as we have argued, contained in this Bill but have been left deliberately to secondary legislation. That is not to say that we will necessarily agree with everything that we see when that comes through. There have to be a lot of complicated discussions on some of these points. We welcome the opportunity to have those, based on where we are now. On that basis, I am happy to agree with these amendments.

[Viscount Younger of Leckie]

My Lords, I will make a few brief comments. I thank those who have contributed to this short debate: the noble Lord, Lord Stevenson, the noble Earl, Lord Erroll, and my noble friend Lord Clement-Jones. I am pleased that the amendments have been accepted, in general, in the spirit in which they were intended. To take up the comments of the noble Lord, Lord Stevenson, it is true that copyright is a complex issue. There are polarised views from both sides. We all recognise that.

I listened intently to the comments of the noble Earl, Lord Erroll. It would be good if I wrote extensively to him concerning the point of extending the provisions beyond normal photographs, to put it crudely. The noble Earl asked whether photographers’ concerns could be addressed regarding Amendment 9. A relatively small number of photographs are covered by the 2039 provisions: as he may know, it is only those taken between 1957 and 1969. Those who want to use those photographs could seek a licence or use orphan work for business. However, I will follow this with a more thorough response to the noble Earl.

Amendment 8 agreed.

Amendment 9

Moved by

[Viscount Younger of Leckie]

9: Clause 78, page 68, line 24, at end insert—
“() make different provision for different purpose;”

Amendment 9 agreed.

19:15

Clause 79 : Licensing of copyright and performers’ rights

Amendment 10

Moved by

[Lord Howarth of Newport]

10: Clause 79, page 69, line 25, at end insert—
“(7) The Secretary of State shall lay before Parliament, not more than three years after the coming into effect of regulations under this section, a review of the progress of licensing of orphan works, including an impact statement and a cost/benefit analysis.”

[Lord Howarth of Newport]

My Lords, Amendments 10 and 11 in this group are intended to help refine the orphan works licensing scheme which the Government are rightly bringing in, to make it more fit for purpose.

I say at the outset, as much for the ears of officials as for noble Lords, that these amendments have been tabled entirely at my own instance. Those in various parts of the cultural sector with whom I have conferred on the whole question of orphan works over the weeks in which we have been examining this legislation would, I think, have preferred that I should not trouble your Lordships any further on these matters, trusting—as they wish to be able to do—that reason will prevail in the processes in Whitehall leading up to the regulations. However, I have thought it right to prevail for a few moments on the patience of your Lordships. This House is always a forum in which it is appropriate for us to consider policy decisions which, unintentionally of course, may damage the cultural life of this country. There are also principles here which, as parliamentarians, we ought to consider.

The term “orphan works”, as we know, denotes material such as books, letters, diaries, documentation from the voluntary sector, broadcasts and newspapers held in our great public collections which may still be in copyright but where the owners of the copyright cannot be identified—or, if they have been identified, cannot be found. Vast quantities of such orphan works are held in our public collections. They would be capable of expressing and illuminating our shared national heritage. They represent a resource of enormous potential value educationally, academically, culturally and economically. Without a well designed orphan works licensing system, it will remain impossible, as it is at the moment, to digitise this material and make it available to citizens and scholars for the public benefit.

All are agreed on two things. We need a workable orphan works licensing scheme that will make this material accessible; and, contrary to suggestions made by some campaigners, rights-holders ought to be paid for the use of their intellectual property, whether they are identified in the process of digital search or appear subsequently, if they request that they should be paid—although we anticipate that nearly all of them will not make the request. There is no question of anybody proposing to steal other people’s intellectual property. If an organisation wanted to do that, of course it should not be licensed. I certainly do not believe that our national cultural institutions wish to do any such thing.

Your Lordships made the decision, on Report, on a narrow majority, that it would be inappropriate to introduce a provision to provide for flexibility in respect of the requirement that fees should be paid up front for the licensing of orphan works. However, I must say to noble Lords that libraries, archives, museums, galleries and universities remain seriously worried about the decision that the House took last week. Of course, I accept that it was the will of the House, but these amendments seek to address entirely reasonable anxieties about elements within the architecture of the Bill as the House has approved it. Nothing in my amendments would undo the principle of the legislation.

I also suggest to your Lordships that these are not political issues. When we have legislated on copyright over the years we have never done so in a partisan spirit. Some noble Lords may have taken part in the parliamentary proceedings on the Copyright, Designs and Patents Act 1988. I well remember that John Butcher, the Minister responsible for that legislation, conducted the parliamentary proceedings in the spirit of a seminar. I was the government Whip on the Bill. We do not normally conduct legislative proceedings in the spirit of a seminar, but we were seeking to elicit from everybody who participated in those proceedings the best contributions they could make towards achieving an appropriate balance and a policy that would protect the legitimate rights of individuals and corporate interests, while providing for the maximum public benefit. We debated in the same spirit the proposals on copyright much more recently during the passage of the Digital Economy Act 2010. Those debates were strenuous but fair-minded. We should continue, even at this very late stage of the Bill, to legislate in the same spirit.

Amendment 10 would provide that, after not more than three years, there should be a review of the progress of the orphan works licensing scheme. The review should include an impact assessment and a cost-benefit analysis. If we have such a review we will be in a position to know whether the anxieties that are now being expressed will have proved justified. The anxieties are principally about the model of diligent search that may be required, particularly if it is to be insisted that there should be a diligent search for each individual item for which a licence is sought, rather than a diligent search on a rigorous but more generic model.

There is a concern that this requirement and the requirement to lodge payments for the vast number of orphan works that we hope to digitise en masse would be burdensome. In particular, there is a fear that this would be an expensive additional cost, on top of the costs that must already be incurred in the process of digitisation. Universities UK, the Wellcome Trust and the British Library have all said, as the House knows, that if up-front payments are required, they anticipate that they will not, after all, feel it possible to embark on large-scale digitisation projects. If that proves to be the case, the Government’s very laudable policy will have bitten the dust.

If we have the review, it will enable us to know whether those who are now expressing those anxieties are right, and whether we, as parliamentarians, may have made a wrong decision. The material in the review —the impact assessment and cost-benefit analysis—would, of course, be extremely valuable in enabling Parliament to undertake post-legislative scrutiny, which is something that many of your Lordships feel is appropriate to be carried out by this House, and of which we should do more.

Amendment 11 would provide that after five years, royalties that had been paid up front to the licensing authority but remained unclaimed by rights-holders should be returned to the institutions that had deposited the funds with the licensing authority. On Report, the Minister briefly discussed the question of what might happen to these funds in due course. He indicated that it is not the intention that the funds should remain indefinitely in the escrow account of the licensing authority for the eventuality that rights holders would turn up, but that after a period, which I understand to be five years:

“Unclaimed fees could be used to subsidise the cost of running the orphan works scheme”.

The Minister must be intending to bring in a mighty expensive quango, because there will be quite substantial funds in the account. Otherwise, he contemplated, the unclaimed fees could be used,

“to pay for preservation costs in public institutions or industry training. There will be further consideration of these options”.—[Official Report, 11/3/13; col. 49.]

Will the Minister explain why BIS should determine how these sums should be spent? The great cultural institutions, such as the national museums and galleries, and the British Library, are funded not by his department but by DCMS, which very rightly operates on an arm’s-length principle. It does not believe in telling these institutions how they should use their funds. This is, therefore, a question of principle. However, the most important principle is that these funds should not revert to the Exchequer. The Minister did not discuss that possibility. Although I raised it in my speech on Report, he did not refer to it in his wind-up. Of course, it was quite explicitly contemplated in the impact assessment last year.

If that were to be the case—if, after five years or after whatever interval, the money, instead of going back to the institutions that had deposited it, reverted to the Exchequer—that would, in effect, be double taxation. It would be a tax on funds that had already been provided by the taxpayer by way of grant, and otherwise it would be a levy on charitable funding, whether that is funding raised charitably by public institutions or by great charitable institutions such as the Wellcome Trust.

These institutions are—I repeat, and again emphasise —happy to pay rights-holders when they are found, and would of course remain happy to pay those rights holders even after the money had been returned to them by the licensing authority. They are happy to contribute to the reasonable administrative costs of the licensing authority. They are not happy to forfeit precious funds notionally for the benefit of rights-holders but in reality for the benefit of the Exchequer. I cannot imagine any justification for that.

To speak of competition in this particular context is, in any case, meaningless. Publically-funded institutions that are not for profit, but that hold collections and provide services for the public benefit, have different obligations and accountabilities, and face different costs from private institutions, operating for profit in the marketplace. You cannot reasonably make a comparison or invoke the principle of competition here.

If the Government were to confiscate funds that had been derived from public and charitable institutions we would be cutting off our nose to spite our face. I hope that the Minister will, in his response, definitively rule out any such intention on the part of the Government. I beg to move.

19:29

[Lord Clement-Jones]

My Lords, I am not unsympathetic to the first of the noble Lord’s amendments, Amendment 10, but on the argument that he makes for a review of the orphan works scheme—and many of us have doubts about how that is going to operate in practice—I wonder whether it could not be done more frequently in the Intellectual Property Office’s annual report. The Minister demonstrated in the course of our debates on the Bill that it will be flexible enough to cover a number of areas. If licensing in the form of a digital hub and perhaps ECL can be covered, or meta-data, why not the state of orphan works?

In passing, perhaps I could raise another matter relating to orphan works. In the debate on Report, my noble friend the Minister said:

“In relation to Amendment 84AE, my noble friend Lord Clement-Jones was concerned that there might be a loophole regarding sublicensing. The answer to this is that the Bill does not permit sublicensing, if that is a help to my noble friend”.—[Official Report, 11/3/13; col. 33.]

I believe that the advice the Minister has received may not be correct in that respect. As the Bill currently stands, it seems expressly to contemplate sublicensing. New Section 116A(4) states:

“The regulations may provide for the granting of licences to do, or authorise the doing of, any act restricted by copyright that would otherwise require the consent of the missing owner”.

An act of authorising another to do the relevant act would clearly permit sublicensing.

Because of the timing of the Third Reading, I was caught on the hop and have been unable to put down a probing amendment on this, but I would be very grateful if the Minister could examine the issue and give an assurance now, or subsequently in correspondence, that the regulations will not permit this.

[The Earl of Clancarty]

My Lords, briefly, I support Amendment 10, proposed by the noble Lord, Lord Howarth, although I support Amendment 11 as well.

To emphasise how important it is that the new orphan works scheme works and how culturally significant that is for Britain, I agree with everything that the noble Lord said. It is impossible to overestimate the importance of this development for our national museums. For instance, being able to show orphan works—there being such a huge number, indeed millions, of records, papers, photographs and artefacts, some over 1,000 years old—may well make a difference to the quality of display and exhibitions and increase the viability of our collections for international scholarship.

As an artist and creator myself, I might have been expected to vote against Amendment 84AG, which the noble Lord, Lord Howarth, tabled on Report, to allow flexibility in the up-front payment of fees to creators. I did not do so, and I think that I speak for other artists and creators who in this instance can see beyond the minimal benefits to them, if indeed they exist at all, from this aspect of the Bill in the direction of the far more significant wider picture of displaying work, which is often one of the major aims of artists and creators in the first place.

It would be a great shame if, because of this component of the Bill or for any other reason, the orphan works scheme failed or did not operate properly, having come this far. We may find out fairly quickly if this is the case, so three years will be ample time. Given how significant the enabling of orphan works to be shown will be in deepening a sense of British and world culture within our own institutions, we should be able to review the situation at the very least. I support the noble Lord’s amendment.

[Baroness Brinton]

My Lords, I thank the noble Lord, Lord Howarth of Newport, for these two amendments, which are very helpful in trying to balance and find a bridge between the two very distinct sides of the argument that we have seen during the various stages of this Bill—and, in particular, the problems already outlined about whether arrangements for orphan works will work. I am grateful, too, to my noble friend Lord Clement-Jones, for saying that Amendment 10 might be helpful to all parties. I hope that the Minister can give us some encouragement on that.

On Amendment 11, I wanted to point out that I am as concerned as the noble Lord about a large amount of licence fees sitting in a large black hole and then returning to the Government in whatever form as a double taxation. My only question—I apologise as it is rather a technical one, but I saw the amendment only earlier today—is about the five years of royalty payments. If it goes into bona vacantia, how long does it have to sit there before it is released into general Treasury funds? Is it another blocking account? I recognise that the proposal refers to “bona vacantia or otherwise”, and that “otherwise” might refer to the general coffers of the Treasury. It would be helpful to know. My only suggestion to the noble Lord, Lord Howarth, is that five years might be too short a period to search for authors of orphan works.

[The Earl of Erroll]

My Lords, I support both amendments, which were spoken to most ably by the noble Lord, Lord Howarth of Newport. The noble Earl, Lord Clancarty, also made comments that were absolutely right on the nail.

A review is only sensible. An awful lot of the figures should be obtainable from the licensing authorities, whoever is going to be appointed, on the financial stuff, how much is done, and so on. I do not imagine that it will require a huge amount of public money to try to do a review at whatever period is thought best.

As a taxpayer, I am concerned about the up-front fees. The noble Lord, Lord Howarth, almost did not stress that point enough. The notion is that those fees should be set at a rate that means that orphan works do not undercut stuff that might be in a commercial library of works that people can license. They would probably not be on the same subject in most cases; they would be for different purposes. If one of the big national libraries or a university was trying to prepare a work of academic interest, they would not rush around paying fortunes to these libraries that have collections of pictures or text. They cannot do that; they will not have the budget for it. If someone was to look at what this stuff was currently sold for, or licensed for, we could be talking about a huge sum of money going into the bodies collecting for orphan works. We are not talking about a petty million, or something like that.

A department always expands to spend the money provided, so if it is going to be ploughed into trying to collect these things will get enormous and complex, and they will spend money like water. On the subject of BIS sponsoring training programmes, well, we know what happens with most government training programmes, so just to get the point across and to see the horror on the Minister’s face, I volunteer to be either one of the societies collecting the money so that I can have a huge scheme, or one of the chief accredited training agencies, because this will be a licence to print money.

The point is well made by the noble Lord, Lord Howarth. The funding of universities and libraries and institutions like that, which this provision is aimed at, comes out of public or charitable funds, and it is there for a purpose. The concept that this is a hidden tax that then goes back to the Exchequer or to fund a nice quango or whatever is totally unethical. I cannot put that strongly enough. If the public woke up to the fact that that was happening, they would be absolutely horrified, so the Minister would be incredibly well advised to accept this amendment to protect the Government from all sorts of accusations in future—unless, of course, they do not expect to be in power by the time this happens and think that another Government will take the flack. However, given that most politicians think they will still be in power, if I were them I would protect myself.

[Lord Stevenson of Balmacara]

My Lords, my noble friend Lord Howarth, when introducing this amendment, mentioned that in Parliament as a whole there was a genuine sense that issues to do with copyright were dealt with in a non-partisan way, and he explained some of the background to the CDP Act 1988 and to the Digital Economy Act. This debate has shown that the spirit lives on. I stress that I do not think that this is a partisan issue; we are all very interested in this new and broadly welcome provision, which anticipates the EU directive and perhaps gold-plates it a little. However, there is no doubt that we need an orphan works scheme. It is right that it should be introduced and we are backing it all the way. Within that it is absolutely clear that rights holders must be remunerated if they wish. However, as many of them will not be easy to find, a diligent search of a high standard must be carried out. I recognise that the way to prove all that is to create this escrow account approach, and that that should be done for a reasonable period. However, the more one listens to the points that are made round here, the more one feels that this is going in the wrong direction in this respect. As virtually all speakers have said, surely it cannot be in the best interests of the Government to tax the institutions that are expected to carry out this work and mainly benefit from it. That cannot be right. The Minister was reported in Hansard as saying that if the escrow funds were building up and not being used, they could be used to defray the costs of running the licensing body, to pay for preservation costs and for training. However, that escrow funding is the money that would be paid to rights holders, so it does not really belong to the licensing body to do with it as suggested.

We are at the fringe of moving in the wrong direction here. It would be sensible if the Government were to pause and think about this again. This is a good scheme and is the right thing to do, but perhaps there is a way in which one can retain the funds that are going to be held for potential rights holders within the original institutions. At least then they would have the benefit of the money even if they could not allocate it, and the sensibility that this somehow was a taxation scheme would be avoided because it would not work. It would be the worst of all possible worlds if, at the end of this process of trying to get these proposals scheduled and incorporated in legislation, the whole scheme was stillborn because people could not see how it could be financed. I very much want to hear what the Minister has to say on this matter. Some movement towards the position of the noble Lord, Lord Howarth, would be much appreciated.

[Viscount Younger of Leckie]

My Lords, I thank the noble Lord, Lord Howarth, for his amendments. They raise important issues and I trust that I can provide some satisfactory assurances. I say at the outset that I very much welcome his support for an orphan works scheme and, indeed, for the principle that creators should be paid. He recognises that there is a balanced approach to this issue in this respect.

Regarding Amendment 10, the Government agree that there will need to be a full and proper evaluation of the effectiveness of the orphan works scheme, and its impact on users and rights holders. That is why the Government have committed to a review of the functioning of the scheme one year after it is fully functional. This post-implementation review would be undertaken by the orphan works authorising body and would include, for example, data on the number of orphan works registrations, and permissions issued by the authorising body. The scope of any review, as determined by discussions with stakeholders, would be incorporated into the authorising body’s regulations. I assure the House that the outcome of the review will be reported to Parliament.

Separately, the Government have committed to another impact assessment of the orphan works scheme in April 2015: that is, one year after the scheme is fully operational. According to government guidance, the first review of regulations,

“should in most cases be carried out and published no later than five years after the relevant regulation comes into force”.

In undertaking to do a post-implementation review after one year, with accompanying impact assessment, the Government’s plans will be fully consistent with these principles and guidance.

Amendment 11 would require regulations to make provision that unclaimed fees paid for the use of orphan works were returned to the licensee within a five-year period. Under the proposals currently in the Bill, in the event that fees remain unclaimed for the licensed use of an orphan work, a variety of options are possible: for example, unclaimed fees could be used to help creators; subsidise the cost of running the orphan works scheme—I believe that that point was raised by the noble Lord, Lord Howarth—pay for preservation costs in public institutions; or pay for industry training. I know that there are wide-ranging views on the appropriate use of unclaimed fees. This is why the wording in the Bill is permissive; it requires regulations to deal with this issue but does not rule any particular option in or out. It does not rule out the return of the fee to the licensee. The current wording allows for further consideration of all these options, with the input of all relevant stakeholders.

The noble Lord, Lord Howarth, supported by the noble Earl, Lord Erroll, raised the issue of the money going to the Exchequer. The use of the funds will be the subject of a full consideration. I hope that gives some reassurance to noble Lords. In other words, all options are open and there will be no presumption that the money will go to the Treasury under this scheme. I hope that that also reassures the noble Baroness, Lady Brinton. The noble Baroness raised a related matter concerning how long the money would sit in bona vacantia. As a general principle, money falling into bona vacantia is dealt with by the Treasury Solicitor, and there is no time period as such. I do not know whether that helps. I hope the House will agree that this is the right way forward. I again assure the noble Lord that it is the Government’s intention that the licence fee for the use of an orphan work should be proportionate to the type of use. However, particularly where orphan works are used commercially, the Government believe it is vital that the conditions of use do not inadvertently undermine the market for known works, particularly, for example, where we are concerned with the livelihoods of creators such as photographers.

The noble Lord, Lord Howarth—

[Lord Stevenson of Balmacara]

I am sorry to interrupt the noble Viscount but this is a crucial point. Will he go back over what he said as I was slightly confused by the wording? Is he saying that before any decision is taken about how the money held in the escrow account is to be utilised if no claims are taken up in the five-year period—that money is held against potential claims—there will be full consultation about that? He used the word “consideration”. If he could confirm that it is a consultation process and that all options are on the table for that, we would be very reassured.

19:46

[Viscount Younger of Leckie]

The word I used was “consideration” rather than “consultation” but there is a fine line between the two. I must stick with “consideration” but I think the best thing to do is to define precisely what is meant by “consideration”. My understanding—I give this commitment today—is that “consideration” does indeed mean consultation. However, I would like to follow up with yet another letter to confirm that.

On Report, the noble Lord, Lord Howarth, concluded that a search would be required for each and every rights holder. The orphan works scheme never intended to promise mass digitisation without a prior diligent search. If we wanted to do this, we would have to find another means of achieving it as the scheme we are now considering could not do so. That might be achieved using ECL, but that depends on the existence of the relevant collecting societies. Those are all questions that we cannot answer at this point.

My noble friend Lord Clement-Jones asked whether there could be a review of orphan works produced as part of an annual report. This seems to be a sensible suggestion. I will certainly consider this idea, along with my officials. He also asked about sublicensing and whether it would be permitted. Every act will require a licence. If someone wishes to use an orphan work—for example, in a television documentary—the licence will need to cover all the issues envisaged. The licensing body will not be able to delegate its powers to license to another person. The provision for orphan work licensing will be construed restrictively by the courts.

On this basis, I hope that the noble Lord, Lord Howarth, feels able to withdraw his amendment. As he considers his reply, and before I conclude, as this is the last group of amendments, I would like to take this opportunity to thank all noble Lords who have participated in our many and varied debates on the important issues covered by the Bill during its passage through this House. As ever, they have brought considerable experience to our debates. In particular, the noble Lord, Lord Stevenson, has led the opposition Front Bench in an insightful and wise way and has rightly subjected the detail to a constructive challenge. We sing in harmony in the Parliament choir—he is more harmonised than me—and we have managed to find a pretty good degree of harmony on this Bill.

It is certainly the case that the Bill is better for the scrutiny that it has received in this House. I should like to place on record my thanks in particular to my noble friend Lady Stowell for her able support on the equalities provisions. I thank the House officials, the Hansard writers and especially the Bill team and all officials who have been deeply involved in supporting me so ably.

[Lord Stevenson of Balmacara]

My Lords, it would be wrong of me to let the noble Viscount’s concluding remarks pass, particularly as I was named. I also thank him for his considerable work on the Bill, his courtesy during debate, and his incredible letter-writing abilities. I have never been in receipt of so many letters, both by e-mail and by hand. Sometimes people actually checked up whether a letter had arrived that I had not even received. It was helpful to know that it was on its way. We even received three further letters overnight in anticipation of this debate. It shows the quality of the service that we received. I am sure that the noble Viscount will accept that that was not entirely his work.

I also thank the Bill team, although not all of them are present. I hope that my words will go back to those who are not here. The team has been extremely helpful in giving us information and facilitating meetings. I also thank my Front Bench team, the noble Baronesses, Lady Worthington, Lady Hayter and Lady Thornton, and the noble Lords, Lord Young, Lord Whitty and Lord McKenzie, who, along with our legislative support team, have taken much of the load off my shoulders and done a brilliant job in scrutinising the legislation. It has been four months—a considerable amount of one’s time—since we began consideration of the Bill. That explains why the choir has been bereft of our support during that time.

The Bill runs to 266 pages, which, as the noble Lord, Lord Clement-Jones, reminded us, is a bit more than when it was first published. That represents a fair number of trees. This was never going to be an easy job. It is also important to put on record that the Bill did not come to us sanctified by work in another place. A lot of changes were added just as the Bill left the House of Commons, and the Government have added a number of measures while we have been considering it. There will presumably be further consideration in another place on matters such as health and safety, abolition of the Agricultural Wages Board and Midata, which were never discussed in the House of Commons. I should be interested to see what happens when the Bill comes back after Easter.

As the Minister said, the Bill is in a better shape from its time here. It was amended and concessions were offered on 27 major points, which is pretty good. I do not claim credit for them all but in the spirit of bipartisanship, I think we can agree that in most cases the changes were of benefit. There are one or two matters on which we divided, but I am sure that the Government will want to reflect carefully on whether they wish to change the will of the House, which was expressed in many cases narrowly, but nevertheless firmly. I hope that those matters will weigh heavily on the Government.

It has been a most enjoyable time, made better by the good responses that we have received, and I hope that the Bill will fulfil its purposes, even though in some areas it never quite lived up to its name.

[Lord Howarth of Newport]

My Lords, the last bars of the music are dying away, the curtain is falling, moving valedictory statements have been made but, unfortunately, I have again to be the grit in the oyster because I need to respond to the debate, and the House may wish to know my intention in respect of these amendments.

I thank all noble Lords who have participated in a genuinely helpful debate. I was particularly pleased that the indefatigable noble Lord, Lord Clement-Jones, with whom I have had some degree of disagreement, was willing to support the proposition in the amendment that there should be a review. The noble Earl, Lord Clancarty, supported it, as did the noble Baroness, Lady Brinton, the noble Earl, Lord Erroll, and my noble friend Lord Stevenson. I am grateful to them all.

I am grateful to the noble Earl, Lord Clancarty, for speaking as an artist, because his perspective was valuable. If he, as an artist, has been willing to see another side of the argument on orphan works that is in the public interest, it is particularly telling. The noble Earl, Lord Erroll, spoke as a taxpayer. We cannot all be artists but we all have to be taxpayers. He was absolutely right in what he said about the inappropriateness of setting the tariffs by reference to market values. It is wrong to introduce market values in every area of public life and I wish we could get away from that in our modern political culture. The noble Earl was extremely forthright in his characterisation of the ethics of the Government’s proposition.

However, I was grateful to the noble Viscount, who spoke thoughtfully and constructively, and I very much appreciate the spirit of his response. He acknowledged that there needs to be review. He asked us to be content with the prospect that there will be a review after only one year by the orphan works authority. There is a question as to whether it is appropriate for the body to review itself. Of course it should always do so, but is that sufficient? I hope that whatever Government there is after 2015 will look again at the methodology for monitoring the progress of the orphan works licensing scheme and ensuring that it is fit for purpose and not producing unintended, unfortunate consequences. We all want it to succeed, and if it is not going to succeed we will need to take further legislative steps to get it right.

It would be helpful to have the second impact assessment that the Minister promised for 2015, but we will need subsequent impact assessments. They need to be proper assessments, not ones whereby you just press a button and the computer produces. Whitehall is getting adept at producing impact assessments. They need to be of high quality.

The noble Lord, Lord Clement-Jones, rightly suggested that the progress of the orphan works licensing scheme would be an appropriate topic to be in the annual report of the Intellectual Property Office. That is so, but a whole range of matters will need to be covered in that annual report and there will from time to time be the necessity for a document that is more particularly focused on the orphan works scheme, unless we can all be confident that it really is working according to our best hopes.

On Amendment 11, the noble Viscount again gave me some grounds for encouragement in his emphasis that a variety of options is possible. He did not explain why the Government do not simply accept that the money ought to be returned after a reasonable interval to those who have lodged it because no rights holders have come forward. Even if they subsequently come forward, of course, they will be paid by the licenced bodies. He did not explain why we do not simply and straightforwardly return the money after a reasonable interval. However, he does not rule it out and he promises full consideration, as well as promising to write to us to clarify what that full consideration may mean, and I am appreciative of that.

The Minister has, as my noble friend Lord Stevenson said, been a most abundant and generous letter writer. However, before he lays down his pen, it would also be helpful if he could bring himself to write one further epistle to us about what diligent search and extended collective licensing the Government envisage at this stage. I recognise that there is more work to be done by the working group, but he will know that probably the greatest anxiety of the cultural institutions, even greater than their anxiety about the requirement for up-front payments, is that the regulations may land them with an impossible task in terms of diligent search. It seemed to me that the Minister made helpful remarks on this subject on Report, but if he were willing to elaborate a little and clarify in another letter to us what he intended when he made those observations on Report, we would be particularly appreciative.

In view of the constructive and helpful tenor of the Minister’s response, I beg leave to withdraw the amendment.

Amendment 10 withdrawn.

Amendment 11 not moved.

Clause 97 : Extent

Amendment 12

Moved by

[Viscount Younger of Leckie]

12: Clause 97, page 89, line 31, at end insert—
“( ) section 92 extends only to England and Wales.”

Amendment 12 agreed.

Clause 98 : Commencement

Amendment 13

Moved by

[Viscount Younger of Leckie]

13: Clause 98, page 89, line 41, at end insert—
“( ) section 92;”

Amendment 13 agreed.

Schedule 4 : The Competition and Markets Authority

Amendment 14

Moved by

[Viscount Younger of Leckie]

14: Schedule 4, page 118, line 21, at end insert—
“( ) The power conferred by section 95 includes power to make provision for the appointment of panel members of the Competition Commission as members of the CMA panel, or for the re-appointment of persons who are appointed as members of the CMA panel by virtue of sub-paragraph (2), for the purpose of enabling anything in the process of being done by or on behalf of the Competition Commission immediately prior to its abolition to be completed by or on behalf of the CMA; and nothing in sub-paragraphs (1) to (4) restricts the provision that may be made for that purpose.”

Amendment 14 agreed.

In the Title

Amendment 15

Moved by

[Viscount Younger of Leckie]

15: In the Title, line 9, after “insolvency;” insert “to make provision about certain bodies established by Royal Charter;”

Amendment 15 agreed.

Title, as amended, agreed.

Bill passed and returned to the Commons with amendments.

House adjourned at 8 pm.