Westminster Hall

Tuesday 23rd January 2018 Westminster Hall

Tuesday 23 January 2018

[Mr Adrian Bailey in the Chair]

Skills Devolution (England)

Tuesday 23rd January 2018 Westminster Hall

09:30

[Catherine West (Hornsey and Wood Green) (Lab)]

I beg to move,

That this House has considered skills devolution in England.

What a pleasure it is to serve under your chairmanship, Mr Bailey. I hope to have the pleasure of hearing your speech later. I am grateful to the Backbench Business Committee for granting this debate on skills devolution in England. I am especially grateful to the Members here from outside London, as I am keen to hear about the reality in their constituency regarding how we can tackle the national skills gap as flexibly as possible.

Across our country, we face an enormous challenge in ensuring that we have the skills that we need to operate the economy, and that we are doing all we can to enable people to secure such skills, and support them in doing so. The issue is particularly acute in London, where my constituency is, but it also exists in the larger cities throughout the country and, indeed, in the regions, and the situation has worsened since 2010, when further education colleges faced cuts—they now receive 50% less funding. The centralised skills system needs to be looked at again, in London and in all parts of England. I will set out the problems seen by us on the all-party parliamentary group for London—and by the all-party group for Greater Manchester, with which we have done work on this—and the recommendations outlined in our report, “Bridging the Skills Gap”, which I recommend colleagues read.

Significant steps have been taken since the devolution project started in 2000, but there is a pressing case for specific devolution in this area, and a need to explore ways in which such devolution can be achieved in regions that do not have devolved Assemblies or metro mayors. Although recent economic growth has led to substantial reductions in the numbers of people on jobseeker’s allowance, an estimated 628,000 Londoners are not in work but would like to be—enough people to fill the city of Nottingham twice over—and youth unemployment is high. In 2016, 9.4% of 16 to 24-year-olds in London were unemployed, compared with 3.6% of 25 to 64-year-olds. For both adults and young people, that represents a huge waste of human potential.

The problem is very unevenly spread across London, a city of 8 million people; there are constituencies where very high numbers of young people face larger problems from unemployment and a lack of skills. Almost a quarter of all vacancies in London—23%—are due to a lack of applicants with the right skills. In addition, almost half of firms—42%—are not confident they will be able to recruit people with the higher-level skills that their organisation needs over the next five years. In the London borough of Haringey, where my constituency is located, 35% of 19-year-olds do not have a level 3 qualification, yet London is an increasingly highly skilled economy. There is a clear skills mismatch.

My local college, the College of Haringey, Enfield and North East London, now merged with City and Islington College and with Westminster Kingsway—mergers that took a lot of energy and money out of the sector when we could least afford it—tells me that many students were held back following the sharp reduction in funding. That has led to too many Londoners being in low-paid and often insecure employment, and there has been an increase in the number of low-paid jobs in the capital.

[Karin Smyth (Bristol South) (Lab)]

To highlight my hon. Friend’s point, in my constituency we send the lowest number of young people on to higher education in the country, despite having two universities in the city, and Bath and Exeter nearby. It is critical that the further education sector pick up such youngsters and support them in their skills and education, not just in London but in places like Bristol.

[Catherine West]

This needs to be looked at specifically in Bristol, where we have seen such a sharp increase in the population of under-30s.

Many people, once in work, fail to get salary and career progression, and 700,000 Londoners are paid less than the London living wage; that has a real impact on families. Recent research by Trust for London shows that people are more likely to be in insecure employment in the capital or in other large cities than elsewhere in the UK.

The population of London continues to grow rapidly—by 1.3 million since 2005—and the demand for basic skills provision grows alongside it. That population growth has increased demand for specific areas of skills provision, such as English for speakers of other languages, or ESOL; the Workers Educational Association has done excellent work in that area. Founded in 1903 and working for a

“A better world—equal, democratic and just”,

the WEA serves people within a two-mile radius and we can see the importance of that local provision throughout the country, not just in cities. However, our cities need to grow their own talent and get businesses to invest more in skills. Levels of business investment are unfortunately at an all-time low and we need a flexible and responsive skills system to respond effectively to the challenges the capital faces. They are urgent challenges and, if ignored, could significantly hamper economic growth, not just in the capital but elsewhere.

There has been criticism from business. Mr Quinn, chief executive of Balfour Beatty, has said that the apprenticeship levy system is very “Yes Minister”, which says something about where we are in thinking through how to enhance the human potential in our economy.

The skills system does not provide the flexibility and responsiveness needed, because providers are often incentivised and rewarded solely on the basis of the quantity of learners achieving a qualification, not according to the quality of the outcomes from getting that qualification, such as higher earnings. The system is market-based and is built on learner choice, but careers advice in London is patchy and inconsistent, which limits learners’ ability to make informed choices and understand the opportunities in the London economy. When I speak to headteachers, they talk about teachers often not being able to put aside valuable time to perform the crucial role of helping students decide which subjects to choose—say, whether to take a foreign language—not just at A-level or when they go on from school, but right back in year 8 or 9, so that they can have ready the skills that we so desperately need in workplaces.

Employers do not engage enough with the skills system to ensure that vocational courses are relevant to their needs. The creation of a Greater Manchester employment and skills board has resulted in the co-designing of apprenticeship courses that can be delivered locally, improving local responsiveness to skills shortages. That was replicated in Sheffield’s city deal and in several other cities, increasing the engagement of small and medium enterprises and delivering on local skills priorities.

It might be too early to tell what impact the apprenticeship levy has had, as it was introduced only in April 2017. I am sure that the Minister has a bit of time to get across that brief—her predecessors had not quite caught up with it. I am sure she will tell us her plans for the levy’s review. April 2017 is not that far back, but I am sure that the Department has plans to review its introduction and effect. Initial statistics from the Department for Education indicate a sharp drop in the number of apprenticeship starts across the UK. Between May and July 2017, they had decreased by 59.3% from the same period in the previous year—in numbers, from 117,800 to just 48,000. I am sure we would all agree, across this Chamber, that that is a crucial area that needs the Government’s attention.

Employers in the public and private sectors report issues with the system’s inflexibility, and it appears that many organisations will fail to spend significant amounts of their levy contributions. It seems highly unlikely that the Government’s aim of 3 million apprenticeship starts by 2020 will be achieved. That is another example of the skills system failing to respond adequately to the current and future needs of our economy.

The skills system in the UK is very centralised, leaving London with few tools at its disposal to cope with London-specific issues, such as the higher demand for English as a second language, historically low levels of apprenticeships and the reliance on incoming labour in key sectors. The picture is potentially worse in other fast-growing cities, such as Coventry and Exeter, which my hon. Friend the Member for Bristol South (Karin Smyth) mentioned; they do not have the same system of devolution that we have in the capital. I am hoping to hear more about those regions of the UK later in the debate.

The system simply does not respond well enough to our growing cities’ needs and priorities. Coventry, for example, is in part of the country that is seeing greater economic growth, although that is coming from a lower base. Our skills system is not matching that growth and is falling behind. The OECD predicts that without significant improvement, the UK will fall to 28th out of 33 OECD countries for intermediate skills by 2020. That would see the UK overtaken by Ireland, Israel and Belgium.

London faces myriad challenges: a rapidly rising population; an over-reliance on migrant labour; skills gaps in many key sectors; low numbers of apprenticeships and an inflexible apprenticeship system; patchy careers guidance; and poor match-up between skills spending and outcomes. The forthcoming devolution of the adult education budget represents an important first step in creating a more efficient skills system, but the Government must be bolder and go further and faster on skills devolution to have the impact needed. Devolving greater powers on skills to London and the metro mayors would enable cities to create a system that meets employer need, not just learner demand.

What about the impact of Brexit? Businesses have met an increasingly large share of their labour needs through immigration. Nearly one in three of London’s workforce is non-UK born, and 90% of London’s businesses recruit EU citizens. Workers from the EU play a vital role in many of the capital’s key sectors, including construction, financial services, hospitality and health and social care. In London, in construction, hospitality and the tech sector, just under a third of all workers are EU nationals. Any fall in EU immigration following Brexit or during the uncertainty that Brexit is producing has a significant impact on not only London, but the UK. We know that London’s economy is a driver of things and has knock-on effects on other regions. Many agricultural areas are over-dependent on the supply of EU labour. The outcome of the discussions and negotiations over Brexit could have a knock-on effect.

The capital attracts highly skilled graduates from across the UK. A significant drop in EU labour could increase that trend, undermining the Government’s industrial strategy and attempts to rebalance the national economy. There is a genuine desire across the House of Commons for every region to grow and for London not to attract all the high-achieving graduates. That could happen for a period, perhaps, but there is a real need to rebalance our economy.

The drop in EU labour could also have a knock-on effect on other key policy areas, such as the need to build more affordable homes in London. A chronic shortage of skills in construction, for example, will create higher project costs and diminish the ability of the sector to deliver the new homes required to tackle the chronic housing shortage facing the capital and the rest of the country. We can think of best practice in public procurement: in many boroughs and city regions, the local authorities are getting much better at using public procurement to ensure that for every £1 million that is spent, say, we get one or two apprentices back from the providers of that crucial capital work. That is mainly in construction and the renovation and refurbishment of social homes, but also in other areas.

All the factors I have outlined suggest that London government and the metro mayoralties need the ability to take a strategic, all-age, whole systems approach to skills. There should be greater engagement with employers and better access to and use of data. The system should allow a more localised approach that works at two levels. In the capital, for example, we should tackle pan-London issues while also having more targeted activity at a sub-regional level to take into account the variations of skills, needs and demand across cities.

The all-party parliamentary group’s report set out eight key principles that should underpin a future skills system. They were:

“1. It must be labour-market led, and include high quality labour market intelligence that captures the needs of individuals, employers and local economies informing learner choice and the provider offer.

2. It must have strong employer engagement in order to identify skills needs and sector priorities.

3. It must have strong local accountability, with joint governance agreed between the GLA and London boroughs via sub-regional partnerships.”

In that regard, we know that other sub-regional areas function much better than London. With a population of 8 million, it is very hard to match the economic partnerships with the various areas. In other sub-regions, we should be able to do much better on local accountability and buy-in from local authorities. The report continued:

“4. It must be outcome-focused, with strategic coordination across all aspects of post-16 professional and technical education to drive better outcomes. The system should focus on and reward delivery of positive outcomes covering jobs, earnings, progression”—

I emphasise that point; too many people are sitting in entry-level jobs way into their 40s and 50s, unable to get that progression that is so crucial—

“personal development and wellbeing outcomes.

5. It must include stronger incentives to encourage provision that meets London’s economic needs and supports progression.

6. It must be flexible to enable London government to have the ability to commission provision based on analysis of need.

7. It must include effective, impartial information and advice to ensure learners can make informed choices that will lead to future employment opportunities.

8. It must take a whole systems approach to ensure that skills policy and commissioning are effectively aligned.”

What would that mean in practice? The Government need to go further, faster, to give local government and metro mayors the levers to address the considerable skills challenges I have set out. They should consider devolving all 16-to-18 provision to combined authorities in other parts of England. The Government should provide commissioning freedom and the ability to set outcomes and incentives for the whole skills system. That would better serve the progression and economic priorities of different areas in England. The Government should give London government control over all vocational capital investments, such as 14-to-19 capital provision and institutes of technology, alongside existing further education capital responsibilities. That would capitalise on local ambition, expertise and intelligence, and align adult education and 14-to-19 capital investment.

The Government should devolve careers funding streams to London government, so that it can build a seamless, single, integrated careers service. The concept of a careers service is something that many people in local government would love to see return, so that they can match aspirations and assist parents, who are so key to helping young people decide what to do next. It would also allow older people to get back into the workplace—or change what they do, now that we are all meant to be working until we are 70. [Interruption.] You have loads of time, Minister. Through those things, we can have a proper system that we can be proud of.

We would like the devolution of careers funding streams to a local level, to build a seamless, single, integrated careers service. The Government should devolve the capital’s future share of the UK’s shared prosperity fund to London government, and ensure that future skills funding settlements take into account each area’s unique needs. We also need short-term flexibilities around the apprenticeship levy. In the longer term, we need to devolve the levy to London. That will be quite a difficult trick to master for a new system, but we need it to be as flexible as possible, so that we can use the resource quickly and build in the ability to develop that longer-term devolution. We could get longer-term value by getting together with local areas to work out the best way forward.

The other voice that needs to be listened to is that of small and medium-sized enterprises. They provide many of the job starts for young people, and older people entering the labour market who need their skills updated. It is difficult for SMEs to communicate with Government, Members of Parliament and the wider system, so that relationship with SMEs must be developed in a special way. We want more flexibility in the levy; for example, it could allow an increase in the amount of levy funding that employers can pass on to their suppliers. That is currently capped at 10%. Local authority areas increasingly use their contracts to have suppliers generate apprenticeship opportunities, but capping that at 10%, particularly in the short term, might mean we are not getting as much value as we could in our timeframe. In 2016-17, for example, London boroughs created 60% of their apprenticeships through contracts and suppliers, as I mentioned earlier.

The Greater London Authority and the Institute for Public Policy Research, a think-tank, have developed a proposal for a skills and progression pilot project, which I recommend the Department look at. A strand of the proposed pilot is to work with employers to pool the 10% that can be passed on to non-levy-paying employers, and support them in developing good-quality apprenticeships through that. The pilot wants to test out increasing the 10% cap as well. There is a strong push for that proposal. In the longer term, the Government should consider full devolution of the apprenticeship levy, as has happened in Scotland and Wales. Obviously, London and other key areas would need to bid and make the case for that, but the Government should not rule that out.

A recent Chartered Institute of Personnel and Development survey found that 53% of employers who pay the apprenticeship levy would prefer a training levy; just 17% support the apprenticeship levy in its current form. I am keen to hear the Minister’s feedback on that proposal.

In conclusion, the proposals might seem radical and far-reaching, but London, Manchester, Birmingham and other major UK cities are experiencing severe skills challenges that could be exacerbated significantly by Brexit. The Government need to act now and allow the skills system to deliver in flexible, responsive ways that the current centralised system does not. The Mayor of London has already indicated that London government is keen to work with central Government to deliver on this agenda, and there is a clear appetite from many of the elected mayors to do the same, as there is from leaders of local areas. I hope we can all work together to improve skills outcomes for all learners and businesses across England.

[Ian Paisley in the Chair]

09:51

[Priti Patel (Witham) (Con)]

It is an honour to serve under your chairmanship this morning, Mr Paisley. I congratulate the hon. Member for Hornsey and Wood Green (Catherine West) on securing this important debate and on her thoughtful speech, which covered the whole gamut of skills policy. She had some good initiatives and suggestions for how we can start to address the ongoing skills shortage across our country and our economy in a wide range of sectors.

I remember often discussing young people here in 2010. We talked about a generation excluded from employment and about the employability barriers facing them. We had a system that was simply not functioning and not getting them the engagement that they needed to help them get the skills necessary to join the workforce. During those years, when we had had a recession too, we found that older workers were finding it difficult to retain their jobs and also to find new employment as the economy changed. There was more part-time employment as demands across the economy fundamentally shifted. One of the things that I feel strongly about, which the country and our Government should focus on, is the agility that is required to sustain the flexible economy. We must ensure that people of all ages, all skills and all backgrounds can still remain active in the labour market. To do that, we need to look at education.

[Jack Lopresti (Filton and Bradley Stoke) (Con)]

My right hon. Friend is making a strong case on the economic benefits of addressing the skills shortage, but there is also a moral case to do with social mobility, aspiration and allowing people to fulfil their potential in society generally.

[Priti Patel]

My hon. Friend is absolutely right. I will come on to the ladder of opportunity, the moral obligation and responsibility, and the progression pay that the right hon. Member for Hornsey and Wood Green mentioned earlier. In fact, we have a good economy right now, but we are faced with a shortage of people in the key sectors that cover the health and wellbeing of our economy: construction, nursing, social care, engineering and a whole range of other sectors. Full-time employment and part-time and temporary employment are all incredibly vital to our labour market.

We have record levels of employment, but we should look beyond that to the next generation and ensure that, while they are at school, they are engaged and nurtured to think about the world of work. The Government have the Careers & Enterprise Company and other models of engagement, but that is simply not good enough in terms of overall coverage—engagement with schools and the requirement on our education establishments to open their doors to businesses, so that they may talk to young people about careers, and to bring into schools sectors that reflect the local economy.

I feel strongly about the role and significance of devolution. In my short apprenticeship as the Employment Minister in the Department for Work and Pensions, I oversaw some of the devolution deals around the Work programme. I worked with the combined authority in Manchester and on other devolution deals. Employment programmes and employability were a major factor in giving devolution to local authorities up and down the country. At the heart of that success is working with the private sector, not just the public sector, to ensure that the private sector and the needs of the local economy are fully reflected in devolution deals. Importantly, the combined authority and local authority models require an absolute understanding of what is going on in the local economy, where the skills shortages are and where future demand might come from. There is also a need to look at succession planning and how businesses can work with their workforce.

[Jim Shannon (Strangford) (DUP)]

In Northern Ireland we have recognised it is important to address the issue of skills shortages and to go into secondary schools. Some people have suggested we should even go into primary schools, although I am not sure that is entirely appropriate. We have also addressed the skills shortage in engineering. We should encourage ladies and girls to look to engineering as a possible job for the future, because they can do it as well as we men.

[Ian Paisley (in the Chair)]

Order. Interventions should be short and not made into speeches.

[Priti Patel]

The hon. Member for Strangford (Jim Shannon) is absolutely right. Young girls should be encouraged and should have the opportunity to look at the careers that they might not even consider to be suitable for them. In STEM subjects—science, technology, engineering and maths—engineering is a classic example.

If I may, I will share with the House a little bit about Essex and how we are approaching the skills issue locally. Essex is famously the county of entrepreneurs. Firms based in my constituency have a proud and strong record of creating jobs and local employment. Businesses in my constituency are almost entirely small and medium-sized businesses and they have now created 25% more jobs leading to more than 30,000 people in employment. They are doing well, but they could do even better. They want to see the barriers to recruitment, employability and access to the labour market brought down. They want people with the right kinds of skills. They want change because we have seen that a deficit in skills standards is one of the biggest barriers to growth locally, and to productivity in our wider economy.

On Friday I attended a skills forum organised by the excellent Essex Chambers of Commerce and Industry, which was also attended by my equally brilliant colleague, my right hon. Friend the Member for Harlow (Robert Halfon). In that business-led forum the spotlight was on skills and on the barriers that prevent businesses recruiting people. It particularly looked at the barriers around the skills and training programmes in Essex and the demands and challenges for the future workforce who are being trained. We need highly trained people, but the lack of flexibility within the training and provider landscape was clearly on display in the discussions that we had.

What stood out in the skills forum, and in my previous meetings and engagement with local businesses, was that they want to be at the heart of the decisions that are made on skills policies, and they want to be involved in designing and shaping courses. They want to play their part in offering job training opportunities. However, there are many barriers and restrictions on their doing that. They are best placed to understand the needs of their businesses and the local economy in a way that no Government with a centralised approached and no local authority can fully understand until those businesses are a full part of the discussion. The devolution of skills to local authorities can be successful only if businesses play a leading role in developing that skills agenda, including working with the education establishments and the courses in those areas.

Over the years, I have received endless complaints from businesses about the time it takes for new courses to be approved. They also complain, as I have mentioned, about barriers put up by the public sector to engagement with businesses. It can take years, with hundreds of hours of input from business and trade organisations, for new courses to be signed off. That equally applies to relevant courses. On Friday, I met representatives from a business who said that finding a course that was specific to their business was near-impossible. They just wanted a course, for a young person who wanted to be on an apprenticeship scheme, that covered the basic employability skills.

There is so much more that can be done, and I welcome the many creative suggestions in the all-party parliamentary group report. We need to ensure that there is flexibility, and that businesses are at the heart of the devolution agenda. I strongly support the idea of devolution in skills coming to the county of Essex. I think that we would benefit from that, in some of the ways that have been suggested today. Devolving skills, and focusing on skills in the workforce, is important not just to businesses, but to individual workers. The skills deficit has a drag not only on our economy, but on the life chances of people who want to work. We have so much untapped potential across our workforce, and there is a great opportunity for the Government to lift the lid on the talents of those people who are struggling to access the labour market.

One way that we can do that, as the hon. Member for Hornsey and Wood Green mentioned, is through the apprenticeship levy. We need to look at how we can unlock the potential of the levy and use the funds it raises to support the upskilling of a whole generation who are simply not accessing the levy. I also suggest using the funds to upskill agency and temporary workers. More than 1 million people go to work every day to do agency and temporary work. That model offers a great deal of flexibility, but those workers make an enormous contribution to our economy; their net contribution stands at something like £35 billion. There is growing concern that the funds that agencies put into the apprenticeship levy cannot be used to train and upskill workers on their books. Somewhere in the region of 2,000 to 2,500 businesses are paying the levy, and the rules on the spending of funds raised by the apprenticeship levy are so rigid that it is almost impossible to use that money to invest in agency or temporary workers.

We have a very good record in Government when it comes to revitalising apprenticeship schemes, and we should be proud of that. The levy has a critical role to play in providing a great pathway. We know that the current pathways are not suitable for everyone, and we need more flexibility when it comes to the levy and apprenticeship schemes. Many workers need to go on shorter, practical courses to take the next step to move on in their career. Examples include courses in food hygiene and fork-lift truck driving, which are not covered by the apprenticeship levy. The flexibility of the levy could be increased to support some of those courses, so that we can support more people to get back into work and get better pay progression, and give them long-term employment opportunities.

If we are to deliver a fair society that invests in people and provides opportunity for those who want a hand up so that they can reach their full potential, why on earth would we not do this? We have a fantastic opportunity to provide greater training support; existing employment programmes are far too rigid and inflexible to do so. A very good way in which we could do that, I suggest, is that the Minister, working across the Department for Work and Pensions footprint, could give people who are on universal credit, and who are limited in their hours of work, the freedom and flexibility to access the levy, to get on some of these courses, and to get skilled up so that they can progress.

We are on the cusp now. The levy is new, but it represents a fantastic opportunity. Devolution of skills is surely a success for our region, and it deserves to receive more encouragement.

10:04

[Stephen Timms (East Ham) (Lab)]

Welcome to the Chair, Mr Paisley. The Government have said that they want skills devolution, and the right hon. Member for Witham (Priti Patel) has supported that aim. Indeed, I think George Osborne announced that skills would be devolved to a number of mayoral combined authorities, but progress has been woefully slow, so I very much welcome the fact that my hon. Friend the Member for Hornsey and Wood Green (Catherine West) has secured today’s debate.

There are still lots of operational details about how that devolution will be achieved. I very much hope that the Minister will be able to give us some detail about when devolution will happen in London and the other mayoral combined authorities, because the need is now pressing. I welcome the report from the all-party parliamentary group for London, and congratulate my hon. Friend the Member for Croydon North (Mr Reed) and the hon. Member for Bromley and Chislehurst (Robert Neill) on bringing it forward. I welcome the sense of urgency that the report conveys about what it describes, absolutely rightly, as “an enormous skills challenge” in London.

There is a striking degree of agreement in London about what needs to be done. My hon. Friend the Member for Hornsey and Wood Green set out a number of priorities. The London Chamber of Commerce and Industry, in its most recent quarterly survey, for the third quarter of 2017, found that 60% of businesses in London that tried to recruit encountered difficulty finding people with the right skills. That is the highest—that is to say, the worst—proportion since it started collecting those figures four years ago. The right hon. Member for Witham mentioned the Essex Chambers of Commerce and Industry. The London Chamber of Commerce and Industry explicitly endorses the recommendation in the all-party parliamentary group’s report to devolve all 16-to-18 provision to London, and to give the capital greater control over policy and commissioning.

Life is difficult for many in London today. Employment is high, which is a very good thing, but jobs are often insecure and uncertain. Housing costs are high and rising quite fast, and wages are not keeping pace. More and more people are in the position characterised by the Prime Minister as “just about managing.” Some forecasters currently estimate that 3 million jobs could be lost to automation in the next generation. Automation is a huge driver of the need for reskilling. Furthermore, in the background to all of that is the perennial UK challenge on productivity. UK productivity fell from 9% below the OECD average in 2007 to 18% below it in 2015. We have to overcome that long-term challenge. The report is also absolutely right to highlight, as my hon. Friend the Member for Hornsey and Wood Green did in her opening speech, that a drop in European Union migration will have a disproportionate impact on London, because so many workers in London are from other parts of the European Union. Lots of London’s key sectors have big EU-born workforces, and Brexit is bound to make the problems of skills shortages worse and increase the importance of achieving solutions.

Those challenges are particularly acute in east London—the part of London that I represent. In October, the Mayor of London published research showing that east London is the fastest-growing area of the capital. Some 110,000 additional jobs have been created in the six Olympic boroughs since 2012—three times the number predicted in 2013. I very much agree with what the Mayor said in October:

“Businesses, universities and cultural institutions are flocking here and the centre of gravity in London is moving east.”

That trend in our part of London further highlights the importance of the skills challenge.

The report published by the all-party parliamentary group for London highlights a number of issues specific to the capital, such as,

“a much higher demand for English for Speakers of Other Languages”.

My hon. Friend the Member for Hornsey and Wood Green mentioned that as one of the concerns, and I very much agree with her on that. It is widely recognised that the ability to speak English is key to integration and community cohesion, and yet funding for it in London has been dramatically cut. The joint briefing for this debate from London Councils and the Greater London Authority makes the point:

“London’s population has grown from 7.4 million in 2005 to 8.9 million in 2017, but funding for English for Speakers of Other Languages has reduced in real terms by 60% since 2009.”

My hon. Friend the Member for Blackpool South (Gordon Marsden), who will be winding up for the Opposition in this debate, pointed out last October, in a parliamentary briefing on delivering skills for London organised by the Learning Revolution Trust—a charity linked with Newham College in my constituency—that annual ESOL funding had been cut from £203 million in 2010 to £90 million. Refugee Action says that about half of ESOL providers report waiting lists of six months or more.

I hope that we can recognise the importance of ESOL and do something to address the current lack of funding. I pay tribute to the work in my borough, Newham, of ESOL Exchange, which will mark its 10th anniversary next month. It is a network of people and organisations working together to improve ESOL in Newham, managed by the Aston-Mansfield Community Involvement Unit. It provides a web-based directory of formal and informal ESOL provision of all kinds across our borough, in order to make it as accessible as possible. Helping people in east London speak English proficiently is a very important part of the skills challenge.

I pay tribute to the Learning Revolution Trust, a charity that aims to reduce the financial barriers to education faced by many people today in east London. It typically provides modest financial support to people, perhaps midway through a course, for example to help with childcare costs, and has helped more than 300 young people since it was established in 2012. It has made an important contribution.

My hon. Friend the Member for Hornsey and Wood Green and the right hon. Member for Witham both mentioned apprenticeships, which are key. It seems to me, however, that the programme has been botched in the past year or two. The Association of Colleges has reported, based on data from 91 further education colleges last November, that the number of apprentices had fallen 39% compared with the previous year. It suggests that, even though £2.6 billion is being collected through the apprenticeship levy, the Government might actually end up spending less on apprenticeships this year than last year, because the cuts in funding for the apprenticeship programme from taxation have been greater than the extra amount going in through the apprenticeship levy.

The right hon. Member for Witham rightly drew attention, in a very courteous way, to some of the flaws in the design of the levy. Those flaws are serious. As my hon. Friend the Member for Hornsey and Wood Green suggested, it would be great if the Minister would tell us that there will be some sort of review of how the levy is going. I have not heard any suggestion of that yet, but I do think a review is urgently needed. It is now absolutely clear that the target of 3 million apprenticeship starts by 2020 will be missed. FE Week published an informative graph in November, showing that achievements towards that target were behind target up to a year ago, and then, almost a year ago when the levy was introduced, they went massively off-target. There is really no prospect now of the ground being made up. It would be very good to hear from the Minister what plans there are to try to get the apprenticeships programme back on track.

The call for devolution, which is across the board now, of powers on skills should be not just heeded—the Government have recognised that—but delivered. I hope we shall hear from the Minister what steps will be taken to do that.

10:14

[Julia Lopez (Hornchurch and Upminster) (Con)]

It is an honour to serve under your chairmanship, Mr Paisley. I commend the hon. Member for Hornsey and Wood Green (Catherine West) on securing what is a welcome and increasingly urgent debate.

As we leave the European Union, we will need our domestic workforce to be ever more dynamic, innovative and flexible, not just to maximise the new opportunities to our economy from trade and technology, but to reduce our reliance on a vast overseas workforce. Access to a pool of half a billion EU workers has for too long allowed businesses to obtain cheap, skilled and hard-working employees without having to properly invest in the domestic skills base. It has similarly allowed the Government to duck some of the shortcomings of our own education and skills systems by effectively piggy-backing on the investments of other nations in their people.

Economic migration to the UK will not and should not stop once we have left the EU. London, where I am an MP, is an economic powerhouse that needs to have access to the global talent pool, but if we are to fulfil our own industrial strategy and maximise opportunities for home-grown workers, we need to turbo-charge our approach to skills and get businesses, schools, colleges and Government to work together in a far more interconnected way. The current framework for improving skills is far too centralised and inflexible, unable to deliver workers to fill London’s vacancies as quickly as those vacancies are created, and failing to provide lifelong learning to keep existing workers sufficiently up to date.

Two weeks ago, I visited my local jobcentre, where the team is doing a quite remarkable job in getting people into work. However, one of the groups they find hardest to place is the over-50s, who need to be given time and confidence to adapt to the changing workplace. Meanwhile, one in five London families are stuck in in-work poverty, so attention also needs to be paid to providing clear progression pathways into higher paid work. We require a new spirit of collaboration that leads to increased interaction between our schools, businesses and public services.

I am very excited by what I see in my own constituency. Hon. Members have referred to the critical importance of investment in STEM subjects. On Friday, I visited the Coopers’ Company and Coborn School, which has a dedicated STEM coordinator, Nick, who is doing some amazing work in increasing uptake in science, maths and tech subjects by connecting the school to the academic community and to businesses. Too often such work is reliant on dynamic individuals and organisations, without whom the workstream would not be able to progress.

I am also particularly excited by a five-week, focused course being run by Havering College in my constituency, working with Transport for London. Committed students in the boot-camp style course at this railway academy are guaranteed a job interview with the prospect of employment as railway engineers. Half a million pounds-worth of rail equipment donated by TfL has been installed at the college and students are getting hands-on experience to learn about the rail industry. That is the kind of joined-up skills approach we shall need to see much more of, not least as it helps to provide workers for critical infrastructure projects such as Crossrail. The programme has also helped long-term unemployed and ex-offenders with few or no qualifications to access full-time employment.

It is probably now time to give London the powers that will enable it to prioritise those kinds of skills investments: getting people into work and delivering critical infrastructure in the capital. Devolution of skills provision would also support the capital to develop Londoners’ employability and skillset, targeting and scaling up skills efforts to ensure that everyone who grows up in London can access employment in a changing and increasingly competitive labour market. Compared with international peers and other parts of the UK, London has much lower fiscal and political autonomy, and it is highly dependent on national policies and funding—74% of Greater London Authority and borough expenditure is based on intergovernmental transfers. That makes it very difficult to plan for the long term.

There are two areas where the Government could now look at devolving additional power, since City Hall will soon take control of London’s adult education budget: unspent apprenticeship levy funds and the 16-to-18 further education skills budget. Those issues will be key to meeting the demands of London’s changing labour market. With a wider range of powers, London would be in a strong position to create a system that meets employer need, not just learner demand, and capitalise on local labour market intelligence. It would enable stronger employment engagement to identify skill needs and sector priorities, which can only be done effectively at local level. The provision of higher level professional and technical education could be driven up and clear progression pathways created for learners. I look forward to hearing the Minister’s perspective on those and the other technical and skills issues raised today.

10:19

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

I say with even greater feeling than normal what a pleasure it is to serve under your chairmanship, Mr Paisley.

I thank my hon. Friend the Member for Hornsey and Wood Green (Catherine West) for securing this debate. Her contribution was thought provoking and adds to an ongoing debate on this serious issue. I describe it as serious because successive Governments have wrestled with the problem of the national provision and accountability of skills funding and the effectiveness of local delivery. Certainly the Government’s own initiative of the apprenticeship levy will not, as far as we can tell at this moment, solve or resolve those historical tensions and problems. We need to look at the issue from a fresh perspective. Now is a good time to do that.

In the Government’s regionalisation agenda—we talk about the northern powerhouse, the midlands engine and so on and so forth—skills is an essential driver of economic growth in a region. To devolve economic power to the regions without devolving the provision of skills in effect leaves a vital part of economic infrastructure out of regional control. I am here to advocate increased devolution of skills, in particular in an area such as mine, which now has a new metro Mayor, Andy Street, who has pledged to enhance economic growth in the area and to see what can be done with local provision of skills funding in order to enhance the initiatives already in place.

Nothing could be more appropriate at this time. Only last week the local chamber of commerce in my constituency warned of acute skills shortages. My area is the historic Black country, which in years gone by was the workhouse of the world, when Britain was an international manufacturing powerhouse. Despite all the reduction in manufacturing as a proportion of our economy, the Black country still enjoys that role—it is a vital part of the engineering and motor manufacturing supply chain, which drives one of the most successful parts of our economic profile, the motor industry, vital to both productivity and our balance of payments.

There are more foundries not only in the Black country but in my constituency than there are in any other constituency in the country, and they are suffering from an acute skills shortage. Those foundries have survived the globalisation drive because they had unique skills and a quality not deliverable in any other part of the world. However, they now have an acute skills shortage. First, they have a problem with the age profile—the average age group in most of those foundries is of people in their 50s—and, secondly, they have survived largely by recruiting from eastern Europe, and if that supply is in any way diminished, the existing skills problem would be enhanced.

In the last quarter of 2017, 82% of businesses in the Black country were reporting recruitment problems. It is estimated that we will need to reduce the number of the workforce with no qualifications by 50,000 over the next 15 years just to bring us in line with the national average, and that the Black country will need a 70% increase in the number of apprentices to meet basic demand. That is a monumental task, but our local area is seeking to address it.

In my constituency, in Tipton, the Elite Centre for Manufacturing Skills is being built. It is a joint venture between Dudley College of further education, the University of Wolverhampton and the historic metal casting company Thomas Dudley. The centre is designed to recruit and attract young people from the area to obtain not only apprenticeship but degree-level qualifications in the range of skills necessary to the local foundry industry. That is an example of a local initiative in which local businesses engage with the academic sector and Government, knowing what is needed locally and delivering the sort of courses and expertise to get the right balance of skills needs in the area.

Unfortunately, if we look at the national picture, central Government policy engages with the regions only on its terms, seeking insights of the problem but not giving direction, and seeking advice but not giving local agencies the funding to be able to deliver on their unique insight and expertise. A particularly bad example of that came to my notice in December.

The BCTG—Black Country Training Group—executive director Chris Luty got in touch with me and other Members of Parliament in the area because the group had lost its apprenticeship funding from the Education and Skills Funding Agency. BCTG is the largest provider of apprenticeships in the Black country. It had tendered for its Government funding to be renewed and, to the astonishment of Chris Luty, was unsuccessful. That meant that all the contracts with SMEs in the Black country would have to be closed, leaving a huge gap in local skills provision for small companies in the area that are vital to the supply chain for Britain’s motor industry.

In all, BCTG has recruited 4,000 apprentices, 750 since last May alone. That is the sort of scale it operates on and demonstrates the gap that would have been left had it not been able to secure the funding. I wrote to the Minister and so did other Black country MPs. To the Government’s credit, they realised that that was an error and changed their decision.

The reason given for the original decision, however, is illustrative:

“The review was conducted by a member of the Agency’s staff who possesses the appropriate technical expertise in the provision of apprenticeship training but who had not previously evaluated your tender.”

If that is not a classic case of Sir Humphrey-speak, I cannot think of a better one. It is outrageous for an organisation so key to the delivery of a vital driver of economic growth in the regions to make such a mistake. That sentence highlights the need for a change in approach to the devolution of skills to the regions.

I realise that other people wish to speak so I will bring my remarks to a close. Enhanced devolution of skills to the new bodies that are being set up affords the possibility and potential of enabling regional and even sub-regional needs to be correctly identified, backed up by initiatives from local businesses working with whatever partners are available to analyse the needs and to address them with the appropriate training and level of funding.

At the end of the day, if we are to be successful, we have to find another way of doing that. The brutal fact is that at the moment we invest billions of pounds into education and skills training but in so many of our vital industries we still have key shortages. I am sure that what is happening in my area is very similar to what is happening in many other areas. Finding mechanisms to devolve skills funding to local agencies is the key to unleashing the skills potential of so many young people and meeting the needs of local industries in a way that has not been done for many years.

[Ian Paisley (in the Chair)]

Before I call the next person to speak, I remind hon. Members that Front Bench speeches will begin at 10.40 am. I call Rachael Maskell.

10:30

[Rachael Maskell (York Central) (Lab/Co-op)]

Thank you for calling me to speak in this really important debate, Mr Paisley. I congratulate my hon. Friend the Member for Hornsey and Wood Green (Catherine West) on the excellent, comprehensive way that she set out the challenges ahead. I agree with my hon. Friend the Member for West Bromwich West (Mr Bailey) about the importance of seeing the issue in the wider context of the local economy, and I will touch on that in my speech.

Although in York we do not have a devolution deal yet—I trust that the Minister will progress that with expedience—there is a real skills gap in our local economy. We are conscious that we are falling behind as other economies accelerate, such as those of London and the south-east. There is the north-south divide, but there is now an east-west divide, too, because of the progress being made in Manchester with the devolved settlement. That is why it is so important that we move forward on all devolution issues, not least skills.

York’s economy has changed massively over the years. We had a strong industrial base in the confectionary industry and in rail manufacturing, but that has really reduced. The low-wage, low-skilled economy has taken over. We have a very high cost of living but very low wages—some of the lowest in Yorkshire. There is real disparity, which causes pressure and mismatches in our city, where the tourism, hospitality and retail sectors dominate.

I have talked to the Secretary of State for Business, Energy and Industrial Strategy about the urgent need to address the skills deficit in the city. I have been out talking to businesses across the city; they consistently raise that mismatch—particularly the fact that business and IT skills do not come into the economy, and that schools do not prepare children for the modern world of work. Last Friday, I visited York St John University, which wants to help to address the skills gap. I have also visited York College, an outstanding college in my constituency that understands the challenges of the local economy.

I want to raise the issue of co-ordination, which other hon. Members have raised. Businesses, schools, colleges and local enterprise partnerships need to come to one place to discuss the real needs of the economy and how to address skills gaps. I will give a couple of quick examples of that. Engineering is a really important part of York, which is a rail city, but the university offers courses in electrical engineering only. Although the city council has identified rail engineering as part of the footprint, we are not providing the skills in the city for that. The National Railway Museum is about to embark on a new project for a gallery about the future of engineering, to engage girls and boys across the city and the country, but if we cannot follow through on ensuring the learning, that future cannot be delivered.

The digital creative sector is another part of our footprint where there is not that connectivity. There are fantastic facilities and there is a university course, and there are business start-ups, but after that, people have to move out of the local area. We need to be able to grow those skills right through to development and address the real gaps in the economy. The same goes for the bio and agri-tech sectors, where the gap needs to be bridged between academia and applied research. There are real gaps.

We need to be careful about how we balance skills acquisition. Clearly, we see a national education service as important in allowing people to enter the economy at different points in their learning and drive those skills forward, whether from the workplace or from school. We need to make sure that we strike the fine balance between addressing national and local needs in the economy.

There are real challenges in schools. We are not preparing our kids for the world of work young enough. They learn how to pass exams, but not about the life skills that are needed. Business talks about children being “screen deep” in IT skills, but not having the skills needed for the digital economy. T-level assessments have real problems, particularly for agriculture, because the assessments have to take place at a particular time of year, but the agriculture sector revolves around the seasons. Tree surgery, for instance, needs to be done at the appropriate time, not at a time that kills trees. I put that on the Minister’s desk to address. We have real opportunities to engage schools in acquiring the skills that the economy needs for the future. We desperately need a review of the curriculum to ensure that we are addressing those needs, starting at primary school.

I am conscious that other colleagues want to make contributions. Finally, my local college has made a plea to me, as have other further education institutes. If the adult skills budget is devolved, the procurement activities could seriously disadvantage colleges and prospective students. Lessons must be learned from the recent procurement of the non-levy apprenticeship budget, which other hon. Members have spoken about. I trust that the Minister will take that on board.

10:36

[Karin Smyth (Bristol South) (Lab)]

It is pleasure to serve under your chairmanship, Mr Paisley. I thank my hon. Friend the Member for Hornsey and Wood Green (Catherine West) for bringing this debate forward. There has been a great deal of agreement on this important issue.

I was a member of the Public Accounts Committee in the last Session. Colleagues will be aware that the Committee has done a lot of work on the interplay between devolution in cities, skills growth and the further education sector, and the need for more accountability regarding those decisions. It had a discussion about LEPs yesterday. That whole agenda needs to be much more cohesive, and people need to understand about local accountability for the way that taxpayers’ money is spent.

Further education colleges, such as City of Bristol College, which I visited again on Friday, remain part school, part training provider, part higher education college and part community college. That last function is really important to us in south Bristol. As my hon. Friend the Member for Hornsey and Wood Green said, there is competition between schools. In south Bristol alone, there are more than 500 surplus school places, plus the college. The schools are all in competition with private schools, a university technical college and a sixth-form college. That dilutes not only the pool of youngsters going into those establishments, but the money and the opportunity to link up skills. Ultimately, it must dilute the quality. We need a strategic delivery function that does that much better.

The system is complex for youngsters, and for parents. I have spoken to the Minister about that and her Department is working on it. Parents are crucial—as partners, in supporting young people through a complicated system, in giving them opportunities, and in ensuring quality of provision, so that when we support our youngsters into their very different pathways, we are sure about the quality and the reliability of the courses.

I want to mention the collapse of Carillion last week. City of Bristol College stepped in, via the training board, to provide last-minute places. That highlights the importance of sustainability in further education, so that institutions can pick up that work. I will write to the Minister to make sure that the college gets the money to follow those young people, whom the college has done great work in supporting. We cannot allow that quality to be diluted any further.

10:39

[Gordon Marsden (Blackpool South) (Lab)]

It is a great pleasure to serve under your chairmanship, Mr Paisley. I congratulate my hon. Friend the Member for Hornsey and Wood Green (Catherine West) on securing the debate. It has been excellent, thoughtful, positive and full of ideas, and she has led the field.

I am afraid that I do not have time to do full justice to the multifaceted points that my hon. Friend made. She mentioned the co-design of courses and the role of local authorities and their contractors and suppliers. She put forward ambitious and interesting ideas about how we might devolve all 16-to-18 provision, and she mentioned careers funding. I am conscious from my links and discussions with various groups in London—my right hon. Friend the Member for East Ham (Stephen Timms) referred to this, too—that there is huge appetite in London for devolution, for all the reasons that she explained.

I also praise the right hon. Member for Witham (Priti Patel), who drew on local experience to inform her thoughtful comments. I was particularly interested in what she said about careers. I think she used the words “not good enough in their spread”. I do not want to criticise what the Careers & Enterprise Company is trying to do, but one of the central issues in this debate is resources—resources in the centre, and how those resources are distributed. I think that there is some common ground in the Chamber on that issue. Interestingly, she also drew on her DWP experience. In my experience, having spent a long time holding this portfolio and others, if we do not get the mix right between the Department for Education and the DWP, we will not make the progress in this area that we all want to make. That is particularly true in areas such as traineeships.

My right hon. Friend the Member for East Ham mentioned the need for urgency from the Government. He rightly drew attention to productivity issues and to ESOL, which is key. The hon. Member for Filton and Bradley Stoke (Jack Lopresti), in an interesting intervention, made the point that this debate is about not just an economic issue but a moral responsibility. On ESOL, we have a moral responsibility to refugees, people who have settled here and given their work to this country, and many other disadvantaged groups in this area.

The hon. Member for Hornchurch and Upminster (Julia Lopez) made some thoughtful comments about initiatives in her constituency and devolution for London. My hon. Friend the Member for West Bromwich West (Mr Bailey), the extremely experienced former Chair of the Business, Innovation and Skills Committee, mentioned skills shortages; the incident that he raised with respect to a lack of proper supervision points to what we have been saying for the past two years about the capacity of the Education and Skills Funding Agency and the Department to handle such things. The fallout from the machinery of government changes is still causing problems.

My hon. Friend the Member for York Central (Rachael Maskell) rightly drew attention to the skills gaps in her local economy and the importance of issues in the service sector, which I will touch on. My hon. Friend the Member for Bristol South (Karin Smyth) used her experience on the Public Accounts Committee to make some telling points, including one that she has made to me on several occasions about parents being crucial.

We are entering a period of extreme uncertainty regarding our skills base because of the challenges of Brexit, automation, cuts to the adult skills budget, and so on. If we do not have a progressive integrated policy, those things will soon make it impossible for us to build highly skilled local economies or address our productivity crisis. Research commissioned by the Local Government Association reveals that the skills gap is worsening. The LGA says that by 2024 we will lack 4 million high-skilled people to take up available jobs, and will have 2 million too many people with intermediate skills and more than 6 million too many low-skilled people. The Open University has said similar things, and the recent British Chambers of Commerce quarterly economic survey also touched on this issue.

As I said when I hosted the launch of the Learning Revolution Trust’s “Delivering skills for London” report in November, we have to accept and embrace the fact that, for many adults, working models and expectations will continue to change radically. That means that there will be more self-employment, more juggling of multiple part-time jobs, more engagement with small businesses, and more demands on individuals with more complex family structures and needs. I pay tribute to the Learning Revolution Trust for that report, which brought together colleges, council leaders and local players in just the way that they need to be brought together.

We must not forget the people who are often missed out. That report referred to the issue of employing people with disabilities—particularly learners with learning difficulties or disabilities, and people with special educational needs and disabilities. The Maynard review made really important proposals in that area. Will the Minister say specifically what collaboration and co-operation is happening in that respect, particularly with DWP and BEIS? Without their involvement, it will be difficult to take this forward. Add to that the public policy challenges for generations and our exit from the European Union—a lot has been said today about Brexit—and it is clear that the skills system needs to be one of our highest priorities if we are going to escape a shortage of labour when we leave the EU, and when people from the EU who are currently here leave. In that context, we must look at devolving skills budgets.

The Minister will know that in November, England’s seven metro mayors—four Conservative and three Labour mayors—called on the Government to devolve that power much faster. The Minister’s colleague, the West Midlands Mayor, Andy Street—I quote from the Local Government Chronicle—said:

“I believe now is the time for government to go a step further and provide us with the tools to tackle the challenges and seize the opportunities we each face.”

Such requests are piling up across the board.

The all-party parliamentary group for London’s report has been dealt with in great detail. I was privileged to speak at its launch last July. I congratulate my hon. Friend the Member for Croydon North (Mr Reed) and the hon. Member for Bromley and Chislehurst (Robert Neill) on the way that they chair the APPG. My hon. Friend the Member for Hornsey and Wood Green talked about its recommendations, so I will not repeat those, but I will say that, although the report focuses on one city, this discussion can be applied to regions across the country.

While we look at how apprenticeships are funded and how they might be part of the mix, we should explore traineeship funding at local level, too. Later today, I will meet the Association of Employment and Learning Providers and around 40 training providers to discuss a way forward for a programme that they believe the Government have neglected. We need to find ways to use traineeships as a contact point for getting on to apprenticeships and meeting local needs and demands. Another area that my hon. Friend the Member for Hornsey and Wood Green and my right hon. Friend the Member for East Ham touched on is ESOL.

We must remember when we look at local funding that European structural funds have traditionally supported the expansion of apprenticeships and small businesses in areas of the country with strong local enterprise partnerships. The Government have guaranteed funding in this area for the moment, but they have given no guarantee about what will happen when we come out of the EU. Can the Minister tell us what she and her officials are doing to make that clear to No. 10 and her colleagues in the Brexit team? The sum that is potentially available, £725 million, simply cannot be lost from the process.

This call for devolution is not new, and neither are the benefits that would come from it. Back in 2013, my hon. Friend the Member for City of Durham (Dr Blackman-Woods) and I wrote a Smith Institute pamphlet about how the Government and Whitehall had been far too slow to grasp the nexus between skills and sectoral delivery, as well as place delivery. I wrote:

“Put bluntly the age of relying on Government micromanagement and mandarins to deliver what we need in this area has reached a bit of a dead-end.”

I added that

“to encompass new low carbon and hi-tech industries…Such initiatives cannot any longer simply come out of Whitehall”.

The Minister will of course remember what Lord Heseltine said about that issue in his famous 2013 report, “No stone unturned: in pursuit of growth”.

I am hugely conscious of what we need to do for councils, such as mine in Blackpool and that of my hon. Friend the Member for York Central, that were able to create their own apprenticeships in the early 2010s but now, because of funding cuts, are not able to do so. The LGA has put forward an important vision in Work Local, which the Minister should look at as well as IPPR North’s recommendations.

Our national education service talks about how important accountability is:

“the appropriate democratic authority will set, monitor and allocate resources”.

Skills devolution is not just the smart thing to do in the community but the way forward. If local authorities, mayors and combined authorities have the capacity, competence and aptitude to take it forward, the Government need to take a far stronger and more thoughtful look at that.

10:50

[The Minister for Apprenticeships and Skills (Anne Milton)]

It is a pleasure to serve under your chairmanship, Mr Paisley. I congratulate the hon. Member for Hornsey and Wood Green (Catherine West) on securing the debate. We do not have enough time to cover everything. It has been a fantastic debate, and it is useful for me to hear from individual Members. As the shadow Minister said, there is a lot of cross-party agreement on the subject. It is not terribly party political.

The hon. Lady talked about the significant skills gap. I was recently at the WorldSkills competition and conference, and of particular note was that Ministers from about 55 countries all around the world were saying the same thing. This is not a uniquely British problem. There is a skills gap around the world. If we look ahead 10 or 20 years, we cannot think of the jobs that will be available. This is a fast-changing climate.

To give some background on how serious the situation is, the skills for life survey in 2011 reported that 43% of people were found to have literacy skills below level 2 —a good pass at GCSE—and 78% had numeracy skills below that level. Of the respondents, 15% were found to have the literacy skills of an 11-year-old or lower—an estimated 5 million people—and 49% were at that level for numeracy. Therefore, it is estimated that 17 million people have the numeracy skills of an 11-year-old or lower.

According to a 2017 Lloyds bank report, 11.5 million people in the UK are classified as not having basic digital skills. However, increasing numbers of young people are now leaving compulsory education with good standards of English and maths. In 2016, just over 71% of 19-year-olds held a level 2 qualification in both English and maths—the highest figure on record. However, we have a cohort of adults who lack those basic skills.

The hon. Lady was quite right that historically employers’ investment in skills has been poor. Employers and businesses have been bad at investing in the skills of their workforce, and the levy is one way of making sure that that is no longer the case. They pay into an account that must be used for training and assessment.

The hon. Lady also mentioned careers. I hope she has time to read the careers strategy I launched late last year—I spent a lot of time on it. Careers advice has been delivered poorly—I say that not least from my own experiences at school—and the strategy specifically mentions some of the issues she raised. She talked about patchy careers advice. What is the point of education if not to give young people the right start in life? Education is not an end in itself but a launch pad for life. We therefore need careers to become integral to what happens in schools. The largest word on the cover of the careers strategy is skills, because that is what it is about. I am not terribly fond of the word “careers”, because it invokes images that no longer apply. It is about jobs and skills.

It was a pleasure to see my right hon. Friend the Member for Witham (Priti Patel) contribute to the debate. I know how passionately she feels about this subject. As an aside, my hon. Friend the Member for Filton and Bradley Stoke (Jack Lopresti) mentioned the moral case, as did the shadow Minister. I could not feel more strongly that we have a moral imperative to get this right. It is not just about business and the skills needed; it is about making sure that people have a job path and manage to reach their potential in life. It should not matter where they come from, who they are or who they know. Everybody should have the same opportunity.

I urge Members to go into schools and talk about their careers advice, and to look at the careers strategy. There are a lot of requirements—there needs to be a lead on the governing body—and the spine that runs through the strategy is the Gatsby benchmarks.

My right hon. Friend mentioned two examples in Essex. I met a fantastic company in Essex, with 1,000 employees and 54 apprentices at any one time. That company is doing what we need employers to do. If it has a skills shortage, it recruits locally and takes apprentices from level 2 up to level 7, catering in some areas specifically for people with special needs and people on the autism spectrum. It is brilliant.

All the changes brought in have put the Institute for Apprenticeships and employers centre stage. Someone mentioned how the work is led by employers, and in a way it has been devolved to them. They, along with the IFA, can set up the new standards and fill those gaps. My right hon. Friend mentioned the training programmes needed, and that is one way of dealing with that.

Flexibility on the levy came up in the debate. Yes, I am open to extending the levy’s use, but it has been in place for less than a year. We will allow transfers. For me, the levy is something I will review constantly and see how it is spent—it will not be about having a review. What matters is not that we just get apprentices. I want high-quality apprenticeships and the money from the levy to go to where it is needed. There is a lot of money sloshing around in the system, and what matters is that it is not gamed or misspent but spent on the purpose for which it is intended.

On small and medium-sized enterprises, the Government will pay 90% of their training costs, and I believe for SMEs with fewer than 50 employees we pay 100%, so there is nothing to stop them taking on apprentices. The opportunity is there.

[Gordon Marsden]

I have personal experience of this. The Minister says that the Government pay 90% of SMEs’ costs, but that is only for 16 to 18-year-olds. It would be useful if they were to look at the market for 19 to 24-year-olds as well.

[Anne Milton]

The shadow Minister raises an important point. There are so many issues I would like to raise—I have all these lovely notes about all the things we are doing. The best response I can give to hon. Members is that it might be useful to set up, along with officials from the Department, a session to let them know what is going on and to get their feedback. That would be a useful way of moving forward, particularly on where we support SMEs, because they are an important part of every local economy.

Although I have lots of things to talk about, I have to conclude. The national retraining scheme, which we have launched, is one of them. We have put £64 million of new funding into early initiatives. I could talk about the skills advisory panels, which will be important in looking at the regional skills issues mentioned by the hon. Member for West Bromwich West (Mr Bailey). I commend what is going on at Dudley College and the local initiatives there. That is exactly the sort of scheme we want to see, and which I am seeing.

T-levels are not in place yet. I wish they were, but they are coming down the road soon. They are part of a consultation. We are also changing completely the approach to careers, and—I am skimming through my notes now—there is the devolution of 25% of the adult education budget. The areas where it is being devolved to have asked for more time, but it will be devolved in 2019-20.[Official Report, 30 January 2018, Vol. 635, c. 4MC.]

None of the skills improvements we want to see will happen through Government action alone. Schools need to see students’ future, not just a set of exam results, as mainstream to their work. Employers need to play their part in building a skilled workforce, and we need a really strong FE sector and those important, independent training providers. That is critical. Parents also need to see that what their children need is a set of skills, not only—and not always—a university degree.

Question put and agreed to.

Resolved,

That this House has considered skills devolution in England.

Rail Services (Bedfordshire)

Tuesday 23rd January 2018 Westminster Hall

11:00

[Mr Gavin Shuker (Luton South) (Lab/Co-op)]

I beg to move,

That this House has considered rail services in Bedfordshire.

I am grateful to serve under your chairmanship, Mr Paisley. Rail services in Bedfordshire is a wide-ranging subject. Six Members of Parliament represent Bedfordshire, and I am pleased that two of them have been able to attend this short debate. With your permission, Mr Paisley, and that of the Minister, I hope to allow time for them to say a few words about services in their areas.

Rail services in Bedfordshire, and their context, have changed markedly in my time as a Member of Parliament. I grew up in Luton, and throughout that time there was the looming spectre—in a positive way—of Thameslink 2000, now the Thameslink programme. That major upgrade programme was given the go-ahead to totally transform the midland main line as it comes in and goes through the Snow Hill tunnel down to Brighton and the south. The programme has developed significantly since I have been an MP, and it will reach its culmination in the next couple of years when all services are switched on. That major investment programme was developed by the Labour and coalition Governments, and it is now under the Conservative Government. I fully welcome it because it provides much-needed capacity on that vital commuter route.

There have been recent developments in rail services in Bedfordshire in a number of different areas, but there are also long-standing issues that the Department must engage with to bring about service improvements for passengers, and those cannot be overlooked as we reach the end of the programme. In particular, we need vital ministerial action and instruction now as the franchise process on East Midlands Trains goes forward.

If I may, I will speak about two or three local issues that affect Luton residents, and then I will address the vital issue of stopping services on East Midlands Trains. In March 2016 I had the opportunity to raise in an Adjournment debate the long-standing issue of the rebuild of Luton railway station. At the time, I noted that it had been 2,179 days since the issue had last been raised in the House, and I regret to inform Members that in the past two years, the situation has not moved on much.

Luton railway station is in the top 10% of all stations in terms of passenger numbers, but it is old, tired, and inaccessible. In 2009, it was recognised as one of the 10 worst railway stations in the country. The response from the then Labour Government was to award it funding through the Better Stations programme, but that money was pulled after the May 2010 general election. That money was a crucial pot—alongside other pots—that leveraged in cash to get the rebuild. As a result, there is a total lack of disabled facilities to allow people to get to the platforms, and the geography of Luton means that, north and south, the primary access point into the town centre is through the train station, which effectively acts as a wall and barrier for many residents who wish to get to the centre of town with pushchairs or heavy baggage. The centre around the railway station has changed and redeveloped massively, but the same tired station still exists, and as we know, first appearances matter.

If the Minister had been unfortunate enough to start her journey at Luton railway station today, as I did, she would have seen boarded up windows, and the amusingly entitled “water feature” that means that water continues to pour on to platforms. If the single lift was out of action, she would probably have struggled to get access to the platform with her ministerial boxes. Those problems need tackling. A number of abortive schemes have been brought forward, but despite the £6 billion or £7 billion investment from the Thameslink programme, accessibility has diminished as a direct result of that programme. As we go to 12-car running, those with mobility issues must now take a taxi to Luton Airport Parkway, or go on a circuitous route that adds about 15 or 20 minutes to their journey.

The Minister is new to her position, and I hope she will bring a fresh wave of enthusiasm to this issue. Within control period 6, will she specify a rebuild of Luton railway station that befits a town that serves a quarter of a million residents and a wider conurbation? As she knows, the East Midlands franchise is coming up for renewal, and there have been significant moves by the owner of Luton airport, the shareholder, the residents of Luton, and the airport’s operator and board to get the Government to include four fast trains an hour to Luton airport within that franchise.

London Luton airport is a rapidly growing airport in the south-east and the fifth-largest airport by passenger numbers in the UK. It is growing by about 15% a year, and it has great ambitions to take up much of the slack in terms of much-needed airport capacity in the south-east. It is the only London airport without an express train service, and of all London airports it has the lowest percentage of passengers who access it by rail. Some 160 fast East Midlands trains—it will be more under the new franchise—pass daily through Luton Airport Parkway, yet only 10% of them stop. That is a major issue, not least because the new service that connects the terminal to the train station—a major £200 million investment by the people of Luton—will be connected in the next few years. Journey times from St Pancras to the airport gate to check in could be as short as 30 minutes, which is a game changer for connectivity, but that will work only if four fast trains an hour connect the service. London Luton airport is integral to the emerging east-west corridor between Oxford and Cambridge, and to connecting services to the east midlands and the north, and I would like to see progress on that.

Despite the culmination of the Thameslink upgrade programmes over the next year—including physical infrastructure—just before Christmas we learned that there will be a phased introduction of new services of up to 24 trains per hour. Although I understand the desire of the operators to phase in that process, we have had a long time to plan for this. The communication strategy for this has been deeply disappointing, and it is not sufficient just to dump that news on Members of Parliament and commuters shortly before the introduction of a new timetable. This change is so significant that it could have been viewed from space, yet for some reason we learn at the final, gasping moments of the programme, that the full implementation of the timetable will be delayed by two to three years.

Finally, the change from May 2018 to the East Midlands franchise will mean that,

“from 20 May 2018 until the completion of the midland main line upgrade in 2020, East Midlands Trains peak-time services will no longer call at Bedford or Luton. As a result, no EMT services arriving into St Pancras between 07:00 and 10.00, or leaving St Pancras between 16.00 and 19.00, will stop at Luton or Bedford.”

That is a major change and major disruption for many of my constituents who rely on taking a direct train to London, and even more so for those north of Bedford, coming, from example, from Corby or Kettering to work further down the line in Bedford or Luton—and the disruption is happening over a long time. I think that I speak on behalf of all six Bedfordshire Members of Parliament—a group including Conservative, Labour and independent Members—when I say we are deeply disappointed by the way in which things have been communicated, and the shortness of the time window off the back of what even the Rail Minister has acknowledged was a less than perfect consultation exercise on the introduction of the new franchise from 2020. To be told that we shall lose services on East Midlands Trains at exactly the moment when we require them was deeply disappointing.

In the hastily organised meeting chaired by the right hon. Member for North East Bedfordshire (Alistair Burt), where we talked to the operators GTR and East Midlands Trains, and officials from the Department, I asked one simple question: who made the decision? It may not come as a surprise to the Minister, even at this stage of her time in the Department, that a long conversation ensued, with not much clarity at the end of it.

Accountability is vital with such major timetable changes. We all acknowledge, pragmatically, that timetable changes cannot now be reversed for May this year, but my simple ask is that the period of disruption be kept to a minimum. I understand that there are mitigation measures in place, under which GTR will operate additional services that stop at Bedford, Luton and then St Albans—which gets the lion’s share of everything—before going on to St Pancras, but we are used to, and many people’s working patterns are built around, long-distance services and slower commuting services. That is a mix that has served those towns well, and I should like a commitment that East Midlands Trains will again stop during peak hours at Luton and Bedford in the new franchise, and that all efforts will be made to move the changeover date so that it is much earlier. I understand that as the sixth path on East Midlands Trains is introduced, that should not be too difficult. I understand that there may be an issue as to rolling stock, but it is not beyond the wit of the Department to ensure that we do not wait three years.

It would be deeply disappointing, and would undermine the trust of all parties that have supported the £7 billion Thameslink upgrade programme, if the net result were to be more services and seats but a worse user experience for a number of commuters coming from different parts of the network, including Luton, Bedford and Bedfordshire. I make a plea to the Minister to engage fully in the issues affecting rail services in Bedfordshire, to make sure that we deliver for passengers.

[Ian Paisley (in the Chair)]

I shall call the other Members who want to speak, but I ask them to take literally one minute, as I want the Minister to have as much time as possible to respond, and we must conclude at 11.30.

11:13

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

It is a pleasure to serve under your chairmanship, Mr Paisley. I am grateful to my neighbour, the hon. Member for Luton South (Mr Shuker), for letting me speak and I look forward to hearing what the Minister—whom I warmly congratulate on her new post—has to say.

I have three quick points to make—mindful of your admonition about time, Mr Paisley. West Midlands Trains serves Leighton Buzzard in my constituency. I learned recently that it is about to invest another £70 million in train maintenance and will provide an extra 10,000 seats to London each day, which will be available during the daily peak times. That will happen over the next few years but, more importantly, there will be two extra class 319 carriages to help commuters from Leighton Buzzard in the next few weeks. That is vital, with the extra housing growth that we have in Bedfordshire.

Secondly, I completely back the points that the hon. Member for Luton South made about the withdrawal of commuter services on East Midlands Trains from Bedford and Luton. That will cause major disruption to my constituents and there are worries that it is a bit of a stitch-up by some long-distance commuters who have been plotting it for a while; there are even worries about the locations of the consultants’ offices. I note that they are in Nottingham, Derby and London; perhaps they would be advantaged by the changes. I call on the Minister to ensure fair play.

Last, I also completely back the point about the need for four fast direct trains an hour from London St Pancras to Luton Airport Parkway. Luton is the country’s fifth-biggest airport and if we get things right it will be the one that is quickest to get to from central London. Let us get the cars off the roads and give people a good experience.

11:14

[Mohammad Yasin (Bedford) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Paisley. I congratulate my hon. Friend the Member for Luton South (Mr Shuker) on securing this important debate. I shall not be as brief as the hon. Member for South West Bedfordshire (Andrew Selous), but I will try my best.

Rail users who use train services from Bedford have been betrayed. We were promised that electrification of the midland main line would mean faster, greener, more reliable train journeys, and associated economic benefits. Instead, electrification has been cancelled and we are now losing our fast peak-time East Midlands Trains service. The announcement just before Christmas was a big shock. In October, the previous Rail Minister wrote to me that London to Corby passengers would have 50% more seats in the peak than they do now. The letter, which I have with me, also said:

“Passengers will also continue to be served by around the same number of East Midlands Fast trains during peak hours as they are now”.

That turned out not to be true. Throughout the time that we were focusing on the East Midlands rail franchise consultation, the timetable changes were being pulled together. I should be grateful if the Minister would tell us today when the Department first became aware of the timetable changes and why the changes to Bedford rail services were communicated so late in the day. Why will there be no consultation? People are really shocked that there is no consultation.

These changes are huge. Passengers have only a matter of months to rearrange their lives around the loss of these well-used services. Many people moved to the area specifically because they thought it would be easy to commute to work in London or to the north. However, that will no longer be so; it has really upset their timetables and their lives.

Members of the local commuters association stood at Bedford station last week and counted passengers alighting from and joining peak evening trains at Bedford between 4.30 pm and 7.30 pm: 1,711 passengers left the train at Bedford and 130 joined it to travel north. No doubt a count in the morning would offer very similar figures. That means that about 4,000 people travel during peak hours from Bedford station. People are anxious about how they will balance work and family commitments. They tell me they will not be able to get back from London on time to relieve babysitters. Those travelling in from the north tell me they will drive from now on.

Dr Sheena Whyte wrote to me:

“My husband and I chose to live in Bedford because this enables us to work in Leicester and London respectively. Without a direct commuter service between Bedford and Leicester at peak times, the ability of my husband to attend his lecturing role at De Montfort University becomes almost impossible”.

That is typical of many of the letters I receive. People have chosen Bedford because of rail connectivity. We keep hearing about all the extra capacity, but rail use in Bedford is up 20% since 2010, so extra seats were needed anyway. It is said that under the proposals 1,200 seats will be gained, but we are losing 2,000 seats from East Midlands Trains. It is unbelievable: Bedford rail users’ fares rose again in January, and I hope the Minister will urge the train companies to offer some form of compensation to them.

The Thameslink trains that people will be forced to use are not fit for a long commute. Many people use the journey to do work, and they cannot do that on the current Thameslink trains. I hope that the Minister will tell us when all Thameslink services will be retrofitted to include tables, power points and wi-fi.

I intend to host an event in Parliament for rail users as soon as possible, and my office has been in touch with the Rail Minister’s team to try to arrange a date. I hope that the new Minister will confirm today that she is willing to attend that meeting and speak to my constituents.

09:00

[The Parliamentary Under-Secretary of State for Transport (Ms Nusrat Ghani)]

It is a pleasure to serve under your chairmanship, Mr Paisley, in my first ever Westminster Hall debate. To prevent any confusion, I must say that I am not the Rail Minister. The Rail Minister, the hon. Member for Orpington (Joseph Johnson), is in the Space Industry Bill Committee, so I will do my best to respond to all the hon. Members here today.

I will start by thanking all hon. Members who have contributed to the debate. I congratulate the hon. Member for Luton South (Mr Shuker) on securing the debate and thank him for allowing other hon. Members to voice their concerns. As a proud Lutonian, I have many family members in Luton who have given me an update on their travel journeys since I have been in the Department for Transport.

I have listened carefully to all the representations about the immediate plans for rail services through Bedfordshire and it is clear that hon. Members and their constituents have lost patience. It is also clear that public trust, or at least confidence, has suffered. That is in part because of the lack of consultation about plans to introduce new but important changes to services across Bedfordshire. I will say more about that shortly.

I apologise to passengers and to local businesses who will be inconvenienced by the planned service alterations in May. I recognise the short-term pain that those changes will cause to commuters and businesses. I can assure hon. Members that the Government, Network Rail and the train companies are doing everything possible to mitigate the impact of these changes on rush hour passengers. For example, we are currently exploring the potential for running an additional “peak-busting” East Midlands Trains service direct between Bedford and St Pancras.

I want to be clear about two things. The enhancements that we are delivering on Thameslink and the midland main line are essential to sustaining the long-term prosperity of Bedfordshire and the east midlands. I know that the hon. Member for Luton South is chair of the all-party parliamentary group for Thameslink, so he knows much more than I do about that, but I gathered from his speech that he is convinced that the investments are being made for the right reason. The passengers, businesses and communities who will have to cope with some service reductions are the very people who will benefit in the future from newer, faster trains, more services, more seats and more destinations.

I also highlight that we are dealing with challenges associated with success and not failure. More people are travelling on trains than by any other form of transport.

[Mohammad Yasin]

May I correct the Minister? It will not be extra seats but fewer seats for commuters travelling from Bedford. We are losing 2,000 seats when we lose the EMT train service and gaining 1,200. There will be fewer seats available, not more.

[Ms Ghani]

The paper I have in front of me tells me that there will be 2,000 seats available. I am aware of the note that the hon. Gentleman sent through to the Department; unfortunately, there was a change of Minister, so that note has been passed on to the new Rail Minister. I know the hon. Gentleman has requested a meeting with his passengers and constituents, and I believe the new Rail Minister will honour that and have the meeting to explain further the impact of the changes on the hon. Gentleman’s constituents in the short term and the benefits for them in the long term. That note has been passed on, and no doubt the Minister will be present at the meeting that the hon. Gentleman wishes to convene.

I recognise that these statements will be of little comfort to hard-pressed commuters who face the prospect of travelling on fewer trains, even if they will be more certain of a seat for their journey during that time. However, the reality is that demand for rail travel is exceeding supply. The Thameslink programme and the upgrade of the midland main line represent only two examples of the major investments that this Government are making across the country to give passengers the rail services they demand.

Last year we announced our intention to commit some £48 billion to improving the reliability of the rail network between 2019 and 2024—all this in addition to the £55 billion already planned for HS2. However, the clear and unavoidable cost to passengers of delivering all those improvements is that there is often an impact on current services in the interim.

I will go back to the question of consultation, which was raised by the hon. Member for Luton South. May 2018 represents one of the largest timetable changes in recent rail history, affecting services across the south-east of England and beyond. The hon. Gentleman also quoted the Rail Minister’s comment that solutions are not always perfect, but that we need to make the changes to increase capacity and reliability on the line. I am rushing through, because we have a short time, but I hope to get to everyone’s points.

In the meantime, let us not forget that the £7 billion Thameslink programme was designed to transform the rail services that are so important to constituents and to the long-term prosperity of Bedfordshire. The upgrade of the midland main line is planned from May 2018 to 2020, and unfortunately Bedford and Luton town will lose East Midlands services in the peak while the upgrade is delivered. However, the Department has agreed to fund East Midlands Trains to lease three additional high-speed trains. In addition, as part of the timetabled development work, East Midlands Trains has found a way to maintain its existing calls at Luton Airport Parkway in the peak, enabling airport passengers from north of Bedford to continue to enjoy a direct service.

However, during that time they will benefit from more frequent Thameslink services. Those services will provide over 2,000 extra peak-time seats from Bedford and over 3,000 from Luton each morning. At Luton, that is far in excess of the number of seats on EMT trains that will no longer be able to call there—most, if not all of which are already occupied. That will be welcome news to some passengers, I am sure. Thameslink will also provide an alternative fast service with fewer stops, delivering journeys of around 45 minutes between Bedford and London, and of around 30 minutes between Luton and London. For some passengers, the convenience of a regular direct Thameslink service to the heart of London will make for an easier commute.

The hon. Member for Luton South mentioned accessibility to platforms and trains. That is within my portfolio, and having done some research I have been assured that Thameslink has better facilities on its trains, better access to toilets, better wi-fi and wider doors, and step-free access to platforms at Bedford but not at Luton. I am more than happy to sit down with the hon. Gentleman to work out what more we can do to apply pressure to ensure accessibility is available to all.

As I said, I recognise that that will be of little comfort to some passengers during the midland main line upgrade. The situation for them will be resolved from 2020, which coincides with our exciting plans for the new East Midlands franchise, on which, I am delighted to say, we conducted a full and thorough public consultation. That consultation is now closed; I thank all those who contributed to the discussion on our proposals. The contributions are being evaluated and we will release our response soon, alongside the invitation to tender for bidders.

Our plans for the East Midlands franchise invite proposals for a brand-new fleet of longer, quieter, more comfortable and more efficient trains, which will provide additional seating with improved on-board facilities on long-distance services. Together with the investment in the midland main line upgrade, a fleet of high-quality electric trains will provide up to 50% more seats in the peak on the fast, direct service between Corby, Kettering, Wellingborough, Bedford, Luton and Luton Airport Parkway, and London St Pancras by December 2020. The next operator of the franchise will also have to bring forward exciting and innovative plans to improve customer service and the provision of information to passengers, and offer tickets that serve flexible travel patterns and improve value for money.

As part of a strategic vision for the railways that puts passengers first, we will also require new ways of working under the next franchise. Therefore, in keeping with our strategy for the railways published last November, the new East Midlands franchise will bring to an end the historic separation of track and train. That separation is no longer suitable for meeting the challenges of today’s intensively used rail network. In its place we will introduce a “one team” approach that will embed shared incentives between Network Rail and the new operator to ensure that passenger interests come first in all decision making. I hope all hon. Members will agree that that vision for the new franchise will ensure that East Midlands services play a full role in securing the long-term economic prosperity of the region.

I thank all hon. Members for contributing to the debate, which has been stimulating. I hope I have answered most questions; if there are any that I have not answered, I am sure that the Rail Minister will most certainly follow up in writing, if not in the meeting that the hon. Member for Bedford (Mohammad Yasin) wishes to convene. I also hope that I have left hon. Members in no doubt that we recognise the importance of Bedfordshire’s prosperity to our national success. For that reason, we have invested and continue to invest at historic levels in enhancements to rail network, trains and services. A railway fit for the 21st century is our vision, and we are rolling out the plans to get us there. Unfortunately, sometimes that comes with unavoidable short-term consequences, for which I have apologised. I assure hon. Members that the Department will continue to work hard with Network Rail and the train operators to mitigate those as far as possible.

I will close with one of the lines used by the hon. Member for Luton South: the £75 billion that we want to deliver must deliver improved quality of service for our passengers and value for money.

Question put and agreed to.

11:29

Sitting suspended.

Shipbuilding Strategy

Tuesday 23rd January 2018 Westminster Hall

[Siobhain McDonagh in the Chair]

14:29

[Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)]

I beg to move,

That this House has considered the National Shipbuilding Strategy.

It is a pleasure to see you in the Chair, Ms McDonagh, and good to see many experienced hands from defence debates assembling for yet another one. It is also a pleasure to welcome the Minister to his place and to the wonderful world of defence procurement.

I declare two interests. First, I introduce this debate not only as the Member of Parliament for Plymouth, Sutton and Devonport—Plymouth is a proud military city in uncertain times because of the possibility of defence cuts—but as a vice-chair of the all-party parliamentary group on shipbuilding and ship repair. It is good to see so many members of that small but illustrious group—a band of brothers and our sister from Berwick-upon-Tweed—in their places today. Secondly, as a proud GMB and Unite member, I have had the input of those unions into the debate, for which I am grateful. The combined skills and experience of shipbuilders, engineers and master craftsmen and women contribute hugely to the debate, and it is in defence of those jobs and skills and that industry that many of us are here today.

I am sure that the Minister’s new officials have brought him up to speed, but it might be useful if I recapped briefly why shipbuilding and this debate are so important at the moment. First, though, every hon. Member, on both sides of the Chamber, wishes him and the new Secretary of State for Defence well in their battle with the Treasury to secure more funding.

The UK spends too little on defence, and that has consequences for what the Ministry of Defence can spend on shipbuilding, ship repair and ship procurement, capabilities and weapons systems. The excellent report by the Select Committee on Defence, “Shifting the goalposts? Defence expenditure and the 2% pledge”, shows that the last Labour Government spent on average 2.5% of GDP on defence, and the figure did not fall below 2.3%. Many hon. Members, on both sides of the House, would like a return to that level of spending.

With defence inflation running at a greater level than consumer prices index inflation, the extra bit that the Treasury affords defence is being eaten away as the real-terms value of defence procurement is put under more pressure. I think I speak for most hon. Members when I say that we strongly oppose, on a cross-party basis, cuts to our amphibious ships based in Devonport, in the constituency that I represent, and plans to merge the Royal Marines, but that should be taken as a given in this debate.

That is the backdrop, but the military context is important as well. We live in very uncertain times. Russia is expanding her horizons, has invaded European countries and has largely got away with it. China has ambitions across the Pacific. And the Royal Navy’s ability to command the waves is severely constrained by a shortage of manpower, a privatised recruitment system that is not delivering, and ships tied up because of faults, personnel shortages and a lack of resources. There is a focus on the carriers and continuous at sea deterrence, but the rest of the Royal Navy is suffering, and my argument is that this House will not stand for it.

The national shipbuilding strategy was much delayed, but was at least a good start. It accepted in full Sir John Parker’s recommendations, so I am not sure why it took so long to be produced. Defence aerospace is not as fortunate as shipbuilding, because at least we have a strategy. Britain is good at shipbuilding, and the many warships on sea trials, in dock being built and being planned are testament to our naval heritage and the up-to-date skills of a superb workforce right across the UK. I hope that today’s debate will illustrate to the new Minister and his officials not that that plan is wrong per se, but that with scrutiny we can make it more robust and more valuable to industry and our armed forces.

I want to highlight two principal areas in asking for revisions to the document. One is the procurement of the Royal Fleet Auxiliary’s vessels, especially the new fleet solid support ships, and the other is the configuration, capabilities, roles and realities of the proposed Type 31e frigate. As I said, the first issue is the new RFA solid support ships. The proposed three ship orders, with the vessels coming in at 40,000 tonnes apiece, would match the 120,000-tonne construction contract for the new carriers so ably delivered by British workers across the UK and assembled in Scotland.

I personally favour a restricted tender for the ships, so that only UK shipyards could build them, as they will be carrying arms, munitions and supplies, but I concede that international competition is the most likely option that the Minister will choose for them. In such circumstances, not only must the UK industry be encouraged to submit a bid and not actively discouraged by the MOD, but we must ensure that the procurement does what the procurement for the MARS—military afloat reach and sustainability—tankers did not: it must truly value the social, employment and economic impact of the work for shipbuilding and supply chain communities right across the country.

[Mr Stephen Hepburn (Jarrow) (Lab)]

I am sure that my hon. Friend is aware that shipbuilding industries throughout the world are very heavily subsidised, in one way or another, by their Government. That does not happen in this country. Does my hon. Friend think that we could get a better, more level playing field if the Government addressed their mind to that?

[Luke Pollard]

I thank my hon. Friend for that intervention; I agree with him. In fact, our hon. Friend the Member for Glasgow North East (Mr Sweeney) has raised the concern that state aid from the South Korean Government was potentially part of the consideration of the value of the MARS tankers contract, which went to South Korea. That £452 million contract was potentially subsidised by the South Korean Government, who are building skills and employment in Daewoo shipyards in that country. Excluding a little bit of final outfitting in the UK, those jobs have been outsourced and offshored.

Contracts to build ships for the Royal Navy and Royal Fleet Auxiliary should be onshored. The ships should be home grown, British designed and British made, using British steel and British technologies, and preserving Britain’s sovereign defence capabilities to design, build and equip complex and important ships for our own use and for export. The MOD could give its friends in the Treasury the good news that between 34% and 36% of the contract value would be flowing back into its coffers in tax and national insurance—bad news potentially for Kim Dong-yeon, the South Korean Finance Minister, but good news for our Chancellor of the Exchequer, who I am sure is following this debate closely and with avid interest. He is, after all, a big fan of the armed forces.

If UK shipyards build elements of the ships, it could help to fill gaps in the order books of yards right across the UK and contribute to what I believe should sit alongside the shipbuilding strategy: a clear running order of contracts over the next 30 years for the Royal Navy and RFA; a pipeline of work; a reason to invest in world-class design and production facilities, not just on the Clyde, but in reanimated yards such as Appledore in north Devon and those of Harland and Wolff and Cammell Laird. Ipsos MORI research commissioned by the Department for Business, Energy and Industrial Strategy found that 100 shipyard jobs lead to an additional 32 jobs in the manufacturing sector within a 60-km area, so there is a multiplier effect from investment in UK shipbuilding.

[Dr David Drew (Stroud) (Lab/Co-op)]

Does my hon. Friend accept that at the other end of the scale, the commercial end, there are also very profitable yards? There are two in Stroud, funny as that may seem, at Sharpness and Saul. It is important that we understand that the whole shipbuilding industry needs support, but also recognise that it is a very integrated industry. Does my hon. Friend agree?

[Luke Pollard]

I thank my hon. Friend for that intervention. I do agree. The great strength of this debate on the national shipbuilding strategy is that we can praise the contribution not only of those yards that might be seen on the 10 o’clock news—the ones with the very large cranes and very large warships—but also all the supply chains to the smallest yards, and all those businesses that supply the kit that goes on the ships. That makes the UK a formidable power when it comes to shipbuilding. I am glad that the shipbuilding strategy hints at that, but perhaps it could go a little further in celebrating it.

That brings me to the second point, and recognising that many hon. Members want to speak, I will be brief. In my maiden speech in the House of Commons in June 2017, I called for more, and more capable, frigates. The Type 31e is not exactly what I had in mind. I am concerned that the shipbuilding strategy embeds the reduction of truly world-class frigates from 13 to eight. The Type 26 is a fine global combat ship, although one of the City class should be named after Plymouth—a campaign started by my Conservative predecessor and continued proudly by me. It is a good ship and a good programme that will serve UK interests well, but there are too few of the ships—to be precise, five too few.

The top-up light frigates have an ill defined military role, a confused capability and a price tag that gives this the potential to be the Snatch Land Rover of the Royal Navy—a comment by the Royal United Services Institute’s director of military sciences. I have a different name for that class: corvettes. I am genuinely concerned that over the next few years this class of ship will be the focus of much critiquing, as it fails to hit established frigate standards and looks less capable than the Type 23 frigates that the ships replace.

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

On the point about an undefined task, we had it from the Minister—I have had it in a written answer—that the ship will not be able to do any NATO tasks, and it will not be able to do any carrier protection work, so can my hon. Friend suggest what the role of this vessel will actually be, apart from being a glorified fishing protection vessel?

[Luke Pollard]

My hon. Friend is spot on. The confusion about the role of this warship is at the heart of the problem with the shipbuilding strategy. It looks like we put the cart before the horse in defining a price tag but not a role. It is essential that in the next couple of months the Ministry of Defence comes forward with that, to provide all defence-leaning Members of Parliament, on both sides of the House, with a reason to celebrate this warship, not critique it, because I worry that the critique will not support it and help its attractiveness as an export product. We should turn those weaknesses of the Type 31 into its strengths and promote a corvette class, not a poorer frigate. That would give the Royal Navy two carriers, two amphibious assault ships retained and not cut, six destroyers, eight proper frigates, five corvettes and the new offshore patrol vessels. That is still too few ships, but a line we should not go below, or accept further cuts or reductions against.

The shipbuilding strategy suggests that UK yards will build five Type 31s as replacement for the Duke class, and pitch for competition for 40 to export. As Darth Vader warned Director Krennic in “Rogue One”—a film I am sure we have all watched:

“Be careful not to choke on your aspirations”.

I truly want to believe the MOD when it says that there is a market abroad for 40 Type 31s, built in Britain, but I cannot see where that might be.

[Chris Stephens (Glasgow South West) (SNP)]

Given that we do not know the capability, and given the comments made by the hon. Member for North Durham (Mr Jones), is there not a question as to who we would export these Type 31 frigates to? Does the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) agree that the view of many in the shipbuilding industry is—to quote his hero Darth Vader again—that we want these ships, not excuses?

[Luke Pollard]

As a Luke, I am not sure Darth Vader is quite my hero, but the point the hon. Gentleman makes is a good one. There are 14 other ship manufacturers globally providing a light frigate option of between 2,000 and 4,000 tonnes. That is an awful lot of competition when the customers are ill defined. Let us look at some of those competitors for the Type 31 frigate: there is the French and Italian FREMM class; the Spanish Navantia F-105; the Danish StanFlex; Germany’s F-125 Baden-Württemberg class; and South Korea’s Incheon class, let alone the myriad cheaper platforms built by China and other far-eastern nations.

[Mr Kevan Jones]

It is a fact that Britain last exported a frigate over 40 years ago. When I raised that with the new procurement Minister at Defence questions, all I got was an accusation of talking down the British shipbuilding industry. Does my hon. Friend agree that as a matter of urgency the MOD needs to clarify exactly where it sees the market for these 40 frigates?

[Luke Pollard]

I agree with my hon. Friend. Clarity around the role, capabilities and market for the Type 31 is absolutely critical in building a strong case—a marketing dossier—that says, “British Members of Parliament support this ship and will actively go out and sell it,” because I am concerned that we cannot even advocate for the Type 31 for UK military use, let alone military use for those abroad.

[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

Does my hon. Friend agree that an increasing pattern in the procurement of ships around the world for naval purposes is that the proposition for bidders, such as Fincantieri and BAE Systems, is that those ships will be part of an industrial offer to the customer country, in that they will be built in their country, so the potential for build in the UK for export is extremely limited, and part of the competitive drive is to move that work into the country purchasing the ships as part of an industrial offer?

[Luke Pollard]

My hon. Friend perfectly sums up where this is going. It is clear that we need to look at what those jobs will be. Will they just be in design, or will they be in build in the UK?

We need to recognise that the Royal Navy needs to sell the best in-class version of the Type 31 if it is to be a compelling export product; it should be a floating showcase, an example par excellence, not a cut-back, scaled-down, bargain-basement, cheap as possible, poorly-armed, combat-light, barely acceptable platform. We need clarity on whether the export version will be built here or abroad. Britain is building ships. Britain is building corvettes and offshore patrol vessels. Babcock is building the Irish navy OPVs at Appledore: the Samuel Beckett-class OPV is lightly equipped, but capable. BAE Systems is building OPVs: the Batch 2 river-class ships and the Khareef class for Oman. They have similar armaments, but with the ability to add Exocets and a medium helicopter. Those ships could well form the basis for the Type 31 Arrowhead or Leander-class options—extended OPVs, rather than frigates in their own right.

My hon. Friend the Member for Glasgow North East mentioned customers and where they will be. Australia and Canada are looking to procure new frigates in the coming months, but they are more in the market for a Type 26 all-rounder anti-submarine warfare frigate, rather than Type 31s. I appreciate that the Minister has inherited someone else’s homework and ambitions, but where will the 40 export orders come from and can the Type 31 really win 40 orders? I am naturally cautious about suspiciously round numbers, and this shipbuilding strategy suggests not only a suspiciously round £250 million per ship, but that there will be 40 exports. As aspirations go, it is good to be bold, but I would prefer us to be realistic about the delivery of this ambition, especially against the backdrop of post-Brexit uncertainty and volatility in the value of sterling.

As with the national security review, I fear that the national shipbuilding strategy puts the cart before the horse. We know the price tag, but not the capabilities. We know the final bill, but not what foes will be faced, what waters will be patrolled or what role it will have. Clarity is our ally if we are to make a strategy that is truly joined up and deliverable. In very uncertain times for our armed forces, this strategy should offer us hope of long-term thinking. I say to the Minister that the paralysis and the pitched battles of the national security review are understandable, but they do not have to lead to the paralysis announcements from the MOD.

I encourage the Minister to announce the base porting arrangements for the Type 26s and the Type 31s, providing clarity for future investment in base ports. Devonport offers a genuine world-class base, as he would expect me to say. I also encourage him to announce that the fleet support ship contract will be open to UK bids, and that no UK shipbuilder will be discouraged from entering by the MOD in order to curry favour for other contracts, especially the Type 31. I also encourage the Minister to announce that the social, economic and employment impact of the contracts will be assessed as part of the contract decision making process. Bring forward greater detail about the Type 31—its capabilities, roles and operations—and be clear about how it will be built in the UK.

There is a huge opportunity to be ambitious here, an opportunity to build and sustain a revitalised shipbuilding industry providing good, well paid and high-skilled employment across the country, backing British supply chain jobs, creating apprenticeships and, importantly, providing the Royal Navy and the Royal Fleet Auxiliary Service with the ships they need for Britain’s sea power to rule the waves once again. A strong defence is worth fighting for, and we know that a strong defence cannot be done on the cheap.

14:39

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

It is a pleasure to contribute to this debate under your chairmanship, Ms McDonagh, and to follow the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard), who has done a service—not for the first time—to the House of Commons, by bringing key defence issues for our consideration.

Having said that, I am going gently to disagree with the hon. Gentleman. I did not know what line he was going to take until I heard his speech this afternoon and I shall be a little heretical myself, because there is a track record on this question of what we ought to do in terms of designing replacement frigates, particularly lighter replacement frigates.

The context in which one wishes to set this is the relentless decline in the size of the frigate and destroyer fleet. The House will probably not need reminding that we had more than 60 frigates and destroyers at the time of the Falklands campaign. By the time that my cohort came into the House of Commons in 1997, that number had come down to 35 frigates and destroyers.

The incoming Blair Government conducted the strategic defence review of 1997-98. That was where the twin concepts of the carrier strike force and the amphibious force making up the sea base, which would be able to exert land and air power from the sea in any particular theatre of warfare across the globe, was born. As a price for bringing forward the idea of the two super carriers, a modest cut in the number of frigates and destroyers was put forward, from 35 to 32 vessels. We all know what happened next: the 32 came down to 31; the 31 came down to 25; and the 25 then came down to the present woefully inadequate total of 19. That is the issue that the hon. Gentleman quite rightly wishes to address. If there had not been any changes in the method of warship design, I would have signed up entirely to his argument from beginning to end.

But the one factor that I wish people to take away from my contribution to this debate is the concept of a template warship. The phrase “modular build” is the one that we need to keep in mind.

I talked about the way in which the numbers of frigates and destroyers were reduced. Part of that process was the way we went about replacing the destroyer fleet. At the time we started introducing the Type 45 we were down to 12 destroyers, and the original idea was that those 12 destroyers would be replaced with 12 Type 45 destroyers. We know what happened then: the same process —the 12 went down to eight, and eventually we ended up with six. Why did that happen? It happened because of our insistence, and the Royal Navy’s understandable concern, that the new warships should be top of the range, ab initio, in every respect that can be thought of. When we do that and we keep adding, in the long course of a period of design and build, more and more requirements to a new warship, inevitably the price goes up and the number of units we can afford to build comes down.

I was fortunate enough to see the Type 45 destroyers close up at a very early stage. Being taken on a tour of the ship, I was struck by the fact that a very large area in the forward part of the ship was devoted to the ship’s gymnasium. Why did the Type 45 destroyer have such a large gymnasium? The answer I was told was that the space that was going to serve as a very large gymnasium was earmarked for the future, so that when we could afford to add a suite of tactical Tomahawk cruise missiles—surface-to-surface, long-range missiles, which we could not afford to equip the Type 45 destroyers with at the time—we would be able to remove the paraphernalia of the gymnasium and insert a module into that area, thus installing this massive upgrade in the weapons system at some future stage in the ship’s life. Warships are rightly designed to have a long lifespan; we are told that the new carriers, for example, are meant to last us for the next 50 years. So how much better is it—the answer is hugely better—to design them from the outset so that instead of having to rip the ship apart halfway through its life to upgrade it, we can easily add to its capacity?

In 2009, I published an article that got me into a lot of trouble. In the RUSI Defence Systems journal in February 2009, I said what was perhaps the unsayable: that if we were ever going to get the future frigate fleet back up to the sort of numbers we needed, we would have to design it in such a way that it was as “cheap as chips”. The First Sea Lord of the day, Admiral Sir Jonathon Band, who is a great man, was not at all happy with that phrase. But I did not use the phrase lightly; I used it because now we have this technique of plug-and-play, of modular build. If we could design a template warship that had all sorts of empty compartments in it from the outset, and if we could get a large number of hulls into the water from the outset, by a process of incremental acquisition, we could arm them up so that, over a period of years, they would become more and more capable.

I see the hon. Member for Plymouth, Sutton and Devonport nodding as a sign, I hope, of some approval of the line that I am taking. We are not disagreeing about ends; we are slightly disagreeing about means. I do not wish to see the Type 31e become more and more expensive before even the first one has been completed. I wish to see a hull design—I look to the Minister to tell us how that is progressing—that will enable us to maximise the number of hulls and to spread the cost of a really high-capability warship, which the hon. Gentleman rightly wants to see and I want to see at the end of the process, over a longer period of years. That is so that, when the defence budget gets the uplift that it needs—and we all hope it will if the Secretary of State for Defence is successful in his so far heroic but incomplete campaign to take on the Treasury—we can hope to start to reverse the terrible downward spiral in the number of frigates and destroyers that had rendered our fleet incapable of doing its duty. The Royal Navy, as we know, is very strong on doing its duty, and we need to give it the tools and the warships to finish that job, whatever job it is confronted with in the uncertain future.

14:55

[Jim Shannon (Strangford) (DUP)]

It is always a pleasure to speak in debates, Ms McDonagh.

May I first congratulate the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) on setting the scene so well, and the right hon. Member for New Forest East (Dr Lewis), the Chair of the Defence Committee, on his special contribution? I am very pleased to make a contribution, and in debates such as this I always refer to the fact that as an ex-serviceperson—on the land, of course—I have an interest in the support of service personnel and wish to see that we do our best, whether it be for the RAF, the Royal Navy or the Army. This debate gives us a chance to focus on the Royal Navy. My hon. Friend the Member for Belfast East (Gavin Robinson) is doing the armed forces parliamentary scheme with the Royal Navy and is also on the Defence Committee. We are very privileged to have his contribution in that Committee, and hopefully in this debate as well.

I am proud to be from a party—the Democratic Unionist party—that pushed the last Government hard into increasing the spend on defence by 1%. As we try to do, we used our influence in a very constructive fashion to make sure that defence issues are the top priority for Government. We have also got some feedback on that, as my hon. Friend will know. We have some commitment to defence spend in Northern Ireland in relation to reserves—this debate is not about that, of course—and capital spend. Those are some of the good things that we are doing positively in relation to Northern Ireland with the Ministry of Defence.

The reason for that defence spend is clear. While it is great to have money spent locally, the fact is that no matter where in the United Kingdom of Great Britain and Northern Ireland someone lives, they will benefit from armed forces that are well trained, well fed and well equipped. That is the reason we are here. The summary in the national shipbuilding strategy, which I am not going to read because I am sure that Members have it in front of them, is clear that the Royal Navy needs to have the eight Type 26 frigates and the strategy for the Type 31e frigates as well. Again, the hon. Member for Plymouth, Sutton and Devonport referred to that.

I believe that we benefit by having been able to send aid over after the recent Hurricane Irma and during the crisis period. Our Royal Navy was already there and able to respond. We benefit by being able to meet our responsibilities throughout the world with a fleet that is capable, and we further know that we can defend these islands and our British colonies when needed. Better than our knowing that we can do that, the rest of the world also knows—it is important that it does—that we can and will do so if and when the need arises.

I will tell this story, not flippantly but to have an illustration on the record. I once had a teacher who advocated picking out a pupil at the start of the year to be introduced to Cain and Abel. The premise was that he had a cane and was able to use it. He then demonstrated that to the class at the first opportunity—I was a recipient of it on many occasions in the ’60s—and we knew from then on that we did not want ever to meet Cain and Abel again. That is perhaps rather simplistic, but it illustrates why it is important that the Royal Navy has the ability to be our Cain and Abel wherever it may be in the world. I am not advocating the use of blunt force to make a statement; I am saying that we have proven in the past that our abilities are numerous, and that we have the premier armed forces in the world. We also need to underline the fact that that is not simply a historical fact; it is a present-day reality. For that, we need facilities that are capable and that make the grade. Every one of us in this debate, whatever angle we come from, will want to impress that on the Minister, whom I am pleased to see in his place; I am also pleased to see the shadow Minister in his. Hopefully, we will all make constructive contributions to this debate, so that we can move forward in a positive way.

I read an interesting article on the topic on the website Save the Royal Navy that gave a concise view of where we are and where we are headed in terms of our shipbuilding strategy and defence capability:

“When the Tide class oil tankers were ordered in 2012 (a remnant of the Military Afloat Reach and Sustainability (MARS) project), no British company had bid for the construction work. There were two main reasons: most UK yards were occupied working on the QEC aircraft carriers blocks, but they also knew they would not be able to compete on price with foreign state-subsidised shipyards. The controversial decision to look abroad made sense at the time, the MoD got four ships at a bargain £452 million and no British shipbuilder could claim they would go under without the work. (£150 million was spent in the UK with BMT who designed the ships together with A&P Falmouth, who are fitting them with additional military equipment). Five years later, the landscape has changed significantly”,

which is why this debate is important.

“The QEC construction project is in its final phase, but one of its very positive legacies has been to help stimulate a modest revival in commercial shipbuilding, and there are now yards hungry for further naval work.”

In a past life as a member of the Ulster Defence Regiment back in the ’70s, I guarded the Samson and Goliath cranes in the old Harland and Wolff shipyard, which made a significant contribution to shipbuilding in Northern Ireland. On the border of my constituency, within that of my hon. Friend the Member for Belfast East, the shipbuilding giant was at one stage the biggest employer of men in both our constituencies, with some 35,000 workers at its peak in the 1920s.

Harland and Wolff has not produced a ship in about 14 years, although it continuously built and provided ships over a period of time. The last to leave Queen’s Island was the £40 million Anvil Point, at the start of 2003. The 22,000-tonne ferry was the second of two vessels built for the Ministry of Defence. Harland and Wolff is teaming up with other companies such as Thales, also in my hon. Friend’s constituency, to bid for a £1.25 billion contract. I believe that they have not only the ability but the drive and desire to deliver the best that can be given. They are invested in securing every bolt and screw, not simply for the sake of their reputations but for the sake of their own children and grandchildren, who may well serve their country on the ship.

[Gavin Robinson (Belfast East) (DUP)]

I am grateful for the lettered references to me in glowing terms. Harland and Wolff in my constituency is one of many shipbuilders seized with the aspiration associated with the national shipbuilding strategy. Does my hon. Friend agree that it would be helpful for the Minister to clarify the distinction between UK content and UK benefit? What is intended, and what surety can UK shipbuilders take from that distinction?

[Jim Shannon]

Everything that I said about my hon. Friend was absolutely true, so he can take my comments as such, but his intervention was specific to the Minister, to whom we look for a helpful response. My hon. Friend outlined some of the issues in the briefing document that we had beforehand about building only in the UK and skills. We need skills not only in the Royal Navy but in the shipbuilding programme. Costs can never be ignored; it comes down to how we do it best. I understand that we are considering exports for the ships and frigates that we are building, but it seems that that may not have been realised yet. Quantity or quality is a difficult debate. What is best? We certainly want quality, but perhaps we need quantity to go along with that.

To return to the Royal Navy’s ability to fulfil all its missions, let us consider some of the things that we are aware that the Royal Navy does today. Fisheries protection will become more apparent when we leave the European Union on 31 March 2019. All our seas will be back in our control, and when they are, we will need to police them to ensure that other countries do not take advantage of places where they once fished, but where they will only be able to fish if they have an agreement with us. We must put that on record. The Navy has a role in the Falkland Islands and in anti-piracy in eastern Africa, as well as in dealing with refugees in the Mediterranean. The demands on the Royal Navy are immense; we should keep that in mind.

I am suddenly conscious of time, so I will finish with this. It is vital for the local economy that shipbuilding is done in-house and not outsourced, and the collaboration of local and UK mainland companies seeks to do that. I believe that that trumps the freedom of trade thought process, with which I agree to an extent, although I do not believe that it precludes the fact that charity begins at home. It is not charity, of course; it is having business, workers, jobs and contracts at home. If we have the capability to produce, which we clearly do, then that work can and must be carried out right here at home.

15:06

[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

Thank you for giving me the opportunity to speak in this debate, Ms McDonagh. I thank my hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard) for his comprehensive contribution, in which he outlined the key concerns about the national shipbuilding strategy, and the right hon. Member for New Forest East (Dr Lewis) for outlining his longer term perspective on the attrition of the capability of the Royal Navy’s frigate and destroyer fleet, which the national shipbuilding strategy ought to aspire to address as an outcome.

I first encountered the man who wrote the report that spurred the creation of the national shipbuilding strategy, John Parker, about three years ago when he attended Glasgow University to deliver a speech on his history of working in the shipbuilding industry. He had a great reputation as a managing director at Harland and Wolff shipbuilders in the 1980s, where he started as an apprentice and grew up through the ranks. There was an international discussion about the long-term decline of British capability, from the global world leader in the shipbuilding industry that it once was to a marginal player now even in Europe, never mind the rest of the world.

I asked him three years ago when I was working at BAE Systems what his greatest regret was in his career. He stood up and said, “My greatest regret is that Europe is building 90% of the world’s cruise ships, and Britain, with such a great heritage of building world-beating ocean liners and passenger ships, is building none. There are high-wage, highly equipped shipyards in Europe building these vessels, and Britain isn’t building one of them.”

As managing director of Harland and Wolff when it was under the ownership of the British Shipbuilders Corporation—the industry was nationalised until the late 1980s—he recognised the emerging market for cruise ships, which were once again becoming a popular recreational pursuit. Harland and Wolff developed proposed designs for cutting-edge new cruise ships and went to the Government for funding to build them for Carnival, now the biggest cruise company in the world, but the Government said that they were not interested in the design. They wanted to hold a fire sale, get rid of the assets and remove shipbuilding from public ownership. They were not interested in any further investment in what they saw as a dying industry.

In the very same year—1987, the year before Harland and Wolff and Govan shipyard were sold off—Meyer Werft in Germany, a family-owned business, got funding from the German state investment bank to build a completely new, undercover shipyard and then the world’s first modern cruise ship. Today, that shipyard dominates the global market for cruise ship and complex shipbuilding in Europe, building about two 100,000-plus-tonne ships every year. That contrasting approach is symptomatic of a broader malaise that we face when it comes to industrial policy and planning in Britain.

[Chris Stephens]

Will the hon. Gentleman outline what the devastating economic consequences were of that decision on cities such as ours, Glasgow, as well as Belfast and elsewhere in the UK?

[Mr Sweeney]

The impact was absolutely devastating, and we saw the wider impact in Govan as well, which was a commercial shipyard up until 1999 when Kvaerner pulled out. That Norwegian oil company rebuilt the yard in the early 1990s for commercial oil tankers and gas carriers. The result of that collapse was disastrous. Sir John Parker said that just as we had got British shipbuilders match-fit, ready to compete, the rug was pulled from under them. Just as the industry was ready to re-enter the market and be a globally competitive player, it was wrecked. That is the sad legacy of the collapse of British merchant shipbuilding to the point where we are entirely reliant today upon the Ministry of Defence to sustain what is left of British shipbuilding capability. That is partly why I am concerned about the national shipbuilding strategy, if it is restricted in its entirety to naval shipbuilding and not the wider issue of how we re-establish a market foothold in commercial shipbuilding. The two are intrinsically linked.

If we are to achieve a competitive advantage we ought to broaden our horizons and re-establish how we deliver a resurgence in British commercial shipbuilding capability. That was Sir John Parker’s biggest regret. That is what drove his frustration at that time, and a lot of that is what underpins the recommendations in his report. He talks about a vicious cycle of changing requirements, which the right hon. Member for New Forest East mentioned, and a year-zero approach every time we have a new MOD shipbuilding programme which duplicates effort and introduces unnecessary costs. It is so bespoke in its approach to designing ships that it introduces unnecessary costs, which render British shipyards uncompetitive, even in the naval sphere, never mind the commercial sphere.

[Ruth Smeeth (Stoke-on-Trent North) (Lab)]

I thank my hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard) for securing this debate. My hon. Friend the Member for Glasgow North East (Mr Sweeney) has just hit the nail on the head. Does he agree that the lack of a steady drumbeat of orders to ensure our industrial base has caused this problem, and that the wonderful words of the shipbuilding strategy are not being delivered by the Government?

[Mr Sweeney]

I absolutely agree. We see a cognitive dissonance between the vision of the outcome desired and the prescription to deliver that vision and commitment, which are not in alignment. They are not going to deliver it. That is the tragedy of it. We all want to see the national shipbuilding strategy succeed. We are trying to deliver our own collective understanding of what is best for the British industrial capability into this document, so that we achieve the outcome of a globally competitive and effective shipbuilding industry in the UK again.

My hon. Friend mentioned a feast and famine approach to British shipbuilding, which has long been an issue, particularly as the commercial capability has fallen away. I look in stark contrast at the American approach to shipbuilding. The Arleigh Burke destroyer programme plans to build 77 ships. Those ships have been consistently under construction with the same hull since 1988. They have been built since the year before I was born, and it still plans to build more. That is a consistency of approach that we ought to think about adopting in the UK. It would essentially be a continuation of the Type 23 frigate programme, but adapting its technology and capability and maintaining the learning curves achieved over a 30-year build programme. That would be a huge opportunity for British shipbuilding. Why do we insist on stopping every time we build six Type 45s and starting from scratch on a Type 26 when a Type 45 platform could have been adapted to deliver the same capability as a Type 26? The approach is wrong-headed.

The Type 45 project has 13 different types of watertight doors. Why do we have such a huge level of variance in the programmes? We have no standardisation, no grip on the design, no standard approach to delivery, and no innovation in adopting new products and defence standards. We have no resilience or innovation in defence when it comes to an entrepreneurial way of delivering ships. If we were to benchmark it against how Meyer Werft build a complex cruise ship, the lead time between specification to delivery of the ship is minuscule compared with what we do with the equivalent ship of, say, our Type 26 platform. It is years and it is unacceptable. We need to seriously grip that if we want to drive down costs, deliver value in the naval shipbuilding industry and achieve the outcomes in terms of numbers for the Royal Navy that we desire.

The prescription is chaotic. It talks about a vision for having more

“certainty about the Royal Navy’s procurement plans”,

yet it wants to introduce a competitive programme for a Type 31. That goes right back to the early 1990s with the Type 23 programme, when Swan Hunter was competing with Yarrow shipbuilders on the Clyde, and what happened? None of those shipyards could invest in modern facilities and modern practices that would deliver the benefits in terms of timescale and minor efficiencies that would allow the ships to be built for value for money. It ended with the collapse of Swan Hunter and a drip-feeding of orders. There were huge redundancies in the shipping industry and huge uncertainty. This is a recipe to return to that model that was deeply flawed in the 1990s and led ultimately to the loss of British shipbuilding capability. That is why we are appealing today for a commitment to uphold what was originally planned in the terms of business agreement, which was extinguished.

A letter of 19 October from the Under-Secretary of State for Defence, the right hon. Member for Bournemouth East (Mr Ellwood), said that the terms of agreement was extinguished. It committed to a single world-class site for complex warship building on the Clyde and investing in that shipyard facility to make it world class, upper quartile. That would deliver the benefits industrially to allow us to deliver a national shipbuilding programme for frigates and destroyers, which would ensure that they had a consistency of build that would deliver the long-term benefits, learning curves and efficiencies. It would drive down the cost of the ships and allow them to be built at volume, which, as the right hon. Member for New Forest East mentioned, is necessary to sustain a larger Royal Navy fleet. That is how we should do this. It is not about spreading it around, which will not work.

The Royal Fleet Auxiliary programme has better potential because it has a lower gross compensated tonnage and is a less complex ship, although it is still complex. If the tonnage of 40,000 tonnes each was spread around the remaining UK shipyards, that would provide the bedrock of capacity to sustain all the shipyards around the UK, while having the designated complex war shipyard on the Clyde. That is what happens with the Canadian and Australian shipyards and it is what happens in the United States. That is the approach we ought to have. Why has the national shipbuilding strategy not taken account of international benchmarks? Why has it not got a commercial shipbuilding focus as well to develop a longer term model based on European norms? Why are we not committed to building British ships, including the Royal Fleet Auxiliary ships, in the UK? I could go on for much longer because I am closely associated with the topic.

In summary, I have outlined what we want to see changed in order to make the national shipbuilding strategy worthy of the name it deserves. We need world-class UK shipbuilding back, and the way to do it is to adopt those suggested improvements.

15:16

[Chris Stephens (Glasgow South West) (SNP)]

It is a pleasure to see you in the Chair, Ms McDonagh. I thank the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) for securing this debate. During the defence debate less than two weeks ago in the Chamber, every single Member of the all-party group on shipbuilding and ship repair complained that we had applied for debates since the publication of the national shipbuilding strategy. All of a sudden, at the very next ballot, the hon. Member for Plymouth, Sutton and Devonport secured one, so I thank him for that. I hope he will accept my apology to him in relation to Darth Vader. I actually misspoke. I did not mean to say “his hero”. What I meant to say was “their hero”, because Darth Vader is a Conservative icon and not of any other political party. I can see nods coming from the Conservative Benches.

The history of how we have got to this point is important, particularly for those of us who represent the best shipbuilders in the world: the shipyard workers on the Clyde, and those in the Govan shipyard in particular. In 2014 they were promised that 13 Type 26 frigates would be built there, plus a frigate factory. Ever since, there has been a real concern that there has been a row-back by the Ministry of Defence. The frigate factory was cancelled. Then, in November 2015, during the national strategic defence review, there were no longer 13 Type 26 frigates, but eight. We were told not to worry and remain happy because instead of five Type 26 frigates, there will be five Type 31 frigates, which the Clyde will build and will be exportable. I will come back to that later.

Sir John Parker’s report was an honest attempt to deal with the feast and famine that we have heard about from the hon. Member for Glasgow North East (Mr Sweeney), but it contained several historical inaccuracies that concern me because the national shipbuilding strategy seems to be based on those historical inaccuracies, which is that two different types of ships have never been built in the same shipyard. That is not the case. Anybody who had worked at Yarrow’s would tell us that that was not the case, because, while they were building ships for the Royal Navy, they were building a different type of ship for the Malaysian navy. If the Government are basing their decision on such an historical inaccuracy, it is up to us Members of Parliament to tell them that it is an historical inaccuracy, and perhaps they might want to comment on that and put that right.

[Mr Sweeney]

I thank the hon. Gentleman for his comments, particularly about the frigate factory. Does he agree that the major issue was the fact that financing could not be achieved, because of fragmentation of the programme? If that had been gripped in the same way as programmes such as HS2 or the London Olympics, and the budget had been assured through its whole life, there would have been a business case to finance, through commercial means, the investment necessary to build a world-class shipyard on the Clyde.

[Chris Stephens]

I agree entirely. My Glasgow comrade is absolutely correct. That was one of the significant reasons for the frigate factory being cancelled.

My concern about the national shipbuilding strategy has been expressed by others: it is that we are going back to 1980s thinking and introducing competition. One of two things can happen when we start to introduce competition on that basis. Shipyards will try to undercut. As we heard earlier from my Glasgow comrade, that meant the collapse of Swan Hunter. It would be inevitable if we went back to the days of competition. Alternatively, companies would get together and the prices of ships would increase.

I think I am being fair and moderate in my remarks when I say that we are now at a place where the announcement of the national shipbuilding strategy was a presentational dog’s breakfast. The then Secretary of State, the right hon. Member for Sevenoaks (Sir Michael Fallon), claimed six times in the Chamber that there was a frigate factory on the Clyde. While he was on his feet in the Chamber making that claim, GMB officials were taking Scottish journalists around the proposed site, which was rubble and ash. There is no frigate factory on the Clyde. It was a presentational disaster for the Government.

I add my support to that expressed already for the argument that there is no need for the Royal Fleet Auxiliary Service ships to go to international competition. The reason no British yard has yet asked to be considered is that they believe the work will be sent out internationally; that is inevitable. As has been said, there would be clear economic benefits from building those ships not just for the local economies of the places where they could be built, in a modular format, but from the tax and national insurance take.

I also want to add to concerns expressed about the Type 31 frigate. It seems to me that the price is setting the capability of that ship, vessel or whatever we call it. The suggestion that it could be built for £250 million has already been described as a conspiracy of optimism. We need to know its capability and its role and purpose within the Royal Navy. To put it more simply: is it a complex naval warship? If it is, it should be built on the Clyde, which has been designated by the Government as a specialist shipyard to build complex naval warships.

[Mr Sweeney]

The hon. Gentleman says that the Clyde has that designation, but in reality, under the terms of business agreement, it was extinguished in 2014, although that has not been explained. Why did the rationale change? It makes sense to build all the complex warships on one integrated site where all the learning curves, benefits and efficiencies are concentrated. Why has that changed?

[Chris Stephens]

I think that is a question for the Minister. We need to know the reason, and I shall explain why. I understand that the only country with more than one specialist shipyard is the United States of America. That is probably no surprise given the size of the US Navy. We need to know such things, because recently there was an accident at sea involving a US Navy ship. If it had been built to commercial standards rather than by a specialist yard the collision with another ship would have been a real disaster. The model elsewhere, especially in Europe, is that one specialist shipyard builds complex naval warships.

There is a contract for three Type 26 frigates on the Clyde and I ask the Minister to confirm that the other five will be built there. There is a feeling in the yards and the trade unions that represent the workers that there has been a roll-back on delivering on promises.

I echo the points that the hon. Member for Glasgow North East made about shipyard construction. If the Ministry of Defence is concerned about economies and efficiencies and similar issues, it has a role to play in investing in shipyards and speaking to companies. The Clyde should have a frigate factory, and there is a role for the MOD to play in that.

The national shipbuilding strategy needs a bit more work. This is the first opportunity that hon. Members have had since the statement to raise concerns, and I hope that the Minister has listened carefully and will be able to respond to many of the points we have made.

15:20

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

It is a pleasure to serve under your chairmanship, Ms McDonagh. I thank the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) for his significant move in bringing the debate to the Chamber today.

Shipbuilding, as hon. Members know, is a key part of our industrial base. Although the industry has undergone much change in recent years, including to the number of people involved in it, it is still a key element of our industrial heritage. The national shipbuilding strategy that was introduced last September gave some rays of hope to the industry more generally. Sir John Parker recognised that a steady drumbeat of orders was crucial if investment in technology and skills was to make new-build projects more competitive, and that the sharing of risks between yards would give flexibility and speed to help in meeting our aspirations to renew our, albeit diminished, naval fleet. On that last point, there has been a debate about the sense of sharing work between yards, and perhaps that is a debate for another day. The proof of the pudding, for the national shipbuilding strategy, will be in the eating. Already the signs are not good.

There is no clear sign that a drumbeat of orders will be forthcoming at a sufficient pace to give some surety to the industry. As workers on the Clyde are all too aware, we have already witnessed the number of Type 26 frigates being reduced from 13 to eight, and then the placing of an order for just three. My good friend the Chair of the Defence Committee, the right hon. Member for New Forest East (Dr Lewis), cited the example of the Type 45s, which started at 12, were reduced to eight and ended up as six. The direction of travel in MOD thinking is a matter of some concern. The only drumbeat that is evident to me is the one to which Type 23s will come out of service, starting in 2023 with HMS Argyll and ending 13 years later, in 2035, with HMS St Albans. That is a steady drumbeat for the withdrawal of ships from service; we need one for a process going in the opposite direction. Indeed, the previous First Sea Lord said that that time scale for the Type 23s was not extendable. If we are to maintain 19 surface frigates and destroyers at sea or in a state of readiness, something needs to give from the Minister’s office.

[Mr Sweeney]

The hon. Gentleman mentioned sustaining the drumbeat. Does he agree that there is an unnecessary constraint on that because of the arbitrary in-year spend profile that the MOD is lumbered with? The key to unlocking that is the Treasury, which can adapt its method of financing huge generational programmes for things such as complex warships. Those are unique in relation to the way the Government buy kit. The undertaking is huge and unique and should be financed in a way appropriate to the project.

[Douglas Chapman]

I know that the hon. Gentleman is very experienced in such matters and I am sure that he has considered it long and hard for a number of years, both as an industry professional and as an MP. It is obvious, given the amount of investment being put in, that it must be done in the long term, and looking at the project overall rather than as its component parts. I agree with the hon. Gentleman.

The Government’s watchword has been that we must live within our means. The Tory manifesto in 2017 spoke of meeting the NATO target of at least 2% of GDP going on defence spending, and increasing defence spending by at least 0.5% over inflation each year. According to the Institute for Fiscal Studies, it has been cut in real terms since 2010-11 by some 13%. That has resulted in a massive black hole of around £20 billion. Big-ticket items such as F-35s are purchased in US dollars, and only one carrier can be used at a time. Last night, Max Hastings said on “Newsnight” that the Dreadnought has an outdated capability.

All that has contributed to the black hole with which the Ministry of Defence currently has to cope. Such things have pride of place in the Government’s strategy, but in the current financial climate it is a case of pride coming before a fall because the budget for them—and for many other things, such as the P-8s, which are also purchased in US dollars—is simply unsustainable. Decisions that would offer hope and a future to the likes of the Clyde, Rosyth, Appledore and Tyneside are delayed, and we miss the chance to synchronise the drumbeat that would secure jobs, skills and investment.

If we are to “live within our means” as the Government mantra suggests, the MOD either needs to find more money, or something else has to give. The SNP would choose to get rid of nuclear weapons. Think of the opportunity-cost benefit if Trident, or Dreadnought—call it what you will—was not a consideration in our defence budget. How much would that release for more conventional forces? How many more surface ships could we start to build to create a real drumbeat of orders? How much more money for cyber, land forces and the Royal Air Force? Is it not madness that we have a NATO ally with nuclear weapons just 20 miles off our coastline? In trying to satisfy the most pro-nuclear lobby in the House, could not that capability be shared between those two adjacent NATO nations, instead of their both paying top dollar for it? If we can share a tapestry, as I believe we are about to do, who knows what other things we could share on a larger scale? If we are to meet the key dates for bringing the Type 26s and Type 31s into service, something has to give. The Government cannot keep delaying orders, lengthening the pace of decision making, and not making savings in the budget to allow contracts to be signed, sealed and delivered.

SNP Members long for the day when Scotland becomes an independent country that is responsible for its own defences. Small nation Norway has a shipbuilding industry order book as long as your arm, and it has also bought into F-35 and P-8 capability. That can be done even with a small nation budget. Last week, small nation Denmark agreed to increase its defence budget by some 20% to meet the threats that the Danish people might face now and in the future. Small, well-equipped, effective, flexible, good partner nations can play their part in the defence of Europe both individually and through NATO.

Finally, while Scotland is still a constituent part of the UK, I urge the Minister to make surface shipbuilding his priority. In my constituency, workers at Rosyth have delivered carriers and a wide range of refit projects on time and to budget. We now have an opportunity to deliver the Type 26s, Type 31s and the fleet solid support ships. The message is simple: let us make the national shipbuilding strategy a working document that encourages the engineering talent of our nation to get on with the job, at pace, and with that vital steady drumbeat.

15:33

[Wayne David (Caerphilly) (Lab)]

It is a pleasure to serve under your chairpersonship, Ms McDonagh, and I congratulate my hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard) on securing this important debate and delivering such a fine opening address.

We have had a good debate—I genuinely mean that. We heard an excellent and thought-provoking contribution from the Chair of the Defence Committee, the right hon. Member for New Forest East (Dr Lewis), and good contributions from my hon. Friend the Member for Glasgow North East (Mr Sweeney), the hon. Members for Strangford (Jim Shannon) and for Glasgow South West (Chris Stephens), and a particularly ambitious speech from the hon. Member for Dunfermline and West Fife (Douglas Chapman).

Last year the Government published the national shipbuilding strategy, and the importance of naval shipbuilding should not be underestimated. Approximately 15,000 people are directly employed in UK shipbuilding because of spending by the Ministry of Defence, and at least 10,000 additional jobs are in the wider British supply chain. Some months before the publication of the national shipbuilding strategy in November 2016, Sir John Parker published his independent report on the UK’s national strategy for shipbuilding. Many people thought that that would become the national shipbuilding strategy, but—for reasons that are unclear even to this day—the NSS was a response to Sir John Parker’s report.

Those two important publications gave a degree of coherence and a sense of direction to the industry. We were, however, disappointed by the lack of emphasis on many of the points on which Sir John Parker developed coherent arguments. In particular, we would have liked an explicit recognition of the significant contribution that shipbuilding can make to the development of regional economies, and for that to have been put at the heart of the national shipbuilding strategy. That important point in Sir John’s report is not really reflected in the Government’s national strategy.

Today we have heard about the multiplier effect and investment in shipbuilding—that point was coherently expressed by my hon. Friend the Member for Plymouth, Sutton and Devonport. My hon. Friend the Member for Glasgow North East pointed out that our shipbuilding strategy must be part of a broader strategy that goes beyond the defence sector, and that can happen if we have the right perspective to develop it in such a way.

As we have heard, the new Type 31e and Type 26 frigates—albeit eight rather than 13, as we were initially led to believe—will be replacing the Type 23 frigates as they leave service. I have a number of questions about that ongoing programme. Some of them have already been touched on by other Members, but other questions are new. First, the MOD has said that there should be a cap of £250 million per Type 31e frigate. Why has that cap been fixed, and why at that figure? We need to know, because we have been reassured by people in the Navy that that amount may well be sufficient, but there are also plenty of experts who say that this insufficient and arbitrary figure has been plucked from thin air. Nick Childs, a naval specialist for the International Institute for Strategic Studies, has raised specific concerns about the level of capability and stated that,

“the naval staff seems to think it can get a vessel of about 3,500 tonnes, with an adequate military capability, for the £250m target price. That will be a challenge”.

That is an understatement. It certainly will be a challenge, and many industry experts say that it is frankly impossible. If it is impossible, what contingency measures will the Government take?

[Chris Stephens]

Does the hon. Gentleman share my concerns, and those of others who have spoken in this debate, that the price is dictating the capability of this frigate, instead of the capability being sorted out first, followed by the price?

[Wayne David]

That is precisely the concern with including the arbitrary figure of £250 million. I hope that the Minister will be able to dispel those concerns and clarify the situation.

Secondly, the national shipbuilding strategy correctly states that there is a potential export market for light frigates—the Type 31e. Much of that is for the purchase of a light frigate designed for construction in the market, not by means of traditional production. How is the Government’s exporting enthusiasm for that going? How many orders have they received? How many do they now think are likely? That key question was also raised by my hon. Friend the Member for Plymouth, Sutton and Devonport.

My third point is that, sadly, less than half the steel in the new Type 26s will be British. That is a crying shame, and I hope the Government will ensure that as the shipbuilding strategy develops, it is increasingly seen as an integral part of industrial strategy in this country, and that there will be complementarity with other parts of British industry.

My fourth question is about delays to the Type 26 programme. There is a great deal of concern among the workforce. Apprentices have been laid off and have had to find training elsewhere. Can the Minister say anything about that?

We are all proud to have seen the launch of the Queen Elizabeth carrier, which was formally commissioned into the fleet in December. We now look forward to the launch of the Prince of Wales carrier. The construction and fitting of both vessels has taken a great deal of commitment and dedication from a well-skilled workforce.

It is important to ensure that those skills are not lost but continually put to good use, which is why we should focus on fleet solid support ships. The contract for three new FSS ships will be subject to international competition. The decision is due in early 2020. I am concerned that that stipulation may put off domestic competitors, as the hon. Member for Glasgow South West suggested. That follows the awarding of a contract for four tankers under the military afloat reach and sustainability—MARS—project to Daewoo, a South Korean company that is widely believed to have been given a tremendous amount of state aid that made its bidding far more attractive than it should have been.

We hope that those ships will be built in Britain because that would secure the maintenance of the skills that have been built up in the industry, and support local economies. It would also help to enhance the national shipbuilding strategy’s domestic capability and to make real the renaissance in shipbuilding that Sir John Parker refers to in his report.

On sovereign capability, I ask the Minister to comment on the report that appeared in yesterday’s Western Mail. It suggested that the Ministry of Defence will award a contract for mechanised infantry vehicles to the Germans without any competition. I give the Minister the opportunity to deny that story.

[The Parliamentary Under-Secretary of State for Defence (Guto Bebb)]

Will the hon. Gentleman give way?

[Wayne David]

I will give the Minister plenty of time to respond.

Finally, I hope that the Government will demonstrate a real commitment to the Royal Navy and naval shipbuilding. This country has a proud maritime history—it had the largest and strongest Navy in the world at one time. That time is a long way behind us, but the challenge now is to ensure that our Navy can successfully meet the new threats and dangers that our country faces.

[Siobhain McDonagh (in the Chair)]

I remind the Minister that we hope the sponsor of the debate will have a few minutes at the end to sum up.

15:42

[The Parliamentary Under-Secretary of State for Defence (Guto Bebb)]

It is a pleasure to serve under your chairmanship, Ms McDonagh. I thank hon. Members in all parts of the Chamber for their warm welcome. It is an honour to have been appointed to this position, but I suspect that I face a difficult task. In the debates on defence that I have attended thus far, I have found a wealth of experience and knowledge from hon. Members about these issues. There is also a significant amount of cross-party agreement, although not always. In my jousts with the hon. Member for Caerphilly (Wayne David) on Welsh issues, we did not experience more constructive debates of this nature.

On the hon. Gentleman’s question about the Western Mail story, that was speculation. It was nothing to do with the national shipbuilding strategy. There was a clear statement from the Ministry of Defence that no decision has been taken. I can say no more than that, but I hope that that keeps the issue at bay for the time being.

This has been an interesting and constructive debate. I congratulate the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) on securing it, and on his constructive speech. Of course, he highlighted his concerns about the national shipbuilding strategy, but it is only right to acknowledge that, as the Minister, I view the reasons why he raised the issues, and the way in which he did that, as a constructive contribution to the debate.

I hope that I will be able to answer many of the hon. Gentleman’s questions. He mentioned the importance of the national shipbuilding strategy in giving opportunities to young people in his constituency and, as we have heard from other hon. Members, across the United Kingdom. I cannot fail to be anything other than impressed when I meet apprentices, whether they are working on building new ships or on maintaining our Hawk aircrafts. The Ministry of Defence and I are very proud that young people have the opportunity to work in the defence sector. We are the largest creator of apprenticeship opportunities in the United Kingdom. I am sure we all agree on that.

The hon. Gentleman also said that he considers the Type 26 destroyer to be a good ship. I hope to be able to say that it is being built in a very good yard by experienced workmen on the Clyde. Again, there is agreement on that.

My right hon. Friend the Member for New Forest East (Dr Lewis), the Chair of the Defence Committee, made a thought-provoking speech. In my eight years in the House, he has always spoken with passion, commitment and an independence of mind when it comes to defence. I am sure that that independence of mind and that willingness to challenge will haunt me, as it has haunted other Defence Ministers over the eight years in which I have seen him perform. No one can doubt his commitment to the defence of this country and the wellbeing of our armed forces, or to his independent, cross-party chairing of the Defence Committee, which represents what is best about the Select Committee system.

I also acknowledge my right hon. Friend’s history lesson and his firm defence of the concept behind the Type 31 frigates programme. His description of the programme’s rationale was clear, and he was listened to with understanding by other hon. Members. His speech included the basis of the points that I will make in due course about Type 31s.

I enjoyed the contribution of the hon. Member for Strangford (Jim Shannon). As a Welshman, I am pleased that there has been a significant Celtic contribution to the debate. Scotland, Wales and Northern Ireland have contributed fully, because we understand the importance of defence to all parts of the United Kingdom.

Even the hon. Member for Dunfermline and West Fife (Douglas Chapman) acknowledged that, while Scotland remains part of the United Kingdom—long may that continue, in my view—we all appreciate and acknowledge its contribution to our defence in terms of capacity on the Clyde, our nuclear capability in Scotland and the contribution of Scots to our armed forces. I thank him for his contribution.

Other hon. Members intervened in the debate. The hon. Member for North Durham (Mr Jones), who is no longer in his place, is correct that at Defence questions a week ago, I responded in a robust fashion to his comment that our country had not exported any warships for 40 years. It is important to engage constructively with what we are trying to achieve through the national shipbuilding strategy. The aim is to ensure that we find ourselves in a position where we are exporting our warships to other parts of the world. It has been acknowledged across the Chamber that the capability, capacity, skills, ingenuity and innovation all exist in this country. When the hon. Gentleman raised that issue, I thought it was important to point out that the way we sell that capability, that capacity and those skills to the rest of the world is by talking our industries up, not down. I will not apologise for the comment I made at Defence questions.

I will turn to the body of my speech, because I have an obligation to try to respond to the debate. We have to step back and ask ourselves what the rationale behind the development of the national shipbuilding strategy was. Although people have asked questions and asked for clarity, even the most challenging comments have acknowledged that it is an attempt to move the issue forward constructively, and to ensure that our country’s capability and capacity are reflected more coherently. Hon. Members may not agree with every single statement in the strategy—there is clearly a debate to be had about it—but the fact that we are moving forward with a strategy is something that most hon. Members clearly seem to welcome.

It is important to understand the context. The Government have always recognised the need to retain operational advantage and freedom of movement in sectors that are critical to national security. That is an issue that I have come across since my appointment to the Ministry of Defence. Indeed, it was an issue that I came across in my time as a Wales Office Minister, which lasted for almost two years, because in that period, as the hon. Member for Caerphilly will be aware, I visited numerous defence establishments in Wales. That issue of national security, and having a national defence capacity, is something that I understand, as do hon. Members from all parties. Shipbuilding is an important part of that and is integral to our fortunes.

The aim was to ensure that we examined the shipbuilding sector, and identified how best to develop a shipbuilding strategy that would reflect our needs, the demands of our Navy in the future, and the potential to create a more coherent and successful shipbuilding sector. Sir John Parker’s report was upbeat and positive. It talked of the renaissance in British shipbuilding that is happening in many smaller yards and smaller businesses within our shipbuilding industry. The report looked at the issue of shipbuilding in a wider context than only defence. Obviously, from a shipbuilding strategy point of view, it was absolutely imperative that we learned from history, and understood what must be protected in the UK national interest, and where we can support capacity in the shipbuilding sector by supporting businesses that can provide us with the warships that we require. The strategy also provided the opportunity to train and support businesses and individuals who can contribute to a further expansion of our shipbuilding capacity.

In my new role as Minister with responsibility for defence procurement, I would very much like to meet the all-party group on shipbuilding and ship repair, because, from an MOD perspective, the shipbuilding strategy must clearly consider the issue of producing warships and defence capability, as well as the wider implications for the economy, which I am very interested in. I have seen the direct benefits of defence spending to the economy in Wales. I would very much appreciate the opportunity to talk to the hon. Member for Plymouth, Sutton and Devonport about issues that I could potentially learn about in relation to his work with the all-party group. In my time in this place, I have learned that all-party groups make a huge difference; I have no doubt about that. They are a constructive forum in which colleagues work on a cross-party basis, and I would be very grateful for the opportunity to discuss these issues in more detail with him.

The recommendations in Sir John’s report were accepted in full by the Government, as they applied to our responsibilities, and that created the national shipbuilding strategy that we now have. I would argue that that strategy examines three main issues. The first is better planning; we heard the history in numerous contributions. I am taken by the idea that my history degree might not be as redundant in this new role as I had thought, because learning from history is one of the things that we have to do if we are to improve the way in which the MOD procures.

The strategy gives planning a great deal of attention, so that we can give industry greater certainty and predictability. It sets out the key procurements of the next five years, from the purchase of eight Type 26 global combat ships to the new Type 31 ships. The hon. Member for Glasgow South West (Chris Stephens) asked what the commitment is in relation to the Type 26. The commitment in our strategic defence and security review of 2015 and in the recent NSBS is very clear: it is a commitment to eight ships. That is a commitment that will protect—

15:53

Sitting suspended for a Division in the House.

15:59

On resuming—

[Mr Gary Streeter in the Chair]

[Mr Gary Streeter (in the Chair)]

The Minister will now continue his excellent summary.

[Guto Bebb]

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

As I was explaining, the strategy is about planning. We are talking about the purchase of eight Type 26 global combat ships, the new Type 31 frigates and the next generation of fleet solid support ships. There has been a discussion on the competitive tendering for the fleet solid support ships, but that is in accordance with the strategy, which looks to ensure that warship capability is built within the UK, but that we are also open to go out to competition.

[Chris Stephens]

Will the Minister confirm that the eight Type 26 frigates will be built on the Clyde? Will he also remove the ban on Royal Navy personnel addressing the all-party parliamentary group on shipbuilding and ship repair on the national shipbuilding strategy?

[Guto Bebb]

I regret that I did not hear the second part of the intervention, but the commitment on the purchase of the eight Type 26s was clear, and I will be on the Clyde on Thursday.

The second element of the strategy is design. It is about taking a new approach to design and construction. We want to challenge outdated naval standards and introduce new ones. In effect, I am repeating the comments of the Chairman of the Defence Committee, my right hon. Friend the Member for New Forest East, but it is about forcing through advances in design, identifying new materials and looking at new manufacturing methods to try to make our shipbuilding industry even more competitive, which is part and parcel of ensuring that we have export markets.

The issue of the export markets for the Type 31 has been touched on by many Members. The figure of 40 frigates is the potential market that was identified for this type of frigate in 14 countries. That was part of market research that was undertaken. We have never argued that there are 40 potential orders for the United Kingdom; what we are saying is that there are 40 potential orders for that type of ship that will be open to competition from the United Kingdom.

[Dr Julian Lewis]

Given what the Minister has said about the design, and given what we know we need the design to do, can he confirm that this will be British design done in Britain and not abroad?

[Guto Bebb]

The value of the strategy is in ensuring that we have a British-owned design. The whole strategy is building on the manner in which the aircraft carriers were built successfully—the block-building capacity. That is the strategy we have undertaken, and it will pay dividends.

The third element is exports.

[Mr Sweeney]

Will the Minister give way?

[Guto Bebb]

I cannot, I am afraid; I only have three minutes left. We identified that the export market is crucial. Having the export market allows us to look at cost controls and the ability to create savings within the programme. It also allows the United Kingdom to show once again that we have the ability to design and deliver ships internationally. For the MOD, the whole effort in identifying the support for the shipbuilding strategy is about building capacity and ensuring we are in a position to target other markets. I hope that Members will join the Ministry of Defence and the Government in ensuring that the advantages of the Type 26 are made known to potential customers in all parts of the world.

The other issue I want to touch on is a key success for the strategy, which is the partnership approach. To return to Sir John Parker’s original point, the strategy hinges on the strength of the partnership between the Government and the sector. It is about our collective ability not simply to improve productivity and develop the product that the international market wants to buy, but to continue to develop the skills and the talent to keep the industry firing on all cylinders. That is exactly what Members have been asking for, it is absolutely what I want to contribute in my role in the Ministry of Defence, and it is the purpose of the shipbuilding strategy. Where we need to refine or take on board the advice and guidance given to us by colleagues, we will do that, because the aim of the strategy is to ensure that we leave the shipbuilding sector in a better place than we found it. I am confident we can do that, but we need support from all parts of the House.

I hope we are building on firm foundations. We are looking to move to the future with a strategy that is not starting from scratch, but builds on our strengths and reputation, while identifying that we have to rectify the fact that we have not sold a warship in 40 years. We have to be confident that what we have to offer is cutting edge. It is about working with the industry, which has a reputation to live up to and has contributed so much in so many parts of the United Kingdom. We need to ensure that the industry is capable of producing ships of value to the UK and the Navy while competing internationally and making a cutting-edge contribution at the world level.

Members have touched on the economic contribution that the strategy can make. I am very aware of that. Ipsos MORI has conducted research that highlights what we need to do. It is available on the Department for Business, Energy and Industrial Strategy website. I am aware that I need to allow the hon. Member for Plymouth, Sutton and Devonport time to sum up the debate, so I will finish. I genuinely believe that we are moving forward constructively. As a Minister, I want to work with Members to ensure that the strategy delivers for the United Kingdom and our Navy.

16:13

[Luke Pollard]

It is good to have a second Plymouth MP here in a Defence debate. I am grateful for the contributions we have heard from all parts of Westminster Hall. I hope it is the start of a productive conversation between the Minister and the all-party group on shipbuilding in particular, but also with Members.

The importance of a drumbeat of orders has been reinforced time and again, and the Minister has heard that. Clarity on the capability of the Type 31s is key, and I would be grateful if the Minister removed the ban on Royal Navy personnel speaking at the all-party group. I would also be grateful if, one year on from the Sir John Parker review, the Minister looked at how the review could be reinforced with feedback from Members of Parliament representing shipbuilding and ship repair communities across the country. There is a collective will in the House to make it work, and the honest conversation we can have here will be an important part of that.

Question put and agreed to.

Resolved,

That this House has considered the National Shipbuilding Strategy.

Stamp Duty Reform

Tuesday 23rd January 2018 Westminster Hall

16:14

[John Stevenson (Carlisle) (Con)]

I beg to move,

That this House has considered reform of stamp duty.

I am delighted to serve under your chairmanship, Mr Streeter, and to have secured the opportunity for the House to debate and discuss stamp duty and its possible reform. I will be speaking in this debate as a politician, but also partly as a practitioner—I am a solicitor who is still in practice. I do not think I have to declare an interest, but I nevertheless think it important that it is on the record.

As everyone knows, property is a huge issue in this country. We like to think of ourselves as a property-owning democracy, and it has certainly been the long-standing ambition of the Conservative party that we see our country as a property-owning democracy, but we should not forget the significant private rented sector, which represents around 20% of the market. It is important to acknowledge the part that it and social housing play in the mix. In many respects, the key issue in housing policy is to get the mix between property ownership, the private rented sector and social housing right.

The other big issue in housing is supply, and in many respects that could be a debate in itself. That issue is clearly of concern to the Government. In my view, we should be looking for a national housing framework with a more flexible local policy. I can give a very simple example: the Carlisle housing market is different from the Lake District housing market, which is different from the Manchester and London housing markets. I acknowledge that is very much a separate debate.

Another issue is property taxes. That is extremely important, especially for public policy. Property taxes are very much part of our tax system. Council tax raises £32 billion a year. Business rates raise £30 billion. Capital gains tax raises £9 billion, and a lot of that is on property. Inheritance tax, much of which goes on property, raises £5 billion. We also have VAT on improvements, income tax on rental income and stamp duty land tax, which raises £13 billion. A huge amount of money is raised from property taxes, and in many respects I understand that—most Governments quite like property taxes, because it is difficult to hide a property.

What is the purpose of ownership? Why is it a good thing? In many respects, it creates the ambition and aspiration of many people to own their own home. They feel they have an investment. It is also a way for many people to save. It gives them a stake in society—they feel they own something and can take responsibility for it. In a survey, the Yorkshire Building Society found that 71% of young adults say that owning their own house makes them feel grown up. It is about ownership and feeling responsible.

Home ownership is a positive thing for the individual and society in general. We must recognise, however, that not everyone will own their own home, so the mix of properties between social housing, the private rented sector and so on is extremely important. We also need to remember that older property owners like to think of property as something they can pass on to their children. They have worked hard throughout their lives. It is an asset that they have enjoyed, but they want the benefit to pass to the next generation. Ownership is beneficial at so many different levels.

What is the purpose of this debate? In many respects, it is about just one element of the property debate. First, I want to look at the reforms to our present system of stamp duty. As an aside, I have a proposal to close a potential tax evasion issue and raise additional tax. I will be interested in the Minister’s response on both those things.

Today, as in the past, the buyer of a property has responsibility for paying stamp duty. They have to pay that tax. Stamp duty is effectively a buyer’s tax. My proposal is simple: change the tax to a sales transaction tax, so that the responsibility for paying stamp duty transfers from the buyer to the seller. I appreciate that that proposal also touches on tax rates, but I want to leave that aside. Each Chancellor has to decide tax rates on an annual basis. My purpose concerns the fundamental principle of who pays the tax.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I congratulate the hon. Gentleman on introducing the debate; he has a lot of experience in these matters. Most people understand that the problems with the housing market are on the supply side, not the demand side. We need to build and deliver more homes. Would it not be a disincentive for people to put their houses on the market if we effectively charge them to sell those houses?

[John Stevenson]

I am grateful for my hon. Friend’s intervention, and accept that we probably have a slightly different view on this subject. I fully accept that the supply of housing is a fundamental problem in our housing market. As I said earlier, that could be seen as a separate debate. For the purpose of today’s debate, I believe that shifting the responsibility for the tax from the buyer to the seller would be beneficial, and hopefully I will explain why.

From the Treasury’s perspective, other than that it would be a change of regime, it is tax-neutral; effectively it would make no difference to the amount of tax that the Treasury raises. I therefore think that the Treasury must look at the issue from a different perspective: is this beneficial to the housing market and to the people who are buying or selling the property? I believe that it will help first-time buyers and give support to those moving up the property ladder. Potentially, it will improve the housing market overall. I emphasise that this is not just the proposal of a random MP; it has a lot of support from the industry, and in particular the Yorkshire Building Society, with which I have had many discussions on this issue.

First, let us take first-time buyers. The changes in the Budget were undoubtedly extremely welcome. The Budget helped a large number of first-time buyers, taking many of them out of the tax regime. That is of course welcome, but there was a cost to it, which I think is reckoned to be in the region of £600 million. There are also some practical issues, such as how we identify who is a first-time buyer and make sure that the correct person is claiming the relief.

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

The Office for Budget Responsibility says that the changes that came through will cost £3.2 billion, with an estimate that around £150,000 will be spent on every additional first-time buyer under the programme. Those are the OBR’s figures, and that change by the Tory Government will be particularly useless without the supply side. Does the hon. Gentleman’s proposal for the tax to be on the seller’s side have any benefit, beyond the loss of income that the Government are now facing, with no real benefit to first-time buyers?

[John Stevenson]

I am saying that moving the liability from buyer to seller should be neutral to the Treasury. It is up to the Treasury what level of rates it applies, and that changes over time. I did not want to go down that route; I was looking more at the principle of who pays the tax.

If we do move it, it will mean that all first-time buyers will not have to pay any tax at all. It will be very simple to understand who is a first-time buyer. At present, first-time buyers have to find a deposit, the costs and the stamp duty, even though the mortgage only covers the purchase price. The change would therefore help first-time buyers, because they would not have to look for money to pay the stamp duty land tax. If there were a small increase in the price, that would be covered by the mortgage. Interestingly enough, according to a Yorkshire Building Society survey, 44% of first-time buyers say that saving up for the required deposit and stamp duty is very challenging.

[Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)]

I congratulate my hon. Friend on introducing today’s debate. He is making a very considered speech and suggesting a practical solution to a very real problem. In that context, does he agree that with so many people in the private rented sector—20% of the housing market— saving for a deposit is a major issue for many working families, who are currently paying rent, or indeed a mortgage, and want to upsize their property? That is why this scheme has some merit.

[John Stevenson]

My hon. Friend is absolutely right: it is saving up for the deposit that is so challenging for many young people nowadays. Added to that are the solicitors’ costs and the stamp duty costs, which can sometimes make it too difficult for first-time buyers to raise the adequate amount. Incorporating that into the mortgage would be much better, from the purchaser’s perspective. One of the important points that the Yorkshire Building Society makes is that the mortgage would cover the costs if there were a small increase in the price of the property.

[Melanie Onn (Great Grimsby) (Lab)]

I congratulate the hon. Gentleman on securing the debate. I just seek some clarity about what level of cost of home the stamp duty relief, transferring to the seller from the buyer, would operate on, in the light of the Government’s stamp duty relief for first-time buyers. At what price range will that start to support the first-time buyers he is talking about at the moment?

[John Stevenson]

The hon. Lady is absolutely right: the changes that the Government introduced undoubtedly helped many first-time buyers. I fully acknowledge that, and they have gone a long way to taking most first-time buyers out of potential stamp duty. There are some practical issues about identifying who is a first-time buyer. What I am suggesting simplifies the process. It takes every first-time buyer out of the tax regime, and I will come on to some of the other benefits that I foresee.

If somebody wants to move up the chain by selling their smaller house and moving on to a bigger house, because they have a growing family or for other reasons, they would benefit quite significantly from the change. They would still have to pay stamp duty, but it would be on only the lower-valued property. The higher-valued property would not be paid for by them. There would be a clear saving for somebody who was moving up the housing ladder. That would help growing families who wanted to move to a larger property.

We now come to the specific question of who pays. As I have suggested, it should be the seller. People often say, “There will be an immediate increase in prices.” I am not convinced about that. I think that the market will adjust naturally. Indeed, when stamp duty was increased by 3% for the purchase of second homes, I do not think that we saw a rigid decline of 3% in house prices. I suspect that the market will adjust and take care of the potential—I believe small—increase.

Overall, I think it will help the market. We have to realise that those who will pay—that is, sellers—are often in a better position to pay the tax. Many of the people who will be selling will have benefited from many years of increasing house prices, so will have sizeable equity in their property and be more capable of dealing with an increase in the price.

[Lloyd Russell-Moyle]

This is a genuine question: is there a danger that the hon. Gentleman’s proposal could disincentivise people who wish to downsize? One of our big problems is people who are currently under-occupying houses, while others are unable to get houses with enough bedrooms. Is there a danger of disincentivising people, or has he thought about a way out?

[John Stevenson]

I take the hon. Gentleman’s point. My view is that if somebody wants to downsize they will probably go ahead, but more importantly the people who are upsizing will get the advantage, and will therefore be interested in the market. I will come to an issue about the housing market, particularly in London at the top end, where I think that the tax regime is causing problems as we speak.

I believe that those who own their property are in a better position to pay the tax when they sell. We also have to look at people who have second homes. They are probably in a much better position to pay the tax because they have an asset that, again, will probably have increased in value. Touching on the hon. Gentleman’s point about individuals and families who are downsizing, quite often properties are sold as part of an estate, when somebody in the family has died. The property probably does not have a mortgage on it, so it will be a windfall for the family. They are therefore in a much stronger position to deal with the payment of that tax.

There are one or two practical issues as well. At present, it is the buyer’s solicitors’ responsibility to pay the tax. I believe that that should continue. Obviously, within the legal profession there would be a mechanism whereby, when the property was sold, they would ensure that they had sufficient money to cover that tax when the property was registered. I also accept that there would have to be a transitional period, because people who have paid tax on a property that they have bought in the last few years would find it a bit hard to subsequently have to pay the stamp duty when they sold the property. I believe that would be manageable. There would be no great change to procedure, it would be effective and I do not think it would affect the market significantly.

What it would do is to improve the market of first-time buyers for those moving up the chain. If we look at the very top end of the market, there seems to be a problem now in London, where very expensive properties are struggling to be sold. Quite often, that is because buyers are unwilling to pay the very high stamp duty required. Changing the rules means there is a possibility of freeing up the top end of the market to some extent, because the seller who wants to get rid of the property would be able to pay the tax, which might encourage the buyer into the market to pay the very high prices.

Another small additional benefit that I would like to raise with the Minister is about the stamp duty land tax form. This might be slightly legalistic and anorakish, but it might nevertheless have a benefit for Government.

At present, when someone submits an SDLT form, the national insurance number of the buyer goes on the form. I suggest that we change that slightly, so that the seller’s NI number also goes on the form. Why? It would give Her Majesty’s Revenue and Customs an opportunity to check two things: capital gains tax and payment of income tax. That is particularly relevant to people who have second, third or fourth properties and is not related to the principal private residence.

I believe that there may be some uncollected tax, because it is possible for people to avoid paying income tax on a rental property, or capital gains tax. Ensuring that the seller’s national insurance number is also on the form would be a great way for HMRC to cross-check to make sure that, over the period of ownership, the seller has paid income tax, as well as to confirm whether capital gains tax is due when the property is sold.

The proposal has strong support from the industry. It is an idea that I have supported throughout my time as a Member of Parliament. Many members of my profession support the idea. Building societies, particularly the Yorkshire Building Society, have been very vocal in support. My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) may be an exception, but many estate agents agree. It is a policy whose time is coming. In the Budget, the Chancellor took first-time buyers out of the tax altogether. It is one more step to reform the tax in the way I suggest.

I welcome the changes that the Chancellor brought in in the Budget. The increase in thresholds was welcome. Previous changes, such as sliding scales, were very sensible. There is an opportunity for the Chancellor to innovate further and change this aspect of our tax system. I do not expect the Minister to announce changes to policy today, but I hope he will consider my idea. Will he look at the issue? Will he meet representatives of the industry to discuss it? Will he carry out a consultation on it? Out of interest, does he agree with my idea?

On the national insurance suggestion, will the Minister look at that and give feedback? I am sure Treasury officials would be able to analyse whether the suggestion would be beneficial. Will he look at whether there has been a loss, or a potential loss, in income tax or capital gains tax from people who have owned second properties?

Property really does matter in this country. I completely understand the importance of getting the supply right. Types of ownership and the mix are so important, but so are changes to our tax regime. As I said at the outset, property taxes raise a huge amount of tax in this country—it is probably one of the biggest areas of tax for our Exchequer. This is an opportunity to make a small but significant change to that regime. I look forward to hearing the Minister’s response.

16:33

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

It is a pleasure to speak under your chairmanship, Mr Streeter—I almost said Mr Speaker there; perhaps that is a Freudian slip. I am grateful to my hon. Friend the Member for Carlisle (John Stevenson) for organising this debate and for bringing to it his customary thoughtful style and experience as a solicitor. I was also a solicitor before coming to this House, although not a property one. I am aware of some of the experiences that he has had and in my prior life, before being appointed as a Minister, I was very interested in the property market and some of the questions that he has raised today. I will try to respond to as many of those as possible, but let me first raise some of the background to stamp duty and the Government’s recent reforms, because it is fair to say that there has been a great deal of activity in the area over the last few years.

Stamp duty as we know it was introduced in 2003. It replaced the former stamp duty regime, which my hon. Friend will remember from his time as a solicitor and required the physical stamping of documents. It raises over £11 billion a year, which makes an important contribution to our public services, as he said—we should remember that in the context of this debate—including £8.6 billion a year from residential property transactions. Although we continue to seek ways to reform stamp duty, we have to bear in mind its importance to the Treasury and our public services.

Over the last few years, stamp duty has played a significant part in a number of different budgets, and the Government’s objectives when considering it and its impact on residential property purchases have been above all to support first-time buyers, and to sustain the tax base. We are trying to keep the tax as simple as possible and to reduce it where possible. We are aware of the distortions that the tax can inevitably lead to, which deters people from moving home, from downsizing and from upscaling, and the effect that has on quality of life. Buying a home and changing where a person lives is obviously one of the most important decisions that they make, and we want to make sure that, where possible, the tax system does not interfere in that. We see it as an important lever in the housing market, but not the only lever. The housing market requires supply-side reforms as well as tax changes, and any reform of stamp duty can only be one potentially small element in our housing policies.

With those priorities in mind, the Government have taken a succession of significant actions to reform how stamp duty works. In 2010, the stepped structure of stamp duty through the most widely applicable price bracket created distortions in the housing market, which everyone was familiar with, particularly people such as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) who have worked as estate agents. We wanted to iron out some of those problems for both sellers and buyers. The stepped increases in rates meant, for example, that those moving up the housing ladder were met with large increases in tax when properties fell into higher brackets.

In 2014, we took action to reform stamp duty on residential properties at the autumn statement, which many hon. Members will remember. We changed the stepped increases to a variable rate that increased with the price of the property purchased. That was an important and successful reform and led to about 98% of people liable for stamp duty finding their bills reduced. There were new, higher rates for properties of the highest value, which increased the tax paid by so-called prime and super-prime properties particularly focused on areas of central London, but the vast majority of homebuyers in our constituencies across the country were better off as a result of the changes.

Since becoming a Minister, I have asked to see the figures on transactions in the higher price brackets. There has been quite a significant amount of press coverage of that. At present, the Treasury does not believe that there has been a material change in the number of transactions at the highest price brackets, but we will continue to keep that under review, bearing in mind the public interest.

In April 2016, we introduced higher rates of stamp duty on additional properties, which was designed to tip the scales in favour of first-time buyers and away from those who want to purchase second homes or invest in buy-to-let. Of course, it is perfectly acceptable for people to want to do that. We understand that and do not want to make it impossible for people to enjoy a second home or to invest in buy-to-let property for their pension and their future or for their children and grandchildren, but we did believe that it was important to make changes to help others to get on the property ladder.

Since those changes were introduced, more than 400,000 people have bought their first home and first-time buyers make up an increasing proportion of those in the mortgaged property market. However, it remains very challenging for young people to get on the property ladder—we all acknowledge that—and therefore in 2017 we made the largest change so far, which was to remove stamp duty for first-time buyers.

At the autumn Budget, we permanently abolished stamp duty for first-time buyers who were purchasing a property for £300,000 or less. First-time buyers purchasing a house for between £300,000 and £500,000 will save £5,000 and, to ensure that the relief is targeted at those who need it the most, purchases above £500,000 will not benefit. We appreciate that in parts of the country properties are of such a high value that the benefit is more limited, but even in London the average amount of stamp duty paid by first-time buyers has been halved, so the change is still significant and an improvement for anyone trying to get into the property market for the first time.

To turn specifically to the points made by my hon. Friend the Member for Carlisle, his suggestion about transferring stamp duty from the buyer to the seller was thoughtful and one that, he will not be surprised to hear, the Treasury has given thought to. We have done considerable research into it. It would be a significant step and therefore one that we should take only if the benefits are clear. The legal liability for stamp duty rests with the purchaser, but evidence suggests that the cost of stamp duty is reflected in the value of the property. That is of particular concern with respect to my hon. Friend’s suggestion, because it means that switching the formal liability to the seller would be likely to have a limited effect on the overall cost of purchasing a house. My hon. Friend’s argument would have been stronger before we changed stamp duty for first-time buyers. Now the vast majority—80%—of first-time buyers have no stamp duty and 95% benefit from our changes. Before those changes, of course his proposal would have made a significant difference.

Another point, made by the hon. Member for Brighton, Kemptown (Lloyd Russell-Moyle), with respect to those downsizing, would be of concern to us, because there might be a reason for people not to downsize when we want those who are a bit older with larger homes to consider moving into smaller homes—if they wish to, of course—freeing up properties for the next generation. We will give the suggestion thought, and I am happy to meet anyone about it, but it is not something that we are considering at present.

The other suggestion made by my hon. Friend the Member for Carlisle, on the stamp duty land tax form, was interesting. I would like to take it up with him and hear more. I am happy to meet him with my officials to take it forward. I think Her Majesty’s Revenue and Customs would be interested in considering the idea.

I have only a minute or so remaining, so I will conclude. The Treasury is extremely committed to improving the housing market. Members on all sides of the House appreciate the fact that our housing market is broken and needs fundamental reform. We see tax as an element of that, and I hope that over the past several years right hon. and hon. Members have seen a number of significant interventions to make that better. One argument is that we now need to move into a period of stability with respect to stamp duty, so that those selling and buying homes and those operating in the market have the confidence to make choices in the future. We will, however, consider future options, and we will do everything we can with the Ministry of Housing, Communities and Local Government to ensure that we continue to increase the supply of homes throughout the country, particularly focused on first-time buyers.

Question put and agreed to.

Democracy in Hong Kong

Tuesday 23rd January 2018 Westminster Hall

16:44

[Fiona Bruce (Congleton) (Con)]

I beg to move,

That this House has considered democracy in Hong Kong.

Last year marked the 20th anniversary of the handover of Hong Kong to China. Pursuant to the 1984 Sino-British joint declaration, the United Kingdom has a responsibility to ensure that the legal, economic and social rights and freedoms guaranteed to the people of Hong Kong under the Basic Law, Hong Kong’s constitution, which was derived from the joint declaration, are protected. The UK also has a responsibility to ensure that the one country, two systems principle on which Hong Kong was handed over to China by the UK is respected.

In 1996, one year before the handover, then Prime Minister John Major said:

“If there were to be any suggestion of a breach of the Joint Declaration we would have a duty to pursue every legal and other avenue available to us.”

More recently, the House of Commons Select Committee on Foreign Affairs has stated that,

“the UK has both a legal right and a moral obligation to monitor the implementation of the principles established in the”

joint declaration.

I note that the Government’s six-monthly reports are a vital part of that, and I welcome the fact that the most recent report was significantly more robust than previous ones, stating as it did that recent developments in Hong Kong on issues such as democracy and the exercise of rights and freedoms, including freedom of expression and of the press, had “caused concern”. I also welcome the public assurances made only yesterday by our consul general in Hong Kong, Andrew Heyn, that Britain will continue to speak up about pressures it feels that the one country, two systems concept is under.

I am pleased to see the Minister who will be responding to the debate in his place, because he is respected in this House as a man who has a keen respect for human rights and freedoms. I have called for this debate to ask him what “meaningful action”—to borrow a phrase from Lord Ashdown, former leader of the Liberal Democrats, who has recently returned from a visit to Hong Kong and whose subsequent report I will refer to later—the UK Government are taking to ensure that the principles of the joint declaration are protected and respected in the light of increasing concerns about challenges over recent years to the rule of law, human rights and democracy in Hong Kong. I will refer to some of those challenges. Furthermore, many of the concerns are referred to in a detailed recommendation entitled, “Hong Kong, 20 years after handover”, which was published by the European Parliament in the past few days.

It is fair to say that for much of the past 20 years, China has by and large respected one country, two systems, but the dramatic signs over the past four or five years, and in particular over the past 12 months, are a cause for increasing concern. The 2015 abduction of the Causeway Bay booksellers—one, British citizen Lee Bo, from Hong Kong territory itself—simply, it appeared, for having published books critical of Chinese authority, caused international consternation about the apparent erosion of Hong Kong’s autonomy.

I pause for a moment from the main body of my speech to put on record the fact that, while four of the five abducted booksellers were released over the following months, two years on the fate of one, Gui Minhai, a Swedish citizen, remains unclear. He has been denied access to legal counsel and has not been officially charged, tried or allowed to return home. I pause to mention that because this week, dramatically, The New York Times reported that he was snatched on Saturday from a train bound for Beijing, where he was heading for a medical examination, apparently by plain-clothed Chinese police. What steps has the United Kingdom taken to raise his case, and to urge the Chinese authorities to allow him to leave China, reuniting him with his family, including daughter Angela, who studies in Cambridge and whom I have met? She campaigns valiantly for her father’s release.

The January 2017 abduction from a Hong Kong hotel of Chinese billionaire Xiao Jianhua has caused similar concern. A further cause of grave, indeed international consternation was the disqualification not long ago of six democratically elected Hong Kong legislators, including the youngest ever member of the Legislative Council, Nathan Law, whom I had the privilege of meeting here in November 2016. Those legislators were removed from their seats because they were accused of failing to take their oaths properly. Some of the individuals, it is true, were disrespectful and inappropriate in how they took their oaths, but Nathan Law took his oath perfectly properly, merely adding to the end some words of Mahatma Gandhi. To be disqualified for quoting Gandhi is extraordinary. For a court to disqualify these young men instead of the legislature giving them a chance to retake their oaths properly is alarming. They now face demands to repay salaries and expenses that they legitimately earned while fulfilling their duties as legislators.

Last August, a further injustice occurred when Joshua Wong, Alex Chow and Nathan Law, who were student leaders of the peaceful umbrella movement in 2014, were sentenced to prison terms of six, seven and eight months respectively. Twenty four hours after their sentencing, a letter signed by 25 international figures, including me, the hon. Member for Hornsey and Wood Green (Catherine West), who is here today, and many leading politicians, diplomats and academics, was published, which expressed concern at this as a miscarriage of justice, a threat to Hong Kong’s rule of law and basic human rights and a blow to the one country, two systems principle. It was followed by a letter by 12 senior international lawyers, many of them Queen’s counsel, who argued that the imprisonment of these young men was not only a threat to the rule of law, but a breach of the principle of double jeopardy in Hong Kong and a violation of the International Covenant on Civil and Political Rights, which applies to Hong Kong. They noted

“serious concerns over the independence of the judiciary”.

I am pleased that a few weeks later, Joshua, Nathan and Alex were granted bail, released from prison and permitted to appeal, but whatever happens with their cases on appeal, the serious issues raised by the decision to jail them in the first place should not be ignored. I would like to think that the international consternation expressed at their treatment, and undoubtedly noted by the Chinese authorities, contributed to their release. That is why I share the view of the last Governor of Hong Kong, Lord Patten, when he said our Government’s Ministers should speak out publicly, not only privately, and that those who believe that raising difficult issues with China, such as human rights, would affect trade are “mistaken”.

Joshua, Nathan and Alex are far from alone. According to expert Kong Tsung-gan in a recent article in Hong Kong Free Press,

“at the heart of the government strategy to keep pro-democracy groups on the defensive and to intimidate ordinary people into not participating in the movement are the 39 legal cases (criminal and civil) it has brought against 26 pro-democracy leaders, as well as prosecutions of dozens of grassroots activists.”

I understand that, at present, more than 50 democracy activists face court proceedings and potentially prison under public order offences, in cases that past precedent indicates would normally have been punished with non-custodial penalties—community service or a fine. Some 16 peaceful demonstrators have been jailed for between six and 13 months already.

“As never before,”

writes Kong Tsung-gan,

“the government is using the courts to criminalise and delegitimise the pro-democracy movement.”

He argues that although some cases—such as those I have quoted—have received international attention, more focus should be given to the “overall pattern”.

In a further example of the erosion of democratic procedures, in December last year, the Legislative Council introduced procedural changes regarding elected legislators’ authority. The powers of the Legislative Council chairman to close down debates were increased. Inevitably, that will reduce the ability of pro-democracy groups, which represent the majority of Hong Kong’s people, to properly scrutinise legislation and hold the Executive to account. A new law imposed on Hong Kong by China now criminalises disrespect of the national anthem. Some Hong Kong football fans have booed China’s national anthem during football matches. One can argue whether it is appropriate to disrespect a national anthem, but is it right to criminalise such action with a penalty of up to three years in prison? Disturbingly, I understand that these new laws can be applied retrospectively.

Journalists now face physical threats. Hong Kong has fallen to 73rd place in Reporters Without Borders’ 2017 World Press Freedom Index—down from 18th in 2002. Academic freedom is being curtailed, too, with recent reports of controversial academic figures being removed from posts or having promotions blocked, of state-appointed figures governing universities, and of a growing push to limit freedom of speech there.

Another illustration of the erosion of Hong Kong’s autonomy, and one that directly affects the freedoms of the United Kingdom, was the decision to deny British human rights activist Benedict Rogers entry to Hong Kong in October last year. I take the opportunity to thank Foreign Office Ministers for expressing concerns to the Chinese authorities about the denial to Mr Rogers, after I raised questions in the House at the time. Does the Minister have any update regarding this? In late 2017, several Taiwanese scholars were also refused entry to Hong Kong.

The year ended with yet another example of the increasing erosion of Hong Kong's authority: the Chinese Government’s decision to enforce mainland Chinese law at the new West Kowloon high-speed rail terminus in Hong Kong. Under the arrangement, Hong Kong will effectively surrender its jurisdiction across a quarter of the new express rail terminus, where immigration procedures will be performed by mainland law enforcement agents with powers of search and arrest. I understand that Chinese national law will apply at the rail terminus. Thousands demonstrated in Hong Kong against these plans on new year’s eve. In the view of many experts, that effectively introduces one country, one system.

I understand that the National People’s Congress standing committee decided that the co-location arrangement is constitutional, thereby usurping the function of the courts, which under the Basic Law of Hong Kong should have exclusive rights to adjudicate cases. The Hong Kong Bar Association has said it is “appalled” by this decision, and stated:

“Such an unprecedented move is the most retrograde step to date in the implementation of the Basic Law, and severely undermines public confidence in ‘one country, two systems’ and the rule of law”

in Hong Kong. Does the Minister share the concerns of the Hong Kong Bar Association?

In December, Mr Speaker hosted the launch in Speaker’s House of a new organisation set up in this country to monitor, report and advocate for Hong Kong’s freedoms and autonomy—Hong Kong Watch. I had the privilege of attending the launch of that organisation, which was founded by Benedict Rogers and others. I commend its work to the House and encourage Members on all sides to engage with Hong Kong Watch. It has a highly distinguished cross-party group of patrons, including Sir Malcolm Rifkind, Lord Ashdown, Lord Alton of Liverpool and Sir Geoffrey Nice, QC. The seniority of those individuals in their respective spheres of public life underlines that the concerns I am expressing are shared by respected public figures across political parties in this country and beyond, and that they cannot be ignored.

Indeed, Lord Ashdown recently visited Hong Kong as a patron of Hong Kong Watch. He published a report, which he presented at a meeting in the House of Lords last week, which I attended. The report is entitled, “Hong Kong 20 Years on: Freedom, Human Rights and Autonomy Under Fire”. I urge the Minister to read it if he has not already done so, and to respond to the concerns and recommendations in it. Lord Ashdown states:

“Over the past five years the freedoms guaranteed to the people of Hong Kong in its mini-constitution, the Basic Law, have been increasingly eroded. In Hong Kong, the rule of law is under pressure, human rights are undermined, and the city appears no closer to democracy. Legislators, legal experts and activists that I spoke to expressed concerns about the direction of travel: the situation appears likely to worsen in the coming years unless the people of Hong Kong and international governments unify to protect the rights of those living there.”

What concerned me particularly, as I listened to Lord Ashdown presenting his report last week, was what he said of his recent visit, compared with previous visits to Hong Kong over the years.

16:59

Sitting suspended for a Division in the House.

17:14

On resuming—

[Fiona Bruce]

I will shortly draw my remarks to a conclusion. I was about to quote Lord Ashdown. Following his recent visit to Hong Kong, he said that

“something has happened to cause the almost irrepressible sprit of Hong Kong to be dampened down”.

It is profoundly concerning to hear claims from China that the joint declaration is viewed by some as a historical document of no relevance. Does the Minister agree that it is still relevant now and right up to 2047, that it is a joint declaration by both Britain and China in which both signatories have responsibilities and obligations, and that, as an international treaty lodged at the United Nations, China’s adherence to those obligations under the treaty ought to be taken as an indication of its reliability in adhering to all its international treaty obligations?

Does the Minister agree that, as Lord Ashdown said,

“it is in the interests of Britain, China and Hong Kong to continue to uphold the rights enshrined at the handover”?

Does he also agree that Britain has, as Lord Patten said,

“a right and a moral obligation to continue to check on whether China is keeping its side of the bargain”

publicly as well as privately? If so, what are the Government doing to fulfil that obligation?

We must heed the plea of Anson Chan, Hong Kong’s former Chief Secretary, and Martin Lee, founder of Hong Kong’s Democratic party, who told the Conservative party human rights commission, which I have the privilege to chair:

“We need the UK to speak up forcefully in defence of the rights and freedoms that distinguish Hong Kong so sharply from the rest of China. If it does not lead, then the future of one country, two systems is at best troubled and at worst doomed.”

I hope we will step up to our responsibilities, speak up for Hong Kong and live up to the promise made by Sir John Major 22 years ago that Hong Kong should never have to walk alone.

[Several hon. Members rose—]

[Mr Gary Streeter (in the Chair)]

Colleagues, five Back Benchers are seeking to catch my eye. The wind-up speeches will begin at 5.40 pm, so you have about five minutes each.

17:16

[Catherine West (Hornsey and Wood Green) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Streeter. I congratulate the hon. Member for Congleton (Fiona Bruce) on her excellent introduction and her commitment over the long term to the people of Hong Kong. As a former shadow Minister for Asia and as a patron of Hong Kong and deputy chair of the all-party parliamentary China group, I congratulate others for joining in the debate and for expressing our concern about human rights, democracy and individual freedoms.

As we reflect on the past 20 years, it is important to pay tribute to the Hong Kong Government for the significant steps forward they have taken since handover, from minimum wage legislation to anti-corruption drives, clean water initiatives and huge investments in public infrastructure projects. As we look forward to the next 20 years, we should pause to remember the past 20, and how important the principles of the joint declaration are for the flourishing of Hong Kong’s economy and society. The dynamism and entrepreneurial spirit of the Hong Kong people has allowed Hong Kong to flourish under the joint declaration. There is no reason why that should not continue.

The UK-Hong Kong relationship has deepened. More than 600 UK businesses with registered offices in Hong Kong, an export market worth £8.6 billion and a UK investment stake of more than £33 billion are clear signs that trade is booming. In terms of academic and cultural exchange, more Hong Kong students are enrolling at UK universities than ever before, which is an achievement to celebrate. In part, the relationships we form with students, young people and young democrats redouble our efforts to commit ourselves to a more socially just society based on individual freedoms and human rights.

We are all aware of the high-profile cases raised in connection with the topic of the debate, including the arrests of the booksellers. It is interesting that today’s papers highlight the case of Gui Minhai, the Swedish national who does not understand why he has been arrested. It is unclear whether he has any legal support. Conversations are going on between Sweden and China, but that case emphasises how surprising such acts can be. At one moment, one can be debating a good trade relationship and things can feel so normal, but in another situation things can seem so strange. When we try to develop a good relationship with China along trade lines, we must be brave and talk about the issues that are important to us.

On 28 March 2017, I asked the Minister’s predecessor as Minister for Asia, the hon. Member for Reading West (Alok Sharma), how confident he was that the Hong Kong Government were committed to genuinely democratic elections. He stated that it was the Government’s view that the best way to secure the future of one country, two systems was through a transition to universal suffrage. I would be grateful if this Minister would give us an indication of the timescale or of what progress might have been made in tackling that fundamental issue of universal suffrage.

Secondly, the issue of functional constituencies continues to be an area of concern when it comes to creating a system of fair and genuine democratic representation. I recognise that the functional constituencies are somewhat a hangover from pre-handover days, but I should be grateful if the Minister would clarify the Government’s position on whether they should play a lasting role in the democracy of Hong Kong, and whether he has discussed the issue with his counterparts in Hong Kong or Beijing.

Thirdly, I wonder what action the Minister has taken to raise the jailing of Hong Kong journalists. The tension between democracy and governance, journalism and the free expression of speech is obviously something that means a great deal to many of us in the Chamber. Could the Minister please give us an update on what progress is being made to discuss genuine freedom of speech in Hong Kong? Of course, Hong Kong has always treasured that; it has always had a lively bookselling tradition and a lively journalistic environment. As we move into an increasingly globalised age, such questions are also crucial around social media. I should be grateful if the Minister would give me an idea of his views on that.

I have one minute to go. Marking the anniversary of the handover, the Foreign Secretary issued a very carefully worded statement, in which he made no specific reference to the persisting cases or concerns outlined by hon. Members today. As a guarantor of the joint declaration, a treaty lodged at the United Nations, it is our responsibility to ensure that its principles are upheld, working with our Chinese counterparts. Following the delegation of young LegCo Members last year, hosted by Lord Collins of Highbury from the other place, I pledged to those young representatives that I would continue to press our Government to ensure that the spirit of the joint declaration is upheld. I hope that, through debates like these, we can continue to be vigilant, to promote human rights, democracy and individual freedom on behalf of Hongkongers.

17:22

[Richard Graham (Gloucester) (Con)]

It is a pleasure, as chair of the all-party parliamentary group on China, including Hong Kong, to join the debate. I congratulate my hon. Friend the Member for Congleton (Fiona Bruce) on securing it. In many ways, this debate is a continuation of others we have had. I last spoke on this subject in this Chamber in March 2016; we were then considering the 38th biannual report on Hong Kong. It is perhaps timely to review again progress on the implementation of the Sino-British joint declaration of 1984, just over 20 years since the handover of Hong Kong.

In the 38th biannual report, the Foreign and Commonwealth Office noted that the system of one country, two systems has in very many areas “continued to function well”, but it noted specific concerns about rights and freedoms, including academic freedom and the freedom of the press. In the 41st report, the most recent one that we have, the Foreign Secretary’s introduction confirmed his strong belief that the joint declaration

“remains as valid today as it did when it was signed by both the Government of the UK and of China over thirty years ago”,

that it was legally binding, that it continues to be enforced and that he had unequivocally raised the issue, both publicly and privately, with the Chinese Government.

In a sense, the updated report is largely a continuation of the earlier one. Anyone objectively looking at the progress of Hong Kong over the last 35, 20 or even five years would have to note considerable elements of progress in the way that Hong Kong continues to surprise—its environmental campaigns, its increased social welfare understanding, and its ability to continue to do dynamic things in its trade with the rest of the world, brilliantly exemplified by the presentation given at the annual dinner of the Hong Kong Trade and Development Corporation in London last autumn.

Our co-operation with Hong Kong, which stretches to cover much more than trade and investment, encompassing the 3.7 million British passport holders in Hong Kong, strong education links and—above all, perhaps—the rule of law, has continued strongly. It will be, I suspect, raised to a new level in March, when our Department for International Trade works with Hong Kong on the GREAT festival of innovation, which will I think be the Department’s largest promotional activity in the far east this year. It will focus on technology in a whole number of different ways, and will be a strong example of how Britain and Hong Kong are still immensely relevant to each other.

None the less, the issue of the freedom and democracy of Hong Kong is incredibly important. Although those concerns remain strong, I note that Hong Kong Watch’s report says that academic freedom is “alive, and generally well,” with the caveat that there should be vigilance against changes to those freedoms. My belief is that in engaging with Hong Kong—many of whose residents are old friends of the UK in a number of ways—and with the People’s Republic of China, part of the issue is the tone we strike. Having something called “Hong Kong Watch” is valuable, in the sense that it will continue to look closely at the six freedoms articulated in the joint declaration, but it also has an element of moral superiority to it, which we must be careful about.

For example, in an email to me a few days ago, a Hongkonger resident in the UK accused China of breaking solemn commitments to respect Hong Kong’s freedoms and “British way of life”, before going on to talk about the Iranian-style fake election of the chief executive and

“Governor-like powers to rule Hong Kong.”

We cannot have it both ways. The fact of the matter is that the British Governor there was not elected in any way whatsoever, and he did have significant powers to rule Hong Kong. That was part of the British way of life in Hong Kong at that time.

Things have moved on. The key thing I would like to leave the Minister to ruminate on today is the importance of shared rule of law for all three parties. When Hong Kong is operating at its best, in a way that can raise huge amounts of capital and provide great services for the Chinese programme of one belt, one road, we, with Hong Kong and China, can use the advantages of a strong rule of law to benefit everyone.

17:27

[Sammy Wilson (East Antrim) (DUP)]

I remember when the discussions were going on about the future of Hong Kong. There was particular interest in Northern Ireland. I was a member of the Chinese chamber of commerce in Northern Ireland; a lot of the members came from Hong Kong or had families there and were very concerned about the future. Of course, Chris Patten had been a member of the Administration in Northern Ireland when the Anglo-Irish agreement was signed and we were moving toward discussions about the future of Northern Ireland, which culminated in the Belfast agreement. Given that the Government had expressly stated that they had no economic, strategic or selfish interests in Northern Ireland, there was a certain affinity with people in Hong Kong who were facing an uncertain future.

Thankfully, despite all the fears about Britain’s exit, or Brexit, from Hong Kong—people thought capital would flee from Hong Kong, industry would be decimated, people would want to leave and the whole economic dynamics of the Hong Kong economy would be affected—that did not happen. Perhaps there are lessons for today from those kinds of warnings.

The commitment was made to the people of Hong Kong that although China would now have control, it would be one country but two systems. Nothing would change for 50 years. Freedoms they had experienced would be guaranteed. As has been shown this afternoon, if we look at the way in which deteriorations in human rights and freedoms have manifested, especially recently, whether we are talking about the abduction of booksellers and businessmen, interference with the judiciary, attacks on journalists or the way in which protestors have been treated, there has quite clearly been an erosion of the freedoms that people were promised. It is significant that the man who did the deal has said that perhaps we should have done more. Chris Patten has expressed concerns about what is going on in Hong Kong.

The one thing that the Chinese do not like—this is quite clear in all dealings with them—is public criticism. We saw that when we were asked to ensure that protesters were kept off the streets of London during the state visit of the Chinese Premier; it showed how, for the Chinese, public criticism rankles. It is important that where these deficiencies are identified, our Government speak out against them, not only privately but publicly. There are some people who say that we look to China as one of our big export markets, and that there are trade implications to speaking out. I do not believe that. One need only look at how in the past Presidents of the United States, for example, have publicly criticised China, and it has not led to the kind of sanctions that one would expect. The one ask I have of the Government is this: let us not be mealy-mouthed in ensuring that the protections that we gave and promised to the people of Hong Kong are delivered.

17:32

[Colin Clark (Gordon) (Con)]

It is an honour to serve under your chairmanship, Mr Streeter. Scotland has had strong links with Hong Kong historically and commercially, in politics, science and modern trade. There can be no doubt that over the last 20 years Hong Kong has thrived as a result of its proximity to China, while enjoying access to financial markets around the world.

Scottish universities, including Aberdeen and Edinburgh Universities, have very strong links to Hong Kong, and they share our concerns. Last year was a special year for the special administrative region, and much was made in Hong Kong and China of the significance of the 20th anniversary of the handover from the British. As the right hon. Member for East Antrim (Sammy Wilson) said, at the time, Britain left in a clear agreement that Hong Kong’s special status under the one country, two systems understanding would be protected, along with a commitment to the rule of law and Hong Kong’s autonomy, as my hon. Friend the Member for Congleton (Fiona Bruce) eloquently explained.

However, in recent years we have seen worrying signs that the commitment is wavering. It does not benefit China and the ruling Communist party to flex their muscles when it comes to Hong Kong. The economic importance of Hong Kong to China should very much temper their response. But all this shows a worrying disregard for the joint declaration. The United Kingdom has a clear right to monitor and comment on the declaration, given that that was one of the major preconditions for the handover of Hong Kong. The commitment to the rule of law and autonomy were agreed for a period of at least 50 years. It is worrying that, only halfway through, we are deeply concerned that those principles appear to be at risk.

I hope that the Government will recognise the concerns expressed in the Chamber today and speak out where necessary. China is a friend to the United Kingdom and a country with which we enjoy a prosperous and beneficial relationship, but friends must be able to be honest with one another and have difficult conversations on issues on which we disagree. Like the right hon. Member for East Antrim, I recognise the economic success of Hong Kong and want to see it flourish. The last 20 years have defined the Hong Kong of today. If it is to continue to flourish for the next 20 years, its democracy, autonomy and rule of law must not only be protected, but enhanced so that they are worthy of any great international city, which Hong Kong most certainly is.

17:34

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Member for Congleton (Fiona Bruce) for her contribution. She is clearly a lady with a big heart, and she presented the case very well. Well done to her. Last week in the Holocaust debate, I quoted a poem:

“First they came… and I did not speak out.”

I recognise that we are not talking about the same thing today, but there is a similarity that we should speak out about. Looking at the situation in Hong Kong and the response to date, I am uncomfortable, as other hon. Members have said that they are.

I often say that I am proud to be a Member of Parliament in the greatest seat of democracy in the world. It is an honour that I do not take lightly. While I am standing here representing my constituents, I am mindful that with great power comes great responsibility. I am sorry to say—please do not interpret my words as an attack on anyone in this place—that we are not living up to our responsibility when it comes to Hong Kong. It is good to see the Minister in his place. I believe there is no better person to respond to this debate, and I mean that with all sincerity. I look forward to his response.

We all know the background: Hong Kong was handed back to China in 1997 following the 1984 agreement between China and Britain. China agreed to govern Hong Kong on the principle of one country, two systems, and the city would be able to enjoy a high degree of autonomy, except on foreign and defence affairs, for 50 years, as the hon. Member for Gordon (Colin Clark) said very clearly. I am not a mathematician, but we have not reached the end of those 50 years. If a loan had been defaulted on, we would not write it off; where there is a prison sentence, we would not allow early release; yet here we appear to have backed off. As I often say, “so sad, too bad.” The abuse of human rights, the right to worship and the right to express oneself in a democratic process—we have a responsibility to these people, and we are not fulfilling it.

As chair of the all-party parliamentary group for international freedom of religion or belief, I take very seriously any form of persecution, and I am constantly asking the Government—as the Minister knows—to step in and speak out on behalf of these people. People who have arranged peaceful protests are being imprisoned. Three and a half years ago, I served on the armed forces parliamentary scheme run by the Royal College of Defence Studies. One of the representatives there was the chief of Hong Kong police. He told me about the number of protests, because I was interested to hear how things were going, and he illustrated to me that protests were able to go ahead. Today they are not. Today people are under the cosh. Today, they can face a jail sentence. We have to step out against that.

Avery Ng, the chairman of the League of Social Democrats, told The Guardian:

“It is ridiculous for the Chinese government to claim that the joint declaration is a historical document. You don’t sign a contract and claim that it is historical the second day after the contract was signed.”

How true that is! He continued:

“I believe the UK government has legal, moral and political responsibility to come out and say the right thing.”

I agree with those sentiments, and while I do not believe that we have humiliated ourselves—I do not say that for one second—we have not draped ourselves in honour, either.

Yes, we would appreciate a good relationship with China to enhance trade, especially in a post-Brexit Britain, but we cannot sell ourselves, our integrity or our obligations off to achieve this. Our products are top-quality. Our relationship has gradually built up. While I firmly believe that organising a boycott of Chinese products would be counterproductive and the wrong thing to do, I do not believe that we have lost the ability to speak out about our former colony, and to instigate a real and meaningful discussion regarding these cases and what they mean for the people of Hong Kong.

Last sentence, Mr Streeter. I am asking the Foreign and Commonwealth Office for more than a strongly worded email. Let us discuss this face-to-face and make the case for those who are not being allowed to speak out for themselves. I often say that we speak for those who have no voice.

[Mr Gary Streeter (in the Chair)]

I remind hon. Members that Opposition Front Benchers have five minutes each, and the Minister has 10 minutes. That should allow a few moments for Fiona Bruce to respond at the end.

17:38

[Peter Grant (Glenrothes) (SNP)]

I am grateful for the opportunity to start summing up the debate. In the interest of brevity I will not go through everyone who has contributed. It is quite clear that everyone who has spoken is concerned about the plight of the people of Hong Kong, and not just because of the United Kingdom’s history in the region. It is perfectly legitimate in any democratic society to have concern for human rights everywhere; human rights are there because people are human beings, not because of where they live or which political system they work under.

I have a concern, as I think we all do, that the Government of China, through the authorities in Hong Kong, as we see in so many other places, use the excuse of law and order or of protecting national security to clamp down on what would be seen in any reasonable society as possibly awkward or inconvenient, but perfectly legitimate, peaceful and lawful, disturbances by people doing no more than exercising their right to disagree with the Government of the day, to make public statements and to take part in public protests against, or in favour of, that Government’s policies. Let me make that clear, as I have done in a number of other human rights debates that I have taken part in here. The Chinese Government and the authorities in Hong Kong have the right to maintain their own society. They do not have the right to use that as an excuse for completely arbitrary arrests and detentions.

I hope that the Minister will indicate what the Government’s intentions are for after we leave the European Union. China will clearly be a big target for one of these wonderful new trade deals that we will get. How can we be sure that that will not be obtained at the cost of our watching brief on human rights in China? It has to be said that the United Kingdom’s record on dictatorships in places such as Saudi Arabia and Bahrain is not good. Far too often, trade interests triumph over human rights. More recently, we have even seen that in Spain: there have been arbitrary arrests for taking part in the wrong kind of political demonstration in Spain in the past few months, and the Government have been very slow and reluctant to criticise them. The United Kingdom’s authority in speaking to the Chinese Government about human rights abuses in Hong Kong would be much greater if we were prepared to speak as firmly to our so-called friends in some other human rights abusing regimes across the world. We do not have to go to Hong Kong to see people being denounced as enemies of the people simply for expressing unpopular or contradictory views.

I am grateful to the hon. Member for Gloucester (Richard Graham), who is no longer in his place, for reminding us that part of the reason why there is little democracy in Hong Kong now is because there was practically none for 150 of the 155 years that Britain was in charge. Out of a population of several million, how many citizens of Hong Kong were asked who they wanted as Governor before Chris Patten took over? None, or practically none. The first real attempt to democratise Hong Kong was introduced by Chris Patten in 1992, exactly 150 years into British rule there. Sometimes we really do need to look at ourselves in the mirror. We should ask why democracy in Hong Kong suddenly became important when Britain was about to hand over control, but did not seem that important when Britain was in control.

Some of the structural, institutional reasons why human rights are sometimes not properly observed are British legacies. The reason that universities can clamp down with complete impunity on academics or students who speak out of turn is because the Chief Executive of Hong Kong is the de facto principal—the boss—of every university in the city. The Chinese did not do that; Britain did that. That was what Britain set up. Half the legislature is elected not by the citizens but by the big business interests. The Chinese did not do that; Britain did that. Let us face it: in this place, half the legislature and more is not elected.

We should by all means comment, criticise and use all forms of diplomatic and political pressure to try to persuade the Government of China that human rights are in everybody’s interests, not only in Hong Kong but in mainland China, but we should do it with a degree of humility. Sometimes we should do it with a degree of shame, when we remind ourselves that Britain’s first insistence on taking control of Hong Kong was not done in the interests of Hong Kong’s citizens, but was done to protect the interests of the opium barons. Although the hon. Member for Gordon (Colin Clark) has mentioned some of Scotland’s positive connections with Hong Kong, it is to our national shame that it was a couple of Scottish entrepreneurs who set up a company purely to sell opium into China to undermine the Chinese economy. Today, we should by all means press the Chinese Government to respect human rights, but we should do it with a sense of humility, because a lot of the problems in Hong Kong just now can be traced back to the British history of colonialism in Asia and elsewhere.

17:44

[Helen Goodman (Bishop Auckland) (Lab)]

It is a pleasure to serve under your chairmanship this afternoon, Mr Streeter.

As hon. Members have said, one of the privileges of serving in our free Parliament is the ability, and the possibility, to defend the freedoms of those in other countries where things are more difficult. Last year was the 20th anniversary of the joint declaration, and I would just like to remind the Chamber of one of the key paragraphs in it, which says:

“Rights and freedoms, including those of the person, of speech, of the press, of assembly, of association, of travel, of movement, of correspondence, of strike, of choice of occupation, of academic research and of religious belief will be ensured by law in the Hong Kong Special Administrative Region.”

Those are fundamental rights, and Her Majesty’s Opposition totally support the principle of one country, two systems and we totally accept our legal responsibilities as a guarantor of that declaration and of those rights.

I want to pay special tribute to the hon. Member for Congleton (Fiona Bruce) for the way that she introduced this debate. Her speech was excellent and set out the whole picture very clearly. I have to say that she is fearless in defending those whose human rights are abused, however inconvenient it is and wherever we see it. I also congratulate my hon. Friend the Member for Hornsey and Wood Green (Catherine West) on her considerable work on Hong Kong in recent years.

The situation is obviously getting more difficult, as the Government report acknowledges, and we have to ask what is to be done in this situation. We should remind China of a couple of things. One is that while we agree that calls for independence are not ones that we support, clamping down on protests and on free speech, and appearing not to wish to see civil society flourish, can only increase those pressures. That will not reduce those protests. As Lord Ashdown said, will the Chinese enhance their own soft power if they undermine Hong Kong’s freedoms? That is a very powerful point.

I am interested to know what the Government are going to do and what they are going to say to the Chinese. I think that the Prime Minister will have a meeting with President Xi in the next few months. Is the intention to raise these issues? The Government have been objective and open in assessing the situation, but what further do they think that they can do? I would also like the Government to assure us that in the post-Brexit pressure for trade regimes, we will not abandon our commitments and responsibilities to human rights. Taking on board what the hon. Member for Glenrothes (Peter Grant) said about humility, and notwithstanding what happened when we were running Hong Kong, what steps do the Government think it is possible to make to move to universal suffrage, and what is their view on the legality of the immigration checkpoint on the new railway?

The title of the debate is “Democracy in Hong Kong”. Most of the focus has been on individual human rights, and at this juncture I think that is the right focus.

17:49

[The Minister for Asia and the Pacific (Mark Field)]

I pay tribute to my hon. Friend the Member for Congleton (Fiona Bruce) for her work as chair of the Conservative party human rights commission. I value her deep interest in Hong Kong and a range of other matters. Forgive me if I reply to some specific issues in writing subsequent to this debate; I hope that all Members will understand, particularly the hon. Member for Bishop Auckland (Helen Goodman). We are concerned about the checkpoint issue, not least because it has been raised by the Law Society of Hong Kong, but I will return to the detailed points made by the hon. Member for Hornsey and Wood Green (Catherine West) after this debate.

I have rather more sympathy than I can probably say publicly for much of what the hon. Member for Glenrothes (Peter Grant) said. It is a conversation that I had with my officials earlier, and I am glad he was not a fly on the wall for that. He will appreciate that although he makes some valid points about the past, we also need to look to the future. It is my responsibility now to make things work for the future and to ensure that the joint declaration is properly enforced, and I intend to do so.

I stress that the UK Government are acutely aware of our historic responsibilities to Hong Kong, and indeed to future generations of Hongkongers, to uphold the joint declaration. We remain absolutely committed to monitoring and ensuring the faithful implementation of that document, and to the principle of one country, two systems. The joint declaration of 1984 is a legally binding treaty registered at the United Nations. It clearly applies to both signatories, remains in force, and is relevant to today’s Hongkongers and those of future generations. We have been unequivocal about our position on that issue both publicly, including in our six-monthly reports to Parliament, and in private with the Chinese Government.

We judge that one country, two systems has generally functioned well. It provides Hong Kong with the essential foundations for success as a global financial centre and a prosperous world city. Those foundations are Hong Kong’s capitalist economic system, its high degree of autonomy, its system of common law and independent judiciary and the protection of rights and freedoms. To return to one thing that the hon. Member for Bishop Auckland said, I take seriously the three prongs of my responsibility as the Minister for Asia and the Pacific: prosperity; security, defence and intelligence; and human rights. Please be assured that there is and must be no trade-off between human rights, whether in Hong Kong or in any other part of the world, and any Brexit-related trade matters. I know that there will be ongoing debates in the House, but please be assured that that is my position as Minister and that of the Foreign and Commonwealth Office.

The Government’s most recent six-monthly report makes it clear that we cannot ignore the fact that important areas of the one country, two systems framework are coming under increasing pressure. However, I reassure the House that we consistently and unashamedly raise those concerns with the Chinese and the Hong Kong authorities. I appreciate that such engagement may not always be obvious or visible, although of course it is very obvious in the six-monthly reports, but be assured that those representations continue to be made.

Personally, I believe that more can often be achieved through quiet diplomatic engagement than through megaphone diplomacy, but we are willing to comment publicly and robustly where we feel that it is appropriate. For example, I raised our concerns about the pressure on one country, two systems during my visit to Beijing and Hong Kong last August, and I was encouraged to hear Chinese Ministers confirm their support for the doctrine. That support was echoed by Hong Kong Chief Executive Carrie Lam in my discussions with her. She pledged to implement the principle of one country, two systems, to uphold the Basic Law and to safeguard the rule of law.

However, I also accept that confidence in that doctrine is being undermined by ever more frequent reports of mainland security officials operating in Hong Kong and continuing concerns raised about the exercise of some of the rights and freedoms guaranteed by the joint declaration. Many people will have followed the media coverage last year when three high-profile pro-democracy activists, Joshua Wong, Nathan Law and Alex Chow, were sentenced to imprisonment. We were further concerned when we heard that the British national Ben Rogers had been denied entry to Hong Kong in October last year. He is a champion of democracy and human rights, well known to Members of all parties. The Prime Minister spoke about his case in the House, we summoned the Chinese ambassador to the Foreign Office to discuss it and the Secretary of State for Communities and Local Government raised the issue with the Hong Kong Secretary for Labour and Welfare during his visit to Hong Kong in November.

I wrote to the Hong Kong Chief Executive Carrie Lam setting out our position on all four of those cases. Her response was consistent with previous public comments made by the Hong Kong authorities on the issue. If the people of Hong Kong and the watching world are to have continued confidence in one country, two systems, it is vital that the high degree of autonomy and the rights and freedoms enshrined in the Basic Law and guaranteed in international law by the joint declaration are respected. As I said earlier, we will not shy away from that. I know that the Prime Minister mentioned it when she met President Xi at the G20 summit in July, and as the hon. Member for Bishop Auckland rightly pointed out, we will no doubt discuss it when the next visit takes place.[Official Report, 25 January 2018, Vol. 635, c. 1MC.]

Let me be clear: ongoing commitment to those doctrines is not interference by the west in Chinese affairs. Maintaining confidence in one country, two systems and the rule of law is crucial for both Hong Kong’s own interests and China’s, including the city’s role as a financing hub for the belt and road initiative. Our interest is also driven by our wish to see Hong Kong prosper well into the future. We firmly believe that Hong Kong’s economic system, which is uniquely trusted to bring huge new opportunities into China from all corners of the globe, will only flourish if its people enjoy the freedom and safeguards that will promote their talents and enterprise.

Turning to political reform, I welcome the Chief Executive’s commitment to addressing that challenge in Hong Kong, which was a focus of her policy address last October. As we have said and will continue to say in the six-monthly reports, we believe that political reform, including on universal suffrage and functional constituencies, will better equip Hong Kong to tackle the challenges that it faces, as well as giving the people of Hong Kong confidence for the future.

On independence, our position is also clear. We do not consider it to be a realistic option for Hong Kong. That is the other side of one country, two systems. Indeed, any move toward independence undermines the concept. Again, we will call that out, because we believe that the system as it stands is the best possible guarantor for Hong Kong’s long-term stability and prosperity.

As I have outlined, Hong Kong matters hugely to the UK, and not just because of our shared history. Hong Kong is also an important trade and investment partner, both bilaterally and due to its pivotal role as a gateway to the belt and road initiative. I am perhaps a little more optimistic than my hon. Friend the Member for Congleton. Twenty years after the handover of Hong Kong to China, the UK’s commitment to the joint declaration and one country, two systems remains as robust as ever. I am very confident that the relationship between the UK and Hong Kong, a relationship that will also include China, will continue to deepen in the coming months and years to come.

Where we identify disagreements, such as in the case of Ben Rogers, we shall continue to raise our concerns. We shall continue to stress to the Chinese and Hong Kong authorities that for confidence in one country, two systems to be maintained, Hong Kong must enjoy the full measure of its high degree of autonomy and rule of law, as set out in the joint declaration and enshrined in the Basic Law.

17:57

[Fiona Bruce]

I thank colleagues for contributing to this debate, and I thank those who have joined me in raising concerns about recent challenges to democracy and human rights in Hong Kong. I also thank the Minister for his considered response, and for the clear assurances that he has given of the UK Government’s ongoing commitment to ensuring that the principles, rights and freedoms enshrined in the joint declaration and the Basic Law are adhered to.

In speaking of such matters, I know that we all share a genuine concern for the wellbeing of the people of Hong Kong, for their flourishing future and for a positive relationship between our two countries. I hope that our deliberations will aid all those things.

Question put and agreed to.

Resolved,

That this House has considered democracy in Hong Kong.

17:59

Sitting adjourned.