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20 July 2010 : Column 42WH—continued

A difficult double message needs to be put across in relation to seaside and coastal towns, and Members have touched on the dilemma. We need to discuss their specific problems-for example, deprivation in some of the inner wards of my constituency and, indeed, that of the hon. Member for South Thanet (Laura Sandys), is
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as strong if not stronger than in some inner-city areas, but that is often masked by grant procedures and formulae because of the larger areas covered by the latter. The Labour Government began to get to grips with the problem, but it was hell for civil servants. No doubt they gritted their teeth when dealing with the minutiae, but they got to grips with the procedures and formulae by considering smaller areas such as sub-ward areas. That was crucial.

The difficult double message is that although seaside and coastal towns have specific problems, they are also worthwhile places. As the Fothergill report shows, they have generated increases in tourism employment over the past few years despite those problems. Those points need to be put across strongly, but it is also a question of seeing seaside and coastal towns in the round. I know from my experience of Blackpool that people too often thought that not enough was being done for the residents, or that not enough was being done for tourism businesses. The truth of the matter is that if seaside and coastal towns are to flourish, things need to be done for both; and what is done for residents and for tourists must be integrated. After all, if residents do not feel good about their town, what sort of welcome will they give the tourists, and how will the tourists feel about it? There are big and important questions when it comes to not having silos and working across Government.

If I have a critique of "No longer the end of the line", produced by the hon. Member for Boston and Skegness, it is that the document is often too generic-or too Pavlovian-in some of the reactions to Government intervention. When producing his report, the hon. Gentleman made a lengthy coastal tour, which was a good thing. In it, he speaks of Blackpool's contribution to regeneration with the construction of the Spanish steps, but where did that money come from? I can tell the House that it came from the RDAs, the Sea Change programme and other Government initiatives. We should keep that in mind.

A lot has been said about the so-called neglect of the previous Government, although the hon. Member for Southport was good enough to acknowledge that the Sea Change programme was taken up by them. Indeed, I was pleased to play a part in persuading my right hon. Friend the Member for Barking (Margaret Hodge), then Minister for Culture and Tourism, to put the programme in place. Members are right to pass the question back to the Government, because in our "Strategy for seaside success" document, published in March 2010, we specifically mentioned the importance of continuing Sea Change or something of that nature. It has been an enormously important pump primer.

It is said that the sun often shines in seaside towns, and we did start to fix the roof in seaside towns while the sun was shining. In our March 2010 report, we say that the Northwest Regional Development Agency had invested more than £200 million in coastal towns, and that the Heritage Lottery Fund had given £234 million to 864 projects in English coastal resorts since 1997. Money came also from the working neighbourhood fund and the new deal for communities. In that document, we made a series of proposals, including new licensing rules, focusing on stronger co-operation, extending Sea Change and focusing on the new low-carbon economy.

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None of those issues are party political; they have to be faced by civil servants, policy makers and Governments. The present Government need to do that, but they will not do it well if they start with cuts-a point made by the hon. Member for Beverley and Holderness (Mr Stuart) and touched on by the hon. Member for Boston and Skegness-especially if seaside and coastal towns get double hits in the cuts compared with other areas. The Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), was candid enough to admit that those with the greatest problems were now getting the greatest hit in terms of the funding streams to seaside and coastal towns. That is not something that seaside and coastal towns want to hear, nor should they.

I return to the general comments made today by those on both sides of the Chamber. We heard some good and useful contributions and everyone focused on community involvement. However, that needs pump-priming; it needs things to be done. I have some wonderful community activities in my constituency. Donna's Dream House is amazing; it was set up for terminally ill children and is known countrywide. The Royal British Legion has its poppy song. However, it is a fallacy to say that such activities do not need pump-priming or some Government support. For example, if we do not have efficient, accurate and specific Government intervention on such things as HMOs-in March, the previous Government proposed good legislation on HMOs, which the present Government should consider-we will not get the results that are needed. If we are to have a big society, voluntary and charitable organisations will need a leg up in seaside and coastal towns, and not a pummelling down from local government or the Treasury through funding cuts.

There are new ideas for the Government to consider. Some were put forward by the previous Government, particularly those to do with Total Place. I would like the Government take up what was said about the funding of seaside and coastal towns but also to consider the specific points made this morning about Sea Change and the other measures needed to ensure that community cohesion in those places continues, and to improve on what was done under the previous Government.

12.19 pm

The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell): It is good to serve under your chairmanship, Mr Amess. Thank you very much for inviting colleagues to intervene; I very much appreciated that invitation.

I thank my hon. Friend the Member for Boston and Skegness (Mark Simmonds) for bringing this subject to the Chamber. The fact that 10 Members have contributed to the debate and another six would have liked to is an indication of its importance. My hon. Friend tried to hide his light under a bushel, but failed because several hon. Members shook that bushel. He was, of course, the author of "No longer the end of the line" and has been a vigorous exponent of his cause for a long while. I thank him for that and for the eloquence of his contribution today. I shall do my best to answer the questions put by him and other hon. Members, but I will have to keep an eye on the time and be mindful of possible interventions.

As several hon. Members said, we should not talk down either the continuing appeal of our seaside towns or their potential. Anecdotes were related during the
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debate, but objective evidence was provided by Sheffield Hallam university, with the support of the Department for Communities and Local Government, which showed that coastal and seaside areas still have a very strong appeal and great potential for the future. That report, which was published last month, found that our seaside tourist industry is alive and well and continuing to grow. I will not repeat the figures that were given in the debate because we are running short of time. Let me make it clear, though, that the coalition Government recognise that coastal and seaside towns face many real problems. They all have unique histories and often differ widely in their economic, social and physical situations and indeed in their history and reputation. None the less, they face some common challenges, which include poor transport links, a dependence on low-wage and low-skill jobs, high levels of benefit claimants, low educational attainment-there is a mixed view on that, but it is a serious problem in some places-and shared private rented housing.

The Government believe that such challenges are best tackled through local solutions. In response to the hon. Member for Blackpool South (Mr Marsden), I am not talking about completely turning off the tap. The point at issue here is who decides how the money is spent. After considering example after example, we are clear that local areas need to be free to determine their own future. They need to be freed from central Government direction and regulation. Let me pick up on two points that were made in respect of that matter. The new Government will give each local authority the capacity to have its personalised approach to HMOs, rather than a blanket central prescription. That is the way to target what needs to be done without imposing burdens on those who do not need them.

My hon. Friend the Member for Redcar (Ian Swales) mentioned the planning system and the way in which it might result in projects being imposed on an area. We are devolving the planning framework to local authorities, so that they can establish their local plans and have the freedom to take those decisions. We are putting power into the hands of local people and local communities, which is very much at the heart of the big society.

Martin Vickers (Cleethorpes) (Con): I accept what the Minister says about intervention and passing down power to local authorities. Will he also tell us about the powers that local authorities have in relation to Government agencies, such as the Environment Agency and Natural England, whereby they are mandated to do something, rather than given advice?

Andrew Stunell: We are, of course, having a cull of quangos. I cannot answer the hon. Gentleman's specific point, but if he wants to draw my attention to particularly unhelpful prescriptive measures being imposed on his local area, I would be very happy to hear from him.

That leads me nicely on to the fact that we are publishing, probably in December, the localism Bill, which will devolve greater powers to councils and to neighbourhoods so that local communities can shape their own future. We want to give local communities, including those on the coast, the tools and incentives to support business growth and to create an enterprise culture. We recognise that coastal towns have unique challenges and that they need locally tailored solutions.
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It would be a mistake for us to say, "Here is the guide book that will apply equally to all the resorts in Britain." That is why we are inviting local authorities and business leaders to come together to form local enterprise partnerships to replace the existing regional development agencies. The Secretaries of State for the Departments for Communities and Local Government and for Business, Innovation and Skills have already written to local councils and business leaders inviting them to come forward with proposals. I know that a number of coastal local authorities are already considering proposals that would take them into local enterprise partnerships. The list with which I have been provided includes the Fylde coast in Lancashire, which may or may not include Fleetwood-incidentally, I will not be trying whelks any time soon, given what has been said-Bournemouth, Poole and Dorset and Portsmouth, Southampton and Hampshire. I am sure that others will be doing the same. Those local enterprise partnerships will empower groups of councils and businesses working together to provide the strategic leadership that their areas need to set out local economic priorities.

Dr Pugh: As much as I subscribe to the doctrine of localism, there is a degree of pump priming needed. Most local authorities carry huge deadweight costs-if I can put it like that-because of their social services budget, and have little financial freedom to carry out some of the big infrastructure projects that are very much part and parcel of regeneration. That specific problem does not seem to be directly solved by the localism agenda.

Andrew Stunell: My hon. Friend anticipates the next paragraph of my speech, which talks about the £1 billion regional growth fund. I do not know how we do that, but there must be some kind of electricity between us. The Government intend to ensure that local areas have the capacity to deliver on their priorities. We are taking away the walls or barriers between the different funding streams that local authorities receive so that they can set their own priorities. I was astonished to find that there were 115 different income streams launched from my Department to local authorities. We are trying to break down those walls, so that the money that arrives in the vaults at the town hall can be spent in the way that the elected representatives at the town hall believe is best.

A number of other points were made, but let me reassure all hon. Members that we intend to maintain the existing co-operation between Departments and I shall look hard to see what opportunities there are to strengthen it, and the Minister with responsibility for tourism will, I am sure, do the same. We will retain the concept of drawing together all the different public service funding streams in an area, and ensure that we get the maximum value out of them.

The hon. Member for Tynemouth (Mr Campbell) spoke about community asset transfer, and we are keen to ensure that such capacity is there for voluntary and community groups. I believe that the localism Bill will contain specific provisions that open the door to that.

I am looking at the time; I do not have very long and I have not answered all the questions. If hon. Members want to reinforce their points by writing to me or getting in touch with me, please do so and I will do my best to give informative answers.

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If we are to ensure that coastal towns have the resilience that they will need in the tough economic times that lie ahead, they must diversify their economies and widen their economic bases. That means attracting a range of employers offering jobs at different skill levels and in new sectors. We need to ensure that coastal towns become more attractive places for people of working age, so that not everybody thinks that people are only born in such towns or die there; we must show that there is something to do in between times. That is an important part of the economic thinking of coastal towns-

Mr David Amess (in the Chair): Order. We now move to our next debate.

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University Funding (Yorkshire)

12.30 pm

Mr Barry Sheerman (Huddersfield) (Lab/Co-op): Mr Amess, Huddersfield is not a coastal town, as you might have noticed, but I am very fond of all things Whitby and Broadstairs. So that is a declaration of interest in the subject of the last debate.

This is the first Westminster Hall debate I have secured in the new Parliament and I do not apologise for returning to a subject that is absolutely crucial to all our regions. I say "all our regions", but I remember the Chancellor's recent speech, in which he said:

In so many ways, we are two countries. We are, first, a country of the regions outside London and the south; and secondly, a country of London and the south. I understand that when the future of the regional development agencies was being discussed, it seemed that London, the south-east and the south-west would lose the particular focus that had been put on them. Is it not true that we must address the imbalance between the regions in terms of employment and innovation?

Many years ago, when Sir Keith Joseph became the Secretary of State for Education he gave a reading list to all his civil servants and junior Ministers. My approach in my speech today will be rather like that. Furthermore, I would like anyone who takes note of this debate to appreciate that Yorkshire and Humber is a microcosm of all the regions: the problems that Yorkshire and Humber has are similar to those that all the regions outside London and the south-east have.

I would like to refer everyone to the recent reports from the National Endowment for Science, Technology and the Arts and the ERA Foundation about the productive capacity of our country and innovation. In particular, the NESTA report sets out four scenarios for the future of Britain's productive capacity, which go to the very heart of the concerns I am expressing today about the funding of universities. In doing so, the report is concerned with how we will make a living and achieve a good standard of life for the citizens of this country.

The first scenario that the NESTA report sets out is that we carry on doing more of what we are already doing-we carry on as we are. However, all the testing that NESTA has done of that scenario shows that it will not work; it will not increase productivity and jobs or get the economy moving again. The second scenario is that we invest entirely in and focus completely on a rebirth of manufacturing. Although that scenario is not entirely discounted, it is certainly not seen as an overall answer to the question of how we can re-energise our productive capacity.

The NESTA report focuses on the third and fourth scenarios for the future. They involve changing the whole nature of our economy, turning it into an innovative one in which we seriously apply innovation to all its sectors. On reading the NESTA report, time and again we find that the real agent for delivering such change is our universities, and that if we do not use them to take a lead and innovate, we will not achieve the increase in productive capacity that we must achieve if our constituents are to have "the good life".

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The ERA Foundation report is also interesting. Many people do not know this, but the royal commission for the great exhibition of 1851 made so much money that Prince Albert was able to invest in buying most of Kensington. Imperial college, the Victoria and Albert Museum and other such institutions are built on that land, and they have the freehold and receive the rents. Through the ERA Foundation, they provide a lot of money-between £60 million and £80 million, I think-for research into productive capacity, manufacturing and much else.

The ERA Foundation report, which came out at about the same time as the recent NESTA report, puts more emphasis on manufacturing than the NESTA report does, but like the latter it says that manufacturing must be highly innovative. Indeed, it says that manufacturing must be led by innovation and by small and productive new enterprises. Again, universities figure prominently in improving our capacity to deliver. So when I talk today about the particular challenges in Yorkshire, I am actually talking about something that is good for our whole country-investing in higher education.

The data show that we invest about 5% of GDP in education. That figure is a little higher than the average for OECD countries but it is not the highest-I think the average is about 4.6%-so we should not get carried away. Even with all the work and investment in education that has gone on during the last 13 years, we have still not become the OECD or world leader in investing in education.

I used to chair the Education Committee, or whatever else it was called during the 10 years I chaired it, and time and again we looked at the increase in per capita spend on education. Of course, the great fashion-it was also absolutely the right fashion, in that it was an evidence-based policy-has been to invest in early years education: education of the youngest age group through to school-age. Later on in the age range, one sees that investment in higher education has been less than in education generally.

Higher education has therefore been fighting to do more with less for a long time, and people must bear that in mind. Those who campaigned against what the Labour Government called "variable fees" and what the then Opposition called "top-up fees" should bear it in mind that the reason why I was always totally in favour of top-up fees and why the Committee eventually came out in favour of them was that we could not see any other way of getting a high level of investment in university teaching and research salaries. Indeed, Mr Amess, if you look at the figures you will see that nearly all the money that has been raised from the top-up fees fund-whereby people make a payment towards their fees, capped at £3,000-has gone into the salaries of researchers and lecturers. British universities have been greatly blessed by having that ability to pay a decent wage, so that they can attract and retain the top talent.

Mr Amess, I want to refer you and everyone else here to three other pieces of reading. The first is the recent speech on higher education by the Secretary of State for Business, Innovation and Skills; the second is a speech by Professor Malcolm Grant, the president and provost of University college London; and the third is an article by Professor Steve Smith, the president of Universities UK. I hope that people will read those speeches and articles and balance them against each other. The Secretary
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of State made a good and balanced speech, saying that we must do even more with less. He also indicated that there were certain ways in which we can raise funding and he spoke about how that funding is retained-or not retained-in universities.

Alec Shelbrooke (Elmet and Rothwell) (Con): I should first declare that I worked for Leeds university for 11 years and did a lot of work on open innovation in conjunction with other Yorkshire universities. I examined a lot of research on universities, which I will elaborate on later if the hon. Gentleman gives way again.

Sometimes, the debate is about whether some universities should be privatised, but in fact, only 3.6% of the income of the American Ivy league universities comes from the private sector, and British universities already receive 2.8% of their income from the private sector. Having listened to the hon. Gentleman's arguments about university funding, I just want to say that privatisation of universities is not the route to go down.

Mr Sheerman: I will certainly not be advocating the privatisation of universities in my speech. Some privatisation has taken place already. The university of Buckingham was much vaunted and much publicised, but what does it do? It specialises in the easy stuff-training lawyers and accountants. At the moment, all the private sector seems to be choosing the easy, soft stuff on the margin. I have certainly not seen anyone come forward and say, "We're going to start a proper university that teaches the tough, expensive subjects." I agree with the hon. Gentleman.

The Secretary of State's speech was good, but it failed to address innovation, universities' role in leading it and recent partnerships between universities and the private sector-partnerships with small and medium-sized enterprises, with manufacturing and with the service sector, which employs 57% of the people in my constituency. Only 10% now work in manufacturing; 33% work in health, education and the local authority. Universities have good partnerships with SMEs country-wide and, interestingly, worldwide. Universities working in partnership have a role to play. The Secretary of State underrates their key role in future investment in this country. This is my most serious point: if we are going to haul our country properly into the 21st century and compete with the productivity of Germany, France and emerging countries such as India and China, we must use our universities in a way that we have not done in the past.

This is not the time to cut back; this is the time to invest in universities and to increase the money flowing into them. I have talked to all the universities in Yorkshire. A 25% cut will mean tremendous staffing cuts. One leading university in a major city told me that it will mean cutting 1,000 jobs in the city. A university in the next largest city-hon. Members can guess from the size which cities I am talking about-says that it will lose 600 jobs. Those figures are from one university; both cities have two universities. The 25% cut in the higher education sector may not be a disaster in the short term-perhaps we will be able to live with it for a while-but it will have enormous long-term effects on our industrial future.

I will not speak for too long, as I want to give the Minister a chance to respond. Yorkshire's universities boost the region's economy by £3.68 billion and play a
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critical role in generating jobs, creating innovation and driving enterprise. They are the most important source of innovation and partnership in the regions. That is recognised across parties; I am not making a narrow party political point. We are discussing a potential decision arising from the present state of the economy.

It does no one any good to exaggerate the state of the UK economy. I refer people to a recent article by Sam Brittan, a known Conservative, the brother of a well-known Conservative politician and a supporter of the coalition. He says that it does nobody any good to exaggerate how bad the UK economy is, and shows carefully that the exaggerations are not true. We have gone through an international meltdown of financial services and a world recession, but Britain has not come out as badly as people think.

I know that the coalition Government like to exaggerate, because that is what all new groups do when they take over. They say, "We've looked at the books, and it's so bad we've got to take draconian measures." That does not help anybody. We must take a realistic view of what we can and cannot afford. I could make myself unpopular outside this room by saying this, but if I were seeking to reduce overall expenditure, I would cut other areas that are perhaps more sensitive in the public imagination-health, education and other Departments-long before cutting into the potential of our productive sectors and our capacity to grow through the higher education system.

We have two countries, as I said. To make things more dramatic, I return to the provost of University college London. Unfortunately, he echoed quite a deplorable comment made in a speech by an Education Minister in the present Government who was a good member of my Select Committee. That Minister said that he would prefer an Oxbridge graduate with no teacher training qualification over someone from a rubbish university with a postgraduate certificate in education. I thought that that was a terrible remark. Malcolm Grant fell into the same trap, saying that research money to rich universities should not be cut and that he would rather see "pile 'em high and sell 'em cheap" universities go to the wall.

Malcolm Grant should visit the university of Huddersfield, which is a cracking good, innovative university. We do not pile 'em high and sell 'em cheap; we emphasise quality. Recently, I went to an end-of-year exhibition by our design students that ranged from high fashion right across to automotive design. People graduating from that university are snapped up all over the world for their talent. I have here a document announcing a new programme in Huddersfield: "Towards an alternative nuclear future: Capturing thorium-fuelled ADSR energy technology for Britain".

I say to the provost of University college London that there are nine universities in Yorkshire and 43 in London. If I were considering the economic regeneration of the regions, I know what I would do if cuts had to be made. I do not want to cut anyone's money; I do not want to close universities serving communities in the most challenged parts of London. However, if push came to shove, I would move 10 of those universities to other places in the country. That would ease congestion
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in London and make a real difference to some towns that do not have the privilege of a higher education institution.

The universities sit at the centre of what I call my big society. When I go back to my constituency, what is the centre of my big Huddersfield? It is the university. The university employs the biggest and most talented group of people, a lot of whom are well paid. Many live locally and are leaders in the town's civic pride. That is important to a big society. Also, they are often close to the third sector. I have been a social enterpriser all my life-I am told that I have started about 48 different social enterprises-but we in the third sector are in danger. Despite what the coalition Government have said about being in favour of the third sector, it is going out of business rapidly. The people who used to fund social enterprises and the third sector have either been abolished or think they are in danger of being abolished, and the funding used by social enterprises is unavailable. Many of them are going out of business or battening down the hatches until we find out what the alternatives are to the funding we have become used to.

We need to be a highly innovative nation and to invest in higher education. There ought to be someone-I hate to use the word "tsar"-who is responsible for innovation in every university campus. They should report directly to the Secretary of State on how much innovation there is, how successful it is, and what partnerships there are. I approve of all that. There needs to be new ways of doing things more efficiently and effectively, and of using resources better. I believe in all that, but for the future of our country, our regions and Yorkshire we must move steadily and steadfastly. We must invest in higher education, in innovation and in our future.

12.50 pm

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey): I congratulate the hon. Member for Huddersfield (Mr Sheerman) on securing the debate. In the last Parliament, as Chair of the Select Committee on Children, Schools and Families, he was a very authoritative voice on all aspects of education and he brings that knowledge and skill to today's debate. I am very sorry that my right hon. Friend the Minister for Universities and Science is not here, but as I am sure the hon. Gentleman is aware, he is attending the Select Committee on Business and Enterprise. My right hon. Friend sends his apologies-I am very much a stand-in.

The hon. Gentleman is passionate and knowledgeable about this subject and he has shown that today. I thank him for the role he plays in partnership with Kingston university in my constituency. He is a trustee of the Rose theatre in Kingston, which has a partnership role with the local authority, local business and Kingston university in relation to creative arts. That is the sort of partnership he was talking about during his speech.

Mr Sheerman: I am an honorary doctor.

Mr Davey: The hon. Gentleman is also an honorary doctor. I should put it on the record that I am an honorary fellow of Birkbeck college, London, which is showing the way in how we can be more innovative in the higher education sector. I was interested to note that
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he referred us to Sir Keith Joseph's reading list. I am not sure if he wanted us to read the books on that list-probably not; I think he was creating his own reading list. I was delighted that he included a mention of the recent speech made by my right hon. Friend the Secretary of State for Business, Innovation and Skills. He was generous enough to say that it was a good and balanced speech, although he made the point that it did not mention innovation, which was the main focus of his speech today.

I reassure the hon. Gentleman that the Government are keen to do what they can to promote innovation. We share his desire to ensure that higher education institutions in Yorkshire and, indeed, across the country are able to maintain their reputation for world-class research, which has been one of Great Britain's key comparative advantages in recent decades. Although there will be some tough decisions to make, we are determined that when we make them, we will not put that huge reputation and the benefits that the wider economy gets from the work of our great universities at risk.

Alec Shelbrooke: On the point about innovation, something to which the hon. Member for Huddersfield (Mr Sheerman) did not refer-or he may have done in part-is that when universities in the Yorkshire region come together, they have an outstanding opportunity to be the leading nanotechnology specialists in the world. Indeed, York university has one of only four machines in the world that can photograph molecules down to that level and see them lined up, and Huddersfield university has one of the most precise measuring instruments in the world.

Overall, innovation is part of the bread and butter of universities. Will the Minister give some thought to how he can free up universities to enable them to capitalise on the intellectual property that they develop? At the moment, they struggle to do so because their charity status means they are unable to make a profit. If they did, they would be hit by VAT, which would be bad for them. If we can change some of the rules that they play by, a huge income stream would be available to universities, which would bring into universities the investment that we all want to see.

Mr Davey: I am sure that my right hon. Friend the Minister for Universities and Science will want to reflect on those remarks, because we will be searching for new revenue streams. It is incumbent on this Government to do so as we make some difficult decisions about public funding. The hon. Gentleman's comment is therefore very helpful. The university of Huddersfield is exceedingly expert in that area and has a unique nano-lab facility. As he was saying, that shows the great research facilities that are in the Yorkshire higher education institutions and how they benefit when they work together either across Yorkshire or, indeed, in the N8 group more broadly across the north.

Mr Sheerman: Yorkshire ranks No. 1 in all the regions in terms of attracting inward investment-£28 million a year-for new start-up businesses.

Mr Davey: I understand that. It is one of the reasons why I wanted to say to the hon. Gentleman that, although there will be a difficult funding climate-as colleagues
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are well aware-it is worth putting it on the record that Yorkshire universities tend to fare reasonably well compared with their counterparts in other parts of the country. That is in no small part due to their strong research performance. Yorkshire universities receive a level of research funding per higher education institution that is above the UK average, and two of its institutions are among the 20 that receive the most research funding in the United Kingdom. He is absolutely right. The Government are keen to ensure that they can build on that success.

The higher education sector is a success story for Yorkshire. The university of Huddersfield in the hon. Gentleman's constituency illustrates what Yorkshire universities can achieve. I have mentioned the nano-lab, but the cutting edge Centre for Precision Technologies is also showing what Yorkshire universities can do for precision engineering. Huddersfield university has other areas of expertise, including automotive engineering, motor sport, computer games, electronic and electrical engineering, and multi-media and music technologies. Kingston university in my constituency also has many areas of expertise in engineering. Given Kingston's past, those are particularly related to the aeronautical industries. I share his commitment to ensuring that universities are able to develop the innovative capacity they have shown in the past. Despite the problems that will arise over the next few years in ensuring the funding is fair, we must ensure that such a capacity to innovate is not lost, as it can play its part in reducing the public sector deficit.

The hon. Gentleman said that we should not talk down the state of the British economy. There is no desire to talk the economy down, but there is a desire to deal with the huge challenges we face-a public sector deficit that is 11% of GDP, and the highest public sector deficit within the OECD. The Government cannot sit by and do nothing. I am sure he will admit-he is such a reasonable person and is very knowledgeable-that the previous Government were considering some significant reductions in funding in this area for this year. If anything, compared with the grant letter of December last year, this Government are putting more money into HE this year for the 10,000 places, which has led to some debate. The previous Government were planning £600 million of spending reductions to take place in future years. On financing the HE sector, this Government have not uniquely decided that they want to consider reducing spending; they are taking on the previous Government's proposals.

Mr Sheerman: I am sure that the Minister's officials will have looked at the speech I made in this Chamber in January, in which I complained about the previous Government's cut to university funding. So I agree with him on that. However, what does he think our competitors are thinking? Higher education is the one sector in which we are the world leaders-we compete with the Americans, the Australians and the Canadians-but suddenly we are going to start cutting it by 25%. That is what he is predicting-25%.

Mr Davey: I am glad to see that the hon. Gentleman is claiming consistency in that he says that he criticised the previous Government for their spending cut proposals. We share his vision of the crucial role that universities and innovation play in our economy, the productive
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sectors and so on. There is no dispute in that area, but there is a dispute about the role that the university sector must play in facing up to the immediate public finance problems facing the country.

I apologise to the hon. Gentleman because I am running out of time. I shall conclude by saying that there are no easy solutions to the challenges that this country-this Government-faces on public spending. We should not run away from those challenges, because it will be in the long-term interests of our university sector if we face up to them. With the help of Lord Browne's review, which will conclude in the autumn, we will have the knowledge base and understanding to put forward a fair and equitable settlement. Such a settlement will ensure that our universities have sustainable funding and that access to universities is not undermined.

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Equitable Life

1 pm

Nicola Blackwood (Oxford West and Abingdon) (Con): I am grateful for the opportunity to debate Equitable Life. As a parliamentary candidate, along with many others from all parties, I signed a public pledge to support and vote for proper compensation for the victims of the Equitable Life scandal and the setting up of a swift, simple, transparent and fair payment scheme, independent of Government, as recommended by the parliamentary ombudsman. I am here today, along with many concerned colleagues, because, with the Chadwick report due imminently, I wanted to give the Minister an opportunity to hear the views of parliamentary colleagues and Members an opportunity to raise the concerns that have been brought to them since the election.

I must confess that I spent much of Sunday watching the Opposition day debate from 17 March on Parliament TV-although that may raise doubts about my sanity, it was very reassuring. The Minister showed a real understanding of the appalling injustice that has been suffered by Equitable members. According to the Equitable Members Action Group-EMAG-more than 1,000 policyholders and 2,000 group scheme members live in my constituency. He understood the anger felt at the previous Government's delaying tactics. Most importantly, he was clear in committing a future Conservative Government to implementing an effective compensation scheme in a timely manner. I am pleased that that commitment has been restated in the coalition programme.

Nevertheless, concerns have been raised with me and my colleagues since the election. As many of us are new Members who did not have the chance to contribute to the most recent debate on the matter, I know that the Minister will appreciate the opportunity to hear their views as he considers the Treasury response to the Chadwick report and decides on future plans for a payment scheme.

I am not inclined to give a summary of the Labour Government's attempts to avoid the findings of the Penrose inquiry and hobble the ombudsman in her first inquiry, only to refuse to accept her conclusions of maladministration and injustice in her second inquiry and the subsequent judicial review, which determined that much of their refusal failed the cogency test. I am sure that all Members present are familiar with that sorry saga; if they are not, there is an excellent Commons Library standard note on the matter, which they can peruse at their leisure. Suffice it to say that the Minister has been left with a scandalous legacy by his predecessor, and one that I would not wish on my worst enemy.

I will focus on some of the main barriers to progress that we face. The first barrier is that Equitable members have had all their faith in Government systematically destroyed by the transparent attempts by the previous Administration to delay and obfuscate-one of the few instances of transparency they can boast. The accusation that the Treasury made the cold-hearted calculation that the longer the process took, the less it would have to pay out, as Equitable members were dying off at such a rate, has never been verified. Nevertheless, the accusation sits uncomfortably in the middle of the negotiating room, making it difficult to build a constructive relationship when attempting to create a scheme that Equitable members can support.

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Together we will have to find a way to build that relationship, however painful the process, and to start rebuilding trust, and I suspect that no amount of rhetoric will do the trick. The only way Equitable members will be able to move past the consistent abuse they suffered at the hands of the previous Government will be by seeing concrete action replace warm words. I urge the Minister to remember that history as he moves forward.

Many of us feel that, after our active championing of the cause of EMAG members when in opposition, they should feel that they can trust us. It is clear, however, that having suffered so much from Labour's broken promises for so long, they now find it difficult to trust so easily. The only remedy for that distrust is to prove the doubter wrong by delivering in government what we promised in opposition. At the same time, Equitable members must meet us halfway by working in partnership with, rather than just in opposition to, the Government as we try to find a way to bring them justice.

Dr Sarah Wollaston (Totnes) (Con): Another point is that so many Equitable Life members are very hard up. I have received letters from many constituents, and one couple I heard from are now surviving on pension credits and rent rebates after a lifetime's savings were decimated by the Equitable Life scandal.

Nicola Blackwood: That is the message I receive in my post box day after day, and I am sure that many colleagues have similar cases.

The second problem we face is uncertainty. For decades, Equitable members have been treated with the utmost contempt by the management of Equitable Life, the regulators and, latterly, the Labour Government, who refused to give them clear answers, denied their claims of injustice, even in the face of all the evidence and, even after accepting some measure of responsibility, have consistently refused to give the victims any indication of the timetable or costing.

Sarah Newton (Truro and Falmouth) (Con): Does my hon. Friend agree that, as we are determined to rebuild a savings culture, in addition to honouring our manifesto pledge, it is vital that people can invest in pensions with confidence, knowing that they will be compensated if those are mis-sold?

Nicola Blackwood: I agree entirely. A key concern during the general election campaign was the fear that the saving culture in this country, which for so long had been part of our economy, had been completely destroyed. We must do everything we can to avoid entrenching that destruction.

Mr Andrew Smith (Oxford East) (Lab): The hon. Lady, who is my fellow Oxford Member, makes her case passionately and effectively. Is not the crucial point that we get a commitment to transparency and fairness, which is what EMAG has been calling for, and that it would therefore be helpful to hear from the Minister on how the coalition Government intend to change and enhance the remit that was given to Sir John Chadwick?

Nicola Blackwood: Transparency must clearly be at the heart of any process we now embark upon. As I have said, with trust at an all-time low, the only way we
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can ensure a process in which all partners can take part is by showing that we are not in some way trying to brush under the carpet some of the problems that the previous Government did.

Mr John Redwood (Wokingham) (Con): My hon. Friend is making a strong case. Like her, I wish to see justice for the victims of the problem. Does she agree with me that it would be helpful if in the meantime all the work proceeds on cleaning up the records and ensuring that the lists, and therefore the potential eligibility by category, are in the best possible order so that my hon. Friend the Minister can make a speedy disposition of funds once he has made a decision?

Nicola Blackwood: My right hon. Friend makes an excellent point. With all the delays we have seen, the last thing we want is to come to an agreement on the terms of a payments scheme, only to have to embark on a lengthy period of making the data ready for that. It would be excellent to hear the Minister's comments on that point.

On timetabling, it does not take much imagination to see how such long-term uncertainty would eat away at an Equitable member, causing as much damage as a shrinking pension. The Minister was vocal in calling for a clear timetable in his statement on 17 March, so I am sure that he will be able to offer a timetable today, or very shortly in a statement to the House.

The final problem I will mention is the deep suspicion with which EMAG members view the Chadwick process. Indeed, the fact that they pulled out of that process less than 24 hours before the most recent debate on the matter was noted, as was the fact that as a result the final Chadwick report might be subject to serious dispute, if not to judicial review proceedings, which will also delay proceeding.

The concerns they have raised include concerns about the assumption of the third interim report, which asserted that regulators should be assessed on the basis of the lowest common denominator, despite the fact that the High Court judgment in EMAG v. Her Majesty's Government found that it was reasonable to assess injustice on the basis of not only strict legal liability, but the policyholder's reasonable expectation of a regulator. During those court proceedings, the ombudsman expressed concern that the Chadwick process broke the link between injustice arising from maladministration and the provision of any remedy by limiting future payments to those who had been disproportionately affected. Also, among current EMAG members is a sense that, in our straitened economic times, the Chadwick report will find a way to underestimate the losses.

Mr Sam Gyimah (East Surrey) (Con): Does my hon. Friend agree that addressing the loss, even in straitened times, is important? The Government ought to send out the signal that people who do the right thing should not be penalised, which is what has happened in the Equitable Life situation.

Nicola Blackwood: Yes, and that speaks to the earlier comments on the need to protect and enhance the saving culture and on sending the right message to people that they can put faith in how we regulate savings.

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Could the Minister comment on two proposals that might address the concerns about the Chadwick process which EMAG has raised with all of us? First, the Chadwick report should not be the foundation of a payment scheme but, rather, one of the resources used in creating an independent payment scheme. Secondly, the final assessment of losses should accurately reflect the cost that Equitable Life members have borne.

Andrew Bingham (High Peak) (Con): We have all received lots of letters from EMAG, as candidates and as Members of Parliament, but two things have not been mentioned today-the dependants of policyholders who are now deceased because there has been such delay, and the issue of not means-testing such people. Does my hon. Friend agree?

Nicola Blackwood: I believe that those issues were raised on 17 March and that there might have been a subsequent commitment. However, hearing the Minister's confirmation would be helpful.

Two issues are at stake in the process. The first is purely financial.

Charlie Elphicke (Dover) (Con): With respect, I add that Equitable Life victims in Dover are deeply concerned. I congratulate my hon. Friend on securing the debate and on her excellent argument.

Nicola Blackwood: The first of the two issues at stake is purely financial-the technical problems of designing a scheme that is fair, transparent, swift and simple. The second issue, which is almost more challenging, is ethical-the admission of responsibility by the Government for regulatory failures and the acknowledgement of what that failure has meant to Equitable Life members.

By failing to admit the full extent of the losses, we will fail on the latter issue, ethically, even if we succeed on the former, financially. I do not see any reason why we need to go down that route. All parties have consistently stated that final payments will have to be balanced against other calls on the public purse. The High Court stated that, as the Government were not required to create a compensation scheme, any legal objections to the nature of such a scheme were bound to fail, so there seems to be no legal barrier.

In my dealings with EMAG, representatives have clearly stated that they understand that full payment may well not be possible, but they want an acknowledgement, at least, from the Government of the full cost that they have shouldered.

Neil Carmichael (Stroud) (Con): We all have big postbags on the subject, obviously. We need clear milestones for delivery. That is what most of my supporters in this connection want-milestones.

Nicola Blackwood: Along with the rest of the country, Equitable Life members know that we have been left to clear up Labour's financial mess. All sections of society will have to do their bit in getting our national finances back on track. If we ask EMAG members to trust us, as their Government, we should trust them to accept that we might be able to pay back only a percentage of their
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losses. If we attempted to pay out in full, according to calculations that do not have the confidence of the public, we would do significant damage to our credibility for the long term.

The Equitable Life case is a prism of the wider legacy of the Labour Government: public distrust in politicians and Governments is at an all-time low, as a result not just of media-induced cynicism but of Labour's chronic inability to deliver on its promises or to take responsibility for its mistakes. The case is one of our key tests, a barometer of how straightforward we will be in the face of the tough choices that we have spoken about so often.

I have the greatest confidence that the Government will be honest and open about the extent of the damage inflicted on Equitable Life members and of the capacity of the Government to remedy it. According to the Minister's own words, he has the compassion to lose no time in setting out a detailed programme for that remedy, putting to an end the decades of injustice and uncertainty endured by hundreds of thousands of Equitable Life members.

1.14 pm

The Financial Secretary to the Treasury (Mr Mark Hoban): First, I congratulate my hon. Friend the Member for Oxford West and Abingdon (Nicola Blackwood) on securing the debate, the first in this Parliament on Equitable Life. I am certain it will not be the last such debate.

I want to respond to a couple of points made in interventions before returning to the main thrust of my remarks. My right hon. Friend the Member for Wokingham (Mr Redwood) asked about the quality and cleansing of the data. It is important to place on the record that there are 1.5 million policyholders holding 2 million policies, and that 30 million premium transactions have taken place over the period in question. The quality of data is a huge problem. I am grateful to EMAG for the offer of access to its database to help us cleanse the information. Equitable Life and others will be working with us to ensure the best-quality database. My right hon. Friend is absolutely right that such work needs to proceed in parallel with other work streams, so that we can make payments to policyholders as quickly as possible.

Reference was made to the importance of savings. The regulatory reforms that my right hon. Friend the Chancellor announced last month include the establishment of a consumer protection and markets agency, which will help to improve the regulation of our financial services, hopefully contributing along with other measures to rebuilding a savings culture in this country.

I did not need this afternoon's debate to remind me of the importance of Equitable Life to so many of my colleagues, having received a number of letters, answered a number of written parliamentary questions and had a number of oral representations from colleagues about how important the matter is. I understand the strength of feeling, and I hope that, over the past four or five years in this role in opposition and now in government, I have come to be seen by policyholders as a strong advocate for ending the plight of those who have suffered as a consequence of Government maladministration. I want to see a swift response but, vitally, one that is transparent and fair to all policyholders and to the taxpayer.

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Andrea Leadsom (South Northamptonshire) (Con): Does my hon. Friend agree that the problem is that, because it has taken so long to get to the point we have reached today, we are in a worse position than if the situation had only recently occurred? Therefore, having promised to make good the damage left by Labour, we must put the matter to rest as quickly as possible-even quicker than in normal circumstances.

Mr Hoban: My hon. Friend makes an important point. The crisis has gone on for too long. Lord Penrose's report was back in 2000, and the previous Government could have tackled the issue then. They blocked the ombudsman's second inquiry into Equitable Life, and they took six months to respond to the ombudsman's report. At every step in the process, the previous Government delayed. We want to make rapid progress, but fairly and transparently for policyholders and taxpayers.

In our coalition agreement we pledged to make fair and transparent payments, through an independently designed scheme, to policyholders for their relative loss as a consequence of regulatory failure. In the two months since we have been in office, we have made real progress and will continue to do so over the coming months. In May, in the Queen's Speech, we announced an Equitable Life Bill, which will give the Treasury the statutory authority to incur expenditure in making payments to those who have suffered loss in connection with maladministration and the regulation of Equitable Life. The Bill will be introduced shortly and will be an important step towards resolving the issue.

Another important step will be the imminent publication of Sir John Chadwick's final report on Equitable Life. It will give us a greater understanding of the losses that policyholders have suffered. Some have called for us to abandon the Chadwick process or to alter Sir John's terms of reference. However, after careful consideration, I decided to allow Sir John to continue with his work under the current terms of reference. His work has been the culmination of almost 18 months of detailed analysis and evidence gathering. He and his actuaries have delved deeply into the issues, and their work has been informed by consultations with interested parties. For example, his flexible approach to establishing loss removes from policyholders the burden of proving what they would have done had they been aware of problems at Equitable Life. It is important to have his work available, as it will aid us in providing a swift response.

Gavin Barwell (Croydon Central) (Con): The Minister certainly has the reputation with EMAG members that he mentioned earlier, but an issue of concern is the Government's attitude to Chadwick. The Minister said that their response would be published imminently. Is there likely to be a statement before the summer recess?

Mr Hoban: I believe that there will be a statement before the summer recess. I recognise the concerns about Sir John's work, but it is a useful building block in the process. To dismiss it and not give it due consideration would be an error.

George Hollingbery (Meon Valley) (Con): Has the shape of the Minister's thoughts on moving this issue forward changed from what he announced as the Conservative party's plans in March?

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Mr Hoban: My views have not changed in that period. An option one gets as a Minister is to drive the process forward further and faster, and to change the approach. What hon. Members will have seen over the past eight weeks, which will become clearer when Sir John's report is published, is that we have adopted a much more transparent and open approach to the resolution of the problem.

As part of that transparency, I will publish with Sir John's report the advice provided by his actuaries as well as correspondence he has received on the matter. In the light of the sensitivity of the issue, we must know how he developed his methodology and what has informed his thinking. To restore trust in the process, I want to be as open and transparent as possible about our approach and the losses suffered by policyholders. I believe that that is the best way to tackle the distrust that my hon. Friend the Member for Oxford West and Abingdon referred to in her speech.

Dan Rogerson (North Cornwall) (LD): I am sure that people listening to this debate will be reassured by the approach that the coalition Government are taking, in contrast with that taken by the previous Government. Can the Minister confirm that, in taking into account what the Chadwick report says about the scale of the losses suffered by Equitable members, the coalition Government's approach to how payments will be judged is new and not built on any of the previous Government's work?

Mr Hoban: I will come on to the commission shortly, if Members will bear with me.

As I said, I want the process to be as open and transparent as possible. I have said to the House that when we publish Sir John's report, I will provide a substantive update on the next steps in the process. We have already set out the important steps in how we will take the work forward, and some points about how the scheme will work.

My hon. Friend the Member for High Peak (Andrew Bingham) raised a couple of points in his intervention. I wish to make it clear that there should be no means-testing, and that the estates of deceased policyholders should be included in the scheme. We felt it important to clarify those two issues early on in order to settle some policyholders' worries, and I am happy to reiterate those commitments today.

I will establish an independent commission that will advise on how best to allocate funds to policyholders and to help develop the scheme design. One of the key aspects of the ombudsman's recommendations was that any scheme should be independent of Government, and I agree with the thinking behind that recommendation. The commission will be given a remit that will allow it truly to add value to the process.

The process will be time-consuming, and there is the potential that payments will be delayed if we ask the commission to start the process of determining relative loss from scratch. However, we want it to play a role in developing a fair outcome for all policyholders.

Amber Rudd (Hastings and Rye) (Con): The Minister kindly mentioned how the funds will be paid out. In my constituency, a number of people are concerned that because it will take a long time to appoint the commission,
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which will then have to go through its own procedure, further delays could be added. Can he tell us how the commission will be put together and what his expectations are of the timing?

Mr Hoban: I am keen that the commission should work as quickly as possible. In many respects, the process would have been shorter without the commission, but it is an important guarantee of transparency and openness, and it is right that it be given a remit to do this work. Equally, I am mindful of the fact that we need to give it a tight timetable, so that it has time to think about the issues but is not seen as delaying the process of making payments to policyholders.

Bob Blackman (Harrow East) (Con): One of the concerns is that, sadly, many policyholders have died or are dying. Can the Minister give some comfort on the issue of giving interim payments once the decision has been taken, so that people can receive payments before the commission has completed its work?

Mr Hoban: I am conscious of the fact that many policyholders are elderly, but there is a challenge: we need to ensure that the scheme is designed transparently and fairly, and that there is fairness between groups of policyholders as well as between policyholders and taxpayers. The commission should look at where priority payments should be made, but I am wary of the question of how we can make interim payments to people on a sound basis that will not lead to further problems later. I take on board my hon. Friend's point, but there are some challenges in taking the idea forward.

A key issue for many policyholders and Members of Parliament is how much the scheme will cost. As the ombudsman said, it is appropriate to think about that,
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and we will consider the potential impact on the public purse of any scheme, and what is affordable, before we decide how much we can allocate to the scheme. We will ensure that fairness is at the forefront of our thinking when making those difficult decisions.

I would like to take a moment to mention the excellent work of EMAG, which has campaigned for many years for a fair resolution to the matter. In opposition and now in government, I have met members of the EMAG board, who have relayed to me their concerns about the Chadwick process. I will say to hon. Members what I said to them: Sir John is only a building block in our approach, and I am willing to listen to EMAG and other interested parties who can give useful and productive insight into this complex issue.

I remind hon. Members that no final decisions have yet been made on many of the important issues associated with the scheme. I want the decisions to be in the best interests of policyholders and taxpayers, and I encourage EMAG and others to be involved so that we can move the process on and find a resolution, for which policyholders have waited for many years.

I will give more details on our approach and the next steps in the process when Sir John Chadwick's final report is published, but I can confidently say that we are moving towards our objective of resolving the issue. We are now reaching a crucial stage in the story of the Equitable Life payment scheme. What happens in the coming months will be decisive in laying out how the scheme operates and the quantum of payments that will be made to policyholders. I encourage all MPs to engage in the debate. This is certainly an issue that we must get right.

1.26 pm

Sitting suspended.

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Ministry of Defence (Statistics)

1.30 pm

Angus Robertson (Moray) (SNP): I am pleased to have secured this debate on Ministry of Defence regional and national statistics, because as we speak the strategic defence and security review, which is looking at the shape and role of United Kingdom conventional defence policy, is under way in the MOD. Given the extreme financial constraints, we expect to learn about radical changes to the UK armed forces when the SDSR reports before the end of this year. The Royal United Services Institute expects a 20% reduction in manpower and a budget cut of between 10% and 15%. In that context, MOD statistics and facts relating to UK defence are key in informing the SDSR, as well as in holding the MOD and UK Government to account.

Although it is essential that the SDSR be driven by defence, foreign and security policy priorities, it must also be relevant to consider what defence footprint there has been and what there will be in the future. I fear that the SDSR will lead to large parts of the UK having no defence infrastructure, with fewer bases, reduced units and manpower, and severely imbalanced defence spending.

There are reasons to believe that Scotland, Wales, Northern Ireland and some English regions will come off worst. That worrying prospect is supported by past regional and defence statistics issued by the Ministry of Defence. In recent years, the MOD has confirmed that more than 10,000 defence jobs have been lost in Scotland and that there has been a defence underspend in excess of £5.6 billion. The defence underspend statistics for Wales and Northern Ireland in the same period are £6.7 billion and £1.8 billion respectively. No doubt, if the MOD provided regional breakdowns for the English regions those would show that other areas have also been badly disadvantaged.

Most shocking of all in an advanced modern democracy is that the UK Government have decided that, rather than explain the impact of their policies, manpower cuts and spending disparities, they will simply stop providing the statistics. I should point out that regional and national defence statistics are available in other countries. With a mouse click, one can access such information down to state level in the United States. In Canada, a nation with close parliamentary and military links to the UK, the Department of National Defence produces similar statistics, both at provincial and constituency level. Those and other countries think that it is right and proper to confirm their employment and spending decisions, and that clearly impacts on their policy thinking. Until recently, that was also the case in the UK, where the Ministry of Defence answered questions relating to regional defence employment and regional spending.

The MOD has confirmed that there are now 10,480 fewer people employed in defence jobs in Scotland than in 1997, which amounts to 1,880 fewer services personnel and 4,600 fewer civilian jobs in addition to the loss of 4,000 jobs that were supported by defence expenditure. Those are MOD statistics. That leaves the current uniformed contingent in Scotland roughly at around 11,000, which is less per head of population than the armed forces of the Irish Republic.

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A series of parliamentary questions on defence spending has, until recently, been answered by the MOD making estimates of how much it has spent in each nation of the UK. That has been broken down by service personnel costs, civilian personnel costs, equipment expenditure and non-equipment expenditure, such as utilities and maintenance, and so on.

There is a complete MOD data set from 2002 to 2008 that shows a significant and widening structural defence underspend relative to population in Scotland: it has increased from £749 million in 2002-03 to £1.259 billion in 2007-08, which represents a 68% increase in six years. Between 2002 and 2008, the underspend in Scotland totalled a mammoth £5.6 billion. Between 2005 and 2008 there was a drastic real-terms decline year on year in the defence spending in Scotland: in total, the previous Labour Government slashed defence spending by £150 million in those years. There was a 3% cut in defence spending between 2006-07 and 2007-08 in Scotland. Those are MOD statistics. Widening the statistics to include Wales and Northern Ireland, in the six years from 2002 to 2008, there was an accumulated underspend of £14.2 billion. Looking at the overall trend, in Scotland and Wales in each of the past six years the underspend figure has gone up faster than the overall budget of the MoD, highlighting a situation that is getting progressively worse, squeezing each country more each year.

Although the MOD budget has not increased every year in real terms, figures on the percentage change from 2002 to 2008 show that its budget increased by 24%, but the underspend increased by more than 50%. In each of the past five years, the amount spent in Scotland, Wales and Northern Ireland combined has been less than the UK spends overseas. Money spent overseas does not include current operations, such as Afghanistan, and the like. For example, a larger contingent of troops is stationed in Germany than is based in Scotland, Wales and Northern Ireland combined.

These facts are shocking and they pose problems for the MOD to answer. Hansard shows that despite numerous attempts to get Ministers and Prime Ministers to explain the underspend and jobs cuts, no explanation has been forthcoming. Instead, the MOD hit on the novel idea of simply not answering the questions any more. In 2009, tucked away in a report, the MOD confirmed that:

On 6 April, the then Secretary of State for Defence provided what turned out to be the last parliamentary answer on defence expenditure in Scotland. He explained:

Rather than provide the information, which is readily available in the Ministry of Defence, the decision was taken just to stop providing it. Of course, that decision was taken under the Labour Government. I hope that the rhetoric in the public pronouncements about transparency and new politics by the incoming Government is matched by their openness.

On page seven of the coalition agreement, the Prime Minister and Deputy Prime Minister say:

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Section 16 of that agreement, which is entitled "Government Transparency", says:

Two specific commitments are mentioned. The Government say that, first:

and secondly:

That is good. Given those clear, unambiguous commitments, I was delighted to hear similar claims of openness from the new Defence ministerial team during the House of Commons debate on the strategic defence and security review a few weeks ago. Hansard records that the new Armed Forces Minister, whom I welcome to the Chamber, said:

That prompted me to intervene, saying that the previous Government had provided this information and asking whether the new coalition would do so. He replied:

I intervened to make doubly sure, asking,

The Minister answered unambiguously,

Naturally, I was delighted and impressed, and I wrote a grateful letter to the Minister. I received a reply on the same day. In the blink of an eye, he wrote:

In an instant, the Ministry of Defence reneged on its promise to the House of Commons and, by extension, the Government reneged on their coalition agreement on openness and transparency.

There are other vital clues that should make everyone who is concerned about a defence footprint across the UK examine the matter closely. Apparently, the UK Government believe that there is

by collating statistics by region. Apparently, national and regional data do not directly support MOD decision making. Frankly, that is code for there being no benefit
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to the Government from being open, honest and transparent about their policy decisions and how they impact on the nations and regions of the UK.

In recent years, UK Governments have cut back manpower, amalgamated regiments and closed facilities in Scotland. Since the last strategic defence review, defence jobs in Scotland have been cut while numbers have risen elsewhere in the UK. A mammoth multi-billion pound defence underspend has opened up and we hear from the SDSR that serious cuts are pending. Despite Scotland having fewer airbases and aircraft than our Scandinavian neighbours of comparable size, the SDSR is considering base closures. Despite only three Army battalions being based in Scotland, there are fears that Scottish-recruited units could be further cut and barracks closed. Despite the reduction in the number of conventional naval craft to a handful of minesweepers on the Clyde, there is an option to cut them still further.

Thomas Docherty (Dunfermline and West Fife) (Lab): The hon. Gentleman clearly knows his material and will be aware that published Ministry of Defence statistics show the vital role that the shipbuilding and refitting industry plays in many regions in Scotland. He will know the devastating impact that cancellation of the second aircraft carrier would have on the Scottish economy. Will he join me in congratulating the Labour and Scottish National party leaderships on Fife council, who have put aside their political differences, such is the importance of the shipbuilding and refitting industry to Fife and elsewhere?

Angus Robertson: I am delighted that SNP-led Fife council and the Labour Opposition are working as colleagues, because the matter is one of concern in Fife and on the Clyde, as well as in other parts of the country where a defence footprint remains. That is all the more reason why we need as many facts and figures as possible to understand the current situation and what it might be in future. The areas that I have mentioned are not the only ones to be affected; there are also questions involving military command functions that have recently been downgraded in Scotland, and apparently a further downgrading is being considered.

A real danger in the defence review is a further geographical concentration of the UK defence footprint away from Scotland, Wales, Northern Ireland and some English regions. Hon. Members should look where the current service headquarters are, where the main operating bases and garrisons are, where the main training facilities are, and where the defence budget is being spent, and ask whether the trend of geographic concentration will continue.

The Government may believe that they can hide the consequences of their centralising priorities and policies by refusing to publish key statistics, but it will be hard to avoid the facts on the ground. UK Governments have been content to recruit young men and women from across these islands and often to send them into harm's way. At some point soon, the MOD must ask itself whether it is acting in the interests of the whole UK. Defence policy is not just about strategic and foreign policy considerations, which must of course drive any review; it is also about the defence footprint, about where our personnel are stationed and about where defence resources are spent.

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The UK Government must end the secrecy on regional and national defence statistics and the SDSR must consider the impact of its deliberations on the nations and regions of the UK. If it is good enough for other countries to do, it is good enough for the UK Government to do; if it is what is in the coalition agreement, it is what they should deliver on; and if it is what was promised in the House of Commons, it should not be reneged on.

1.45 pm

The Minister for the Armed Forces (Nick Harvey): Ministry of Defence national and regional statistics may sound a fairly obscure subject for a debate, so you can imagine my astonishment, Mr Amess, when I walked into the Chamber and found it packed to the rafters. I thought that there must have been some misunderstanding, and it was soon cleared up when hon. Members trooped out. Nevertheless, I congratulate the hon. Member for Moray (Angus Robertson) on raising the matter, which is clearly one about which he feels keenly. He demonstrated that the crux of the matter is not statistics. Rather it is in the size and structure of our armed forces and how we go about equipping them. The subject could hardly be more serious.

The hon. Gentleman clearly feels strongly about the matter. He has two major RAF operating bases in his constituency, and a significant number of his constituents are armed forces personnel. Clearly, he has done something to impress them at the last three elections because they continue to send him back as their MP. He has also spoken as his party's spokesperson on defence matters. That party is, of course, the Scottish National party, and because of its pursuit of independence for Scotland comes with a certain perspective of the world. He will understand that I do not share that perspective, and as Minister for the Armed Forces, I could hardly be expected to do so.

The hon. Gentleman has spoken forcefully about the implications for Scotland of how the defence budget is spent, but I and my ministerial colleagues are more concerned with the implications for the men and women in the armed forces. Let me be absolutely clear that the purpose of the defence budget is to maintain the armed forces so that they can contribute to our nation's security-the whole nation's security. Every pound that the MOD spends must contribute to the security of the United Kingdom. Decisions on where personnel are based, and on which contracts are let to which firms are based fundamentally and totally on what is best for the armed forces.

I fear that the thesis that the hon. Gentleman advanced is based on a completely false premise of how defence works-for example, the idea that a variation in the number of servicemen and women permanently based in Scotland is somehow related to Scotland's significance to our armed forces. That is simply not the case. The armed forces offer amazing opportunities to those who want to join, regardless of which part of the United Kingdom they come from. Scots may join any part of the Royal Navy, Royal Marines, Royal Air Force, or the Army, and have a tremendous career. I am sure that the hon. Gentleman knows that even joining the Royal Regiment of Scotland does not mean that a soldier will necessarily stay in Scotland.

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The 4th Battalion the Royal Regiment of Scotland is currently based at Fallingbostel in Germany. Its personnel would not appear in any statistics as being based in Scotland, but that does not lessen the battalion's connection with Scotland, or the contribution that it makes to Scotland's economy. Of course not. Scots serving in the various parts of the Army, the Royal Navy, or the Royal Air Force, but not necessarily based in Scotland, do not, in any sense, lessen the contribution that those Scots make to the armed forces. As the Secretary of State said recently in the House, the service personnel we meet do not care whether their comrades come from Cardiff, Edinburgh, Belfast or London. They are all members of the armed forces under the Crown, and proud of it.

The hon. Gentleman spoke passionately about patterns of defence spending. He referred to the defence footprint, and then alleged that there was a defence underspend in Scotland, but that is simply not the basis on which defence could possibly be organised by a Department with specific responsibility for the provision of defence of the entire realm. We have an interest in the defence footprint to some extent, but only in so far as it enables our military functions to be performed better. We must ask whether footprint is an issue in military terms, and whether it affects our ability to recruit from and defend the whole of the United Kingdom. That is the beginning and end of the Ministry of Defence's responsibility to consider the defence footprint.

It cannot be repeated often enough that every pound of the defence budget must deliver as much as possible for the men and women of our armed forces, and through them, our national security. As Minister for the Armed Forces, I make no apologies for seeing beyond where a firm is based and looking at the overall benefit to our service personnel. It is the duty of Government to ensure that the defence budget is spent wisely, maximising the resources available to the front line and ensuring that every pound counts.

Operating at a national UK level is the only way that we will achieve the best value for money and deliver what the armed forces need. That is what matters. The hon. Gentleman seems to propose a different method of spending the defence budget. He implies that there should be a quota for each region and nation of the United Kingdom. Perhaps he thinks that a set proportion should be spent in each region; perhaps a set proportion should be spent overseas. He seems to believe in a concept of a "fair share" to be calculated per head of population, and the implication seems to be that we should do that irrespective of the capabilities that it would provide for the armed forces. Surely he does not think that that would be a wise way to allocate the defence budget? If that argument is taken to the extreme and we look at regions where there are no defence manufacturers, the logic would suggest that we should artificially stimulate the creation of a defence manufacturer.

Thomas Docherty: Will the Minister give way?

Nick Harvey: With great reluctance, since the hon. Gentleman has not observed the normal courtesies.

Thomas Docherty: Does the Minister understand that his arguments about making decisions based purely on defence would have more credibility in Scotland if the
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previous Conservative Government had not taken the Trident contract away from Rosyth and sent it to Devonport? That was not in the interests of the MOD or the taxpayer; it was about political chicanery.

Nick Harvey: I listened with interest to the opening speech from the hon. Member for Moray. His thesis seemed to be that the 13 years of the previous Labour Government had-according to the construct in his mind and his ideas about the fair divvying out of jobs and investment-counted against Scotland's interests. It is not my role or responsibility to defend the previous Conservative Government or any decision that they made. However, if the previous Government did what the hon. Gentleman alleges, one presumes that they did it according to their best calculation of how to act in the interests of UK defence. One might not necessarily agree with each and every decision that the Government took, but they took those decisions from that perspective. The Ministry of Defence's responsibility is the defence of the realm. Other Departments have responsibility for stimulating economic growth in different parts of the country. If hon. Members wish to form cross-governmental policies, they are welcome to do so, but that is not the purpose and locus of the Ministry of Defence. Our role is to secure the defence of the realm and to ensure that our armed forces are properly supported and equipped to carry out that function. There would be no sensible alternative way to organise our defences. Any alteration to that general approach would be a function of industrial policy.

I make no apologies for differing with the hon. Gentleman on that matter. We do not allocate money on a regional basis and it should be clear why the MOD stopped producing estimates of its regional expenditure two or three years ago. Quite simply, the estimates did not add anything to the decision-making process, given that that process was founded, fairly and squarely, on defence considerations.

The decision passed me by at the time-I make no bones about that. However, I can see no sinister motive, cover up or scramble to hide uncomfortable truths. The hon. Gentleman presents his concern as if it is part of some preconceived plot, but it seems from the time scale that the MOD had stopped gathering those statistics before it conceded the principle of a strategic defence review. The idea that one action went hand in glove with the other to mask the impact of the strategic defence review is far-fetched in the extreme. Let me return to my point: every pound counts. I readily acknowledge that those estimates may have been helpful to the hon. Gentleman in pursuing a political agenda, but they were not helpful to the Ministry of Defence in furthering decisions that had to be based on defence considerations.

The previous Administration drove down the cost of MOD head office by about 25%, which meant that the number of analytical staff in head office was reduced
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by a similar proportion. That was achieved by cutting some low-priority outputs, and one output deemed to have lower priority was the estimate of defence expenditure by region, and the employment dependent on that expenditure. That decision was made two or three years ago and I was not party to it, although I understand the logic behind the decision. By all accounts, the figures were difficult to produce and resource-intensive to maintain. They relied on analytical tables produced by the Office for National Statistics, which have not been updated since 1995. As I explained, that did not support the MOD's decision making.

I have looked into how much it would cost to reintroduce the estimates, and I am told that reproducing the ONS tables would cost in the region of £150,000. Every three years or so, another £100,000 would have to be spent updating the underlying data. Additional statistical staff would have to be employed to perform regular updates at a cost of about £50,000 a year. As much as I respect the hon. Gentleman, I agree with my predecessors that one struggles to justify that expenditure as being in the interests of United Kingdom defence.

The hon. Gentleman challenged me about the exchange that we had on the Floor of the House. I have already apologised to him unreservedly, and I will do so again today. I raised a false hope and expectation that production of the figures could recommence. I understood that he was asking me to stop suppressing some information held by the Ministry, and I agreed to his request on that basis. Had he explained in large letters that he wanted to recompile figures that had ceased to be complied two or three years ago, I would have looked into the issue more seriously before replying. My impression was that the information was still held and that the previous Government had chosen, for political reasons, to suppress it. I turned to the Secretary of State for Defence and asked what he thought about it, and he replied, "He can have whatever we've got." The hon. Gentleman can have whatever we have got, but we do not have what he asks for. It would cost a lot of money to get it again.

In conclusion, it would be a mistake to believe that we are singling out Scotland-I know that the hon. Gentleman feels that we are, but we are not. We are ceasing to produce such figures across the board. I would be interested to know whether he can point to any other central Government Department that goes to a lot of cost and expense to break figures down on a regional basis in that fashion. We cannot find any comparator in the ways that other Departments spend money on UK-wide projects, but if the hon. Gentleman can point to one, I will have another look. This debate should not be about competition between different parts of the UK. As far as we are concerned, it is about the security of the nation. We must spend our money on that basis, not on compiling the figures that the hon. Gentleman asks for.

2 pm

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

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