“out of the danger zone”—[Official Report, 15 December 2010; Vol. 520, c. 901.]

We warned then that there was a global hurricane brewing in the eurozone, America and across the developed world. We also warned the Chancellor that ripping out the foundations of the house here in Britain with a reckless approach to deficit reduction was the wrong approach. The global hurricane is now swirling around us. With the eurozone crisis deepening, and in advance of Wednesday’s debate, will he tell us today whether he still believes that Britain is out of the danger zone and that we are still a “safe haven” in a turbulent world? With the European Central Bank unwilling to cut its interest rates, is it really the crisis in the eurozone that has prompted the Chancellor to change so radically his views on quantitative easing? Two years ago he called it

“the last resort of desperate governments when all their other policies have failed”.

We will return to the British economy on Wednesday, but the Chancellor is right to say today that the crisis in the eurozone now constitutes a direct threat to our flatlining economy, not least because only Greece and Portugal in the eurozone have had lower growth than Britain in the past year. With no growth, it is no wonder our interest rates are so low. He is also right to say that the threat is not only to our exporters, but to the stability and solvency of our banking system. Can he update the House on his latest estimate of the full exposure of UK banks to euro sovereign debt? Is the House of Commons Library estimate of a $187 billion exposure correct? Is it correct that, as part of his contingency planning, the Treasury has been working on detailed plans to inject further capital into Royal Bank of Scotland?

The Chancellor is also right that it is a great relief that Britain is not a member of the eurozone, although I was rather surprised to hear him last week give the credit to the Foreign Secretary, who was in opposition, on the Back Benches and writing history books at the time. I have long given up hope of getting any thanks from the Chancellor for that vital judgment. Above all, the Chancellor is right: eurozone leaders have prevaricated too long and need to get their act together to put in place a credible plan before next month’s G20 meeting.

Back in July, the Chancellor told the Financial Times in an interview that eurozone leaders had to “get a grip”, and he called for a eurobond, but what has happened since? Precious little. Has he urged eurozone leaders not just to increase EFSF funding, but to widen its role to help recapitalise troubled banks and to put in place first-loss guarantees on sovereign debt to stop contagion in Spain and Italy? Rather than talking to the newspapers over the summer, perhaps the Chancellor should have gone to those meetings and urged a Europe-wide plan for jobs and growth to get unemployment falling and deficits down.

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What do we have today from the Prime Minister? Do we have a report back from weekend meetings with President Sarkozy and Chancellor Merkel? No, because our Prime Minister was not at the meetings; he was too busy dealing with a local difficulty. Instead, we have another interview in the Financial Times, and his solution is that eurozone leaders need to get out their “big bazooka”. Their what? He could have called for political backing for the European Central Bank to act as a lender of last resort in return for credible fiscal policies, for a euro area debt guarantee or for a European plan for jobs and growth, but “big bazooka”—what does it mean? Can the Chancellor explain? I made the mistake of looking it up on Google this morning, and I warn hon. Members, “Do not make the same mistake.”

To be fair, and in conclusion, the Prime Minister did call this morning for a five-point plan to deal with the eurozone crisis, although it was not clear from the Chancellor’s statement what those five points are or add up to, but let us hope that, with Britain badly exposed, our growth flatlining, unemployment rising and borrowing set to be higher than planned, when the Chancellor comes back to the House on Wednesday he will agree to back our five-point plan for jobs and growth here in Britain.

Mr Osborne: I welcome the shadow Chancellor to his place. When I heard that the Labour leadership were clearing out their shadow Treasury Front-Bench team today, I was worried that the Conservative party would lose its greatest electoral asset, but it is great to see him still in his place.

Let me address the right hon. Gentleman’s specific questions. First, he asked about the exposures to eurozone nations. The FSA publishes the appropriate information on that, on the exposures overall to peripheral economies and to other eurozone banks, and it is appropriate that it does so. On RBS, I touched specifically on that issue, because there has been speculation, but let me make it very clear: in our assessment, and in that of the FSA, RBS is well capitalised and liquid.

On the eurozone facility, let me answer the right hon. Gentleman’s specific question. I believe that it should be broad in application, as well as deeper in funds, and undertake as many operations as is required. He talks about meetings, but let me reassure him that I have been to many, many meetings over the past few weeks. There has not been a shortage of meetings; there has been a lack of leadership from eurozone leaders in those meetings. But, that is changing, and that is very welcome.

Frankly, it is absolutely astonishing that a shadow Chancellor, who led his entire party through the Division Lobby in July to vote against the increase in IMF resources initiated at the London summit by the previous Prime Minister, should accuse us of a lack of leadership in the international community. Let us just imagine if that vote had been won—presumably the right hon. Gentleman cast his vote hoping to win the Division—we, alone in the world, I think, would not be ratifying the increase in IMF resources, and I would have to turn up at those meetings and explain, “I am very sorry, but the British House of Commons does not want to use the Bretton Woods institutions to help us with one of the greatest financial crises of the century.” As I say, his lectures on leadership come a little thin, and perhaps he should practise what he preaches.

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I end by saying this. We will have our debate on the British economy, but it would be hard to imagine the shadow Chancellor coming back from the Labour conference with his party’s economic credibility even lower than it was before he began the conference season, but there is still no recognition from him that his Government spent too much money, ran up a big budget deficit when times were good and spent more money than they had available—even though that is acknowledged by Tony Blair, who was Prime Minister at the time. The shadow Chancellor still thinks that the answer to a debt crisis is to spend more money. His five-point plan is, of course, a complete abandonment of the plan set out by the last Chancellor of the Exchequer, to which, as I understood it, the Labour party was still in theory committed.

When we listen to the combined speeches of the shadow Chancellor and the Leader of the Opposition, they seem to amount to more regulation and more tax on businesses—indeed, they confirm the Labour party’s reputation as the anti-business party. The shadow Chancellor has managed to get the Labour party into an extraordinary position for an Opposition—of complete irrelevance: irrelevant at home and irrelevant abroad. The leader of the Labour party asked a good question—“Why would you bring Fred Goodwin back to run the banks?” But why on earth would we bring the shadow Chancellor back to run the British economy?

Mr John Redwood (Wokingham) (Con): When the Chancellor gave his authority to create another £75 billion of money, what forecast was he given about the impact that that will have in the next couple of years on the price level and therefore on real incomes? So far it has been high inflation that has clobbered real incomes and depressed demand.

Mr Osborne: As my right hon. Friend will know, in its most recent quarterly bulletin, the Bank of England did an assessment of the impact that the previous round of quantitative easing had had; it thought that that had increased GDP by 1.5% to 2%, but that it had also increased inflation. However, the Bank was very clear that in recommending or requesting further quantitative easing, it was still aiming to hit its inflation target in the required two-year period.

Mr Alistair Darling (Edinburgh South West) (Lab): I am glad that the Chancellor now realises that the policy of quantitative easing was, in fact, a good one and did help get our economy growing. Can he tell us how he plans to ensure that the additional £75 billion gets out of the bank vaults and on to the high street? He has mentioned the credit support scheme, on which we have not yet got some details, but I am sure that he would agree that it is important that the money finds its way out into the economy.

On the question of Greece, is there now an acceptance that the present austerity policies being visited on that country are not going to work? Were the reports coming out of the IMF a couple of weeks ago—that there would have to be some sort of write-down of Greek debts—accurate?

Mr Osborne: Let me deal first with the right hon. Gentleman’s question about quantitative easing. I think there is general recognition that what worked was the

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increase in asset prices and also pushing investors up the risk chain. I defer to the right hon. Gentleman’s view on this, but what did not work so well was an increase in bank lending; that did not happen as a result of QE, although the Government at the time hoped that it would. As he knows better than anyone, the Government also created the asset purchase facility with the idea that the Bank of England might purchase some corporate paper; it ended up purchasing only around £1 billion-worth.

I thought that it was sensible, therefore, that alongside the Bank’s action on QE we separately, as a Government accountable to the House, looked at credit easing options, which directly try to address the bank lending issue and enable the Government—again, directly accountable to elected people—to look at a range of assets that one can buy, such as small business loans.

On the question of Greece, I have to be a little careful; I alluded to that in my statement when I said that the advice that we are giving on Greece is private. But our public intent is very clear: the Greek situation has to be resolved. It is very debilitating for the world that at the moment each week goes past and there is another event risk around Greece—the troika turns up, there is a parliamentary vote in Greece. Of course, a lot of the frustration of eurozone members is not so much at the impact of austerity, but at the feeling that they have that the Greeks have not done what they promised to do. But as I say, if the right hon. Gentleman will forgive me, I will continue to give my specific advice on Greece to my eurozone neighbours in private.

Mrs Anne Main (St Albans) (Con): I am pleased that my right hon. Friend is taking a robust approach towards our economy, but does he share my concern that the eurozone’s attempt to open up our benefits and pensions pots this September will derail his efforts to make sure that we get money back to the British taxpayer?

Mr Osborne: I am very clear that the resources we provide to the European Union should be well spent. Indeed, there is a whole separate agenda that we have not touched on today of getting the European Union better focused on trying to encourage growth and competitiveness across the entire continent. Like, I suspect, my hon. Friend, I also share the frustration about the application of European law that means that we have to end up paying benefits to people who are not in this country. That is one of the frustrations that Governments in the past have had to deal with, and we are looking at whether there are potential avenues around it.

Sir Stuart Bell (Middlesbrough) (Lab): It was no doubt an oversight that the Chancellor did not mention the conference at the weekend between President Sarkozy and Angela Merkel where they called for a rapid and global response that had to be in place by the time of the G20 meeting in November. The Prime Minister responded by saying that he did not want to put a single euro into saving the euro after 2013. He said that he did not want the involvement of the investment bank and that all he wanted was participation through the IMF—which, incidentally, I did not vote against earlier in the year. Is this what we call being at the heart of Europe and punching above our weight, or are we moving towards a two-speed Europe?

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Mr Osborne: I did not directly mention the meeting at the weekend between the French President and the German Chancellor, but I alluded to it when I said that there were signs of progress, as the meeting was one of those signs. They have now decided to delay the European Council until the end of next week to give them more time to put together a package, the components of which are becoming clear. The timetable that we first identified of the Cannes summit being the last possible point when we can resolve this is now generally accepted. On the hon. Gentleman’s substantive point about international resources, I commend him for his sensible vote in defying the Whip imposed by the shadow Chancellor.

Ed Balls: There were some people on your side as well.

Mr Osborne: Let me address this. There certainly were some people on my side, and no doubt some of them may ask me about it today. I am very happy to stand up and explain why I think that is wrong, why Britain has been a founding member of the IMF, and why the international institutions like the IMF and the World Bank are absolutely central in trying to get an international response to economic problems. However, there is a big difference between Back-Bench Members of this House deciding to vote against this issue as a matter of conscience and the shadow Chancellor leading the entire Opposition into an official vote against an IMF package that—let us remember this—was supposed to be the crowning achievement of the last Prime Minister’s premiership. When we look back at the last Prime Minister’s premiership, the one thing we say he got right was the London G20 summit, and then the shadow Chancellor leads his party into the Division Lobby against it. That is pathetic.

Martin Horwood (Cheltenham) (LD): Does the Chancellor agree that if your neighbour’s house is on fire, with or without exits, and if it threatens to set yours on fire too, the sensible, constructive and intelligent thing to do is to protect your own house, do your best to help your neighbour to put out the fire, and not start an argument about where the boundary line falls between the two properties—or, as Labour Members suggest, throw away the fire extinguisher?

Mr Osborne: There are quite a lot of fire analogies there. We are trying to do those things. First, we are trying to protect our own country. Of course, this was an independent decision of the Bank of England, but when it made its decision it explicitly referenced what was happening in the eurozone as the principal reason for doing so. Secondly, we are very actively engaged with the eurozone in trying to find this international solution to its problems. I mentioned all the conversations that have been had just in the past 72 hours or so. There have been a string of international meetings where we have made forceful interventions. We have helped to push the eurozone in the right direction, but there are also people—leaders—in the eurozone who are trying to lead it in the right direction as well. The hon. Gentleman’s point about the rather remarkable vote by Labour Members against the IMF is well made.

Dr William McCrea (South Antrim) (DUP): In these challenging times for UK families, can the Chancellor assure the House that hard-pressed taxpayers throughout

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the United Kingdom will not be saddled with the financial burden of saving the euro? Will he continue actively to engage with banks to save the financial viability of small and medium-sized enterprises across the UK?

Mr Osborne: The hon. Gentleman makes a good point about the financial burden. Obviously we bear a burden as an economy that is closely inter-connected with the eurozone, but we took a decision that we wanted to get Britain out of the EU27 mechanism, and we put considerable negotiating effort into doing that. That meant not just the current mechanism, with its €60 billion capacity which had been established—we are still part of that—but ensuring that the permanent bail-out mechanism did not include people who were not in the euro. If the members of the euro want monetary union and want to move towards greater fiscal union, it is not reasonable to ask countries that are not in the euro to be part of one of the key mechanisms of that union, which is a bail-out fund.

Mr Douglas Carswell (Clacton) (Con): The bail-out-and-borrow approach to dealing with the crisis in the eurozone has not worked. We can call it the three R’s —ring-fence, recapitalise, resolution—but it is still bailing out, and bail-out simply begets more bail-out: more public liability to rescue rich men from the folly of their investment decisions. When will my right hon. Friend advocate a new approach, one that works: instead of bail out and borrow, default and decouple?

Mr Osborne: The first thing I would say to my hon. Friend is that he is right to allude to the debt dynamics in some of the countries involved, and I mentioned that specifically in the case of Greece. The difference between the Greek situation and the Irish situation at the moment shows that countries can take different paths, and with political will they can deal with their problems. However, if the political system is unable to address those problems, the rest of the international community has to step in.

My hon. Friend’s second allusion—the decoupling—is, I guess, a reference to the break-up of the euro. As he knows, I was against Britain joining the euro—I perhaps did not argue the case on quite as many occasions as he did—but as the world stands today, the break-up of the euro would be absolutely calamitous for the British economy, and it is not in our interests to advocate that. It is profoundly in our national interest to try to make monetary union work. Monetary unions can be made to work, but greater fiscal integration and fiscal union are needed, and—this is a crucial additional part—we also need the competitiveness of the other, peripheral European economies to be greatly improved.

Mr George Mudie (Leeds East) (Lab): The Chancellor has said that the asset purchase facility is the best way to get money into the real economy and stimulate growth. Why is the Bank of England refusing to use the asset purchase facility, when the last Government used it successfully, and instead allowing the money to be channelled through the banks, which keep hold of it for their own security, and not to be sent into the real economy?

Mr Osborne: I am not sure that the asset purchase facility was the enormous success that the hon. Gentleman implies. It probably did do a good job—again, I defer to

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the views of the Chancellor at the time, who would have seen the data closer up. The asset purchase facility helped to stop the collapse in the corporate bond market at the time, but it never led to the big increase in lending that the previous Government hoped it would. The Bank of England did not make use of the £50 billion facility that was made available. Although the facility remains, to date the Bank has made use of only around £1 billion. Instead of revisiting the theology, as it were, of who is responsible and the role of the Bank, my view has been that in order to maintain the proper division of responsibility between the Bank and the Government, who are accountable to Parliament, the Government should undertake credit easing operations with their own balance sheet, and that is what we are working on at the moment.

Michael Fallon (Sevenoaks) (Con): What was the point of the European Banking Authority conducting two rounds of stress tests that excluded any serious test of banks’ exposure to sovereign debt? Surely it is in the interests of eurozone Governments to have such exposure made more transparent and to start facing up to how to tackle it?

Mr Osborne: My hon. Friend makes a very good point. We repeatedly argued that the stress tests should be tougher and more credible, but there were strong vested interests that did not want to see that happen and did not want to confront some of the problems in their own banking system. They are now having to confront those problems, however. The fact that Dexia passed the test, and that when it identified a capital shortfall it was in the low billions of euros across the entire European continent—given that tens of billions of euros were required to deal with the Irish problems that occurred around Christmas—demonstrates that those tests were not credible enough. To be fair, I do not think this is an EBA problem; it is more a problem with the membership of the EBA, but the association is now, with our support and encouragement, finally conducting what I think will be a much more credible set of assumptions for the European banking system.

Stewart Hosie (Dundee East) (SNP): I thank the Chancellor for his statement and for giving me early sight of it. He said that the eurozone countries needed to undertake structural reform and to move towards greater fiscal integration—he later mentioned fiscal union—and that that would form part of a comprehensive package that he had been urging. He has not, however, described what he means by fiscal integration or fiscal union. Would they involve the European Union controlling 2% or 3% of countries’ gross domestic product, or 20% or 30%? Would they involve a counter-cyclical stability mechanism, or an enhanced European stability fund? Would the measures be applied uniformly, irrespective of debt ratios or savings ratios? It is important that we hear publicly what the Chancellor is saying in private, if we are to avoid speculation and confusion over the UK’s position when none need exist.

Mr Osborne: The debate on how that fiscal union should take shape is just starting in the eurozone, and we can contribute to that debate while ensuring that Britain is not part of it and that Britain’s important national interests are protected in regard to the single

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market, competition policy and financial services. Key components of the measures will include some transfer of resources: in effect, the European financial stability fund is becoming a sort of central resourcing fund. The measures will also mean greater surveillance and mutual vetoes and the like over each other’s budget policies. I have raised the issue of eurobonds, as have the Italian Finance Minister and the chair of ECOFIN. I think there will be a number of components. In the end, it has to be, in part, a decision for the eurozone itself to take the lead, provided that our interests are protected.

I cannot help but make the observation that one of the things we are learning about the eurozone is that if we have a single currency, we need much greater co-ordination of economic policy. That is rather contrary to the Scottish National party’s approach, which is to maintain a single currency but to have a dis-integration of fiscal co-ordination.

Mr William Cash (Stone) (Con): On the issue of growth, will the Chancellor accept that, last year, our trade deficit with the eurozone went up from minus £4 billion to minus £38 billion in one year alone? Does he recognise that this has a great deal to do with the problem of over-regulation and that we need to repatriate social and employment legislation so as to create growth in small and medium-sized businesses? Will he also face down the Deputy Prime Minister, as the Home Secretary did the other day?

Mr Osborne: Speaking as a member of the Conservative party, I would make it clear, as the Prime Minister has done, that if a future treaty should arise, as it may well do, we will argue the case for bringing back certain powers to this country. I am sure that we will have a very active debate about what those powers should be—

Mr Ronnie Campbell (Blyth Valley) (Lab): And throw union rights out of the window?

Mr Osborne: I am sure the hon. Gentleman can put in his bid for things he would like to see repatriated. Perhaps there would be some trade union powers, so that a Government led by the union man, the leader of the Labour party, could get their way more easily. But we will have that debate in due course; it is not active at the moment in European circles. I suggest that we focus on the immediate issue at hand, which is resolving the eurozone crisis.

Alison McGovern (Wirral South) (Lab): In response to the right hon. Member for Wokingham (Mr Redwood), who is no longer in his place, the Chancellor described the Bank of England’s analysis of the impact on inflation of the last round of quantitative easing. At a time when British people have less and less cash in their pockets, few issues could be more important. [ Interruption. ] [Hon. Members: “It’s Gordon Brown ringing for you!”] Will the Chancellor tell the House, perhaps by telephone, or by e-mail, whether he has requested any analysis from his civil servants in the Treasury of the forecast for the impact on inflation of the current round of QE?

Mr Osborne: I think the phone would have been flying through the air rather than ringing, if it had been the last Prime Minister. Of course we have made our own examination of the impact of QE. When I became

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Chancellor, I set out the procedures I would follow if there were a request from the Monetary Policy Committee. I set it out within weeks of coming into office and I said I would follow exactly the procedures set out by my predecessor—that if there were a request, we would accede to it. I also believe that the MPC has come to the right judgment; its judgment was independent, but I believe it was right.

Nadhim Zahawi (Stratford-on-Avon) (Con): The shadow Chancellor would like a pat on the back for keeping us out of the euro. Will the Chancellor tell us how much the euro preparations unit cost under the previous Government?

Mr Osborne: I am afraid I do not have the figures to hand, although I will definitely bring them to our debate on Wednesday. What I do know is that when I arrived in the Treasury, the euro preparations unit still existed, and we had to shut it down. Perhaps it was something that the shadow Chancellor did not get round to in all those years at the Treasury when he was running British economic policy during the golden era.

Kelvin Hopkins (Luton North) (Lab): A number of eurozone members will be condemned to permanent deflation, low growth and high unemployment and will require ongoing fiscal handouts unless and until they can leave the euro. Britain is well placed to advise on such a process. Whatever the Chancellor says publicly, will he be offering that advice privately?

Mr Osborne: I think that is called a trick question. The hon. Gentleman has been an absolutely consistent and principled opponent of the euro. When I first arrived in the House in 2001, he was making the argument then and he is still making it now, and I respect him for it. As I have said, however, “I told you so” is not an economic policy at the moment. He may well be right about the problems of combining the economies of different countries with totally different structural problems, competitiveness rates and so on, let alone fiscal policies. He is right about all that, but we have to deal with the world as it is, and at a time like this I do not think that advocating the break-up of the euro is in our national interest. We need to make the euro work. Monetary unions can be made to work, but that involves things like fiscal transfers. At last, I think, the eurozone is facing up to that.

Mr Bernard Jenkin (Harwich and North Essex) (Con): May I remind my right hon. Friend of what he said on 24 September, when he reminded the world that there were six weeks to save the euro? If we get to 5 November and this crisis is grinding interminably on, will it not be time to start advocating the advice of Lord Lawson, who advocates an orderly break-up of the euro in order to restore growth to European economies and limit the liabilities that are constantly building up the longer this crisis goes on?

Mr Osborne: My hon. Friend is right to remind us that the G20 summit in Cannes is the last of a string of international meetings that have involved the G7, ECOFIN, which the Treasury Secretary attended, the International

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Monetary Fund, G20 Finance Ministers later this week and the European Council next week. It all culminates in the G20 meeting of world leaders at Cannes. That really is the moment when the world needs to be in no doubt that there is a solution to the eurozone problems and that we have the firepower and strength in the banking system to deal with them. If we do not deal with them, the situation will go from bad to even worse. However, as I say, it would not be sensible to advocate to our European colleagues the break-up of the euro. That would greatly diminish what we had to say in these meetings, as it would not be seen as practical—


Well, I also think it would be wrong, as it is not in Britain’s national interest to see the euro break up.

Graham Stringer (Blackley and Broughton) (Lab): The Chancellor of the Exchequer says that he wants to make the euro work, although he also says that it is the epicentre and the cause of instability in the world economy, and he talks about co-ordination of fiscal policy and cash transfers. Is that not just a euphemism for taking central control away from many of the peripheral democracies in Europe, and does not the loss of democracy in countries many of which were recently fascist pose a greater danger than an orderly break-up of the euro?

Mr Osborne: The eurozone was also described as the epicentre by the president of the European Central Bank, Jean-Claude Trichet.

The hon. Gentleman is right: we are talking about the exercise of greater control over the finances of other nations by the eurozone authorities, which is one of the reasons we should be very grateful that Britain is not part of those arrangements. The hon. Gentleman mentioned some of the social and political strains that that might lead to. As I have said, those who follow the remorseless logic of monetary union end up with greater fiscal union, which involves all sorts of sovereignty issues for all the countries in the euro; but I must add that I do not recognise the image of the green pastures of a break-up of the euro and what might happen after that event in Greece. I think that political and social tensions could be considerably higher in countries such as Greece if they left the euro, and that such action could bring about the situation to which the hon. Gentleman referred and which none of us wants to see.

Several hon. Members rose

Mr Speaker: Order. A great number of Members are still seeking to catch my eye, and I am keen to accommodate them, but progress so far has been at best leisurely. What is required is brevity, a legendary example of which will now be provided by Mr David Tredinnick.

David Tredinnick (Bosworth) (Con): Is not the fundamental problem with the Greeks that even if a package is agreed, there is no way the Government can implement it, because the tax authorities have themselves said that they are not going to do so? A depreciated or, indeed, a new currency for Greece would give my Hinckley constituents and others some chance of buying cheaper Greek holidays and stimulating the economy.

Mr Osborne: As I have said, I was always one of those who said that Britain should not join the euro. I worked alongside my right hon. Friend for Richmond

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(Yorks) (Mr Hague) when he was Leader of the Opposition, and helped him to write many of the speeches that set out that case. Although the shadow Chancellor keeps talking about the important role that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) played in all that, I do not recall lots of passionate speeches about why Britain should not join the euro; but no doubt he was doing his work in private.

Let me say this about the Greek situation. If Greece were to leave the euro, there would be a balance of payments crisis. Greece does not have a primary balance, so there would automatically be a need for a huge international programme. The idea that leaving the euro would get it out of needing international assistance, or out of the clutches of the International Monetary Fund, is just fanciful, because it would need such a programme. There would be a balance of payments crisis and there would probably be runaway inflation as well, which would wipe out any competitiveness gains.

I think that we are depicting a nirvana of Greek exit from the euro which does not exist. Greece is in a very difficult position, and it needs to work through its problems.

Chris Ruane (Vale of Clwyd) (Lab): The private sector is not creating the jobs that the country needs. Will the Chancellor now review his massive cuts in the public sector? Forty-six per cent. of workers in my constituency work in the public sector; what chance have they of employment if there is a double jobs whammy, in both the public and the private sector?

Mr Osborne: The hon. Gentleman is the shadow Chancellor’s Parliamentary Private Secretary—[Hon. Members: “No, he’s not.”] Oh, he has been promoted! It is a complete clear-out. Well, well. We are very pleased to see that the shadow Chancellor is still in his place.

Let me draw the hon. Gentleman’s attention to what was said by Digby Jones, one of the members of the last Government. [Interruption.] It is funny how Labour Members disown these people. They booed Tony Blair, and now they are attacking their former Trade Minister. Anyway, he said that the Labour leadership was

“displaying poor statesmanship at a time when the country needs leaders, not players to a union gallery”.

He also said that their policies were

“a kick in the teeth for the only sector that generates wealth, that pays the tax and creates the jobs”

in this country. He added:

“Pro-business? Not!”

It is the businesses that will create the jobs in this country, and being the anti-business party will not get Labour anywhere.

Margot James (Stourbridge) (Con): Does my right hon. Friend recall the howls of derision from Opposition Members when he warned 18 months ago of the possibility of a Greek-style economic catastrophe engulfing this country’s economy? Now that the threat of contagion has reached even Italy, what is his assessment of the dangers to the UK economy of slowing down implementation of the deficit reduction strategy?

Mr Osborne: My hon. Friend makes a good point. When we first said, “Look at Greece”, Opposition Members all said, “Well, that couldn’t happen here.” It

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then extended to Portugal, then Ireland, then Spain, then Italy, and now questions are being raised about the French banks, which France is seeking address, and a Belgian bank has fallen over this weekend. In the end, we can look at what the credit rating agency who gave us the triple A rating said last week. It said that the rating would come under downward pressure if

“the coalition Government’s commitment to fiscal consolidation falters”.

There would be an automatic downgrade if we were to follow the Opposition’s approach. That would lead to higher interest rates, hitting families and leading to more repossessions and more job losses. That is the path to ruin, and we know what it is like because we have been down it before under the shadow Chancellor.

Helen Goodman (Bishop Auckland) (Lab): The Chancellor of the Exchequer has laid great emphasis this afternoon on credit easing, but he has said he cannot tell us how that will operate until the autumn statement, although it will be an alternative to bank finance. When will small and medium-sized enterprises actually get something from this process?

Mr Osborne: As I said, we have already extended the loan guarantees that we inherited. We have concluded a deal with all the high street banks—not just the two that were nationalised under our predecessors—to get an increase in SME lending. We want to go further, however, and we will set out the full details in the autumn statement, when the hon. Lady will, no doubt, be present to ask me a question.

Joseph Johnson (Orpington) (Con): Can the Chancellor confirm that Moody’s downgrades of 14 UK banks on Friday reflected the planned and progressive withdrawal of state support for the banking system and a reduction of the likelihood of further taxpayer bail-outs for the UK banks, rather than any weakening of the UK banking system per se?

Mr Osborne: Yes, I can confirm that. Moody’s was explicit in saying that that was not a reflection of financial conditions in the UK or the financial strength of the Government. Rather, it was a recognition of the fact that the current Government are trying to move away from the taxpayer either implicitly or explicitly standing behind our largest banks. That is sensible policy, and I hope it commands support on the Opposition Benches.

Michael Connarty (Linlithgow and East Falkirk) (Lab): Returning to the eurozone rather than our domestic concerns, I agree with the Chancellor about the difficulty that would arise if Greece were to leave, or be forced out of, the eurozone. Although he will not tell us his policy, will he give us an estimate in respect of the secure fund for the eurozone? It has been said that €2,000 billion would be required for that fund. How great a contribution from the International Monetary Fund and the World Bank is the Chancellor going to argue for in order to bolster the ability of the eurozone to see itself through the crisis and save Greece from being pushed out?

Mr Osborne: We are not arguing for an increase in IMF resources as part of the Greek programme, but I did make reference to the broader resourcing of the

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IMF. That is increasingly an issue because of its flexible credit lines to Poland and Mexico—neither country is in the eurozone, of course. The truth is that after taking into account the IMF’s existing commitments and the buffers it needs to maintain in order to operate as an institution, it does not have a huge amount of resources—although by most people’s standards it does have a huge amount, of course. Its resources amount to about €400 billion, but that is not as large as some people imagine. There is therefore a debate about whether to try to increase the IMF’s resources, but we are not discussing a possible increase of resources in the IMF programme to Greece.

Sajid Javid (Bromsgrove) (Con): During the 2008 crisis, it turned out that credit default swap spreads were a better indicator of the financial health of a borrower than credit ratings. Over the last 18 months our credit default swap spread has fallen dramatically, and in the last few weeks it has, for the first time, been lower than that of France and Germany. Does the Chancellor have a reason why that might have happened?

Mr Osborne: I think it is a reflection of the fact that people around the world believe that we have “a credible plan”—those were the words used by the Governor of the Bank of England last week—to repay our debts. Let us remember that we have the largest budget deficit of any forecast for the G20. That is the situation we inherited and we are trying to bring that deficit down. Other countries with much lower deficits have got into trouble because they have not had credible plans, presented by a united Government and implemented with a good majority in their Parliament. We have those things and we are going to keep them.

Nia Griffith (Llanelli) (Lab): Many small businesses and manufacturers across the country are still very worried. They have seen growth stall under the Chancellor’s policies and now they see the crisis in the eurozone. Can he explain, simply and clearly, how his policies are going to help stimulate growth and help these companies have the growth that they need, particularly given that many of them are going to lose a lot of business when public procurement contracts come to an end?

Mr Osborne: The hon. Lady says that public procurement projects are going to come to an end. The British Government are going to be spending £3 trillion over the next four years, so let us make sure that that money is well spent and that good British businesses, small and large, are able to avail themselves of the procurement that will take place under a £3 trillion Government budget. But of course I do not underestimate the difficulty of the situation the world faces at the moment and the situation that Britain faces because of its exposure to the world and to the problems that it itself created in recent years. I understand that, but the whole world is experiencing slow growth at the moment. We have actually grown more this calendar year than the United States and we are currently forecast to grow more next year than France and Germany. That is just a reflection of the fact that our problems are being experienced by other countries but our solutions have kept us out of the financial danger zone, which the shadow Chancellor

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asked me about earlier. They have meant that our credit default swap rates, our interest rates and market interest rates, our credit rating and so on have been protected at a time when many other European countries have experienced real market volatility.

Mr Marcus Jones (Nuneaton) (Con): Following the problems in the eurozone, there seems to have been a suggestion in some quarters that an EU-wide financial transaction tax should be explored. Will the Chancellor categorically confirm to this House that he will strongly oppose any such move?

Mr Osborne: I am not against a financial transaction tax in principle; after all, Britain already has one—the stamp duty on shares. What I am against is a European financial transaction tax that operates only on the European continent and is imposed in Europe. If we can get global agreement, with the United States, China and others, on a world financial transaction tax, all well and good, although I do not think that is terribly likely. If we do not have that, all this business currently conducted in the UK would immediately depart to the United States. We saw the same thing happen when Sweden imposed a financial transaction tax—all the business departed to London. I am therefore against a European financial transaction tax, although, as I say, if we can get global agreement, all well and good.

Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): It is deeply uncomfortable to hear Ministers say from the Dispatch Box that they give advice in private but they do not share it with the House. I wish to give the Chancellor another chance by asking him whether he agrees that as Greece is unable to regain its competitiveness—because it cannot devalue—he is therefore in favour of permanent bail-outs. Another term for those is “permanent gifts”, because that country cannot regain competitiveness.

Mr Osborne: As the hon. Lady knows, these are very market-sensitive issues and I have to be careful, as the UK’s Finance Minister, in what I say about the Greek situation. However, I was pretty clear in my statement in saying that the debt sustainability of Greece had to add up. That is the issue that has to be confronted with Greece in the coming weeks.

Several hon. Members rose

Mr Speaker: Order. At one point I thought that the hon. Member for Reading East (Mr Wilson) had toddled out of the Chamber, but I am delighted that he is back in his place and we want to hear him.

Mr Rob Wilson (Reading East) (Con): My right hon. Friend was right to be concerned in his statement about money finding its way to small and start-up businesses. May I urge him to consider streamlining the current, overly complex enterprise investment scheme and add tax relief to those business angel investors who are making their savings available to small businesses in this country? Such an approach would give a much-needed boost to small business in this country.

Mr Osborne: My hon. Friend will be pleased to know that we have just announced reforms to the EIS to make it more generous and, we hope, simpler to claim.

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Mark Durkan (Foyle) (SDLP): The Chancellor has repeated that the FSA confirmed that UK banks are better capitalised and more liquid than many of their European counterparts. Is that assurance enough for him and how assured is he about the level of UK banks’ exposure to sovereign debt in the eurozone?

Mr Osborne: As the hon. Gentleman will understand, that has been kept under close surveillance at the Treasury—certainly for as long as I have been Chancellor, and no doubt before. We are well aware of the exposure of UK banks to the eurozone peripherals. However, we have satisfied ourselves that even with those exposures—as I said, the FSA has made much of the information public—banks such as RBS are well capitalised and liquid and do not have the kinds of problems that some banks on the continent have.

Claire Perry (Devizes) (Con): It is my belief that the fiscal activism of this Government has created headroom for the next round of quantitative easing. Will the Chancellor tell us what he thinks would have happened if we had carried on spending under the plans of the previous Government and whether there would have been any room at all for a further round of QE?

Mr Osborne: My hon. Friend is right to call it fiscal activism, because one has to step in and take difficult decisions, which the Opposition have ducked, to get the deficit under control, to have a credible plan and to allow monetary policy greater freedom of manoeuvre. We are monetary activists while being fiscally responsible and that is the right approach. The alternative advocated by the Opposition is a big increase in interest rates—[ Interruption. ] Let me let hon. Members into a little secret. The Chancellor does not set the interest rates. They are set not only by the Bank of England but by the markets and if we abandoned our plan and suffered the credit downgrade that the shadow Chancellor is, in effect, advocating, interest rates would go up, families would face higher mortgage bills, people would lose their homes, businesses would go bust and jobs would be lost. That is not a path we will go down.

Derek Twigg (Halton) (Lab): May I refer the Chancellor to Hansard from 12 September, column 770? He might recall that I raised with him the serious problems that small businesses are having in gaining access to financial support, based on talking to businesses in my constituency. Will he tell me what changed in the three weeks between 12 September and his speech at the Tory party conference? If the policy he announced then turns out to be a practical source of extra help, I will welcome it, but he made no mention of it on 12 September and seemed to suggest that enough was being done anyway.

Mr Osborne: I always listen closely to my Cheshire colleagues.

Neil Carmichael (Stroud) (Con): Does my right hon. Friend take comfort in the result of the German Parliament’s vote at the end of last month, when it effectively created a fund with conditions? Does he see that as a generation of political support for the robust action that the Prime Minister has been talking about over the past few days?

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Mr Osborne: The vote in the Bundestag was very encouraging. Of course, it is easier for us in the House of Commons to say that the Germans must act and that we must create this fund, but we must understand that German taxpayers are being asked an awful lot—although I would say that that was one of the consequences of a single currency. Nevertheless, it is reassuring that the vote in the Bundestag was passed not merely with a straightforward majority but with the so-called Chancellor’s majority.

Andrew Selous (South West Bedfordshire) (Con): I very much welcome the action my right hon. Friend has announced about quantitative easing and credit easing. Will he say whether he thinks it would be helpful for the UK economy if our European partners were to adopt the same policy, given that 40% of our exports go to Europe?

Mr Osborne: I think I had better leave their monetary policy to the European Central Bank and not offer them such advice.

Several hon. Members rose

Mr Deputy Speaker (Mr Nigel Evans): Order. I am going to ask for very short questions as we will move on at 5.45 pm, irrespective of whether Members are still standing.

Mr Denis MacShane (Rotherham) (Lab): For five centuries, British policy has been to oppose any hegemon on Europe, whether a single religion, a single state, a single economic model or a single ideology. Why is the Chancellor so keen on creating a fiscal and monetary union that would dictate terms of commerce, trade and banking rules to this country?

Mr Osborne: That was quite a sweep of history. Of course, Britain has always sought to maintain the balance of power in Europe and one could argue that the enlargement policy was quite a successful extension of that policy, but the decision has already been taken with the monetary union and we have to make it work because we would be directly impacted by its failure.

Mr Peter Bone (Wellingborough) (Con): Is not the euro like the parrot in the Monty Python sketch—dead, extinguished, without life—and is not the German Chancellor like the shopkeeper in saying that it is actually healthy and that we really must buy it? Should not the Chancellor be like John Cleese and say, “This is dead and we should bury it”?

Mr Osborne: I think the parrot was a Norwegian blue, and Norway is not in the euro.

Chris Heaton-Harris (Daventry) (Con): Although the Chancellor is completely focused on the eurozone crisis, I am sure that it will not have slipped his notice that meanwhile the European Commission and the European Parliament are asking for more regulation and more money. Could he please instruct his officials to ensure that, while negotiations on these very important matters regarding the eurozone are going on, we kill some of the bad ideas that are flowing from elsewhere in Europe?

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Mr Osborne: We are also arguing strongly for a real freeze in the budget and—I alluded to this earlier—a change in the direction of European policy making so that we do not price this entire continent, including ourselves, out of the world market.

Mr Sam Gyimah (East Surrey) (Con): Does the Chancellor agree that, in the short term, quantitative easing could produce a weaker pound, and that within clearly defined limits that could help to boost exports and therefore drive growth?

Mr Osborne: I have made it a policy not to comment on the value of sterling and I do not intend to break that policy right now.

Penny Mordaunt (Portsmouth North) (Con): Many of my constituents do not want the UK to be part of any new, permanent EU bail-out mechanism. Will the Chancellor confirm that under this Government we will not be part of such a mechanism?

Mr Osborne: I certainly can confirm that, and it is down to the hard negotiating effort of the Prime Minister at the European Council where it was agreed to wind down the temporary EU27 fund and that the permanent bail-out fund would not include Britain.

Christopher Pincher (Tamworth) (Con): With instability in the eurozone and fever in the markets, any Government who contemplated changing three of their five Treasury Ministers would be sending a very dangerous signal. Does my right hon. Friend have any advice for any wannabe political leaders when they choose to sack half their Treasury Bench?

Mr Osborne: As far as I can tell, they got rid of all the people who wanted the shadow Chancellor to be the leader of the Labour party and the leader has put in place all the people who wanted him to win. That tactic was used by the last two leaders of the Labour party, as well, at the Treasury.

Andrew Stephenson (Pendle) (Con): In addition to the structural reforms and other measures that the Chancellor outlined in his statement, what is he doing to ensure that the eurozone follows the lead he is showing in the UK by cutting regulations to stimulate business growth?

Mr Osborne: There is greater recognition in other European member states that we need to make the European continent more competitive, and the pamphlet that we sponsored on making Europe more competitive, which the Prime Minister presented at the European Council, was endorsed by a number of other member states.

Jake Berry (Rossendale and Darwen) (Con): International media, particularly in the USA, are beginning to say that it is a matter of when, not if, Greece defaults on her sovereign debt and leaves the euro. If “I told you so” is not the basis of a good economic policy, what credible and mature plans do we have to deal with the Greek default?

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Mr Osborne: Of course, we make contingencies for all possible outcomes—and people should not take that either way because we plan for all situations. I do not want to comment specifically on the issue that my hon. Friend raises about Greece, but I have made it very clear that the situation in Greece needs to be resolved. It needs to come to a decision and stick to it, and it needs to get the debt dynamics in that country right.

Richard Graham (Gloucester) (Con): Given the close correlation between my right hon. Friend’s disciplined approach to spending, the ratings of our sovereign debt and the low interest rates from which our constituents benefit, has the Treasury been able to calculate the likely impact on our interest rates of the shadow Chancellor’s higher spending policies so that we can calculate the true cost on the average family’s mortgage of the widely discredited plan B that he advocates?

Mr Osborne: We have not done that calculation, but my hon. Friend has given me a very good idea for Wednesday’s debate. We know, because we have all experienced it, what Labour policies lead to: a completely uncontrollable budget deficit; a negative outlook for our nation’s credit rating; and interest rates that were tracking Spain’s. We have been there under the Labour party, and it is remarkable that when it cleared out the shadow Treasury team, it did not clear out the man most responsible in this Parliament for getting Britain into this economic mess.

Andrew Bridgen (North West Leicestershire) (Con): In his statement, the Chancellor quoted the sage remarks of the former Minister, Lord Jones. Perhaps it is the Chancellor’s modesty that prevented him from quoting these remarks that Lord Jones made about the fact that we are sticking with plan A:

“The markets of the world will say, ‘well done George’. That will mean that interest rates are low”,

that we keep our triple A rating, and that we do not become Greece.

Mr Osborne: We should certainly listen to the sage words of the former Labour Trade Minister.

Charlie Elphicke (Dover) (Con): Deficit reduction has kept us ahead of the curve, so our triple A rating has been maintained and interest rates are lower than they otherwise would be. Is it the same with quantitative easing, that it will keep us ahead of the curve if the eurozone does not make the right decisions in the next three or four weeks?

Mr Osborne: As I said, it was an independent decision of the Bank of England. In the explanation that the Governor gave of why the Bank took the decision, he explicitly referred to the situation regarding the euro. I agree with that decision. Work done by the Bank of England suggests that the method can work.

Mr David Nuttall (Bury North) (Con): Following the bail-out of Dexia, does my right hon. Friend consider that there is an increased risk of the credit rating of other eurozone countries, particularly Belgium, being downgraded?

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Mr Osborne: Of course, a number of eurozone countries have seen their credit rating suffer, and have seen it downgraded. That has impacted on the cost of borrowing for their Government and their citizens. That is one of the reasons why it is so important that we maintain a credible fiscal policy—something to which the Governor of the Bank alluded last week, and to which all business organisations have alluded. As far as I can see, only the shadow Chancellor now opposes that.

Mr Deputy Speaker (Mr Nigel Evans): I thank the House for its co-operation. We managed to get everyone in, within time.

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New Schools

5.42 pm

The Secretary of State for Education (Michael Gove): Mr Deputy Speaker, with your permission, I would like to make a statement on the next steps in our school reform programme. Just a few weeks ago, we opened the first 24 free schools—new comprehensive schools free from central and local government bureaucracy, designed to tackle educational inequality, widen choice and raise standards. Those schools have provided great head teachers with a new opportunity to extend educational opportunity, and they have given parents who had been denied a choice the chance to secure educational excellence for their children.

In the most disadvantaged areas of Enfield and Bradford, outstanding state school teachers have opened new schools for children who have been denied the good school places that their parents wanted. In Norwich, the new free school is open from 8 am to 6 pm, 51 weeks a year. In Haringey, Birmingham and Leicester, inclusive schools with a religious ethos, whether Jewish, Sikh or Hindu, now provide parents with more choice. In Hammersmith and north Westminster, outstanding academy sponsors are extending to primary schools the superb education that they have already been providing for secondary school children.

Across the country, new schools, by increasing choice, are forcing existing schools to raise their game. By embodying the principle that every child should have access to a great education, free schools are helping to advance social mobility and make opportunity more equal. It is because we want to make sure that more children benefit that we are today accelerating the pace of reform. The 24 free schools set up in the past year were established in record time. It took the Governments of Margaret Thatcher and John Major five years to establish 15 city technology colleges, and it took Tony Blair eight years from winning office before the first 17 academies were established. The speed with which the first 24 free schools have been set up is astounding, and credit is due to the teachers and parents behind them, and to the superb team of officials at the Department for Education who oversaw the reform.

The establishment of free schools is just one of a series of reforms that we have taken forward explicitly to raise standards in the state sector. We have also ensured that more than 1,000 schools have been able to convert to academy status, each enjoying new freedoms, and each using those freedoms to help other schools. When Tony Blair was Prime Minister, he argued that having 400 academies would be transformational; we now have three times that number.

We are using the academy programme to transform underperforming schools. This year, more underperforming schools than ever are becoming sponsored academies. Outstanding schools that enjoy academy status are increasingly sponsoring underperforming schools. By extending academy freedoms to more great schools, the capacity is created to turn round more disadvantaged schools. We have explicitly targeted those secondaries where fewer than 35% of children get five good GCSEs and those primaries where fewer than 60% of children get to the proper level in English and mathematics. We are targeting those local authorities with the worst

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concentrations of poor schools, and we will lift the floor standard below which no secondary school should fall, so that schools know that by the end of this Parliament at least half their students must get five good GCSEs. Under this Government, there will be no excuses for underperformance.

Sadly, one area where England has underperformed for years is vocational education, but under our reforms and the leadership of my hon. Friend the Minister for Further Education, Skills and Lifelong Learning, that is being addressed. I was pleased that, this weekend, England came fifth in the WorldSkills championships, outstripping nations such as Germany and, indeed, France and proving that, when it comes to vocational skills, our young people are world beaters. [ Interruption. ] I am always happy to acknowledge that our United Kingdom is stronger for all its constituent parts.

We are building on that success, because there is a new model of academy whose development has the potential to be particularly transformational—the university technical college. Thanks to the leadership shown by Lords Adonis and Baker, and the vision of Sir Anthony Bamford of JCB, the first university technical college opened its doors in September last year. Educating young people from the age of 14 to 19, with a curriculum oriented towards practical and technical skills, with support from industry and sponsorship from a university, these schools have the potential to transform vocational education in this country immeasurably for the better. They combine a dedication to academic rigour—with the JCB UTC delivering GCSEs in English, maths, the sciences and modern languages—with the adult disciplines of the workplace. Longer school days and longer school terms contribute to a culture of hard work and high aspirations.

The JCB UTC was joined by another in Walsall this September, and three more are in the pipeline. If we are to ensure that the benefits of UTCs, academies and free schools reach many more children we have to up the pace of reform. That is why I am delighted to be able to announce today that my Department has given the go-ahead to 13 new UTCs in Bristol, Buckinghamshire, Burnley, Bedfordshire, Daventry, Liverpool, Newcastle, Nottingham, Plymouth, Sheffield, Southwark, Wigan and at Silverstone race track. This Baker’s dozen of UTCs will specialise in skills from engineering to life sciences, and I am convinced they have the potential to change the lives of thousands for the better.

In addition, I am delighted that today we can more than double the number of free schools approved to go through to the next stage of opening by confirming that 55 new applications have been accepted, including the first fully bilingual state-funded schools—Brighton bilingual primary school and Europa school in Oxfordshire. They include schools set up by existing strong educational providers such as the Dixons academy and Cuckoo Hall academy. They include the London Academy of Excellence—a school for sixth-formers set up by Brighton college with the aim of getting talented pupils from disadvantaged backgrounds into our leading universities. They also include a school led by Peter Hyman, a former Downing Street policy adviser turned deputy head who wants to create new opportunities for pupils in east London. They also include Atherton free school,

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which has been set up by a community group in the constituency of the right hon. Member for Leigh (Andy Burnham), and they join eight free schools already in the pipeline for opening in 2012.

Altogether, the number of wholly new schools, UTCs and free schools that have been approved to go ahead from 2012 is 79. Once they are open, more than 100 new schools will have been established by the coalition Government to help to raise standards for all. More than 70% of the free schools given the go-ahead today are in the 50% most deprived areas of the country. More than 80% of the schools are in areas where population growth means that we need more good school places. Every single one of those schools was born out of the passion, the idealism and the commitment to excellence of visionary men and women.

The proposer of one of the new schools we approve today, Mr Peter Hyman, explained in T he Guardian why he was opening a free school—and his feelings are shared by every promoter of free schools and UTCs:

“There is no cause greater in our country today, no mission more important, than giving all children an education that inspires them to do great things.”

I could not agree more, which is why I commend this statement to the House.

Stephen Twigg (Liverpool, West Derby) (Lab/Co-op): I welcome the Secretary of State’s statement today and thank him for providing a copy of it in advance.

At the Conservative party conference last week, the Secretary of State said:

“We’re fortunate in this country that we have so many good schools. We’re fortunate that we have so many great teachers.”

I agree with that. May I thank him on behalf of the Opposition for his fitting tribute to Labour’s education record?

Like the Secretary of State, I am pleased to echo the words of Peter Hyman in The Guardian, and I congratulate the university technical colleges and free schools that have secured approval today. UTCs are an exciting innovation modelled, as he said, on the highly successful JCB academy in Staffordshire established under the previous Government. However, there is a real risk that the success of the UTCs will be undermined at birth by the stringent requirements of the English baccalaureate. There is a basic contradiction at the heart of Government policy. The rhetoric is often about freedom and autonomy, but the reality is that the Government want to dictate the details of the school curriculum from the Department.

The Government’s emphasis on the central importance of English and maths is absolutely right and I support them in that, but are we really saying to successful schools and colleges such as the JCB academy that they will be punished because they offer engineering rather than the full range of E-bac subjects? In the summer of 2011 this academy, the first UTC and the model for what the Secretary of State is announcing today, scored 0% on the E-bac. How can that make sense? Surely if we are going to increase the status and quality of vocational education, we need a modern baccalaureate, a policy championed by my predecessor and by Lord Baker?

As we showed in government, Labour supports experimentation and innovation in how we set up new schools. Our academies programme proved that good schools can indeed be delivered. The question for the

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Government’s free schools policy is will the new schools established be good ones. Will they extend opportunities, particularly in deprived areas? Will they drive up school standards in their localities? Will they be based on a fair admissions policy? Most important of all, will they help to close the attainment gap between children from rich and poor backgrounds? That is the basis on which we will scrutinise and challenge the Government’s policy. The Secretary of State’s belief in the programme is ideological. Our scrutiny will be evidence-based.

However, the bigger challenge is the hundreds of schools that need new capital investment and that are not in today’s announcement, including in areas with a severe shortage of school places. Is not the central problem here that the Secretary of State got such a terrible spending review settlement for schools capital from the Treasury a year ago—a cut of 60% in schools capital, compared with a Government average cut of 29%? His failure to persuade the Treasury to give education the settlement given to other Departments means that thousands of children will continue to go to schools with out-of-date facilities, leaking roofs and asbestos.

Today we have an announcement that focuses on just 68 new schools. We wish those schools well, but there are 24,000 schools in England. The Opposition will support reform, investment and innovation that benefit all schools so that we can improve standards for children in all our communities.

Michael Gove: May I thank the hon. Gentleman for his generous words and welcome him back to the Front Bench? He was a superb Minister in the Department for Education. Like Lord Adonis and the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett), he was a reformist in government and I am more than happy to underline my appreciation for the work that he did. He is the third shadow Education Secretary whom I have faced across the Dispatch Box. His two predecessors indulged in raucous opportunistic assaults on our reform programme and were promoted as a consequence. I realise that there is now a battle between ambition and principle in the hon. Gentleman’s breast. I know that he will choose principle, as he always has done throughout his political career.

I am grateful to the hon. Gentleman for the support that he has given to the university technical colleges. They are emphatically a cross-party achievement. Lord Adonis played a part. I think others, including the right hon. Member for Morley and Outwood (Ed Balls), acted as fairy godfathers to the project. I am delighted that UTCs have their support.

It is important to recognise that the English baccalaureate is there to ensure that students pursue the sort of subjects that will get them into universities. The great advantage of university technical colleges is that they also have that link with higher education institutions that help to raise aspiration for all. There is no single tool that will raise aspiration in all our communities. We have to use whatever tools are to hand. I believe that the English baccalaureate, as so many head teachers are demonstrating, helps alongside high quality vocational education, to raise aspirations and increase the number of students going into higher education.

The hon. Gentleman said that when he was looking at free schools, he wanted to apply a series of tests. The tests that he asked me to apply are: will they extend

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opportunity, will they drive up standards, will they have a fair admissions policy and will they close the attainment gap? Those are four sensible tests, and I would add a fifth—can they ensure that we have a low-cost way of adding capacity to our school system so that exactly the solution to the problem that he alluded to, the need for good school places, was found at the lowest possible cost?

The hon. Gentleman asked me about capital and drew attention to the difficulties that we have with capital in the Department for Education. These difficulties, I am afraid, are a consequence of economic decisions that were taken while he was out of the House by his successors in the Labour Government, and they landed us with a poisoned economic legacy. We are doing our very best to deal with it, and one of the things that we can do is ensure that we get more schools more cheaply. That is why I am so delighted that as well as the additional sums that have been made available for school repair, and as well as the additional sums that we are making available for new schools, the free schools programme has seen schools being delivered at a unit cost lower than was the case under the Labour Government’s school building programme.

Finally, the hon. Gentleman asked me whether I regretted not getting the same settlement for the Department for Education as other Government Departments. No, I do not regret it. I am delighted that we secured the same level of funding in cash terms for education as the previous Government had secured. I am delighted that we had the best revenue deal of any domestic Department, apart from the Department of Health. I am overjoyed that, thanks to the support of our coalition partners, there is £2.5 billion of additional money going in the pupil premium to the very poorest schools. It is additional money being spent in a progressive cause, and it is deliverable only thanks to the leadership shown by two parties working together in the national interest.

Mr Graham Stuart (Beverley and Holderness) (Con): The Secretary of State is bringing choice and diversity to our education system while seeing off his shadow at the same time.

For too many 14-year-olds school is an ordeal from which they learn and benefit not at all. I welcome the support for more UTCs, but for those who do not have the choice of a UTC, what steps will the Secretary of State take to ensure that young 14-year-olds can go to college instead of school if they wish?

Michael Gove: My hon. Friend makes a very good point, which is that we need to think hard about the paths that those from the age of 14 will follow. One of the things that I believe we can do is ensure that high quality further education colleges make available their resources, whether through sponsoring underperforming schools or allowing lecturers or others from FE colleges to operate in schools. Following on from the Wolf report, we have already changed the law to allow that to happen. But there is more that can be done to integrate the great work that FE colleges and schools do.

Mr Frank Field (Birkenhead) (Lab): May I challenge the slight complacency that I noticed in the Secretary of State’s speech when he referred to UTCs? Is it not true that if we are going to do anything about the

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competitive position of this country and if we are going to win new markets and offer rising living standards in this country, we do not want a Secretary of State coming to the House offering 13 UTCs? We want a Secretary of State coming and offering 113 such bodies. When does he expect to announce the next round of UTCs? When he does, I hope he will include Birkenhead in the list.

Michael Gove: There are few parts of the country that need schools of quality more than the areas around Merseyside. In Birkenhead, the young people who want a better future are lucky to have such a great champion. We will be bringing forward more UTC proposals, but sadly our capacity to invest in schools of that quality is constrained inevitably by the poisoned economic legacy that we were left.

Robert Halfon (Harlow) (Con): Does my right hon. Friend agree that UTCs are an essential instrument of social justice, that they transform how we look at vocational education and that they provide young people with a conveyer belt to apprenticeships? Will he also confirm that strong bids, such as that from Harlow college and Anglia Ruskin, will be considered in the next round and that there will definitely be funding for the next phase of UTCs?

Michael Gove: Absolutely. My hon. Friend, like the right hon. Member for Birkenhead (Mr Field), wants me to go further and faster with reform. If only I could. I can confirm, however, that strong bids, such as those from Birkenhead and Harlow, which have not made the cut this time but which benefit from having very effective constituency advocates and strong backing from an outstanding college or a great university, are bids that we would like to be able to support in the future. We shall continue to work with bidders to try to ensure that they can be agreed.

Ian Mearns (Gateshead) (Lab): On a recent visit to the Department by the Education Select Committee, officials said that they were surprised by the rate of applications for academy status. Undoubtedly many schools will be applying for the right reasons—because they want to unleash the educational potential among their teaching staff and youngsters. However, others will be drawn by the financial carrot—capital—or by the fear of being left behind if they do not apply for that status. Is the Secretary of State certain that he has the resources to fund this package appropriately without leaving other schools behind?

Michael Gove: Absolutely. That is a very good point. The hon. Gentleman, in local government and the House, has always tried to ensure that we fund schools equitably. We have always sought to ensure that maintained schools and academies are funded fairly. The word “carrot” is sometimes used to describe the incentives inherent in academy status, but I want to make it clear that if a school becomes an academy, it does not receive any additional money. It is just that it can spend money on it pupils’ priorities—money that had hitherto been spent by others on their behalf.

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Dan Rogerson (North Cornwall) (LD): I welcome the Secretary of State’s confirmation that the programme will focus on providing capacity where it is needed. However, when considering applications, will he also bear in mind the need for new providers to work alongside existing providers to complement provision?

Michael Gove: It is right that we ensure, when new schools are established, that they add to the great schools already there—whether through a different type of pedagogy or capacity. I am grateful to the hon. Member for Liverpool, West Derby (Stephen Twigg) for underlining the point that I made at the Conservative party conference—the fact that we need new schools and need to reform should not take away for a moment from the significant achievements that have been made over the past several years by schools and teachers doing a great job in the maintained sector.

Lilian Greenwood (Nottingham South) (Lab): How will the Secretary of State ensure that my constituents are fully involved in, and consulted on, plans for the new UTC in our city?

Michael Gove: Having visited Nottingham twice over the past six weeks, I am under no illusions about the passion that Nottingham’s MPs and its people have for improving educational performance. I shall do everything possible to ensure that the local community is involved in plans that I think are exciting and will extend opportunities to a particularly deprived constituency.

Damian Hinds (East Hampshire) (Con): May I congratulate my right hon. Friend on the pace of his reforms and his constant focus on narrowing the gap for the underprivileged? Does he agree that the benefit of free schools can be felt not just where they appear but much wider afield? The fact that such a school could be set up helps to raise the bar. They can act as beacons of excellence and innovation.

Michael Gove: My hon. Friend makes my own case better than I could ever make it myself. It is true. We have seen with the academy programme that excellent schools prompt the question, “Why can’t all schools be like that?” As more schools adopt longer school days, longer terms and more personalised learning, parents increasingly ask, “Why can’t more schools offer what these schools are offering?” It is a virtuous circle that raises aspiration and attainment for all.

John Mann (Bassetlaw) (Lab): Seventeen scheduled new academies, including three in my constituency, did not go ahead this September because the Secretary of State cocked up the primary legislation on academies and private finance initiatives. By way of an apology, will he guarantee to underwrite all the additional legal costs that these schools face because he messed up the legislation?

Michael Gove: As ever, I am grateful for the constructive tone taken by the hon. Gentleman. I have long admired his bipartisanship. I should point out that those PFI contracts were signed by the previous Government. However, I shall refrain from criticising the Ministers responsible for signing them, and instead seek to work

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with him to ensure that children in that particularly important part of Nottinghamshire receive the support that they deserve.

Graham Evans (Weaver Vale) (Con): I pay tribute to my right hon. Friend and the parents of Sandymoor on the announcement of the new free school there. The Sandymoor free school will provide a rigorous science-based education to all children, from whatever background, which will produce the engineers, scientists and entrepreneurs that this country needs to pay its way in the world.

Michael Gove: I am grateful for my hon. Friend’s support. I am convinced that the emphasis on science in so many of the free school applications is exactly what a 21st century education system needs.

Glenda Jackson (Hampstead and Kilburn) (Lab): In a typically self-satisfied statement, the Secretary of State referred to the principle that every child should have access to a great education. The issue in my constituency is a desperate shortage of school places now, not only in junior schools, but in secondary schools. What does he intend to do to ensure that those children benefit from what he regards as a basic principle?

Michael Gove: I am delighted that one of the first free schools was opened in the hon. Lady’s constituency. I would be delighted to visit it with her. I am also delighted that organisations such as University college London have sought to extend academy provision in Camden. Sadly some small-r-reactionary and small-c-conservative elements in the local Labour party have not advanced that cause. I cannot imagine that she would make common cause with those who put ideology above children’s futures.

Neil Carmichael (Stroud) (Con): I welcome the Secretary of State’s decision today. I also think that he is absolutely right to quote Mr Hyman’s comments about inspiring young people to do great things. However, will he ensure that those great things include contributing to manufacturing and engineering in this country?

Michael Gove: My hon. Friend is absolutely right. We all know that in contributing to economic growth, we cannot at this stage anticipate all the skills that the jobs and companies of the future will require, but we know that a rigorous training in mathematic and scientific disciplines will help. That is the emphasis of so many of the schools being set up today.

Nic Dakin (Scunthorpe) (Lab): Will the Secretary of State clarify whether the free schools and UTCs will be funded on projected student numbers rather than actual student numbers like other schools?

Michael Gove: We will ensure that in all free schools and UTCs, the existing funding mechanism for the first 24 free schools and existing UTCs carries on.

Angie Bray (Ealing Central and Acton) (Con): Will the Secretary of State confirm that Ealing is on the list to get a new free school? If so, does he not agree that this will not only help to alleviate pressure on school

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places in the borough but massively widen the choice for parents of schools to which they might want to send their children?

Michael Gove: I am grateful to be able to confirm that there will be a school that should take students, I hope, from both the constituency of the hon. Member for Ealing North (Stephen Pound) and my hon. Friend’s constituency. It is the extension of an already great offer provided by an outstanding head teacher in the state sector. I am delighted that an area of significant population growth is getting the additional capacity that it needs from an outstanding head teacher.

Fiona Mactaggart (Slough) (Lab): I think that I was one of the few MPs who attended the skills olympiad. I was impressed by what British young people could achieve, but I am concerned that the English baccalaureate will reduce the practical skills that young people can learn. Will the Secretary of State think again, as I have asked him frequently to do, about including at least one subject in which young people are making, creating, doing and that will count towards the basic five GCSEs that he expects schools to provide?

Michael Gove: I underline to the hon. Lady that the principal accountability measure for schools is five GCSEs, including English and mathematics. Among the other three GCSEs or equivalents, there can be a number of applied, technical and vocational areas. The English baccalaureate is a useful accountability measure and raises aspirations, but it is not the be-all and end-all and it has never been the opinion of the Government that it should be. We recognise achievement in all its forms, and it is incumbent on everyone, on both sides of the House, to celebrate the achievement of those who succeed vocationally, as she did in the first half of her question.

Chris Heaton-Harris (Daventry) (Con): My right hon. Friend will not be surprised to hear that I am delighted that the UTC for new technologies has been approved for Daventry. It is vital for raising aspirations among young people in my constituency and the surrounding area. Part of the vision for the Daventry UTC is to use local procurement solutions for the design-and-build phase. It is envisaged that the lead sponsor, Moulton college, and its partners will be looking for local architects and contractors to assist with the design and build. Will there be flexibility in the procurement phase for UTCs to allow for this, as alluded to by the Chancellor in his previous statement?

Michael Gove: I always defer to the Chancellor.

Robert Flello (Stoke-on-Trent South) (Lab): The Secretary of State referred to faith schools in his statement. He might not be aware that there are a number of faith schools across the UK, including a couple in my city of Stoke-on-Trent, that, because they are voluntary aided, are having to pay VAT on the Building Schools for the Future money that is being made available to them. Will he meet me to discuss this issue in greater detail, because it is sapping huge amounts of money that should be going to children but is actually going to the Treasury?

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Michael Gove: I know that there are some excellent faith schools in Stoke-on-Trent, including an outstanding Roman Catholic grammar school. I would be more than happy for either I or one of my colleagues to talk to the hon. Gentleman.

Jessica Lee (Erewash) (Con): In Erewash, we have seen a number of academy schools established over the past year, including two conversions by the Ormiston trust, which stepped forward and opened those two schools during this academic year. The pace of change has already been mentioned, but for me it is the positive response from head teachers and schools coming forward and taking on this programme with gusto and enthusiasm that really shows that the drive for autonomy and excellence must go on.

Michael Gove: I am really grateful to my hon. Friend, not least for the support she gave head teachers early in the life of the coalition Government to overcome some of the entrenched opposition to academy status. She does a superb job as a constituency Member and I know that future generations of children will thank her for it.

Ms Diane Abbott (Hackney North and Stoke Newington) (Lab): The Secretary of State will be aware that, as well as new schools, we will have a new chief inspector of schools, Sir Michael Wilshaw, whom I first met when he was head of St Bonaventure’s school in Newham, where he ran an inner-city boys school that was 95% African and Afro-Caribbean and got outstanding results. Does the Secretary of State agree that Sir Michael will bring to the inspectorate the same inspired leadership and emphasis on standards that he had at St Bonaventure’s school and at Mossbourne academy?

Michael Gove: Obviously, Her Majesty has yet to confirm her decision on who her chief inspector of schools will be. However, with regard to what the hon. Lady has said, I could not have put it better myself.

Dr Andrew Murrison (South West Wiltshire) (Con): My right hon. Friend has shown his concern for the relative disadvantage often experienced by service children by including them in the pupil premium. One of the main problems is that those children, because they move around a great deal, are sometimes particularly disadvantaged when they apply to the best schools. How will they be helped with free schools and their admissions policies?

Michael Gove: We hope that all maintained schools will abide by a new admissions code, which is explicitly designed to make it easier for schools to manage in-year admissions and for service children to secure admission to the school of their parents’ choice.

Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op): Of the six secondary schools in my constituency, three have been built new and three rebuilt, thanks to the Labour Government, so I am pleased that the Secretary of State and the Government have agreed to a proposed new 800-place academy near Victoria park in my constituency. It has the benefit of being sponsored by Mossbourne academy, which has a strong track

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record. In his haste, how will he ensure that other new academies meet the same high standards that all Members across the House would like to see?

Michael Gove: I am very grateful to the hon. Lady. I know she has returned to the Back Benches, so may I say on a personal note that I thought she was a distinguished member of the shadow Cabinet and that she has fought amazingly hard for her constituency? Her question absolutely gets to the nub of it. I am delighted that we are supporting the new Victoria Park academy and that it is linked with Mossbourne academy. I will continue to work with the Learning Trust in Hackney and will ask the new chief inspector, whoever he or she may be, to keep a special eye on that borough. I am sure that he or she, whoever they may be, will join me and ensure that it is at the top of their agenda.

Sir Alan Beith (Berwick-upon-Tweed) (LD): Will my right hon. Friend assure me that spending on free schools will not endanger the funding that is needed to replace those schools that were left out of the previous Government’s programme and are in a desperate state, such as the Duchess’s community high school in Alnwick?

Michael Gove: I can provide exactly that assurance.

Stephen Pound (Ealing North) (Lab): May I assume from the subtle suggestiveness of the Secretary of State’s reply to the hon. Member for Ealing Central and Acton (Angie Bray) that the inspirational Alice Hudson of Twyford high school has been successful in the proposals regarding north Greenford? The question I wished to ask before that matter was raised was whether he will answer the question I asked him in writing two months ago about whether teachers and head teachers in free schools will be subject to public sector pay controls.

Michael Gove: Yes and no.

Stephen Pound: In which order?

Michael Gove: In that order.

Henry Smith (Crawley) (Con): Will my right hon. Friend join me in congratulating Andrew Snowdon and his dedicated team in Crawley, who set up the new Discovery free school, which has been successfully open now for just over a month? Will he say how free schools and academies will help to increase admissions choice and capacity in my constituency, where that has been a problem in recent years?

Michael Gove: I am very grateful to my hon. Friend, who was a very distinguished leader of West Sussex county council. In Crawley we need additional capacity and people also need proper choice. The Discovery free school provides both.

Julie Hilling (Bolton West) (Lab): I, too, attended the world skills event at the ExCel centre—I was supporting my constituent, Andrew Fielding, from MBDA, who was competing in electronics. His employers and others at the event told me how essential it is that young people are taught technology in school. What will the Secretary

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of State do to ensure that there is good technology teaching with up-to-date equipment for all young people in all schools, not just technology colleges?

Michael Gove: We are doing everything possible to attract new teachers into science, technology, engineering and mathematics by transforming initial teacher training and providing additional support for teachers who are qualified in those disciplines. We will say more on that when we publish our teacher training strategy, which I hope will be later this month or early next month.

James Wharton (Stockton South) (Con): I thank the Secretary of State for the support he has given me and the residents and parents campaigning for a new free school in my constituency. Will he confirm that the statements he has given today mean that his Department will do all it can to support those campaigners to deliver the new school that is so badly needed in Ingleby Barwick? I cannot thank him enough for his support, which has meant an awful lot for parents and campaigners. Will he confirm that the Department will give them its full and wholehearted support?

Michael Gove: Absolutely. When I visited my hon. Friend’s constituency, he showed me not only a superb existing maintained school that needed additional support, which I was delighted to visit, but the parental campaigners for the Ingleby Barwick free school. They were a model of what the big society is about and I am delighted to offer them our support.

Mr Nick Raynsford (Greenwich and Woolwich) (Lab): The Secretary of State is probably aware that the Greenwich free school, which is one of those approved in his statement, has not yet got premises. The site that the school is looking at is, in my judgment and that of others, including the education authority, very unsuitable for a secondary school. I understand his wish to proceed fast, but he will appreciate that going too fast without suitable premises could be a recipe for disaster for something that ought to be a success. Will he ensure that his officials and the promoters of the Greenwich free school give more attention to finding a really suitable location?

Michael Gove: That is a very fair point. I know that some promoters have superb visions for their schools and that there is real demand, but in some areas, such as London, there are difficulties in securing the right site. If we can work constructively, I am sure that we can make it happen.

Andrew Selous (South West Bedfordshire) (Con): May I warmly welcome the new university technical college announced by the Secretary of State today for Houghton Regis in my constituency? What difference does he think it will make to the manufacturing industry locally, which has had a challenging time in recent years?

Michael Gove: We are all committed across the House to rebalancing the economy and ensuring that, in addition to our strength in financial services, we recover our strength in manufacturing. If we are to do that, we need to ensure that children acquire the necessary mathematical and scientific skills at the earliest possible age. I think

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that the involvement of more than 130 companies in the UTC programme, as well as high-performing higher education institutions, will help us to do just that.

Mrs Jenny Chapman (Darlington) (Lab): I am afraid that I must inform the Secretary of State that the Tory group on Darlington borough council somewhat embarrassed him recently by inviting Lord Baker to Darlington to discuss the prospect of a UTC. I do not think that they fully understood the scheme, because in Darlington we have enough secondary school places. The scheme seems quite inflexible, as a new school would have to be established, rather than an existing one converted. Will the Secretary of State spare their blushes in future by allowing schools to convert, rather than being brand new?

Michael Gove: Rather than embarrassing me, Darlington Conservatives have shown that they have exceptionally good judgment by inviting Lord Baker rather than me to address them. I absolutely take the hon. Lady’s point. Sometimes we will look at existing schools to see how we can allow them to develop a specialism that will support high-quality vocational learning.

Craig Whittaker (Calder Valley) (Con): In addition to welcoming the announcements made today, I would also like to welcome the Government’s recent announcement of the £500 million pot for rebuilding the most dilapidated schools in the country, such as Todmorden high and Calder high in Calder valley, which never qualified under BSF because they overachieved and there was no deprivation. Will the Secretary of State look at guidance for those many schools across the country that want to convert to academies but are so dilapidated that the fabric of their buildings is a liability for the people doing it?

Michael Gove: Those are two very fair points. I would never want to prevent any school that wanted to become an academy from doing so, nor would I wish to coerce unduly any school that was reluctant to take that step, but it is important that any judgment on capital be made on the basis of need, not on the status or location of any school. That is why schools such as the Duchess’s community high school in Alnwick, a school I visited along with Todmorden high, which were not in the Building Schools for the Future programme, are being judged alongside other schools that were, and they are being done so on a totally equal basis.

Mr Denis MacShane (Rotherham) (Lab): Some two hours ago, my right hon. Friend the Member for Rother Valley (Mr Barron) received a faxed letter from the Under-Secretary of State for Education, the hon. Member for East Worthing and Shoreham (Tim Loughton), announcing the opening of a free school in my constituency. It is called Rotherham, not Rother Valley. The proposed head teacher, Miss Charlotte Blencowe, is a failed Conservative municipal candidate who was rejected from a job at Clifton comprehensive and wants to open the school on a disused B&Q site next to one of the busiest and most fume-filled roundabouts in south Yorkshire.

I have had no communication on the matter, and it is going to cause real problems. We have falling rolls in Rotherham, but we had the best GCSE results this year,

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beating the Department’s own standards, so will the Secretary of State, out of courtesy, meet me to discuss the issue, and will he at the Dispatch Box now guarantee that no money is to be taken from the existing education budget for Rotherham in order to allow Miss Blencowe to award herself, as the Secretary of State said, the salary that she deems appropriate?

Michael Gove: It is an uncharacteristic lapse from the normally high standards of bipartisanship and open-mindedness that the right hon. Gentleman brings to the House, and I am sorry that he feels churlish about the establishment of a new school in his constituency.

Mr MacShane: The letter was faxed to somebody else.

Michael Gove: I hope that this—I am sure, outstanding —new school will attract, from all of south and west Yorkshire, students who will want to benefit from the high quality of education. It is always a pleasure to talk informally to the right hon. Gentleman, and always a pleasure to work with him in his relentless crusade to put politics aside and our children first.

Richard Fuller (Bedford) (Con): The Secretary of State must be heartened by the encouraging words from Members on both sides of the House for his policy announcement today, but, as he knows, there are still Sirte-like pockets of opposition to his policies from stonewalling councils and knee-jerk ideologues in some unions, including unfortunately the general secretary of the NASUWT, who today claimed that for young people UTCs

“could reduce their employment chances later on.”

Does the Secretary of State agree that the best action the shadow Secretary of State can take is to go back to his union paymasters and tell them to drop their opposition to UTCs and free schools and get on board with a policy that is all about social mobility in our country?

Michael Gove: It is very good point by my hon. Friend. The hon. Member for Liverpool, West Derby (Stephen Twigg) is new to the job, but, on the basis of everything that he has said so far, I think that there may be a real change in the Labour party’s approach towards the issue, so I encourage him on the path of virtue and say no more than that.

Pat Glass (North West Durham) (Lab): May I clarify the Secretary of State’s response to my hon. Friend the Member for Ealing North (Stephen Pound)—that head teachers and teachers in free schools will not be subject to the public sector pay freeze? Will there be any upper limit at all, or will governors and trustees be able to pay those people whatever they want? Will there be a limit so that such teachers cannot pay themselves 20% more than the lowest-paid member of staff?

Michael Gove: Not just free schools and UTCs, but all academies have the freedom to depart from national terms and conditions, and, as a result, teachers in academies, even though they are younger on average than teachers in other maintained schools, are paid on

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average £1,000 a year more. I personally think that, notwithstanding the real problems we have in dealing with the poisoned economic legacy of the previous Government, we should do everything we can to reward great professionals. Paying teachers more at every level is something that we, across the House, should aspire to do as resources allow.

Matthew Hancock (West Suffolk) (Con): The Secretary of State will know that in West Suffolk we have two proposed free schools at different stages of development to replace closing middle schools. Will he join me in urging parents not only in Brandon, at the Breckland middle school, but in Ixworth and in Stanton to put forward expressions of interest in joining the free schools—whether or not they come through, and I hope that they do—in order to ensure that the project gets off the ground?

Michael Gove: Absolutely. One of the great things about Suffolk as a local authority is that its leader and its lead member for education recognise that, at a time of change, embracing academies and free schools can complement the already great state schools for which they are responsible. As for visionary leadership in local government, you have to go a long way to beat Suffolk.

Alok Sharma (Reading West) (Con): Will the Secretary of State join me in congratulating the All Saints junior free school, which opened its doors in my constituency in September? The reason why parents pressed for it is quite simple: there is huge pressure on school places in Reading, parents and students are not able to obtain their choice of feeder school, and the school’s opening will help parents and students throughout Reading.

Michael Gove: I am grateful to my hon. Friend for his support, and I am delighted that Reading is one of the areas benefiting. It is an area of real population growth.

Mr Edward Timpson (Crewe and Nantwich) (Con): It is only right that free schools and, indeed, academies should follow the school admissions code, particularly in relation to the high priority that should be given to looked-after children. Yet, despite having been given that highest priority for many years, there is still a dearth of looked-after children in our best schools. What can the Secretary of State do to encourage new free schools and academies to play their part in raising the social mobility of, in particular, children in care?

Michael Gove: Looked-after children, like children who are eligible for free school meals, are eligible for the pupil premium, which is a strong incentive for free schools either to prioritise admissions or to locate in a way that helps those children. More needs to be done, however, and we will bring forward some proposals, I hope, later this year to help ensure that the whole care and education system is better oriented towards the welfare of looked-after and adopted children.

Andrew Stephenson (Pendle) (Con): I am delighted to welcome the news that the Visions Learning Trust’s proposal to create a UTC in east Lancashire has been approved. The bid was sponsored by Rolls-Royce, Fort Vale Engineering, Graham Engineering, Weston EU, Training 2000 and many other significant employers in

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my constituency. Does the Secretary of Stage agree that, in an area as reliant on manufacturing as Pendle, that is a huge boost to local businesses and jobs?

Michael Gove: Yes, it was a cracking bid, and I am delighted that Pendle will benefit from it.

Patrick Mercer (Newark) (Con): May I thank the Secretary of State for supporting the bids for free schools in Newark? He will share my delight at the Grove school being placed top of the list of priorities by Nottinghamshire county council, but what message does he now have for the Grove?

Michael Gove: I am grateful to my hon. Friend for the way in which he has championed those schools in his constituency that lost out as a result of the unfortunate cancellation of the Building Schools for the Future programme, and I look forward to having a private meeting with him and then discussing how I and my ministerial team can do more to help schools in his constituency.

Dr Thérèse Coffey (Suffolk Coastal) (Con): I was thrilled to receive the letter from Lord Hill stating that the proposed school in Saxmundham has been given clearance to go to the next stage, and I am sure that my right hon. Friend the Secretary of State will join me in thanking parents, community leaders and the Seckford Foundation for taking the scheme further, but what advice does he have for certain head teachers in neighbouring schools who see it as a competitive threat, rather than as a welcome addition to the educational offering in Suffolk?

Michael Gove: The experience so far of existing head teachers, where new free schools have been set up, has been in some cases concern before the application has come forward and, afterwards, some trepidation, but after the school has opened there has been a general recognition that wider choice and an emphasis on helping the most disadvantaged students has helped to raise the prestige and reputation of state education overall, so such proposals should be seen as friendly emulation and not as a threat to any school.

Mr David Ward (Bradford East) (LD): Last week, I visited a school in Bradford, you will not be surprised to hear, Mr Deputy Speaker. Indeed, you will know that it was not in Bingley and Ilkley when I tell you that 60% of the children in one year 3 class were not in it in year 1. We have more than 7,000 in-year starters in our schools, and that exceeds the number of children who start in reception class each year. That is the level of mobility and churn, so will the Secretary of State please tell me how on earth the local education authority is to fulfil its statutory responsibility for the strategic planning of school places at the same time as maintained sector begins to fragment completely?

Michael Gove: I am grateful to my hon. Friend for his question. I appreciate that one of the challenges in Bradford is that we have not just huge population churn, but different communities with different needs and a requirement to ensure that those communities feel that they are part of one Bradford. It is therefore important that, when we bring forward proposals for

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free schools and the growth in academies, we recognise the achievement of the local authority and of the leadership of existing maintained schools. I hope that, before too long, I will have the chance to come to Bradford and talk to existing and new head teachers about how we can all work together in the interests of Bradford’s children.

Mr Rob Wilson (Reading East) (Con): I warmly welcome my right hon. Friend’s statement. I am delighted that the new school that I championed in Reading East is moving towards a 2012 opening. Will he confirm that UTCs are an essential addition to choice in our schools and join me in acknowledging the huge contribution that Lord Baker of Dorking has made to this successful programme?

Michael Gove: I am delighted to underline my debt to both Lord Baker of Dorking and my hon. Friend, who was one of the early advocates of free schools and the pupil premium. I am absolutely delighted that this ministerial team is able to take forward proposals that he championed when we were in opposition.

Mr Steve Brine (Winchester) (Con): This morning, I visited Harestock primary school in my constituency, where nearly 20% of pupils have a family member serving our country in the armed forces. The Secretary of State knows how warmly I welcome the new school places that the Government have created, but many of the service parents whom I met this morning are greatly concerned about the availability of school places in the system, as families return from Germany over the next few years. Will the Secretary of State work with his colleagues at the Ministry of Defence to see that those families can come home with some confidence in the next two or three years, instead of feeling fear, as they do currently?

Michael Gove: I absolutely will. Of course, it is for the best of reasons that 14,000 service personnel are returning from Germany; thanks to the inspirational leadership of Baroness Thatcher and Ronald Reagan, we won the cold war and are able now to welcome back the servicemen of the British Army on the Rhine.

We need to make sure that those who have worn the Queen’s uniform enjoy the best possible education. The service premium and the additional changes that we are making to the admissions code are part of that. Of course, we have to work with the Ministry of Defence to do so, and I will be delighted to work—for many years to come, I hope—with my right hon. Friend the Member for North Somerset (Dr Fox), who is doing such a great job in championing service families and defending the armed forces covenant.

Mr Deputy Speaker (Mr Nigel Evans): Last but not least, I call Dr John Pugh.

John Pugh (Southport) (LD): To finish on a factual note, how many free school applications have been rejected or declined and what percentage is that of the total?

Michael Gove: More than 200 have been declined. I should emphasise that some of those were free school applications that had significant merits, but required

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additional work to take forward. One of the reasons why only some 50-plus were taken forward is that we wanted to make sure that every free school application was meritorious.

The point was well made by the shadow Education Secretary—the quality and performance of charter schools in the United States was variable. However, in states where the performance of charter schools was strong, a filter had been placed by the authorising authority to make sure that only the best applications went forward. Overall, between a fifth and slightly more than a fifth—I do not know the exact percentage—of proposed schools have been approved. One of the reasons for that is that, like the hon. Gentleman, we want to make sure that when we spend public money, it goes to people who are going to use it in the public interest.

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Protection of Freedoms Bill (Programme) (No. 3)

6.33 pm

Mr Deputy Speaker (Mr Nigel Evans): The debate may continue for 45 minutes. I should inform the House that Mr Speaker has selected the amendment on the Order Paper in the name of Mr Edward Leigh.

The Parliamentary Under-Secretary of State for the Home Department (James Brokenshire): I beg to move,

That the Order of 1 March 2011 (Protection of Freedoms Bill (Programme)) be varied as follows—

1. Paragraphs 4 and 5 shall be omitted.

2. Proceedings on consideration and Third Reading shall be concluded in two days.

3. Proceedings on consideration shall be taken on each of those days as shown in the following Table and in the order so shown.

4. Each part of the proceedings shall (so far as not previously concluded) be brought to a conclusion at the time specified in relation to it in the second column of the Table.

First day


Time for conclusion of proceedings

New Clauses and New Schedules relating to, and amendments to,

Chapter 1 of Part 1.

8.30 pm

New Clauses and New Schedules relating to, and amendments to,

Chapter 2 of Part 3.

10 pm

Second day


Time for conclusion of proceedings

New Clauses and New Schedules relating to, and amendments to,

Chapter 1 of Part 2.

5.30 pm

New Clauses and New Schedules relating to, and amendments to, Part 5.

7.30 pm

New Clauses and New Schedules relating to, and amendments to, Part 4, Chapter 2 of Part 1,

Chapter 2 of Part 2, Chapter 1 of Part 3, and Part 6; remaining New Clauses; remaining New Schedules; amendments to Part 7

and remaining proceedings on


9 pm

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at 10.00 pm on the second day.

The programme motion provides two days for Report and Third Reading, and it follows more than 44 hours of consideration, over 10 days, in Public Bill Committee. During that time, the Committee was able to scrutinise carefully all aspects of the Bill.

In Committee, much of the focus of the debate was on the provisions in respect of the retention of DNA, the further regulation of CCTV, the prohibition on

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wheel clamping without lawful authority, the changes to counter-terrorism powers and the reform of the vetting and barring scheme and criminal records regime. It is right that those provisions should also be the focus of our deliberations on Report. The programme motion has accordingly been structured to achieve that.

The motion provides for the provisions on the retention of DNA and in respect of parking enforcement to be considered until 10 o’clock this evening. When we resume tomorrow, we will first consider the CCTV clauses, followed by the amendments to the safeguarding and criminal records provisions in part 5. That will allow some time to consider the counter-terrorism and other provisions in the Bill before we move on to Third Reading at 9 o’clock tomorrow evening.

Mr Philip Hollobone (Kettering) (Con): My hon. Friend said that the Government have generously given the House two days at this stage of the proceedings. We have already lost three hours because the Government decided to make three statements to the House; with one hand they provide time generously, but with the other they take that time away.

James Brokenshire: As my hon. Friend will appreciate, there is a balance to be struck in all these proceedings. We maintain that the programme motion strikes that right and appropriate balance in respect of consideration of the Bill.

Andrew Miller (Ellesmere Port and Neston) (Lab): The Minister listed a number of items that the Committee rightly dealt with in great detail. However, it did not cover in any detail the issues raised in new clause 17, which is enormously important to the whole research community. Can the Minister guarantee that time will be available for a debate on that new clause?

James Brokenshire: We have sought to structure the programme motion to enable consideration of the Bill, and that is right and proper for Report. A priority appropriately has to be given to enable scrutiny of the Bill as drafted. Obviously, it is for the House to decide within the programme motion the extent to which it will debate particular clauses, but we have had to strike as fair a balance as we can on the provisions of the Bill to ensure that appropriate scrutiny is applied.

Mr Peter Bone (Wellingborough) (Con): I appreciate that my hon. Friend is a coalition Minister and not a Conservative one; before we got into power, the Conservative party was against having programme motions.

Given that we have lost three hours or so to statements, would not a fair balance have been to have allowed us to go for three hours extra tonight? We have been away from this place for a long time; surely an extra three hours this evening would have been fair. That is what democracy is about—we are not trying to force things through. Let us have three hours extra tonight.

James Brokenshire: My hon. Friend takes the issues of the House extremely seriously, and I respect him for that. The Government have made important changes to how legislation is scrutinised. We are having two days on Report for the Bill, and that is markedly different

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from what we would have seen from the previous Government; we would have had a day for consideration of a Bill of this kind.

The terms of the programme motion will come as a disappointment to my hon. Friend the Member for Gainsborough (Mr Leigh) and the other right hon. and hon. Members who have put their name to new clause 1. Despite the two days that we have set aside for Report, twice the normal allocation that we were accustomed to seeing in the last Parliament, regrettably it is unlikely that the House will be able to consider all the new clauses tabled for debate.

As I said, the programme motion has been constructed to ensure that there is adequate time to consider the key provisions already in the Bill. I believe that that is the right approach. Although this is not the occasion to consider the substance of new clause 1, which seeks to amend section 5 of the Public Order Act 1986, I fully recognise that the matter is of considerable interest to a number of Members on both sides of the House. That much is clear from the number of right hon. and hon. Members who have added their names to the new clause.

We agree that the issue should be examined further. That is why, in the next few days, we will publish a consultation seeking views on whether section 5 should be amended along the lines proposed by my hon. Friend the Member for Gainsborough. I will be happy to meet him to hear his views on this important issue. Once the consultation has concluded—it will run to early in the new year—the Government will set out their conclusions as quickly as possible, so that they can inform the debate on the issue while the Bill is in another place. I have no doubt that there will be other opportunities for the House to consider section 5, either when we next examine the Bill on its return from the other place or on some other suitable occasion. I can assure my hon. Friend that through the consultation we want to promote debate on this issue, not seek to curtail it, by widening and broadening it outside this House.

Sir Alan Beith (Berwick-upon-Tweed) (LD): I am grateful for what my hon. Friend says, which helps to set in a more attractive context the otherwise uncharacteristic step that was taken by moving new clause 1 to the very end of the Bill’s consideration. Is he saying that the Government will facilitate a parliamentary opportunity to legislate if a clear conclusion emerges from these discussions?

James Brokenshire: The timing of the consultation is intended to be such that it can inform proceedings in the other place. There may therefore be time, in the context of the consideration of the Bill as a whole, to be able to address issues that may come through from the consultation. I hope that my hon. Friend the Member for Gainsborough will accept the consultation as a mark of our determination to undertake a proper review of section 5 and that on that basis he will agree not to press his new clause.

We believe that the programme motion strikes the right balance. I commend it to the House and ask Members to support it so that we can get on with debating the important issues that lie within the Bill.

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6.41 pm

Mr David Hanson (Delyn) (Lab): I sense that, deep down, the Minister knows that he is on a sticky wicket and that the programme motion is not really adequate for debating the issues before the House.

As the Whip responsible for this Bill, my hon. Friend the Member for Alyn and Deeside (Mark Tami), and his colleagues, would have accepted the programme motion had we not had, as the hon. Member for Kettering (Mr Hollobone) said, three hours of statements, which have taken us up to 6.41 pm. This Bill determines the very important issues of DNA that my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson) wishes to discuss, and those discussions will reach their conclusion at 8.30 pm.

Although I disagree with the hon. Member for Gainsborough (Mr Leigh) on those issues, I support his right to say what he wishes about his concerns. His concerns on public order issues will not be debated at all because the programme motion means that we will run out of time. However, I cannot support the hon. Gentleman if he presses his amendment to a vote, for the simple reason that it would knock out the business of my right hon. Friend the Member for Kingston upon Hull West and Hessle regarding the important issues of DNA.

On reflection, the Minister will know that this is an inadequate programme motion that requires an 8.30 pm completion time for important issues of life and death, which is what DNA is about. It is about the prevention of crime, the security of our citizens, and ensuring that our citizens can walk safely, free of fear of crime. Those issues will not be debated at the length that my right hon. Friend wishes. We have had debates in the past when I have sat where the Minister sits and he has sat where I am now. I suspect that if I had come along this evening with a programme motion that provided for one hour and 45 minutes—potentially even one hour and 15 minutes—on DNA, he would be standing here saying what I am saying. As a Minister, I moved programme motions from the Government Front Bench just as the Minister has; I know and respect that fact. I am not averse to programme motions. My hon. Friends the Whips are not averse to programme motions, and, in the past, the Labour Government introduced programme motions. However, there has to be an element of fairness about them. We cannot support a programme motion that gives us, potentially, one hour and 15 minutes on the life and death issue of DNA and upsets the hon. Member for Gainsborough because he is not having a debate at all.

If I had moved that programme motion tonight, the Minister would have opposed it. If I had spoken as he has tonight, he would have opposed it. He will vote for it tonight, but he knows that he would vote against it if he were in my place. In fairness to the Opposition, he should allow time for this debate and reflect on the programme motion. The hon. Member for Wellingborough (Mr Bone) made some sensible points, and we could have further discussions based on those. There is no problem with that. I will happily consider a small Adjournment of the House if Ministers want to discuss this with my hon. Friend the Member for Tynemouth (Mr Campbell). He is an amenable chap. We have worked together in the Home Office and we know about these matters, and he will help us to reach a conclusion.

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It is not acceptable to have these major issues debated in this way and rushed through the House. We did not do that when the Minister opposed our proposals on DNA, which were fair and responsible. He needs to reflect on that. If he does not, then I cannot support the hon. Member for Gainsborough for the reasons I have outlined, as much as I wish him to have his say, but I will certainly not support the programme motion, and I ask my hon. Friends to vote against it.

6.45 pm

Mr Edward Leigh (Gainsborough) (Con): I beg to move amendment (a), after “Proceedings” on the first day insert—

‘New Clauses relating to the Public Order Act 1986; and’.

I have tabled this amendment to the programme motion because I simply cannot believe that the Government are trying to stifle debate on new clause 1 —the only new clause in the Bill to attract support from dozens of Members from all parties in this House. One would have thought that the Government would welcome hon. Members trying to improve the Bill—is that such an outrageous thing? One would have thought that they would welcome the fact that 65 Members have put their names to new clause 1.

On Friday, the Joint Committee on Human Rights produced a voluminous report which says on page 61:

“We support the amendment of the Public Order Act 1986 to remove all references to offences based on insulting words or behaviour. We consider that this would be a human rights enhancing measure and would remove a risk that these provisions may be applied in a manner which is disproportionate and incompatible with the right to freedom of expression”.

One would have thought that surely a Government committed to free speech would realise that this was an important issue and allow some time for new clause 1 to be debated, especially as it is normal, if not a convention, for new clauses to be debated early on Report because they are debated last in our Committees. Because new clauses are often not reached in Committee, it is normal for a Government who want to have open debate to allow them to be debated at an early stage on Report.

This is one of the most extraordinary programme motions that I have seen, because it ensures that no new clauses are debated. Why have the Government done this? For the life of me, I do not know why we are being pushed to the back of the queue. There is no point in having emollient words. There is not some small chance that new clause 1 will be debated; as a result of this programme motion, there is no chance that it will be debated or voted on. We have had three hours of statements, and we now have two hours to debate many important issues. However, we are going to spend an hour and a half on car parking. I am sure that car parking is very important, but so is freedom of debate. How ironic that the Government are using their own powers under guillotine procedure to stifle a debate on freedom of speech. It is an extraordinary situation.