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House of Commons

Tuesday 6 March 2012

The House met at half-past Two o’clock


[Mr Speaker in the Chair]

Business Before Questions

New Writ

Ordered ,

That the Speaker do issue his Warrant to the Clerk of the Crown to make out a new Writ for the electing of a Member to serve in this present Parliament for the Borough constituency of Bradford West in the room of Marsha Singh, who since his election to the said Borough constituency has been appointed to the Office of Steward or Bailiff of Her Majesty’s three Chiltern Hundreds of Stoke, Desborough and Burnham in the county of Buckingham.—(Ms Winterton.)

London Local Authorities Bill [Lords] (By Order)

Resumption of adjourned debate on Question (21 February), That the Bill be now read the Third time.

Hon. Members: Object.

Debate to be resumed on Tuesday 13 March at Seven o’clock.

Transport for London (Supplemental Toll Provisions) Bill [Lords] (By Order)

Second Reading opposed and deferred until Tuesday 13 March (Standing Order No. 20).

Oral Answers to Questions


The Chancellor of the Exchequer was asked—

Working Tax Credit

1. Jessica Morden (Newport East) (Lab): What assessment he has made of the effect on families of the changes in eligibility rules for working tax credit to be introduced in April 2012. [97998]

4. Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): What assessment he has made of the effect on the economy of changes to the working tax credit to be introduced in April 2012. [98001]

6. Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op): What assessment he has made of the effect on the economy of changes to the working tax credit to be introduced in April 2012. [98003]

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7. Catherine McKinnell (Newcastle upon Tyne North) (Lab): What assessment he has made of the effect on families of the changes in eligibility rules for working tax credit to be introduced in April 2012. [98004]

13. Mr David Crausby (Bolton North East) (Lab): What assessment he has made of the effect on families of the changes in eligibility rules for working tax credit to be introduced in April 2012. [98011]

The Economic Secretary to the Treasury (Miss Chloe Smith): The Government are reforming tax credits to ensure that support is targeted on those most in need and costs are controlled. The change to the working hours requirement for couples with children makes the system fairer by reducing the disparity between lone parents and couples. Lone parents have to work 16 hours a week to be eligible for tax credits, so it is right that couples should have to work more hours between them.

Jessica Morden: Some 730 families in Newport will be hit by the changes to tax credits, which means that they will either have to work more hours or face losing up to £3,800 a year. The Government have so far demonstrated no understanding of the difficulties faced by families in this position trying to find extra work. Will the Minister tell my constituents exactly where these mythical hours will come from?

Miss Smith: I shall be precise. I can tell the hon. Lady that the number of vacancies was up by 11,000 in the last three months to January 2012, and 1.07 million people moved into employment in the last quarter.

Luciana Berger: I was interested to hear that response from the Minister because a representative of the Union of Shop, Distributive and Allied Workers in my constituency told me that in one supermarket alone close to 30 employees had requested extra hours. Those extra hours just do not exist. Will she confirm that from April a couple with children on the minimum wage who cannot increase their hours to 24 per week will be £728 better off out of work?

Miss Smith: I cannot comment on that particular set of circumstances, as the hon. Lady will appreciate, but the fact is that about 80% of households with children will see their tax credit awards rise. It was the previous Government who allowed nine out of 10 households with children to be eligible for tax credits. That was unsustainable and uncontrolled spending.

Jonathan Reynolds: The Minister will remember that in an Adjournment debate last November I warned her about the devastating impact that the cuts would have, particularly because the hours were simply not available for people to increase the number they worked to meet the eligibility criteria. This week, a coalition of charities has written to the Government begging them to postpone these devastating changes. May I ask her and the Chancellor to meet some of the families affected so that they can understand what the impact will be on them from April?

Miss Smith: Any elected MP will regularly meet constituents in their constituency and discuss a range of matters. I certainly do that, and when I have met those

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affected in my constituency—whether as a constituency MP or, most recently, as a Minister—I have explained the fairness of this measure, which is that it puts couples on a par with lone parents. Where is the Opposition’s concern for single mums and dads, who have always had to face that challenge?

Catherine McKinnell: The Minister knows fine well that in today’s economy part-time workers will find it extremely difficult, if not impossible, to get the extra eight hours a week to keep their working tax credits. The lowest-income families will lose £3,870 a year, which would be crippling for any family, let alone the poorest. To accord with reality—something that the Minister should get back in touch with—what are this Government going to do about that?

Miss Smith: This Government’s main priority, as the hon. Lady knows very well, is to reduce the deficit left to us by her party, for which her party shows no responsibility whatever. She will also know that the cumulative average loss for households from our measures next year will in fact be £310.

Mr Crausby: Last week a young woman constituent employed locally by the Stroke Association complained to me that as a result of the association’s funding being cut, her hours were being reduced from 28 to 20, so she loses eight hours’ pay and tax credits as well. What advice can the Minister give my constituent other than to stop work and go on benefits?

Miss Smith: I would be sure that the hon. Gentlemen’s constituent in that case took a clear look around at the opportunities available throughout the economy. I refer him to my previous response, which is that vacancies were up in the three months to January 2012. There are jobs out there: hon. Members need only to hear, for example, this morning’s announcement from Nissan—somewhere near the hon. Gentleman’s constituency—to know that there is work available.

Margot James (Stourbridge) (Con): Is my hon. Friend aware that, according to the Office for National Statistics, there are currently 476,000 job vacancies? It should be possible for a couple, between them, to find an extra eight hours’ work. Does she agree?

Miss Smith: I do agree with my hon. Friend. As I have said already, it is a question of fairness. This measure asks a couple to do what a lone parent has always had to do, and I think that is fair.

Harriett Baldwin (West Worcestershire) (Con): Can the Minister confirm that, under the current system, a single parent who is offered more than 16 hours’ work a week by his or her employer would face a marginal withdrawal rate of up to 97%, and that such anomalies will disappear with the change to the universal credit?

Miss Smith: My hon. Friend makes a very fine point, and she is absolutely right that the reform paves the way for the universal credit, through which this Government are proud to be tackling the incentives that make work pay.

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Charlie Elphicke (Dover) (Con): Should we not look at providing tax help for hard-pressed families in totality and in the round, in particular, through measures such as increasing the personal allowance to £10,000 for income tax?

Miss Smith: I certainly agree, and my hon. Friend will know, just as other Members of this House do, that that measure would take more than 1 million low-income earners out of tax altogether, which is a healthy start and a step on the path to our economic recovery.

Rachel Reeves (Leeds West) (Lab): We have heard incredible complacency so far from the Minister about couples in receipt of working tax credit, who are desperately worried. Liz, a low-paid worker in Suffolk, told her union, the Union of Shop, Distributive and Allied Workers, that

“two weeks ago my boss informed me that the likelihood of finding the eight extra hours I need was next to none, at least for another three months. I have been looking for another job to boost my hours, but so far have had no joy”.

What advice would the Minister give to Liz and thousands of families in her position, who stand to lose up to £4,000 in just a month’s time?

Miss Smith: Liz from Suffolk might like to listen to Rachel from Leeds, who says that

“we must ensure we pass the test of fiscal credibility. If we don’t get this right, it doesn’t matter what we say about anything else.”

Rachel Reeves: The Minister offers Liz cold comfort, especially as the Government’s own figures show that families are likely to be £728 better off out of work, rather than in work, as a result of these crazy changes. The Minister could not answer my last question, so let me ask her about another family. Let us imagine that a single mum with three kids who is earning £42,000 a year is offered a promotion that would take her pay to £43,000. If she takes the pay rise, she will lose almost £2,500 in child benefit—every single penny of it. What is the Minister’s advice to her? Should she turn down the promotion to keep her child benefit, or should she reduce the number of hours she works?

Miss Smith: It is absolutely extraordinary that the hon. Lady is unable to deal with any aspect of her own challenge on fiscal credibility. May I ask her whether she voted for the welfare cap that highlights the average family’s earnings within the example that she just gave?

Mr Speaker: I remind the House that Members ask the questions and Ministers answer them.

Child Care

2. Mr Barry Sheerman (Huddersfield) (Lab/Co-op): What fiscal steps he is taking to assist women facing high child care costs. [9799]

The Chief Secretary to the Treasury (Danny Alexander): The Government do not assume that high child care costs are an issue for women only, but we have increased the provision of free child care for three to four-year-olds to 15 hours a week, and extended that commitment to about 40% of two-year-olds by 2014-15. The Government support low to middle income working families directly

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through the child care element of working tax credits. We also provide support through employer-supported child care vouchers.

Mr Sheerman: But what does the Minister say to young women who are professionals and managers and who, according to the Daycare Trust, face the double whammy of a 30% increase in the cost of nursery provision over the past four years and the loss of their child benefit? What does he say to those young women?

Danny Alexander: I say that the Government are increasing the entitlement to free child care for three and four-year-olds from 12.5 to 15 hours a week, and introducing a new entitlement for disadvantaged two-year-olds, so that 40% of two-year-olds will have 15 hours of free child care per week. That represents substantial support for those families, in addition to which there will be tax credit support—depending on income—and access to employer-supported child care vouchers, which were taken up by 500,000 people in 2011-12.

Mrs Anne Main (St Albans) (Con): I welcome the free nursery places, but nursery care in constituencies such as mine is often so expensive that nurseries decline to offer the free places unless they are allowed to request a top-up. Will the Government please consider listening to those nurseries that would welcome parents being able to give a small amount so that they could offer the free places?

Danny Alexander: My hon. Friend makes an interesting point. She will also recognise that local authorities have a duty to maintain sufficient child care to meet the needs of working parents in their area. The Department for Education is to undertake a review to ensure that that is happening.

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): Many women facing high child care costs are low-paid workers in the public sector. We wrote to the Chancellor in January, calling on him to write to the pay bodies to ensure that by being tougher at the top, we can help to protect lower-paid workers in 2013 and 2014. Can the Chief Secretary to the Treasury tell us whether the Chancellor has taken that action, and whether he will deliver on his promise that, as he delivers pay restraint, he will do more for the lowest-paid public sector workers?

Danny Alexander: The hon. Lady will recognise that, during the pay freeze of last year and the coming year, we have provided a £250 pay increase for those earning less than £21,000 a year. The pay review bodies have been asked to provide advice in relation to the future pay remit, but she should also recognise that the increase in the income tax personal allowance, which will come through this April, will be worth £126 this coming year to precisely the people she is talking about. I hope she welcomes that.

Claire Perry (Devizes) (Con): Does the Minister share my absolute incredulity at hearing the Opposition talk about the cost of child care, given that it went up 50% during their term in office? Will he tell us how much this Government are spending to help hard-pressed parents with the burgeoning costs of child care?

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Danny Alexander: I entirely share my hon. Friend’s sentiments; she expresses them very well. We will be investing £760 million a year by 2014-15 to extend free child care to disadvantaged two-year-olds.

Financial Services

3. Julian Sturdy (York Outer) (Con): What steps he is taking to strengthen consumer protection in financial services. [98000]

The Chancellor of the Exchequer (Mr George Osborne): In the Financial Services Bill, the Government are establishing a new financial conduct authority with additional powers to protect consumers and promote effective competition. On the day on which banks are writing to customers who were possibly mis-sold payment protection insurance, we are ensuring that banks will be open about any unarranged overdraft charges and interest payments on savings accounts.

Julian Sturdy: I thank the Chancellor for his response. As families and individuals try to get on top of their debts, will the Chancellor outline whether the Government believe that new legislation is required to ensure that credit markets act in a responsible rather than predatory manner towards customers?

Mr Osborne: We are introducing legislation through the Financial Services Bill. It creates the financial conduct authority, which will have additional powers and will, I think, be a powerful champion of consumers. Rather than wait for legislation, we are taking action with the industry’s agreement to introduce a seven-day ban on store card retail incentives so that people cannot take out a store card and immediately get a special offer with it in the shop; and we are stopping excessive card charges being hidden on statements.

Mr Andrew Love (Edmonton) (Lab/Co-op): What is the Chancellor going to do about the exorbitant interest rates being charged to vulnerable consumers by pay day lenders, which are now so ubiquitous on our high streets up and down the country?

Mr Osborne: I agree with the hon. Gentleman that there are practices in that industry that we want to see stopped—and I would highlight two in particular. The first is the rolling over of loans, which we are working with the industry to stop; the second is the ongoing use of continuous authorities to take money out of bank accounts, which people might not be aware that they have granted to a pay day loan company or anyone else. We are dealing with those specific abuses and, as I say, we are creating a new powerful consumer champion in the financial conduct authority.

Mr Andrew Tyrie (Chichester) (Con): The Financial Services Authority agreed to publish a review of its own conduct in the run-up to the failure of RBS only after considerable pressure from the Treasury Committee. It really should not be that difficult to get some answers out of a regulator.

Does the Chancellor agree that accountability to Parliament would be better served if the Financial Services Bill were amended to require the new regulator, the financial conduct authority, to respond to similar such reasonable requests from the Treasury Committee?

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Mr Osborne: Of course we will listen to any proposals put to us. Clauses 69 to 76 include a new requirement on both the new bodies we are creating—the prudential regulator and the financial conduct regulator—to make a report when a regulatory failure has occurred. That trigger will be set out in the legislation, so we are providing additional powers to require reports when things go so badly wrong, as they did a few years ago.

Mrs Jenny Chapman (Darlington) (Lab): The financial service from which my constituents most need protection is high-cost lending. The Chancellor’s remarks so far go nowhere near far enough in protecting consumers. We need a range of caps and we need some properly enforced regulation of advertising. When is the Chancellor going to do something about this?

Mr Osborne: I completely understand the concern about excessive and very high interest charges, which have been a problem for many years. I think it is better to tackle the specific abuses. The Government are conducting a review of the cost of credit to consumers, but by tackling very specific abuses such as the roll-over of loans and the use of continuous authority, we think we are getting to the really hard cases and abuses that we want to see ended. I have to say—this was certainly the view of the previous Government, too—that although it could be worth looking at, simply introducing a cap might have the effect of pushing a lot of people into a completely unregulated black economy. I am not sure that any of us would want to see that.

John Thurso (Caithness, Sutherland and Easter Ross) (LD): I remind the Chancellor of the excellent suggestions in the Treasury Committee’s report on the objectives of the successor body to the FSA, as they would certainly help consumers. Will he take the opportunity provided by the current legislation to give effect to those recommendations?

Mr Osborne: As I have set out before, we have listened carefully to the Treasury Committee and made all sorts of amendments to the Bill to take account of its recommendations, including changing the FCA’s remit to include competition. The Joint Committee chaired by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) also proposed similar recommendations. We have listened to Parliament; thanks to those suggestions, we have made changes that we think will improve the Bill; and the Bill is now before the House and soon to be debated.

VAT (Hospitality Industries)

5. Naomi Long (Belfast East) (Alliance): What recent assessment he has made of the effect on tourism of differential rates of VAT in the hospitality industries in the Republic of Ireland and Northern Ireland. [98002]

The Exchequer Secretary to the Treasury (Mr David Gauke): The number of overseas visitors to Northern Ireland grew by an estimated 11% in the first half of 2011, compared with just 7% over the first 10 months in the Republic of Ireland. Building on that performance, marketing campaigns by the Northern Ireland Tourist Board and Tourism Ireland are expected to draw 150,000

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more visitors to Northern Ireland, create over 600 new jobs, and provide an additional £24 million in revenue for the economy in 2012.

Naomi Long: The Minister is right to draw attention to the success that Northern Ireland has enjoyed as a result of the efforts of the Northern Ireland Assembly. However, given that tourism is so price-sensitive, will the Government think again about the potential offered by a VAT reduction? We are currently the only part of the European Union that does not support our tourism industry in that way. Will the Minister reconsider, so that we can try to maximise the potential and grow even more jobs in the sector?

Mr Gauke: As I have said, Northern Ireland tourism is doing well at present. Were we to pursue a relief along the lines adopted in the Republic of Ireland, it would involve a cost of some £8 billion, £9 billion or perhaps even £10 billion, which would have to be made up for by higher taxes or spending cuts elsewhere.

Tax Avoidance

8. Mr David Amess (Southend West) (Con): What steps he is taking to reduce tax avoidance and evasion. [98005]

The Exchequer Secretary to the Treasury (Mr David Gauke): The Government are determined to tackle tax avoidance and evasion and ensure that the tax system operates fairly for all. By closing down two aggressive avoidance schemes on 27 February, we have demonstrated that we are prepared to take bold action to counter avoidance. The Government’s commitment has been underlined by their reinvestment of £917 million in Her Majesty’s Revenue and Customs, which will bring in additional revenues of £7 billion a year by 2014-15.

Mr Amess: The United Kingdom has the longest tax code in the world. It has 11,500 pages, and is 10 times longer than “War and Peace”. Does my hon. Friend agree that any simplifying measures would be welcome, as they would reduce tax avoidance and evasion and would prevent further ridiculous trials such as that of Harry Redknapp? I always thought that he was innocent, because he is such a good football manager,

Mr Gauke: I may be wrong, but I suspect that the hon. Gentleman should have declared himself to be a Tottenham supporter.

Mr Amess: No, West Ham.

Mr Gauke: So he is an ex-Harry Redknapp fan.

Complexity in the tax code can provide opportunities for avoidance, but, equally, much of the complexity that exists is a consequence of attempts to crack down on avoidance. The Government have set up the Office of Tax Simplification, and we are determined to do what we can to simplify the code and address avoidance and evasion.

Chi Onwurah (Newcastle upon Tyne Central) (Lab): Stamp duty land tax avoidance schemes cost the Exchequer hundreds of millions of pounds a year, but my questions

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on the subject have been met with complete complacency by Ministers. I was told:

“HM Revenue and Customs… is aware of a number of marketed… schemes. HMRC considers that none of the schemes… is effective in reducing… liability”.—[Official Report, 17 January 2012; Vol. 538, c. 708W.]

Now we hear that the Chancellor is going to crack down on such schemes. Which is it?

Mr Gauke: There are many marketed schemes that HMRC is convinced do not work, and that will be established in the courts. I suggest that those who are sometimes persuaded by claims that a particular scheme will work should treat them with caution. However, the Government are determined to crack down on stamp duty land tax avoidance. We took steps in the last Budget, we took steps in the autumn statement strengthening the disclosure regime, and there may well be more to come.

Mr Peter Bone (Wellingborough) (Con): When the banks begin to make profits again, they will offset the losses that they made when they got us into a total mess, and will avoid paying tax. Whenever companies are paying tax on their profits, the banks will be avoiding tax on theirs. Will the Government look at that?

Mr Gauke: There are times when taxpayers engage in aggressive avoidance and we put a stop to it, as we did last week. However, the offsetting of losses is not novel—it is a long-standing element of the tax system—and, although of course we keep all such matters under review, the legitimate use of losses does not necessarily count as aggressive avoidance.

Anas Sarwar (Glasgow Central) (Lab): Given the Government’s attempts to cut the deficit, it would make sense to clamp down on tax evasion, so why are they cutting 10,000 staff at HMRC?

Mr Gauke: We are cutting down on tax evasion. Whereas under the previous Government tax evasion coverage was reduced—the number of staff dealing with tax evasion was reduced—it can be seen that the number of people working on tax evasion in HMRC is now increasing.

Economic Growth

9. Ian Austin (Dudley North) (Lab): What assessment he has made of the effect of fiscal policy on the level of economic growth in 2011. [98007]

The Chief Secretary to the Treasury (Danny Alexander): Tackling the deficit is necessary for supporting sustainable economic growth. The Government’s credible consolidation plan has restored confidence in the UK’s fiscal position, helped avoid a rise in market interest rates, and allowed a more activist monetary policy to support the economy.

Ian Austin: We know that this Government’s Ministers think they are always right and everyone else is always wrong, but how do they explain why growth in America, which took a more balanced approach to dealing with the deficit, was twice the rate here in the UK, and if it is, as they insist, all the eurozone’s fault, why was it only exports that prevented the British economy from lurching back into recession last year?

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Danny Alexander: If the hon. Gentleman wants an explanation for the country’s current economic position, he need look no further than the Office for Budget Responsibility report published at the time of the autumn statement. It highlighted three factors: the problems in the eurozone; high inflation and commodity prices over the past year; and the depth of the crisis that was caused in part by the hon. Gentleman’s Government and the damage that did to the British economy. If he is looking for people who should be asked to apologise, he should look to himself, and perhaps he should apologise not least to the people of the west midlands, as that region fell behind the rest of the economy during Labour Government’s period in office.

Michael Fallon (Sevenoaks) (Con): Given the amount of Budget lobbying now going on, will the Chief Secretary remind those who want to add even more to our borrowing by proposing wholly irresponsible and unfunded tax cuts of the Institute for Fiscal Studies advice that

“there is a strong case for the Budget not to contain a significant permanent net giveaway”?

Danny Alexander: I would certainly remind them of that, and of the fact that the need to maintain the credibility of this country’s fiscal position should override any such considerations.

Mr David Anderson (Blaydon) (Lab): In the assessment the Chief Secretary is undertaking, will he let us know about the extent of the income tax and national insurance losses that will result from the sacking of between 7,000 and 10,000 public servants? Does he expect the benefit bill to go up, and if so, by how much?

Danny Alexander: As the hon. Gentleman knows, we have had to make some very difficult decisions in order to deal with the enormous Budget deficit left to this country by Labour. If his party had not left a mess, we would not have to clean it up.

Stephen Williams (Bristol West) (LD): One direct economic stimulus would be to allow people to keep more of their own money from the proceeds of work. The Government have already taken a great step forward in implementing the Liberal Democrat policy of raising the income tax threshold to £10,000. Will the Chief Secretary and the Chancellor seriously consider going further and faster in the Budget and achieving in this Parliament the goal of all our constituents having £10,000-worth of tax-free pay?

Danny Alexander: Such decisions are, of course, for the Chancellor to announce on Budget day, but, as my hon. Friend will know, the coalition agreement commits this Government to real-terms increases in the personal allowance every year in order to reach the goal of a £10,000 tax allowance, which the Liberal Democrats set out in our election manifesto. As a result of the substantial steps we have already taken, there will be a further tax reduction of £126 for all basic rate taxpayers in this country from April this year.

Job Creation (Private Sector)

10. Mark Pawsey (Rugby) (Con): What fiscal steps he is taking to encourage job creation in the private sector. [98008]

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11. Gavin Williamson (South Staffordshire) (Con): What fiscal steps he is taking to encourage job creation in the private sector. [98009]

The Chancellor of the Exchequer (Mr George Osborne): We are making businesses more competitive by cutting business taxes, helping work pay by increasing the personal allowance and introducing universal credit, and helping unemployed people into work through our Work programme and work experience.

Mark Pawsey: As someone who owned and ran a business, I welcome the reductions in corporation tax and the small profits rate already announced by my right hon. Friend, but a further area of taxation is business rates, where although the reliefs for small companies are very helpful, many businesses currently face a significant increase. Can anything further be done to help businesses in this respect?

Mr Osborne: I will not pre-empt any Budget announcements, but I will say that we have extended small business rate relief to 2013. We announced that in November, and it will help more than half a million small businesses, and we have also introduced a deferral scheme to help larger businesses with their cash flow, so we are doing other things as well as reducing corporation tax—a further reduction in corporation tax is planned for April, of course—and cutting the small companies tax rate, which was due to go up under the previous Labour Government.

Gavin Williamson: The recent changes in research and development tax credits will provide a major boost for hi-tech manufacturing businesses based in my constituency and near it, such as Moog and Goodrich. What more can my right hon. Friend do to help generate more high-skilled, well-paid jobs in the manufacturing sector?

Mr Osborne: I have been very encouraged to hear about the success of companies in my hon. Friend’s constituency, including the two that he mentioned. We will provide further details later this year on the R and D “above the line” tax credit, on which we have listened to representations from industry and Members of Parliament. In the vicinity of my hon. Friend’s constituency, we also have the enterprise zone i54, which will start up in April. More generally, this is a week when 20,000 new jobs have been announced by Tesco and we have heard the great news that Nissan will produce a new car in the UK. There are some encouraging developments in the British economy.

Mr Geoffrey Robinson (Coventry North West) (Lab): Is the Chancellor not aware that his measures are not working? In the last quarter for which we have figures, set against a 67,000 drop in public sector employment there was a welcome but very modest increase of only 5,000 jobs in the private sector. Why not do something bold and positive in the Budget, such as taking one of our proposals, rather than rejecting it out of pride, to expand the national insurance holiday to cover all small companies that take on new employees, rather than just the relatively small number of new small companies?

Mr Osborne: I have noticed in the Budget representations from Labour Members that they are always very good at suggesting things we can spend money on but never

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have any ideas about how to save money, despite leaving us with the largest budget deficit in our peacetime history. They are all over the place: one week it is a tax cut, the next it is a spending increase. The truth is that we need economic credibility. The budget deficit is coming down but it is still far too high. Of course, we will not have the unfunded giveaways that got this country into a mess under the previous Labour Government.

Chris Leslie (Nottingham East) (Lab/Co-op): At the budget a year ago, the Chancellor published his “Plan for Growth” with the rhetorical flourish that it would create

“a Britain carried aloft by the march of the makers.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]

A year later, we can see that he has achieved less than half of the downgraded growth forecast made at the time. We had a shrinking economy in the last quarter with—and this is true—only one private sector job created for every 13 public sector jobs lost. Looking back at the past year, where did his plan go wrong?

Mr Osborne: We have secured for this country economic credibility and stability in the most intense global storm, with the eurozone crisis and rising oil prices. Of course it is difficult, but where is the credible economic policy from the Labour party? It is completely absent. Is it not striking that we have not had a single Labour MP get up and talk about the good news from Nissan today? The car is called the Invitation, but the only invitation the hon. Gentleman is interested in is one to the lasagne parties held by the shadow Chancellor.

14. [98012] Andrew Griffiths (Burton) (Con): Does the Chancellor agree that the national loan guarantee scheme has massive potential to help small and medium-sized enterprises grow? Does he also share my view, however, that we need a more enlightened approach from the banks in lending for growth, particularly to support start-ups, exporters and manufacturing?

Mr Osborne: We have introduced various tax changes, including our seed capital scheme, creating the most tax-advantaged start-up environment almost anywhere in the western world. Indeed, it is more attractive than that in the United States. On credit easing, I can confirm that subject to final EU state aid approval, which we expect to get in the next week, we will have the scheme up and running before the Budget.

Sammy Wilson (East Antrim) (DUP): Is the Chancellor aware that while fiscal policies are being used to create jobs, HMRC, through its hard-line attitude towards many small businesses with cash-flow problems, is driving people out of jobs and firms to the wall? What can he do to avoid the continuation of the situation in Northern Ireland, where 55% of bankruptcies in the past four years have been initiated by HMRC?

Mr Osborne: I think the figure that the hon. Gentleman cites, across the whole UK—I shall come back to him with the specific figures for Northern Ireland—has been roughly the same for many years. Many bankruptcies are ultimately caused by the taxpayer because the tax bills are the last thing that a company cannot pay, and that has been true in good times and bad. We have continued

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with the time to pay scheme, which was introduced by the previous Government during the recession, and we are making every effort to help viable businesses with their cash flow and to help them pay their taxes, which benefits everyone, in a way that keeps them afloat.

Nadine Dorries (Mid Bedfordshire) (Con): I am sure the Chancellor is aware that it is not just Nissan that we have heard good news about. Last week, Center Parcs announced that it had been able to secure £250 million-worth of investment to build a new Center Parcs in my constituency, creating 1,700 ongoing jobs and 1,500 jobs in construction. Does the Chancellor agree that tourism is an ideal way to attract inward investment into the UK and that it is an area we should be looking at to create jobs in the private sector?

Mr Osborne: The announcement was very welcome. I commend my hon. Friend for taking an enlightened attitude to development in her constituency, which is not always the case. When it comes to tourism, we have authorised a big increase in the advertising campaign that is currently going around the world to sell the UK in this very special year when we have the Olympics and the jubilee. We want a permanent increase in tourism as a result of those events.

Money Advice Service

12. Dan Jarvis (Barnsley Central) (Lab): What assessment he has made of the performance of the Money Advice Service. [98010]

The Financial Secretary to the Treasury (Mr Mark Hoban): The Money Advice Service is an independent body and the Financial Services Authority approves its business plan and budget. The service’s online health check was launched in June last year and received nearly half a million visits. More than half of those visits resulted in a personal action plan, providing thousands of visitors with a direct route to taking control of their finances.

Dan Jarvis: The Minister will know that low-paid workers in my constituency are currently missing out on the discounts that utility providers offer to customers when they pay their bills by direct debit. What work is he doing with the Money Advice Service to increase the number of low-paid workers who pay their bills by direct debit?

Mr Hoban: It is important that people take as much advantage as they can of the discounts on offer. The Money Advice Service is there to provide advice to people at all levels of income. Encouraging more people to open bank accounts and to take advice on direct debit services is a key part of its role.

Budget Deficit

15. David Rutley (Macclesfield) (Con): What assessment he has made of the effect of Government spending commitments on the budget deficit. [98013]

The Chief Secretary to the Treasury (Danny Alexander): In the autumn statement, the Government announced their decision to continue the consolidation beyond the current spending review period in response to a deterioration

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in the Office for Budget Responsibility’s forecast. The Government’s plan has restored confidence in the UK’s fiscal position, protected the UK from the European sovereign debt crisis and kept low long-term interest rates.

David Rutley: Has the Chief Secretary seen the latest report by the International Monetary Fund, which shows that although the US had a fiscal contraction of 0.8% last year and Germany saw a 2.3% tightening of its fiscal policy, both those economies are still growing? Does he agree that this shows that those who have called for an increase in the deficit as a way to drive growth are completely wrong?

Danny Alexander: Yes, I wholeheartedly agree with my hon. Friend. When the coalition Government came into office the UK was forecast to have the largest deficit in the whole of the G20. It is necessary to stick to the Government’s consolidation plan to restore public finances to sustainability. At the same time, the Government are delivering a radical programme of supply-side reforms to lay the foundations for a stronger and more balanced economy in the future.

Kevin Brennan (Cardiff West) (Lab): I think the Minister has studied some economics. Does he understand the mechanism by which going too far, too fast with cuts can make the budget deficit worse? Where did he and his colleagues go so wrong with their sums on the budget deficit?

Danny Alexander: There is a very simple mechanism going on in the economy: the hon. Gentleman’s party caused the mess and we are cleaning it up.

George Freeman (Mid Norfolk) (Con): Has my right hon. Friend seen the report in today’s Times saying that on his appointment the shadow Chancellor apparently turned to the Leader of the Opposition and asked:

“What if George Osborne is right?”

Does not the news of the jobs in Nissan, along with the 500,000 jobs created in the economy and our low interest rates, prove that he is?

Danny Alexander: I have not seen that report, but I can tell my hon. Friend that it is not a question I have asked myself.

Gross Value Added

16. Jonathan Edwards (Carmarthen East and Dinefwr) (PC): What steps he is taking to create greater equality in gross value added between the countries and regions of the UK. [98014]

The Chief Secretary to the Treasury (Danny Alexander): Economic development policy is devolved, although the UK Government continue to work with the devolved Administrations in Scotland, Wales and Northern Ireland, as well as with the English regions, including on policies to maintain low long-term interest rates and provide 100% capital allowances in designated enterprise zones.

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Jonathan Edwards: Latest European Union statistics indicate that GVA per head in inner London is £109,278 while the figure for the south Wales valleys is £10,654. Will the Chief Secretary include provisions in the forthcoming Budget to equalise wealth levels across the British state?

Danny Alexander: Budget announcements are a matter for the Chancellor, but I recognise very much the point that the hon. Gentleman raises. That is why we have asked the Silk commission to consider changes to the financial provisions within Wales—we look forward to its report—but he will also know that the autumn statement saw an additional £216 million of capital funding going as a consequence to the Welsh Assembly Government. I am sure that he, along with me, wants to press them to announce how they will use that money.

Ian Swales (Redcar) (LD): Ninety-three organisations in the north-east have been awarded almost £100 million from the regional growth fund. May I welcome the additional £1 billion being allocated to the fund, and will the Chief Secretary ensure that bids are supported that would route more of that money to small and medium-sized manufacturers?

Danny Alexander: My hon. Friend is absolutely right. The regional growth fund is making an enormous difference across the country, particularly in those regions that are most affected by public spending reductions. Many of those projects are creating jobs and boosting the economy in constituencies such as his. He is right to say that we need to find more ways to get those moneys to smaller businesses, and of course the next round will invite programme bids that can do precisely that.

Topical Questions

T1. [98023] Damian Collins (Folkestone and Hythe) (Con): If he will make a statement on his departmental responsibilities.

The Chancellor of the Exchequer (Mr George Osborne): The core purpose of the Treasury is to ensure the stability of the economy, promote growth and employment, reform banking and manage the public finances so that Britain, from now on, lives within her means.

Damian Collins: Will the Chancellor join me in welcoming today’s report from the east Kent enterprise zone that nearly 1,000 jobs have already been created on the former Pfizer site? What assessment has the Treasury made of the positive impact of tax credits for video game production and high-end TV production in the UK to mirror the success of the film tax credit, which has helped to secure Britain’s place as one of the world’s leading creative economies?

Mr Osborne: With two weeks to go to the Budget, I shall not comment specifically on tax policy, but the industry to which my hon. Friend refers has made its representations to the Treasury. It already benefits from the reduction in the small companies tax rate—or, indeed, the corporation tax rate in respect of larger firms—as well as the reforms to research and development tax credits and the introduction of the seed enterprise investment scheme, which will help start-up companies in the creative sector, as elsewhere.

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Ed Balls (Morley and Outwood) (Lab/Co-op): The Chancellor’s policy on child benefit seems to be that a two-earner family on £84,000 can keep all their child benefit, but a one-earner family on £43,000—whether that is a single parent, or where mum or dad stays at home to look after the kids—will lose all their child benefit, which is £2,500 if the family has three kids. What is fair about that? For the benefit of Labour Members, the Deputy Prime Minister, the Justice Secretary, the Prime Minister and Government Back Benchers, will the Chancellor tell the House what is today’s policy on child benefit?

Mr Osborne: What I would say to the right hon. Gentleman is that I think it is fair to ask those in the top 15% of the income distribution to make a contribution to the fiscal consolidation. I happen to think that that is fair. If we now have a Labour shadow Chancellor who thinks it is not fair to ask people in the top 15% of income distribution to make a contribution to cutting a 9% budget deficit, he has completely lost sight of his party’s values.

Ed Balls: So on the comparison of £43,000 and £84,000, we are none the wiser. Let me ask the Chancellor another question about family finances. A year ago, he promised to get the economy growing and introduce a fair fuel stabiliser, which would cut fuel duty when petrol prices were higher. One year on, he is now indicating that he is going to press ahead with fuel duty increases, even though rising oil prices mean that pump prices have today reached a record high. How can he press ahead when petrol prices are 4p higher than they were in last year’s Budget? What has happened to the stabiliser, or is it not the truth that he cannot do the right thing on child benefit, tax credits or fuel because his plans have failed? A year ago, he said in the Budget that he would put fuel into the tank of the British economy. The fact is that the economy has tanked—on the hard shoulder—and this Chancellor has run out of fuel.

Mr Osborne: There is an inconvenient truth, which is that the fuel duty rises that the right hon. Gentleman refers to are the ones put in place by the Labour Government, which he and any Labour Member who was in the previous Parliament voted for. That is the unbelievable opportunism of the Labour party today. One month it is VAT, another month it is child tax credits and now it is fuel. He is like a pinball machine, bouncing all over the place. He does not have a credible economic policy.

Today, the right hon. Gentleman may have been listening to his Labour leader on Radio 5 Live. This is what a caller from Wakefield—very close to the shadow Chancellor’s constituency—said:

“I voted Labour all my life…but we need to have a credible Opposition…You’re not going to be the Prime Minister of this country by any stretch of the imagination. I’d put my life on that.”

Another Labour voter said:

“It’s really bad what you’re doing.”

The truth is this: they need a credible economic policy to be a credible Opposition and a credible shadow Chancellor and they do not have it.

Hon. Members: Hear, hear.

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Mr Speaker: Order. When the House has calmed down a bit, I will gently and kindly remind the Chancellor that answers are to be about the responsibility for Government policy. It is pretty straightforward.

T2. [98024] Anna Soubry (Broxtowe) (Con): Many Conservative Members have long believed that lower-paid workers should be moved out of paying income tax. Will the Chancellor confirm that next month’s increase in personal allowances will have a real benefit for hard-working families in Broxtowe, and can they be increased even more come the Budget, please?

Mr Osborne: The personal allowance is increasing from April. We inherited a personal allowance that was £6,475. It is going to be £8,105 in April. That will take 1.1 million people out of tax and deliver a tax cut to 23 million or so basic rate taxpayers. I say to my hon. Friend, to my colleagues in the Conservative party and to my colleagues in the Liberal Democrat party that this is a coalition policy. It was part of the coalition agreement. It was in the Liberal Democrat manifesto, but I am also proud that it is a Conservative Chancellor who is implementing it.

T4. [98027] Toby Perkins (Chesterfield) (Lab): If the Chancellor had cut less than the Darling plan and at the same time was borrowing less, we would be calling him a genius. What word would he use to describe somebody who has achieved the opposite?

Mr Osborne: I did not really understand what the hon. Gentleman was saying. He seemed to suggest that we should be cutting less than the Darling plan, so the Opposition are now abandoning even the deficit reduction plan that they claimed to have when they were last in government. It just shows how all over the place they are.

T3. [98026] Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): The oil and gas industry has opened its books to an unprecedented degree to show the costs of operating in the North sea, to help the Chancellor understand the need for investment and incentives. Will he recognise the need to respond positively in the Budget on decommissioning relief and on other incentives to maximise the job potential of the oil and gas that we have left in the North sea?

Mr Osborne: I am very aware of what an important industry that is for the UK and how important it is to extract what remains of the oil and gas in the North sea—of course there is still an enormous amount of oil and gas in the North sea—and to have an industry in Aberdeen and other places that continues long after the oil runs out. We are specifically engaging with the industry on decommissioning relief in order to give certainty to the industry about the years ahead, and on specific field allowances, which might aid new exploration.

T8. [98032] Dan Jarvis (Barnsley Central) (Lab): Given that schoolchildren and students are the future bill payers of this country, can the Chancellor explain why, two years after the Conservatives blocked plans to include financial education in the national curriculum, no progress has been made in ensuring that our young people have the tools to make informed decisions about their finances?

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The Financial Secretary to the Treasury (Mr Mark Hoban): The Department for Education is looking at this area. I am clear that the support that this Government have given to the Money Advice Service will ensure that people of all ages and all income levels receive the advice that they need to manage their money properly and prepare for their futures.

T5. [98028] Mr Sam Gyimah (East Surrey) (Con): The Opposition’s policy of more spending, more borrowing and more debt is not credible and will result in higher interest rates. Will the Chancellor tell the House what impact just a 1% rise in interest rates would have on businesses, mortgages and the cost of servicing the colossal national debt racked up by the previous Government?

Mr George Osborne: I gave these figures to the House before and will give them again because they remind us how irresponsible the Labour party’s policy is: a 1% rise in mortgage rates would add £10 billion to family mortgage bills; a 1% rise in interest rate loans would cost businesses £7 billion; and a 1% rise in interest rates would add £21 billion to debt interest payments. The policy that the Labour party claims to pursue, at least this week, would definitely put market rates up, which is what has happened to other countries without a credible fiscal policy, and taxpayers, families and businesses would pay for the mess they got us into.

Hugh Bayley (York Central) (Lab): By how much will the national debt have grown by the next general election, compared with the situation the Government inherited following the last general election?

Mr Osborne: In two weeks’ time I will produce the latest Office for Budget Responsibility forecasts for the fiscal situation, so the hon. Gentleman will have to be patient and wait until then.

T6. [98029] Jason McCartney (Colne Valley) (Con): With new businesses setting up and others expanding in my constituency, I very much welcome plans to promote equity investment in new business ventures through the seed enterprise investment scheme. What else is being done to support new business ventures across my constituency and the rest of our nation?

The Exchequer Secretary to the Treasury (Mr David Gauke): My hon. Friend is absolutely right to highlight the seed enterprise investment scheme, which will provide 50% income tax relief on investments in new start-up businesses. There is also the £50 million business angel co-investment fund, supported through the regional growth fund, the business coaching for growth arrangements and a number of measures that HMRC is taking to help start-up businesses.

Shabana Mahmood (Birmingham, Ladywood) (Lab): The Minister’s answer on the national insurance holiday for small businesses was simply not good enough, so may I press him again on why he will not expand eligibility for the national insurance holiday to all small businesses with fewer than 10 employees that take on extra workers, as set out in Labour’s five-point plan for jobs?

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Mr Gauke: I am afraid that my answer is the same: we cannot keep doing things if we cannot fund them. We will have the Budget in two weeks’ time, but once again we hear proposals for tax cuts or spending increases but nothing to show how the books would be balanced.

T7. [98030] John Pugh (Southport) (LD): What success are we having in stamping out VAT fraud, specifically missing trader fraud, which affects us more than it does other EU countries and costs us almost £10 billion?

Mr Gauke: This has been a major problem over a number of years. Progress has been made since the mid-2000s, when the problem was at its greatest, but we must of course remain vigilant and I know that HMRC continues to monitor the matter closely.

Paul Goggins (Wythenshawe and Sale East) (Lab): Airports create jobs, yet next month’s increase in air passenger duty will apply equally to unused airports in regions with high unemployment and busy airports in the south-east. Will the Chancellor consider introducing a differential level of air passenger duty so that airports in regions with high unemployment can gain some benefit from it?

Mr George Osborne: We will of course listen to any representations. My constituency is also served by Manchester airport. Indeed, the second runway is in my constituency, so I am well aware of the representations from the airport, but I gently say to the right hon. Gentleman, with whom I get on well as a constituency neighbour, that the increase in air passenger duty was the policy of the previous Labour Government and was set out in their last Budget. The one thing we were able to do was to delay the increase last year to give passengers some relief. It is a little opportunistic for Labour Members to complain about a tax that they all voted for when in government.

Andrea Leadsom (South Northamptonshire) (Con): Does my hon. Friend agree that it is unacceptable that four banks in the UK have 80% of the SME business and 80% of the personal current account business in this country and that it is essential we get more competition in the banking sector? During the passage of the Financial Services Bill, will he consider again the Treasury Committee’s recommendation for a specific primary competition objective for the Financial Conduct Authority?

Mr Hoban: We have listened to representations from not only the Treasury Committee, but the Independent Commission on Banking, and one of the three objectives of the FCA will be to promote competition, which will get better outcomes for consumers so that there is more choice and better value for money.

Mrs Linda Riordan (Halifax) (Lab/Co-op): Unemployment in Halifax has doubled since 2010, because of the Government’s failed economic policies. Will the Minister outline the urgent action that he is going to take to ensure that people get back to work in the town?

Mr George Osborne: Unemployment rose sharply at the end of the previous Labour Government, and youth unemployment has been rising since the middle of the previous decade, which is a tragedy for everyone affected

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by it and for the country. That is why we have the Work programme, why we are introducing the youth contract and why we have our work experience scheme, but a Labour MP is chairing the campaign to sabotage it and deny young people who are currently claiming unemployment benefit the chance of real work experience, so perhaps, first, the hon. Member for Halifax (Mrs Riordan) will have a word with the Labour MP who chairs the so-called right to work scheme.

Mr Christopher Chope (Christchurch) (Con): The Chancellor referred to the top 15% of earners having to contribute to deficit reduction. Why is he proposing that, in that 15%, those who have children should make a bigger contribution than those without?

Mr Osborne: The reason we have put forward the policy is that those higher-rate taxpayers who do not have children are not in receipt of state benefits, so it is quite difficult to remove state benefits from them.

Geraint Davies (Swansea West) (Lab/Co-op): The Chancellor and his Government are considering the complete removal of all subsidy to disabled manufacturing workers in Remploy. Does he accept that, as a minimum, the subsidy should be at the level of unemployment benefit and reflect the knock-on cost on health in order to avoid making a net loss by putting those people on the dole?

Mr Osborne: We are seeking to use the same amount of money in a better way, and it is a very sensitive issue, which hon. Members from all parts of the House are concerned to ensure we get right. We are working very closely with disability charities to come up with a future that is right for the people who have disabilities and want to work.

Eric Ollerenshaw (Lancaster and Fleetwood) (Con): In 1997 the gross value added difference in the national economy between the north and London was some 70 points. By 2010 it had gone up to 86 points. What more can my right hon. Friend do, or what will he consider doing in the next Budget, to add to the Government’s drive to narrow the north-south divide, which increased under the previous Government?

Mr Osborne: My hon. Friend is absolutely right. The gap between the economic performance of the south of England and the north of England and, indeed, all parts of the UK increased under the Labour Government, so all those policies for regional development agencies, The Northern Way and all that led to an increase in disparity in our country, and manufacturing as a share of our national economy halved. We have introduced the regional growth fund, and we have enterprise zones and major transport schemes such as High Speed 2, to shrink the gap between the north and the south and to make sure that all parts of our economy benefit—[ Interruption ] so that we have a better record than the one when the right hon. Member for Morley and Outwood (Ed Balls) was sitting in the Treasury.

Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): The Royal Bank of Scotland has today announced that it is cutting 300 jobs, mainly in Edinburgh, and transferring the work to India, where 250 jobs are to be

6 Mar 2012 : Column 713

created. Will the Chancellor intervene and tell RBS that the public did not put billions into it just to let it export jobs in that way?

Mr Osborne: As the hon. Gentleman well knows, the Government’s shareholding in the Royal Bank of Scotland is managed through United Kingdom Financial Investments Ltd, an institution created by my predecessor, another Member for Edinburgh, the right hon. Member for Edinburgh South West (Mr Darling), and we have no plans to change those arrangements.

Duncan Hames (Chippenham) (LD): Last week was indeed a triumph for those in the Treasury tackling tax avoidance, but can the Chancellor tell us whether those tax receipts, which will have not been budgeted for, are going to be used to set against the deficit or to put money back in the pockets of ordinary working people?

Mr Osborne: I am afraid that my hon. Friend will have to wait for the Budget to see what we propose to do across the board, but last week we demonstrated that we are prepared to take decisive and swift action where we find unacceptable tax avoidance—by a bank in that case, which we felt was incompatible with the code of practice that we asked the banks to sign and which they have signed. I hope that he and his constituents take it as a signal of our seriousness about tackling tax avoidance and, indeed, tax evasion.

Nick Smith (Blaenau Gwent) (Lab): Much work has been done to secure a private sector-led infrastructure project in Blaenau Gwent. The developers say that it could create sustainable jobs for over 10,000 people. Given that the Chancellor has already announced 100%

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capital allowances in six English enterprise zones, when will he be able to offer similar assistance to the Welsh enterprise zones?

The Chief Secretary to the Treasury (Danny Alexander): We are in discussions with the Welsh Assembly Government about their proposals for enterprise zones in Wales, including the possibility of applying within them the capital allowances regime that the hon. Gentleman describes, and we will make an announcement shortly.

Several hon. Members rose

Mr Speaker: Patience rewarded: I call Mr Matthew Hancock.

Matthew Hancock (West Suffolk) (Con): Thank you, Mr Speaker.

Does my right hon. Friend agree with the statement made this morning:

“The last Labour government didn’t regulate the banks properly. That’s what caused the financial crisis”—

not my words but those of the right hon. Member for Doncaster North (Edward Miliband)—or does he, like me, think that it was caused not just by a failure to regulate the banks but by the Labour Government spending more money than they had?

Mr George Osborne: Of course, it was a double failure: the catastrophic failure of Labour Ministers, including the then City Minister, the right hon. Member for Morley and Outwood (Ed Balls); and the failure to get a grip on public spending. We are having to clean up both messes at the moment.

6 Mar 2012 : Column 715

Bill Presented

Planning Applications (Appeals by Town and Parish Councils)

Presentation and First Reading (Standing Order No. 57)

Martin Caton, supported by Philip Davies, Mr Elfyn Llwyd, Andrew George, Caroline Lucas, Bob Blackman, Paul Flynn, Kate Hoey, Robert Halfon, Steve McCabe, Kelvin Hopkins and Sir Bob Russell, presented a Bill to allow town and parish councils to appeal against the granting of planning permission in their area in certain circumstances; to make provisions for Wales; and for connected purposes.

Bill read the first time; to be read a Second time on Friday 27 April, and to be printed (Bill 314).

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Energy Generation (Planning and Right to Invest)

Motion for leave to bring in a Bill (Standing Order No. 23 )

3.36 pm

Mr Gareth Thomas (Harrow West) (Lab/Co-op): I beg to move,

That leave be given to bring in a Bill to require new energy generation companies to offer a proportion of shares for purchase by residents in local communities; to provide that residents in local communities have the right to invest in ownership of local electricity distribution grids; to establish an agency called Community Power Direct to advise local communities on matters relating to energy generation; to require local planning authorities to consult Community Power Direct when considering planning applications involving energy generation; and for connected purposes.

My Bill seeks to keep within local communities more of the wealth and power that our need for energy creates. The motivation behind the Bill is to make communities more resilient by helping to keep a little more of the wealth from energy generation in local hands. Being a child of the 1980s, I remember the “Tell Sid” campaign advertising new energy company shares for sale to ordinary people for the first time. I believe in share ownership, and I want more people to have a share in the electricity market, with one crucial innovation: we need a new “Tell Sid” campaign. My Bill would encourage those new electricity share owners to co-operate and pool their influence. Widening the pool of people who have a direct stake in the ownership of how new energy is generated would be good for the country, for communities, and for the energy market. My Bill would give a shot in the arm to the ambition for more co-operatives and mutual methods for delivering services.

Some community-scale energy schemes are already wholly community-owned, funded by community share schemes such as Westmill in Oxfordshire, Fenland Green Power, and the famous Baywind Energy in the Lake District. Of course, I support those who want their energy to come from a wholly self-generated or community-generated source. My Bill seeks to lock into law the ability of the local community to buy into the ownership or part ownership of energy that is being generated in and from their area. The Bill would create a right for local people to invest in the new energy companies that are created whenever new energy generation projects are developed.

To secure a licence and to raise the finance for generation schemes, the energy companies would establish new, separate wholly-owned companies. The Bill would require shares in those new companies to be made available to local people wanting to invest in new energy generation projects in their area. For example, why should not local people who are seeing a new wind farm go up have the chance to get a direct personal benefit from a new business which, important as it is for bringing down carbon dioxide emissions, will nevertheless inevitably have some impact on their community? Why should local people not have a say, through their ownership of a stake in the new business, in how it is run? Why should local people, whose ever-rising energy bills have helped to pay for the new energy business, not see a direct financial return too? That could help the finances of people in the local community and make them feel more secure.

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I believe in the power of markets and the benefits of strong competition, but markets have to be regulated properly if the benefits of competition are not to be captured by the few. My Bill therefore seeks to spread the benefits from new investment in energy markets to the many. The squeeze on finances up and down the country, which has been caused by the Government’s economic policies, is exemplified in part by Ministers’ failure to tackle rising energy prices. I support the need for action on rising prices, which my right hon. Friends the Leader of the Opposition and the shadow Secretary of State for Energy and Climate Change have rightly championed. My Bill would help to increase the number of winners from the energy market. It would also accelerate the slow process of decentralising the generation and supply of energy, which bolder Governments than ours are embracing with enthusiasm.

Communities should have the opportunity to own the electricity grid in their area. That means not the electricity transmission wires, but the electricity distribution network beneath the grid supply point. My Bill would give a right of first refusal to local communities to allow them to buy the local grid if it is put up for sale. It would create a period in which the community could consider whether to buy or partly buy the grid network in their area. In the meantime, new infill grid infrastructure —the local wires that connect new homes on new estates to the grid—would in future be community owned and operated under licence, perhaps by the National Grid or another body. Ofgem would be required to license the process.

One lesson from the financial crisis and the various privatisations of the ’80s and ’90s is that individual shareholders are not powerful enough on their own. My Bill would therefore establish Community Power Direct

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to enable those in a community who buy shares in a new energy generation project to pool their shares through a co-operative so that they have a more effective voice in how the business operates and who benefits from its success.

Similar ownership and control structures are emerging in services other than energy, such as health care, leisure services and financial services. Foundation hospitals allow local people to become direct members of their hospital, giving them a voice and even more of a stake in the delivery of a service that is vital to their community. Building societies and credit unions give users of financial services a stake in their ownership, giving them a voice in and, crucially, a financial benefit from how the business is run. Why can a similar process not operate for energy generation?

Community Power Direct would have to be consulted when new energy generation projects are planned or developed. That important new planning requirement would be a further stimulus to widening the opportunity for local people to invest in the energy services of the future.

My Bill would help communities to become a little more resilient in these tough times. It would stimulate new social investment and share more fairly the benefits of energy wealth. I commend it to the House.

Question put and agreed to.


That Mr Gareth Thomas, Gavin Shuker, Barry Gardiner, Ms Karen Buck, Clive Efford, Kate Green, Chris Evans, Stella Creasy, Alun Michael, Mr Andrew Love, Rushanara Ali and John Cryer present the Bill.

Mr Gareth Thomas accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 27 April , and to be printed (Bill 315).

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Point of Order

Paul Flynn (Newport West) (Lab): On a point of order, Mr Speaker. Sir Christopher Kelly said at the Public Administration Committee this morning that the Prime Minister had “almost certainly” broken the ministerial code in not having an investigation into the conduct of the previous Secretary of State for Defence and Mr Adam Werritty. Instead, the probe was conducted by a senior civil servant. That view has also been expressed by the only enforcer of the ministerial code, Sir Philip Mawer, who has now resigned.

Do you think, Mr Speaker, that two investigations are now necessary—a legitimate investigation into the conduct of the previous Secretary of State and Mr Adam Werritty and an investigation into the conduct of the Prime Minister? As the Prime Minister is the only person who can authorise an investigation under the ministerial code, is it, perhaps, a matter for you in the Chair to consider whether action is needed on the allegations made by Sir Christopher Kelly?

Mr Speaker: The hon. Gentleman is a very experienced Member, and he never uses a word accidentally. I noticed in his attempted point of order his use of the word “perhaps”, which I suspect was surrounded on either side by an appropriate comma. My answer is no, it is not a matter for the Chair, and this is not a point of order for the Chair. We are considering a matter of Committee business on the one hand and, as I understand it, the ministerial code on the other. The latter, as he acknowledges, is supervised and overseen by, and the responsibility of, the Prime Minister. Whether that is satisfactory to the hon. Gentleman I cannot say, but it remains a fact. He has very effectively made his point for today, but it is not a point for me to respond to beyond what I have said.

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Water Industry (Financial Assistance) Bill

Second Reading

Debate resumed .

Question (29 February) again proposed, That the Bill be now read a Second time.

3.46 pm

Oliver Colvile (Plymouth, Sutton and Devonport) (Con): Thank you, Mr Speaker, for calling me back to the crease to continue my batting, in the same way as a nightwatchman who has been put in half an hour before stumps being drawn is asked to come back and play again. Unlike the nightwatchman, I do not expect to occupy the crease until lunchtime, but I hope to score a few runs and make a few points.

A BBC producer reminded me over the weekend that at the outbreak of the second world war, the BBC was showing a cartoon. It stopped it bang in the middle, and then five years later, picked it up from exactly the same point so that people could carry on watching it. I do not suggest for one moment that you, Mr Speaker, or anybody else will necessarily remember what I was saying in the final two minutes of last Wednesday’s debate, although I have no doubt that some Members will have ensured that they have a copy of Hansard in front of them. I will, if I may, take this opportunity to remind everybody of where I got to.

I thanked Ministers for ensuring that the south-west would receive the £50 cut in water bills, and I recognised that the previous Government had done a significant amount of background research to ensure that that could be delivered. I also mentioned, however, that it was the current Government who had had the political strength to deliver it. I suspect that one reason for that was the lack of political commitment or pressure needed to deliver the cut, given that there were only three Labour Members of Parliament in the whole of Devon and Cornwall up to 2005. Members of Parliament from other regions of the UK were putting greater pressure on the Government to deliver projects that they wanted.

I added on Wednesday that until 1997 St Peter’s ward in my constituency was one of the most deprived in the whole country. I therefore argued that the challenge facing that community, where there has been significant regeneration and demographic change, remains as great as ever.

I also remember my hon. Friend the Minister telling the House that the bad water debt added an extra £15 to all our bills throughout the country. The £50 is very welcome, but I was disappointed to hear that there is likely to be a 4% increase in this year’s water rates bill, which is an estimated £24, or nearly half that £50.

I understand that South West Water is expected to meet EU regulations by investing in water infrastructure, and by improving the quality of our drinking water and beaches. However, we have 30% of the coastline and 3% of the population. Communities such as those in the Devon, Cornwall and Somerset peninsula are expected to make a significantly greater contribution to the local environment compared with other parts of the country.

South West Water, like other companies, has a monopoly on the supply of water. Ofwat—its regulator—oversees the economics and the quality of the environment, but we need to widen its remit so there is more competition

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in the delivery of water. In addition, we need to ensure that there is greater connectivity between neighbouring regions, so that water assets can be transferred to parts of the country where there is a greater demand. It beggars belief that we were told in February that parts of the country will be subject to hosepipe bans because we have failed as a country in the past 20 years to invest in reservoirs and other infrastructure.

To deliver that greater connectivity so that we can deliver water from one part of the country to another, we should make much more of our network of canals and waterways, another achievement of that great Victorian era, which was the basis of our industrial revolution.

Ian Paisley (North Antrim) (DUP): I wholeheartedly agree with the hon. Gentleman on the use of the network of canals. This is niche legislation pertaining mainly to England, but I hope those views are extended to include our network of canals in Northern Ireland.

Oliver Colvile: It is fair to say that the Bill affects a specific part of England, and it would not be appropriate for me to start advising the Northern Ireland Assembly what it should and should not do, so I shall continue—I do not have far to go, and no doubt the hon. Gentleman can make his contribution on that later.

I am arguing that to deliver that connectivity, there should be greater use of canals and waterways. I very much welcome the £50 off the water rates, and I am grateful to my hon. Friend the Minister for providing it, but I hope it will be a temporary solution and that the Government make the cut more sustainable by creating greater competition within the market; reforming Ofwat, so that it has a greater role in delivering that competition; making greater use of our canal system and waterways to move water between regions; and explaining how we can reduce the bad debt element of water rates.

I hope that in providing those answers, we can ensure that we stop pushing water uphill and that we have affordable water bills.

3.53 pm

Julie Hilling (Bolton West) (Lab): I am pleased to be able to speak in this debate. I am not against support for water customers in the south-west, and I absolutely agree that it is unacceptable in 2012 for the Thames—the major river in our capital city—regularly to be flooded with sewage. However, it is also not acceptable in 2012 that hard-working people in my constituency are having to beg for food, or that they are spending more than 5% of their income on water bills. My constituents cannot wait for a further water Bill to address the affordability of water: they need action to help them with their bills and action on social tariffs.

In the north-west of England, the affordability of water is based on deprivation rather than on historical or geographical issues. The bills of United Utilities Water—my local water company—are close to the national average, but income deprivation is worse than in any other region. More than half the country’s most deprived communities are in the north-west, even though we have only 13% of England’s population. Based on Ofwat’s analysis, once households in South West Water’s region receive their proposed £50 bill reduction, affordability problems will be more severe in the north-west than in

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the south-west. Company social tariffs will not solve the problem. Too many customers in the north-west are in financial need to make in-house cross-subsidy work. It therefore needs a national social tariff scheme that all water companies will pay into. The Government’s hands-off approach, leaving it to water companies to devise their own affordability scheme and even giving them the choice whether to provide one, definitely will not help those people most in need in Bolton West.

There is no definition of water poverty. Households needing to spend more than 10% of their net income on heating and lighting are deemed to be in fuel poverty, but there is no equivalent definition for water. It seems to me, however, that if someone has to pay 5%, or even 3%, of their income on their water bill, they are pretty poor. Some 840,000 households in the north-west are spending 3% of their income on water, and 370,000 households are spending more than 5% of their net income. It is no surprise then—absolutely shocking, but no surprise—that 4,890 tenants of Bolton at Home are in debt, and that 1,462 of them owe between £1,000 and £2,000. This debt is of concern to all of us and adds £15 a year to everyone’s bill.

We need to recognise that some people simply cannot afford to pay their bills. I was told last Wednesday about a 70-year-old lady in Bolton who has just been rehoused in a Bolton at Home house. She had to move out of her last rented home because she could not afford to pay the heating costs. She has had to ask Bolton at Home for a furnished property because she cannot afford to buy her own bed, cooker, carpets or armchair—a furnished property at the age of 70 when she should be able to enjoy her life surrounded by her own belongings. Before she retired she was a care worker, but was never offered a pension scheme and was never able to save for her old age. She is now trying to live off £134 per week for her gas, electricity, water, food, clothing and all her other needs, and her water bill is about to go up by nearly 5%. Such people need help not greater debts.

United Utilities is a good water company and offers financial assistance schemes. It has a trust fund that will make grants to customers in genuine financial difficulty. That can clear outstanding water arrears, which is great, but does not help people to find the money on an ongoing basis to pay their bills. I am also told by Bolton citizens advice bureau that the fund often runs out of money before the end of the financial year, that it rarely assists people who cannot afford to pay the current year’s instalments, and it will refuse a grant if it does not think that the customer has a good enough reason for falling into arrears in the first place.

United Utilities also has an arrears allowance scheme that reduces the balance by £1 for every £1 paid by the customer. Again, however, the customer has to be able to pay the ongoing charges, and if they miss just one payment, they are thrown out of the scheme and will not be readmitted. There are also 5,200 United Utilities customers on the WaterSure scheme, which is for those who have medical or other needs that mean they have high water usage, but that simply caps their bill at the average household bill. United Utilities is also running a feasibility study on a support tariff. However, none of this solves the fundamental problem that some people do not have a big enough income to pay their water bills.

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Unlike for other services, my constituents cannot shop around for a better deal. They can buy their water only from United Utilities. These private firms are monopolies, and frankly it is not enough just to expect them to be philanthropists. United Utilities is telling me that company social tariffs will not work for the north-west. We therefore need national action on social tariffs. Water companies can apply to have money deducted directly from benefits, but Bolton citizens advice bureau tells me that its money advice staff are deeply frustrated by that. Of course, we all believe that people should pay off all their debts, but when a person reaches a crisis of debt, priorities have to be made. There is no point paying off a water bill if the person is evicted from their home; the water bill is not a priority if they have no electricity in the house; and the water bill is not a priority is there is no food to feed the children. If a person is on limited income, the advice from all professionals is to manage priority debts. Only when homes are saved or prosecutions avoided are other debts dealt with. As there can be only a limited number of attachments to benefits, it can be harmful if one of them is for water bills.

Finally, water debt is just part of the problem facing so many low-paid people. It is 2012, and we have poor people dependent on food handouts. We have poor people losing their homes, poor people unable to heat their homes, poor people unable to pay their water bills—in fact, poor people paying the price for global economic failure. The Secretary of State should take action now on water poverty. I urge her to do so.

4 pm

George Eustice (Camborne and Redruth) (Con): Let me begin by welcoming this Bill. We all know the historical causes of high water bills in the south-west. They go right back to the time of privatisation, when insufficient account was taken of the lack of sewerage infrastructure and the pressure that this would put on companies such as South West Water to provide such infrastructure in the future. In Cornwall and the south-west, we also have just 3% of the country’s population looking after some 33% of the coast.

I have always argued that we have spent way too long in recent years talking about the problems and not enough time talking about the solution. I am delighted that we now have a solution to the unfairness of high water bills in the south-west, through the measure in this Bill to deliver a £50 discount on all household bills. I pay credit to the Minister for all the work that he has done to make that a reality. He has managed to deliver a policy where the previous Government were unable to do so. I remember talking to Labour candidates even at the last general election who said that although there was a problem, nothing could really be done about it. We have proved that something can be done, and where there is the political will, there is a way. I hope that the Minister does not feel that Devon and Cornwall MPs have lobbied him too ferociously on this issue. I feel there were times when he saw a Devon or Cornwall MP approaching him that his face dropped somewhat, as he knew the subject that was up for discussion. I hope that has not put him off the counties of Devon and Cornwall, because this move is very much welcomed by everybody there.

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There has been some discussion about whether the £50 rebate is enough. However, it is important to remember where we were just a year ago. There was not going to be a Government-funded discount; in fact, the discussion at that time was very much about what might be achievable through a national social tariff. That would effectively mean having a pot of money funded by all the water companies, at the expense of water bill payers across the country, with resources allocated on the basis of affordability. That would have disproportionately helped those in the south-west—it would have helped some in other parts of the country as well—but it would have been paid for by water bill payers across the country. The decision that the Government have finally come up with—to find public money to fund the discount, so that it does not cost water bill payers elsewhere in the country money—is a sensible solution. Importantly, it separates the historical unfairness of high water bills in the south-west from affordability, which it seeks to address through the company social tariff. That is the right approach, and we should welcome it. We in the south-west should not look a gift horse in the mouth and say, “This isn’t enough,” because I think that £50 is a significant discount, which we should all welcome.

I would like to pick up on what my hon. Friend the Member for Plymouth, Sutton and Devonport (Oliver Colvile) said about the projected rise in water bills from South West Water. This is an issue, because with the Government having done their bit and finding some money to create a genuine discount for people in the south-west, it would be a dreadful state of affairs if it was all swallowed up by water bills in the south-west being increased anyway. As my hon. Friend said, that could take up around half the discount. However, the Government have done their bit and found the money; we now need South West Water to do its bit by showing restraint in the bills it issues and by developing the social tariff. Most importantly, we need Ofwat to do its bit. I very much hope that the Minister—if he can do one last thing—will hold its feet to the fire, and keep the pressure on Ofwat to ensure that it keeps those bills under control.

Finally, I want to touch on how we might create downward pressure on water bills in the longer term. I am encouraged by what I have seen on that issue in the remainder of the White Paper, which deals with the development of proper competition on the retail side, particularly in the business sector. Businesses will not benefit from the £50 discount, but if we can increase competition at the retail end, we should be able to achieve downward pressure on their bills. I welcome these proposals.

4.5 pm

Mr Andy Slaughter (Hammersmith) (Lab): In London, there is a real need for improvement to the sewerage system. The present network of major sewers was designed for a 19th century city. London’s population is now 7.6 million, but it is projected to rise to 8.3 million by 2021 and to 8.8 million by 2031. It will then have doubled since the major sewers were built. It is remarkable that the system has managed so well for so long, and is a tribute to Bazalgette and the others who designed and built it. It is, however, clearly inadequate, and has been so for some time.

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The present system consists of combined sewers, which convey foul sewage and rainwater run-off to the sewage treatment works before they are discharged. When the combined sewers reach capacity, the combined sewer overflows—CSOs—are designed to discharge excess untreated waste water into the River Thames. This avoids overflows and back-ups through manholes and into individual properties, but it means that as soon as the hydraulic capacity of the sewage treatment works is exceeded, sewage is pumped directly into the Thames. In fact, some parts of London, including my constituency, also have a problem with sewage back-up, and the Counters Creek relief scheme that Thames Water is seeking to implement will bring an end to that appalling problem, which has affected thousands of my constituents over the past few years. It happened three times in four years during the latter part of the last decade. I welcome the implementation of the Counters Creek relief scheme—a major scheme across west London—but the result will be even more sewage going into the Thames. The river will continue to bear the brunt.

Discharges can occur following as little as 2 mm of rain; they happen approximately 60 times a year. The Thames is tidal between Hammersmith and Beckton, and when CSOs discharge, the resulting sewage and litter flows up and down the river with the tide. In winter, it takes about a month for non-biodegradable waste to get from the head of the estuary at Teddington to the sea. In summer, when water levels are lower, it can take up to three months. It is in summer that we get the worst response and the worst smells.

In future, sewage might flow into the Thames even on dry days unless the situation is managed. In any typical year, 39 million cubic metres of untreated waste water—a mixture of sewage and rainwater—are discharged. The frequency and volume of untreated waste water entering the tidal reaches of the Thames have increased, and will only increase further. This level of waste entering the environment is not tolerated anywhere else in the UK, and it should not be flowing into the main river of our capital city. Something clearly needs to be done.

The discharges affect the river in several ways. First, polluted water increases health risks to recreational users of the Thames, whose numbers I am pleased to say are increasing year on year. Secondly, the aesthetic impact of CSO discharges is offensive. Materials such as faeces, toilet paper, wipes, sanitary products and other “flushable” items, including hypodermic needles, regularly end up in the Thames at Hammersmith. All of this causes slicks of pollution to float on the river before being washed up on the foreshore. Thirdly, sewage discharges harm the ecology of the river by reducing dissolved oxygen levels in the water. In extreme events, this can result in the death of fish and other wildlife, often in large numbers. There are therefore strong environmental, health and economic cases for the Thames tunnel.

The Thames tunnel will work with the existing system of sewers, with improved sewage treatment works and with the Lee tunnel to reduce the frequency of CSO discharges. This Government and the previous one have conducted serious studies of the issues behind the tunnel. Investigations have been carried out by the Department for Environment, Food and Rural Affairs and by independent bodies, resulting in the 2007 regulatory impact assessment, the Thames tunnel needs report,

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and DEFRA’s 2011 strategic and economic case for the Thames tunnel. They all conclude that the tunnel is the most comprehensive solution available at the most proportionate cost.

A number of alternatives have been suggested. The first is that we have a system to mitigate and reduce the dissolved oxygen levels in the Thames. This involves using the so-called Thames Bubbler oxygenation craft, as well as hydrogen peroxide dosing. This has helped with fish mortality in some places, but it is not sustainable; neither is it a complete solution and neither will it work in a tidal river.

Mr Matthew Offord (Hendon) (Con): The hon. Gentleman is making an eloquent speech. Does he agree that the Bubbler and the sustainable drainage system will not remove things like heavy metals, pesticides and all the other contaminants that go into the river through the CSO system he describes?

Mr Slaughter: That is absolutely right; it is a sticking plaster approach. I have reservations about the tunnel, which I shall come on to, but I am making the case that the tunnel is the only sensible solution thought of so far because many alternatives have been put forward but they are simply not sustainable.

SUDS—sustainable drainage systems—are one alternative. There is nothing wrong with them. They reduce the amount of surface run-off blowing into the sewerage system and complement other measures. However, the Government policy statement makes it clear that to prevent rain water and run-off entering sewerage systems completely will require either a new system designed to meet the principles of SUDS and source control or a completely new conventional separate water system, which would be disproportionately expensive. Although it can be installed effectively in new developments, trying to retrofit all London’s properties to the required level is simply impractical. It is impractical, too, to create extra capacity in the existing sewerage system. Existing sewers cannot be enlarged or duplicated because the system is so large and complex and has so many cross-connections that most of the network would need to be enlarged to prevent CSOs from discharging.

The Government’s report says that substantial duplication and enlargement to most of the sewers would entail massive construction work throughout inner London, enormous disruption and extremely high costs. Converting a combined drainage system into a separate drainage system would involve the provision of a completely new network of sewers approximately 12,000 km in length. Every existing property would require connecting to the new system and the cost and disruption would be high and might lead to a large number of misconnections, which could create a legacy of problems.

Any of those alternatives, if they were sustainable, would cost many times the cost of the tunnel—whether it be a SUD system or a separate rain water and sewerage system. What the opponents of the tunnel have been left with—I am sorry to see that the right hon. Member for Bermondsey and Old Southwark (Simon Hughes) appears to have joined them—is the idea of a shorter tunnel. This is a tunnel that would cover just west London—the so-called Selborne tunnel, named after the author of the report sponsored by Hammersmith and Fulham council.

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The shorter tunnel has none of the advantages of the longer tunnel and brings many more problems. It would effectively mean sewage stuck in the shorter tunnel for up to two weeks at a time while it became septic and could go nowhere—clearly it can flow only through the existing network of sewers in east London as capacity becomes available there. It would also require far more storage on land in west London. Thames Water’s response to the Selborne report—I have no brief for Thames Water—was quite devastating, pointing out its follies and fallacies. Indeed, if we read the Selborne report, we find that it does not talk about the shorter tunnel because it was realised that it was not a workable proposition. It would cover only half of the CSOs in London—that is, it would do only half the job. East of Battersea, sewage would continue to go into the Thames; west of Battersea, including in my constituency, the tunnel would regularly be full of sewage, with all the attendant problems of smell and disease that that can cause.

Mr Offord: Does the hon. Gentleman agree that our aim is to address some of the environmental problems of the river apart from the death of the fish on which so many people seem to focus, and that because the shorter tunnel would not comply with the urban waste water directive, the whole exercise would be pointless?

Mr Slaughter: The whole exercise has been a PR exercise, a sham and a spoiler. Those who have supported, or are supporting, the shorter tunnel have no credibility when it comes to resolving environmental and other problems. By all means let people criticise the Thames tunnel on its merits, but let them not propose this chimera as an alternative.

As a Hammersmith Member of Parliament, I have had to deal with all the propaganda and misleading statements that have appeared over the past five years under the auspices of Hammersmith and Fulham council. In fact, there is a huge amount of consensus about what needs to be done, and, to a large extent, about the solution, at least in principle. It is agreed that we must resolve the problems of sewers flooding the Thames, and that a tunnel is the best way to do that. We can argue about the route and about the cost, but both this and the last Government, mayoral candidates, most local authorities and most London Members of Parliament of all parties are of one mind, and it is not helpful to suggest otherwise.

Let me summarise the recent history of the campaign against the tunnel in Hammersmith. It began because this was an EU scheme: it began as an anti-EU campaign. Then it was claimed that it would despoil all the local parks—such as Ravenscourt park, which is about half a mile from the Thames—or that Furnival gardens would be dug up, which was never the intention. There were also false claims that housing estates would be demolished to make way for the tunnel portals. None of that has helped to identify the reasons for what is being done.

I sympathise with individual residents’ groups who are concerned about what is happening in their immediate areas. My constituency contains at least two of the sites involved. The Acton sewage tanks are on the very border of my constituency, and I hope that the fact that the tunnel will begin at that point will mean an improvement,

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because tanks that often cause problems of smell and are unsightly will no longer be needed. The other site is the Hammersmith pumping station. I have had the pleasure of going down into it—as have the hon. Member for Hendon (Mr Offord) and many others—to see the appalling conditions that exist when raw sewage is pumped into the Thames. At that site, the necessary building work will be contained within the parameters of Thames Water’s own development area. Of course we should be concerned about the disruption caused by building work, and should encourage Thames Water to use the river wherever possible to take spoil away, but, as far as I can see, Thames Water is working quite closely with local authorities and others, when that is allowed, to ensure that that disruption is minimised. It will clearly be necessary to keep an eye on the situation.

The one issue that is of concern in Hammersmith and Fulham is what is going to be the main drive shaft of the tunnel, which was to have been at Barn Elms in the constituency of the hon. Member for Richmond Park (Zac Goldsmith) but will now be in south Fulham, in the constituency of the hon. Member for Chelsea and Fulham (Greg Hands). I feel for the residents of Fulham if disruptive work is to take place there, but much of the blame for that must lie with the local authority, which, by running an extraordinarily outrageous campaign against the tunnel on principle and on entirely false premises, has failed to engage with Thames Water other than to try to take it to court to prevent it from proceeding with the project at all. By contrast, the hon. Member for Richmond Park and other London local authorities have played a blinder in negotiating with Thames Water, pointing out the problems involved in development in one area or another. It seems that the people in Hammersmith and Fulham will have to put up with the main drive shaft because of the incompetence of their own local authority.

I find it strange that the main defence put up by Hammersmith is that 95% of what is going into the river at present is water, and only 5% is sewage. Raw sewage is, by definition, a mixture of water and other products. I am not sure that that quite answers the question of how we are to have a sustainable River Thames in the future. I was fascinated by the following statement by the hon. Member for Chelsea and Fulham in his explanation of why he is opposed to the tunnel:

“Anglers, rowers and sailors will experience personal benefits from the tunnel”.

Never before have I heard not having to swallow human excrement proposed as a personal benefit. There is a complete lack of reality about what is actually happening. At present, people who walk along the Thames towpath see raw sewage floating in the river on a regular, weekly basis. That is a disgrace to London, our capital city, and something must be done about it.

We must keep a careful eye on both where Thames Water is intending to build and the cost of this project. It is true that costs have escalated over time. Both Front-Bench teams have made the point that Thames Water’s bills are the lowest in the country, and even after the anticipated additional cost of the tunnel, its bills will be near or below the national average water bill. Although that is true, it is no great comfort to those of my constituents on low incomes who will have to pay the additional cost. Because there is a clear and overwhelming

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need for the alleviation of sewer flooding, the attitude to this issue of both Thames Water and the Government has been somewhat blasé.

Ironically, the Bill contains provisions for both the construction of the tunnel and subsidies in respect of excessive water bills. I am not suggesting that that may be required in the London area at present, but we must be aware that there are many very poor people in my constituency and across London who find it difficult to pay their water bills in addition to everything else. I would like either the Government or Ofwat to conduct a more critical analysis of Thames Water’s plans and the costs. We did that in respect of Crossrail, which is another major civil engineering project in London, to try to keep down, or drive down, costs, and I believe we should do the same for the Thames tunnel. It is not good enough simply to say that there are social tariffs and that the bills will be no higher than the national average. People are being asked to pay substantially extra on top of bills they may already be struggling to pay.

I am grateful for the House finding additional time to debate this issue, which is vital for London. There are only a handful of opponents, including those representing Hammersmith and Fulham. It is extraordinary that they do not have a response to what is a national embarrassment and a health hazard, and something that we can no longer sustain in London—a river that is getting back to the state it was in in the 19th century, when the Bazalgette scheme was necessary. Whenever we discuss projects such as HS2, Crossrail and the Thames tunnel, I am always ashamed that there seems to be a reluctance to undertake great civil engineering projects, in which this country led the world in the 19th century.

I hope that there is a solution, and I suspect that it is the Thames tunnel project. In going forward with it, the Government must consider the sensitivities of the various local areas and the cost.

4.24 pm

Dan Rogerson (North Cornwall) (LD): Clearly, I am delighted that the Bill has been introduced. I would have liked to have seen it some time ago and I am very pleased that the coalition Government have responded to the call from people in the south-west for a measure of support towards the incredibly high costs that they pay for their water—or, more accurately, for the disposal of their sewage, as that is what we are talking about. We talk about water bills, and as a generic term I suppose that is fair enough, but in reality we are talking about the cost of dealing with sewage. As we heard from the hon. Member for Hammersmith (Mr Slaughter), that is clearly an issue in other parts of the country, too. This is very much a Bill of two parts and I shall not seek to comment on the question of what is required in London, other than to say that I sympathise with London MPs who see the costs that their constituents will pay in the future. Whatever scheme we use, and, clearly, the hon. Gentleman thinks that this is the right scheme, there will be greater costs for their water—or sewage—bill payers. From a south-west perceptive—that is, from a Cornish and Devonian perspective—people have been paying these bills for a long time, as we have heard. They are not worried about the future; they have been dealing with this problem since privatisation and, as we have heard, it goes back to the way in which the water industry was privatised.

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My speech is somewhat timely. I shall not seek to comment in detail on the inquest that has just reopened in Taunton, but we need to remember just how controversial the process of privatisation and how it was undertaken were. The water poisoning incident at Lowermoor in my constituency still concerns people today and I shall follow with interest the outcome of the inquest into the death of Mrs Cross and the question of whether information was withheld from people as privatisation was introduced.

Simon Hughes (Bermondsey and Old Southwark) (LD): On the broader, rather than the narrow, point, may I say that those of us with London seats do not try to make the case that our bills are as high as those for people in the south-west and have always argued for a better deal for them? Any argument about the Bill, for us, concerns part 2 and the terms and conditions under which the Government might support Thames Water with any funding for big projects.

Dan Rogerson: My right hon. Friend is absolutely right. The Bill offers opportunities for other parts of the country in that if the Secretary of State felt subsequently that measures should be put in place to look after the interests of water bill payers—or sewage bill payers—in other regions, the Bill would allow them to do that. That is very welcome to all parties.

Let me return to my point about privatisation in the south-west. I do not have the figures to hand about whether much of a receipt was realised at the time, but, clearly, the liabilities companies were being asked to take on were quite high. I suspect that some income was coming into the Treasury at the time of privatisation and a small “green dowry”, as it was called, was provided to the south-west to deal with the recognised cost of clearing up the woeful underinvestment in sewage treatment around a very long peninsula. If a fairer assessment of the real picture had been undertaken at that time, bill payers in the south-west could have been spared a great deal of hardship. It is worth putting on the record that more account could have been taken of the situation at the time. Rather than everything being rushed through, there could have been a better deal at that point that more fairly reflected the burden being placed on my constituents and those of other hon. Members in Devon and Cornwall.

Members from other parts of the country have said to me, “Well, you live in that wonderful part of the world and have that coastline. You enjoy it, so you’ve got to pay for it.” They should try saying that to a young person living with their family in the ward in which I live and in which I spent the early part of my life, St Mary’s ward in Bodmin, which is one of the most deprived wards in the south-west. I would venture to suggest that a young person growing up in that ward might well spend far less time on the beaches of Cornwall than people from other constituencies who come down and visit, or than those who are fortunate enough to own a second home in my constituency that is very close to the beach. My hon. Friend the Member for St Ives (Andrew George) has already discussed the costs sometimes involved in connecting water and sewerage systems to isolated and remote properties, which may be unoccupied and have low water bills because they are on meters. Those costs are borne by people living inland, on the peninsula, who probably do not get the benefit of going to the coast very often.

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Alison Seabeck (Plymouth, Moor View) (Lab) rose

Dan Rogerson: I suspect we will hear more about people in Plymouth who are in that situation.

Alison Seabeck: Actually, I rose to talk not about people in Plymouth but about the additional costs that the water company has had to bear of placing pumping stations in places that will not spoil tourists’ views of a harbour or a beach. That is certainly the case in some places in Cornwall. People do not see those costs but South West Water bill payers have been burdened with them.

Dan Rogerson: The hon. Lady makes an excellent point, and we can set that against the background of what others have said in this debate and in our previous debate on this. People in our part of the world have low incomes and comparatively high housing costs—not as high as those of constituents here in London, but much higher than in the north-west or the north-east. When combined with a low income, those costs are a significant pressure on people’s spending power.

I am delighted that the coalition Government have recognised that this problem needs to be dealt with, but it is not easy. The previous Government looked at the issue for some time and I pay tribute to those who have previously campaigned on this, including many Members who are still in the House. Members from my party and some Conservative Members, as well as Linda Gilroy, who was very useful to have involved, along with the hon. Member for Plymouth, Moor View (Alison Seabeck) and the right hon. Member for Exeter (Mr Bradshaw), all helped to put pressure on the then Labour Government to take action. We got as far as getting the Walker review, so I suppose we should be grateful for that.

Alison Seabeck: Before the hon. Member for Plymouth, Sutton and Devonport (Oliver Colvile) leaves the Chamber—oh no, he has gone—I wanted to draw attention to something he said earlier about the problem being partly due to the fact that there were only three Labour MPs in the south-west. Clearly, it is about quality, not quantity, but on that premise, given that we have a very large number of MPs from the Government parties in the area now, I assume that everything we want in the south-west will happen. That was a little churlish because the hon. Member for North Cornwall (Dan Rogerson) is right that there was complete cross-party effort on this.

Dan Rogerson: I think we can point to the time before the Labour Government, during the early days of the privatised industry, when, although there was a preponderance of MPs in the area from the Government party, we did not get anything. We have to recognise that there has been a problem and that it is being dealt with to some extent.

The company still has work to do, so we are not looking at a static position. We are looking at the fact that, as the hon. Member for Hendon (Mr Offord) said in his excellent contribution in our previous debate on this issue, raw sewage is still being washed out. That happens in London, as the hon. Member for Hammersmith has described, and in coastal locations such as Trevone, which I mentioned in an intervention. Water companies argue that that is a very rare event, happening two or

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three times a year, but the statistics show that it happens far more than that. Rainfall patterns are changing and development patterns have changed. We have, fortunately, got some affordable housing and market housing built in some of those communities, but that has added to the burden on the sewerage systems, which are just not up to the job. South West Water still has work to do and it also has to take responsibility for taking over the private sewerage systems. I welcome that change, but it will add to the costs going forward. The measures are long overdue and will, I hope, help to offset some of the burden on bill payers.

I have some concerns about the debt model that has been agreed between Ofwat and the water companies. The debt that has been taken on over previous decades to provide infrastructure is not being paid off to any significant degree. Under the debt model, those loans are repackaged periodically.

The water companies and Ofwat argue that that is a great deal because it keeps the cost of borrowing down—if we were to start to pay off these things now, we would put bills up even higher. I see that, but I am concerned that, essentially, we are saying that the Government’s sensible proposal will have to continue for ever, because we will never, ever pay off some of the significant debt that has been arrived at to put in the infrastructure. I hope that Ofwat will continue to look at the issue, because my constituents come to me and say, “At least we must have paid off a lot of this money by now and we must be getting to the point where the bills will start to go down.” No we are not, because the debt is constantly repackaged. That issue perhaps needs to be examined.

Hon. Members have talked about national WaterSure, or social tariffs. I know that the advice from the Treasury is that that effectively amounts to a tax—we need to examine that—but any scheme that seeks to help those who are struggling the most ought to do so regardless of where those people live. Even after the welcome investment in tackling inequality in bills across the country, people in my constituency and in other constituencies across Devon and Cornwall—because of low income, high housing costs, and high water and sewage costs—will still be worse off than people in other parts of the country.

I accept that other hon. Members will say, “Come on, you are getting this and surely you must be satisfied with it,” but I will be satisfied when I think there is a fair deal for people in my constituency and in neighbouring constituencies. As I said in a Westminster Hall debate earlier this year—or perhaps at the end of last year; memory fails me—I hope that we reconsider having some sort of national tariff. If measures are kept within region, the pressure on the other bill payers will be so high that those measures will not be allowed to be significant enough to meet the need.

We also need to keep a close eye on the profits of the water companies. In an excellent contribution to the first part of the Second Reading debate, my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) mentioned the sometimes arcane business models and the layers of companies that manage to pass on significant dividends. Ofwat could do more to look at the profits there. As my hon. Friend the Member for St Ives said, the leadership at South West Water is far better than it was and those people have engaged hugely with the campaign to deliver on this issue. They are being open and realistic about what is achievable, but all

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water companies need to consider the contribution that they, too, could make to perhaps providing a more generous WaterSure or social tariff scheme. We need to be vigilant about that.

George Eustice: Does the hon. Gentleman agree that another shortcoming of the WaterSure tariff is the fact that it is available only to those who are on meters? That is good if it encourages people to go on to a meter, but there is a problem with blocks of flats where it is not practical for people to go on to a meter. Some of those people are in temporary rented accommodation, and it is not their call whether they go on to a meter.

Dan Rogerson: The hon. Gentleman is absolutely right, and we might be talking about some of the people who are worst off, because they live in smaller flats or houses in multiple occupation. I hope that as the Government move forward with their review of water policy they will consider whether any resource could be put into finding technological solutions to overcome those problems. At a time when we are considering smart metering and all sorts of things to do with energy, there must surely be a solution that allows metering for all water consumers, no matter where they are. A small investment, perhaps in that, or some encouragement to companies that might be coming up with such ideas, would help to deal with the issue. The sooner we can get everybody on to a meter, the sooner we will take the burden from those who, thus far, have been unable to take advantage of metering. The hon. Gentleman makes a strong point.

I should perhaps conclude by returning to the issue of fairness and who these measures are designed to help. South West Water feels strongly that it would like to see help for small businesses—it is concerned about that. I sympathise with that point of view, although we have to be realistic about how much money there is, and therefore about the support that will be available to residential customers if businesses are covered as well. It is difficult to distinguish between the smaller and the larger businesses, some of which are national and quite profitable. They would see a benefit that was nothing to them, but which would suck up money that could go to a residential customer down the road.

Second homes are an issue, as one might expect me to say. The Government’s proposals contain a careful appraisal to make sure that nobody gets £50 off their bill if they are currently paying less than £50, or we would be giving them money. I suspect that many in that category are people on water meters who are not using much water because the property is empty much of the time, as a second home. If, as the Bill moves beyond Second Reading, anything more could be done to examine the issue and make sure that it targets people who live in the area and pay higher water bills, I would welcome that.

I am delighted that the Government are moving on the matter at last. I hope they continue to examine ways in which we could help the very poorest consumers through social tariffs. I congratulate the Minister on tiptoeing through the various minefields surrounding the subject and coming up with the Bill that we are debating. I look forward to it making progress and becoming an Act.

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4.40 pm

Kate Green (Stretford and Urmston) (Lab): It is a pleasure to speak in the debate. Many hon. Members have noted that the Bill seeks to deal with two specific local issues, the south-west in respect of the first clause and London in respect of the second, but the Bill is widely and non-specifically drawn.

I take the opportunity to ask about Ministers’ broader strategic intentions. In what the clauses encompass there is some real potential for development of the Government’s broader water strategy, and I am keen to explore two questions in relation to that. The first is affordability. A number of hon. Members, including the hon. Member for North Cornwall (Dan Rogerson), who has just completed his excellent speech, have raised some important issues about that. In common with other non-south-west Members, I want to put it on record that I have no concerns at all about ensuring a fair water deal for customers in the south-west, but customers across the country are struggling with water bills, as a number of hon. Members have pointed out, as the cost of living rises, and the cost of water and other utilities creates additional pressure on household budgets.

The Bill offers Ministers the opportunity to think creatively about how Government can help to relieve those financial pressures, and perhaps to give some indication today of their thinking in that area. Social tariffs have been rightly identified as the route to achieving that, but there is a clear need for the industry and Government supporting the industry to ensure that we raise the game. Water is clearly not a luxury and some families, such as those with young children and families where there is ill-health or a disabled member of the household, are hit particularly hard. WaterSure is helpful in addressing some of the additional need that arises for those families, but it applies only to families with more than three children in the household and the take-up is not particularly good. Only about a third of households that could benefit from WaterSure are taking advantage of the scheme.

The hon. Member for North Cornwall and others mentioned the need to spread water metering more widely and some of the properties where that is quite challenging. It is also important to recognise that without the benefit of well designed social tariffs, families with higher levels of water usage because families are larger or because of health and other needs may find that water metering worsens their position. It is therefore important that we design very carefully the way in which we apply tariffs to meet the needs of particular families and to support those on lower incomes.

I urge the Minister to recognise the lessons that have been learned in relation to social tariffs from the energy industry, and work that has been done with energy utility companies. The first and extremely important lesson is that a hands-off approach is not sufficient. If it is left to the industry alone to apply the sorts of tariffs that support low-income households, the result is poor protection for the poorest consumers. There would be a lack of information about tariffs and the benefits of more favourable tariffs would more often accrue to better-off customers who can pay by direct debit, for example, which reduces industry costs but passes the benefits to those who can operate their personal finances in that way. Customers often end up on a tariff that might initially have been quite good for them but becomes

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inappropriate, and there is a lack of proactivity on the part of the supplier to seek to inform individual consumers and improve their position. That is understandable in a market where competition pertains, as is the case for energy utility companies, but it will happen all the more in a market that is effectively a series of regional monopoly markets, as is the case for the water industry.

There have been some interesting experiments on improving the coverage of social tariffs and affordable bills in the energy industry, and I hope that Ministers will take those into account in relation to water supply. There have been some interesting experiments on entitlement to the benefits that support low-income families or those that meet a particular additional need, such as disability benefits. There has almost been a two-way trade in working around that linkage with the receipt of benefits. It is of course possible to think more creatively about how information held by the Department for Work and Pensions and other agencies on who is in receipt of financial benefits could be used more widely to identify households that might also be eligible for social tariffs, a point the Secretary of State alluded to in her opening remarks last week. Although I appreciate the concerns about data sharing, I think that the benefits would surely outweigh the risks and urge Ministers to think imaginatively about how the data could be shared effectively.

Alison Seabeck: My hon. Friend talks with a great deal of experience in this field. Could she offer a view on whether the introduction of universal credit will make it more straightforward to operate a social tariff through the benefits system or slightly more complicated because it will be less easy to pull out certain elements and see where people’s needs are?

Kate Green: I will not venture to speculate on that—it is disappointing that I, a universal credit junkie, do not have an answer. This is one of the rare moments when I say that it might be useful that universal credit is a household benefit, because water is of course a household bill and so the calculation might be easy. However, a number of the elements of local financial support, such as council tax benefits, will not be within universal credit, so it might not be a straightforward indicator of which households and properties are particularly likely to be linked to high water usage. I hope that the Minister will take the opportunity to discuss the localising of benefits with colleagues in the Departments for Work and Pensions and for Communities and Local Government and to explore what the options might be following the introduction of universal credit. The Secretary of State for Work and Pensions certainly makes great claims about the access to data that universal credit will both rely on and introduce, and I think that it is undoubtedly the mood of the House that we would want to see the data used effectively and constructively, with careful attention to privacy and data sharing concerns, in order to help bring water bills down.

As I have said, the linkage to those in receipt of benefits works two ways. It is not just a case of looking at benefits data and identifying people who might be eligible for a social tariff; it is also about looking at people who are on social tariffs and ensuring that they are in receipt of all the financial support to which they might be entitled through the benefits system.