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Westminster Hall

Tuesday 19 March 2013

[Mr Philip Hollobone in the Chair]

UK Trade & Investment

Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Swayne.)

9.30 am

Nick de Bois (Enfield North) (Con): It is a pleasure to serve under your chairmanship on this fine early morning, Mr Hollobone. I know that hon. Members are rested and have slept well after a long night, so I am sure that the quality of their contributions will not be affected.

I am grateful to the Speaker for selecting today’s debate, which comes at a most pertinent moment. Few would disagree that the Foreign and Commonwealth Office, through its embassies, should be championing Britain and creating a stable, open, global environment in which Britain can succeed. Fewer still would disagree that foreign policy should support jobs, growth and prosperity. Indeed, the greatest threat to our country is actually economic in nature. That is why we are having this debate, which I hope will have a common sense of urgency and purpose. It is only the second debate on trade and investment in the past 12 months, the previous one being called by my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski). I will try not to be too partisan, but it is extremely disappointing that the official Opposition are again not well represented on something that, frankly, is crucial to our country’s future.

James Duddridge (Rochford and Southend East) (Con): I know that it is an early morning, but my hon. Friend says that the official Opposition are not “well represented.” Will he cast his eye around and do a quick headcount of Labour Back Benchers who have bothered to turn up?

Nick de Bois: My hon. Friend is right to force me to highlight that the shadow Minister, the hon. Member for Wrexham (Ian Lucas), is here unsupported by any Labour Back Benchers.

It is a pleasure to welcome the right hon. Member for Belfast North (Mr Dodds) and the hon. Member for East Londonderry (Mr Campbell) to the debate.

I cannot resist commenting that I am surprised that our coalition partners are not yet here. Perhaps it was the late night and we shall see them later. Let us be generous.

Daniel Kawczynski (Shrewsbury and Atcham) (Con): Does my hon. Friend agree that small and medium-sized enterprises in the many constituencies represented by Labour Members will clearly be disappointed that their Members of Parliament have not turned up to this debate to find out how such companies can work with UK Trade & Investment to help them to export?

Nick de Bois: I am grateful for my hon. Friend’s well-timed intervention. The fact is that trade and investment affects every single constituency. It is the one thing that unites us and the one thing that serves all our constituents, wherever they may work or whatever they

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may do, because without trade and without business we have no taxes, no hospitals and no infrastructure. Frankly, it is at the heart of our jobs, growth and prosperity.

As a nation, we import some $640 billion—I used dollars deliberately and hon. Members will see why as I refer to other figures—but we export approximately $480 billion only. This is a timely debate. The UK’s share of global exports has declined sharply over the past decade from just over 5% in 2000 to a fraction over 4% in 2010—a 20% drop. We should not pretend that this country is alone in seeing such a drop, but some of our near neighbours have fared much better. Germany, to which I will be making further references during my contribution, managed to grow its share of global exports. Are UK companies slow to react to opportunities? Are there inherent uncompetitive disadvantages? Perhaps more pertinently, have we been tapping into the wrong markets? I will suggest later that that has been the case. Have we failed to reach the high-growth markets as a result, perhaps, of over-dependence on our European neighbours and the US? If one looks beneath the figures, one wonders whether there is a mismatch between the goods and services we currently sell and those demanded by high-growth economies. After all, we are not supplying high-capital goods to the booming markets in the BRIC countries for machinery, tools and equipment. Whatever the diagnosis, the treatment is the same. We have no choice but to increase exports and inward investment.

Geoffrey Clifton-Brown (The Cotswolds) (Con): Does my hon. Friend agree that there are some bright spots in our export market? In China, for example, our exports were up 19.5% from 2011 to 2012, and UK services exports were four places up in our market importance compared with the previous year, so our exports to China are doing well.

Nick de Bois: My hon. Friend anticipates some comments I will make shortly. Even within that good news story, it is worth remembering that the success of our services exports perhaps masks an underlying problem in our not being successful in selling our capital goods to emerging BRIC countries. He is absolutely right, however, and since 2009 the volume of exports to the rest of the EU has probably risen by some 5%, but exports to the rest of the world have increased by 30%. The trend is definitely the right one. There are encouraging signs, and we should be quick to recognise that and to endorse such efforts.

We are coming together this morning as a constructively critical friend to the work of UKTI and the FCO. Since entering Parliament, I have found an admirable determination in Ministers and officials to deliver on the often quoted target for exports of £1 trillion by 2020. I have no doubt that this is the first Government to put trade and inward investment at the heart of government and, in particular, to make them a cornerstone of the wider economic resurgence of the UK. I count myself lucky, because there are Government Members present today—I welcome such a strong showing—who have witnessed the work of the Government after a career in business and are therefore qualified to fulfil the role of constructive friend. On that note, I remind the House that I spent 25 years in business, actively supporting SMEs and large corporations in their efforts to trade abroad, which involved working in the exhibition

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and events industry, which in turn involved working with trade associations and UKTI’s predecessor, British Trade International. I remind the House that my wife runs the company that I was involved with, which still works with some trade associations, so I can put on the record both my experience and a declaration of interest.

Today, I want to deal with both the strategic and tactical aspects of UKTI-FCO work, and I am grateful for the support of the CBI, the Federation of Small Businesses and other organisations, not least SMEs and trade associations from whom I have gleaned advice. Let us start with a premise. One in every four SMEs in Europe is an exporter, but the figure in Britain is currently one in five. What is holding back a nation of entrepreneurs that has an enviable track record in trading and a history of unique historical ties with Commonwealth countries, and that is now host to large diasporas from many parts of the world? Many of our competitor countries would envy such a pedigree as a platform for exporting, so what is allowing our neighbours to outperform us?

As my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) said, there are some success stories, which should not be overlooked. Our service sector is buoyant, and that has hidden some of the goods sector’s decline, although we have excelled in pharmaceuticals and chemicals. Sadly, however, manufacturing as a whole has declined.

Even when we are doing well in pharmaceuticals and chemicals, our rate of growth still compares unfavourably with that of Germany, because we have not sold to high-growth economies. However—I speak as a former owner-manager of an SME—where SMEs have the right goods and services for high-growth economies, the reluctance to export is a combination of risk management assessment, operating outside the comfort zone and, of course, fear of failure. That is often fuelled by what seem daunting and in some cases very real barriers to export, but also by a fair share of myths, without necessarily recognising the hidden and transparent benefits of export markets.

Andrew Bingham (High Peak) (Con): I thank my hon. Friend for securing this important debate. Does he agree that the fears and concerns that he highlights among SMEs are more prevalent with micro-businesses, which, despite their smallness, have a lot to offer and have great potential up and down the land?

Nick de Bois: My hon. Friend is absolutely right that micro-businesses will be more inclined to stay in their comfort sector. When they are successful and they grow, it is hard for them to shed the fear of the unknown and of recognising the extra management time that would go into breaking down the barriers to export. Success as a micro-company often brings with it concerns about entering the export market. However, the answer is staring us in the face: engaging with those that have succeeded and letting them drive those that are inclined to go—or thinking of going—into the export market.

Recently, I went to an exhibition where I spent the day with SMEs exporting to the Gulf—I hasten to add that I went at my own and not the taxpayers’ expense, en route to a delegation. I was hosted by UKTI for the

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day, and I spent the whole day with SMEs. A number of things came out that I thought were very encouraging, but let me focus on one issue.

When I asked SMEs how they broke down the barriers, why they were successful and what they were achieving, they all had innovative ideas, as we expect from SMEs in this country. They had all used the support of UKTI and the FCO, which, in the Gulf region, is exceptional. However, they all wanted more British companies to be there with the British pavilion, supporting a British presence in the region, because it was as much in their interests to have that greater commercial and intellectual capital in a region in which they were operating. When I asked, “Would you attend forums and speak to contemporaries that are either thinking of, or may not even have considered, going into export markets?”, “Would you come and tell them about your experiences?”, and “Would you help them learn the lessons that you have learnt?”, every single company—these were small to medium-sized enterprises—was willing to do so.

My challenge is that perhaps UKTI should now seek to leverage the good will of the work that SMEs have been doing, where they have been successful, to reach new potential exporters. Why? Despite the success of UKTI, we are still not reaching enough people. I suspect that my hon. Friend the Member for Shrewsbury and Atcham will touch on that point when he talks about how UKTI’s work must expand—I do not wish to anticipate him unfairly, but I have read his report, and he has done some excellent work on the future of UKTI. Therefore, with the companies that want to leverage more activity in a region, it is a win-win, no-cost option for UKTI and the FCO to capitalise on those who are successful in order to breed more success.

During the few parliamentary delegations that I have attended, I have always met local embassies, and local UKTI representatives and staff. Every time I visit, I ask the staff a simple question: “What are the top three UK companies doing business in this region?” I confess that the answer is often mixed. Some do not know, some waffle, while others are extremely well briefed. The picture is mixed, but what all have in common is that although the large exporters may be identified and known to them, very few of the SME companies, which might even be in the same supply chain as the well known prime contractors, are known. That worries me. At delegation level, led by senior Ministers, I cannot recall how often SMEs were included in the teams accompanying Prime Ministers or Foreign Secretaries.

My specific interest is with the “M” in SMEs. Medium-sized businesses will be crucial to driving export growth, because it is not realistic to presume that our export goals can be achieved by securing large, single-group contracts. The critical mass achievable by the vast swathe of medium-sized companies will lead growth and I suggest that UKTI overseas representation is spread more evenly across the company base to reflect that fact.

Geoffrey Clifton-Brown: I promise my hon. Friend that this is my last intervention, because I am really grateful to him for securing the debate. He will be well aware that only 23% of our small and medium-sized companies currently export. Does he not agree that the excellent £1 trillion target that he has mentioned will

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only be met if we have a large increase in the number of medium-sized companies in particular, but also small companies, that export?

Nick de Bois: My hon. Friend is absolutely right. If only one message is taken away today, it should be that across Government, across UKTI, and across parliamentarians, we have to make, as some in the Chamber have, excellent efforts to engage with medium-sized companies, and that is the only way that we will hit our goal, because of the critical mass, size and number of SMEs. However, let me be positive. My hon. Friend said “only 23%”—well, 23% can multiply that much quicker. The 23% that are active can reach out to those that are not active. It will not be politicians in suits telling people how to export; it will be the businessmen who have got dirty, been down there and done it, and can sell their expertise and encourage others. That would be my key message.

To achieve the critical mass in relation to the SMEs and particularly the medium-sized enterprises, we should start to engage more. I recommend that UKTI and the FCO have more trade delegations where medium-sized enterprises are engaged with, not only as an SME delegation, but as part of larger delegations. They can be integrated into the supply chains of prime contractors, and we can look at the supply chains of the high-growth economies and what they need. We should ensure that we give the political clout that we commit to larger groups.

I still remember, with absolute frustration, a meeting of the all-party group on trade and investment—of which I am lucky enough to be vice-chair, and which is chaired by my hon. Friend the Member for Stourbridge (Margot James)—where I was told of a large hospital construction programme in Saudi Arabia. UKTI had gone out and sought suppliers to the hospital industry for equipment—diagnostic equipment. It was going to take suppliers out—it invited them to go—and the prospectus said that a Minister would be leading it to open the political doors and provide the clout it needed. There was a modest charge, in my opinion, to do it, and then at the last minute, the Minister was not available. How disappointing that was for those SMEs—not because they wanted to rub shoulders with the Minister, however attractive that may be, but because that Minister would have opened doors and allowed them to make the contacts that they needed. We must ensure that we deliver on our promise and spread that political clout beyond the larger groups.

I want to talk now about where we focus our efforts. To reflect the new commercial emphasis, the Government have rightly increased investment in personnel and resources. The debate has been about how we secure business from the so-called emerging—emerged, I think—economies and most notably the so-called BRIC economies. That is understandable and it is reflected in increased investment. We have put, I believe, 50 more staff into China and another 30 into India. There are also more staff in Brazil, Turkey and Mexico. However, those pesky Germans —perhaps that is an inappropriate thing to say with a Foreign Office Minister present; I take full responsibility for that. Those very assiduous Germans have already resourced up to 30% more staff, with a total of 1,700. France is already expanding its efforts into Chile and Argentina.

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There is no doubt that the potential growth for UK plc in the BRIC countries will, if developed, provide a much-needed boost to our balance of payments, jobs and prosperity. They are the immediate attraction when it comes to helping us to meet our challenges. It is interesting that in those economies there will now be a shift to a different market. As the infrastructure there changes and consumer demand increases—consumer spending is set to increase by about 12% per annum—we desperately need to be there. Although we are playing catch-up now, I remain optimistic that, particularly with the increase in consumer spending and infrastructure developments, British companies will be able to capitalise on the changes. My concern is that while we are focusing on the battle in those economies to fuel our immediate needs, we are possibly in danger of losing the next war.

Hon. Members may know that the CBI commissioned research that showed the poor penetration of the UK into what are described as the next generation of emerging economies, compared with the efforts of some of our competitors. For the N11—next 11 economies so identified—we will have to do the groundwork now to avoid playing catch-up in the future. That will ensure that we are strategically and politically aligned in such a way that British companies can capitalise on the increased spending by those economies. I argue that it is important for business and policy makers to identify those markets that will provide opportunities to exploit our comparative advantages in the future, so that we can capitalise on the growth dynamism in those regions.

If we plan now, the FCO and UKTI will generate greater diversification of our overall export presence across a series of high-growth markets, rather than our being over-dependent, as we have been in the past, on Europe and the US and potentially on the BRICs. We would not run a business on any other model, so why should we run a country in that way? We need to be ready to exploit the new markets now, even though the payback may come in 10 or even 15 years.

Let us take a snapshot of the next emerging economies. In relation to Bangladesh, which has been identified as one of the growth economies, we import seven times more than we export. We do not feature in the import statistics to Bangladesh, despite the major historical links between the two countries and, if I may say so, our international aid programme. In relation to Turkey, which is set to grow at a rate of about 8% a year and be the fastest-growing economy outside Europe, the UK has only a 1.2% share of the market. Those pesky Germans and, incidentally, the pesky Spanish and the pesky Italians are outperforming us to a great extent.

We have recognised that—I give credit to the FCO and UKTI—but again we are in danger of playing catch-up. We have talked about BRIC. Believe it or not, we now have MIST—Mexico, Indonesia, South Korea and Turkey. Overall, those economies have more than doubled in size in the past decade. That is a warning sign for us. My recommendation and challenge to UKTI and the FCO is to look to run an N11 strategy in parallel with the emerging economies. We should entertain a presence in those countries at both strategic and tactical level to foster and engage with the influencers to ensure that we are positioned to capitalise on the emergence of those economies over the next 10 to 15 years. Let us avoid being a spectator and instead lead the team on to the pitch. That would be to the benefit of future generations.

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Would that take more money? Of course it might take some more money, but I would ask for some slightly out-of-the-box thinking and suggest that UKTI go further in making partnerships with professional bodies and trade associations that could help to share the load. After all, that is also in the interests of the companies that are their members. I thought that there were early signs of that. I ask the Minister whether the announcement in February 2012 of a strategic agreement between UKTI and the Council of British Chambers of Commerce in Europe was a taste of things to come—an example of where Government can partner with trade associations and bodies that are experts in their field and, much like the Germans, use those bodies to provide support services and strategic planning in export markets. The House will be interested to know that the network of German chambers of commerce is already established in 80 countries, providing precisely those services. Can the Minister update us on how the strategic agreement reached last year is progressing?

UKTI rightly claims that it gains a £22 return on every £1 of taxpayer funding spent. With that rate of return, it is not unreasonable that although more funds have been allocated, we should consider whether to increase the allocation. Frankly, if someone had offered me those returns in business, I would have seized them, thank you very much.

I shall make just two final points to give other hon. Members a chance to speak. When I was at the exhibition event in the Gulf states, exhibitors said to me, “Look, we can’t compete with the costs in China and India, but we can compete on added value.” That becomes very important. They said, “What we want the Government to do is not to tell us how to run our businesses, but to sell the strategic value, the top-brand message, of what Britain is good at, which will support what we do.” They said, “When you think of Germany, you think of engineering, technology, the motor industry—BMW. That reinforces the idea of quality and advanced engineering, and German companies trade on the back of that image.” Drawing on my previous days in communications, I would say that the message is that in UKTI and the FCO we should be defining brand UK and reflecting that brand. We should remember that the brand supports everything we do, and everything we do supports the brand. Let us give businesses the platform from which they can have an added-value dimension.

Our trade envoys—I am delighted that the trade envoy to Azerbaijan, my hon. Friend the Member for Wealden (Charles Hendry), is present—have a crucial role, and not just in pushing that same message and opening the doors to trade delegations. I believe that they could help to support our efforts to drive new exporters to market. MPs have a role to play. My hon. Friend the Member for Witham (Priti Patel) led her own delegation to the Indian subcontinent. That was absolutely the right thing to do. We all have our part to play. I do not stand here saying that it is up to UKTI, the FCO and business to get on with it. We have our role to play, and that is important.

Finally, on a practical level, can we please see more focus on the ground? Access—getting into and out of markets—is crucial. I think that UKTI and the embassies in particular can do more than just advise. Sometimes

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they will need to get their hands dirty. Sometimes they will need to lobby and make the case as to why customs is a barrier in some countries and we need to overcome that. Sometimes they will need to take on the challenges of corruption if that is necessary to help to break down the barriers where we have markets.

I want us to take the initiative locally so that we can help our companies to do business on as level a playing field as is reasonably possible. Specifically, for the defence industry, and even beyond, UKTI and the FCO should look at simplifying the export licence application process, which many, including a company in my constituency engaged in large sales overseas, find slow and cumbersome.

In conclusion: much done, much to do. The FCO and UKTI have the full support of the House, but we need to make a realistic assessment of our strategic challenges and ensure that we are delivering the tactical support to meet them, so that my children and grandchildren will have the chance of a wealthy, prosperous life in the future.

Several hon. Members rose

Mr Philip Hollobone (in the Chair): Order. After that excellent start, I shall call Mr Nigel Dodds in a moment. Six Back Benchers hope to speak. I will invite Mr Lucas to speak no later than 10.40 am, which gives us 40 minutes. If hon. Members could limit their remarks to no more than five minutes, we should be able to get everyone in. I know that it is going to be more difficult for some of you than for others, but if we all work together, no one will be disappointed. The batting order after Nigel Dodds will be Daniel Kawczynski, Priti Patel, Charles Hendry, Chris White and Geoffrey Clifton-Brown. For Mr Clifton-Brown’s sake, please keep your remarks to about five minutes.

10 am

Mr Nigel Dodds (Belfast North) (DUP): It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the hon. Member for Enfield North (Nick de Bois) on securing this important debate. We are perhaps now glad that not so many official Opposition Members have turned up, but I am glad that my hon. Friends the Members for East Londonderry (Mr Campbell) and for Strangford (Jim Shannon) are here for the debate.

I shall concentrate on the relationship between UKTI and FCO, and the work of Invest Northern Ireland, with which the Minister will be familiar, given his previous role in the Northern Ireland Office. When he was in that post, he usefully helped with trade delegations and Invest’s work in Northern Ireland, and we appreciated his work.

Northern Ireland has a good story to tell with regard to foreign direct investment. Outside south-east England, Northern Ireland is the top region in the United Kingdom for foreign direct investment. That might be hard for some people to believe, but it is a fact. We have won 7% of UK foreign direct investment, despite having only 3% of the UK population. Invest and the overseas sales teams have done a lot of work over the years to make that happen. We have a good offer, and it is important that UKTI works with Invest to promote opportunities for investment in the Province.

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There are areas in which UKTI could do more, working with Invest to attract foreign direct investment and promote trade opportunities. None of the investments that have come to Northern Ireland in the past couple of years were identified or developed through the work of the UKTI network, over and above the work of the Invest teams. To date, there is a lack of project opportunities for Northern Ireland in the UKTI national pipeline of prospective investors, so I ask the Minister to consider, with his colleagues in other Departments, what more can be done. Is it appropriate to set proportionate targets for successful inward investment projects in Northern Ireland? Will he consider setting proportionate targets for inward investment visits to Northern Ireland? Will he commit, with colleagues, to a schedule of regular visits by UKTI overseas staff to Northern Ireland, organised on a sectoral basis, to update UKTI staff on Northern Ireland’s product offering, because that would be significant for providing qualitative feedback?

Mr Gregory Campbell (East Londonderry) (DUP): Last week, the First Minister and Deputy First Minister of Northern Ireland were in Brazil targeting opportunities for small and medium-sized enterprises. If UKTI is so minded, as I hope it will be, it can assist similar future projects to enable small businesses in Northern Ireland and throughout the UK to target BRIC countries and ensure that investment comes to the UK, and particularly Northern Ireland.

Mr Dodds: My hon. Friend makes an important point. The First Minister and Deputy First Minister have worked with Invest to visit a lot of the BRIC countries. Indeed, I have noticed criticism of their travelling the world recently, but it is important to visit places such as China, India and Brazil to show the opportunities in those countries and Northern Ireland.

I am conscious of your strictures, Mr Hollobone, so I shall deal quickly with a couple of other points. In recent years, the Prime Minister has led a global investment conference event in London for the chief executive officers of top global companies, and Invest provides input to such events. Communication regarding invitations and attendees is not always as it should be, and access to the events and CEOs is often limited. I ask the Minister to consider how UKTI can help Northern Ireland business leaders to gain greater access to the global CEOs attending such conferences. I am sure that that goes for other regions of the UK as well, because presently the concentration seems to be on London. Will he also have a word with the Prime Minister about the G8 summit? It is in Northern Ireland this year, which is very significant and welcome, and we could build on that opportunity. I suggest that the Prime Minister hosts a G8 investment conference in Northern Ireland, because that would be an opportunity further to maximise the spotlight on the Province.

With the Olympics, we had a very successful 2012. A lot of British companies did a lot of good business, which arose out of the games. The feedback has been positive, because of 40 companies in Northern Ireland, 24 have won £53 million of business, which is excellent. There are issues about marketing rights, however. In January 2013, all London 2012 suppliers were offered the opportunity to apply for licences to allow them to publicise the fact that they had supplied London 2012. Greater access to those licences is important so that people can build on the success.

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Northern Ireland was originally excluded from UKTI’s GREAT campaign because, as I keep saying in the House, Great Britain does not include Northern Ireland—it is the United Kingdom of Great Britain and Northern Ireland. I am glad that progress has now been made, because Northern Ireland was included on the Prime Minister’s recent visit to India, and the strapline and messages now include Northern Ireland. Northern Ireland must not be excluded from United Kingdom initiatives and measures, as we are part of the United Kingdom. It is easy to fall into a lazy way of describing or promoting the country, and Northern Ireland must be included as an equal part with England, Scotland and Wales.

10.7 am

Daniel Kawczynski (Shrewsbury and Atcham) (Con): There is nothing more important than exports. The House constantly debates and argues over how to slice the cake—there are huge areas of difference between Opposition and Government Members—to provide for all the public services that we want to support, yet exports are about increasing revenue as a whole for the country and making that cake bigger. I am extremely disappointed that no Labour Back Benchers are present for the debate, but that is typical of debates on exports. They also table few written questions on this critical subject, so they clearly are not interested in engaging with it. I hope that the shadow Minister, the hon. Member for Wrexham (Ian Lucas), will take a message to his parliamentary party about the importance of engaging in such debates so that we can work constructively together, across parties, on this critical issue.

My office and I have spent the previous few months interviewing people from hundreds of SMEs from all over the UK, who have come to the House of Commons to give us their experiences—good and bad—of UKTI. We presented our preliminary results at a meeting with the Prime Minister and the Chancellor of the Exchequer. I have repeatedly lobbied the Chancellor on the issue, and I very much hope that some movement, or some additional support for UKTI, will be spoken about on Wednesday.

During my interviews, I have got to know Mr Nick Baird, the chief executive of UKTI, who I think is doing a very good job, and I want to put on record my thanks to him for his professional leadership of the organisation. I am, however, disappointed that a number of companies that I have met have failed to get the support that they require from UKTI, so I have started to take them to Mr Baird to allow him to engage directly with them and provide support. Some of the companies are talking about hundreds of millions of pounds of investment into the United Kingdom, so that is very important.

I shall mention briefly, as I have to be very brief, three key recommendations that I would like the Minister to take on board, with which, by the way, Mr Baird agrees. The first is about the structure of UKTI. At the moment, personnel report into different Departments, including the Foreign and Commonwealth Office and the Department for Business, Innovation and Skills, and sometimes to local ambassadors. What we want in the United Kingdom is one organisation that is fit for purpose, with reporting taking place directly to UKTI’s board and its chief executive. We want an organisation that can hire, fire and reward on the grounds of performance and on a

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commercial basis. We want to encourage people in UKTI to go the extra mile and strive to do everything possible to help British businesses to export. Regrettably, the support is rather patchy; in some parts of the world it is superb, but in others it is poor. We therefore want a common theme across the world and a common reporting structure.

Jim Shannon (Strangford) (DUP): Will the hon. Gentleman give way?

Daniel Kawczynski: No, I will not. I am sorry, but I do not have time.

My second point is about funding. Only 0.005% of Government spend goes to UKTI, and I am concerned that we will fall behind Scottish Development International, for example. That body receives far more pro rata, given the number of companies in Scotland, so it is able better to support its companies.

There is only a 49% awareness of UKTI among SMEs, and it is important that the body gets more funding from the Chancellor so that the message about what it can do for those companies throughout the world is better understood. My hon. Friend the Member for Enfield North (Nick de Bois) made the superb point that for every £1 spent, UKTI generates £22 of revenue. If I was the Chancellor of the Exchequer, my No. 1 priority would be to give UKTI more money.

My third point is that we need greater parliamentary scrutiny of UKTI. I am having to condense a 25-minute speech into five minutes, and this is only the second debate that has been held on UKTI in the past 12 months. This is a ridiculous way of scrutinising one of our country’s most important bodies. I want ongoing parliamentary scrutiny, and even—dare I say it—a Select Committee that can interact with Ministers and the UKTI chief executive on a daily, weekly, monthly and yearly basis, and hold them to account about specific countries and projects so that we are always scrutinising how taxpayers’ money is spent. When that parliamentary scrutiny takes place, we will be able to say to the Chancellor of the Exchequer, “Look at what UKTI is doing. Look how things are improving. Give it more money,” and I cannot overemphasise the importance of that. I desperately want to work with colleagues to convince the Chancellor and the Prime Minister to give us a Select Committee of the House of Commons to allow those of us who are passionate about exports to work together constructively to hold UKTI to account.

Some 45 UKTI staff work in Brazil, but 52 opportunities are listed on the website. The website is not properly maintained, and no opportunities are listed for a huge number of countries. We might not be surprised that that is the case for some obscure, small countries, such as Cape Verde and Mauritania, but there are many larger countries that have no opportunities listed against them. If we are going to have a website and to communicate with SMEs up and down the country, we need always to be harvesting opportunities across the world and putting them on that site. We must ensure that information is disseminated daily to all nine regions in England, and that those regions then interact with their SMEs to find out which can best be tailored to each opportunity.

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Whenever I have travelled abroad, I have noted that the most important thing to remember, as my hon. Friend the Member for Enfield North mentioned, is branding. The British brand is the gold standard. It is the best in the world, so many people across the middle east, and in the rest of the world, yearn to buy British. Give us an opportunity here in the Commons to scrutinise UKTI on an ongoing basis, and give us a Select Committee.

10.15 am

Priti Patel (Witham) (Con): I commend and congratulate my hon. Friend the Member for Enfield North (Nick de Bois) on securing the debate.

I pay tribute to Conservatives in government who have refocused our foreign policy on prioritising the development of new trading links, the importance of which I cannot emphasise enough. As we have heard, the previous Labour Government had an inward-looking approach that left the UK economy at the mercy of the economic performance of the eurozone. We have lost a decade on trade and investment, and reaching out to the BRIC economies. I declare a significant personal interest in the issue, because before I became a Member of Parliament, I worked internationally across many markets, from the Gulf to Africa, Asia and south America.

Last month, I had the privilege of accompanying the Prime Minister and the Minister on the trade delegation to India, and I saw at first hand the role of UKTI, the Foreign and Commonwealth Office and, in particular, the British high commission and the exemplary team on the ground in identifying opportunities for UK businesses and supporting their endeavours to do business with Indian counterparts. Such trade delegations, under the leadership of the Prime Minister and other Ministers, do tremendous good by boosting the prospects of UK exporters. As my hon. Friends have said, they send out a strong signal that we are in a global race and that the UK is open for business. In addition to our expansion of diplomatic networks, with new embassies, consulates and trade offices being opened, we need to cascade opportunities down to all the UK’s regions and all our constituencies.

I pay tribute to the work of the Essex chamber of commerce in reaching out to SMEs and other businesses in my constituency and the wider eastern region. I pay particular tribute to Lord Green, who has put great emphasis on entrepreneurship, supporting exporters and bringing forward inward investment through schemes such as the global entrepreneur programme. He came to Essex just last month and spent considerable time working with the chamber of commerce and holding out the hand of information and guidance through UKTI to Essex businesses.

It will come as no surprise to you, Mr Hollobone, that I want our businesses in Essex to reach global dizzy heights and to export more. Those are companies such as Crittall Windows, a winner of the Queen’s award for enterprise, which is a world leader in the manufacture of metal windows; businesses such as Wilkin and Sons, which is based in Tiptree and makes the finest jams in the world; and small businesses such as Margaret’s Frozen Luxuries, which makes frozen yoghurts and is based on the border of my constituency. That company recently lost an export order to France because of

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changes in the value of the pound against the euro, but it still has an opportunity because it is now looking to export to the middle east. That clearly demonstrates that the Government are right to focus their efforts away from the deteriorating situation in the eurozone and Europe, and on to restoring Britain’s status as a great global trading partner by opening up new opportunities.

There are a number of additional opportunities to build on. We have already heard about parliamentary scrutiny, building greater links and strengthening the roles of UKTI and Members of Parliament, and there is also the 2014 international festival for business, which will showcase in Liverpool the best of British brands—the best that we have to offer—on the international stage.

It would be good to hear the Minister outline what further steps UKTI and the FCO are taking to showcase small and medium-sized businesses, and especially small businesses. One thing that I observed during my time in business and my involvement with trade delegations is that we need to increase the representation of small as well as medium-sized businesses, as my hon. Friend the Member for Enfield North said, and get our constituency businesses involved in such showcases.

Finally, I want to highlight the need for UKTI to do more to encourage greater foreign direct investment in the United Kingdom. Companies, as well as sovereign wealth funds, pension funds and other overseas businesses, should all be welcome to the United Kingdom. I particularly want to hear what steps UKTI is taking to bring in foreign investors who could, in effect, invest in not only companies, but the bricks and mortar—the infrastructure—of UK plc, especially in the county of Essex.

10.21 am

Charles Hendry (Wealden) (Con): I put on record my interests as the Prime Minister’s trade envoy to Azerbaijan, Kazakhstan and Turkmenistan, and as the chairman of the advisory board of the Russo-British chamber of commerce.

I congratulate my hon. Friend the Member for Enfield North (Nick de Bois) on securing the debate. He was absolutely right to say that our future recovery lies not within the eurozone, but outside it. We must focus much more on countries where there are tremendous opportunities that we are often missing. From my experience of visiting them as a Minister and subsequently, such countries want to trade with Britain. The door is open, and the question we are most often asked is, “Why don’t we see more of you?” I am delighted at the work being done by the Foreign Office and UKTI teams to try to ensure that we are in a strong position to do that.

There are very exciting developments in Russia, with which our trade has doubled in the past three years. It has moved from being our 19th biggest trading partner to being as large as our 11th biggest, which is a huge improvement in activity. We want such an approach to be replicated in many other countries.

I welcome the approach taken by the Minister for Trade and Investment, my noble Friend Lord Green, towards developing links with chambers of commerce. They are well established in their countries, where they are well known to their Governments, and they understand those countries well. It is much better to develop those relations than to put in place a new structure.

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Chambers of commerce are also well positioned to ensure that we go beyond the few cities that trade delegations usually visit. In Russia, there will be delegations to Moscow and St Petersburg, but there are exciting new opportunities and a real enthusiasm for doing business in Kazan in Tatarstan, and chambers of commerce should be our natural allies in making things happen.

At the end of last year, the Prime Minister appointed seven of us as trade envoys to some of the fast-developing markets, which are exactly the sort of markets that my hon. Friend the Member for Enfield North spoke about. We should recognise the extraordinary personal contribution that the Prime Minister is making in that area, with the success of his trade missions and his determination to get out there and win opportunities for British companies right around the world.

The role of trade envoys is to give an extra level of support, working alongside the FCO and UKTI. It is to focus purely on trade, not politics or diplomacy, and on taking that contact forward to a deeper and broader level of engagement. In the three countries in which I work, there are tens of billions of pounds of British investment in the oil and gas sector, and companies such as Shell, BP and BG have enormous departments that focus on improving such links. My focus therefore needs to be not only on working with them, but on seeing how to secure opportunities for the supply chain and service companies, of which Britain has some of the finest in the world.

Jim Shannon: The effectiveness of businesses is measured by export contracts. Does the hon. Gentleman think that we should do more for our skills and people skills in construction, for instance, so that people are able to go overseas to help companies to build?

Charles Hendry: The hon. Gentleman is absolutely right that we have world-class skills in that sector. I find that people saw what happened in Britain in 2012, when we delivered the most successful Olympic games ever, and know that those involved often have a tremendous amount to offer to countries with big ambitions in such areas.

The Asian games are in Ashgabat in 2017, the European games are in Baku in 2015 and the Expo is in Astana in 2017. In all those areas, we are introducing British architects, engineers and construction companies—working alongside other partners—to ensure that they have the chance to compete. The issue is not only about the big companies, because my hon. Friend the Member for Enfield North is completely right that it is also about SMEs. On the recent mission that I undertook to Turkmenistan, the majority of companies were SMEs with expertise in the sports sector that saw how they could work alongside others and realise the potential of the 2017 games.

We also have opportunities to attract more investment into the United Kingdom. These countries all have significant sovereign wealth funds. We can highlight the opportunities for them to invest in British businesses and infrastructure, and they should become our natural partners as we take that forward.

I believe that what really makes a difference is the relationship between trade envoys, and the Foreign Office and UKTI. We have excellent missions and ambassadors in those countries, but we also have

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outstanding UKTI representatives who are focused on understanding those markets and realising the opportunities. That means that we host good round tables to bring together a range of companies that are interested in investing here. For companies that are looking for where to export next, but are anxious about going to markets that are distant and new, we can help to make the process much easier.

I very much welcome the debate. Above all, the key message is that countries throughout the world that want to trade with Britain need to see us more. I am delighted that we have such an energetic Minister in post, because I know that he is tireless in taking that forward.

10.26 am

Chris White (Warwick and Leamington) (Con): I congratulate my hon. Friend the Member for Enfield North (Nick de Bois) on not only securing the debate, but his comprehensive remarks.

The UK remains the ninth largest manufacturer in the world, but over the past few years, our export performance has been poor. In 2000, our share of world goods exports was 4.4% but, unfortunately, that had fallen to 2.8% by 2009, which is quite shocking. Perhaps that is why so few Labour Members are in the Chamber.

Ian Lucas (Wrexham) (Lab): Will the hon. Gentleman give way?

Chris White: Unfortunately, I cannot, given the time available.

There are, however, now positive signs of improvement. In contrast to financial services, exports in manufactured goods have risen since the financial crisis. Fortunately, in the period between 2008 and 2011, exports of finished manufactured goods grew by more than 16%.

Ultimately, exports depend on good products and pioneering companies, such as DCA Design International. I will not go through a list, as my hon. Friend the Member for Witham (Priti Patel) did of all the jam makers and so on in her constituency, but my constituency has similar manufacturers.

The Government have a role in supporting businesses to export, and I hope that they will use the upcoming Budget to provide additional resources to UKTI so that it can reach out to even more businesses. The Prime Minister has announced a national challenge for the UK to encourage more small and medium-sized businesses to export, which is essential. As has been mentioned, if the UK exported at the EU average of about 25%, rather than 20%, about £36 billion would be added to the UK economy.

Businesses need support if they are to export, particularly smaller businesses that do not have large teams and resources to enable them to get into such markets. Our competitors in Europe and America see potential growth in the BRIC countries, as has been mentioned, and their Governments seek to provide their companies with every single advantage. That is why collaboration between the Foreign Office and UKTI is so important. The Foreign Secretary has made it clear that he wants British embassies to roll up their sleeves and support British

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business. We must also ensure that officials have their ear to the ground for new trade opportunities and then feed such information back to UKTI. We need to create a dual hub-and-spoke system, with the UK’s vast diplomatic opportunities feeding back information to UKTI and trade bodies in the UK, while they in turn have their own systems to feed back local information to chambers of commerce and business networks.

The Foreign Secretary has tried to reverse the decline in trade offices in consulates throughout the world, but we need to do more than merely reverse the decline—we need to expand, particularly in the emerging markets I mentioned earlier. Information is crucial in an age in which companies can communicate in minutes and deals can be won or lost through the smallest of delays. In the longer term, we also need to encourage businesses to make personal connections with emerging markets.

As a British Chambers of Commerce survey in 2011 pointed out, contacts are often key for businesses exporting into new markets. Businesses that had employees or directors who had lived abroad were even more successful. However, the most direct way in which we can support British businesses to export is by ensuring that our export products and guarantees are as competitive as possible. The Government should therefore commission a report into the comparative competitiveness of the UK’s export guarantees and credits, and the effectiveness of our institutions such as UKTI, so that we can learn from the success of others, and accordingly improve our own standards and the way in which we work.

10.31 am

Geoffrey Clifton-Brown (The Cotswolds) (Con): Thank you, Mr Hollobone, for chairing what should, in my view, become an annual debate. I urge the Business, Innovation and Skills Committee to pay more attention to exports and foreign direct investment, and to produce an annual report on the subject as an update of what has happened the year before. I hope that no offence was intended, Mr Hollobone, because I did write to Mr Speaker to ask whether I could speak in the debate.

I welcome the Minister to the debate. The Foreign Office plays a vital role in exports, so I am delighted that he is here. He and my right hon. Friend the Foreign Secretary have been opening embassies around the world, whereas the previous Government closed them. It is important that we have a really good embassy network throughout the world and that we use our contacts and all our strengths. A third of the world speaks English, for goodness’ sake. The British Council is one of the best cultural organisations, and BBC radio is one of the best broadcasters. We should use all those strengths to help our exporting situation.

I also pay tribute to my hon. Friend the Member for Stourbridge (Margot James). Her all-party group on exports, of which I have the privilege to be an officer, does fantastic work, and I urge her to keep doing it.

I congratulate my hon. Friend the Member for Enfield North (Nick de Bois) on securing the debate. He and my hon. Friend the Member for Wealden (Charles Hendry) highlighted high spots in China and Russia but, generally, our balance of payments is still sluggish, which is because the European market, where more than 50% of our exports go, is still in deep trouble. The situation in Cyprus has reminded us of how much

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trouble the eurozone is in. Barclays Bank has an exposure to Cyprus of £184 million, yet it has an exposure to Spain and Italy of £22 billion and £23 billion respectively, and those countries are still not out of the woods.

We need to concentrate on the BRIC countries. By around 2025, the whole of the eurozone and America will occupy only 40% of the world’s GDP, whereas just four BRIC countries will occupy 41%. There are many additional emerging countries, so we need to concentrate more of our efforts on getting exports around the world in these high-growth markets. As my hon. Friend the Member for Enfield North has said, this is about not only the BRIC countries.

I have very little time in which to speak, so I will concentrate on one or two areas. I am delighted that UKTI has got an extra 25% over the next two years, but I want to see it account for how it spends that money. Although it is now establishing a new regional trade adviser in every region, I still believe that there is a big gap. I was never a friend of the regional development agencies, and I did not think that they did a particularly good job. We abolished the RDAs and put in their place local enterprise partnerships, but their contact with business is still patchy. There is a huge job of work to be done by the regional trade advisers.

Mr James Hurley reported in The Daily Telegraph on 5 December 2012:

“Our research shows that nearly 70% of SME exporters are not aware of UKTI”.

If that is correct, and I query it, it is a shocking statistic that UKTI needs to work rapidly to deal with.

Some 40% of our GDP depends on FDI, so it is absolutely vital that we take all steps necessary to protect that investment. We are still making strategic decisions that are wrong. We are making a strategic decision on where our major hub airport should be on the basis of which party wins which constituency at the next election. Can we not get an all-party agreement on where our hub airport is? It almost does not matter where it is, but let us make a decision. Also, to come up with the HS2 high-speed rail policy in isolation of where the airport will be is not a clever thing to do. At the moment, 70% of Europe’s corporate headquarters are based within 75 miles of Heathrow, but we are losing those corporate headquarters by the day because of an incoherent policy, so we urgently need to do something about the situation.

There are one or two bright spots. The Chancellor is absolutely right to drop the rate of corporation tax and the Prime Minister is absolutely right to use the G8 to make sure that companies pay the appropriate amount of corporation tax. However, there is still a problem with finance for companies that wish to export. The Government have announced a £50 million UK export finance scheme, but it is still not up and running because agreement has not been reached with the banks on how it is to be operated.

A major director of a British FTSE company, who was in my office yesterday, told me that the Canadian equivalent of our Export Credits Guarantee Department had telephoned his firm to ask whether it wanted finance from that Canadian export department. One would never imagine a British export department doing that. I am not criticising the ECGD, but it and the Government need to get their act together and think about how we can help companies.

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My hon. Friend the Member for Enfield North was absolutely right to mention the target of 100,000 new companies exporting by the year 2020, which would represent £1 trillion in exports. If we are to meet that target, we will have to connect with many more SMEs. If my figure of 23% currently exporting is correct, that has to grow hugely, which means that awareness in UKTI has to increase hugely. It also means that we all have a role—the Government, the Foreign Office, the Department for Business, Innovation and Skills and Members of Parliament. When I go round the world and visit companies in my own constituency, my brain is always working to see how I can increase opportunities.

I know how difficult it is to export, because I used to be the largest exporter of daffodils in the country—to the Dutch. If one can do that, one can do anything. We need to concentrate more on our exports. It is only through exports—and, above all, only through FDI—that we will grow the economy and get out of the economic problems that we are in.

10.38 am

Ian Lucas (Wrexham) (Lab): It is a pleasure to serve under your chairmanship, Mr Hollobone.

I commend the hon. Member for Enfield North (Nick de Bois) for initiating this interesting debate and for making a valuable and interesting speech. I was particularly interested in his perception of working with the 11 developing economies, which was a positive suggestion. We are operating in a world economy that is growing in different parts of the world. Unfortunately, our own economy is not, but we are aware that there are opportunities, as we heard often in the debate, in those emerging economies. Looking ahead in the way the hon. Gentleman suggested is important, as is his emphasis—this was a thread throughout the debate—on SMEs. I will return to that theme, because it is crucial to the success of British exporters.

The right hon. Member for Belfast North (Mr Dodds) also made a valuable contribution in which he raised the important issue of devolved institutions and the relationship between UKTI and the devolved nations. More work can be done to ensure that those parties work together, both to promote investment in the UK and to sell the message about Scotland, Northern Ireland and Wales. Also, within England, a more devolved approach within UKTI would increase the links between business and UKTI, which I sense from listening to the debate that many hon. Members feel are lacking.

The contribution made by the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) was interesting, particularly his suggestion, which is certainly worthy of consideration, that there should be a Select Committee to examine these important points. The hon. Member for Witham (Priti Patel) also emphasised the crucial importance of small and medium-sized businesses. We heard about the jam that is made in her constituency, which I am sure is excellent—I would love to experience it at some stage. I was also interested in the contribution by the hon. Member for Wealden (Charles Hendry) and his reference to the Azerbaijan games.

In the debate so far, we have not touched on creative industries. Sport is obviously crucial. Last year was a wonderful year in which we projected Britain—sorry,

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the United Kingdom—to the world, in addition to our artistic merit. I am sure that it is true for all Members that the potential of the creative industries in our constituencies and the skills of our young people in those industries match the world’s best. When we consider exporting, we need to talk much more about the creative industries than we do now and concentrate on that sector.

I almost got upset with the hon. Member for Warwick and Leamington (Chris White) because of the misrepresentations he made about the previous Labour Government, but I will move on from that. I also learned from the hon. Member for The Cotswolds (Geoffrey Clifton-Brown) about the daffodils that he exported, and as a representative from Wales, I commend him on his choice of flower. All Members who contributed to the debate did so positively.

We are, of course, in a difficult situation because despite the references to business expertise by Conservative Members, the reality is that this country’s economic performance has been very bad since 2010, and far worse than the Government said that it would be in 2010. The Government said that they would base their economic policy on exporting, but I am afraid that that process has not been as successful as we would have liked. We need to up our game. On the eve of the Budget, it is quite clear that we need to do more.

We do have companies that are extremely successful at exporting. I do not want to be the bringer of bad news the whole time, so I will say that only yesterday we had an excellent announcement from Airbus, which has a factory just outside my constituency, that it is selling more than 200 new aircraft to Indonesia, which is one of the economies to which the hon. Member for Enfield North referred. That is an excellent example of the Government and the industry working together. That form of business is very successful, because we are the No. 1 exporting nation in Europe and we can outperform our competitors.

The UK automotive industry is also a successful exporting industry. It is doing extremely well and, again, that is an example of the Government, industry and—dare I say it?—trade unions working extremely closely for the benefit of the economy. That means that we can succeed when we work together, ensure that we reach out to development markets and make real progress.

I turn now to Germany, to which the hon. Member for Enfield North referred, because I found some interesting statistics during my preparation for the debate. I was especially interested to learn that Germany’s export credit agency, Hermes, provided €32 billion of financial support to German exporters in 2010, which is equivalent to 3% of Germany’s exports. The UK equivalent, the Export Credits Guarantee Department, provided only £2.9 billion of support for exporters which, if my maths is correct, is less than one tenth of the support that Germany offers. It would therefore be helpful if the Minister examined that German budget and considered how a country such as Germany can fund such a seismically larger approach to investment abroad.

Geoffrey Clifton-Brown: The hon. Gentleman has made what is perhaps the most important point that could possibly come out of this debate. The banks are

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still not lending to small businesses, there is still a problem with export finance guarantees and there is still a problem with currency instruments. If we can get ECGD at least to start backing instruments to help small and medium-sized companies to export, I believe that we could have a step change.

Ian Lucas: The hon. Gentleman makes an interesting point. I am a proponent of a much more regional structure in banking than the one that exists in the UK at the moment. The flawed reforms in the 1980s created a very centralised and uncompetitive banking sector that has not fundamentally changed in any way since 2007. The German Sparkassen model has been successful since 2007, and the Leader of the Opposition made a speech only last week in which he talked about introducing the concept of regional banking within the UK to try to link in with those businesses that we need to see expand.

I say that because the businesses that are exporting successfully from the UK at the moment—and, frankly, the businesses that are also using export credit guarantees—are the largest businesses that we have. I do not want that to diminish in any sense, as I speak as someone who represents a constituency that is immediately adjacent to an Airbus factory, which is a vital part of our local economy. However, we also need an expansion of exports by small and medium-sized businesses.

Of course we need to work more closely with UKTI and our embassies abroad, which in my experience do an excellent job of linking in with local economies. We particularly need to look at the developing countries where we ought to be doing better. Of course, there are many examples of the benefits of soft power in the UK. Reference has already been made to the World Service and to the English language, and our universities also develop excellent links with the outside world.

We are, however, sending mixed signals to some developing countries. This issue was raised on the Prime Minister’s recent visit to India because, for example, the changes in our visa regime are sending mixed signals to India. India is an important market for us, so we need to be conscious that we require a pro-business and pro-growth strategy on such issues as visas. It is also true that the World Service is one of our greatest assets. It builds a positive picture of Britain, so we must ask why its budget has been reduced by the Government through their reforms of the BBC. We must always look to the longer term on building our economy and exports.

I am aware that one way in which the Department for Business, Innovation and Skills builds its links to businesses is through the strategic relations team, so I want to ask some questions about that—[Interruption.] I do not know why the Minister is looking at his watch, because he will have exactly the same length of time that I have had to speak in which to wind up the debate.

I want to ask the Minister specific questions about the process whereby specific Ministers are allocated to specific larger businesses. How do those Ministers, who are linked through the UKTI strategic relations team’s list of companies, link in to smaller businesses? How do they liaise with smaller businesses, which we know will drive the expansion in exports in the future? They have close relationships with the larger companies, so how is their performance with those larger companies assessed? Is there a measure of the investment that is brought in?

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I would be very grateful if the Minister would consider my points. We all agree that we need to expand exports and that we need to do better. We will support initiatives that will enable that to happen, but we certainly need to up our game, because we do not have the growth that we need in our own economy.

10.49 am

The Minister of State, Foreign and Commonwealth Office (Mr Hugo Swire): I congratulate my hon. Friend the Member for Enfield North (Nick de Bois) on securing this important—at least to some hon. Members—debate.

It is vital for the Government to succeed in transforming the UK’s export and inward investment performance. As the Prime Minister has said often, we are in a global race. We have suffered from weak trade performance for decades. As my hon. Friend the Member for Warwick and Leamington (Chris White) rightly said, there was a decline in manufacturing between 2000 and 2009, although there are now signs of a recovery. It is for this reason—the appalling, precarious financial situation we inherited—that my right hon. Friend the Prime Minister and my noble Friend the Minister of State for Trade and Investment, Lord Green, launched the national export challenge, encouraging more small and medium-sized enterprises to export. They set an ambitious target to get another 100,000 companies exporting and to double UK exports to £1 trillion by 2020, as we have heard.

My hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) talked about the rather patchy local enterprise partnerships and said that there is more to do. A number of hon. Members said that we need to better publicise what UKTI can do for mid-sized businesses. In January 2012, BIS formally launched a national campaign to help raise the profile of medium-sized businesses, working with the CBI, TheDaily Telegraph,the Institute of Directors and other intermediaries and relevant organisations. UKTI now has some 30 mid-sized business advisers in place, will engage around 400 mid-sized businesses by the end of the year and will deliver engagement with a target of 1,500 MSBs over the three-year life of the programme. There have been specific trade missions for mid-sized businesses; jointly with the CBI, the noble Lord Green has led trade missions to Turkey, Russia, Mexico and Colombia. But of course we can always do much more.

The nation’s trade and investment performance will not be transformed overnight. My hon. Friend the Member for High Peak (Andrew Bingham) spoke about real growth in micro-businesses, which we can grow further, and getting them exporting. The prize is clear. We need to get more SMEs exporting. The more they grow, gain efficiency and create jobs, the more they help the UK to pay its way in the 21st century. I hope that all hon. Members are left in no doubt that we are committed to that transformation. I shall now mention what we have done and what more we will do.

My hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) kindly congratulated Nick Baird and his team. They do a magnificent job. I am not altogether sure that Nick Baird supports all the proposals that my hon. Friend suggested he did. My hon. Friend made some interesting points and we welcome his continuing interest. He is right to take companies to

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UKTI. All hon. Members should be proactive in doing so. I am doing that myself, to try to get inward investment into my area. Doing that is right.

It is worth saying and fair to say that, organisationally, UKTI has become more entrepreneurial, with 75% of the senior management team now having been recruited from the private sector. The Foreign and Commonwealth Office is injecting commercial thinking into the way we work, with commercial awareness training for staff and private sector secondments for new ambassadors, before they go to post. That close alignment of trade and diplomatic interests is new. That is not only welcome, but necessary.

A number of hon. Members talked about what we are doing in terms of building up capacity and about the capability of British Chambers of Commerce and other potential delivery partners overseas. My noble friend Lord Green has been doing a lot of work on this. UKTI is piloting a scheme to harness British businesses groups and chambers of commerce overseas, to help them develop their networks and capabilities. Increased autumn statement funding of £8 million will allow UKTI to run a pilot project that will focus initially on 20 priority markets, including Brazil, Hong Kong, India, Russia and China.

We will also be working to increase the amount of trade in emerging markets. My hon. Friend the Member for Witham (Priti Patel) went to India recently, in the biggest trade delegation ever to leave British shores. I am glad that the hon. Member for Wrexham (Ian Lucas) has discovered the importance of trade with India. It took the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) 10 years, from the time he was Chancellor to when he was Prime Minister, to go to India. It took my right hon. Friends the Prime Minister and the Chancellor of the Exchequer 10 weeks. I do not think we need any lessons on the importance of existing and emerging markets or about high-level politicians visiting them. Some 100 companies, including more than 30 SMEs representing different sectors, travelled to India on that trade mission. I am travelling there again this evening, in support of a British company that will be revealed in the fullness of time.

Another contrast between this Government and the last is the fact that we are trying to get Ministers to travel much more than the previous one ever did. That is recognised. Ministers have already undertaken 24 trade missions in 2012, to places such as Indonesia, Japan, Malaysia, Mexico, Brazil and Saudi Arabia. I undertook missions to the United Arab Emirates and Burma.

Front-line support for business comes, of course, from our diplomatic staff. It is important to note that we are increasing our presence in the emerging powers. We are strengthening the UK’s diplomatic network, including opening embassies, as my hon. Friend the Member for The Cotswolds said, whereas the previous Government were closing them. By 2015 we will have opened up to 20 new embassies, consulates and trade offices, and deployed 300 extra staff in more than 20 countries, particularly in Asia, Latin America and parts of Africa, linking us to the world’s fastest-growing economies.

To help showcase the many opportunities available in these markets, my right hon. Friend the Prime Minister launched the trade envoy programme, which is specifically

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designed to help promote trade in emerging and growth markets. So far, 48 separate events have been undertaken by the prime ministerial trade envoys. My hon. Friend the Member for Wealden (Charles Hendry) recently led a trade mission to Turkmenistan, where he met the President and Foreign Minister and signed a memorandum of understanding on major sports infrastructure delivery. That is just one of the many notable successes for him and his colleague as trade envoys. My noble Friend Baroness Morris met the Jordanian Prime Minister, Dr Abdullah Ensour, and Minister for Trade, Hatem al-Halawani, to develop the relationship and expand opportunities in health care, a significant sector for the UK.

We should not forget the excellent work of the business ambassador network and its chair, my noble Friend Lord Marland. That network is a powerful advocate of the UK abroad, promoting the UK’s expertise, economy, business environment and reputation as the trade and investment partner of choice. The hon. Member for Wrexham said that we were not doing enough in the creative industries. A good example of the network’s participation is the Los Angeles creative forum, which was designed to develop relationships between the best forward-looking US and UK companies across the wider creative digital and related technology sectors. The forum was a success, with £50 million of business reported so far. We are doing things in the creative sectors.

The high-value opportunities programme is benefiting from our overseas network. The programme provides UK businesses with intensive support to access opportunities worth billions, as well as significant supply chain opportunities for SMEs. The scheme has helped deliver £4 billion of success for UK business since its inception, but we have increased the target for UK contract wins from £3.5 billion to £10 billion per annum.

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To meet that, we will strengthen our HVO support by doubling the number of campaigns from 50 to 100, with the top 20 campaigns being led personally by Ministers. There are £14 billion in projects around upcoming global sporting events in South Korea and the £1.3 billion expansion of Hong Kong’s airport. Among the successes are the multi-million pound contracts won for the Sochi winter Olympic games in Russia, the Zhuhai-Macau bridge project in China, and for UK rail companies, which are securing more than £78.5 million of business in Singapore.

However, our work is not all about trade. Foreign capital investment is vital if we are to enable UK infrastructure projects to be delivered. UKTI has a particular focus on major projects and major investors, with extra autumn statement funding available to enhance support in growth markets, such as the UAE, Qatar, Kuwait and Russia.

The right hon. Member for Belfast North (Mr Dodds) talked about the work of Invest Northern Ireland. I testify to its excellent work. Northern Ireland has an excellent story to tell. I take on board the right hon. Gentleman’s point about the G8 meeting, which is a real opportunity for Northern Ireland. I hope that he and colleagues, including Arlene Foster, will see whether there are ways of promoting even further investment in Northern Ireland in connection with that.

We are also working to position the UK as the leading location of choice for European headquarters, elite global entrepreneurs and exceptional talent, with a new dedicated visa route for entrepreneurs brought into the UK. For the first time ever, to answer the question of the hon. Member for Wrexham, we have identified the leading companies in the UK and have allocated to them Ministers responsible—not small companies, but the leading companies, which we want to look after now they are here and to encourage them to grow. We are not trying to do that for small companies. We simply cannot do that; it is unrealistic to expect that.

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South West Trains

11 am

Mr Dominic Raab (Esher and Walton) (Con): It is a great pleasure to serve under your chairmanship for the first time, Mr Hollobone, especially as you are fresh from your doughty defence of parliamentary prerogatives in the main Chamber yesterday.

My constituency is home to a large number of commuters. Every day, more than 22,000 residents of Elmbridge commute to London for work. That represents roughly 38% of the borough’s work force—no small proportion. Many rely on the rail network, which means travelling with South West Trains. As a commuting MP, I know first hand what the service is really like.

The number of people using the railway has increased sharply in recent years. Reflecting national trends, the number of recorded journeys to and from stations in Elmbridge rose by 78% between 2002 and 2010. The most recent figures from the Office of Rail Regulation reveal that, in the financial year 2010-11, 11.6 million passengers used the various Elmbridge stations.

With that in mind, the quality of the service provided by South West Trains is an important issue for local residents. The latest figures published by the consumer watchdog Passenger Focus are disappointing. In autumn 2012, it received 31,500 responses to its national passenger survey. South West Trains was rated the joint-worst train operating company for providing value for money, with just 37% of respondents expressing satisfaction. By contrast, Merseyrail achieved a 70% rating for value for money, and Grand Central achieved 73%.

There are various reasons why so many passengers do not feel they get value for money. For one, overcrowding has worsened. In 2011, the most recent year for which information is available, the company’s morning services ran at 4.1% over capacity, up from 2.8% in 2008. In the evenings, they ran at 2.4% over capacity, up from 1.7% in 2008.

Some services are much worse. According to Department for Transport data, the South West Trains 7.32 am service from Woking to London Waterloo, which I regularly take, is the second most overcrowded service in the whole country. It normally runs at 64% over capacity, carrying 471 more passengers than it is meant to.

The punctuality of South West Trains services has stayed flat over the past five years. On average, a commuter will experience at least one late train per week, and far more at certain times. On top of that, a spate of signalling problems has caused longer delays. The service is also often unable to cope with what must be described as relatively minor snowfall. Of course, some of that is Network Rail’s responsibility. Unfortunately, Network Rail is pretty hopeless too.

It remains to be seen whether the new alliance between South West Trains and Network Rail—the train company and the infrastructure operator—makes a significant difference in practice. I hope it will. We should bear in mind that, in 2012, 4,232 trains were cancelled, up 39.5% on the previous year.

Damian Hinds (East Hampshire) (Con): Does my hon. Friend share my hope that the alliance between South West Trains and Network Rail will, among other

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things, elicit some co-operation on looking in depth at some of the capacity issues, particularly on trains into Waterloo? That might be fundamental to addressing some of the overcrowding and overcapacity issues.

Mr Raab: I thank my hon. Friend for his intervention. He is spot on. Too often, there has been something almost like buck passing on the issue between the train company and infrastructure operator. It is to be hoped that the alliance allows a slightly more coherent, joined-up approach, although I suspect there are limits to what even a more integrated approach can deliver.

The company’s wider performance must be set against a backdrop of sharp increases in fares. Further analysis by the Office of Rail Regulation reveals that season ticket costs for companies operating in London and the south-east rose by 46% between 2004 and 2012, which was just above the national average. Currently, a season ticket between Guildford and London Waterloo costs £3,224 every year. That does not take into account the rising parking charges at stations, an issue that is also the responsibility of South West Trains. Frankly, it is difficult for me to stand on the platform with commuters and residents and to tell them they are getting value for money. I am just not convinced that they are.

Despite rising fares and low customer satisfaction, remuneration at Stagecoach Group, which runs South West Trains, increased between 2010 and 2012 by 8.2% for directors and by 9% for executive directors. The dividends rose by 44% between 2008 and 2012, to 7.8p per ordinary share. That was dwarfed by the one-off dividend issued in 2011, when Stagecoach Group completed a return of value to shareholders of 47p per share. That was worth a grand total of £340 million, including a reported £51 million for the chief executive, Sir Brian Souter.

I appreciate that South West Trains is just one part of Stagecoach Group, but when the performance of South West Trains has been so underwhelming, such figures smack of complacency, if not outright reward for failure. What levers do the Government have under the franchise agreement to press South West Trains to do more to improve the quality of the service and value for money for customers?

Then there is a whole series of questions about the role played by central Government. Under the terms of its franchise agreement, South West Trains pays a premium to the Government for the right to run its services. That was worth 4p per passenger kilometre in 2011-2—the second-highest rate paid by any train operating company to the Treasury. The subsidy paid by South West Trains can be contrasted with the subsidy of 11.4p per passenger kilometre received by ScotRail and the 12p per passenger kilometre subsidy paid to Arriva Trains Wales. Altogether, over the three years to 2011-12, South West Trains paid a whopping £544 million in subsidy to the Treasury— £140 million more than any other train operating company. That is inevitably reflected in fares paid by South West Trains users.

Those figures raise a slew of questions. First, while South West Trains has been the largest net contributor to the Treasury through its premium payments in recent years, other train operating companies in the south-east region were still receiving a Government subsidy. Those included Chiltern Railways and Southeastern. Will the Minister therefore clarify what objective criteria are

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used to determine which travellers subsidise other lines, how that subsidy is calculated and what can possibly justify the stark discrepancies in the figures?

There is a second range of questions about the regional train companies group, which includes the five train operating companies that received the highest Government subsidy in 2011-12: Arriva Trains Wales, ScotRail, First TransPennine Express, Northern Rail and London Midland. In direct consequence, passengers who use those regional train companies, as classified by the Office of Rail Regulation, have enjoyed below-average increases in the cost of their season tickets.

Let me make a broader point. It is one thing for the Government to seek to control ticket prices in more remote destinations, to prevent them from soaring out of control. However, it is another thing altogether to ask passengers on South West Trains to subsidise below-average season ticket rises in the north, Scotland and Wales, when, as I have made clear, some passengers in the south-east have faced price increases above the national average for their season tickets, in return for crowded carriages and poor service.

That is not just a redistribution of wealth out of general taxation, which understandably and rightly takes place to a degree, but a massive redistribution of wealth from the fares paid by specific commuters using a specific rail service. Can the Minister understand why so many in my constituency, particularly those on low and middling incomes, will find being targeted in such a flagrant manner so unfair?

I suspect most MPs, let alone constituents, have little idea of how their rail services are funded, at least in detail—the mix between user-pays and general taxation—or the criteria being deployed and implemented for each. I wonder what steps the Government are taking to correct that frankly lamentable lack of transparency—which is inherited, I hasten to add—over a vital element of national infrastructure.

Furthermore, it seems reasonable to expect that at least some guarantee can be made that a certain proportion of the premium payments received from busy lines will be reinvested back into those routes. Can the Minister give me any transparency or clarity on that? What assurance can he provide passengers on South West Trains that the premium payments they make are properly reflected in Government investment in the line on which they travel?

Looking at the big picture, the independent review of the rail network by Sir Roy McNulty in 2011 highlighted the extent of the underperformance of the rail network nationwide. Its calculations suggested rail costs in the UK are 20% to 30% higher than they need to be. That is a major cause of concern. The report concluded that up to £1 billion of savings could be made by 2018-19, without any reduction in services. That echoed the analysis of the Office of Rail Regulation in 2010 that revealed Network Rail was up to 40% less efficient than the top European rail infrastructure managers.

I welcome the fact that the Government accepted the McNulty recommendations to end the micro-management of rail operations and give operators greater flexibility to meet passenger demand. I also welcome Ministers’ commitment to achieve the efficiencies McNulty outlined.

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I would like to ask for an update on the progress made in delivering—not just accepting—the McNulty recommendations. I think a lot of people listening to the debate will not understand why so much is being paid in rising rail fares when such an important element of national infrastructure is lagging behind that in Europe and, to some degree, other developed economies.

I raised the point about the impact on commuters and residents and the sense of value for money. However, there is a broader question about the competitiveness of our economy, in a vital area of infrastructure. There is a huge amount of emphasis and focus on airport capacity and there is some on roads. I fear we are failing to grasp the nettle on this important element of our national infrastructure, with serious knock-on implications for the economy.

Beyond the set of issues that the McNulty Report looked into, does the Minister have any wider views on whether and how more effective competition could be introduced, in order to promote the innovation and value for money that rail users want, and that Britain sorely needs if we are to compete economically in the 21st century, with rising competition from Latin America through to Asia?

To what extent are the changes in systems and the innovation that we want being stymied by militant union leaders such as Bob Crow, who periodically relies on brinkmanship and outdated strike laws to hold the system, and the public, to ransom? I know that Network Rail has quite a broad, serious and substantial programme of reform. I would be interested to hear the Minister’s view on the extent to which that is being held up by the National Union of Rail, Maritime and Transport Workers and other unions.

In conclusion, South West Trains provides vital services in Elmbridge, but also well beyond. I recognise that running a train service across ageing infrastructure in a time of rising demand is not an easy challenge. There is also the compound effect of rising fares on customers, commuters and residents at a time of rising energy prices and the standard of living becoming a real issue, particularly for the squeezed middle. There is not a huge amount of extra money in the pot. In fact, we are trying to be as frugal as we can, given the huge debt problem inherited from the previous Government.

However, it is important that the managers and directors of South West Trains hear the message loud and clear that their passengers demand better value for money. Commuters pay a substantial and rising share of their income to get to work. It is right and understandable that they expect a fair deal in return. That must comprise reasonable fares, trains that run on time and decent travel conditions. Government must also play their part by providing a coherent overarching framework that promotes innovation and productivity, and transparency in relation to the funding arrangements, in particular by ensuring that passengers on South West Trains are not treated—let us talk frankly—like a cash cow to subsidise other parts of the network, without getting a fair deal in return such as investment in the line and the level of fares.

To sum up, it will take a combined effort to ensure that my residents, all those travelling on South West Trains and the country as a whole get the rail network that we need for the 21st century.

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11.16 am

The Parliamentary Under-Secretary of State for Transport (Norman Baker): I congratulate my hon. Friend the Member for Esher and Walton (Mr Raab) on his contribution, and I will do my best to answer the points he raised.

As hon. Members know, the South West Trains franchise is primarily based on services operating into and out of the nation’s busiest terminal station, London Waterloo, to a wide range of destinations. It includes the provision of one of Europe’s most intensive suburban and commuter networks, servicing more than 200 stations with more than 1,700 trains a day. The route network, which is managed by Network Rail, extends to 643 miles, with 1,375 sets of points and more than 4,000 signals. The network is therefore complicated.

One issue with the railways is that of success. We have seen a fantastic growth in passenger numbers over the past 15 years; across the country, numbers have just about doubled. They are where they were in 1929, on a network that is about the half the size that it was then. That is a huge operating challenge for Network Rail and the train companies, and it means that there is sometimes no longer the space to pick up on problems when they occur. Every train that is late has a knock-on effect on every other train all the way behind it.

I now turn to the operational performance of the South West Trains franchise, as my hon. Friend raised that matter. According to the public performance measure, which is used to record arrival within five minutes of the scheduled time, its current performance is 91.4%. That is a moving annual average. My hon. Friend may be interested to know that, for the latest period, 67% or thereabouts of arrivals were within one minute of the scheduled arrival time.

The company maintains its position as the most punctual railway south of the Thames. It is important to make that point, as it might be of some comfort to my hon. Friend, given his concerns. Its operational performance is better than that of Southeastern, which had a performance figure of 91.2%, while the five-minute performance figure for Southern was 88.3%, and it was 88.7% for First Capital Connect. The company’s joint performance improvement plan target of 92.7% of trains over the course of the year arriving at their destination within five minutes of the published arrival time will unfortunately be missed by around 1%, but that is still a better performance than other train companies in the south-east. However, that is not to say that we are complacent about performance in any way.

My hon. Friend asked what levers we had. In my capacity as Minister for rail performance, I regularly meet train companies and Network Rail not only to go through performance generally across the network, but to pick up individual problems. For example, I had a meeting this morning with East Coast Trains about problems on the line north of King’s Cross. Such meetings take place regularly.

There are, of course, safeguards in the franchise regime. My hon. Friend may have seen that, in the case of London Midland, we exercised our right to invoke penalties—or at least to secure passenger benefits that London Midland had to pay for—as a consequence of its poor performance on the network, which was below acceptable standards.

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As and when train companies fall below the specified standard, we will invoke measures to ensure that passengers effectively get some compensation for that poor performance. Ultimately, of course, a franchise can be removed from a train company, although the performance has to be really bad for that nuclear option to be exercised.

The autumn 2012 national passenger survey by Passenger Focus showed that 85% of passengers were satisfied overall with South West Trains, which was a higher figure than that for any other train company south of the River Thames. Another survey was undertaken—I think by Which?—but it was not statistically valid. The Passenger Focus survey is independent and properly validated, so it is the one to which we should pay attention.

My hon. Friend is right to say that we need to do more to drive up performance, which is one of the reasons why we are pursuing the concept of alliancing, which has been piloted in the South West Trains area.

Mr Raab: There is a discrepancy between the passenger surveys that are being quoted, because the autumn 2012 Passenger Focus survey rated South West Trains as the joint worst for providing value for money—I think that is the most recent survey—with a satisfaction rating of 37%, which suggests a slightly worse picture than the Minister indicates. If customers are giving such a poor indictment of the state of the service, despite the punctuality statistics that the Minister has kindly cited, is he suggesting that those customers have got it wrong? Is he suggesting that they are not appreciative enough of the service? I travel on the line every day, and I suspect that those people are right. I suspect that I am among the more than 60% who do not think that we get decent value for money.

Norman Baker: As I understand it, the figure my hon. Friend cites is about value for money. I was talking about overall passenger satisfaction with the network, which takes account of a wide range of factors, including, for example, the information given on station platforms and the cleanliness of trains. A wide range of factors make up Passenger Focus’s overall figure. I will drop him a line to clarify exactly what the various surveys say so that he is familiar with them and able to report back to his constituents with full knowledge of the nuances of the various surveys.

Alliancing was piloted in the South West Trains area, and it was recommended by the rail Command Paper as a key mechanism for aligning incentives in the rail industry and driving out costs. Alliancing was supported by Sir Roy McNulty’s report on rail value for money and by Richard Brown’s review of rail franchising.

With support from the Secretary of State, South West Trains and Network Rail commenced operation of the deep alliance, a commercial arrangement between South West Trains and Network Rail, on 29 April 2012. I make it clear that we as a Government—and therefore the taxpayer—take no downside risk in the alliance, but above a threshold, we receive funds from profits earned through efficiencies.

The alliance has established a day-to-day management relationship between the two core organisations that represents an unprecedented level of co-operation between track and train to improve performance and efficiency

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on the route. The alliance’s scope includes the operation and maintenance activities of the Network Rail Wessex route and all South West Trains activities other than IT. The alliance does not extend to Network Rail’s capital enhancement or renewals schemes, although incorporating those activities and realising efficiencies from them remains a long-term aim. Initial financial baselines of costs and revenues for both parties have been agreed by the alliance. By reference to those baselines, the parties share the risk and reward for the financial performance of the alliance through a pain-gain sharing arrangement. If the gain is sufficient, the Government also benefit on behalf of the taxpayer.

My hon. Friend mentioned fares, and we are all acutely conscious of the need to try to bring to an end the era of above-inflation rail fare increases, as the Government has clearly set out. We inherited a situation in which the previous Labour Government had driven up rail fares by above inflation under a process that started, I think, in 2003-04. The difference between the previous Government and this Government is that we are investing heavily in the network to try to provide extra capacity to address some of the issues that he rightly raises on behalf of his constituents, whereas fare increases in previous years were simply a measure to provide extra funds to the Treasury for other uncertain purposes. We now have the biggest rail investment programme since Victorian times, and the South West Trains area, like all others, will benefit.

The present fare arrangements, which we seek to bring to an end as the Network Rail efficiency savings kick in, allow regulated fares to rise by 1% above the retail prices index each year. Importantly, the formula is exactly the same as that applied nearly all the way through the previous Labour Government. The formula is applied equally across England, so there is no difference between what we do for the South West Trains franchise and what we do for Northern Rail or TransPennine Express. They all use RPI plus 1, unless there are exceptional circumstances, such as under the previous Government when the Southeastern franchise used RPI plus 3 for a while to pay for the Javelin high-speed train. The subsidies for First ScotRail and Arriva Trains Wales are not a matter for us, as they are entirely determined by, respectively, the Scottish Government and the Welsh Assembly. What they do with their trains and their money is up to them.

Through the franchising process, we also try to ensure that we get the best value for taxpayers’ money, because the more money we get in, the more we are able to invest in addressing the capacity and crowding problems to which my hon. Friend rightly referred. There is a competitive tendering process for each franchise, and I am sure that he accepts that it is in our interest to get the best possible price for each franchise. If that means that we are securing money through a premium from the franchise holder, that is a good outcome for the taxpayer. There are clearly some areas of the country in which the train service will not turn a profit, meaning that a premium is not possible. Under this Government, we have seen a

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general trend towards ensuring a better balance between the fare payer and the taxpayer. Driving out inefficiencies leads to the opportunity to try to correct some of the imbalances that exist across the network.

Mr Raab: The Minister is most generous with his time. The point I made in my speech was that the subsidy from South West Trains users is 4p per passenger kilometre—that is what fare payers pay back to the Government, presumably for wider investment in rail infrastructure. If we look not just at Scotland and Wales, but at Northern Rail, London Midland and Southeastern, they receive a subsidy from central Government. Will the Minister explain how that is determined? On what possible basis can those discrepancies be justified?

Norman Baker: Obviously, nearly all the franchises were let under the previous Government so, in a sense, we inherited the arrangements that apply to the various franchises across the country, and they cannot be unpicked during the period of a franchise. However, we can try to influence future franchises, and the Secretary of State will make a statement to the House in the near future about how we are taking forward the franchising regime.

Inevitably, some lines are profitable and some lines are not, and that is simply down to market forces. A concentrated commuter network or a highly attractive route—say, from London to Manchester—is more likely to be profitable than a route that serves a large number of small stations, such as between Inverness and Wick and Thurso. It is difficult to envisage how that could ever make a profit, because it is a long, straggly line that few people use. Market forces therefore inevitably apply, but our job is to try to ensure that we secure the maximum return from the private sector to enable us to reinvest in the network for the future.

My hon. Friend mentioned Brian Souter’s salary but, on the other hand, his company is now paying a premium to the taxpayer. In a sense, the private sector system seems to be working. Brian Souter has invested heavily. He is taking the rewards for himself, which he is entitled to do, but he is also paying a premium to the taxpayer that enables us to reinvest. The system seems to be working, and we want to get more train companies paying money to the Government. If we can do that, because efficiencies have been driven in and inefficiencies have been driven out, it is all to the good.

I am afraid that I have not been able to say anything about investment, but there are large investment plans for the South West Trains area. I will happily drop my hon. Friend a line to set out what they are, but they include longer platforms and trains, and in due course steps to improve the situation at Waterloo.

Mr Philip Hollobone (in the Chair): We have arrived at our destination and I am afraid that our journey terminates here.

11.29 am

Sitting suspended.

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Fuel Poverty (Wales)

[Mrs Linda Riordan in the Chair]

2.30 pm

Chris Ruane (Vale of Clwyd) (Lab): I rise to speak about fuel poverty in Wales. Fuel poverty is defined as when 10% or more of a household income is spent on fuel. Wales has the highest rate of fuel poverty in the whole UK, with 420,000 households, which is 30%, in fuel poverty. To put that in perspective, the figure compares with just 11% in the south-east, so that for Wales is nearly three times higher. The ward in Wales with the highest rate of fuel poverty is Rhyl West, which is in my constituency. The ward with the 10th highest rate is Rhyl South West, where I have many relatives, in which I grew up on a big council estate.

In Rhyl West, 900 hotels and guest houses have been turned over to houses in multiple occupation, and the landlords have made no investment to insulate and improve those homes. They have made money out of misery, charging £85 a week in housing benefit for substandard homes. That is a big problem in my constituency and in Wales.

There is a perfect storm, because disposable income in Wales is going down and fuel bills are going up. Since 2010, the average household fuel bill has gone up by £300 a year. In the past year alone, it has gone up by 7%, and over the next two years, it will rise by a further 7%.

Jessica Morden (Newport East) (Lab): Does my hon. Friend agree that many of our constituents’ disposable incomes will be hit even harder by the impact of the bedroom tax in April, when people will be forced to choose between heating their homes or cutting down on food in order to pay the extra rent?

Chris Ruane: I agree entirely and will come to that issue shortly. The TUC in Wales reports that Wales has the lowest levels of disposable income, but the highest falls in living standards. The situation is going to get worse, as my hon. Friend rightly said, because council tax for the poorest will be introduced, although the Welsh Government have mitigated the effect of that by setting aside £22 million for the next year to stop the rise hitting the poorest. Owing to the bedroom tax, someone who has lived in their council house for 50 years but does not want to move, because they love their house and community, will have to find an additional £25 a week. The benefits freeze of 1% could result in people on benefits actually freezing. There is also wage stagflation in Wales.

At the same time, the Government and their allies are giving £44,000 a year extra to a person who earns £1 million a year. The total package is worth £3 billion. Imagine what good work could be done if that money were used to employ unemployed people to insulate the homes of the poorest and most vulnerable.

Glyn Davies (Montgomeryshire) (Con): Does the hon. Gentleman accept that for the whole 13 years of the previous Labour Government, the top rate of tax was 40p? Next year it will be 45p. How on earth can he stand up and say what he just said?

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Chris Ruane: I can do it quite easily and I will do it again. Whichever way the hon. Gentleman slices it, the Labour Government introduced a rate of 50%, but the Conservatives and their Liberal allies have taken it down to 45%. That means additional money in the pockets of millionaires and billionaires, and less money in the pockets of the most vulnerable. That is Robin Hood in reverse; it is Robbing Hood—taking money from the poorest and giving it to the richest.

I do not want to sound too negative, so let me say what could be done. Local authorities need to work with the Department of Energy and Climate Change and the Department for Communities and Local Government, and more widely across the Government, to ensure that they play a full role in encouraging collective switching, because that process can lead to big discounts of £200. DECC needs to promote that more with local authorities, because people are not switching at the rate they should be. There might be many reasons for that. For example, an elderly person may be going blind or have early-onset dementia, while poorer people may be functionally illiterate or have no access to computers. There is a whole swathe of people who should be switching but are not, so local authorities should be co-operating with DECC and other Departments to organise collective switching.

Local authorities should introduce community energy initiatives, perhaps with the encouragement of central Government grants. A lot can be done by local authorities. In my constituency, Denbighshire county council used £35 million of prudential borrowing to upgrade fully its 3,000 council houses with double glazing, gas and insulation—it did a fantastic job. It also co-operated with me and Crispin Jones, the director of Eaga Partnership in Wales, to connect 125 former Ministry of Defence soldiers’ and officers’ houses to the gas grid.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): I congratulate the hon. Gentleman on securing this important debate. Before I was a Member, I used to work for Citizens Advice. As part of that role, I was strategic adviser for National Energy Action Cymru, and I also served on the Welsh Government’s fuel poverty advisory group. It was of great interest to us that Wales is a net exporter of electricity, producing nearly twice the amount we need for ourselves, yet we have the highest levels of fuel poverty. Can the hon. Gentleman explain that discrepancy?

Chris Ruane: I will come on to that point, and there is a particular north Wales angle to the debate. I pay tribute to the hon. Gentleman’s work with Citizens Advice and on fuel poverty.

A lot can be done by local government, but more can be done by national Government. The Labour Government introduced the winter fuel allowance and helped pensioners in the middle of winter by giving them £200 or £300 to pay their gas and electricity bills. That Government also reduced VAT to 15%, but the Conservative Government, with their allies, increased it to 20%. In 2001, Labour introduced the home energy efficiency scheme. Over the past 12 years in Wales, £150 million was spent insulating and improving the energy efficiency of 127,000 properties. A property that has been improved can cut its gas and electricity bills by up to 25%.

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Roger Williams (Brecon and Radnorshire) (LD): The hon. Gentleman talks about VAT but, of course, VAT is charged at 5% on energy and, as far as I know, it has stayed at that level during this Parliament.

Chris Ruane: The hon. Gentleman might be right about that, but wider cuts are affecting the disposable income of all families, especially the poorest.

The Prime Minister talks a good talk but he does not walk a good walk. He promised from the Dispatch Box that he would force the energy companies to offer the lowest tariffs to the poorest people, but nothing happened—he did not know the detail. The Government need to do much more. Pressure needs to be put on the energy companies and the big bonuses they are handing out at the same time as they increase prices massively. In the past year, two chief executives have left their energy companies. One was given a £13.5 million golden handshake and the other got £15 million. That is obscene at a time when people will be freezing to death—dying of hypothermia in their own homes.

There needs to be an inquiry into the ups and downs of gas prices. When supply is tight, gas prices shoot up, but when it is loosened, they gently come down. The time lag and price lag need to be fully investigated, because people are being ripped off. If customers are middle class and have a steady income, so they pay by direct debit, they are offered a discount of £100, but if people have to fill their electricity or gas meter with 50p and £1 coins, they are charged the maximum, and that is wrong.

There needs to be certainty and unity within the Government on energy policy. We see the antics of Ministers who are opposed to solar farms in the fens. There are MPs—some from north Wales—who are opposed to offshore wind farms, MPs who are opposed to onshore wind farms, and MPs who are opposed to the feed-in tariff. They know what they are against, but they do not know they are for, and the uncertainty and lack of unity has led to a lack of investment in the renewable energy market in my constituency and throughout the UK.

Roger Williams: Will the hon. Gentleman give way?

Chris Ruane: I have given way to the hon. Gentleman once; that is all he is getting from me.

The Government have introduced the energy company obligation, for which I give them credit, and £1.2 billion has been set aside for the whole of the UK—[Interruption.] I urge the Minister—he is yakking away over there—to ensure that Wales gets its fair share of that ECO money.

Susan Elan Jones (Clwyd South) (Lab): I wonder whether the hon. Member for Brecon and Radnorshire (Roger Williams) was going to point out that the 5% VAT rate for energy came about due to a successful Labour rebellion in the dying days of John Major’s Government. There may be a good analogy there for us in what will hopefully be the dying days of the current Government.

Glyn Davies: Mention Thatcher.

Susan Elan Jones: I am grateful to the hon. Gentleman for his noise.

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Does my hon. Friend agree that this matter is one of the most moral issues because it disproportionately affects people on low incomes and pensioners? That is a really important issue right across Wales.

Chris Ruane: Those affected are the most vulnerable and elderly pensioners, and, specifically in Wales, they are also those who are off grid but cannot get connected to gas because of topography, geology or geography. Dyserth is an off-grid town in my constituency. I was successful in getting gas connected to Bodelwyddan, because it was low-lying, but unsuccessful with Dyserth.

As the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) said, Wales is a net exporter of energy. North Wales, in particular, is playing its role in renewable energies, and my constituency will have the biggest array of offshore wind farms in the world. I switched on 30 turbines at North Hoyle some eight years ago, and when he was Secretary of State for Wales, my right hon. Friend the Member for Neath (Mr Hain) switched on another 30 turbines at Rhyl Flats. Behind those, we will have 200 turbines at Gwynt y Môr and the 2,000 wind turbines at the Rhiannon wind farm array. When I was switching on the North Hoyle turbines, the Prime Minister was describing them as “giant bird blenders”, at the same time as sticking a mini turbine on his own roof in Notting Hill. He was looking both ways.

North Wales has in Wrexham the Sharp solar panel factory, which is the biggest producer of solar panels in western Europe. Sharp made its future plans when Labour introduced the feed-in tariff. It cranked up production and got all the workers in place only for the current Government to say that they were going to scrap the tariff. We and companies such as Sharp need certainty.

The Minister of State, Department of Energy and Climate Change (Gregory Barker): Will the hon. Gentleman give way?

Chris Ruane: The Minister will have plenty of time to address all these issues later.

North Wales has Wylfa nuclear power station, which will hopefully be replaced shortly. In Dinorwig, we have Electric Mountain, which is a hydroelectric power centre with a lake at the top of the mountain. It can produce electricity in seconds to respond to demand at peak times, such as at the end of “Coronation Street”. My constituency has all these fantastic renewables. Looking to the future, we have the OpTIC centre, which is working on fusion power. In the rest of Wales, we have the possibility of the Severn barrage, which could create 5% of the UK’s electricity needs. There is the Irish interconnector from Dublin to Prestatyn in my constituency, which will allow energy to go from north Wales to Ireland. We also have non-renewables in Wales, as we have the gas terminal in Milford Haven that brings a great deal of gas to the UK, as well as the Connah’s Quay gas-fired power station in north Wales. We create energy in Wales, but we have the highest energy bills in the UK. It is the same with water: we capture water and export it, but we have the highest water bills in the UK.

With 420,000 families living in fuel poverty, Wales already has a higher proportion of households in fuel poverty than any region in England. The problem will

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only get worse unless the UK Government act. The Welsh Government are doing what they can to improve energy efficiency in Wales and they have an excellent record. However, on the fundamentals of fuel poverty—lower incomes and rising bills—it is the austerity and inaction of the Tory-led Government that are hitting Welsh households hard. The Chancellor has an opportunity in tomorrow’s Budget to ease the strain that his policies are putting on families in Wales. He should adopt Labour’s proposal to force energy companies to pool the power that they generate and make it available to any retailer, as well as the requirement that energy companies put all over-75s on their cheapest tariff. In Wales, that would mean more than 250,000 pensioners being up to £200 better off. That proposal could be part of a Budget that would be much fairer than last year’s, which everybody, including some Government Members, rebelled against, and which asked millions to pay more so that millionaires could pay less.

2.46 pm

Roger Williams (Brecon and Radnorshire) (LD): It is a great pleasure to serve under your chairmanship, Mrs Riordan. I congratulate the hon. Member for Vale of Clwyd (Chris Ruane) on securing this important debate. It is useful to remind ourselves that cold weather means misery for the many people who have to choose between heating their home or finding something to eat. That situation needs to be addressed, and I am sure that the Minister will set out what the coalition Government are doing.

The hon. Gentleman is sometimes known as the hon. Member for Rhyl because of his passion about his constituents there. I have fond memories of Rhyl, because I spent the first holiday that I can remember there, although during that time I unfortunately also had my first tooth extraction, so my memories are mixed. I am sure, however, that the hon. Gentleman would want me to say that Rhyl is a very fine place to have a holiday.

The hon. Gentleman mentioned the scheme in his constituency whereby MOD houses have been joined up to mains gas. One way of remedying fuel poverty is to ensure that as many people as possible have access to mains gas. Many people in my constituency do not have that benefit and suffer as a result. Will the Minister say whether there are any plans for communities in my constituency, such as Coelbren, Abercraf or Llangynidr, to have access to a scheme that would subsidise connection to the mains, because that would make a great deal of difference to those communities?

My second point is about cold weather payments, although this is not directed specifically at the Minister because his Department is not responsible. In their last two years of existence, the Labour Government increased the cold weather payment from £8.50 to £25. That was perhaps seen as a sweetener prior to the general election, but I am pleased that the coalition Government have made that £25 payment permanent, because it makes a real difference to a number of our constituents. However, some of our constituents do not benefit to the extent that they should, as eligibility for the payment is worked out by linking each postcode area to a particular weather station.

That system works reasonably well when an area is linked to a weather station that has the same type of weather and is the same height above sea level.

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Unfortunately, Coelbren in my constituency is badly served by the process. For a very long time—during my time in this place as well as that of my predecessor—we have campaigned for it not to be associated with a postcode that runs all the way down to the sea at Baglan. Coelbren is linked to the weather station at St Athan, which is almost at sea level as well.

Coelbren, which is 800 feet above sea level, often does not benefit from cold weather payments, whereas Ystradgynlais, which is at an altitude of probably 200 or 300 feet below, does benefit from the payments, because it is linked to Tredegar, believe it or not. While I do not want to do any disservice to Ystradgynlais at all, because I believe its linkage is fair, the linkage of Coelbren to St Athan is undoubtedly unfair. The area of its postcode is very long and thin, and I know that the hon. Member for Swansea East (Mrs James) would agree, because she has local knowledge of it.

I shall be taking a group of constituents from Coelbren to see the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), to see whether an exception can be made for that area, because it has been done a great disservice. It is an old coal-mining area with a lot of local authority housing that has not been brought up to the best standards of heat efficiency. A lot of elderly people living there would benefit from cold weather payments, so we shall make a last-ditch appeal for Coelbren to be served better by cold weather payments, because that would make a lot of difference to those people’s comfort and to whether they are in fuel poverty.

Several hon. Members rose

Mrs Linda Riordan (in the Chair): Order. As allowed by Mr Speaker, I shall now impose a time limit. To give all Members who wish to contribute to the debate the opportunity to do so, I intend to allow each speaker seven minutes. I call Nia Griffith.

2.52 pm

Nia Griffith (Llanelli) (Lab): Thank you very much, Mrs Riordan. The figures for Wales on fuel poverty are very stark indeed because more than a quarter of all households are affected, with a much higher figure in some areas. The housing stock in many areas is fairly old, and we also have a prevalence of coal fires. If people have a coal fire, they need an air flow to keep it going, and consequently we have had many poorly insulated properties. The Welsh Government are doing a good job of trying to remedy the situation through the Arbed and Nest programmes, but the legacy remains, and some homes are very hard to heat and to make energy-efficient.

We also have the major problem that a number of homes are not on mains gas, and they are not only isolated farmhouses, but whole villages. That is often the case because those villages were mining areas in which coal was the predominant fuel, meaning that gas was not seen as a priority.

Jonathan Edwards: The hon. Lady and I represent the area that contains the anthracite coal field, where the gas network was vehemently opposed. We are all dependent on solid fuels in my village of Penygroes, for instance,

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and throughout the Amman and Gwendraeth valleys, which she represents. Does she agree that it would be really helpful if payment of the winter fuel allowance was brought forward for those who are reliant on oil, gas bottles or coal so that they would be able to buy those fuels in the summer, when they are cheaper?

Nia Griffith: The hon. Gentleman is absolutely right. The November payment is made at exactly the time when solid fuel is at its most expensive, and it would be much better if people had the money earlier so that they could then spend it in preparation for the winter.

There is a particular problem for homes that are not on mains gas, because that limits people’s choice of fuel. They might use solid fuel, more electricity, or bottled gas for cooking. More recently, of course, people have been using liquefied petroleum gas, but some areas face a problem because one supplier of LPG gas has a monopoly. I corresponded with Chris Huhne about that matter when he was Secretary of State for Energy and Climate Change, so I hope that the Minister will be able to continue work to examine LPG competition, particularly when people are trapped into continuing with the same supplier because a whole estate is supplied by one supplier, which creates a difficult situation.

The major problem involving some of the insulation and energy efficiency programmes is a real slap in the face when that is combined with the cuts to the feed-in tariff that the Government brought in. Housing associations, which house some of the most vulnerable people who are often in fuel poverty, were going to roll out a comprehensive solar panelling programme to lower people’s bills and generate additional cash through the feed-in tariff, which would then enable them to improve yet more homes. Following the cut, those programmes are completely gone, which is a real tragedy for those people who would have benefited.

I congratulate the Government on ensuring that cold weather payments keep up with inflation, but Wales rarely experiences seven continuous days with an average temperature of 0º. We are far more likely to see the temperature fluctuate, so the payment is not the answer that we would like to think it is. It is definitely important for emergencies, but it is not something that the Government can be proud of because, at the same time, they have taken £100 off the £400 winter fuel allowance for the over-80s, and £50 off the £250 winter fuel allowance for other pensioners. That has left people over the past two years with an even greater struggle to pay their bills than previously.

It is worrying that the Government have not got a grip on energy companies that are letting prices go up and up. They really need to step in and have a far stronger regulator, which is certainly something that Labour would be doing in government. One thing that has distressed me most is the issue of SWALEC—now SSE—which is a large supplier in south Wales. Because many people tend to be loyal to their original company, they have not switched from their supplier, and that particularly applies to people who are perhaps elderly, or not in a position to make price comparisons on a website. Such people often stick with their original supplier.

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The supplier has chosen to impose a standing charge of £100 for people’s electricity, and if they also have gas supplied by the company, they do not get a decrease or a discount—they pay another £100 for the privilege. When I took that up with the supplier, saying that it was absolutely outrageous that the standing charge had rocketed to the extent that the poorest families were paying £200 before they used even 1W of electricity or one therm of gas, I received the answer that the practice was encouraged by the regulator, because it would simplify things. However, it is clear that that is a regressive way of charging people, because those who are trying to scrimp and save—such people are often single pensioners, who make a terrific effort, perhaps by heating only one room and being very careful about what they use—are being hit the hardest.

I am cynical about the motives behind the charge, and one reason why is that I am aware that energy companies know that politicians are trying to suggest that they might offer the lowest tariff to the most vulnerable customers. If the lowest tariff is upped, a buffer is created against politicians doing that. Additionally, bills go up every time energy prices rise. Again, as politicians, we would like to see energy companies decreasing their charges when prices fall, but of course a standing charge will not be decreased. It seems to me that that is an extremely sly ploy to fix a price that will not be hit by the whim of politicians and that will escape such scrutiny. If that is what the regulator is recommending, I ask the Minister to have a serious discussion with it about whether that is the best way forward. I have singled out one company, because it is one in Wales whose actions hit a lot of my constituents.

Chris Ruane: The company that my hon. Friend has singled out, SSE, is the company that spent £15 million on a golden handshake for its chief executive.

Nia Griffith: That is a real inversion of priorities.

Many other companies are carrying out that practice. In fact, there are few that offer tariffs that do not involve a fixed standing charge. However, the one to which I am referring is particularly obnoxious, because a high proportion of the money that a low-income family ends up paying goes on just the standing charge.

Simon Hart (Carmarthen West and South Pembrokeshire) (Con): I have a brief question arising from the previous intervention. Will the hon. Lady inform us whether the contracts that resulted in those big pay-offs were entered into under the previous Government?

Nia Griffith: I expect that the hon. Gentleman will answer his own question when he has the chance to speak later, but it is certainly not something that I am going to deal with now.

I want to get back to the families I have been dealing with and the people I see from day to day. I ask the Minister to examine very carefully the ways in which energy companies set their bills and to consider whether there is any way in which he can alleviate some of the desperate fuel poverty that we are seeing in our communities.

3.1 pm

Glyn Davies (Montgomeryshire) (Con): I look forward to speaking under your chairmanship, Mrs Riordan. I thank the hon. Member for Vale of Clwyd (Chris Ruane)

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—I, too, sometimes think of him as the hon. Member for Rhyl—for bringing forward for debate one of the most important issues that we face as Members of Parliament. I may not have agreed with everything that he said in his presentation of the argument, but there is no doubt at all that fuel poverty—the choice between eating and heating that so many people now face—is one of the biggest challenges that we have to address.

Much of what happens is probably beyond our ability to deal with. I do not want to make a political point, but what we saw between 2004 and 2009 was an absolutely massive increase in fuel poverty. We have seen the Library figures. The number of households in fuel poverty in this country increased from 2.5 million to 5.5 million between 2004 and 2009. The reason why I do not want to make this a political point—I suppose I could do if I wanted—is that I accept that an awful lot of that was probably beyond the ability of the former Government to control.

Chris Ruane: If the hon. Gentleman has the figures with him, will he tell those of us gathered here today what the figures were in 1994—the first figures in the document—in comparison? They were far higher.

Glyn Davies: The first figures are for 1996, but I just made reference to the figures for the period from 2004 to 2009, which saw a massive increase. I simply wanted to draw attention to the fact that even though the Government at the time would have been very committed to protecting people from fuel poverty, there were international conditions that resulted in a massive increase. That is why I congratulate the hon. Gentleman on bringing forward a debate on such an important issue. It is one that faces us all. It is a particularly serious issue in Wales, and there are a number of reasons for that.

Clearly, one reason is that we have less insulated housing stock in Wales. The Welsh Government are seeking to deal with that issue, and here at Westminster we have the drive towards the green deal. Across Britain, we are tackling the issue of home insulation, which is massively important. However, there is one issue that we must always be careful of: all these things add costs to new housing; they make it very difficult to build. One of the worries that we have is that we should be focusing all our attention on making sure that properties are well insulated. That is why I so disagree with the sprinkler system that is being introduced in Wales. That puts a high value on new houses when that value should be coming from making houses more insulated.

The second issue is the higher dependence in Wales on oil, which is more expensive. That is an historical issue. And of course, in Wales—this is a big issue in Rhyl and certainly in the north of my constituency—average wages are lower, which increases the level of fuel poverty.

I commented initially on the huge rise in fuel poverty between 2004 and 2009, much of which was due to the international market, which is outside our control. We are seeing now the pressure that comes from international gas prices—probably the biggest contributor to the increase in energy prices that we have seen—which are outside our control. That means that we must be particularly careful about the additional things, which might not have quite as much impact but are within our control. That is why I want to refer again to an issue that I think my right hon. Friend the Minister will be tired of

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hearing me talk about: the impact of the environmental taxes that are put on the bottom of our energy bills. We are always told how little a factor that is compared with the international market. We cannot influence the latter, but we can influence the former, and I want to explain why we should reduce that increase.

Mr Mark Williams (Ceredigion) (LD): I welcome my hon. Friend’s comments. He talks about action that we can take. One thing that we can do on oil prices is actively encourage, particularly in rural areas, the development of oil syndicates. The Department of Energy and Climate Change has taken some action on that. Would he encourage DECC to take more action to encourage the development of oil syndicates and get those prices down, particularly in rural areas that are off-grid and have no other options?

Glyn Davies: I thank the hon. Gentleman for his intervention and I certainly agree with him. I have encouraged DECC to do a number of things recently in relation to energy and oil prices. One thing it should not be doing is building wind farms and destroying the countryside in mid-Wales.

We must consider seriously the issue of shale gas. I know that there are an awful lot of conditions and we must be very careful about how we go forward with shale gas, but as a nation we must take the issue seriously. We have to take it forward and understand whether there is potential there to help us with energy prices.

Nia Griffith: Will the hon. Gentleman accept that in areas such as mine, where we have the Loughor estuary, which is famous for its cockles, the sort of drilling and exploration to which he refers could have devastating effects, both in terms of flooding along the coast and on the industry itself, because of the disturbance of the wildlife?

Glyn Davies: The hon. Lady makes a fair point, which is why I think that we must be incredibly careful. We have to do a great deal of research. It is right that Cuadrilla, the company involved, is making certain that it goes to an awful lot of trouble. If there is somewhere in Britain that is unsuitable, we should not be allowing shale gas drilling there. We can allow it only where the potential for bringing down energy prices is such that we have to go forward with testing and seeing what the potential is.

Most of my objection to onshore wind is due to the impact on not only my constituency but the whole of mid-Wales and, indeed, much of rural Britain—much of the wild land of Britain. There is no doubt at all that the level of subsidy that is paid to the international companies that are going forward with the proposals is obscene. It is the biggest transfer of money from the poor people, very often, to massively rich foreign development companies. This transfer of money is the opposite of what we should be seeing, the like of which I have never seen before. The whole thing is obscene. The Government have reduced the level of subsidy by about 10%—I think the order might have been signed off in the past couple of weeks—but there is much more scope for that.