Mr Osborne: Getting a lecture on “splitism” from the shadow Chancellor, who has been the biggest source of division in the House over the 10 years that I have been

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in Parliament, adds to his lessons on how to regulate banks properly as something to treasure, but this document is a very good advertisement for the coalition Government and the work that we have done with the Business Secretary.

Stewart Hosie (Dundee East) (SNP): I thank the Chancellor for the statement, and for much of what was in it on Lloyds divestment, competition, account switching, retail ring-fencing and the final 2019 implementation date. I hope that that implementation will do nothing to weaken small and medium-sized enterprise lending, but what in particular did he mean by “RBS will make further significant reductions in the investment bank”? Can he put a cash figure on that? How much deleveraging does he see taking place? What does he envisage being sold off? Will it be in the UK or overseas? We need certainty about RBS’s future, so can we have some detail today, and will he confirm that he does not intend to undermine the independence of the board, notwithstanding the fact that the Government are the major shareholder?

Mr Osborne: The hon. Gentleman asks me not to undermine the independence of the board and, then, to provide all sorts of detail on exactly what the board should now do, so let me say this. I know that the Royal Bank of Scotland is a very important employer in Scotland and a very important part of the Scottish economy. We want to see it focused on its UK businesses, on UK corporate and individual customers, and its investment bank should support that service. The Royal Bank of Scotland management have also come to that conclusion, and in the coming months they will set out further details on how they are going to do that work, but it is a significant change of direction for the bank.

Adam Afriyie (Windsor) (Con): Given the shadow Chancellor’s involvement in the biggest banking crisis in the history of our country, and given his overt criticism of the current Chancellor, will my right hon. Friend tell me whether he has received from him any constructive submissions at all during this period?

Mr Osborne: I do not think that I have received a single submission on banking reform from the shadow Chancellor since he took up his job.

Frank Dobson (Holborn and St Pancras) (Lab): Will the Chancellor of the Exchequer confirm that nothing he has announced today will for the next five years reduce in any way the risk to the British taxpayer in the event of a British bank losing out on sovereign debt in the European Union in a way that damages its retail operations?

Mr Osborne: There are things that we have done and are doing now to make our banking system safer. Banks are required to hold more capital—more cushion—to protect them against losses, whether from sovereign debt or anything else. We regularly take part in pan-European stress tests, and actually the British banks pass those tests when other European banks do not. I think that that is because the British banking system is well capitalised and liquid.

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We are also introducing a new system of regulation, which, as I say, will be operational in 2013; once the legislation has passed through the House of Commons, the Bank of England will be in charge. Furthermore, we are introducing the Vickers requirements over the next three and half years, until the general election at the end of this Parliament—we are getting all that legislation through as well. We are doing a huge amount to make the British banking system safer now, but also safer in future.

Mr William Cash (Stone) (Con): To protect the City of London, will the Chancellor follow the example of the Prime Minister when he used the veto the other day? When necessary, will the Chancellor here in Westminster override European legislation to protect the taxpayer, the City of London and the United Kingdom?

Mr Osborne: We need legislation that works effectively for British banks across Europe; British banks have subsidiaries in other European countries. Actually, a single market in financial services would be a very good thing—and it is a good thing for this country, although we need to see it deepen. We also need to make sure that countries with very large banking systems, such as our own, are able to take national decisions that protect our banking systems. I am confident that we can secure agreement to that.

Mr Dennis Skinner (Bolsover) (Lab): Is there not a possibility that if the banks are split up, there will be more top bankers than there are now? What we need in Britain is small business growth and large business growth. The chances are that the most reviled group of people in the land—the top bankers—are going to multiply.

Mr Osborne: I do not think that it automatically follows that if we ring-fence the banks, we double the number of bankers. It is our intention, yes, to have a successful financial services industry, which is very important in Derbyshire, Cheshire, where my constituency is, the west midlands and Scotland, as well as in the City of London.

However, we do not want our entire economy to be in hock to the City of London; that is what we are seeking to avoid. We do not want to put all our bets on the City of London. That is what happened over the last 13 years, and it went disastrously wrong. The Government are determined to build up other sectors of the economy, including manufacturing and small businesses. The very fact that later today we are debating the Government’s apprenticeship programme shows our commitment as a Government to building up those other industries.

Mr Edward Leigh (Gainsborough) (Con): After these reforms, will our banks be more or less regulated than their international competitors?

Mr Osborne: In certain respects, they will be more regulated compared with some other regimes. Obviously, the ring-fencing requirement that we are introducing is not present in every other financial centre. However, it is an appropriate course of action for the UK, given the size of our banking system relative to our GDP—it is 500% of our GDP; the United States banking system is only 100% of its GDP. As I said, there is now quite a lot of international interest in what we are doing, so we may find that other financial centres follow our lead.

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Ann McKechin (Glasgow North) (Lab): The Chancellor rightly attacked casino banking. Does he not agree that now is the time to restrict UK state-owned banks in respect of their operations in tax havens, which have been a source of much of that casino banking?

Mr Osborne: We have required all the major banks in Britain to sign up to the tax code that the previous Government introduced, although they got only two or three banks to sign up to it. We not only have the code, but we are making the banks sign up to it.

Michael Fallon (Sevenoaks) (Con): Does the Chancellor agree with me that if the three politicians identified as culpable in the Royal Bank of Scotland report had been serving in local government, they would probably have been surcharged? Does he think it likely that, in the fullness of time, other European countries will follow us along the road of a retail-wholesale split?

Mr Osborne: Two of those three politicians are now busy earning quite a lot of money in the financial sector to deal with the fact that they might face a surcharge. Perhaps, with the efforts of my colleagues, we can make sure that the third politician soon follows them.

Ed Balls: You wish.

Mr Osborne: Actually, we are quite happy for the right hon. Gentleman to stay where he is, so I retract my previous comment.

In response to my hon. Friend the Member for Sevenoaks (Michael Fallon), we are confident that we will be able to do this within the regime of European Union law.

Mr William Bain (Glasgow North East) (Lab): Has the Chancellor assessed the impact on levels of net lending to business of corporate deposits, estimated at £270 billion for RBS, Barclays and Lloyds, potentially lying outside the scope of the retail ring fence? Who will decide which corporate deposits sit outside the ring fence—the new Prudential Regulation Authority or the banks themselves?

Mr Osborne: A key part of the Vickers report was that the location of the ring fence would be flexible. Certain things would have to be in the ring fence, such as small and medium-sized business overdrafts and deposits and the overdrafts and deposits of individuals, and certain things definitely could not be in the ring fence, such as investment banking activity. However, corporate deposits could either be in the ring fence or not in the ring fence; that would be a decision for individual institutions, although of course they sit under the regulatory regime. That is what John Vickers recommended, having looked at this very carefully, and that is the plan that we are now implementing.

Lorely Burt (Solihull) (LD): I welcome the coalition Government’s commitment to implementing the recommendations of the Vickers report. What difference, practically, will it make to people in Solihull and elsewhere in the country, and by when will they start to feel that difference?

Mr Osborne: The intention is to make sure that the taxpayers of Solihull are better protected against the failure of banks in future in a way that they were not in

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recent years when banks such as RBS failed. That is the overall intention of the report, but it has a very important component that does not get nearly the same media attention as the ring-fencing element that we have all been talking about—namely, the promotion of competition. The report has a specific recommendation whereby, from 2013, customers in Solihull will be able to switch their bank account within seven days, at no cost, and all their direct debits and credits will follow them to their new bank account. That is a very practical benefit to the people of Solihull and, indeed, the entire country.

Mr Denis MacShane (Rotherham) (Lab): Given that the Government are not spending and banks are not lending, is the Chancellor at all worried that he and Sir John Vickers are generals fighting the last war? Surely, rather than keeping a lot of money in vaults, we want it out there fructifying in the economy creating jobs and new businesses.

Mr Osborne: At times it feels like the current war as well. I do not think that the effects of the financial crisis have disappeared from our economy. Through these proposals, we are taking steps better to protect British taxpayers in the future. There is a decent implementation period for some of the recommendations, such as the loss absorbency recommendations, precisely to take account of what is going on in funding markets. It would be pretty extraordinary if this country, after all that it went through in recent years, with the biggest bank bail-out in the entire world happening here, did not learn the lessons of what went wrong and try to protect people in future.

Andrea Leadsom (South Northamptonshire) (Con): The Vickers proposals definitely make banks more robust and more resolvable, but does my right hon. Friend think that they will definitely be more competitive? Specifically, the stickiness of personal current accounts and SME accounts is a real problem. Will he consider the proposal for full account portability rather than this halfway house which just makes it faster to transfer one’s bank account?

Mr Osborne: There is a specific reference to full account portability in the report, as my hon. Friend will see when she reads it, and that is there partly because of the point that she made to me about it in the Treasury Committee. We will consider full account portability if the switching service that we introduce is not effective and does not deliver the expected consumer benefits.

Mr Andrew Love (Edmonton) (Lab/Co-op): The House is not clear from an answer that the Chancellor gave to my right hon. Friend the Member for Morley and Outwood (Ed Balls) whether he supports the Vickers recommendation that in order to create an effective challenger bank, Lloyds needed to divest itself of a greater number of branches. Does he agree with that recommendation, and if so, when is he going to implement it?

Mr Osborne: We are confident that the sale proposed by Lloyds of 600 branches to the Co-op will create a sufficiently strong challenger bank because it is to an existing institution rather than a new institution. Obviously, that sale is subject to commercial negotiations and the

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deal is not yet done, but we think that it meets the conditions set out in the Vickers report. We have kept in close personal contact with John Vickers throughout this process.

Mark Field (Cities of London and Westminster) (Con): The Chancellor has acknowledged that the Vickers recommendation would gold-plate the already onerous capital requirements on EU banks, as set out in the Basel III protocol. Does he recognise that if the figures were implemented in full, there would be the twin risk of diminishing the attractiveness of London as a global financial centre and further disincentivising corporate lending by UK banks, which is an essential part of the economic recovery and growth that we all support?

Mr Osborne: I do not think that it will discourage corporate lending, nor do I think that it will make the UK any less attractive as a location for the headquarters of global banks. We addressed that issue explicitly in our response. Because the principal proposals and additional national requirements are directed at UK retail banking, I do not think that it will change people’s view of the UK as an attractive place to locate their financial services, whether it be in the City of London or elsewhere.

Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab): I welcome the Chancellor’s conversion on bank regulation. I remind him that there are more bankers and former bankers behind him than there are behind me. [ Interruption. ] I mean on all the Benches behind me. Why can he not bring forward the 2019 timetable? That is what my constituents want to know.

Mr Osborne: The 2019 timetable was recommended by John Vickers in the report. People should be clear that that is the backstop. That is the final day when everything has to be implemented. In particular, if the additional capital requirements were implemented today, it might have an impact on the economy that we would not want to see. The ring-fencing legislation will be in place by the end of the Parliament and banks will be expected to comply with it as soon as is practically possible. The competition requirements will be in place by 2013. When it comes to jibes about who is working in the financial services, I seem to remember that a number of former Labour Prime Ministers are now quite lucratively paid in the financial services.

Steve Baker (Wycombe) (Con): Chapter 3 of the Government’s report, on loss absorbency, seems, perhaps reasonably, to take for granted the adequacy of accounting standards. I press the Chancellor in his forthcoming White Paper to consider seriously the pernicious effects of the international financial reporting standards, which were applied to banks by the previous Government.

Mr Osborne: There is a debate to be had about international accounting rules and their impact on the financial crisis, which I am happy to have with my hon. Friend in person. There are moves afoot to make the international bodies that set the standards more accountable by using the Financial Stability Board. He raises a good issue.

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Kevin Brennan (Cardiff West) (Lab): What assessment has the Chancellor made of the proposal in the ICB report to apply a blanket leverage ratio across all financial institutions, and in particular of the possible unintended consequences that that could have for building societies?

Mr Osborne: That is an issue that some building societies have raised with us. That is why we say in the report that we are attracted to a leverage ratio—indeed, it is now part of the international regulatory architecture—but that we will consult on exactly how to implement it so that it does not have a perverse impact on building societies, which have served customers well throughout this period.

Richard Harrington (Watford) (Con): On behalf of my knees, Mr Speaker, I thank you. [ Laughter. ] I commend the Chancellor on his statement. Will he confirm that had these proposals been implemented before 2007, the RBS-ABN AMRO deal could not have taken place?

Mr Osborne: The RBS-ABN AMRO deal stands out as the moment of greatest folly in banking regulation, not just because—[Interruption.] The shadow Chancellor was the City Minister. He has incredible amnesia about his role, but thankfully we are here to remind him. It is extraordinary that the ABN AMRO deal was given the go-ahead after Northern Rock had failed. People do not appreciate the fact that it happened after that. We were highly critical of the Government’s regulatory system then, and we remain highly critical of the regulatory system that we inherited.

Keith Vaz (Leicester East) (Lab): On 16 June 2010 the Chancellor told me that he would read the confidential parts of the Bingham report on the closure of the Bank of Credit and Commerce International and seek urgent advice from the Treasury about whether he should publish them. I do not know what the definition of “urgent” is in the Treasury, but 18 months seems like a very long time. I know that he has been busy, but has he read the report and will he now publish it?

Mr Osborne: The good news is that I have read the report. The bad news, from the right hon. Gentleman’s point of view, is that I do not propose to publish the appendices. Of course, my predecessors also took that decision. I have looked into the matter, and the view remains that publishing the appendices would not add substantially to people’s understanding of what went wrong, and that they would probably require extensive redacting, which would not only be expensive but still leave people with suspicions, even if those suspicions were unfounded. I have taken the same view that I believe the last three or four of my predecessors took.

Several hon. Members rose

Mr Speaker: Order. I think the hon. Member for Watford (Richard Harrington) has set a trend of leaning forward expectantly, and the hon. Member for Erewash (Jessica Lee) is now following in his wake.

Jessica Lee (Erewash) (Con): Does my right hon. Friend agree that one key conclusion of the report is about customers’ ability to move their accounts more

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cheaply and easily? That will be well received by people in Erewash and elsewhere. Banks are there to provide a service, and that is the type of measure that will significantly increase competition and aid this country’s recovery.

Mr Osborne: My hon. Friend is right, and she speaks up well for her constituents, who want greater choice on the high street. They want to be able to switch their bank accounts easily, and there are significant proposals in the report to help them do that within seven days and without having to chase up all the direct debits and the like, which will be done for them at no charge. That will be a practical benefit of the Vickers report and the Government’s implementation of it.

Steve McCabe (Birmingham, Selly Oak) (Lab): Will the Chancellor give the House a categorical assurance that he has now fully recovered from his dangerous flirtation with deregulation, and that he will be able to avoid any further advances from the right hon. Member for Wokingham (Mr Redwood)?

Mr Osborne: If the hon. Gentleman examines what the Government and I have done over the past 18 months, he will see that we want proper regulation that works, enabling consumers to make choices and market forces to operate where appropriate while protecting the British taxpayer, with the Government stepping in where necessary. The report that we commissioned from John Vickers sets out a very important point about the regulation of bank structure that the previous Government did not examine. It represents a significant advance by this Government.

Duncan Hames (Chippenham) (LD): The public are impatient for reform and proper regulation of our banks, so I applaud the Chancellor’s dexterity in separating the timing of the loss absorbency requirements from that of the requirements for increased competition and the introduction of a ring fence on high street banking. Having decided to introduce that ring fence, what is preventing him from doing so before 2015?

Mr Osborne: We have made a clear commitment—Sir John Vickers set the back-stop at 2019, but we have said that we want the legislation to go through by 2015. My hon. Friend has to appreciate, and I am sure he does, that it is about passing not just the primary legislation but the secondary legislation through Parliament. That is a very complex matter, because we do not want the banks to find a way around secondary legislation and we do not want to come up with rules that turn out to be full of holes. It is detailed, technical work, but we are absolutely determined to do it and have given ourselves a clear timetable for delivering it.

Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab): How much money has the City of London donated to the Conservative party since the general election?

Mr Osborne rose—

Mr Speaker: Order. In framing his response, the Chancellor of the Exchequer should be aware that if it is related in any way to banks, he is welcome to answer, but he is not obliged to do so. The question must relate to the specifics of the statement. It is up to the Chancellor.

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Mr Osborne indicated dissent.

Mr Julian Brazier (Canterbury) (Con): I welcome my right hon. Friend’s excellent statement, and I also understand why progress on ring-fencing has to be slow. Will he confirm that the guarantee for eligible retail deposits does not necessarily extend to the banks themselves?

Mr Osborne: The financial compensation scheme is very clear. We cover 100% of eligible deposits, up to £85,000 in a subsidiary. It is important that people are aware of that, and I think the public are more aware of it than they were three or four years ago. We want the explicit taxpayer guarantee of people’s deposits; what we do not want is the implicit taxpayer guarantee of the banks that took those deposits.

Jim Shannon (Strangford) (DUP): I welcome the Chancellor’s statement. Will he confirm that the legislation will apply to mutual societies? If so, would it have prevented the crisis in the Presbyterian Mutual Society in Northern Ireland?

Mr Osborne: One of the things we are considering is whether there should be a de minimis exemption from the regulations for smaller banks and building societies. Vickers proposed that in the interim report, but not in the final report, so this is an area where we are looking at the interim report, rather than the final report. However, we will consult, and the views of Members from Northern Ireland and others will be welcome in that process.

Stephen McPartland (Stevenage) (Con): Does the Chancellor agree that there is no painless way of reforming the banks and that the banks have to accept a little pain now, so that the Government can protect taxpayers from future bail-outs?

Mr Osborne: The banks themselves—inasmuch as we are talking about shareholders who own them—will benefit from a safer banking system. Among the casualties of the banking crash were shareholders of the Royal Bank of Scotland, Northern Rock and the like. They lost money too and, as my hon. Friend well knows, they were not all immensely rich City people; rather, many were actually on quite low incomes. The shares were their main source of savings, so the shareholders also lost out. Owners of banks, including small shareholders, will benefit from a safer banking system.

Mr David Nuttall (Bury North) (Con): Given that the UK’s four largest banks hold seven out of 10 personal current accounts and eight out of 10 of the current accounts of small and medium-sized businesses, will my right hon. Friend reassure me that the proposed new legislation and regulation will neither result in banks leaving the UK or being deterred from expanding, nor deter new banks from opening in the UK, thereby reducing competition and restricting choice for customers?

Mr Osborne: The reforms will make the UK an attractive location for international financial services, which will know that our system is better regulated, and for retail banking, because customers will have greater assurances that the banking system is safe and that they will not have to bail out the banks if they go wrong.

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Matthew Hancock (West Suffolk) (Con): I very much welcome the report, which, along with all the other measures, I hope will help to change the culture of finance. With that end in mind, will the Chancellor set out what he hopes we can achieve in terms of having a direct impact on individuals’ personal pay and compensation in the financial sector?

Mr Osborne: We expect the bonus pool to be lower than last year and very much lower than four or five years ago, when it was probably four times what it will be now, so bonuses have come down. We have a very transparent regime, which did not exist when we took office, with the pay of the eight highest-paid non-board executive members now having to be disclosed. Above all, however, people should pay attention to what the Financial Policy Committee has just advised, which is that banks should retain earnings to build up capital at a time such as this, not pay them out in bonuses. The Governor of the Bank of England, the Financial Services Authority and I have all made it clear that banks would do well to pay attention to that advice over the next couple of months.

Jason McCartney (Colne Valley) (Con): Does the Chancellor agree that the high street banks have a key role to play in regenerating our towns and rural communities, by continuing to have a presence on the high street?

Mr Osborne: Yes, I do, and, to be fair, the banks themselves acknowledge that they withdrew from the high street too much. We want to get back to more of that face-to-face banking that served our country well for many decades. As I have said, the banks acknowledge that, and they have come together to create the business growth fund, which will invest in new start-up businesses. They have also issued a new code of conduct to enable them to get back to the high street banking that we remember from the past.

Mr David Hamilton (Midlothian) (Lab): On the subject of the personal responsibility of directors, I should like to draw the House’s attention to Fannie Mae in America, some of whose directors are being charged and, if found guilty, could face prison. Is there anything in the Chancellor’s proposals that could put directors in this country in the same boat, in that they could be sent to prison if they were found guilty of doing something wrong?

Mr Osborne: There is nothing specifically about that in the Vickers report, but the Financial Services Authority has done an investigation into what happened at the Royal Bank of Scotland, and has made specific recommendations on the law regarding bank directors. It turns out that the laws were inadequate to help the authorities to investigate specific individuals at RBS and HBOS, so we are going to look at the recommendation, which came to us only recently, and see whether we can implement it, to ensure that individuals as well as institutions can be held responsible for their actions.

David Mowat (Warrington South) (Con): There is no agreed definition of which bank functions may be included in the ring fence, and which may not. There is therefore a risk of fudge as the proposals are rolled out over the next few years. Will the Chancellor agree to ensure that

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that is defined in primary and secondary legislation, and not simply left to the regulators to argue over with the banks?

Mr Osborne: There will be clear definitions in the legislation. To be fair, what John Vickers recommended, and what we are proposing, is relatively straightforward. There are certain things that will have to be in the ring fence, such as the deposits of individuals and the overdrafts of small businesses. There are also certain things that cannot be in it, such as classic investment banking activities. There will then be a middle ground, which will essentially involve corporate lending, and that can either be in the ring fence or not. John Vickers thought that it would be wrong to prescribe that, because different banks have different models, so he has left the location of the ring fence flexible. However, the height of the fence will be high, and we are going to introduce it into legislation.

Nicky Morgan (Loughborough) (Con): I welcome the emphasis in the Chancellor’s statement on more choice and competition, which will benefit businesses in my constituency and elsewhere. They often tell me that this is not just about bank lending, and that it is also about poor customer service and unexpected charges being imposed. Will my right hon. Friend confirm that this is just the start of a process, and that there will be continuous monitoring of the way in which banks treat their customers from now on?

Mr Osborne: There will be, and part of the new regime will involve a specific authority looking at competition and customer service. In that way, we shall avoid having one institution—namely, the FSA—trying to do both functions of a regulator, which are to look at the point-of-sale service that someone gets to ensure that they are being sold a product correctly, as well as ensuring that the bank itself is being properly managed and is not about to collapse. Separating those functions will be an essential part of our reforms.

Charlie Elphicke (Dover) (Con): May I urge the Chancellor to consider a whole in-country depositor preference system, such as that in the United States, rather than the insurance-based system recommended in the Vickers review? This would, over time, discourage reliance on the wholesale short-term funding markets. It would also reduce the risk to the taxpayer of banks that are too big to fail.

Mr Osborne: I am happy to consider my hon. Friend’s views, but we are equally clear that the depositor preference proposals in the Vickers report are the ones that we support in principle; their implementation in practice will be addressed in the White Paper.

Brandon Lewis (Great Yarmouth) (Con): Does my right hon. Friend agree that the ring-fencing outlined in the proposals will not only protect the taxpayer from casino banking but have the longer-term benefit of encouraging more competition by creating a fairer and more even playing field for small banks, which would be to the benefit of all?

Mr Osborne: We want to see more competition, which is why we proceeded with the sale of Northern Rock and why we are pleased to see Lloyds seeking to sell its branches to the Co-operative bank. It is also why we

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want to see other challenger banks out there. We are also considering a de minimis exemption for some of the smallest banks; we will report back on that when we publish the White Paper.

Tony Baldry (Banbury) (Con): Small businesses in Banbury, Bicester and elsewhere will welcome the enhancement of competition in high-street banking and the fact that it will be easier for them to move accounts. Will my right hon. Friend explain, however, why it is going to take until September 2013 for these changes to be implemented? If the banks had the will, surely they could implement those changes much more speedily.

Mr Osborne: I believe this is quite a complex operation. We have looked at this, as has John Vickers—and he thought 2013 was the appropriate timetable. We are trying to create a seamless service through which people can indicate that they want to change their current account; that happens within seven days without any charges and all the direct debits and the like will follow people to the new bank. It is, as I say, quite complex to achieve and we want the service to be seamless for the customers, so I would rather spend a few months to get it right rather than try to rush its introduction.

Glyn Davies (Montgomeryshire) (Con): Notwithstanding the benefit to individual taxpayers, the banking sector is unlikely to welcome the separation of its retail banking from its investment banking activities, so will my right hon. Friend assure us that he will stand his ground and ensure that our banks cannot look to the taxpayer to save them from the consequence of high-risk borrowing in future?

Mr Osborne: I can absolutely assure my hon. Friend that we will stand our ground. While I have been on my feet, I have received the news that John Vickers has welcomed our response. I absolutely commit to my hon. Friend, to John Vickers and to others that we will implement the proposals in the report to make sure that our banking system is safer, that taxpayers are better protected, that customers get a better service and that we do not repeat what went so badly wrong under the previous Government’s regulatory regime.

Andrew Stephenson (Pendle) (Con): Given the dominance of the four largest banks in the UK, does my right hon. Friend agree that, in addition to new banks, credit unions such as the Pendle Community Credit Union or building societies such as the Marsden building society

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headquartered in Nelson in my constituency have a key role in improving competition on the high street?

Mr Osborne: I think credit unions and small building societies have a key role to play, whether it be in Pendle or other parts of the country. What we want is the greatest possible choice for customers. This report is an important step towards providing that competition and dealing with the large banks that have such a large proportion of the market. The competition part of the report is important and sits alongside the ring-fencing part—all designed to make our banking system safer and to serve customers better.

Mr Philip Hollobone (Kettering) (Con): My Kettering constituents would like to see more competition between the high-street banks. At the moment the big four banks have about 77% of all personal current accounts and 85% of all small business accounts. Would the Chancellor like to see those market shares fall; and, if so, by how much?

Mr Osborne: I would like to see them fall, which is why we are keen to get challenger banks out there. It is why we proceeded, as I have said, with the sale of Northern Rock, and why we want the Lloyds divestment to take place. As for what the exact market share of those banks should be, I do not believe, perhaps unlike my hon. Friend, in the command economy in which the Chancellor of the Exchequer determines every share of the market for every business. I will not prescribe exactly how much market share a bank should have; there has to be an element of the free market .

Mr Tobias Ellwood (Bournemouth East) (Con): I welcome these recommendations for regulation. It might come as a surprise or, indeed, a shock to Members to learn that I was refused my first mortgage application. That happened back in the days when mortgages to first-time buyers were capped at two thirds of the value of the property. Under the previous Government, however, first-time buyers could get 100% or 125% mortgages. Will the Chancellor confirm that those days of irresponsible lending are behind us?

Mr Osborne: We have not much mentioned today the report from the Financial Services Authority, which is about ensuring that people can afford the mortgages they seek. The changes are important, as they get the balance right between not pricing first-time buyers out of the market even more than they are now and ensuring at the same time that people are informed and can get a mortgage that they are able to afford.

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Fisheries Council

5.19 pm

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon): I wish to inform the House of the outcome of the discussions on fisheries at last week’s Agriculture and Fisheries Council, at which I represented the United Kingdom for the fisheries elements of the agenda, while Richard Lochhead, Michelle O’Neill and Alun Davies represented Scotland, Northern Ireland and Wales respectively. I am aware that that many Members are very interested in the annual fisheries discussions, and I am grateful for the opportunity to inform the House of the outcome of this year’s negotiations.

The annual December round is always a difficult negotiation, but this year we went into it facing a greater challenge than we have confronted in recent years. Just under a month ago, the Commission published a regulation on the cod recovery plan that would have had dire consequences for significant elements of the UK fleet. We had not only to negotiate the annual total allowable catch and quota allocations, but successfully to negotiate a resolution of the threat of massive cuts in the time that our fishermen can spend at sea under the cod recovery plan. I am pleased to report that we managed to achieve both those outcomes.

We stated and won our case for our interpretation of article 13 of the cod recovery plan. That means that we can continue to offer incentives, in the form of additional days at sea, to fishermen who undertake additional conservation measures. Without that correction in interpretation, more than three quarters of the fleet would have had their fishing time cut drastically short, in some cases to just four days a fortnight. This important victory means fleets can go on fishing and catching their quota, while continuing the ground-breaking cod avoidance and discard reduction schemes that are being developed and implemented by fishermen all around our coast.

I know that the fact that—except in regard to the regulation that I mentioned a moment ago—we were unable to avoid reductions in days at sea has come as a blow to significant parts of the industry, and I share their disappointment. However, the Commission felt that significant legal obstacles, as well as resistance from a number of member states, prevented it from not cutting the number of days at sea. That said, the Commission has made it clear that the cod recovery plan is not meeting its objectives, and has agreed that the review that I secured last year must be accelerated as a matter of urgency. I hope that it will be possible to revise the rules without a full-blown co-decided revision of the text, but if that is needed, we will work hard with the Commission to create mitigating technical measures that will maximise the opportunities available to our fishermen.

Let me now turn to the TACs and quotas for next year, which constituted the main issue on the Council’s agenda. Since the Commission’s proposals were published in the autumn, we have consistently argued that we should follow the science, and should aim for the securing of sustainable fish stocks in our seas. That was particularly important in the context of tackling the so-called data-poor stocks. The Commission’s proposal that quotas should

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be reduced by up to 25% did not take into account all the information that the fishing industry and scientists had been collecting, or the implications of such cuts, both in economic terms for the fleet and for discards. Significant cuts in by-catch species, for instance, would have been likely to result in a substantial increase in discards. That is completely contrary to the policy of both the UK and the Commission, which is to eliminate discards.

We successfully negotiated amendments to the Commission’s original proposal for TACs and quotas—amendments that are worth an additional £36 million to the UK fleet. We secured the continuation of this year’s quota allocations for the majority of stocks, including North sea and west of Scotland megrim, whiting in western waters, and pollack and sole stocks along the west coast. I can give more details if Members require them, but a couple of noteworthy gains included a 200% TAC increase in west of Scotland haddock, a roll-over of Northern Ireland nephrops, and a 150% increase In south-western cod. The UK battled hard to reach an agreement that ensures the long-term sustainability of fish stocks while providing short-term catching opportunities for our fishing industry. The package we secured helps all sectors of the industry, large and small, and delivers benefits for all parts of the UK, north, south, east and west.

I would like to put on record my thanks for the co-operative manner in which colleagues from Scotland, Northern Ireland and Wales contributed to the discussions. In the event, all Administrations were able to agree to the final deal. I would also like to stress that the overall package of measures was negotiated with close and constructive co-operation with the European Commission and with other member states, most notably France, Germany, Spain, Denmark and Ireland. This shows that the UK is playing a firm and constructive role in Europe, getting the best deal for the UK and its fishermen. This was a good result for the UK fleet and, equally importantly, a good result for the long-term sustainability of the stocks that our fleet fish.

Fiona O'Donnell (East Lothian) (Lab): I congratulate the hon. Gentleman on at least managing to stay in the room with his European colleagues until 4 am, unlike the Prime Minister. I also congratulate him on exposing the two faces of the Scottish National party on Europe: on the one hand it promises to get out of the common fisheries policy, while on the other hand it says it wants to be a leading player in the EU.

A sustainable and profitable fishing industry is vital to the UK’s economic interests and to coastal communities around the UK. Some 12,000 fishermen are employed on UK boats, with just over 5,000 working in Scotland. The fishing industry is particularly important in Scotland. I grew up in the highlands of Scotland, and on a recent visit to the Western Isles I had a chance to speak to the fishermen in those fragile island communities. Fishing provides employment not only to the men I met in Tiree, Barra and Lewis, but to women as well, in the processing of the catch. May I ask the Minister whether he has visited the Western Isles, and if he has not may I urge him to talk to those men and women, so he can see for himself the impact the decisions he makes has on these fragile communities? Without a good deal from this Minister, the very existence of those communities is at risk.

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The case for reforming the CFP is compelling. At present, almost half the fish caught in the EU are discarded, which is both an economic and an environmental waste. In July, this House unanimously adopted a motion urging the Government to support radical changes to the CFP. The Commission published its draft reform proposals on 13 July. What guarantees can the Minister give that the Government’s position on discards and CFP reform will not lose out in future negotiations? What progress is he making in advancing the case for the regional management of fisheries waters, a move that would be welcomed by the UK fishing industry?

I pay tribute to the Scottish fishing fleet, which has already reduced discards and introduced CCTV as part of catch quota to better manage fish stocks. What investment in scientific evidence is the Minister proposing to make as we move to long-term management of fishing stocks?

The verdict on this Minister is in: the fishing industry and conservation groups have described his deal as a disaster. In November he met representatives of the fishing industry and stakeholders to agree the UK’s red lines for the negotiations, including rejecting any calls to cut the number of days that fleets can spend at sea. On 5 December he issued a press statement saying his discussions with Commissioner Damanaki on the amount of time fishermen can spend at sea were very positive, yet his deal will mean a cut of between 15% and 25% in the number of days white-fish vessels can put out to sea in 2012 as part of the cod recovery plan. Fewer days at sea could lead to the unintended consequence of more damage to fish stocks and higher levels of discards, as fleets rush to catch all they can in their allotted time. Will the Minister explain why he abandoned his red line last week? Will he confirm that some vessels will see their period at sea cut to about four days in every fortnight? Will he tell us how many vessels will be affected and what the position of the Scottish fisheries Minister was on this issue? How difficult was it for the Minister to build alliances to support his red line? What went wrong? Bertie Armstrong, chief executive of the Scottish Fishermen’s Federation, said:

“This is a bitter blow for our fishing fleet, which is now going to struggle to maintain economic viability under the impact of these…unwarranted cuts.”

What is the Minister’s message to fishing communities who feel betrayed by his broken promises?

I welcome the 200% increase in respect of west of Scotland haddock, the 150% increase in respect of south-west cod and the deal for fishing fleets in Northern Ireland. What assessment has he made of the ability of the fleet to use the extra quota, given that they will be at sea for fewer days? What impact does he believe the overall package will have on the number of fishing vessels that will be viable next year? What assessment has he made of the impact of the reduction in the number of days at sea on the financial viability of the Scottish fishing fleet and fleets elsewhere in the UK?

Next year, we have a once-in-a-lifetime opportunity to reform the CFP. What reassurances can the Minister give the House that the Prime Minister’s stance on Europe will not isolate us in discussions and ultimately harm the British fishing industry?

Richard Benyon: I thank the hon. Lady for her warm welcome—I am attempting irony, which never quite works from this position. She really needs to understand

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that at the beginning of last week we were looking down the barrel of a gun at cuts that could have resulted from a penalty regulation introduced by the Commission. Its interpretation of the cod recovery plan could have resulted in between half and two thirds of the Scottish fleet being put out of business, the Northern Irish nephrops fleet being tied up for 11 months of next year and a great many other vessels and fleets around the country being put out of business. We argued that both at meetings last week and at the end of the week at the Council and we got things reversed. We did so by close working with Ministers from other devolved Governments, and I thank them for their efforts.

If the hon. Lady looked into the details, she would see that although vessels will have a reduced number of days at sea next year, what we secured, through our interpretation of the cod recovery plan, was the ability for them to buy back days at sea by the imposition of other methods of conservation. So she simply has not understood the difference between the control order that the Commission has now withdrawn and the remains of the cod recovery plan.

The hon. Lady asked me to visit the Western Isles. I have done so in the past but not in this role, and I will certainly do so in the future. My right hon. Friend the Member for Orkney and Shetland (Mr Carmichael) has reminded me that I am due to visit Shetland soon, and I see such visits as an important part of my job as UK Minister. She rightly says that there is an important social element to this, because the men who risk their lives to get this healthy and much-needed food on to our plates also support people in ports.

The Government remain absolutely committed to reform of the common fisheries policy. I sat up until 4 o’clock on Saturday morning arguing about net sizes, the gauge of nets, the Orkney trawl and eliminator trawls—such details simply should not be the subject of a management system where the people imposing regulations on the fishery are sometimes located 1,000 miles away from the fishermen who are supposed to use them. We must have reform that is more decentralised and that gets away from the micro-management that has failed. I believe that last week exposed a system that is obsessed with process and therefore ignores outcomes. The cod recovery plan is not working because the Commission sticks so rigidly to the process and the rules and regulations.

What we have achieved is a realisation from the Commission that it must start to look at the process, because the outcomes we all want to achieve are being lost. The hon. Lady is right that Scotland’s fleet has done many good things. It has led the way in real-time closures and selective measures, but it has not done so exclusively. Wonderful work has been done around the United Kingdom and we want to see it being brought forward. That is why we have secured the science budget, which the hon. Lady asked me about, to ensure that the information we can give the Commission is accurate. We faced 25% cuts in total allowable catch for data-poor stocks, but we managed to argue against that, not out of a blind desire to let our fishermen go fishing but because there was scientific evidence for it.

When the hon. Lady talked about last week, she talked as though Britain was somehow isolated in Europe. Nothing could be further from the truth. My right hon. Friend the Secretary of State is today at the Environment

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Council and she will have the same experience as I had, which is of a close working relationship. I built alliances with the French and the Germans, and, as I said, with the Spanish, the Irish, the Danish and those from many other countries. I can assure the hon. Lady that Britain is far from being isolated in these matters.

Miss Anne McIntosh (Thirsk and Malton) (Con): I congratulate the Minister on his stamina and on delivering an agreement that was in the best interests of Britain. What does he understand centralisation to mean under the fishery reforms? I hope he will join me in wishing Denmark well as it takes over the presidency. Does he share my concern at the lack of science? He referred to the data-poor species, but we are proceeding with these annual rounds with a complete ignorance of the science about the stocks and climate change, warmer waters and the movement of species. Will he also give us an undertaking today that our inshore fishing fleet will not be disadvantaged in the future reform of the common fisheries policy?

Richard Benyon: My hon. Friend will know that I have been particularly keen in this job to see a better deal for the inshore fleet. I believe that the pilots we are about to start will show a new way of managing the inshore fleet and I can assure her that the scientific evidence we require for that will be vital. As we roll out the Marine and Coastal Access Act 2009 and the marine conservation zones, we will see further investment in information about what is going on in our seas, on the seabed and so on, to ensure that we protect those areas as much as possible.

My hon. Friend asked about regionalisation and it is vital that we get this right. This is a once-in-a-decade opportunity, and, frankly, I do not believe that we will have another chance if we do not get it right this time. Decentralisation must mean an end to the top-down detailed decisions that I described earlier being taken so far from the fisheries. The problem we have in the United Kingdom is that our fisheries are complex. They are mixed fisheries with species swimming alongside each other, which means that if one species is targeted another is caught. Systems of management such as the cod recovery plan that operate from the sub-Arctic waters of the north down to the waters of Spain simply do not work because they are a one-size-fits-all solution and that simply does not work with fisheries.

Mr William Bain (Glasgow North East) (Lab): Will the Minister guarantee that the result of the Council last week still places the European Union on target to achieve maximum sustainable yield by 2015? Does not the outcome of the Council make a powerful case for the introduction of long-term reforms to the CFP and of long-term catch quotas to deal with the problem of by-catch and discards? Is not that reform preferable to the abolition of the CFP, which is the policy of Scotland’s separatist party?

Richard Benyon: The hon. Gentleman makes an important point. We very much stick to our international agreed position of seeking to achieve maximum sustainable yield where possible by 2015 and good environmental status by 2020. He is right that long-term management

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plans are the way forward. I have just been rubbishing one long-term management plan, the cod recovery plan, which is a bad plan. What we want is good long-term management plans, and we certainly can achieve that. The problem with the common fisheries policy is not that it is common but that the policy is wrong. We will always need a degree of common working and all but a very few people in this country recognise that where there is an arbitrary line, such as the one that goes down the Irish sea or the median line through the channel, fish do cross those boundaries. We simply cannot work our management systems on just one side of that line; we must work on an ecosystems basis. That is why we need co-operation with other countries.

Several hon. Members rose

Mr Deputy Speaker (Mr Lindsay Hoyle): May I suggest speedier answers and quick questions? Then, we will get everybody in.

Stephen Gilbert (St Austell and Newquay) (LD): I congratulate my hon. Friend on resisting the more extreme ideas that came from the summit over the weekend. Does he accept, though, that one of the dangers is that as a result of the cuts in the number of days at sea, fishermen may not be able to catch their full quota? Will he undertake to keep the position under review and, if that proves to be the case, go back to Brussels in a year and argue for changes?

Richard Benyon: One of the most ridiculous outcomes of the penalty that was due to be imposed on British fishermen was that they would not have had enough days at sea to catch the quota they were allocated. We managed to stop that. We will constantly keep that under review and we are working hard to make sure that the problems that the fishing industry faces through the reductions in days will not continue in future years.

Angus Robertson (Moray) (SNP): I am grateful for advance sight of the statement and acknowledge the efforts of the Minister, Richard Lochhead, and other colleagues at the discussion, but does the Minister not acknowledge that this annual merry-go-round in Brussels is just not fit for purpose for the fishing industry or for the marine environment, so when will we see proper regional management come into force?

Richard Benyon: The hon. Gentleman is right. It is a circus. It is not a way to do business. We cannot make decisions in this way, working through the night and finding that the direction that we are seeking to take is thwarted by other countries working in a different way in an entirely different sea basin. It is not a good way of making any decision, so reform of the common fisheries policy, which we are discussing in the coming year with a view to a more regionalised system of management becoming possible in 2013, is a priority for this Government.

Amber Rudd (Hastings and Rye) (Con): I know that the Minister is aware that 10 days ago the Environment, Food and Rural Affairs Committee met in Hastings and took evidence from fishermen. May I let him know that the local fishermen whom we spoke to are very concerned about transferable fishing concessions, and may I urge him in all his conversations to bear in mind their differences on the under-10-metre group?

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Richard Benyon: I am very aware of the fishermen’s concerns, which I share. Transferable fishing concessions may have application with certain vessels in certain fisheries, but by no means all. That is why we need localised management. Member states should be able to take decisions to apply such measures in a way that suits some, but not necessarily all, of their fleet.

Mr Iain Wright (Hartlepool) (Lab): A large proportion of Hartlepool’s fishing fleet comprises boats under 10 metres. The Minister did not mention that in his statement. Specifically, what did his late-night work help to achieve for that category of the fleet?

Richard Benyon: I am delighted that we are able to report that there were considerable increases in stocks that will benefit fishing out of the hon. Gentleman’s constituency, and that we were able to invoke the Hague preference, which is of particular importance to fishermen in the north-east. We secured increases in whiting, which is of particular interest to his constituents, and I very much hope that we will be able to continue the scientific work that we are doing with fleets based in the north-east on a land-all system so that we can learn what a discard-free fishery means, following it right through the food chain.

Neil Parish (Tiverton and Honiton) (Con): I congratulate the Minister on standing up for British fisheries, and compliment him on the deal he got for cod in the western approaches. On the cod recovery plan, he should not have to defend our plan when we are stopping discards. Should we not get the Commission to endorse more of our plans, rather than having to defend them?

Richard Benyon: My hon. Friend is absolutely right. There has been some really good work in this country on reducing the number of discards, which was acknowledged by the Commission, so it was rather perverse that there was the possibility of measures being introduced that could have brought an end to precisely that good work. In his area, for example, Project 50% saw a more than 50% reduction in the number of discards in the beam trawler fleet. That would not have been possible under the proposed reduction in days that we were facing but luckily managed to reverse.

Jim Shannon (Strangford) (DUP): First, I congratulate the Minister on the hard work done in Brussels along with the other Ministers, including our own Northern Ireland Minister of Agriculture and Rural Development and Fisheries Minister. The Minister fought hard to ensure that prawn quotas were retained although the scientific evidence showed that they should have increased. The herring quota was also decreased although, according to the scientific evidence, it should have been increased. Will the Minister comment on the state of play at the sentinel fishery? We met some of the fishermen the week before he went away and we were told it was being investigated. I believe that the figures for that scheme will show the abundance of cod in the Irish sea.

Richard Benyon: I was particularly worried about the impact on the Northern Irish fleet. The initial proposal would have meant that many of them would have gone out of business. They could not survive if they were tied

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up for 11 months of the year and I am glad we managed to reverse that. I am glad that we also managed to reverse the proposed 19% cut in Irish sea nephrops, which was totally unjustified, and we were able to prove the science behind it. I was very interested by the proposal that the hon. Gentleman brought to me about a sentinel fishery in the Irish sea. We are looking into it and I will be in touch with him as soon as I have some information.

Sheryll Murray (South East Cornwall) (Con): I thank my hon. Friend for both his stamina and determination in securing an increase in many stocks that my fishermen rely on, particularly cod in area 7B to K. Will he explore the possibility of top-slicing the additional quota that he secured, creating a reserve for the under-10-metre fleet, thus avoiding the disastrous situation we had under the last Government when, in 2008, the under-10-metre fleet in Looe was tied up because the quota was exhausted by the end of February?

Richard Benyon: I am delighted that fishermen have been telling me at great length, not just in the south-west, but certainly in the south-west, that they are seeing more cod now than they have seen for a great many years. That has been backed up by the science and we were able to secure an increase of 150%. That was a good result. Haddock is also up 25% and whiting up 15%. The package is worth £1.3 million in total to the fleet in the south-west. The managing director of one producer organisation told me in the small hours of Saturday morning that at the start of last week he was looking at a £250,000 cut to his members, which would have been devastating, but by the end of it we had secured a £250,000 increase. I will certainly look at my hon. Friend’s proposal for the under-10-metre fleet as well.

John Cryer (Leyton and Wanstead) (Lab): At the beginning of the statement the Minister mentioned that the agreement was supported by France, Germany and Spain, among others. I bet they supported it; they saw him coming. If the number of days at sea is reduced, the number of boats going out and the number of people working in the industry will be reduced. The reality is that we will end up with a smaller industry, and that will not be reversed until the Minister obtains some sort of reversal during the review of the doctrine of common resource. That is the root of all the problems in the common fisheries policy, which is one of the most loony ideas ever to fly out of Brussels, and that is saying something. Until he does something about the doctrine of common resource, we will not reverse the situation.

Richard Benyon: I think we are coming from the same direction, but I am not sure we are reaching the same conclusion. The hon. Gentleman is just wrong to say that our relationship with other countries was somehow to their advantage and not to ours. There was a collective view across major fishing countries in Europe that the cod recovery plan was not working and the Commission had to understand why. We were absolutely on the same page with major fishing countries that fish in areas such as the North sea and around our coast. Not only did we achieve a good result last week, but in terms of reform of the common fisheries policy, we will continue to work on those relationships, whoever is in government in those countries, to make sure that we have the result that we need for our fishermen.

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Martin Vickers (Cleethorpes) (Con): I, too, praise the Minister for his steadfast and robust approach. One of my constituents shrugged his shoulders this morning and told me, “It could have been much worse”, which I can assure the Minister is high praise, coming from them. Many fishermen have virtually eliminated discards through new processes, but that is not reflected in the methodology used in the negotiations. What hope is there for future improvement in that respect?

Richard Benyon: I am grateful to my hon. Friend. It is really important that we build on good work, such as the fisheries science partnerships, which involve scientists going out on fishing vessels and fishermen meeting scientists to discuss how to approach this, as information on discards can then be dealt with in an informed way. That helps me in our negotiations with the Commission, so I commend the work being done by fishermen in his constituency on reducing discards and ask him to keep me informed.

Tony Baldry (Banbury) (Con): I know from personal experience that the post of UK Fisheries Minster is a lonely one and I congratulate my hon. Friend on what he has managed to achieve. This ludicrous system whereby decisions are taken year on year on the basis of sleep deprivation simply has to stop. Will he give the House a written statement in the new year on how he sees the reform of the common fisheries policy moving forward? This year two maritime nations—Denmark and Cyprus—will hold the presidency of the Council of the European Union, so surely there is an opportunity to move to regional fisheries management during their year.

Richard Benyon: I am grateful to my hon. Friend for his help and advice as I have progressed in this job. It is useful to have Members of the House who know what it is like to go through this charade—I use the word carefully—of a process, which requires decisions to be made after two or three days of heavy negotiations that run right through the night. We must have meaningful reform and it must have regionalisation at its heart. We need to be able to define in the new year exactly what we expect when working with partners in the sea basins around the UK. I pledge to keep the House informed of our progress.

Mr Gareth Thomas (Harrow West) (Lab/Co-op): Given the considerable disquiet among British fishermen about the deal, particularly the breaching of the Minister’s own red lines, is the deal not further proof of the catastrophic loss of influence in Europe since the Government parties came to power?

Richard Benyon: No, the hon. Gentleman probably was not listening when I said that we have been working extremely closely with our European partners. I think that he would really benefit from seeing just how well we worked and how we joined forces to defeat a proposal that, had it been implemented, would have been utterly devastating for our fishing industry.

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Oliver Colvile (Plymouth, Sutton and Devonport) (Con): I congratulate my hon. Friend on getting a 150% increase in the amount of cod being fished off the south-west. What position did the Hungarians and Austrians take in the matter, given that they have absolutely no coastline? Will he also confirm that there will be no impact on recreational fishermen?

Richard Benyon: As my hon. Friend knows, I am a great supporter of recreational angling and want to see many more people fishing in our seas. One of the ways of achieving that is by having more fish in the sea, so that feeds into what we are doing. I can assure him that all my conversations—I think—were with nations that have a maritime interest and that we work well with them.

Mr David Nuttall (Bury North) (Con): We keep hearing about all the benefits of our membership of the European Union. Does my hon. Friend think that UK fishermen agree that the common fisheries policy benefits the UK fishing industry?

Richard Benyon: I do not think that anyone loves the precise elements of the common fisheries policy, but fishermen tell me that they understand that proper management of our seas requires a common approach that recognises ecosystems, because fish do not recognise lines on maps. We need policies that reflect the ecology of fish, which sometimes means having to work with other countries.

Mr Philip Hollobone (Kettering) (Con): The tragedy of all this is that Britain should never have given away her fisheries in the first place. Our European neighbours have overfished Britain’s territorial waters and we should be repatriating powers over our fisheries industry. Given that that is not Government policy, I congratulate my hon. Friend on doing his best in difficult circumstances, but will he tell the House whether Britain’s market share of fishing will go up or down as a result of this deal?

Richard Benyon: If I may correct my hon. Friend, it is precisely our position to see more regional management of our fisheries, which means that we will be responsible for more of the decisions that are taken at a local level. That seems much more sensible than the current system. I believe that we have created a considerable economic benefit for a number of fishermen around our coast and that we have certainly seen off some very damaging economic decisions that could have come out of it. I hope that, in moving forward to a properly reformed common fisheries policy, I will have his support in trying to get more localised management for our fisheries.


The following Member made and subscribed the Affirmation required by law :

Seema Malhotra, for Feltham and Heston.

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Points of Order

5.58 pm

Miss Anne McIntosh (Thirsk and Malton) (Con): On a point of order, Mr Speaker. I have given you prior notice of this point of order, which relates to item 23 of the future business on today’s Order Paper—Public Bodies: Scrutiny of Draft Orders. This was due to be debated in the House last week, but the order, as drafted, was defective and so was pulled. It has enormous implications for the Environment, Food and Rural Affairs Committee in particular, but it also relates to all the orders for the dismantling once and for all of particular public bodies, the vast majority of which relate to the Committee.

If I may, I wish to ask for three things: that the order be debated in an orderly manner in the customary fashion; that, where an order for approval is drafted, it is not to be tabled before the end of the laying period and that additional time be granted to an individual Committee, such as the Environment, Food and Rural Affairs Committee, to allow a minimum of 60 to 90 working days to consider it; and that, if necessary, a debate on such an order is allowed on the Floor of the House. This order is monumental in its nature. These public bodies will cease to exist and the members of the Committee would like to have time to consider it fully.

Mr Speaker: I am grateful to the hon. Lady for advance notice of her point of order, and for the point of order itself. Sadly, none of the three requests that she has put to me is a matter for the Chair; all three are mattersher brow is furrowed, but I assure her that I am right on this issue—for discussion perhaps between the Liaison Committee, as the collective representative of Select Committees, on the one hand and Treasury Front Benchers on the other.

I should say to the hon. Lady and to the House, which I am sure will want the issue to be interpreted, that the point at issue is the procedure for Select Committees to deal with proposals made by Ministers under the recently passed Public Bodies Act 2011. I note—she referred to this in passing—that a proposed Standing Order to deal with those draft orders is indeed item 23 in today’s Future Business, section C, and no doubt those on the Treasury Bench, which does not include the Leader of the House or the Deputy Leader of the House at the moment but a number of Whips, who doubtless can convey the relevant information, will have heard her point. I have a feeling that if she does not get satisfaction, she is likely, if precedent is anything by which to judge, to return to the matter.

Mr Wayne David (Caerphilly) (Lab): On a point of order, Mr Speaker. At the end of October I submitted a written question to the Treasury for a named day reply. On the named day, 7 November, the reply from the Treasury Minister was, “I shall let the hon. Member have a reply as soon as possible.” It is 19 December, and I fully appreciate that I asked about a sensitive issue—fiscal integration in the eurozone—and I know how difficult

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things are in the coalition on the issue of Europe, but 19 December surely indicates that I should have had a reply by now. Will you, Mr Speaker, make urgent inquiries with the Treasury to ensure that I have a reply as quickly as possible?

Mr Speaker: I thank the hon. Gentleman for his point of order. This has been the subject of some considerable discontent on both sides of the House over a sustained period. Ministers have heard me say before that conforming to the spirit of what the House expects requires the provision of a timely and substantive response to the question posed. Simply to say just before the deadline or on the day of the deadline, “I will reply to my hon. Friend as soon as possible,” really is not good enough. The hon. Gentleman is a perspicacious Member if ever there was one, and he might wish to provide that example and possibly others to the Procedure Committee—and, perhaps, to write to the right hon. Member for East Yorkshire (Mr Knight), who chairs that august Committee and is looking into those matters—in the hope that he and his colleagues can get satisfaction.

Mr Denis MacShane (Rotherham) (Lab): On a point of order, Mr Speaker. The Front Benchers’ opening statements on the Vickers report earlier this afternoon lasted more than 25 minutes. They were almost Second Reading opening speeches. Statements have become alarmingly long recently. They used to be only seven or eight minutes, and then questions allowed points to be developed. Can we get back to that general rule?

Mr Speaker: I am grateful to the right hon. Gentleman for his point of order. I share his concern. Ordinarily, a ministerial statement is not expected to exceed and, indeed, is expected not to exceed 10 minutes. I was informed that the nature of that statement had required something slightly longer, and in those circumstances I allowed a little extension of time for the Opposition Front Benchers, but on the right hon. Gentleman’s substantive point I agree, and I hope that we can start 2012 rather better, with crisp statements and crisp responses from Opposition Front Benchers, and then get on to the people with whom I am mainly preoccupied, namely Back Benchers. I hope that that is helpful.

Bill Presented

Local Government Finance Bill

Presentation and First Reading (Standing Order No. 57)

Secretary Eric Pickles, supported by the Prime Minister, the Deputy Prime Minister, Mr Chancellor of the Exchequer, Secretary Vince Cable, Danny Alexander, Oliver Letwin, Andrew Stunell, Robert Neill and Mr David Jones, presented a Bill to make provision about non-domestic rating; to make provision about grants to local authorities; to make provision about council tax; and for connected purposes.

Bill read the First time; to be read a Second time tomorrow, and to be printed (Bill 265) with explanatory notes (Bill 265-EN).

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Mr Speaker: We come now to the motion relating to apprenticeships, and to move the motion I call the Minister for Further Education and Lifelong Learning—he may even have other elements within his arsenal—Mr John Hayes.

6.5 pm

The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes): I beg to move,

That this House has considered the matter of apprenticeships.

Mr Speaker, the other element is skills—but my skills could never be as great as your own, I hasten to add.

The guitarist Chet Atkins once said:

“A long apprenticeship is the most logical way to success. The only alternative is overnight stardom, but I can’t give you a formula for that.”

Mr Speaker, you and I know, along with others, that long apprenticeships in public service can bear out the first part of that sentiment. On overnight stardom, I say only that the hon. Member for Streatham (Mr Umunna), the new shadow Business Secretary, will no doubt enlighten us on some future occasion.

Mr Speaker, you and I have no wish for this debate to become an exercise in party political tergiversation alone. There is no need for unnecessary contumely, and no need for more criticism of Opposition Members than that which is necessary to, by contrast, highlight the extent of our achievements.

There are many on the Opposition Benchers whose commitment to apprenticeship training is deep and sincere, and I recognise that the previous Government did indeed invest in apprenticeships—certainly towards the end. It is also fair to point out that there was a rise of almost 50,000 in the number of apprentices aged over 25, so, despite some things that we have read recently, the growth in older apprentices is a trend change that has been taking place over a number of years.

Indeed, the previous Government recognised, as you will know Madam Deputy Speaker, in the Leitch report on skills, which they commissioned, that such growth in the skilling of older workers was essential to keep pace with our competitors by upskilling and reskilling the existing work force.

Above all, I know that Members on both sides of the House recognise that apprenticeship training is a sure way to success. The all-party group on further education, skills and lifelong learning recently called for the creation of a “Royal Society of Apprentices” as a means of raising the profile of what many of us believe is our most effective form of vocational training, and I will, I am pleased to tell the House today, take that proposal forward.

Mr Barry Sheerman (Huddersfield) (Lab/Co-op): The Minister knows and is quite right that all Members are in favour of apprenticeships, but we are in favour of quality apprenticeships. When I was Chair of the Education and Skills Committee, I discovered that too many apprenticeships lasted only one year and very many did not lead to a secure job. There are now 1 million unemployed young people, and some of us believe that

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6% of young people going into apprenticeships is not enough. We need new efforts to get more people apprenticeships now.

Mr Hayes: The hon. Gentleman has been a long-standing advocate of apprenticeships, and he rightly draws attention to previous Select Committee reports on the subject. He highlighted those reports in the Chamber on more than one occasion when I was present, and he is right in two particular respects: first, it is important that we focus apprenticeships on where they are of most value, and there is more evidence to suggest that they are of most value to young people between the ages of 16 and 24; and, secondly, it is important that we are relentless in our drive for quality. He is right, too, that as we increase the quantity of apprenticeships there will be a tension with quality, but I shall say a great deal more today about the steps that we have taken and the future steps that we propose to take to achieve just that ambition.

Having said that there is a broad measure of agreement, a point echoed by the hon. Gentleman, I should say, first, that the difference between us and the previous Government is that we have made apprenticeships the pivot around which the rest of the skills system turns. Secondly, we have made them fill a bigger space than ever before. Finally, we have put in place an unparalleled level of funding to support our single-minded aim to create more apprenticeships than modern Britain has ever seen. It is important to point out that that growth has not been only in traditional craft apprenticeships, but in the new crafts too—advanced engineering, IT, the creative industries and financial services.

Why, people might ask, do we put such an emphasis on apprenticeships? It is not just that apprenticeships work, although they do, or that an apprenticeship is probably the most widely recognised brand in the skills shop window, although it is; it is also about what apprenticeships symbolise—the passing on of skills from one generation to the next and the proof that that offers that learning by doing is just as demanding and praiseworthy as learning from a book. As William Morris said, all art and craft is

“the expression by man of his joy in labour”.

It is my ambition to dispel once and for all the myth that one can gain accomplishment only through academic prowess. The sense of worth that people gain through the work of their hands—through practical, technical and vocational skill—needs to be recognised, just as we recognise academic achievement.

It is that sense of apprenticeships as the embodiment of a continuum that guarantees their place at the heart of my vision for skills. I hope that, like me, hon. Members on both sides will welcome the provisional figures that show that, in the academic year that has just finished, nearly 443,000 people started an apprenticeship in England.

Mr Andrew Turner (Isle of Wight) (Con): Will my hon. Friend join me in congratulating HTP Training, an Isle of Wight apprenticeship provider, and its managing director Rachael Fidler? Most notable is its successful apprenticeship completion rate of 87%—significantly higher than the national average of 74%. Does my hon. Friend agree that none of that would have been possible without the Government’s help and support?

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Mr Hayes: That is the kind of testing question and penetrating intervention that I expected during this debate. None the less, it was most welcome, and from a Member who never ceases to represent his constituents in the Isle of Wight with vigour, verve and absolute integrity. His support for apprenticeships has been critical in delivering the 100% increase in Isle of Wight apprenticeship numbers to which he has drawn the House’s attention.

Mr Sheerman: Some of us sometimes try to get the Minister to be cross with us because he is always so polite and always strokes the feathers of everyone who asks him a question. However, I have to put it to him again: we all know that apprenticeships are something of a fig leaf for the Government. One million young people are unemployed and the Government keep pointing to what I call the fig leaf of apprenticeships.

Will the Minister stop weaving the myth that they are all three or four-year apprenticeships leading to secure jobs? What is the average length of an apprenticeship today? That is the crucial thing. I think that the Minister is going to have to say that it is about a year. Is that the truth? That is what the public want to know. What quality and length are the apprenticeships of which he is so proud?

Mr Hayes: The hon. Gentleman is renowned for his insight, and I had thought until today that he was equally renowned for his patience. I said that I would deal with quality and I assure him that I will also deal with the length of apprenticeships. I think he is right. Although there is no direct, guaranteed link between the length of an apprenticeship and its quality, there is a relationship. It is not a direct correlation, but it is a correlation none the less.

Today I will set out my demands for a minimum length for apprenticeships. That is perfectly reasonable. As I said, it is not a guarantee of quality, but it will certainly offer considerable assurance to the hon. Gentleman and others who, like me, are determined that quality should match quantity. The hon. Gentleman has, over many years, supported my view that technical education is critical not merely because it serves an economic function—because of its utility—but because of what it does for social mobility and social cohesion. Drawing on his patience and insight once again, I ask the hon. Gentleman to wait a few moments. I shall be speaking about the issue at considerable and eloquent length.

The figures that I cited show that numbers were up by more than half in the 2009-10 academic year. I want to make the point firmly that that includes an increase of about 10% in the number of apprentices under 19. I remind hon. Members that that Government achievement has been completed not merely because of our concentrated effort and the funding that we have put in place, although that is critical, but thanks to the work of further education colleges and other training providers, businesses coming forward and creating apprenticeship places, and learners and their families seizing the opportunity with both hands. The real credit lies with the learners, the training organisations and the businesses that allowed that expansion in the apprenticeship programme to take place.

Richard Harrington (Watford) (Con): SQI in Watford offers 10-week apprenticeship courses followed by 10-week

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placements. They lead to 85% of those taking part being in permanent employment. I do not think that the length of an apprenticeship is everything.

Mr Hayes: My hon. Friend has a lot to be pleased about in respect of apprenticeships; as he will know, in his constituency their number has grown by 98%. I did say that I did not think there was an exact correlation between quality and the length of a course, but I think there is a relationship. By setting down a marker about the minimum length of an apprenticeship, we will drive up quality. We will certainly reassure those who are genuinely committed to the apprenticeship programme, but have doubts about the tension between quality and quantity, that we are serious about standards. That matters.

I take my hon. Friend’s point. It may be possible, particularly for older learners with greater prior attainment, to top up skills—perhaps they are moving from a level 2 to a level 3 qualification, or they already have many of the skills necessary to gain their first level 2 qualification. None the less, I still think that length matters.

I should like to put the debate in context, Madam Deputy Speaker; you would expect me to do no less. The Government’s macro-economic policy is built on twin pillars—reducing the deficit and reshaping our economy to make it more sustainable. That second core aim is served by the apprenticeship programme, because it assists in recalibrating work force skills so that productivity rises and competitiveness grows. Britain’s future chance to prosper lies in a high-tech, high-skill economy and to prosper in that way we need a high-tech, high-skill work force.

The recent announcements of reform to the programme concentrated on three areas key to the programme’s continued expansion and success: how to get more employers involved in offering apprenticeships; how to ensure that apprenticeships continue to offer people, especially young people, a firm first step on the ladder that leads to fulfilling careers and further learning; and how we ensure that the money that we spend on apprenticeships has the greatest success.

In the end, apprenticeships are jobs and the programme is demand-led. That means that the growth depends on employers coming forward to make places available. In the current economic climate jobs are in short supply, notably for young people, so the record increase in apprenticeship numbers is remarkable. Hon. Members will join me in commending the 100,000 employers that are using apprenticeships to develop work force skills—helping their businesses, but also providing opportunities for people across this country to grow their skills and improve their prospects.

Our work to recruit more employers to our cause goes on. Only this morning, I was at No. 10 Downing street briefing major employers on what apprenticeships can do for them. They were as committed to spreading opportunity and to social justice as I am.

Our objective is to improve and strengthen the programme even further so that more individuals and employers can access the benefits of high-quality apprenticeships. Overall, employer ownership of vocational skills is the key to our approach. This ambition informs all our priorities in moving forward: first, by reducing bureaucracy to an absolute minimum, speeding up processes

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and boosting employer engagement; secondly, by safeguarding quality, raising standards, and enhancing the reputation of the apprenticeship brand; and thirdly, by focusing future growth where the returns and benefits are greatest, including growth sectors of the economy, small and medium-sized enterprises, young people and new employees.

SMEs tell us that they still face considerable hurdles in taking on apprentices, and we have taken a serious look at what we can do to help to remove the barriers that they face. This has rightly been raised on the Floor of the House by Members on both sides and in all parties. I can announce today that, first, we will bring reduce to one month the time it takes for an employer to advertise an apprenticeship vacancy, including identifying the provider and completing an agreement on a training package between the employer and the provider; and secondly, we will remove all health and safety requirements that go beyond what health and safety legislation requires. From 1 January, employers that meet the Health and Safety Executive’s requirements as set out in “Health and safety made simple” will be deemed to provide a satisfactory level of compliance. We will also work with the insurance industry to encourage an approach that is proportionate to risks, and with training providers to develop new service standards for supporting SMEs to be included in all contracts for apprenticeships delivered from March 2012.

In addition, we are committed, in a significant new pilot programme, to taking radical steps to give businesses direct access to up to £250 million of public funding for training and apprenticeships over two years. This pilot is a key part of the Government’s growth review. It will route funding directly to businesses, will be more efficient than current arrangements, and will give businesses real purchasing power in the schools marketplace to secure the support that they need.

Mr Adrian Bailey (West Bromwich West) (Lab/Co-op): Will the Minister give way?

Mr Hayes: I happily give way to the Chairman of the Business, Innovation and Skills Committee.

Mr Bailey: I thank the Minister for his customary courtesy in giving way. I welcome the announcement about provider and employer engagement, and speeding that up, but will he clarify whether there are any restrictions regarding a member of a board of a provider company being precluded from being a member of a board of a user company?

Mr Hayes: The answer is that I do not know; in these circumstances, it is always right to be straightforward. Because I know that the hon. Gentleman takes these matters seriously and is committed to getting this right, as I am, I will take his point away and look at it. He is arguing that there might be a conflict of interest in terms of provider and employer, and he is right to say that there should be a proper separation. However, as he will know, it is often the case in large companies that the training wing of the company provides the pedagogy associated with an apprenticeship while the apprentice is engaged in the work-based training in the same

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company, though in a different part of it. I would qualify his query with that caveat. None the less, I will take another look at the subject and will be more than happy to respond to him directly.

The pilot that I described will involve employers being asked to demonstrate how public funding will be used to leverage private investment and commitment to raising skill levels in their sectors or supply chains. As we grow the apprenticeship scheme, it is very important to take advantage of the value chains associated with our major corporates—their supply chains and their distribution chains, where they exist. Typically, Governments have spent insufficient time considering how that might work in the light of the well-established nature of those relationships and the dependence of large organisations on myriad smaller companies, the fragility of which, by their very nature, is possibly injurious to the interests of those corporates.

For example, major suppliers in the automotive industry tend to have very large numbers of organisations with which they deal commercially in their locality, some of which are vital to the effectiveness of such large organisations. It is vital, in their interests and in ours, that we do more to ensure that those relationships allow us to grow the apprenticeship system within SMEs. It may be of value for large companies to absorb some of the bureaucracy and some of the cost, and certainly to absorb some of the management associated with seeding apprenticeships in their value chain. Bidding for the employer-led pilot will formally be launched in the new year.

Above all else, my advocacy of practical learning and my faith in apprenticeships are driven not by economic imperative—not merely by utility—but by social purpose. I said earlier that for too long the myth that only through academic accomplishment can a sense of worth be achieved has been perpetuated by those who themselves have travelled a gilded path to academia. Now it is time once again to recognise what Ruskin and Morris knew—that all those with practical tastes and talents, with technical vocational aptitudes, deserve their chance of glittering prizes too. This is not just because of the relationship between craft and beauty and, in turn, between beauty and truth, but because for society to cohere we must promote the common good through a shared appreciation of what each of can achieve. All feel valued when each feels valued. Given that inequality is the inevitable consequence for a free economy in a free society, only through social mobility can a communal sense of fairness be achieved. A society that is unequal and rigid is bound to be unable to secure the ties of shared identity, as invisible and yet as strong as the heartstrings of love.

Mr Sheerman: The hon. Gentleman and I share a great admiration for the poet John Clare. I am still waiting for a quotation from John Clare, who lived very near his constituency.

May I bring the hon. Gentleman back to the false dichotomy that comes through insidiously in his honeyed words—namely, that there is one group of people going into academia and higher education and a more worthy group going into apprenticeships and more practical learning by doing? This September, 36% of people went into higher education and 6% went into apprenticeships; we want him to talk about the 58% who went in neither direction.

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Madam Deputy Speaker (Dawn Primarolo): This is the season of good will, so I am pleading for good will from hon. Members in making short interventions. I remind everybody in the Chamber that this is a very heavily subscribed debate with a time limit on speeches that may, at this rate, have to be shortened for each speaker. In the interests of good will, perhaps we could make sure that all hon. Members get to speak tonight.

Mr Hayes: Yes, Madam Deputy Speaker; I must not allow my legendary generosity to prevent Members from contributing to this debate.

To the hon. Member for Huddersfield (Mr Sheerman) I say:

“I loved thee, though I told thee not,

Right earlily and long,

Thou wert my joy in every spot,

My theme in every song.”

That is by the people’s poet, John Clare. I believe that the hon. Gentleman saved John Clare’s home with the involvement of a social enterprise. We share a passion for the people’s poet, as we share a passion for the welfare and interests of the people. It is just a pity that I am in the people’s party and he is not.

With so many people currently not in employment, education or training, we must do more to extend the ladder of opportunity—the point that the hon. Gentleman is making. It is absolutely vital that in getting apprenticeships to fill a bigger space, we not only allow them to redefine our sense of what we understand as higher learning—I shall speak about that, too—but use them as a vehicle to allow for re-engagement of those who are currently unable to contribute in the way that we both want them to by getting a job, keeping a job, and progressing in a job. Through our access to apprenticeships programme, which we piloted as a result of my determination to do exactly what the hon. Gentleman described, I believe that we can provide just such a vehicle to get those who were failed by the system the first time around and who do not have sufficient prior attainment on to a level 2 course.

The drive for greater quantity must be matched by a determination that quality will grow in tandem. First, we will strengthen the English and maths requirements for apprentices who have not yet achieved a level 2 qualification. Those subjects remain essential for long-term employability and progression, so from the 2012-13 academic year all apprenticeship providers will be required to provide opportunities to support apprentices in progressing towards the achievement of level 2, GCSE or functional skills qualifications. They will be measured on their success in so doing.

Secondly, we will launch a rapid employer-led review of apprenticeship standards to identify best practice, ensure that every apprenticeship delivers the professionally recognised qualifications that employers need, and ensure that the Government are maximising the impact of public investment.

Andrew Griffiths (Burton) (Con): Does the Minister share my concern that the new requirement for maths and English to be part of the apprenticeship course might deter some of the NEETs—those who are not in education, employment or training—we are trying to get into apprenticeships from taking part in such schemes? Does he believe that we need additional support to help

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underachievers who do not have the required attainment in maths and English to achieve it so that they can get on to an apprenticeship scheme?

Mr Hayes: My hon. Friend will know that in his constituency of Burton, apprenticeship numbers have risen by 76%. He will know, too, that that rise is due to the excellent work of his local further education college, with which I have had regular dealings.

My hon. Friend is right to argue that it is important that we take account of those who do not have the prior attainment to get on to a level 2 qualification. That is precisely the point that I was making a few moments ago, when I spoke about pre-apprenticeship training. To be clear, I said that those achieving a level 2 qualification must meet the standards in maths and English. There is an absolutely proper argument that we need steps on the ladder before people get to level 2, to allow for the re-engagement of those who are currently not able to get a job.

Thirdly on quality, we will continue to raise quality through consumer empowerment and transparency by improving employer and learner access to objectives and comparable information on providers.

I can also announce today additional steps that I am taking to raise the bar of apprenticeship standards even higher and to root out poor quality where it exists. All apprenticeships should involve a rigorous period of learning and the practice of new skills. If the standards are sufficiently stretching and the expectations of competence high, I believe that a course should naturally extend over at least 12 months. That will be the expectation first for 16 to 18-year-old apprentices from August 2012, as new contracts to training providers are issued. I have asked the National Apprenticeship Service to assess the implications of extending that to apprentices of all ages, taking account of the fact that older apprentices typically have greater prior attainment, as has been said. That will also allow time for our raised expectations on English and maths standards to be achieved. I am mindful of the comments of my hon. Friend the Member for Burton (Andrew Griffiths) in that regard.

Alongside that, I have asked the National Apprenticeship Service to work with the Alliance of Sector Skills Councils to tighten guidance for those who are developing apprenticeship frameworks to ensure that expectations on national standards and rigour are met, and to take action where frameworks are insufficiently stretching. In the current economic times, we must be more vigilant than ever to ensure that funding delivers value and is properly spent. I am mindful of the remarks of the Chairman of the Business, Innovation and Skills Committee. We must crack down when there is evidence that public money is not being spent properly. Action is in hand to review cases where there is concern. Our resolve is to ensure that every penny of public money delivers high-quality apprenticeships and to continue to weed out failure and weakness wherever they are found. I know that the Select Committee is about to launch an inquiry into apprenticeships. I will make the evidence available in my submissions to that inquiry, giving a clear timetable of action and details of the steps we intend to take to root out poor provision.

The Skills Funding Agency will tighten the contracts with colleges and other training providers to allow the immediate withdrawal of funding from provision where

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quality standards are not met. I am mindful of the comments of the former Chairman of the Children, Schools and Families Committee, the hon. Member for Huddersfield.

Members are aware of the scale of the crisis in public spending that this Government inherited and of the sometimes painful measures that we have had to take to deal with that. The fact that even in these circumstances we have increased spending on apprenticeships is a clear demonstration of our belief in the economic and social value of this form of training, and in the talent and potential of our young people. On 17 November, we set out a clear commitment to focus growth where the returns are greatest, both in terms of age groups and sectors. For example, there is evidence that younger apprentices see the greatest benefits. We will expect the National Apprenticeship Service, employers and providers to focus their efforts on those groups. Accordingly, I am asking the National Apprenticeship Service to target more actively, through marketing and other operational levers, the learner groups, qualifications and sectors where apprenticeships deliver the greatest benefits.

In addition, to widen the effort to create more and better apprenticeship opportunities and to grow the programme among SMEs, from April 2012 we will offer up to 40,000 incentive payments of £1,500 for small employers who take on their first young apprentice. Sufficient funding was already available for next year to support at least 20,000 incentive payments in respect of apprenticeships for young people. An additional fund will be made available to support a further 20,000, meaning that in total there will be 40,000 incentive payments. The payments will be targeted to provide additional apprenticeship opportunities for young people who are ready for employment with small employers that have not been engaged with the programme previously.

I said at the beginning of my remarks that what distinguishes this Government from the previous one is that apprenticeships are at the heart—at the very core—of our approach to skills. We want to build a ladder of opportunity that stretches from re-engagement to the highest skilled levels, with apprenticeships filling a bigger space. We will redefine what we mean by higher learning. In future, our vision of higher learning will extend out from the university classroom or laboratory into the workplace. Because I want a vocational pathway as rigorous, accessible and progressive as the academic route, on 1 December we announced that £18.7 million from the higher apprenticeship fund will support the development of 19,000 new higher apprenticeships in key growth sectors, including construction, renewable energy, advanced engineering, insurance and financial services.

Sajid Javid (Bromsgrove) (Con): I am glad that my hon. Friend is setting out plans to increase higher apprenticeships, because for many young people that is a better route to successful employment than a university degree. For the benefit of the House, will he outline how many higher apprenticeships were created by the previous Government?

Mr Hayes: I do not want to be excessively critical of the previous Government. I made that clear at the outset. I said that I would not be more partisan than was necessary to illustrate the extent of our achievement.

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In answer to my hon. Friend, let me point out that in 2008-09 there were fewer than 200 higher apprenticeships. With the announcements that have already been made and the relaunch of the higher apprenticeship fund in January for its next phase, I estimate that in this Parliament we will create 25,000 higher apprenticeship places. From 200 places to 25,000 is an extraordinary and remarkable achievement, for which the Prime Minister, the Chancellor, employers, learners and providers can take an immense amount of credit, and for which I can take just a little credit too.

Toby Perkins (Chesterfield) (Lab): I am very keen that the hon. Gentleman should get all the credit that he can. On that note, will he tell the House how many more young people between the ages of 16 and 24 are unemployed after the 18 months in which he has been in his role?

Mr Hayes: I wondered whether the hon. Gentleman might ask that question because I know of his genuine and deep-seated concern about these matters, so I had a look at the figures on NEETs over the period from 2000 to date. He will know that from 2004 the number of disengaged young people grew steadily, and that in the third quarter of 2009 it reached 925,000. He will understand that that is a structural problem that requires structural solutions, and that part of the solution is to recast how we train and educate young people and how we create opportunities of the type that I have described, so that we can not only re-engage them but allow them to progress.

The difference between our approach and that of the Labour Government—and, to be fair, previous Governments—is that for a time, apprenticeships may have been seen as a cul-de-sac rather than a highway. By creating the number of higher apprenticeships that I described, I am ensuring that there is a vocational pathway, so that far from being a cul-de-sac, apprenticeships are a route to higher learning that enables people to fulfil their potential. I am confident that our structural changes will help us to deal with a structural problem in a way that the last Government failed to do. I do not say that in an unnecessarily partisan way, but it is pretty surprising that even at a time when the economy was very strong, the number of young people not in education, employment or training remained persistently high and continued to grow.

Steve Rotheram (Liverpool, Walton) (Lab): Perhaps I can help by saying that in 1995-96, the number of young people starting an apprenticeship under the Conservative Government was a little over 20,000. The Tory Government did pump that up in their last few months and reached the amazing number of 65,000, but after 12 or 13 years of the last Labour Government, that number had increased to 280,000. I say that to be helpful to the hon. Member for Bromsgrove (Sajid Javid).

Mr Hayes: The hon. Gentleman is a former apprentice and is passionate about the subject, and on that basis I defer to his expertise and personal understanding of the subject. He will be as pleased as I am that apprenticeship numbers in his constituency have grown by 65%. I acknowledged at the outset that apprenticeship numbers grew under the last Government. Indeed, the former Prime Minister declared to the House in 2010 that there were 250,000 apprenticeships. Now there are nearly

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440,000. That is the difference between Labour’s record and ours. I know that in the spirit of generosity that typifies all the hon. Gentleman does here, he will want to acknowledge that success when he speaks later.

The development of our new higher apprenticeships in key growth sectors, including construction, renewable energy, advanced engineering, insurance and financial services will allow about 250 employers, including Leyland Trucks, Unilever, TNT, Burberry and so on, to benefit from nationally accredited technical training delivered in the workplace. Higher apprenticeships have the potential to deliver higher-level skills tailored specifically to individual business requirements, and I am encouraged by the research produced at Greenwich university earlier this year showing that about 13% of apprentices progress into higher learning within four years of completing their apprenticeship. As I said a moment ago, we will deliver more than 25,000 higher apprenticeships in this Parliament.

There is much more that I could add to that catalogue of good news. I could wax even more lyrical about the scope and scale of our achievements, but I know that many Members want to speak and I am anxious not to impinge too much on their time. I know that when they speak, like those who have already intervened, they will want to reflect on how much has been achieved over recent months, not just in expanding the apprenticeship programme but in making it more responsive to the needs of employers and the aspirations of learners. Hon. Members will also be aware of how much remains to be done to ensure that we build on excellence, focus on quality, direct funding, link apprenticeships to growth and ensure that not only the macro-economic ambitions that I have set out but our social ambitions are achieved. That is the scale of what we want to achieve. We will be ever vigilant in raising standards and quality, cutting bureaucracy and prioritising areas in which returns and impact are greatest.

At a recent Business, Innovation and Skills questions, I asked all hon. Members who had not done so already to set an example by taking on an apprentice. Today, I ask for their engagement during national apprenticeship week, which starts on 7 February 2012.

To change our national prospects, we must change our view of what matters to each of us and all of us. Apprenticeships are an economic imperative, a social mission, a cultural crusade—such is the scope and scale of our ambitions. We want to reinvigorate practical, technical and vocational skills by reigniting the fire of learning. We want lives lit up by achievement, with a new generation of craftsmen shaping a bigger Britain and building a better future.

Several hon. Members rose

Madam Deputy Speaker (Dawn Primarolo): Order. Before I call the other Front-Bench speaker I inform Members, so that they can get ready, that as we are not making as much progress as we should, I am reducing the time limit for Back-Bench speakers to six minutes in order to get everybody in. I hope that is clear.

6.46 pm

Mr Gordon Marsden (Blackpool South) (Lab): I know that in certain quarters—some of the more world-weary denizens of the 21st century—the Minister, for whom I

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have much respect and affection, is the subject of mild amusement because of how he manages to cover all times, all places and all poetry, and in particular because of how he invokes mediaeval guilds. I think that is extremely unfair, and I have a confession to make tonight: I, too, am a mediaevalist. In fact, a significant chunk of my education at Stockport grammar school was down to an apprentice made good, Sir Edmund Shaa, who was apprenticed as a goldsmith in 1450 and subsequently founded the school in 1487. His Latin motto was “Vincit qui patitur”, which very loosely translates as “You’ll get there if you stick at it”. Of course, that was what happened in that period for people such as Dick Whittington, who was of course apprenticed as a mercer. This is the time of year for pantomime, Madam Deputy Speaker, so I trust that you will forgive me for mentioning him. It also happened for Scrooge, who was not represented in Dickens’s novel as the Chancellor of the Exchequer but was an apprentice to Fezziwig, who was also a great model.

Apprenticeships were renewed by the trade union movement in this country in the 19th and 20th centuries. It was the skilled working class who took them up. My own father, who was apprenticed just before the second world war to Crossley Brothers, one of the best engineering companies in the north-west, was told by my grandfather that he had a job for life. However, as we well know, we have seen the decline of traditional industries over a long period. In the spirit of Christmas and non-partisanship, which the Minister mentioned, I will not ascribe that to any one particular Government, although Thatcherism comes to mind. We saw the meretricious pursuit of funny money and fluffy activity under the Thatcher Government—not that I would accuse the Minister of being either fluffy or funny. [Hon. Members: “Ooh!”] Funny peculiar, not funny ha-ha.

By the 1990s, as my hon. Friend the Member for Liverpool, Walton (Steve Rotheram) said, apprenticeships were on their knees, and it was the Labour Government who renewed them, as the Minister was gracious enough to acknowledge. Incidentally, that renewal did not come out of a focus group, and sadly it was not detailed on the great pledge card. It certainly did not come via Twitter, because we did not have the technology in those days. It came from a deep belief and a response to what we were being told in our heartlands about industrial decline, the failings and horrors of the youth training schemes and the low-skill, low-quality training that had taken place under the Conservatives before 1997.

We said that there must be a better way. That was why we revived manufacturing and gave it a sense of structure as we approached the millennium, and why we set up the national apprenticeship scheme and introduced national apprenticeships week. At the end of the day, it was also why it was the Labour Government who supported our successful bid to stage WorldSkills this October in London—I also pay tribute to the Minister and Members from across the House—and what a wonderful showcase for vocational activities in this country that was.

I do not need to remind the House—because the Minister has already generously done it for me—that we commissioned the Leitch report, that seminal report on our skills needs which has informed policy in all parts of the House. What it says about the direction of travel remains just as relevant, even though the economic situation has changed utterly from the period in which

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it was produced. Leitch ascribed to apprenticeships an important role to play in improving adult skill levels, as the Minister rightly said. That will only become more important as our demographic profile changes. However, we have to resist the temptation to label all in-work training as apprenticeships, thereby stretching the brand to breaking point. We also have to judge training schemes critically in their own right, and in preparation for this situation.

However, at a time of huge rises in youth unemployment and the number of NEETs, it is clear that the immediate challenge is to grasp the nettle and boost the number of apprenticeships available to those aged 16 to 24. The Government’s own head of the apprenticeship service warned only this summer about the chronic lack of places for interested school and college leavers. It is therefore not just a question of supply, or even money—although the Minister has been somewhat over-familiar with the figures, and I intend to return to where some of the money has come from. It is also about demand—demand in the workplace and demand from employers—and, crucially, confidence. Without confidence, the Government can produce as many schemes as they like, but they will face an uphill battle in successfully attracting the numbers. It is this Government’s failure to produce economic arguments or an economic strategy that will generate confidence that has contributed to many of the problems with which the hon. Gentleman has had to grapple.

However, I would like, if I may, to pose a further question for the House—one that goes to the heart of the future for apprenticeships. What are apprenticeships for? Do we see them as a means to expand someone’s existing skills competences, providing a traditional role, or as a means to give rigour to new and developing types of employment, such as in green and low-carbon areas? If so, we need to highlight the importance of adopting a collaborative approach in those areas between employers and training providers in designing frameworks that best fit those new competences. I know from talking to a successful construction business in my area—a company called Amion, which has a good track record in supporting employees from Blackpool to gain higher and further education qualifications as apprentices, both part time and full time—that expansive frameworks might not always be the answer for young people taking an apprenticeship or skills route to qualifications while working in a company. As for older workers, especially in construction or electrical activities, it might make more sense to have shorter, one or two-day bolt-ons to existing qualifications, which again highlights the need for frameworks to be flexible and adapt rapidly to new developments. In a labour market where the average person will be expected to change jobs a number of times in their lives, can a portfolio of skills be offered that will allow the budding apprentice the ability to cope with this new-found flexibility, as he or she progresses?

There is a lively and ongoing debate about the nature of apprenticeships—an issue to which the Government have rapidly been forced to turn because of some of the disquiet in recent months. That was apparent from a meeting in this House organised recently by FE Week, when more than 80 apprenticeship providers came to the Commons to voice their views and concerns about

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quality and overstretch in apprenticeships, which is something that we have also articulated via our parliamentary questions. As Peter Cobrin, the national education director of the website, argued:

“Is 12 weeks working in a catering establishment and coming up with a certificate—is that an apprenticeship? Or three years working in a engineering company—is that an apprenticeship? We haven’t got a handle around what it is.”

Alastair Thomson from the National Institute of Adult Continuing Education talked about people who are already working for the employer and then being put on the programme. He said, “Sometimes that’s not a bad thing, but if the person who goes through an apprenticeship stays on the same job or does not get any pay rise—is that really a good use of public money? I’d suggest not.”

Those are issues that have been raised strongly, along with others, in connection with Elmfield Training, which made significant profits in delivering the apprenticeships framework. I have also written to David Way of the National Apprenticeship Service to voice my concern about those issues. I therefore welcome the Minister’s announcement today about curtailing apprenticeships that are shorter than a year. I also welcome all the other things he has said in that respect, but this House needs to remember that this comes on the back of a process of concerted pressure, 18 months into this Government’s period of office. I would say gently to the Minister that the devil is in the detail. I appreciate that he wanted to present a lot of the detail today, but when he was going through it so rapidly, talking about the sunny uplift, I was reminded of the old saying: “The faster they counted their honour, the faster we counted the spoons.” We will certainly be counting the spoons and holding the Government to account on these issues.

The Minister’s announcement will do nothing immediately to address the concerns about the quality and progression of apprenticeships for those in the crucial age range between 19 and 24, although the Minister said that he would look at that. After all, their futures are just as important to the economy and jobs as those in the younger range. We will therefore be pressing Ministers to ensure that apprenticeship standards and quality are maintained for all ages.

Mr Hayes: I do not want to intervene too frequently on the hon. Gentleman, because a lot of colleagues want to contribute, but he will know that the growth in apprenticeships for 19 to 24-year-olds over these two years—the first year of which his Government might take some credit for, because of the time lag in publishing the figures—has been around 60%. There has been considerable growth in apprenticeships for 19 to 24-year-olds. As for quality, he will also know that it was this Government who introduced both minimum contract values, to take out some of the smaller and less reliable providers, and apprenticeship standards, and that was in the beginning, not in response to any pressure from the Opposition.

Mr Marsden: Well, I—

Nigel Adams (Selby and Ainsty) (Con): Agree?

Mr Marsden: No, I do not agree. I hear what the Minister has to say, and I accept that he and colleagues have made progress in that area. My point about 19 to

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24-year-olds was not that the numbers had gone up, but that it is just as important to look at quality for that group as it is for 16 to 18-year-olds. Let me say rather gently—albeit excluding the Minister from culpability in this respect—that if the Government move in the same glacial fashion as they moved in other areas of quality and due diligence, such as with the regional growth fund, then we will have the opportunity to come back and quiz them further. However, knowing the Minister’s commitment in this area, his perspicacity, his ability to summon up armies of rhetoric—and, indeed, civil servants to do this job—I am sure that that will happen.

Let us create a landscape where we can continue to boost apprenticeship numbers. However, if we are going to do that, it is crucial to get the preparatory work right. That means a strong, solid system of careers advice for young people, to ensure not only that they are aware of the vocational opportunities available to them, but that they are given the skills to take them up. We support the principles behind the establishment of the all-age careers service, on which the Minister, while in opposition, and I, as a Back Bencher, agreed some time ago, as members of the all-party skills group. But the Ministers’ noble aspirations have been undermined by the chaos and confusion arising from the Department for Education’s arbitrary abolition of Connexions and the removal of a dedicated £200 million of support provision in schools. It is therefore not surprising that the president of the Institute of Career Guidance, Steve Higginbotham, went so far as to say:

“In reality, the National Careers Service is an illusion, and not a very imaginatively branded one either, and is a clear misrepresentation with regard to careers services for young people.”

A recent survey carried out by the Association of Colleges showed that only 7% of school pupils could name apprenticeships as a potential post-GCSE qualification. That illustrates the problem that still exists in some schools, in which the vocational route is not explained to pupils. Teachers and others need to have a much greater understanding of the role that apprenticeships can play in careers development and future job prospects. I fear, however, that the situation will not improve following the abolition of Connexions.

New initiatives such as the programme announced this week by the chief executive of the CBI to send mentors into schools to promote apprenticeships are to be welcomed. That announcement shows a welcome recognition that everyone needs to play their part, not just teachers. We must also ensure, however, that young people can afford to stay in education. Following the abolition of the education maintenance allowance, college enrolment data from the Association of Colleges show that numbers are down across the board. That has real implications, as many young people will miss out on the opportunity to gain the crucial pre-apprenticeship skills that they will need to take up a placement. If apprenticeships are to play an integral role, we must ensure that they are fit for purpose, and that they can match the expectations of the individuals who take up the placements with those of the employers who take those individuals on.

We need apprenticeship frameworks that allow progression for the individual; they must not just be there for their own sake. I know that the Minister shares that view, as it featured heavily in his “Skills for Sustainable Growth” document last year. Now, however, we need

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movement to match the aspiration. We need clear portability from apprenticeship frameworks, with qualifications that are pyramidal in shape, rather than horizontal. We need a process of continuous assessment and credit accumulation that builds up a broad competence, rather than just bite-sized chunks of training that do not add up to anything.

It is equally important, whatever the qualification route, that we do not force employers or apprentices into a false dichotomy between functional skills and skills for life. Enabling skills are important for gaining and keeping an apprenticeship, and subsequently a job, as well as a knowledge of specific skills. Both aspects need to be taken into account as we balance our skills needs in the years ahead.

We need clear, accessible pathways from higher-level apprenticeships into higher education. I want to point out that the choices relating to vocational and academic education should not be viewed as an either/or proposition. Perhaps the Minister should ask his colleague, the Minister for Universities and Science, the right hon. Member for Havant (Mr Willetts), to get UCAS to consider recognising apprenticeship qualifications as part of its tariff-points system. For too long, complacency about the status quo and some minor snobbery in a minority of universities have hampered not only access but the interchange between the academic and vocational worlds. I welcome what the Government have said about the higher apprenticeship fund and the way in which it will be taken forward, but the key question is how those qualifications will be recognised and integrated into higher education progression.

How will this culture shift of which the Minister is so proud be delivered? The national apprenticeships service, which we set up when we were in government, is clearly set to lead from the front, but will it have the resources to deliver the expansion that the Government are talking about? Recent parliamentary questions have shown that the organisation has lost just under 100 staff in the course of the past year, at the very time that it is being asked to lead the delivery of more and more apprenticeships and to oversee the additional initiatives that the Government are pushing out, including those announced today. My own inquiries have shown that regional directors are now finding themselves further stretched by having to cover multiple areas of the country as well as delivering all the new initiatives that the Government are launching.

The Skills Funding Agency is responsible for all post-19 provision, but, crucially, the Department for Education still controls 16-to-18 provision and is arguably not showing the same commitment to apprenticeships and vocational education as Ministers in the Department for Business, Innovation and Skills have done. The problem with all this, and with the Minister’s dual role in the two Departments, is that it is sometimes hard to see who is leading whom.

We might also ask about the situation on the ground. Following the abolition of the regional development agencies, the Government have completely failed to link local and regional growth into their skills policies. That obviously includes apprenticeships. They have swept away the informal architecture that used to bring together the key players who were crucial to delivering apprenticeships locally, including further education, higher education and small and medium-sized enterprises.

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I welcome what the Minister said today about the supply chain, but he merely echoed what we have been saying for more than a year. Why did a year have to be wasted before he came to the House to say these things? Why did we have to wait a year for the Minister of State, Department for Communities and Local Government, the right hon. Member for Tunbridge Wells (Greg Clark) to talk about the Government setting up a set of apprenticeship hubs in a number of city areas? The reason is that both Ministers were fettered by other Ministers, by the Chicago-based economists and by the people who think that they can deliver everything on the ground without any Government intervention, whom the Minister has on other occasions derided. Yes, it is good that the Government are looking at apprenticeship hubs, but who on the ground is going to deliver, arbitrate and energise demand? What about those outside the city regions? Are the second-tier towns, the seaside towns and the suburban and rural areas not entitled to an apprenticeship hub locally? We need those structures on the ground so that business demand can be recognised locally rather than being micro-managed from Whitehall, as happens now.

The situation is not helped by the cluttered environment that has developed in post-16 provision, with the creation of university technical colleges and the potential for free colleges and 16-to-19 academies alongside existing FE colleges. We can all see the results when apprenticeship schemes are run well; we have only to look at the demand for schemes run by BAE Systems, Jaguar Land Rover and Network Rail. I have also seen for myself the excellent work being done by British Gas to encourage more female apprentices, and the work done by the nuclear skills academy. All those schemes demonstrate the value of investing in training and skills for the long term—a point emphasised eloquently by my hon. Friend the Member for Streatham (Mr Umunna), the shadow Business Secretary, in his recent Bloomberg speech.

This brings us back to the age-old question: what is a good job? How do we match the fluid skills demands of the labour market with the life chances and skill sets of individuals? To boost apprenticeships, we will have to meet the challenge of winning over employers who are still sceptical about the some of the values that apprenticeships could bring. A recent British Chambers of Commerce skills survey showed that many employers were still not ready to engage with the programme. Only 20% of businesses surveyed across the board took on apprentices in 2010-11, with the figure set to drop to 15% in the coming year. The Federation of Small Businesses has rightly highlighted issues of complexity and red tape, which act as a deterrent to its members. So I welcome what the Minister has said today, although we shall have to wait to see the small print and to see how rapidly the proposals are put into practice.

I raised the problems of SME engagement in a debate in June, when I said that the Government needed urgently to consider tailoring apprenticeships better towards their needs. That means not just having financial incentives, which Ministers and others sometimes seem to think are enough, but structuring them to the daily cycle and the needs of SMEs’ work. We need to improve the levels of engagement between large companies and middle-ranked companies—identified

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only last week as key by the CBI director, Mr Cridland. They can play a vital role in boosting apprenticeships via supply chains.

Undeniable pride and dignity surround apprenticeships. That is why so many hon. Members have been able to recruit support for individual initiatives in their area. It has been the same in my area, and this summer I met apprenticeship award winners at Blackpool and the Fylde college in my constituency. My local paper, the Blackpool Gazette ran a successful campaign to create 100 apprenticeships in 100 days. In these sorts of processes, however, making connections and having middle men can be key. I learned that by talking to my FE college and to apprentices and the SMEs with whom they had bonded.

The Government have re-announced today—this is about the third time—the £250 million scheme to allow employers to bid directly for the training budget, but they need to be careful that the human resources element is not lost in hastily thought-out schemes that do not have safeguards and risk deadweight while funding for learning providers and colleges, which are already voicing their concerns, is top-sliced.

This October WorldSkills hit London, and team UK won 12 medals. I was delighted when by lobbying the Government I was able to play a small part as chair of the all-party skills group in tandem with others in the group in helping to bring that event to the UK. Young people with apprenticeships shone out, including Rachel Cooke from Blackpool and the Fylde, a BAE employer in my area. I agree with what the Minister said about the value of that. Labour Members have agreed with it for many years. Although I did not regret the changes made in the 1990s to the Labour party’s constitution in respect of clause IV, I did regret the removal of the words, to achieve

“for the workers by hand or by brain the full fruits of their industry”

because that embodied and continues to embody an important part of our tradition and our aspiration. I believe it is crucial that apprenticeships should have and deserve to have this respect—not least because some of the organisations that promote them, such as City and Guilds, which has been with us since 1878, have become a byword for attaining qualifications, rather like Hoover has become a byword for vacuum cleaners. Apprenticeships now span both traditional types of occupation such as stone masonry and thatching offered by the National Trust and the new schemes in the green industry and everything that goes with them. Harsh words have been said about some elements of the service sector in connection with some of the shorter-term apprenticeships, but we have to recognise that the sector will be key in delivering future economic prosperity.