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The Minister may be aware of—and if he is not, I urge him to go and look at—the excellent schemes that have been developed with energy utility companies in order to link benefits checks, proactive benefits advice and entitlements assessments, working closely with a number of charities, to customers on social tariffs. That interesting model has worked well in several parts of the country, with several utility companies and advice agencies working in partnership, so I hope that he will consider whether it might work for the water industry, too.

I endorse strongly what my hon. Friend the Member for Bolton West (Julie Hilling) said about help for people struggling to pay water bills, and I ask the Minister also to comment on consumer education in terms of water usage, because if households can use water more efficiently, they will also help to manage their bills.

My second issue relates to clause 2, and I shall look again at its wider potential beyond the immediate need that it seeks to address—that of resolving the serious problems in London. It relates to the substantial infrastructure investment that the Bill envisages but which I again encourage Ministers to think about using proactively in terms of infrastructure development throughout the country.

At Davyhulme in my constituency, United Utilities operates a large sewage and water treatment plant, which was built in the 19th century but has been at the forefront of technical innovation and development since it was established—and no more so than now. Its groundbreaking sludge treatment project, which when fully up and running will be the largest such programme in the world, takes raw sewage and effectively transforms it into renewable energy sources, with the treatment by-product being used as soil conditioner.

That interesting and remarkable project has already benefited from modest financial support from the Government for its pilot stage, but, if drawing such green energy supplies from sewage and water treatment is to be a real runner, we might want to encourage substantial national investment in it. It is estimated that the Davyhulme plant, when fully operational, could supply green energy to 5,000 homes in the north-west, so there is substantial potential for such energy sources to become a major part of the Government’s renewable energy strategy. I should therefore be interested to hear from the Minister what discussions are taking place with his colleagues in the Department of Energy and Climate Change to link investment in our water treatment sector to the development of new energy supplies.

Under clause 2, I see how Government thinking about their role in supporting the industry’s development through investment or pump-priming might be taken forward. There is a real win-win possibility, which I am sure the Minister will want to explore.

I am grateful to have had the opportunity to raise these wider issues in the context of this Bill. I appreciate that it has not been introduced to deal with the long-term strategic issues of infrastructure and affordability, but in the absence of any other water legislation, or of any sign of new legislation, this may be the only legislation that we have to work with for some time to come, and it would be a great shame if we were not able to maximise its potential.

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4.53 pm

Neil Parish (Tiverton and Honiton) (Con): I thank the Minister for all his work in getting this Bill into Parliament so that we can deliver the £50 saving to water rate payers in the south-west, because they are a hugely deserving cause, as one would expect me to say.

As other Members have said, although we have only 3% of the country’s population, we have 30% of its beaches. We welcome many holidaymakers to Devon and Cornwall—they are most wonderful places to go to, and I encourage every Member to do that—but of course people from throughout the country use those beaches, so a small share in the cost of cleaning them up and looking after them will be gratefully received, and is necessary and fair. I thank the Chancellor for getting the money through, because we inherited a very difficult financial situation from the previous Government. They had 13 years to sort this out in much better economic times; we have managed to find the money in very difficult economic times, and that is a worthy achievement.

We must look at the profile of the people who are having to pay those bills in Devon and Cornwall. A large percentage of the population are elderly, including a lot of people who have been retired for a long time, and may have retired on good incomes but have found that inflation and other things have taken away their buying power.

Sheryll Murray (South East Cornwall) (Con): Does my hon. Friend agree that the average income per household in my constituency and the wider south-west is about £23,000, which is way below the national average?

Neil Parish: I do indeed. We have to look at the income profile of people’s salaries and wages. We rely a great deal on tourism, which, while it is essential for the whole area, is not necessarily the most highly paid industry in the country. It is right to give support to the people paying those bills.

The money that South West Water has made available to clean up the beaches is essential. Whatever the rights and wrongs of water privatisation, we must realise that before the industry was privatised, the infrastructure had not been dealt with. That meant that a huge backlog of work needed to be done on the sewerage works throughout Devon and Cornwall, and the cost of that was bound to impact heavily on water bills. In my constituency of Tiverton and Honiton there is a £2.8 million scheme to improve Cullompton sewerage works, which started last November and is due for completion in June. South West Water has also spent £340,000 on a scheme to enhance Allers water treatment works, and there is another scheme to enhance the Cullompton works. It is key that the company carries on putting the infrastructure in place so that we can get much cleaner beaches. We have beautiful countryside in Devon and Cornwall, but we should not forget that people mainly come for our beaches, so it is absolutely right to keep them clean.

We must consider those who are unable to pay their bills. There is a national cost of over £15 per bill to make up for those who cannot pay. The combination of those who cannot pay and those who will not pay is always the most difficult thing for Governments and companies to deal with.

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My hon. Friend the Member for Camborne and Redruth (George Eustice) talked about businesses. The Bill covers not businesses but private households. Businesses need much more competition. I urge the Minister not to let the horses frighten him. At the moment, the companies are saying, “You can’t possibly give us more competition, because that will frighten away investment from the City.” We do not want to frighten away investment, but neither must we be frightened away from looking at where we could create greater competition. In Scotland there is one nationalised company for wholesale water, and retail companies that can compete with one another. With our privatised water companies in England, Wales and Northern Ireland, we can look into ways to create more competition and then get the bills down for businesses too. It is essential that businesses, as well as householders, in Devon and Cornwall should benefit. The trouble is that if we spread the money for the £50 reduction across businesses as well, householders would lose a significant amount of it.

We need South West Water to be clear about why it is putting its bills up by another £20 or so. Although that might be justified, we do not want it to eat significantly into the £50 that we have provided to help people with their bills. We must remember that the south-west has been singled out because it has the highest water bills in the country, mainly because of the cleaning up of the sewage works.

The final point that I want to raise is about the London tunnel and the sewerage works in London. Last week I made an intervention that caused one or two long faces among Opposition Members, but I shall repeat the point. One night, when I was travelling back from here on my bicycle towards Chelsea bridge, going into Battersea, there was a low tide and I could smell the sewage being pumped into the River Thames. I question whether that should be happening in 2012. A company, a farmer or anybody else who polluted in that way would be prosecuted. Is there one law for some and another law for others?

It is high time this issue was dealt with. I know that that involves a huge expensive infrastructure project, but in the 21st century it is essential to clean up the sewage that goes into the Thames. Every time there is a tremendous amount of rainfall, the sewage works cannot cope and out goes the sewage into the Thames. The water companies have the right to do that—whereas a business that did it would be prosecuted immediately. I am delighted that this project is to be undertaken. I know that parts of London do not welcome it because of how it will affect them, but for the greater good of the capital and of the Thames, it has to be done.

5.2 pm

Mr Andrew Love (Edmonton) (Lab/Co-op): Rather unusually, I will start my contribution by seeking to resolve a confusion that has been in my mind over the past couple of weeks. I received a letter from the Minister, as did all London Members, pointing out that discussion of the Thames tunnel would be prioritised in this Second Reading debate. It also mentioned the national policy statement for waste water. Although the letter states clearly that that is before Parliament, I have been unable to gain reassurance that it will be debated on the Floor of the House. I seek the help of the House on that. I will comment

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on the Thames tunnel, but I will also touch briefly on the national policy statement for waste water, because it affects my constituency.

Like other London Members, I am shocked by the regular reports about the consequences of the discharges into the River Thames, even though my constituency does not lie on the river. I am shocked by the number of discharges—about 50 a year, or one a week. The discharges can have cataclysmic consequences for people who live along the Thames. That is an extremely important issue. There is European legislation under which countries that do not clear up such discharges will be fined. That should weigh on us heavily, not only because of the level of the fines that will be imposed, but because it highlights our responsibility.

I have been impressed by the 10 years of hard labour, if I may call it that, that has gone into the preparation of the Thames tunnel scheme. I have listened closely to the debate, and I have heard many people’s views and received many letters and e-mails about some of the proposed alternatives. Like most Members who have spoken, I remain to be convinced that any of those will address the existing needs. Broadly speaking, I am therefore in favour of the Thames tunnel project. My concern is about its affordability for individual water consumers and its cost and likely value for money.

We have talked a lot about water poverty. I am sure the Minister will say that Thames Water bills are low compared with those in other parts of the country, but we must consider water poverty. If we define water poverty as having to spend 3% of income on water, more than 1.1 million Thames Water customers are affected. If we define it as 4% of income, more than 600,000 are affected. That is twice the level in any other water authority area, which should concern us.

The previous Government introduced the WaterSure scheme to place a cap on water bills for low-income families whose water usage is metered. The problem is its narrowness, and the fact that take-up has not been widespread. Only a third of eligible consumers make use of it. That represents roughly 3,600 families in the Thames Water area, where more than 1.1 million consumers live in water poverty, so it does not really address the problem. I will not go into detail about social tariffs, because other Members have done so, but I am sceptical about the scheme as it is currently constructed, and we need it to be changed enormously to address the problems.

My final point about water poverty is that the Thames tunnel will cost consumers roughly an additional £50 a year, or £1 a week on their bills. The Minister will say that that will take Thames Water bills only up to the national average, but the consequences for the 1.1 million consumers already in water poverty will be extreme, and must be taken into account.

I shall now turn to the value for money, the costs and the delays of the project. It has been going for 10 years now. The study was started up in 2001 and was carried through to the development of the scheme in 2005. As the debate has shown, the scheme is still being consulted on and there is still significant opposition to it. It might not be very well-informed opposition, and it might not address the issues that need to be addressed, but it is there. Perhaps the Minister could say something to

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reassure us about whether the £4.2 billion cost can be kept to. Will the ambitious time scales upon which that cost is based be realised? Can such a complex and, if I may say so, risky project be delivered at that cost?

To echo what my hon. Friend the Member for Hammersmith (Mr Slaughter) said, the public sector will be supporting some of the riskier aspects of the project. Are the Government getting to the bottom of how to get value for money? We could go into the issues of public-private partnerships and the private finance initiative, but I remain to be convinced that the project will be delivered on time and to cost. I should like some reassurance from the Minister about how we can ensure that Parliament and the Government play a role in protecting the Thames Water customer and the UK taxpayer and ensuring that the project delivers for them.

The national policy statement on waste water is related to my local project at the Deephams sludge works. Like the Thames tunnel, Deephams currently discharges into a river—the River Lea, a tributary of the Thames—which contributes in a smaller way to the discomfort along the Thames. The technology at Deephams dates back to the first half of the last century. To put it crudely, it is exhausted. There was little investment until the last year or two, when significant new investment was made in preparation for the national policy statement.

Deephams was not a problem some years ago. It was in the Lea valley, quite a long way from my constituents, many of whom did not know it existed and were not concerned about it. That is not the case now, which is a primary reason why I am raising the matter. During the past 10 years housing has come to the edge of Deephams, and there are consequences, including the statutory nuisances from sludge works, such as the pungent smells. Thames Water will say that it does not get many complaints about the smells, but there are sound reasons why the number of complaints is not as great as it should be—not least the confusion caused by the fact that a number of different facilities in the Lea valley can contribute to those problems. Constituents living close to Deephams regularly take up the consequences of the lack of investment with me.

I should say something positive about the national policy statement, because much in it is to be welcomed. There is no longer a preferred option for the redevelopment of the Deephams site, which shows flexibility, leaving open a wide range of options. I strongly welcome the increased priority given to design. The policy statement talks of sustainability, durability and adaptability, which are important considerations for the redevelopment of the Deephams site.

The national policy statement recognises the need for flexibility and talks of the likely population increase for which Deephams must provide a facility: the population will go up from 850,000 to nearly 1 million over the lifetime of the project, so recognition of that is welcome. Finally, the national policy statement recognises that most of the infrastructure is woefully out of date and must be replaced.

I want to build on those welcome changes to the national policy statement, and I ask the Minister, if he has time, to comment on some of my suggestions, the first of which relates to the central role of Ofwat, which will be responsible for funding capital infrastructure. I understand that Ofwat has responsibility for ensuring

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that capital infrastructure comes in on cost and on time, but based on previous experience, I make a plea not to limit the preferred options to be considered for Deephams, and not to restrict what can be done to existing legislative requirements.

The national policy statement recognises the critical need for flexibility, and to find innovative and sustainable solutions. We should not base proposals on existing need—as I have said, the national policy statement recognises that the population will increase and that there should be flexibility—but there should also be flexibility in welcoming higher standards, which will undoubtedly be introduced. There will also be legislative change during Deephams’ period of operation.

Climate change will come to the fore—we are now in the midst of a discussion of drought, but there will be other climate change issues in future. Everyone keeps talking about the green agenda, but we need to introduce the new technologies into our water system. I shall come back to that in a few moments. Thames Water will claim that the recently improved project in Reading is state of the art, but the problem for Deephams is that development will come 10 to 15 years down the road. So we need to consider not what is state of the art now, but what will be state of the art in 15 years. I hope that the Minister can reassure the House that the Government recognise the need for these flexibilities, because there is a danger that Deephams will be out of date by the time it comes on stream. It is incumbent on Thames Water and the local community to consider what alternatives there are, and what other technologies could be used.

I want to mention two such technologies that are being piloted in this country but have not been fully rolled out, although they are being used in the United States and China. My knowledge here is suspect, so I hope that nobody will press me too closely, but there are things called integrated fixed-film activated sludge—I can give Members a definition if they want—and moving bed biofilm reactors. Council officers at the London borough of Enfield speak about little else at the moment; they can wax very lyrical about it.

Council officers sympathise with the idea of introducing a combination of the two technologies to future-proof Deephams in respect of the factors that I have mentioned, including climate change, improved water quality and population increases. Is the Minister aware of, and sympathetic to, those technologies? They are not mentioned in the national policy statement, but it would be welcome if he could say something helpful about them. We recognise that the introduction of new technologies has a cost implication, but there is growing evidence not only that they can respond more flexibly to future pressure, but that over time they work out much cheaper.

To sum up, it would be helpful if the Minister commented on some of these issues. I strongly welcome much of what is in the national policy statement, but if Deephams is to address the issues of concern to people in my constituency and round about, we need to build in the flexibility to allow them to develop the technologies that will address the issues of the future.

5.17 pm

Gavin Shuker (Luton South) (Lab/Co-op): Allow me, Madam Deputy Speaker, to convey the apologies of the shadow Secretary of State, who has been unable to attend

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owing to the split sitting of this Second Reading. I am sure that that is true of many other Members across the House.

We have had a robust discussion of a variety of issues, and I am heartened by the contributions of different Members. I shall start with last Wednesday’s contributions. The hon. Member for Thirsk and Malton (Miss McIntosh) pressed the Minister for an amendable motion on the debate on the waste water national policy statement, asked about the lack of an impact statement, raised concerns about the Government’s actions in the negotiations on flood insurance, and asked where the comprehensive water Bill was. We share all those concerns.

My hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) raised understandable concerns about the King Edward memorial park in his constituency and educated us on the importance of fire sprinklers. I hope that the Government will work with him and us to ensure that the comprehensive water Bill responds to this aspect of fire safety. The hon. Member for St Ives (Andrew George) made a typically insightful speech that recognised the actions of Members on both sides of the House to reduce bills in the south-west. He also made a compelling point about the national treasure status of Devon and Cornwall’s beaches, which is a point that we accept.

My right hon. Friend the Member for Lewisham, Deptford (Dame Joan Ruddock) spoke powerfully about the Deptford high street Thames tunnel site, demonstrating once again that she is a powerful advocate on behalf of her constituency, and the hon. Member for Hendon (Mr Offord) confirmed his view, which we share, that the Thames tunnel is both essential and desirable for the ongoing health of the river and Londoners.

My right hon. Friend the Member for Exeter (Mr Bradshaw) asked where the comprehensive water Bill was—a theme that many Members picked up on—and established that the welcome £50 reduction would be quickly wiped out by a lack of action more broadly on affordability.

The hon. Member for Newton Abbot (Anne Marie Morris) asked a number of technical questions—in particular, about park homes—to which, given the six-day hiatus in this Second Reading debate, I would expect the Minister to have a comprehensive and erudite response.

My hon. Friend the Member for Plymouth, Moor View (Alison Seabeck) was generous and forward-looking in thinking not just of her constituency—for which she has helped to secure water affordability payments—but about affordability more broadly. She reiterated our question: where is the Government action to quell rises in water bills beyond the direct subsidy to the south-west?

The right hon. Member for Bermondsey and Old Southwark (Simon Hughes) asked his own questions about the Thames tunnel. To be clear, we do not necessarily agree with the alternative proposals to deal with the problem, many of which have more to do with short-term political interests than the long-term benefits of being good custodians of the natural environment.

The hon. Member for Plymouth, Sutton and Devonport (Oliver Colvile), in what was originally a very short contribution, paid tribute to his predecessor, Linda Gilroy. When it comes to water, I am sure he will represent his constituents’ interests in the same way. He was less generous, however, when he talked about three

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Labour MPs as perhaps being one reason why more action was not taken. I would say that those three Labour MPs more than punched above their weight in bringing the issue to the fore.

My hon. Friend the Member for Bolton West (Julie Hilling) talked about debt in her constituency and gave us real stories of customers struggling to pay their bills. The hon. Member for Camborne and Redruth (George Eustice)—another Devon and Cornwall Member—talked about the nature of the scheme to award £50.

My hon. Friend the Member for Hammersmith (Mr Slaughter) talked about the need for the Thames tunnel, in his typically forthright style. He did not hold back from saying what he really thought, including about his local council. He also slew the myths of the Selborne commission—a sensible thing to do in a debate such as this.

Mr Slaughter: If my hon. Friend has any lingering doubts about the need to alleviate the sewage going into the Thames, he is welcome to join me and my constituents at 10 o’clock this Saturday when Thames21 will be doing a deep clean just by the sewage outlet at Hammersmith bridge. I am sure he will find ample evidence there of why we need such alleviation.

Gavin Shuker: I believe that is what is known as a helpful intervention from my hon. Friend.

The hon. Member for North Cornwall (Dan Rogerson) talked about the nature of the privatised settlement, and raised the possibility of the Bill being used to extend payments to other areas. I hope he will look carefully at our amendments to ensure that the issue has proper parliamentary scrutiny as the legislation goes through.

My hon. Friend the Member for Stretford and Urmston (Kate Green) talked about affordability, social tariffs and data sharing, all of which are essential if we want to reach a broader affordability settlement.

The hon. Member for Tiverton and Honiton (Neil Parish) talked about bill payers in Devon and Cornwall, and returned to the theme of competition, which we obviously look forward to hearing more about in our comprehensive debates on the Bill.

Last but not least, my hon. Friend the Member for Edmonton (Mr Love) talked about the consequences of the 50 discharges each year on average, and about Deephams, the site in his constituency.

This Bill deserves proper scrutiny, because the issue of water affordability is not going to go away. Across the country, families are under real pressure. We therefore welcome the help extended to the south-west, and we praise the many Members, in all parts of the House, who have raised that point, both in this Second Reading debate and in the run-up to it. However, the problem of water affordability does not stop at the River Exe. In a moment, the Minister will stand up and talk about financial assistance—indeed it is in the very title of the Bill—but today, across this country, a fifth of all households are spending more than 3% of their income on water. What assistance does this Bill extend to the 400,000 households in Wales, the 460,000 households in Yorkshire, the 780,000 households in the Severn Trent region or the 1.1 million households here in the Thames region

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that fall into that category? Sadly, the legacy of this legislation will be what it does not do, as it offers no help for millions of hard-pressed households.

We know that the pressure on budgets will only increase—the White Paper makes that much clear. Populations will increase, as will scarcity of water in large parts of the country. We in this House must therefore take action to keep water affordable. The Government promised us a proper water Bill—significant legislation, far-reaching market reform and action for customers. However, their own water White Paper—their blueprint for water—was delayed by six months. Our Cave, Pitt and Walker reviews gave the Department a clear direction of travel. Everyone across the House accepts that what is needed is a comprehensive package, tackling water issues, introducing changes and then letting the industry settle down and deliver. What we need is a proper water Bill, but Ministers have lost their slot in the Queen’s Speech. Indeed, just last week I asked the Minister across the Dispatch Box:

“If tackling drought, conserving water and reforming abstraction are so important, why has the Secretary of State delayed her own Bill?”—[Official Report, 1 March 2012; Vol. 541, c. 410.]

His response was that he was not privy to the contents of the Government’s legislative programme for the next Session of Parliament. That is a shame. I would have hoped that someone had pointed out to the Minister that he had lost his slot. Everyone in the House seemed to know that, apart from him.

This mini-Bill proves that the pilot light is on at DEFRA, but that there is little legislation coming through any time soon. Customers, investors and water companies will rightly ask: where is the beef? This delay is serious: we are to see no action to curb the unsustainable abstraction of our rivers and streams, no time scales to increase competition in this highly regulated monopoly market, no changes to ease water scarcity—exacerbating the extreme drought conditions that we are already experiencing—and no action to keep water affordable across the UK.

This legislation is for the future, but the cost increases are for now. This April, water bills are set to rise by an average of 5.7%, which will add £20 to the average bill. We will seek to amend the Bill to ensure that those who are struggling to pay will have access to a social tariff. It is unfair to extend the situation in which a postcode lottery determines whether people can afford to pay their water bill. We know that the Government have ruled out extending national social tariffs beyond the WaterSure scheme, even though that scheme reaches only a third of eligible households. They have walked away from making further social tariffs mandatory. Under their plans, the design of social tariffs is to be left to private companies. In fact, in the DEFRA draft guidance, companies are even given the choice of whether to provide one at all.

In the short term, we know that tackling the bad debt that raises all our bills, pooling cross-subsidy to make it more effective, requiring landlords to share the names of their tenants, as they do in the energy sector, and setting minimum standards for social tariffs can all make a serious dent in the cost of water. We know what works, and we are willing to work with the Government to introduce comprehensive reforms to achieve that. So which of those measures will DEFRA commit to? None of them. That is not good enough.

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Andrew George (St Ives) (LD): How would the hon. Gentleman answer the questions that he has just put to the Government?

Gavin Shuker: We have been very clear about the measures that we believe the Government could take right now to make a real dent in water prices. We are not going to talk about the long term but do nothing in the short term, which, with the exception of the measures relating to the south-west, this Bill is the very definition of.

The Government must do what only they can do. Their White Paper talks about water for all, but merely offers affordability for some. We will not oppose the Bill this afternoon, but we will table amendments next Wednesday to improve it. Ministers should not deny the existence of the quiet cost of living crisis that is very real for many families across the country. Instinctively, we all feel that water should be affordable. As the Bill progresses, I hope that the Government will accept our amendments to improve it. In doing so, they could help to ensure that there is water for all.

5.28 pm

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon): I thank hon. Members on both sides of the House for their participation in this debate. It is good to hear that the issues tackled by the Bill are at the forefront not only of my mind but of those of other hon. Members. Also, it is a pleasure to be lobbied by my hon. Friend the Member for Camborne and Redruth (George Eustice). He should not worry about collaring me in the Lobby, and neither should any other hon. Member. If I give the impression of putting my head down and trying to get through it as quickly as possible, I regret that. I congratulate him and Members from the south-west from all parties on the pressure that they have brought to bear to achieve a measure to alleviate what we accept is an unfairness that dates right back to privatisation 20 years ago. I congratulate them on the success that they have achieved thus far in getting this legislation introduced.

Water seems to have been in the news on a daily basis recently, which reflects how precious the resource is to each and every one of us. Despite the confidence of the right hon. Member for Exeter (Mr Bradshaw) that we live in a rainy country, parts of the United Kingdom have been affected by drought for many months now, and that is likely to continue into the summer.

We must act now: it is imperative that we have a system in place that provides a secure water supply now and for the future, while continuing to protect the environment. That is why we are dealing with the situation we face at the moment. We brought together experts and key players in the water industry at a drought summit. We do not need legislation to get on and tackle some of the drought-related problems; we are doing that right now.

I often find myself making speeches about the particular river of concern in my constituency—the River Kennett—and I am also lobbied by Members across the country about the water that flows, or does not flow, through rivers in their constituencies. Of most concern to this Bill is the river into which the Kennett flows—the Thames. Today, the proposed Thames tunnel offers the most timely, comprehensive and cost-effective solution to the combined sewer overflow problems and the dumping of raw sewage into our river.

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My right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) asked for the case on the tunnel to be compared once again with other proposals put forward. I have to say, however, that none of the alternatives identified during the extensive studies carried out over the past decade has been found swiftly or adequately to address the environmental and health objectives for the Thames tideway while simultaneously complying with our statutory obligations.

Mr Slaughter rose—

Richard Benyon: I shall give way just once to the hon. Gentleman.

Mr Slaughter: I compliment the Minister on his clarity and consistency on this issue. Does he share my frustration, however, that when I go back to my constituency I find the hon. Member for Chelsea and Fulham (Greg Hands)—as a Government Whip, he should be helping this Bill through the Commons—running a vitriolic campaign against the tunnel and a local authority that not only spends tens of thousands of pounds on a misleading campaign, but as of last night is threatening to sue the Secretary of State for Communities and Local Government to prevent him from safeguarding sites in the borough? Can the Conservative party get its act together on this issue?

Richard Benyon: I thought that the hon. Gentleman was going to make a helpful intervention, but he made his point eloquently once again.

The alternative proposal for a shorter western tunnel would allow large volumes of raw sewage to continue to flow into sections of the Thames—exactly what the Thames tunnel is designed to avoid. It is clear that the public do not want raw sewage going into this iconic river through one of the most important cities in the world.

In what I must say was a great speech, we heard from my hon. Friend the Member for Hendon (Mr Offord) about how serious is the issue of combined sewer overflows—not just in London, but around the country. He added his own perspective on other elements of the Bill. I can assure him that combined sewer overflows are monitored robustly and that action is taken where permits are breached or problems with the environment are identified. Beyond the Thames tunnel, some £1 billion is being invested further to reduce the impact of combined sewer overflows across the country.

We are ever mindful of the costs involved in the Thames tunnel project. We remain convinced that there is an economic case for it. Part of it is Thames Water’s estimate that the project would directly employ about 4,250 people in the construction and related sectors, as well as providing further secondary employment. The Thames tunnel team actively support the Crossrail Tunnelling and Underground Construction Academy, which is currently training and gaining employment for 70 apprentices a year. Following the Crossrail model, the Thames tunnel project will specify in its contracts the level of apprentices that will be employed by the contractors.

Let me say that I remain sceptical on cost, which is where I believe Ministers should be on a project of this size. We are receiving the best possible advice, and the work will be ongoing. I cannot possibly stand here and

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say now that costs will definitely be pegged at the current estimated level, but we will try to deliver this project within budget and effectively for the people of London and the country as a whole.

Simon Hughes: Will the Minister allow me?

Richard Benyon: I am sorry, but I am a bit short of time, and I may be about to answer the point. Despite the concerns raised by my right hon. Friend the Member for Bermondsey and Old Southwark, Ofwat regulates the ring-fenced regulated businesses and ensures that customers receive value for money from them. Who ultimately owns that ring-fenced business makes no difference to customers; the licence conditions attached to the ring fence provide the necessary protections. Thames Water’s structure is similar to that of several other water companies.

We heard eloquent and passionate speeches from the right hon. Member for Lewisham, Deptford (Dame Joan Ruddock) and from the hon. Member for Poplar and Limehouse (Jim Fitzpatrick), reminding us of the potential impacts of the tunnel’s construction on their constituents. I remain ready to work with them to try to minimise the impacts in any way I can. I am very conscious of the effect that it can have on communities.

My hon. Friend the Member for Thirsk and Malton (Miss McIntosh), my right hon. Friend the Member for Bermondsey and Old Southwark and the hon. Member for Edmonton (Mr Love) asked for an opportunity to amend the waste water national policy statement. We are, of course, happy to have a debate on the policy statement, and, like other debates in the House on national policy statements, it would be a yes or no debate. Best endeavours are being made to ensure that it is held before the Easter recess, and I hope that that provides the necessary reassurance. As for the other project to which the policy statement refers, the Deephams sewage treatment works, Thames Water intends to begin the phase 1 consultation in about June this year. It is still working on a preferred option, and aims to submit a planning application in late 2013 or early 2014.

The hon. Member for Wakefield (Mary Creagh), the shadow Secretary of State, sometimes reminds me of someone having a fight in a pub when the lights have been turned out. She flails around in all directions, and causes as much damage to her mates as to anyone else. She had to intervene later in the debate to tell us that she was, in fact, supporting the Bill, which is a great relief. That was underlined by the hon. Member for Luton South (Gavin Shuker), and we are grateful for his support as well.

Despite the concerns raised by the shadow Secretary of State, the powers in the Bill are appropriately drafted. Although we currently have no plans to use those powers other than to assist South West Water customers and in relation to the Thames tunnel, we heard many calls today—including, again, calls from Opposition Members—for us to legislate to help reduce the problems of water affordability around the country, and to invest in new infrastructure to help make the country more resilient to droughts in future. As the water White Paper made clear, given our growing population and changing climate, our need for infrastructure investment will not diminish. We should leave ourselves the flexibility to

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offer similar Government support to future projects if the case is strong. However, it is inconceivable that any nationally significant infrastructure project would proceed with Government backing unless the case had been fully debated, as the Thames tunnel project is at present.

Let me repeat the Secretary of State’s commitment: we will publish a draft Water Bill for pre-legislative scrutiny in the coming months, and it will cover the remaining legislative commitments set out in the water White Paper. The market reform proposals in the White Paper will be a key part of the Bill, and are a direct response to Martin Cave’s invaluable report.

In the few seconds that I have left, I want to talk about affordability. One of the necessary provisions is the ability for us to issue guidance on water company social tariffs, so we can address the issue of water affordability nationally. The reduction in South West Water bills to which we are committed addresses an exceptional historic unfairness, but we recognise that many people in the south-west and elsewhere are struggling to pay their water bills. We are encouraging all water companies to introduce social tariffs to reduce those bills in order to help people who would otherwise struggle to pay them, and we will publish final guidance on the design of the tariffs in the spring.

My hon. Friends the Members for St Ives (Andrew George) and for Newton Abbot (Anne Marie Morris) were keen for us to expand the existing reach of the WaterSure scheme. I assure the House that we have considered that carefully, but, as Members will appreciate, we have to make tough decisions about the use of limited public funds.

Miss Anne McIntosh (Thirsk and Malton) (Con): Will my hon. Friend give way?

Richard Benyon: I am sorry, but I cannot.

My hon. Friend the Member for Newton Abbot expressed the fear that not all household customers would receive assistance. We know that in some cases the bill payer is the landlord or manager, for example in a park home, a block of flats or sheltered accommodation. I assure my hon. Friend that we are working with South West Water to ensure that the money reaches the people, in whatever residence they live.

As the water White Paper explained, keeping water affordable is vital, but it is also vital for us to use water more efficiently. While there are many uncertainties in connection with the weather, the one thing of which we can be certain is that it will become more unpredictable. That is why we are taking action now, and why we are responsible for ensuring that we use water wisely so that we can retain a secure water supply in the months and years ahead.

I am grateful for the support of Members in all parts of the Chamber, and I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Water Industry (financial assistance) Bill (programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Water Industry (Financial Assistance) Bill:

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1. The Bill shall be committed to a Committee of the whole House.

Proceedings in Committee, on consideration and on Third Reading

2. Proceedings in Committee, any proceedings on consideration and proceedings on Third Reading shall be completed at one day’s sitting.

3. On that day, proceedings in Committee and any proceedings on consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption.

4. On that day, proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption.

5. Standing Order No. 83B (Programming committees) shall not apply to proceedings in Committee of the whole House, any proceedings on consideration or proceedings on Third Reading.

Other proceedings

6. Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Mr Vara.)

Question agreed to.

Water Industry (financial assistance) Bill (Money)

Queen’s Recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a),

That, for the purposes of any Act resulting from the Water Industry (Financial Assistance) Bill, it is expedient to authorise-

(1) the payment out of money provided by Parliament of any expenditure incurred by the Secretary of State by virtue of the Act, and

(2) the payment of sums into the Consolidated Fund.—(Mr Vara.)

Question agreed to.

6 Mar 2012 : Column 750

Public Procurement

5.40 pm

The Parliamentary Secretary, Cabinet Office (Mr Mark Harper): I beg to move,

That this House considers that European Union Documents No. 18966/11 and Addenda 1 and 2, relating to the Draft Directive of the European Parliament and of the Council on public procurement, and No. 18964/11 and Addenda 1 and 2, relating to a Draft Directive of the European Parliament and the Council on procurement by entities operating in the water, energy, transport and postal services sectors, do not comply with the principle of subsidiarity for the reasons set out in Chapters 2 and 3 of the Fifty-seventh Report of the European Scrutiny Committee (HC 428-lii); and, in accordance with Article 6 of Protocol (No. 2) of the Treaty on the Functioning of the European Union on the application of principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.

This debate gives the House a welcome opportunity to consider the subsidiarity questions—pronouncing that word will be one of today’s challenges—identified in the draft directive on public and utilities procurement. It may assist the House if I give some general context on subsidiarity, after which I shall turn to the draft directives under consideration, focusing in particular on the subsidiarity concerns.

This is the fifth time the House has considered a motion for a reasoned opinion on subsidiarity. The first three related to financial services, and one related to justice. The Under-Secretary of State for Justice, my hon. Friend the Member for Reigate (Mr Blunt), read into the record on 7 December—at column 313—a very good definition of subsidiarity. That is not only my opinion; the hon. Member for Stoke-on-Trent South (Robert Flello), speaking for the Opposition, said precisely the same thing, so there is clearly general approbation on both sides of the House for that definition. I do not propose to trouble the House by reading out the definition again—[Interruption.] There is approbation for that from those on the Government Benches behind me. However, colleagues can, of course, read it for themselves, if they so wish.

The Government support the Lisbon treaty provisions to uphold the principle of subsidiarity and want to work with Parliament to highlight any subsidiarity concerns that the Government may share. Our explanatory memorandums on the proposals in question drew attention to those concerns, and I am very pleased that the European Scrutiny Committee—chaired by my hon. Friend the Member for Stone (Mr Cash), who is present—decided to pursue the matter with suitable dispatch. I also note that the National Assembly for Wales has written to the European Scrutiny Committee expressing concerns about subsidiarity in respect of the procurement proposals.

We have looked into whether other member states share these concerns, and I know of at least one case: the Swedish Parliament has raised similar concerns and tabled reasoned amendments on both proposals in very similar terms to those of our motion.

Kelvin Hopkins (Luton North) (Lab): Does the Minister agree that the principle of subsidiarity is too little used and too little understood? We take it seriously, but many other European Union member states do not. Should we not take a lead on this issue more often?

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Mr Harper: I agree. It is an important principle, and where it is sensible to raise it, we should do so.

Let me turn to the substance of the proposed directives. Although the motion before the House rightly refers to the draft directives as a whole, the specific issue on which the ESC has drafted the reasoned opinion is the requirement that member states must establish “national oversight bodies”. I will therefore briefly outline the proposals as a whole and the Government’s position, and then I shall turn to our specific concerns, which are shared by the Committee, about the oversight body provisions.

To recap the background, since the early 1990s there have been EU rules governing procurement by public authorities and utilities. In this context, utilities are certain bodies operating in the water, energy, postal and transport sectors, where those bodies have certain special rights or a monopoly position. The directives currently in force were adopted in 2004, and were transposed into law in the three United Kingdom jurisdictions in 2006 by means of procurement regulations. In line with the devolution settlement, the Scottish Government did that separately in Scottish law by making their own regulations; that is relevant, as I shall explain shortly. In addition, there are directives that govern the rights and remedies available to aggrieved suppliers or other interested parties if a public body or utility breaches the rules when awarding contracts. In the UK, those remedy rules have been implemented by amendments to the procurement regulations.

The directives require EU-wide advertising of many requirements and establish specific procedures to promote fair, open and transparent procurement decisions to promote open market public procurement across the EU, encouraging competition, innovation and value for money. The Government are keen to see that those rules are properly respected across the Community to ensure opportunities for UK businesses and a level playing field for all.

Perhaps at this point I should say a few words about the Government’s wider position on public procurement. My right hon. Friend the Minister for the Cabinet Office and Paymaster General announced a series of major reforms to public procurement with the aim of using the public sector’s considerable purchasing power to promote efficiency and growth. The reforms will fundamentally change the way in which the Government buy by providing an open door for current and future suppliers to discuss upcoming procurement opportunities; making it faster to do business with Government by speeding up the procurement processes to world-class standards and removing unnecessary wasteful practices; working with industry to identify and address any key capabilities needed to meet future demand; ensuring that SMEs can access the value of procurement; and reforming the EU directives that govern public procurement.

Following consultation by means of green papers, the Commission published proposals for new directives. Its declared aim is to modernise, simplify and increase flexibility in the procurement rules. The public procurement proposal covers five main areas of improvement: simplification of procedures; the strategic use of public procurement to meet new challenges, such as increased innovation and environmental protection; better access for SMEs; sound procedures to discourage corruption and favouritism; and improved governance procedures.

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As the European Scrutiny Committee’s reports mention, the Government support many of those elements of simplification and modernisation and I am pleased to note that the Committee also welcomes those improvements.

There are some areas where the Government will continue to press for further improvements through the negotiations, working with other member states when they have similar aims. Those improvements include a review of and increase in the financial thresholds as early as possible consistent with wider international procurement agreements and a specific time-limited exemption for mutuals, so that they can become established before being subject to competition.

Mr Dave Watts (St Helens North) (Lab): The Minister is setting out the rules to which the Government will work to ensure that there is free and fair competition across borders, but is not the rest of Europe ignoring all those rules and, in some instances, has no intention of opening up its markets to British companies? By not taking the same position, are we not disadvantaging our businesses?

Mr Harper: There are two separate issues. The first is what other European countries do, and the European Commission should be our ally in taking action to open up those markets. The second is what we do to open up competition, and I do not think that our adopting a protectionist strategy benefits us at all. Our companies trade globally, not just in the European Union, and we need them to be competitive and to be able to win business not just in the EU but in countries with fast-growing markets.

Mr Watts: Let me give an example. Recently, all police forces have decided to buy foreign cars with no parts made or manufactured in the UK. Can the Minister name another European country with a car industry where that has happened? I do not think there is one.

Mr Harper: Off the top of my head, no, as I do not pretend to have an encyclopaedic knowledge of all public procurement for cars across Europe. We will not help our car industry by having people make procurement decisions to buy such cars regardless of other criteria. We need to ensure that we take into account a wider range of criteria and the hon. Gentleman will know that the Government set out our steps towards making procurement decisions, taking wider features into account. The European Commission suggests using public procurement strategically to meet challenges such as increased innovation and environmental protection to ensure that some of those extra, wider issues are built into procurement decisions.

Kelvin Hopkins: On this matter of trade, we do not so much have a problem with the rest of the world, but we have a serious trade problem with the rest of the European Union where we have a very big trade deficit. That is evidence that the other parts of the EU do not play fair on trade, particularly when it comes to currency. The Germans have persistently maintained a low parity for their currency over many decades, which has meant that their manufacturing sector has been built up at the expense of ours.

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Mr Harper: I note the hon. Gentleman’s point but I think that you would restrain me, Madam Deputy Speaker, if I felt tempted to get into a debate about the merits or otherwise of the eurozone so I am going to resist that temptation.

Mr William Cash (Stone) (Con): A big issue that has cropped up in the past year is that of Bombardier. The question that the hon. Member for St Helens North (Mr Watts) just asked is apposite because this is not simply a question of whether there are fair rules on procurement in terms of competition. Because a legal framework has been created, there is a special and fundamental requirement to comply with those rules because they are part of the legal process. The problem is not merely whether proper competition is being avoided but whether the law is being breached as well.

Mr Harper: I thank my hon. Friend for making that point. On the specific issue of procuring rolling stock, he will know that when this came up in the House last year the then Transport Secretary made it clear that the bids were being evaluated by criteria laid down by the previous Government. The problem was that we had to follow the criteria that were already laid down. The then Secretary of State also said that we would look at procurement in the growth review that was under way, and that we would look at what happens in other EU countries that are constrained by the same rules and at best procurement practices to make sure that, where appropriate, we include appropriate socio-economic criteria in the procurement decisions. That has to be done right at the beginning; we cannot set out the criteria and then change the rules part way through the process to favour domestic bidders. I have looked in detail at the particular case my hon. Friend mentions and it was made clear that the decisions that people are not happy with were taken under the previous Government and that we had to implement them. The alternative would have been to suspend the procurement process completely and go right back to the drawing board.

Daniel Kawczynski (Shrewsbury and Atcham) (Con): I, too, wanted to raise the issue of Bombardier. Does my hon. Friend agree that there is growing interest in this among British citizens and that they want the Government to be more resolved to buy British goods, particularly British agricultural products, when it comes to supplying our armed forces? How will the Bill enable us to do that?

Mr Harper: My hon. Friend makes a very good point. The Government have been doing a great deal of work on this, and my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs has been setting out some of the Government’s policies to improve that position. However, I shall not go into those in depth, because that would take us away from the focus of this reasoned opinion.

Kelvin Hopkins: Will the Minister give way?

Mr Harper: I shall take one more intervention on this, and then I shall set out our concerns about the oversight body, which is the focus of the reasoned amendment.

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Kelvin Hopkins: The Minister is being very patient and generous in giving way. On Bombardier, is it not the case that with such complex and big contracts, it is very hard to make judgments between bids? Over time, the Siemens bid might turn out to be a lot more expensive and a lot less good than we first imagined.

Mr Harper: If the hon. Gentleman will forgive me, I have answered the point made by my hon. Friend the Member for Stone about the procurement process and I am not going to go into specifics about a particular procurement decision because I have not seen the detail and I was not involved in making that decision. The hon. Gentleman makes a good point about such procurement contracts being significant and complex and there is a need to get the specification right in the first place. There has been a considerable amount of controversy about that particular case.

Mr John Spellar (Warley) (Lab): Will the Minister generously give way?

Mr Harper: I will probably regret it.

Mr Spellar: First, as a previous Transport Minister may I tell the hon. Gentleman that the Germans always buy German trains and the French always buy French trains? They make it very clear how they do that. Secondly, going back to police cars, I do not know what he does on a Saturday night but if he watches any of the police series from various European countries, he will notice that if they are from any country that produces cars they always drive their own vehicles. I do not want to get into specifics, but this is about the mindset of our civil service. The French, German, Spanish and Italian civil services back their industry. What is wrong with the culture of our civil service that it is always trying to do British industry down?

Mr Harper: That is a very good point and I will leave it hanging. I have not seen any evidence that our civil servants are always trying to do our industry down. No doubt the right hon. Gentleman will respond by giving me evidence of that on another occasion.

Mr Cash: Before my hon. Friend sits down—

Mr Harper: I am not anywhere near sitting down, but I shall give way.

Mr Cash: After 28 years in this place one gets a sense for when a Minister wants to get to the end of his speech as quickly as possible, particularly when he is being assailed on all sides. May I just ask whether a full analysis has been made by the Government through the appropriate Department—not his Department, but the Department for Business, Innovation and Skills—of whether there has been a real investigation into the way public procurement operates in this country as compared with the rest of Europe?

Mr Harper: The short and honest answer is that I do not know. I will find out and make sure that I or my right hon. Friend the Minister for the Cabinet Office writes to my hon. Friend to let him know.

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I was not close to sitting down because I was about to set out the three areas in which the Government have subsidiarity concerns about the proposed oversight body—concerns that are shared by the European Scrutiny Committee. First, the oversight body was not proposed in the Commission’s consultation green paper or otherwise consulted on, so neither member states nor anyone else had an opportunity to comment on the proposal. The Commission’s impact assessment does not provide a clear or detailed justification. The European Scrutiny Committee expressed similar concerns about the inadequacy of the Commission’s impact assessment when we debated the common European sales law.

Secondly, the proposal for a single, national oversight body in each member state does not recognise or respect the different legal systems within the UK. As Members are well aware, Scotland has a separate and distinct legal system. Under the devolution arrangements, the development and application of public procurement policy and the implementation of public procurement legislation are devolved matters in both Scotland and Northern Ireland. As I have mentioned, Scotland has chosen to implement the procurement directives separately. The requirement for a single national oversight body for a member state is inconsistent with those settlements, and the Commission has not demonstrated any objective necessity for a single body in each member state.

The third substantial concern is the proposal that the oversight body should be empowered to seize the jurisdiction currently resting with the courts to determine some disputes about compliance with the procurement rules. That would be a judicial function, whereas the other functions of the body would be administrative or regulatory. If they were all combined in one body, that would intrude unjustifiably in national legal and judicial structures. That would be inconsistent with the UK’s legal traditions in which a clear distinction is made between judicial and administrative functions. The remedies rules that I mentioned earlier leave it to member states to determine the legal structures that enforce the rules. There seems to be no clear justification for departing from those now. This might affect other member states as well.

As I have said, a number of other member state Governments will have issues with the national oversight body, whether on grounds of bureaucracy, cost, incompatibility with existing arrangements or subsidiarity. The Parliament of one country has already set out similar concerns to ours in a reasoned opinion. The debate has been very helpful and the European Scrutiny Committee’s motion is very welcome. I look forward to listening to other Members and having the opportunity to support the motion and have this House take a sensible decision today.

5.59 pm

Michael Dugher (Barnsley East) (Lab): I begin my brief remarks by joining the Minister in thanking members of the European Scrutiny Committee for their thorough work in producing the draft reasoned opinion. As the Minister said, the report concentrates on two key areas: the Commission’s apparent failure to adhere to proper processes and the question of infringement of the principles of subsidiarity. On both those issues, Labour Members are in general agreement with the European Scrutiny Committee’s conclusions.

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First, we share the concern that the draft directives in question fail to comply with the Commission’s procedural obligations. In an apparent breach of article 2 of protocol No. 2, the Commission neither consulted member states properly on the possibility of setting up a single national oversight body to monitor procurement nor carried out the required “detailed statement” assessing the implications.

Secondly, on the substance of the directives, we are particularly concerned by the proposal that would require the UK to allow the introduction of a single oversight body with the power to “seize” jurisdiction from British courts. As the Committee makes clear, that proposal would force the UK to combine non-judicial and judicial responsibilities within the same organisation. Crucially, the proposal could be seen as breaching the principle of subsidiarity due to it requiring an administrative body to carry out functions that would normally be dealt with by UK courts. As the Committee states,

“this aspect of the proposal amounts to an unwarranted interference in the domestic legal order of the UK, in which administrative and judicial powers have traditionally been exercised separately.”

In addition, the National Assembly for Wales has said that the proposal to introduce a single oversight body in the UK fails also to have proper regard to the principle of devolution.

The Commission’s draft proposals are simply not the right approach. Indeed, it is our view that they amount to little less than another power grab by the European Commission. As the European Scrutiny Committee has outlined, they will add another layer of bureaucracy.

There is a growing public perception in the UK—one that has been echoed by Members on both sides of the House during the debate—that when it comes to EU procurement rules, the current system does not function fairly. The Commission has to face up to that perception. How the rules are interpreted has been allowed to vary too much from country to country over the years. Too often, it seems like one rule for us and another for other member states. Too often, weaker Ministers, in all Governments, have been rolled over by officials, often at the Treasury, who, at best, have an ambivalent attitude to British industry. They have used EU procurement rules as a basis to make recommendations to Ministers that simply do not do the right thing by the United Kingdom.

Mr Spellar: I have always thought that there was precious little to commend Chairman Mao’s misrule in China, but his policy of sending recalcitrant officials back to the countryside for re-education seems to have something to commend it. Would not undertaking a shift in respect of Britain’s manufacturing be salutary for many of our civil servants, who are letting Britain down?

Michael Dugher: I thank my right hon. Friend for his intervention: he is not noted for being on the left of any party, so it is refreshing—surprising—that he refers to Chairman Mao, but he is of course right.

I referred to weaker Ministers, but I pay tribute to my right hon. Friend: whether he was a Defence Minister or a Transport Minister, he was assiduous in standing up for British industry and challenging his officials—indeed, challenging other Ministers, whether in this Government or the previous Government—on behalf of the UK taxpayer and British industry.

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The strictest and most inflexible approach to EU procurement rules seems to be almost an article of faith for some parts of the system here at home. Officials and Ministers might believe that they are acting like good Europeans, but the truth is that they do not act like other Europeans. Little wonder that the British public remain so sceptical of many of the European institutions.

Mr Watts: Is it not worse than that? Even when British civil servants and Ministers have a right not to apply European rules—for example, in defence—on more than one occasion we have seen those same civil servants advising Ministers to buy something that is not created in the UK.

Michael Dugher: My hon. Friend makes an excellent point. Defence is a good example—

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

Michael Dugher: I shall happily give way to the shadow defence procurement Minister in a moment. We should consider the development of defence industrial policy, which formed the basis of the defence industrial strategy: it was written into the rules that Ministers would have to consider the impact on UK industry and UK exports as part of the criteria by which they made decisions. I thought that was an enormously important improvement, and it is a great pity that the Government are rolling back in that determination.

Alison Seabeck: My hon. Friend is absolutely right. We talk of an Anglo-French defence treaty and further co-operation, but I am already picking up from British industry concerns that the French Government are one step ahead of us and are already lining up contracts for small and medium-sized enterprises in France to pre-empt anything that emerges from that. We do lose out. People in industry are deeply concerned that this Government are not fighting for them.

Michael Dugher: I thank my hon. Friend for that intervention, which echoes my conversations with industrialists in defence and in other sectors. The attitude—the mindset—that my right hon. Friend the Member for Warley (Mr Spellar) referred to was plain to see when the Government cited EU procurement as justification for not choosing Bombardier for the £1.4 billion Thameslink contract.

Such a decision would have been unthinkable in any other member state, supposedly subject to the same EU procurement rules. Ensuring effective and equal access to public contracts across the single market is important, but, as my right hon. Friend the Leader of the Opposition said today, instead of Ministers standing rather idly by in the Department for Business, Innovation and Skills and other Departments:

“We should be using the power of procurement to support innovation and jobs here”

in the United Kingdom.

Opposition to protectionism is right, but opposition to industrial activism is wrong. Contrary to the apparent direction of travel inside the European Commission, there is an increasingly strong argument that there should be greater application of subsidiarity and flexibility in the EU’s attitude to procurement. It is important to

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remember, not least from the point of view of public confidence, that in spending UK taxpayers’ money, Governments of all political persuasions should be mindful of the implications for the domestic UK economy and for the people who pay those taxes. That is especially the case in tougher economic times, when the pressure on resources is even greater.

We will no doubt return to the issue in the coming months. Labour Members agree with the European Scrutiny Committee’s overall view that the Commission has failed to show that the proposal to set up a single oversight body produces clear benefits that cannot be achieved at national level. We support the motion, and in so doing we agree that the reasoned opinion should be forwarded to the Presidents of the European institutions.

6.8 pm

Jacob Rees-Mogg (North East Somerset) (Con): My hon. Friend the Member for Stone (Mr Cash), the Chairman of the European Scrutiny Committee, asked me to make a speech on behalf of the Committee and on his behalf because he thought that he would not be here, but such is the attraction of a European debate that he is in his place anyway. None the less, the Committee is grateful to Her Majesty’s Government for facilitating the debate so quickly. The time scale under the Lisbon treaty for national Parliaments to submit a reasoned opinion on a subsidiarity issue is extremely tight. In this instance, the European Scrutiny Committee received the views of the National Assembly for Wales only a couple of days before the Committee’s meeting last Wednesday, when it recommended that the House adopt the draft reasoned opinion.

The Government have welcomed the proposals, and many of the detailed measures in them, and have provided an impact assessment that suggests that the benefits would significantly outweigh the costs. However, as we have heard from the Minister, they have one major concern—namely, that the proposals would require member states to establish a national oversight body, which would not only have a range of administrative and regulatory powers, but would be able to “seize” jurisdiction of the courts and pre-empt their functions in a way that the Government consider might infringe the principle of subsidiarity.

As I mentioned, this concern was echoed in the letter from the Chairman of the Constitutional and Legislative Affairs Committee of the National Assembly for Wales. I understand that the Scottish Parliament takes a similar view. Let me say from the outset that this concern is shared by the European Scrutiny Committee for reasons that I will come on to in a moment. So the debate today is not about the generality of the draft directive, in spite of some of the comments that we heard earlier. Rather, it is about a subsidiarity issue that the Government, two of the devolved Assemblies and the European Scrutiny Committee have identified.

Before I turn to the subsidiarity issue, I should explain that a reasoned opinion is a new procedure under the treaty of Lisbon, available to national Parliaments if they wish to challenge Commission proposals for legislation on subsidiarity grounds. National Parliaments have eight weeks from publication of a proposal to submit a reasoned opinion. The deadline in this case is midnight Brussels time, which would be 11 pm Greenwich mean time, on 8 March 2012.

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If such opinions represent one third of all votes of national Parliaments—the bicameral UK Parliament has two votes—the Commission has to reconsider its proposal. We understand that, as the Minister mentioned, one other national Parliament, Sweden’s Riksdag, is also submitting a reasoned opinion on similar grounds. Even if the threshold is not met—in reality, the numbers required mean that it is highly unlikely that it will ever be met—the Commission responds to each reasoned opinion it receives. In addition, national Parliaments can, acting through the Government, now challenge EU legislation on the grounds that it infringes the principle of subsidiarity.

The principle of subsidiarity is born of the wish to ensure—if you believe this, you would believe anything—that decisions are taken as closely as possible to the nationals of individual EU member states. It is touted as a buffer against unnecessary supranational—not supernatural—legislation but it has been largely unsuccessful. If only the legislation were supernatural, we might find that our experience of the European Union was a happier one. None the less, its definition is important. It is set out in article 5(2) of the treaty on the functioning of the European Union, which states:

“Under the principle of subsidiarity, in areas which do not fall within its exclusive competence, the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level.”

In addition, the treaty requires the EU institutions to ensure “constant respect” for the principle of subsidiarity as laid down in protocol No. 2 on the application of the principles of subsidiarity and proportionality. Accordingly, article 2 of the same protocol obliges the Commission to consult widely before proposing legislative Acts. This is one of the parts that has not taken place. Such consultations are to take into account regional and local dimensions, where necessary. If the Commission fails to do so, a reason must be given in its proposal.

George Eustice (Camborne and Redruth) (Con): Does my hon. Friend agree that the principle of subsidiarity would work far better if rather than just being able to prompt a response from the Commission, groups and national Parliaments were able to strike down policies of the Commission?

Jacob Rees-Mogg: If I may divert from the set text from the European Scrutiny Committee, it is always worth remembering that subsidiarity started as a theological term in the Roman Catholic Church, of which I am a member. That is one of the most centralised bodies of any organisation anywhere in the world, with power vested in the Holy Father, so I have always been rather suspicious as to what the purpose of subsidiarity is.

Mr William Cash (Stone) (Con): As a fellow Catholic, may I ask my hon. Friend whether he agrees that it is one thing to have the Jesuitical concept of subsidiarity, which has been brought into the rule-making of the European Union, as a theological question, and that it would be far better if the matter were regarded purely as one of theology and not exclusively one for political purposes?

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Jacob Rees-Mogg: I am grateful to my hon. Friend for his helpful intervention. I do not think one should use the term “Jesuitical” too pejoratively, as the Jesuits are a fine body who, I believe, educated my hon. Friend—

Mr Cash: With great success.—

Jacob Rees-Mogg: With enormous success, which is acknowledged around the country and for which we are all grateful. However, I agree with the fundamental point that it is a political rather than a theological reality in this case.

By virtue of article 5 of protocol No. 2, any draft legislative Act should contain a “detailed statement” making it possible to appraise its compliance with the principles of subsidiarity and proportionality.

I turn now to the Committee’s view, as expressed in the draft reasoned opinion. The first conclusion we came to was that the Commission had failed to consult member states in the Green Paper, or otherwise, on the possibility of setting up a single national oversight body. This is in clear breach of article 2 of protocol No. 2, and I ask the Minister to say whether he agrees with this, and whether he intends to pursue it with the Commission.

Similarly, there is no evidence in the Commission’s explanatory memorandum or impact assessment of it carrying out the requirement under article 5 of protocol No. 2 to prepare a “detailed statement” containing

“some assessment . . . in the case of a directive of its implications for the rules to be put in place by Member States, including where necessary the regional legislation”.

As a consequence, the draft directive on public procurement and, by implication, the draft directive on procurement by public entities is said by the National Assembly for Wales to breach the devolution principle in both Wales and Scotland. I quote from the letter of 23 February from the National Assembly for Wales:

“The proposal also fails to have regard to the principle of devolution in imposing the duties on a single body.”

Mr Watts: I agree wholeheartedly with the thrust of the hon. Gentleman’s speech. The only weakness that I perceive is that it is clear to me that the Commission believes that there is not fair trade within Europe. Some countries abide by the rules and others do not. We have heard examples of that today. How would the hon. Gentleman address that problem?

Jacob Rees-Mogg: I am in complete agreement with the hon. Gentleman that one of the problems of the European Union has long been that we as a nation are particularly good at obeying the rules and our continental colleagues are not necessarily so good at obeying the rules. This is for all sorts of historical reasons and understanding of our constitution as against their constitutions. The problem, and the reason why I am fairly relaxed about them not obeying the rules, is that one would have to argue for more Europe and more intrusive regulation to get them to obey the rules. That would be a bad thing. I happen to believe, though I am not sure that Opposition Members share this view, that one-way free trade encourages efficiency in the home economy, that one can compete very effectively even with one-way free trade, and that we should be relatively relaxed

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about how they cheat, if I am allowed to use such a term in relation to our continental friends.

The National Assembly for Wales went on to say about the proposal:

“It fails to reflect the way in which separate implementing regulations have hitherto been made in Scotland, and the way in which extensive administrative and advisory functions in relation to procurement in Wales are exercised by or on behalf of Welsh Ministers.”

The Government’s explanatory memorandum does not consider the impact of the proposals on the devolution settlement, so I would be grateful if the Minister said whether the Government agree with the concerns raised.

Before turning to the Committee’s final conclusion, I should emphasise how important it is that the Commission, which has considerable executive power to initiate legislation, is obliged to consult properly, and prepare a “detailed statement” which assesses its proposals for compliance with subsidiarity. If it does not do so, we risk ending up with a provision such as this, which conflicts with a fundamental principle of the UK’s constitution. I trust that the Government agree with this and will take the Commission to task over it.

Finally, I turn to the proposal to establish a national oversight body, which not only would have a range of administrative and regulatory powers, but could “seize” the jurisdiction of the courts. The Committee thought this an alarming proposal, and it really is. It hits against the heart of our understanding of the separation of powers between governmental agencies and the judiciary. Again, no consultation on that proposal took place and it was not in the Green Paper—it came out later—so we have this great leap in our understanding of the law without any proper consultation. The Committee concluded that the proposal amounted to an unwarranted interference in the domestic legal order of the United Kingdom, where administrative and judicial powers have traditionally been exercised separately, and so infringed the principle of subsidiarity.

The Committee also considered that the combination of functions would be likely to prevent the oversight body from acting judicially without suspicion of a conflict of interest—we looked at that fairly recently when the European Court of Justice ruled in its own favour over the pay of EU officials, so we know how corrupt these EU courts can be—contrary to article 6(1) of the European convention on human rights. That is the core of the matter. It undermines one of the principal objectives of these two directives: to increase legal certainty in the award of procurement contracts. It is for these reasons that the Committee asks the House to approve the Government’s motion on subsidiarity.

6.20 pm

Kelvin Hopkins (Luton North) (Lab): It is always a great pleasure to listen to the hon. Member for North East Somerset (Jacob Rees-Mogg), whose speech was properly prepared and helpful to the debate. I am very pleased with the Government’s motion, and it is not often that I am unqualified in my support for the Government. Indeed, from time to time I am critical of my own side, although the robust speech by my hon. Friend the Member for Barnsley East (Michael Dugher) was also very welcome. We also heard some particularly helpful interventions from both sides of the House, and I concur with them all.

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I am happy to speak in favour of the motion and support the principle of subsidiarity in this instance. The proposal states:

“The subsidiarity principle applies in so far as the proposal does not fall under the exclusive competence of the EU.”

I am rather pleased that the national health service and various other public bodies do not fall under the exclusive competence of the EU. In fact, I rather like them being under the exclusive competence of the British Parliament, but that is my personal view. I think that we ought to decide democratically what we do with our public services and not be dictated to by anyone else.

We are putting forward a reasoned opinion, but I would go even further and call it a reasoned opposition. Indeed, I think that opt-outs or derogations would be preferable to subsidiarity, as I have argued from time to time. The Government have talked about the possibility of regaining some powers from Brussels, and I could suggest one or two to be returned—but that might go beyond the boundaries of the debate.

The draft directive is about contracting authorities or public bodies, but some of those are now more or less in the private sector, so I am not sure whether they really fall within the scope of the EU’s proposal. The idea of a national oversight body, presumably set up by the British Government, that would police British contractors or contracting organisations on behalf of the EU is bizarre. If the EU wants to set up a body to police things, it should do that itself. It should not expect us to do it. Even then, I would, of course, object.

We are talking about the EU trying to lever public services into the marketplace, and the EU marketplace rather than the British one. I am in favour of strong public sector organisations with public sector employees, paid for publicly and accountable to this Parliament, local authorities or other public bodies. I am against the privatisation of our public services in principle, but if there is to be any private involvement it should be British private involvement, and we should not see our public services sold off to foreign organisations over which we have little control, if any. The whole proposal is unacceptable.

The European Scrutiny Committee’s document refers to social services. It states:

“The evaluation on the impact and effectiveness of EU public procurement legislation has shown that social, health and education services have specific characteristics which make them inappropriate for the application of the regular procedures for the award of public service contracts.”

That is a long way of saying that it is inappropriate for the EU to intervene in our public services, and I strongly agree. I am a member of the European Scrutiny Committee. Sadly, on this rare occasion I was unable to attend the meeting at which the matter was discussed, as I was out of the country on parliamentary business—I obviously missed an interesting and serious debate—but I absolutely support the Committee’s decision.

There have been some general comments on public procurement, what other countries do and what we do, and it has been observed that some countries seem expert at somehow managing to secure contracts for their companies rather than foreign ones. Indeed, I remember some years ago Signor Agnelli, the proprietor of Fiat, being asked why there seemed to be Fiat cars everywhere in Italy, whereas other countries seemed to import cars. He denied the existence of any sort of

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protectionism or arm-twisting in Italy and said that it was simply because Italians preferred to drive Fiat cars. We all know that Italy is completely above suspicion in these matters, so I will go no further.

Members also talked about railways. I really think that we have made a terrible mistake in offering the Thameslink contract to Siemens. I have been travelling on Thameslink and its predecessors for 43 years, and if the contract proceeds as we expect, I shall be very unhappy about the fact that in future I will be travelling on Siemens trains rather than Bombardier trains made in Derby.

I am known to be sceptical about the EU arrangements. I want voluntary arrangements with our fellow European countries. I am an enthusiastic European in the genuine sense. I love Europe as a place, the countries, the people, the politics and the philosophies that have come out of this great subcontinent, but I am not in favour of an ever-growing EU that is increasing its control over our lives and economies and trying to dictate how we run our countries. That should be done by democratically elected Parliaments. I hope that in time other countries will feel as we do about that. With the current crisis in the eurozone, I suspect that other countries are already starting to think in those terms. The Greeks are very unhappy about what is happening, and who can blame them? Around 25% of their population are unemployed. Wisely, the UK has been somewhat more sceptical of the EU, and perhaps has been leading the way towards a more sensible future for the whole of Europe in the coming years.

Mr Cash rose

Mr Harper rose—

Mr Deputy Speaker (Mr Nigel Evans): I call Mr William Cash.

6.28 pm

Mr William Cash (Stone) (Con): I see that the Minister is anxious to get to his feet and am sorry to have to disappoint him, but it will not be for long.

As my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) dealt so well with the European Scrutiny Committee’s representations, I want to look at some of the context within which this all takes place and, in particular, draw attention to the explanatory memorandum provided by the Government. It states:

“Public procurement plays an important role in the overall economic performance of the European Union. In Europe, public purchasers spend around 18% of GDP on supplies, works and services. Given the volume of purchases, public procurement can be used as a powerful lever for achieving a Single Market fostering smart, sustainable and inclusive growth.”

There is one point to which I am bound to draw attention, and that is the figure of 18%, which is a monumental percentage of the European Union’s GDP. We therefore want to be absolutely certain that it is not subject to abuse.

There is a good degree of cross-party support on this question, and when intervening during the debate I mentioned that there are important reasons for ensuring that we are not cheated through any fancy practices by

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other member states. I voted for the Single European Act 1986 and wrote a letter to

The Times

about it, drawing attention to the difficulties that might arise if any mistakes were made in the Act’s operation. At the same time I tabled an amendment stating that nothing in the Act would derogate from the sovereignty of the United Kingdom Parliament.

As it happens, the then Speaker, Bernard—Jack—Weatherill, and I had a discussion, because I disagreed with the House officials on the selectability of my amendment. I was told in those days—I repeat, in those days—that the question of derogation from the sovereignty of the United Kingdom Parliament was regarded as reopening the whole issue of the European Communities Act 1972. In fact, it did no such thing, and I am glad to say that since then such amendments, including those on the sovereignty of the United Kingdom Parliament, have been accepted on several occasions.

That raises the question of the extent to which a single market, and the legal framework carried with it, is compliant with the general principles of competition, because we live in a global environment. We live in a world where there is a great deal of international competition, so constraining economic performance and public procurement within the single market raises one or two issues.

On the question of the manner in which the report has been put together, the explanatory memorandum states that

“the European Commission conducted in 2010/2011”—

only a short time ago—

“a comprehensive evaluation of the impact and effectiveness of EU procurement legislation drawing on an extensive body of evidence and new independent research.”

I raised that question from the UK point of view with the Minister, because it is one thing for 18% of the EU’s entire GDP to be looked at by the European Commission, in which some of us have not very much confidence, but it is another thing to ask whether the UK Government have looked at the implications for the UK, particularly in the light of recent examples, such as Bombardier.

The Minister replied, “Well, that was done under the previous Government,” but, although that is no doubt true, the question of whether it is a matter for political point-scoring does not necessarily lead us to the right conclusion. I am interested to know now what impact public procurement has on the UK vis-à-vis other member states of the European Union. That is why I asked the Minister if he would be good enough to take it up with the Business Department, and he has graciously agreed to do so.

It is clear that Germany has a monumental advantage, some of it created by its own success, when it comes to foreign direct investment in other member states—particularly in those with economic and political ties to Germany, as geographically, politically and economically such links give Berlin substantial leverage over those countries. That process is in part leading to a distortion of the EU’s overall objectives, hence the increasing concern that Germany is becoming not merely the predominant member of the European Union but the dominating element. I say that in no hostile sense—just that I think it is bad for Germany, for Europe and for the UK.

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Kelvin Hopkins: It has been said that the European Union is one way of avoiding conflict between the nations of Europe, but, with the pressures inside the eurozone at the moment, tensions are being exacerbated by the European Union, not lessened.

Mr Cash: I do not need to go any further down that route, other than to say that public procurement amounting to 18% of the EU’s GDP represents a significant advantage to countries with the maximum degree of foreign direct investment, if they are able to induce the Governments and official bodies of those countries to procure for them the return that they no doubt feel is justified, given the contribution that countries such as Germany make to the European Union as a whole. All that requires a great deal of careful analysis.

I do not want to be unduly suspicious, but I fear that there is a considerable amount of hand-wringing over the extent to which Germany is expected to contribute to the European Union in relation, for example, to Greece and to Spain, when in fact, as Wolfgang Münchau said in the Financial Times a couple of days ago, the root problem is the imbalance that Germany is creating by its refusal to import. I cannot be sure about this, but BIS should ask itself the serious question whether there is not a similar problem in relation to public procurement.

If Germany, for example, makes massive contributions to other countries in Europe, no doubt it believes that if it in turn obtains contracts for the roads, railways and all the other things that make up the public procurement system, it will therefore, through the contracts that it has secured there, receive a repayment—with fantastic profits attached, no doubt—that returns the money to Berlin. That is no doubt what it wishes to achieve—and is achieving.

Mr Watts: The hon. Gentleman hits on a real problem. As far as I can see, the German authorities, whether they be the Government, civil servants or politicians, all tend to see manufacturing as the core of what they do. They make every effort to maximise the potential work that they can generate for their own manufacturing industries. That is not the case in the UK, and we are in an unfair position because of it, so do we, as well as the Germans, need to change?

Mr Cash: I am glad that the hon. Gentleman raises that issue, because it is very much the direction in which we should go. We need an analysis and we need to know whether the UK is stepping up to the plate. We know that we have incredibly good industries, but are we making the most of them? Are we being cheated? Are we—if it falls short of cheating—being taken for a ride? Are the rules being properly complied with, and should BIS not conduct a strategic analysis of the issue, irrespective of the fact that the Business Secretary, being a Liberal Democrat, has an apparent abhorrence of investigating what I should like him to look at in terms of the inadequacies and manipulations of the European Union?

I am not being hostile or over-suspicious, but when 18% of GDP is tied up in such public procurement, it is very important for us to be completely sure that we are having a calm and collected look at the extent to which it operates for or against us. The evidence on Bombardier suggested that things had gone badly wrong. I do not really care which side of the House is at fault; as far as

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I am concerned, this is an opportunity to get it right. I am glad to see that those on both Front Benches are nodding in agreement, because I know that their main concern is to serve the national interest, and that would be well achieved by making such an analysis.

The document contains, as part of the study that the European Union conducted, issues relating to small and medium-sized enterprises. Bigger manufacturing industries tend to be able to look after themselves, but some SMEs need to be carefully monitored and given every possible advantage to enable them to get into the procurement market. The document also refers to the “strategic use” of procurement in Europe—strategic, I imagine, in the context of global trade.

There are deep concerns about the extent to which our water, electricity and many other main utilities are exposed to degrees of competition that are apparently not complied with in some other countries. I hope that that, too, will form part of the overall strategic analysis.

Kelvin Hopkins: Some of our utilities, such as electricity and water, are owned by foreign companies—even foreign state-owned companies—and there is a suggestion that they are exploiting the British market to subsidise their own markets.

Mr Cash: Yes. This is all part of what I would like someone to look into very carefully. We are far too used to hearing generalisations and soft words when we are in fact talking about very substantial sums of money—on a monumental scale—and the question of whether this is a fair and free market that benefits us. I take into account the remarks of my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) about the manner in which free trade operates, but for practical purposes, in terms of public procurement, I would want to be satisfied that it always works on a fair and reasonable basis and does not in any way upset the UK economy.

This is a very important debate, albeit not one that has attracted a vast amount of interest. I am afraid that these European debates, the contents of which are extremely important, do not necessarily attract the degree of attention that they deserve, because although they deal with people’s daily lives, with whether the UK economy will function effectively, and with many other areas within the rubrics of the European Union’s legislative framework, they do not have the word “domestic” stamped on them, and people think that when we talk about “Europe” we do not mean the UK. The truth is that the UK is affected very directly by everything that happens in the EU, and I want to be entirely satisfied that we get the full benefit of the trading system that the single market is supposed to provide.

Kelvin Hopkins: The work that the Chair of the European Scrutiny Committee does, in which some of us try to support him, does make a difference, and this House does hear about the realities of the European Union. I think that our Front Benchers, possibly our civil servants, and certainly the public outside appreciate that we are taking these things seriously. I pay particular tribute to the hon. Gentleman in that regard.

Mr Cash: That is extremely generous of the hon. Gentleman. I feel very strongly that we have a duty to look at these matters and to do what we can to help in

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debating them for the benefit of our constituents in the United Kingdom as a whole.

The explanatory memorandum contains a reference to the impact assessment and its executive summary, which gives us reason to believe that the impact on the European Union has been considered. However, the European Union is not an end in itself; it is an artificial framework that has been created for the purpose of an objective, which is, ultimately, political union. We know that. We also know, from what Chancellor Merkel has been saying recently, that that is very much tied up with her own agenda; I do not need to go down that route. We must consider the impact on the United Kingdom of the huge amount of money involved in public procurement, and the effect in relation to utilities, which may determine whether we get any energy and whether we have a proper water system, electricity system, and so forth. Enabling other countries’ companies to have control over those matters is a question not only of trading but of national security.

It is very important to have these things properly looked at. I am sure that the Minister and the duty Whips will pass on my messages to BIS, and that we will end up with a virtuous circle whereby we have a proper analysis to ensure that the United Kingdom gets what it deserves out of the European Union, and does not participate in it in ways that are, as our debate on subsidiarity amply demonstrated, unnecessary.

6.47 pm

Mr Harper: With the leave of the House, let me respond briefly to some of the concerns raised during the debate. I will try to keep my remarks as focused as I can on the motion before us, tempting though it is to range more widely over the whole gamut of European policy.

I, too, pay tribute to my hon. Friend the Member for Stone (Mr Cash) for the excellent work that he does in chairing the European Scrutiny Committee. His wider concerns about growth, trade, jobs and our success as a country were exactly the focus of the recent European Council, the details of which my right hon. Friend the Prime Minister set out so ably yesterday, when my hon. Friend was in the Chamber. From our perspective, the purpose of being in the European Union is to ensure trade, jobs and success for the United Kingdom.

I welcome the comments of the hon. Member for Barnsley East (Michael Dugher) and his general support for the motion. He referred to concerns that he had

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picked up about officials and “weaker Ministers” at the Treasury. I can only assume that he has reached those conclusions from his close working with the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), who has great experience of the Treasury and must have encountered such things in the 10 years that he was Chancellor.

My hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) entertained us, as ever, on behalf of the European Scrutiny Committee, leaving an opportunity for my hon. Friend the Member for Stone to range more widely. My hon. Friend the Member for North East Somerset made an excellent speech that took us down one or two little byways. The House will be pleased that I am going to resist the temptation to engage in any kind of theological debate about subsidiarity, or even supernatural law-making. The National Assembly for Wales, to which he referred, had two main concerns: first, about the oversight body and subsidiarity in general; and, secondly, about specific issues to do with devolution. The Government agree with those concerns, as I explained in my earlier remarks.

My only other point is about the wider procurement issues. It is worth noting that recent analysis showed that UK companies won 17% of all the public procurement contracts awarded to companies from other member states across Europe. I will leave it to hon. Members to draw their conclusions about whether that is good or could be better, but it is a fairly substantial chunk of GDP.

Finally, on the subject of how other European countries do their procurement, there are remedies for aggrieved suppliers, which countries have to implement. I urge any British company that feels that it has been hard done by to use those remedies to ensure that it gets a fair bite of the cherry.

Question put and agreed to.


That this House considers that European Union Documents No. 18966/11 and Addenda 1 and 2, relating to the Draft Directive of the European Parliament and of the Council on public procurement, and No. 18964/11 and Addenda 1 and 2, relating to a Draft Directive of the European Parliament and the Council on procurement by entities operating in the water, energy, transport and postal services sectors, do not comply with the principle of subsidiarity for the reasons set out in Chapters 2 and 3 of the Fifty-seventh Report of the European Scrutiny Committee (HC 428-lii); and, in accordance with Article 6 of Protocol (No. 2) of the Treaty on the Functioning of the European Union on the application of principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.

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Consumer Insurance (Disclosure and Representations) Bill [Lords]

Consideration of Bill, not amended in the Public Bill Committee

New Clause 1

Review of the impact of the Act on availability and cost of consumer insurance

‘The Treasury shall, within one year of commencement of this Act, publish a review of the impact of the Act on the availability and cost of consumer insurance.’.—(Chris Leslie.)

Brought up, and read the First time .

6.50 pm

Chris Leslie (Nottingham East) (Lab/Co-op): I beg to move, That the clause be read a Second time.

It is fortunate that we have the opportunity to debate the Bill on the Floor of the House on Report and Third Reading for a number of reasons. First, the Committee stage of the Financial Services Bill is currently under way upstairs in Committee Room 12, where the Financial Secretary, who usually deals with these issues, is answering the debate and addressing the many amendments that I and my hon. Friends have tabled. It is a shame that the Government saw fit to put only one Minister on that Committee, because it means that he is unable to join us in this debate. I have popped down briefly. It is a pleasure to see the Economic Secretary fielding the questions on his behalf. I have a number of them for her on the detail of the Bill.

Secondly, it is fortunate that we are having this debate on the Floor of the House because, rather bizarrely, the Government chose to take Second Reading upstairs in Committee. I did not know that such Bills could have a Second Reading debate on the Committee corridor, but apparently, under one of the more arcane Standing Orders of the House, Law Commission Bills can be debated upstairs in Committee on Second Reading and never usually see discussion on the Floor of the House. I do not believe that it is right for primary legislation not to have a hearing on the Floor of the House. That is an important principle. However, despite my objections, the Second Reading debate happened upstairs. I challenged the Financial Secretary to hold the Report stage on the Floor of the House and he eventually relented, under extreme pressure. I regard that as one of my greatest triumphs in opposition. It turns out that the Report stage could also have been taken in Committee, so this piece of primary legislation need never have seen the Floor of the House of Commons.

I realise that I have digressed, Mr Deputy Speaker, but I just wanted to show how fortunate we are to have the opportunity to debate the Consumer Insurance (Disclosure and Representations) Bill here today.

This is a broadly positive Bill. I place on the record my thanks to the Law Commission and the Scottish Law Commission, which in 2009, when the previous Administration were in office, published a joint report entitled, “Consumer Insurance Law: Pre-Contract Disclosure and Misrepresentation”. That report resulted in this Bill.

The new clause is simple and, I hope, relatively uncontroversial. I hope that the Government will accept it as a positive step forward. The many hon. Members who have joined us for this debate will know that

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consumer insurance is incredibly important to all our constituents. We are talking not just about life insurance, which members of the public might want to take out, but more day-to-day insurance such as household and contents insurance, building insurance, motor insurance, flood risk insurance, personal effects insurance, health insurance and even pet insurance. There are a number of insurance schemes that the Economic Secretary or my hon. Friend the Member for Clwyd South (Susan Elan Jones) may have taken out. Consumer insurance is, therefore, incredibly important.

Although superficially it looks as though the Bill changes only small aspects of contractual matters, it nevertheless gives us the opportunity to take stock of the state of the consumer insurance market and to ask where it is heading, particularly in the light of its provisions. The Bill has a number of important purposes, which I will touch on at Third Reading. Essentially, the story goes back to the 18th and 19th centuries, when a degree of common law had accrued and there were questions about a new contract for insurance. At the start of the 20th century, it was felt that the Marine Insurance Act 1906 needed to be placed on the statute book.

Stephen Phillips (Sleaford and North Hykeham) (Con) indicated assent .

Chris Leslie: I note that the hon. and learned Gentleman recalls that from his history studies. Although, strictly speaking, the 1906 Act applies only to marine insurance, it has since been generally understood that it applies to all forms of insurance. Essentially, its provisions are the building blocks of the contractual process that is involved in the consumer insurance trade.

Stephen Phillips: The hon. Gentleman will know that the 1906 Act, which was drafted by Sir Mackenzie Dalzell Chalmers, is commended to the House by many insurance lawyers as a wonderful piece of drafting. I suppose, as this is my first intervention in this debate, that I should refer the House to my entry in the Register of Members’ Financial Interests; I am an insurance practitioner. Does the hon. Gentleman think that it is a good idea for Parliament to intervene in this way, given that there are certain respects in which the 1906 Act altered the common law? For example, the test of loss in relation to marine insurance now differs from the test of loss in relation to non-marine insurance.

Chris Leslie: I am grateful to the hon. and learned Gentleman for bringing his experience to bear on this debate; it is incredibly useful. I suppose that, to a certain extent, we all ought to declare an interest in these matters as consumers, because some of our arrangements may be affected.

The hon. and learned Gentleman is right that the 1906 Act has stood the test of time for a considerable period, indeed for more than a century. I confess that I do not have a copy of it in front of me, but I will paraphrase its arrangements. It enshrined in law certain principles of disclosure. In particular, it placed a considerable emphasis on the requirement for the party seeking insurance to disclose any issues that might be broadly relevant in the insurance process. It did not require the insurer to ask a series of specific questions about the particulars of the individual being insured. That was left

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to the discretion of the insurer. That is part of contract law. Of course, common law has accrued since that time. Some serious problems have developed in recent decades in relation to where the balance is struck between the insurer and the person being insured. The onus falls perhaps too heavily on the person who is being insured.

For example, if you have taken out household contents insurance recently, Mr Deputy Speaker—I am not sure whether you have, but I suggest that you do, because it is a wise thing to do even though it can be quite expensive—you may have been asked a number of questions about the type of mortice lock you have and other things about your place of residence. If you did not volunteer particular data about the building in which you reside, how frequently you are away on business and so on, an insurer with a beady eye on avoiding an obligation to pay up could invalidate your insurance should you be unfortunate enough to be burgled and need to make a claim. That would be through no fault of your own, other than your failure to disclose a number of matters to the insurer.

7 pm

Consumers up and down the country have had such problems for a long time, and they cause great frustration and sometimes a sense of mistrust between insurance companies and parties seeking to be insured. I therefore welcome the Bill, which has a large dollop of cross-party support. It will hopefully clarify the issue and move us on from the 1906 Act, however finely drafted it was. It will put in statute a clear and simple set of rules updating the law on pre-contractual disclosure, and it will address the problem of misrepresentations being made, sometime deliberately but often unwittingly. It is important that the accretion of case law, guidance and voluntary codes is superseded by this statute law.

It is important that we have the opportunity to review the Bill one year from its commencement, partly because of the good faith that many consumer bodies have placed in it. Many organisations have written to support the proposals in it, which is a very good thing. They have done a fantastic job of scrutinising the development of the Bill by the Law Commission. To assure those bodies that the Bill’s provisions have been the right ones to put on the statute book, a simple commitment to a review after a year would not be especially onerous.

Paragraph 17 of the regulatory impact assessment mentions that a number of additional claims payments might result from the tightening up of disclosure provisions under the Bill. They represent a fraction of total payments, but it will be interesting to see whether consumers receive payouts more frequently as a result of the specificity that the Bill will introduce to insurance contracts.

There are different types of insurance market, and we cannot simply lump them all together and assume that they will all be affected equally by the Bill. Certain insurance contracts related to the business sector are covered by other legislation in different parts of the world. There are certain consumer insurance contracts, however, that could be regarded as discretionary or luxury insurance. It might be desirable to have them, but they are not essential for daily life. For instance, the Government Whip may have a pet animal—a cat or a dog.

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The Lord Commissioner of Her Majesty's Treasury (Michael Fabricant): A llama.

Chris Leslie: A llama? I did not know that. I am not sure I needed to know it, either, but the hon. Gentleman may choose to take out insurance on his pet llama. You might well ask yourself where this is going, Mr Deputy Speaker, but the key question is whether that is a luxury insurance product, or whether the hon. Gentleman has such affection for that pet llama—

Michael Fabricant: I do.

Chris Leslie: In that case, he will feel that it is an absolute necessity to ensure that his llama always has pet insurance. He may well find that under the Bill, rather than simply taking out a generic insurance contract, he is asked a series of specific questions about his pet llama. They could include how long he has kept the llama, its age and the environment in which it is kept. He may well think to himself, “Well, this insurance could become quite expensive,” and feel that of all his insurance products, he can leave that one and take a risk. Poor old llama—it may well just have to take its chances.

Jonathan Evans (Cardiff North) (Con): Before the hon. Gentleman frightens my hon. Friend the Member for Lichfield (Michael Fabricant) away from insuring his llama, I will follow my hon. and learned Friend the Member for Sleaford and North Hykeham (Stephen Phillips), who declared his interest, and point out that I am a former director of NFU Mutual. That farming insurance company would find no difficulty whatever in providing insurance for a llama.

Chris Leslie: I think a deal has been transacted on the Floor of the House. However, under the provisions of the Bill, a series of disclosures may be requested from hon. Members seeking such insurance.

My point is simply that we need to know the impact that the Bill will have on pet insurance and other discretionary insurance, but also, perhaps more importantly, on essential types of personal insurance that we all want our constituents to have, such as household insurance, flood risk insurance and motor insurance. In those cases, there is less wiggle room for individuals to decide not to take out insurance.

There are separate discussions to be had in another place about the problem of certain drivers thinking, “Well, the fine that I get for driving uninsured is less than the cost of motor insurance, so I will take my chances and drive uninsured.” In my view, the penalty for driving uninsured needs to be higher than the cost of getting insurance. That is a pretty straightforward point, but you would be surprised, Mr Deputy Speaker, by the small fines that are sometimes issued to people who drive uninsured. I am sure that hon. Members will know of cases in which constituents have unfortunately been involved in accidents caused by uninsured drivers. When those uninsured drivers are prosecuted the fines are a pittance, which sends the message, “Why bother with insurance?” We must return to that issue, but it is a moot point whether it would fall under the scope of a review under the new clause.

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Mandatory types of insurance are particularly important in the Bill. I can foresee circumstances, particularly with car insurance, in which the insurance sector feels that it is not getting much return. Many of our constituents howl with derision at the sheer expense of motor insurance—the AA recently said that it rose by about 16.4% in 2010. The Bill will make provision for the disclosure of certain extra pieces of information, even though people have no choice but to take out motor insurance if they want to drive; it is a legal requirement.

People will be surprised to find that even though motor insurance costs are escalating—that problem needs to be tackled in a number of ways—the insurance sector says that motor insurance is not massively profitable. The Association of British Insurers has described it as one of the most challenging products for insurers. I believe it has stated that premiums amounted to £10.7 billion and claims to £10.3 billion in 2010, so often the margins are not particularly great.

It is difficult for hon. Members, as non-experts in that trade, to know whether insurance companies are making significant profits, but let us take them at their word that they are not doing so. I can envisage a situation in which insurance companies say, “We want to back out”—pardon the pun, Mr Deputy Speaker—“of the motor insurance trade.” They might feel that in order to do so, they will deter new contracts for motor insurance. One way of doing that would be by placing a series of extra hurdles in front of customers wanting to obtain such insurance.

Many young drivers will know to their cost how difficult it can be to get insurance cover for their vehicles. I do not know whether the Minister has a driving licence—

The Economic Secretary to the Treasury (Miss Chloe Smith) indicated assent .

Chris Leslie: She does have a driving licence.

Miss Smith: I have insurance as well.

Chris Leslie: I am glad the hon. Lady has insurance—I would expect nothing less. The Government car service will certainly have insurance. Not so many years ago, when she was under the age of 25, she might have found it extremely difficult even to find companies that would insure her. She is doubtless a very careful driver with an unblemished record, and she might find it easier to get insurance as a woman driver, but many young male drivers find getting insurance incredibly difficult. My point is simply this: we need the ability to review the impact of the Bill to test what is happening in motor insurance, particularly for those drivers who struggle to get insurance.

Additional hurdles could be placed in the way of those drivers. I do not object to the shift in the balance of disclosure in the Bill—I want to put that on the record—but it is important that we take time to recognise that there could be circumstances in which those seeking motor insurance find it more difficult to get as a result of these measures. We just do not know, which is why we need a review one year after the commencement of the legislation.

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Another aspect of a review would be households subject to flood risk. Apparently—I did not realise this until I researched it—one in six homes in the UK are subject to the “at risk” category in respect of flooding. Amounts paid out by insurers since 2000 exceed £4.5 billion. A recent article in This is Money said that annual flood damage claims are running at more than £1 billion each year, and that 200,000 homes could become uninsurable by 2013 if an agreement cannot be reached between the Government and the industry on high-risk areas. That is incredibly important to the affected individuals, whether in Hull, where people recently had difficulty in gaining insurance, or elsewhere.

The changes on disclosure could well affect the ability of individuals to take out an insurance contract. Many who have taken out flood insurance might have found, unwittingly, that they were unable to receive a payment even though a catastrophe had occurred—a flood, a river bursting its banks or whatever—because they did not realise they were supposed to disclose certain aspects.

I want a review of the Act after one year. The provisions will, I hope, improve the situation and we will find that more people can take out flood insurance in a way that means they and insurers are assured that the contract will be fulfilled and that payouts can be made following floods and other such eventualities, but we do not know what the impact of the measure will be.

The Bill is relevant to flood victims, for whom the cost of insurance—if they can get flood insurance at all—could increase 500%. It is therefore very important that we have a review to see what happens in such circumstances. It is important that we see what is happening in the market for discretionary types of insurance as a result of the Bill, but we also need a review of the essential, mandatory, roof-over-the-head types of insurance. For those reasons, it would be helpful if the Minister accepted that such a review will take place.

7.15 pm

Stephen Phillips: I rise to make only a short contribution. The new clause is misconceived. The Law Commission did not think it necessary, and with the greatest respect, the hon. Member for Nottingham East (Chris Leslie) has undermined his own case, because only in circumstances in which claims that ought to be paid have not been paid might there be any adverse impact on the costs of the types of insurance contract that the Bill covers.

I say to the hon. Gentleman and the whole House—to be fair, there is no one but him and the Opposition Whip on the Opposition Benches—that in this day and age, I am pleased to see the Bill before us. It is not only long overdue, and perhaps I shall speak to that on Third Reading, but it is inconceivable either that it will remove products from the market or add greatly to the costs of the type of insurance contract that it is designed to cover. I cannot help feeling that the hon. Gentleman will not wish to press the new clause to a Division.

Chris Leslie: I hear the hon. and learned Gentleman’s points, and I do not wish in any way to denigrate the importance of the Bill—it is an extremely positive and important measure—but the fact that it originated with the Law Commission does not necessarily make it perfect or negate the need for a review. He should not be under

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that illusion. Just because those fine minds at the Law Commission introduced the Bill does not necessarily mean that we should not scrutinise it.

Stephen Phillips: I am not for a moment suggesting that the Bill should not be scrutinised.

Insurance companies ought to pay claims that they have not paid previously as a result of an inadvertent misrepresentation or non-disclosure—everyone wants that change, which is the reason for the Bill. The only way in which the costs of the types of insurance contract that the Bill covers will increase is if claims that ought previously to have been paid—legitimate claims—are paid. Disreputable insurance companies—I venture to suggest that there is none left in this country—currently might decline to pay a claim on a specious basis. For that reason, the review proposed in the new clause is unnecessary. I anticipate that the Government will not wish to carry it out, and the hon. Gentleman is rather hoist on his own petard because of the argument he has made in support of the Bill.

Jonathan Evans: My hon. and learned Friend will know that arrangements are in place for the Financial Ombudsman Service to look at the circumstances to which he refers—when an apparently proper claim is declined by an insurance company on specious grounds. Notwithstanding the 1906 Act, the financial ombudsman has, under the “treating customers fairly” provisions, which were put into operation by the Financial Services Authority, many times ordered a payment to be made. Is that not one of the reasons for the Bill? The situation will be that legislation rather than the financial ombudsman will be involved in righting wrongs.

Stephen Phillips: My hon. Friend makes a valid point. The insurance industry has long been regulated and the ombudsman has long been able to make declarations, but there are circumstances in which one cannot go to the ombudsman—for example, if the financial value of the contract is too high. There are circumstances in which the ombudsman will not intervene—for example, if legal proceedings between the consumer and the insurance company or, if Lloyd’s, some other insurer, are already afoot. In addition, experience dictates that the financial ombudsman is not, for example, particularly au fait with some of the more obscure parts of insurance law with which the Bill grapples, such as those parts of common law that deal with basis clauses and the turning of representations into warranties when made the basis of the contract.

I hear, then, what my hon. Friend the Member for Cardiff North (Jonathan Evans) says, but it is fair to say that the Bill is not only welcome but contains proposals that the Law Commission has properly considered and requires no review of the type that the new clause contemplates. For those reasons, the new clause is, in my respectful view, misconceived; and for those reasons, I am sure that the hon. Gentleman will not push it to a vote.