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House of Commons

Tuesday 14 May 2013

The House met at half-past Eleven o’clock


[Mr Speaker in the Chair]

Mr Speaker: Order. I draw Members’ attention to the fact that the book for entering the private Member’s Bill ballot is now open for Members to sign in the No Lobby. It will be open until the House rises today and when the House is sitting on Wednesday 15 May. The ballot will be drawn on Thursday 16 May, and a note setting out those arrangements and the dates when ten-minute rule motions can be made and presentation Bills introduced are published in the Order Paper.


Sessional Returns


That there be laid before this House Returns for Session 2012-13 of information and statistics relating to:

(1) Business of the House.

(2) Closure of Debate, Proposal of Question and Allocation of Time (including Programme Motions);

(3) Sittings of the House;

(4) Private Bills and Private Business;

(5) Public Bills;

(6) Delegated Legislation and Regulatory Reform Orders;

(7) European Legislation, etc;

(8) Grand Committees;

(9) Panel of Chairs; and

(10) Select Committees.—(The Chairman of Ways and Means).

Oral Answers to Questions


The Chancellor of the Exchequer was asked—

Housing Market

Q1. Ann McKechin (Glasgow North) (Lab): what fiscal steps he plans to take to stabilise the housing market. [153848]

The Chief Secretary to the Treasury (Danny Alexander): My right hon. Friend the Chancellor is in Brussels today at ECOFIN, exercising the considerable influence that Britain enjoys as a full member of the European Union. The Government are committed to the vital reforms needed to address long-term structural issues in the housing market. They have already committed to investing £11 billion during the spending review period,

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and in the Budget we announced the Help to Buy scheme, a major new package to increase the supply of low-deposit mortgages for creditworthy households, which I hope the hon. Lady will welcome.

Ann McKechin: In evidence to the Treasury Select Committee, the distinguished commentator, Martin Wolf, described the Government’s mortgage indemnity guarantee as

“good politics and horrendous economics.”

Why are the Government pursuing a policy that is likely to increase the price of already over-inflated property, rather than financing affordable social housing that is needed by hundreds of thousands of people across the country?

Danny Alexander: The hon. Lady comments on affordable social housing, but I note that during Labour’s 13 years in office the amount of social housing fell by 421,000. This Government’s policies will increase the amount of social housing by 200,000—a record on which she should compliment us. On the mortgage indemnity guarantee, offering support to many households who cannot afford the large deposits now required is a thoroughly good thing, and by involving the Financial Policy Committee of the Bank of England in a review after three years we also have a guarantee of financial stability.

Mr Philip Hollobone (Kettering) (Con): The Government’s fiscal and other policies have cut the deficit by one third, helping to keep interest rates low. What would happen to the housing market and domestic mortgage costs were interest rates to rise, even by just 1%?

Danny Alexander: My hon. Friend makes an important point, and he will know that if mortgage rates increased by 1% it would add more than £10 billion a year to the costs for British households—not a consequence any of us on the Government Benches would welcome.

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): When the priority should be helping first-time buyers, will the Chief Secretary finally rule out the Help to Buy scheme being used to buy second homes—yes or no?

Danny Alexander: Actually, I have been very clear on this question throughout. It is not the intention of the Help to Buy scheme to aid people in buying second homes. The part of the scheme already up and running—the shared equity scheme—is available only for someone’s primary residence, and we will set out details of the mortgage indemnity guarantee as we go forward. The intention is not to help people buy their second homes.

Cathy Jamieson: Is it not staggering that two months after the Budget the Chief Secretary is still unable to rule out people buying a second home for themselves under this scheme? Let me try another question. With house building at its lowest since the 1920s and the housing benefit bill rising, why did the Government not use funds from the 4G auction to build 100,000 more affordable homes?

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Danny Alexander: The hon. Lady will know that housing completions are 19% above the trough of 2010, numbers of housing starts are 58% above the trough of 2009, and she should welcome that improvement. In the Budget, we announced a £5 billion package to help the construction sector through the Help to Buy shared equity scheme, which will support the construction of 76,000 properties, as well as a massive expansion of the Build to Rent programme. It is staggering that the hon. Lady cannot bring herself to welcome those measures.

Harriett Baldwin (West Worcestershire) (Con): Will the Minister welcome today’s figures showing that the number of first-time buyers increased by 20% this month? Will he also welcome the fact that the Department for Communities and Local Government has shown that 37,000 new homes for social rent were built last year, which is a record since 1997?

Danny Alexander: I welcome those figures. They suggest that the policies being pursued by this Government are having the desired effect.

Youth Unemployment

Q2. Andrew Gwynne (Denton and Reddish) (Lab): What assessment he has made of the effect of current fiscal policy on the level of youth unemployment. [153849]

The Chief Secretary to the Treasury (Danny Alexander): The UK labour market is showing signs of recovery. More people are in work than under any previous Government.

Andrew Gwynne: The Chief Secretary says the economy is healing but he should take more seriously the fact that youth unemployment is growing again, with nearly 1 million young people unemployed for the last year. Will he explain why, in the past year, youth unemployment has grown by a staggering 355% since the Work programme was introduced? Is that not disgraceful? Should not the Government prioritise a compulsory jobs guarantee paid for from a bank bonus tax?

Danny Alexander: In this matter, a wee bit of humility from the Labour party would not go amiss, on the basis that youth unemployment has been a persistent problem in this country for many years—youth unemployment has been rising since 2003 or 2004. I note that, in the hon. Gentleman’s constituency between December 2010 and December 2012, youth unemployment fell by 11.8%. Through measures such as the Youth Contract and the Work programme, we are deploying considerable support for the task that he and I agree on, which is getting more young people into work.

Sir Peter Tapsell (Louth and Horncastle) (Con): Did the Chief Secretary to the Treasury note that, while Finance Ministers seemed remarkably cheerful in Aylesbury last weekend, the Archbishop of Toledo was warning that their fiscal policies were threatening to cause social breakdown and the overthrow of democracy in Spain and much of southern Europe?

Danny Alexander: I am afraid that I had not noted the comments of the Archbishop of Toledo, but I did notice the successful G7 Finance Ministers meeting.

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Chris Bryant (Rhondda) (Lab): Fiscal policy is not the only thing providing a difficulty for young people. Welfare policies mean that they have to stay at home and cannot move to places where there might be jobs. The policy on youth services, which are being dramatically cut throughout the country, means that young people are not getting the skills that might make it possible for them to get into work. Is not the truth of the matter that the only people in this country who are doing anything to get young people into jobs are those in the Labour-run Welsh Assembly?

Danny Alexander: I cannot agree with anything the hon. Gentleman says. The truth is that this Government are creating more opportunities for young people to take steps towards work than any previous Government. Let me give an example from the Department of my right hon. Friend the Secretary of State for Business, Innovation and Skills. One million apprenticeship starts—a 50% increase on the previous Government—are creating valuable opportunities for young people to gain experience in the workplace and employment afterwards. The hon. Gentleman should welcome and support those efforts, not condemn them.

Stephen Williams (Bristol West) (LD): The Archbishop of Toledo might well have been concerned about high rates of youth unemployment in Spain, which are much higher than they have ever been in this country, but does my right hon. Friend agree that, despite the fact that the problem, as he has just said, has been intractable for more than decade, the Deputy Prime Minister’s Youth Contract gives an opportunity for young people to have work experience in the private sector, from which most of the growth and job opportunities of the future are likely to come?

Danny Alexander: I wholeheartedly agree with my hon. Friend. The Youth Contract, which was launched in April, supports 500,000 young people into employment through a range of measures, including an in-work subsidy and access to work experience. Alongside the 1 million apprenticeships that my right hon. Friend the Secretary of State for Business, Innovation and Skills is starting during this Parliament, the Youth Contract offers a range of new opportunities for young people, which are necessary in getting more young people into work, which the House agrees is vital for the country.

Income Tax

Q3. Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab): What estimate he has made of the value of the reduction in the additional rate of income tax to 45% to a person earning £1 million a year. [153850]

The Exchequer Secretary to the Treasury (Mr David Gauke): The cost of reducing the additional rate of income tax to 45% is estimated at around £100 million per year. That is set out in table 2.2 of Budget 2013. We have not broken down the impacts of income ranges because a significant behavioural response is associated with the additional rate of income tax. The behavioural response is estimated in aggregate and reflected in the costing.

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Mr McCann: I am grateful for the Minister’s answer, but I can give him the answer to the question I asked: millionaires will get a cut of £42,000 under this Government’s policies. Does he think it right that those in receipt of tax credits are making a bigger financial contribution to the country’s coffers than millionaires?

Mr Gauke: Of course that is not true. As the Institute for Fiscal Studies has shown, the biggest contribution to reducing the deficit is coming from the wealthiest 10%. The hon. Gentleman might also wish to ask himself why, when his party was in office, it had a top rate of income tax of 40% for all but 36 days out of 4,758.

Jacob Rees-Mogg (North East Somerset) (Con): The Minister will be aware that in 1978-79 the top 1% of taxpayers paid only 11% of total income tax. That is now nearer 30%, which shows that the Laffer curve works and we are better off with lower rates. May I therefore encourage the Government to cut rates further?

Mr Gauke: I note my hon. Friend’s representation. It is worth pointing out that in 2010-11, the year in which the Government came into office, the top 1% paid 25% of income tax receipts: this year it is forecast that the top 1% will pay almost 30% of income tax receipts.

Catherine McKinnell (Newcastle upon Tyne North) (Lab): The Government should listen to people such as the deputy chair of Harlow Conservatives, who has said:

“The voters are disillusioned with Cameron…They don’t like the fact that he didn’t keep the 50p tax. That has really grated and people feel here that he is not working for them, he is working for his friends.”

No wonder the Conservatives in Harlow lost so many seats to Labour last month. Will the Minister explain again, for the people of Harlow and elsewhere, just why the Government have prioritised a tax cut for those at the top while ordinary taxpayers are struggling?

Mr Gauke: This is the Government who have raised the personal allowance that has taken millions of people out of income tax and resulted in tax cuts for some 26 million people. A tax rate that does not bring in revenue is a flawed tax rate, which I assume is why, despite everything we hear from the Opposition, they will not commit to returning to a 50p rate of income tax. They know that it does not raise revenue.

Q25. [153872] Charlie Elphicke (Dover) (Con): Can the Minister confirm whether, all things considered, the richest people in this country are paying a greater or lesser proportion of their wealth in tax than they were under the previous Government?

Mr Gauke: They are paying a greater proportion of their income. If we look at what the Government have done across the board, including stamp duty, capital gains tax and the cap on reliefs, we see we are ensuring that the wealthy are paying more. The reality is that there are better ways to ensure that than the 50p rate of income tax, which was uncompetitive and failed to raise revenue.

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Q4. Graham Jones (Hyndburn) (Lab): What discussions he has had with the Secretary of State for Communities and Local Government on levels of construction output. [153851]

Q11. Dr Alan Whitehead (Southampton, Test) (Lab): What discussions he has had with the Secretary of State for Communities and Local Government on fiscal incentives for the construction of affordable housing. [153858]

The Chief Secretary to the Treasury (Danny Alexander): The Government are committed to supporting new housing supply while maximising value for money. The Government committed £4.5 billion to support 170,000 affordable homes over the spending review period, and we have added a further 30,000 to that figure through the guarantee programme that was announced last year and extended in the Budget a few weeks ago.

Graham Jones: In my constituency, that would ring hollow. I note that all three insolvency industry associations stated this week that nearly one third of construction companies in the north-west of England were at risk of financial collapse, which is a higher rate than in the non-construction sector of the north-west’s economy. Is not that an indictment of the Government’s record in the north and their failure to get growth going in the regions?

Danny Alexander: The hon. Gentleman should recognise that—while the previous Government presided over a decline of more than 400,000 in the number of affordable properties—the Government’s action to increase the numbers by 200,000 is a welcome support to the construction sector, as is the Help to Buy scheme that we announced in the Budget, which will produce a significant additional demand for properties to help the companies to which he refers.

Dr Whitehead: Does the Minister not recognise that the Help to Buy scheme will not produce a single new affordable home? It will simply enable people to buy other people’s homes. In my constituency, it costs eight times the average annual income to purchase a house in the city, so does the Minister not accept that action to improve affordable house building should have been taken in the Budget?

Danny Alexander: The Help to Buy shared equity scheme is available for the purchase of new build properties only. It is a multi-billion pound scheme that will help to fund an extra 75,000 or so construction sites in the next couple of years—a welcome boost to the construction sector. In the Budget, we announced funding to extend the guarantee scheme for housing associations to build new affordable properties, doubling its extent to ensure that 30,000 affordable homes are built over and above the 170,000 already announced. The hon. Gentleman is a close observer of these matters, and it will not have escaped his attention that the net number of affordable homes during Labour’s time in office fell by 421,000. That is not a record for him to be proud of.

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Mr Christopher Chope (Christchurch) (Con): Does the Minister accept that a tax on transactions reduces the number of transactions? Does he therefore agree that the current level of stamp duty is reducing the number of housing transactions, and as a result is disadvantaging the construction sector?

Danny Alexander: I have to say that I do not really accept that. The evidence of previous attempts to support housing transactions through stamp duty cuts is not all that positive. The Government have sought to make the stamp duty system more progressive, asking those with the largest properties to pay more. Indeed, I hope my hon. Friend welcomes the introduction, from the beginning of April, of a new annual charge for homes owned by offshore companies—a mansion tax for tax dodgers, as it were.

Sir Tony Baldry (Banbury) (Con): New housing requires land for building, so it is good news that the Government are making significant sites available for new housing, such as the surplus Ministry of Defence land in Bicester. We intend to take advantage of that by building a new garden city in Bicester, because people need decent homes for the 21st century.

Danny Alexander: I wholeheartedly agree with my hon. Friend. I particularly welcome his comments on the potential for garden cities to add substantially to the housing supply, a matter on which the Government will make further statements in the next few months.

Chris Leslie (Nottingham East) (Lab/Co-op): The Government have presided over a massive collapse of our construction sector. How can they maintain the pretence that they support the economy when just seven projects out of the 576 that were set out in their infrastructure plan are completed or operational? The director general of the CBI says:

“I have a queue of businesses at my door telling me the Government’s Infrastructure Plan needs speeding up.”

Will the Chief Secretary confirm that, so far, they have managed to deliver only two projects—less than one quarter of 1% of the underwriting guarantees authorised by his emergency legislation last summer?

Danny Alexander: The hon. Gentleman is stretching somewhat beyond the area of housing, Mr Speaker, but with your permission I would like to address his question. Some £10 billion worth of infrastructure projects prequalified for the guarantee scheme, bringing forward substantial investment in infrastructure. We are investing more in transport infrastructure in this Parliament than his Government managed during the economic good times. We are investing more in the railways than has been done since Victorian times. He should compliment the Government on our approach to infrastructure, because, whether in transport or communications and broadband, more is happening than his Government ever managed.


Q5. Hazel Blears (Salford and Eccles) (Lab): What steps he is taking to implement the Public Services (Social Value) Act 2012 in his Department in relation to its procurement procedures; and what guidance his Department has given to its agencies on this matter. [153852]

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The Economic Secretary to the Treasury (Sajid Javid): Those buying services on behalf of taxpayers should be continuously looking for ways to maximise value for communities. As part of the sustainable procurement agenda, the Department and its agency already consider social factors when evaluating relevant tenders. The Cabinet Office guidance on the Public Services (Social Value) Act has been shared with all procurement staff in the Department and its agencies.

Hazel Blears: I thank the Minister for that reply, but as economic growth and job creation are proving somewhat elusive for the Government, will he now take practical steps to include in major infrastructure contracts—such as High Speed 2, defence procurement and house building programmes—social value clauses that promote local labour, apprenticeships, local supply chains and small and medium-sized enterprises? That is a practical measure that he could put into action now.

Sajid Javid: First, I hope the right hon. Lady will join me in commending the work done by my hon. Friend the Member for Warwick and Leamington (Chris White) to ensure that the 2012 Act reached the statute book. I also commend her for her work to promote and help its passage. However, I do not recognise her comment that jobs and growth have been elusive. We have seen 1.25 million jobs created in the past three years: one of the fastest rates of private job creation ever. Returning to her main point, it is important that social impact is taken into account in public procurement. The Treasury takes that very seriously, and we expect other Departments to do so too.

Jesse Norman (Hereford and South Herefordshire) (Con): Will my hon. Friend join me in congratulating Hereford Futures on its new construction project in Hereford, which precisely targets drawing in local labour and local firms for the reasons of social value that the right hon. Member for Salford and Eccles (Hazel Blears) mentioned?

Sajid Javid: Yes, I join my hon. Friend in commending Hereford Futures. It is just the kind of procurement we want in promoting social impact.

Economy: North-East

Q6. Helen Goodman (Bishop Auckland) (Lab): What recent assessment he has made of the performance of the economy in the north-east; and if he will make a statement. [153853]

The Financial Secretary to the Treasury (Greg Clark): Last year, the north-east was Britain’s biggest destination for inward investment, after London and Greater Manchester, it doubled its trade surplus in goods to the highest in England and saw unemployment fall faster than in any other region of the country. The north-east independent economic review, published last month, shows the region’s further huge potential, which the Government are determined to support.

Helen Goodman: In fact, after the £2.8 billion of cuts that the Government have imposed, unemployment in the north-east is 10%, which is the highest in the whole country. I am pleased that the Minister mentioned the

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independent review, which recommended a doubling of apprenticeships, significant investment in transport infrastructure and the locating of major public institutions, such as the business bank, in the north-east. Have the Government put forward any resource to make any of those things happen?

Greg Clark: First, I congratulate the hon. Lady’s team of Spennymoor on, I am afraid, beating my team of Tunbridge Wells in the final of the FA Vase at Wembley 10 days ago. If she was there—I am sure she was—she will have seen that Spennymoor’s approach was characterised by very positive play, and she would do well to pay tribute to the efforts made in the north-east in much the same way. Exports are growing, employment is growing and the number of apprenticeships has doubled since we came into office. I will visit Newcastle in two weeks to discuss the implementation of the economic review, which I hope she will support.

Sir Alan Beith (Berwick-upon-Tweed) (LD): Will the Minister go a little further north when he goes to Newcastle and have a look at Northumberland, where we are proud of our record on exporting manufacturing businesses? Will he also continue the good work of Treasury Ministers in encouraging the Department for Transport to consider a properly dualled A1 to link us to the markets and places where we can do business in this country and abroad?

Greg Clark: I shall certainly do that. One of the bright spots in the north-east is its exporting of manufacturing goods, particularly in areas of high technology. Exports in specialised manufacturing were up 24% in the last year and power-generating machinery was up 20%. I shall certainly visit some of the businesses in the north-east, including in Northumberland, to encourage them to do more.

Pat Glass (North West Durham) (Lab): Despite what the Minister says, the north-east’s unemployment is the highest in the country and continues to rise, with youth unemployment having reached dangerously high levels in constituencies such as mine. When will he introduce those recommendations in the economic review targeted at helping young people in the north-east?

Greg Clark: I welcome the hon. Lady’s support for the economic review and its proposals. She will know that under the city deal that we negotiated with Newcastle, which is already being implemented, sites are being prepared for new businesses to move in, creating valuable jobs. I hope that she will maintain that support for the proposals as we implement them.

Richard Graham (Gloucester) (Con) rose—

Mr Speaker: No, Gloucester is a long way from the north-east of England.

Private Sector Job Creation

Q7. Stephen Metcalfe (South Basildon and East Thurrock) (Con): What fiscal steps he is taking to support private sector job creation. [153854]

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The Chief Secretary to the Treasury (Danny Alexander): More than 1.25 million private sector jobs have been created since the first quarter of 2010. At the Budget, we took additional steps to support job creation—for example, by further reducing the rate of corporation tax to 20%, through a new employment allowance for national insurance to encourage every business to create jobs in this country and by extending the seed enterprise investment scheme to encourage start-up investment in the UK.

Stephen Metcalfe: Will my right hon. Friend consider taking further measures? For example, the provision of cheap, easy-to-access finance remains an issue for many small and medium-sized enterprises. With more than 3 million SMEs in our country, will the Government consider creating their own easy-to-access, less risk-averse provision, which I think would seriously stimulate both growth and job creation?

Danny Alexander: I am grateful to my hon. Friend, who raises an important issue. We are all aware of the continuing difficulties of small firms in getting access to the finance they need. The business bank, which is being taken forward by the Secretary of State for Business, Innovation and Skills, is acting to address gaps in the financial offering for small firms. The funding for lending scheme is substantially expanding lending to small businesses, which is one of its objectives. The business finance partnership is investing £87 million through non-bank channels, such as peer-to-peer platforms, that can reach SMEs in a different way.

Geraint Davies (Swansea West) (Lab/Co-op): Does the Chief Secretary agree that an EU-US free trade agreement would help private sector job creation and that the noise about EU exit is undermining such an agreement? We would get no benefit from such an agreement if we were out of the EU, so why don’t they shut up?

Danny Alexander: I agree, as do the entire Government, that an EU-US free trade area would be of substantial benefit to the United Kingdom and to the whole of the EU. I welcome the fact that the Prime Minister is in Washington this week precisely to advance that agenda.

Mr Brooks Newmark (Braintree) (Con): The Government is to be congratulated on creating over 1.25 million private sector jobs, but youth unemployment is, as we have heard, still a sticky problem. Will the Minister join me in encouraging businesses to take advantage of the £2,000 tax break provided by the national insurance contributions Bill to try to hire one, two, three or even four young people?

Danny Alexander: First, I congratulate my hon. Friend on the work he is doing on the million jobs campaign to support young people in getting back to work. I echo his words on the employment allowance, which ensures that one person on an average wage and three on the minimum wage can be employed national insurance-free. That should be a substantial incentive, especially for small businesses, to take on more staff.

Jim Shannon (Strangford) (DUP): On skills training and apprenticeships for young people, there is a two- pronged approach: employment opportunities through

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apprenticeships and skills training. What is the Chief Secretary doing to ensure that companies can provide skills training in conjunction with colleges?

Danny Alexander: I hope that the hon. Gentleman will have a look at the employee ownership pilot on apprenticeships, the purpose of which is to put much more of the funding, and more of the control over the way in which apprenticeships are designed and supported through colleges, in the hands of employers to make sure that the skills training that the young people get is suited precisely to the needs of the employers concerned.

Mr Alan Reid (Argyll and Bute) (LD): Small businesses in remote areas such as Argyll and Bute have been greatly helped by the Government’s decision to freeze fuel duty and to introduce the island fuel duty discount. This means that businesses on the islands of Argyll and Bute benefit from fuel duty being 18p a litre less than it would be under Labour’s plans. I very much welcome the Government’s policy, and will the Chief Secretary make the case to Europe to extend the island discount to remote parts of the mainland, such as the Kintyre peninsula?

Danny Alexander: I am grateful to my hon. Friend. Every small business in the country is benefiting from the fact that fuel taxation is 13p a litre less under this Government that it would be under Labour’s plans. It is the coalition Government who are on the side of those firms. I will make the case to the European Commission to extend the discount to the most remote areas. We are working to build a case on that and I would welcome his support, and that of his local authority, in doing so.

Economic Recovery

Q8. Karl McCartney (Lincoln) (Con): what steps he is taking to secure economic recovery. [153855]

The Economic Secretary to the Treasury (Sajid Javid): The Government’s strategy of deficit reduction, monetary activism and supply-side reform is designed to protect the economy and to lay the foundations for stronger, more balanced growth. There are encouraging signs that the economy is healing. The deficit is down by a third, GDP is growing and the private sector is creating jobs at a near-record rate.

Karl McCartney: I commend the Government’s efforts to reduce the budget deficit. The Opposition are yet again advocating more spending to achieve economic salvation, but such expenditure in the past has left us with a current national debt of close to £1.2 trillion. Does my hon. Friend agree that the British public, and certainly my constituents in Lincoln, will not trust the Labour party with the nation’s finances as long as it continues to hold on to such reckless ideas and to a shadow chancellor who continues to peddle them?

Sajid Javid: I could not have put it better myself; I agree 100 per cent. with my hon. Friend. The economy is healing after suffering the deepest post-war recession this country has seen, which destroyed the hopes of many working families up and down the country. The deficit is down by a third, which has brought confidence and helped create jobs at a record rate: 1.25 million created in three years.

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Sheila Gilmore (Edinburgh East) (Lab): Is the Minister familiar with the universal jobmatch website created by one of his colleagues in the Department for Work and Pensions? If he has looked at the nature of the jobs being advertised there, he will have seen that in my area, 57 out of 76 advertised shop vacancies were for one company, operating all over the east of Scotland, which wanted people to work on a self-employed basis, distributing catalogues and selling things from them—

Mr Speaker: Order. I do apologise to the hon. Lady, but we must press on. There is a lot to get through. We need short questions and brief answers.

Sajid Javid: In the last decade of the previous Government, youth unemployment rocketed by more than 70%, so the hon. Lady is in no position to lecture this Government on jobs. In three years, 1.25 million private sector jobs have been created, more people are now employed in the private sector than at any other time in our history and we had a faster rate of job growth last year than the rest of the G7.

George Freeman (Mid Norfolk) (Con): I congratulate the Government on having created six private sector jobs for every public sector job loss. Has the Minister seen the latest news from the CBI, which this week shows trend growth for this year running at 1.8%, and has he seen this quote from the CBI’s director of economics:

“We continue to expect UK economic growth to strengthen and become more broad-based over this year and next”?

Sajid Javid: I have seen the report to which my hon. Friend refers. I have also seen similar reports—for example, from the National Institute of Economic and Social Research—which also show encouraging signs. Together, all those reports show that this Government’s policies are working.

Mr Russell Brown (Dumfries and Galloway) (Lab): In reply to a question I tabled, which eventually ended up with the Cabinet Office, I was informed that between June 2010 and September 2012, 741,000 private sector jobs were created. Can the Minister explain the discrepancy between that figure and the fanciful figures of 1 million, and now 1.25 million, private sector jobs that he and his colleagues use?

Sajid Javid: The numbers I tend to look at are those provided by the Office for National Statistics. Those numbers show not that 1.25 million jobs were created in the private sector since the end of the first quarter of 2010, but that 1.31 million jobs were created. If we allowed for transfers from the further education sector, which we do not, the figure would be 1.5 million jobs.

Corporate Tax Evasion

Q9. Andrew Stunell (Hazel Grove) (LD): What plans the Government have to use the UK’s presidency of the G8 to tackle corporate tax evasion. [153856]

Q10. Stephen Gilbert (St Austell and Newquay) (LD): What plans the Government have to use the UK’s presidency of the G8 to tackle corporate tax evasion. [153857]

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The Exchequer Secretary to the Treasury (Mr David Gauke): Tax evasion and tax avoidance undermine public revenues and the public’s confidence in the fairness and effectiveness of our tax system. The UK is pursuing action on both fronts through the presidency of the G8. We are promoting the development of new global standards on automatic information exchange and increased transparency of company ownership in order to better tackle tax evasion. We are seeking strong endorsement through the G8 of the importance of the work of the G20 and the OECD on tackling avoidance by multinationals.

Andrew Stunell: I thank the Minister for his reply. Does he think that it is now time to take a second look at the USA’s experience and its Foreign Account Tax Compliance Act to tackle the question of international tax avoidance?

Mr Gauke: My right hon. Friend makes an important point; indeed, we are doing that. We have signed an agreement with the US to implement FATCA as the new standard in tax transparency, and we are promoting that type of information around the world. We have reached agreements with the overseas territories and the Crown dependencies, while France, Germany, Italy, Spain and the UK have all agreed to exchange information based on the FATCA standard. That is very much the approach that we are taking in the G7, G8 and G20, and we have made remarkable progress so far.

Stephen Gilbert: Does the Minister recognise that, as well as capacity building in their domestic authorities, developing countries need better access to international tax information? Can that be part of the negotiations with the G8?

Mr Gauke: My hon. Friend makes an important point. It is important that we have better information that we can provide to developing countries. Whether we do that by exchanging information along the FATCA lines or by encouraging better global reporting to tax authorities by multinational companies, that information will prove very helpful for both developed and developing countries.

John Cryer (Leyton and Wanstead) (Lab): The Minister will be aware that some employers are increasingly using payroll companies and umbrella companies to avoid paying tax and national insurance. What can the Government do to address that tendency?

Mr Gauke: We are taking measures to address this: the hon. Gentleman will be aware of the action that we took in the last Budget to close the loophole relating to offshore companies. We of course want a tax system that ensures that the tax is consistent with the economic reality, and that is what we intend to have.

Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): Do the Government believe that cutting £2 billion from HMRC’s budget will help or hinder its ability properly to address tax evasion and tax avoidance in this country?

Mr Gauke: This is the Government who have found £1 billion to support HMRC in dealing with tax evasion and tax avoidance. This is the Government who have

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provided resources in that area. Yes, we can find efficiency savings in HMRC—just as the previous Government did, to be fair—but we are putting more into those parts of HMRC that get the money in. We are making dramatic progress, with HMRC’s yield hitting record levels.

Banking Industry: Code of Conduct

Q12. Katy Clark (North Ayrshire and Arran) (Lab): If he will introduce a statutory code of conduct for the banking industry. [153859]

The Financial Secretary to the Treasury (Greg Clark): The Parliamentary Commission on Banking Standards was established to consider and report on professional standards and culture in the UK banking sector. The Government look forward to considering the commission’s report and we will make decisions on the need for further action in the light of its recommendations, including on whether there should be a code of conduct.

Katy Clark: A recent survey by Which? showed that 87% of the public wanted an independent code of conduct for bankers. Does the Minister agree that such a code would restore trust? Does he also believe that he should look again at the amendments on banking reform tabled by Labour proposing a licensing system that would enable bankers who broke the rules to be struck off?

Greg Clark: As the hon. Lady knows—her colleague the right hon. Member for Wolverhampton South East (Mr McFadden) might also like to comment on this—the commission has been hard at work considering various representations, including those from Which? and the British Bankers Association, on whether there should be a code of conduct. I am sure that the House would expect us to wait for the commission’s recommendations and then to respond to them.

Mr Pat McFadden (Wolverhampton South East) (Lab): Does the Minister agree that it was politically unwise for the Treasury to brief that it hoped the Parliamentary Commission on Banking Standards would endorse its politically motivated attacks on the previous Chancellor’s bail-out of the Royal Bank of Scotland? Does he further agree that the uppermost criterion for the reprivatisation of RBS must be the interests of the taxpayers who bailed it out, rather than any political or electoral timetable?

Greg Clark: It goes without saying that the interests of the taxpayer must be paramount, and I am not aware of any of the briefing that the right hon. Gentleman refers to.

Arck LLP

Q13. Paul Goggins (Wythenshawe and Sale East) (Lab): What assessment he has made of the obligations owed by Yorkshire bank to investors in Arck LLP. [153860]

The Financial Secretary to the Treasury (Greg Clark): A Serious Fraud Office investigation into Arck is under way, and the Government cannot comment specifically

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on any ongoing investigations. However, lawyers acting on behalf of Arck investors have themselves announced that the Financial Ombudsman Service is investigating complaints about Yorkshire bank’s role as custodian to Arck LLP. If the FOS were to determine that there had been any regulatory breach or failure by Yorkshire bank, and that that had led to investor detriment, it would be able to set an appropriate level of restitution.

Paul Goggins: I am grateful to the Minister for that reply. A constituent of mine is one of the 750 investors who placed about £60 million of their pension funds and savings into a ring-fenced, segregated account at Yorkshire bank. When Arck LLP went into liquidation, it was discovered that there was just £25 left. The Minister must agree that Yorkshire bank has some serious questions to answer. Will he raise this case with the Financial Conduct Authority and do everything he can to ensure that those investors are properly compensated?

Greg Clark: I will certainly do that, but I happen to know that the Financial Conduct Authority is already well aware of the case, and it is obviously taking a close interest in the continuing police investigation.

Government Expenditure

Q14. Mr John Baron (Basildon and Billericay) (Con): What steps he is taking further to reduce Government expenditure. [153861]

The Chief Secretary to the Treasury (Danny Alexander): In the Budget this year, we set out the envelope for the spending round that will set budgets for 2015-16, looking to deliver a total of £11.5 billion of savings from departmental current expenditure, and that process is ongoing.

Mr Baron: The Government have done well to reduce the deficit by a third, but they know that much more needs to be done. Are they going to re-examine their spending priorities to ensure that Departments such as the Foreign and Commonwealth Office and the Ministry of Defence do not suffer disproportionately in comparison with other Departments that deal with international aid and welfare?

Danny Alexander: The Government have rightly put in place protections for the budget for the national health service and for schools. We have also made a strong commitment to reaching the 0.7% objective on international aid, which I think most Members would agree is absolutely the right thing to do. Of course we will consider submissions from all Departments throughout the spending round process, but in the end every Department will have to bear its fair share of the reductions.

Municipal Bond Market

Q15. Mr Graham Allen (Nottingham North) (Lab): What steps his Department has taken to promote the growth of a municipal bond market in the UK. [153862]

The Financial Secretary to the Treasury (Greg Clark): Under the prudential system, local authorities are able

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to borrow for capital projects, providing they can afford the borrowing costs. Local authorities can choose the source of these funds and they are free to use municipal bonds where they wish to do so.

Mr Allen: I thank the Minister for his warm welcome for my second report about the financing of early intervention, entitled “Early Intervention: Smart Investment, Massive Savings”. One of the report’s recommendations was to free up local authorities to issue early intervention social impact bonds in order to fund early intervention in the localities. Will he meet me to discuss how we can take this forward?

Greg Clark: I certainly will meet the hon. Gentleman, who has been a pioneer in these matters. I have been very taken with his report’s recommendations. He points to some initiatives taking place in the US to have social impact bonds, and the authorities in London are keen on this, too. I am sure that he will want to continue his campaign; he will find a receptive counterpart in me.

Average Earnings

Q16. Ian Austin (Dudley North) (Lab): What recent assessment he has made of the extent to which the rate of increase of average earnings has kept up with the rate of consumer price inflation. [153863]

The Economic Secretary to the Treasury (Sajid Javid): The best way to deal with today’s cost-of-living challenges is to have paid employment. In the UK, the number of people employed has risen by 2.1% compared to a year ago—a faster rate of growth than those of our major competitors, including the US, France, Germany, Japan and the euro area as a whole.

Ian Austin: Instead of being complacent, the Minister should look at what the Office for Budget Responsibility says, which is that real wages will be lower in 2015 than when this Government came to power. A survey in Dudley shows that nine out of 10 families do not think they will be better off next year than this year, that eight out of 10 spent less at Christmas, and that a similar number have stopped saving. Can the Minister tell me why his Government are cutting taxes for millionaires instead of helping hard-pressed families in places such as Dudley?

Sajid Javid: I think that the hon. Gentleman joined the House in 2005, and he is probably scarred by his experience during his first term in government, when he saw unemployment in his constituency rise substantially, with youth unemployment going up by more than 100%. He will know that paid work is the best way to raise earnings. As I said earlier, this Government have helped to create 1.25 million jobs over the last three years—more jobs in the private sector than at any other time in our history. He referred to tax cuts; the tax cuts that have come through the personal allowance are for the lowest paid.

Topical Questions

T1. [153873] Mike Freer (Finchley and Golders Green) (Con): If he will make a statement on his departmental responsibilities.

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The Chief Secretary to the Treasury (Danny Alexander): The core purpose of the Treasury is to ensure the stability and prosperity of the economy.

Mike Freer: Will my right hon. Friend advise us what assessment he has made of the effect of the £2,000 employment allowance on employment in general, and on small businesses in particular?

Danny Alexander: The employment allowance will reduce the cost of employment and will therefore support small businesses aspiring to grow by hiring their first employee or expanding the work force. In total, up to 1.25 million employers will benefit from the allowance, with over 90% of that benefit going to small firms with fewer than 50 employees.

Ed Balls (Morley and Outwood) (Lab/Co-op): This is now the slowest economic recovery for 100 years, and the International Monetary Fund is in town and openly questioning the Treasury’s economic plan. May I remind the Chief Secretary of what he said in October 2009? He does not need to worry, as this is not the one where he reconfirmed the Liberal Democrat commitment to an EU referendum; it is a different article. He said:

“Cutting spending now would plunge us back into recession…The Tories claim…they can fix the country’s finances, but their plans are economically illiterate.”

He was right then, was he not?

Danny Alexander: The right hon. Gentleman mentions the fact that the IMF is in town; there are, of course, discussions going on, and we look forward to seeing the outcome of the proposals. I have to tell him, however, that given the situation that this coalition Government inherited in May 2010—the catastrophic mess that he and his colleagues made of the British economy—the measures we are taking are absolutely right. If we compare the progress this country has made with the forecast for our major European competitors, we see that on employment, for example, this Government are delivering the right policies for this country.

Ed Balls: The right hon. Gentleman also said in that article that

“at a time of crisis”,

the Tories

“have the wrong solutions and the wrong priorities…They claim to care about the poorest, but will only slash taxes for millionaires.”

He was right about that as well. Is it not the truth that the economy has flatlined, deficit reduction has stalled, living standards are falling and the IMF is saying that the Treasury is playing with fire? In January, the Prime Minister said that we should listen to the IMF, so why is the Treasury telling newspapers that if the IMF tells him to act to kick-start the recovery, the Chancellor intends to ignore it and plough on regardless with a failing plan?

Danny Alexander: The right hon. Gentleman talks of having the wrong solutions and the wrong priorities. That appears to be the verdict of many of his colleagues on his own approach as shadow Chancellor. I note that the former science Minister Lord Sainsbury has said:

“In retrospect the Labour government should have used the opportunity of a strongly growing economy to reduce the deficit.”

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That would have reduced pressure on the Labour Government, but we are reducing the deficit now. I also note that The Sun quotesan anonymous shadow Cabinet Member as saying:

“Balls is a busted flush when it comes to economic competence because of his legacy with Gordon.”

I could not have put it better myself.

T2. [153874] Mr David Ward (Bradford East) (LD): A recurring theme of yesterday’s debate on health and social care was the growing demand for social care against a background of declining resources. What commitments will the Chief Secretary make to provide extra funding for adult social care in the June comprehensive spending review?

Danny Alexander: That is an important question. My hon. Friend will have seen the statements published today by the Minister of State, Department of Health, our hon. Friend the Member for North Norfolk (Norman Lamb), and we will address the issue seriously in the spending round. I am not going to pre-announce what we will do, but my hon. Friend will know that in the 2010 spending round we ensured that additional resources amounting to £7.2 billion were available over four years to support social care services. If we are to deal with these important issues while also reducing the strain on the national health service, further such transfers will clearly be necessary.

T3. [153875] Paul Blomfield (Sheffield Central) (Lab): In just over an hour, in an unprecedented move, the bishops of Sheffield and Hallam and a delegation of civic, community and faith leaders will present a petition to No. 10 from thousands of Sheffielders calling for a fair deal for our city. Will Ministers accept their argument that the unfair distribution of cuts is having a disproportionate impact on cities such as Sheffield, widening inequality, hitting those who have least the hardest, and weakening the capacity of the council and the voluntary sector to support them?

The Financial Secretary to the Treasury (Greg Clark): The hon. Gentleman should support the Sheffield city deal, which has been enthusiastically endorsed by civic and business leaders in Sheffield. The point of the deal is to improve the city’s record for getting people into work, thus ensuring that the growing businesses there can access a high-quality labour force.

T4. [153876] Damian Hinds (East Hampshire) (Con): In the light of the Government’s commitment to helping families to save for their futures, can the Minister tell us when we will see the details of the consultation on the measure announced in the Budget to allow the transfer of savings from child trust funds to junior individual savings accounts?

The Economic Secretary to the Treasury (Sajid Javid): My hon. Friend has raised an important issue. The details of the consultation will be published today, and the consultation will close on 6 August. It will deal with the question of whether transfers should be allowed, and if so on what basis. The Government propose that voluntary transfers should be allowed if requested by the registered contact for an account.

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T5. [153877] Heidi Alexander (Lewisham East) (Lab): Can one of the Ministers here today explain exactly how publishing a Bill providing for a European Union referendum in four years’ time will first create jobs, secondly attract investment and thirdly secure Britain’s future in a global economy?

Danny Alexander: I do not think that it would achieve any of those objectives, which is why I do not support it.

T10. [153882] Glyn Davies (Montgomeryshire) (Con): Perhaps the most welcome policy announcement in the Gracious Speech was the announcement that Ministers would

“prioritise measures that reduce the deficit”.

Does my right hon. Friend agree that that Government priority is crucial to my Montgomeryshire constituents, because it will keep interest rates low for home owners and for businesses?

Danny Alexander: I agree wholeheartedly with my hon. Friend. Dealing with the deficit and repairing the mess that the Labour party made in the public finances must remain the No. 1 priority for the Government, and indeed for all Members of the House.

T7. [153879] Graham Jones (Hyndburn) (Lab): The Government’s housing policy focuses on new build which is exempt from VAT, but in my constituency one in 13 properties is empty, and building companies tell me that they rely on refurbishments which are not VAT-exempt. They are really struggling. Do the Government recognise that building companies in areas such as mine are being penalised in that way?

The Exchequer Secretary to the Treasury (Mr David Gauke): The difficulty is that if we were to reduce VAT on repairs and refurbishments, that would have a substantial fiscal cost. It would result in more borrowing and that is not something we can afford because of the circumstances we were left.

Richard Graham (Gloucester) (Con): We now know there was no triple-dip recession and almost certainly no double-dip recession either. Of course there is no room for complacency, which is why I am holding my seventh jobs fair in the centre of Gloucester this Thursday. Does the Minister agree that it is time for the party of doom and gloom on the Opposition Benches to recognise that the economy is beginning to recover and that it is time to support British business—especially things made in Gloucester?

Danny Alexander: I welcome my hon. Friend’s efforts in trying to help his constituents to find employment—something that every Member of this House could be engaged in. On the deficit, the Labour party did seem disappointed when the triple dip did not materialise; no doubt it will be even more disappointed if, in due course, the second dip dematerialises. The one thing we can be sure of is that the biggest dip took place when Labour was in office.

T8. [153880] Diana Johnson (Kingston upon Hull North) (Lab): On 25 June last year, the Secretary of State for Environment, Food and Rural Affairs told me that a

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new agreement was to be reached on flood insurance. I understand that the Chief Secretary, who has been heading up the negotiations, has blocked this deal. As the statement of principles is due to come to an end next month, can he tell me what assessment has been made of the effect on the housing market of hundreds of thousands of householders in this country not being able to get house insurance?

Sajid Javid: The hon. Lady raises an important issue; it is important that affordable insurance is available to people on whom flooding could have an impact. That is why this Government, led by DEFRA, are engaged in intensive negotiations with the Association of British Insurers. In Thursday’s DEFRA questions, she will have an opportunity to put this question to DEFRA Ministers.

Greg Mulholland (Leeds North West) (LD): The latest dismal figures from the giant pub company Enterprise Inns show the disaster that the leased pub company model has been for the British economy. The boss paid himself nearly £1 million last year, while his tenants are struggling to make a living and are subsidised by the taxpayer, through tax credits, to the tune of millions of pounds. Will my hon. Friend conduct a Treasury study into just how many millions the taxpayer provides to subsidise this immoral business model?

Sajid Javid: My hon. Friend cares deeply and passionately about the pub industry, and has done great work to help, including welcoming this Government’s decision to cut beer duty for the first time in decades. He makes an important point. He will know that Ministers in the Department for Business, Innovation and Skills are looking at this issue, and I will bring it further to their attention.

T9. [153881] Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): The Chief Secretary was absolutely right on the question of the EU referendum Bill. He cannot speak for the Conservative party, but will he ensure that his party leader once again exercises his European veto and ensures that any such Bill does not come forward as a Government Bill and does not have Government backing?

Danny Alexander: The Government’s position was made very clear in the coalition agreement and was confirmed in the mid-term review document published at the beginning of this year: we wish to maintain British membership of the European Union and during this Parliament we will exercise our influence to the utmost to win the arguments in Britain’s national interest, in favour of jobs, investment and growth in this country.

Jeremy Lefroy (Stafford) (Con): Research and development is key to current and future growth, and I welcome the Government’s support for it. What measures are the Government taking to ensure that we rise to the level of our major competitors on research and development?

Mr Gauke: One measure that I know my hon. Friend will be well aware of was the reform of research and development tax credits. We are making those more

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generous and bringing in a new above-the-line R and D tax credit. That is making the UK increasingly competitive in this sector.

Naomi Long (Belfast East) (Alliance): Developing countries need assistance from the west with collecting the tax due to them from multinational companies. How will the Government use their presidency of the G8 to ensure specifically that the strengthening of disclosure standards takes place multinationally?

Mr Gauke: The hon. Lady is right to raise this issue, which we touched on earlier. One of our priorities for the G8 presidency is to bring forward measures on tax evasion and tax avoidance. It is worth pointing out what the Prime Minister said in an article in The Wall Street Journal yesterday; he wants to encourage

“better global reporting to tax authorities in both the developed and developing world”.

That could make a big difference.

Mr Brooks Newmark (Braintree) (Con): Will the Minister join me in supporting Lord Young’s report on growing micro-businesses, which was released yesterday? It suggests a new package of support for starting and growing small businesses.

Danny Alexander: I strongly welcome that report. The Government have already introduced a package of measures, including start-up loans to support new small businesses. Lord Young has presented his findings to the Government and we will respond in due course.

Caroline Lucas (Brighton, Pavilion) (Green): Given the increasing evidence, such as last month’s Carbon Tracker report, showing that so-called unburnable carbon assets pose a serious risk to the financial system, will the Minister look seriously at the proposal that companies should be required to disclose the carbon emissions potential of their fossil fuel assets?

Greg Clark: The first requirement is to assess the risk that the hon. Lady has described, and it is for the Bank of England to consider the systemic consequences. Should the Financial Policy Committee of the Bank of England conclude that investment in high-carbon assets poses a risk, it would have to report and explain that risk in its financial stability report.

George Freeman (Mid Norfolk) (Con): Our banking sector is suffering the consequences of a state-sponsored boom in bad loans under the last Government. Has the Minister seen the news of the Co-op’s bad debts, including to the Labour party, and noted the withdrawal of Labour party funding from Lord Sainsbury? Does he agree that nothing better exemplifies the risks of Labour’s addiction to borrowing and trade union funding?

Greg Clark: I understand that the Co-op has lent more than £3 million to the Labour party. I would assess that as not being a particularly good credit risk;

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the Labour party has a toxic credit rating, and the experience has been that when it starts to borrow, it never pays the money back.

Mr William Bain (Glasgow North East) (Lab): The youth employment rate is lower now than in 2009, with a shortfall of nearly 400,000 jobs, so why are the Government continuing to resist a tax on bank bonuses that would help put young people back into work?

Danny Alexander: As I said in answer to earlier questions, the Government have taken forward a package of measures. The Youth Contract, which is helping half a million young people, the massive expansion and improvement in the quality of apprenticeships, helping young people all around the country, and the Work programme make up a proper package of measures to do what the hon. Gentleman and I agree about—try to help more young people off benefits and into work. The problem has been building up for many years, and he should be a bit more humble about it.

Mark Durkan (Foyle) (SDLP): Would a meaningful G8 outcome on tax evasion involve the Chancellor’s revisiting the controlled foreign company rules that he introduced? They incentivise the use of tax havens and deny revenue to the Exchequer here and, more so, to developing countries.

Mr Gauke: The CFC regime is designed to protect revenue for the UK, but we can do a great deal to help developing countries through exchange of information, new global standards and capacity building. The Government are doing a huge amount on those fronts.

Charlie Elphicke (Dover) (Con): If the Government were to go out and borrow £28 billion as some suggest, what would the effect be on fiscal stability and interest rates for homeowners?

Danny Alexander: My hon. Friend rightly draws attention to the figure of £28 billion—the extra borrowing in the alternative Queen’s Speech put forward by the Opposition. It confirms yet again that their approach is to borrow more and more, taking no account of the consequences. Perhaps that is one reason why the Leader of the Opposition, in a well-known radio interview, refused to accept that his party would increase borrowing and why his proposals have rightly been dubbed a “Milishambles”.

Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op): Research by the House of Commons Library shows that no peacetime Government since the 1920s have presided over fewer housing completions than this Government over the past two years. When will the Chancellor and his team stop tinkering with allowing a few people to buy new homes, and instead deal with the systemic problems by increasing housing supply?

Danny Alexander: The hon. Lady should study the figures more carefully. They show that the low points in housing starts and housing provision were in 2009 and 2010 respectively—both years in which her party was in office.

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Operation Herrick

12.33 pm

The Secretary of State for Defence (Mr Philip Hammond): With permission, Mr Speaker, I would like to make a statement on troop rotations as we draw down our forces in Afghanistan.

First I would like to pay tribute to Corporal William Thomas Savage and Fusilier Samuel Flint, both from 2nd Battalion the Royal Regiment of Scotland, and Private Robert Murray Hetherington, a reservist from 7th Battalion the Royal Regiment of Scotland, who were tragically killed in action in Afghanistan on 30 April when their Mastiff vehicle was struck by an improvised explosive device on route 611. Their deaths are a stark reminder of the continued dangers our soldiers, sailors, airmen and marines face as they manage the transition of security responsibility to the Afghan national security forces. My thoughts are with their families and loved ones as they come to terms with their loss.

Although security in Helmand is steadily improving, with Afghan forces already responsible for the bulk of the province, the environment in which our troops operate remains dangerous. IEDs remain one of the greatest threats and present risks even to the very best-protected vehicles available, of which Mastiff is one.

As the House will be aware, at the height of operations we had around 9,500 military personnel in Afghanistan. Our troop numbers will be at 7,900 by the end of this month and, as the Prime Minister announced last December, they will reduce further to around 5,200 by the end of this year. This is a clear reflection of the international security assistance force campaign drawing to a close and the Afghan national security forces taking on increasing responsibility for their own security. Already the ANSF lead 80% of all security operations, covering nearly 90% of the Afghan population. By the summer, that figure will reach 100%. So after more than a decade in which fighting the insurgency has been a primary focus of the ISAF coalition, the campaign is changing and the UK’s military role in Afghanistan is evolving from combat to one of training, advising and assisting the Afghans; and, as the Prime Minister has made clear, UK forces will no longer be in a combat role by the end of 2014.

In the light of this, and of the changing nature of the operation, we have looked at how we can best deploy what will be declining numbers of troops and smaller amounts of equipment between now and then to deliver the best possible protection to our people while continuing to provide the Afghans with the support they need during this critical transition period. Brigades deploying to Afghanistan on Operation Herrick have routinely done so on a six-monthly cycle, with a relief-in-place occurring in spring and autumn each year. The phased nature of the rotation and the overlap of deploying and redeploying forces has meant individual tours of between six months and six and a half months for the vast majority of personnel. That pattern of rotation has worked well for the enduring deployment, but is judged not to be sustainable during the final months of the draw-down period. The Army has therefore decided that the brigade deploying in October on Herrick 19 will deploy for eight months from October this year until June 2014. The subsequent brigade, Herrick 20,

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will deploy for six months from June 2014 to December 2014 when the ISAF campaign concludes, but the deployment could extend to up to nine months for a relatively small number of individuals who may be needed to support final redeployment activity post-December 2014.

The rationale for this decision is clear and is based on advice from military commanders. First, it will better align the final tours with key milestones in the transition process such as the Afghan presidential elections in spring 2014. Secondly, it will help to maintain continuity in posts where we work closely with our Afghan partners at a time when retaining and bolstering Afghan confidence is critical, both for mission success and to ensure our own force protection. Thirdly, it removes the need to train and deploy another brigade at greatly reduced scale to cover the final couple of months of 2014. It will therefore minimise the total number of service personnel who deploy to Afghanistan over the next 18 months. That will allow personnel to focus on post-Afghanistan training, improving the general readiness of the Army as it reverts to a contingent posture for the future.

The Chief of the Defence Staff and I believe that extending Op Herrick 19 to eight months and allowing the possibility of some personnel on Op Herrick 20 deploying for up to nine months is the most effective way of maintaining force protection, meeting our commitment to the NATO ISAF mission, and supporting the Afghans until the end of 2014. Of course, as we have already made clear, the UK’s commitment as part of the international community’s assistance to Afghanistan will continue well into the future, beyond 2014, in terms of significant investment in development assistance and support to the ANSF, as well as UK-led military training.

The changed pattern of brigade rotations does not mean that all those deploying will do so for a longer time. I should emphasise to the House that, because of the expected steady reduction in numbers during Herrick 19 and 20, we expect that most personnel will continue to serve no longer than the standard six or six-and-a-half-month tour, while significant numbers will serve less than six months. At the same time, the amended tour rotations mean that some personnel will deploy for up to eight months, with a much smaller number potentially deploying for up to nine months. At this stage it is not possible to be precise about the total numbers of personnel who will be affected, although current estimates suggest that between 2,200 and 3,700 overall may deploy for more than six and a half months.

We have considered carefully how best to compensate affected personnel who serve extended tours and face increased uncertainty about their pattern of deployment and relatively more austere conditions which may be expected towards the end of the Herrick campaign as the redeployment of assets continues. Her Majesty’s Treasury has agreed the recommendation of the defence chiefs that a bespoke allowance should be paid to eligible personnel who serve more than seven and a half months in Afghanistan from September 2013. This Herrick draw-down allowance will be paid at the rate of £50 per day before tax and is payable on top of the standard operational allowance package. The new allowance will not apply to those personnel in the small number of established longer-term posts who are already compensated by the campaign continuity allowance. Service personnel

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who may serve longer terms and who may therefore be eligible for the new allowance have already been notified by their commanding officers.

As I said at the beginning of this statement, the campaign and the UK’s military role in Afghanistan are changing. During this period, it is critical that we retain the ability properly to protect our forces, as well as to maintain the confidence of the Afghans as our combat operations draw to a close and they take on full security responsibility. The number of UK forces in Afghanistan may be reducing, but they still have a vital job to do, and this initiative is the most effective way for them to do it successfully, while remaining as safe as possible. I commend the statement to the House.

12.42 pm

Mr Jim Murphy (East Renfrewshire) (Lab): I thank the Secretary of State for his statement and for providing notice of it, although unfortunately much of it appeared in this morning’s media.

I wish to start in the same way as the Secretary of State by paying tribute to those who lost their lives recently in Afghanistan: Corporal William Thomas Savage and Fusilier Samuel Flint, both from the 2nd Battalion the Royal Regiment of Scotland, and Private Robert Murray Hetherington form 7th Battalion the Royal Regiment of Scotland. Little we can say in this House can heal the hurt that their families feel, but they should at least know that they remain in our thoughts and prayers. Members on both sides of the House will always remember the remarkable individual acts of heroism and the collective acts of courage that define our armed forces. It is their sacrifice and bravery that is helping to make Afghanistan more stable and the UK safer.

It is essential that the progress our armed forces are making in Afghanistan becomes permanent and that full transition to an Afghan lead on security is successful. This remains a mission that is not just in our national interest, but in the interests of international stability.

The Opposition consistently commit to bipartisanship on Afghanistan and our support is, of course, complemented by scrutiny. Today is no different: we see the logic in the Government’s move, but many will be concerned about the impact on the individuals affected.

The enormous operation mounted over the past 12 years will require extensive and expensive effort as it is brought to a close. Recouping and reintegrating equipment, training the Afghan forces, facilitating inward investment and seeking a political solution are all essential elements of the international community’s task. As part of this, we see the merit in ensuring that there is not a destabilising changeover during the Afghan presidential election next year and that personnel are present to ensure that equipment is repatriated efficiently.

Could the Secretary of State say which regiments and units will be affected, how many of those expected to stay for longer he anticipates will be reservists, and why the Herrick draw-down allowance does not start from the beginning of the extended tour?

I say gently to the Secretary of State that there appeared to be a slight contradiction in his statement. He said that he was not aware of the exact number that will be expected to stay beyond six months, but towards the end of his statement he said that everyone who will

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be expected to stay for longer than six months has been informed by their commanding officer. There therefore seems to be a glitch, if not a contradiction, in the logic of his argument.

Many people will worry that a smaller force operating in Afghanistan after the withdrawal deadline may be subject to higher risk. Will the Secretary of State say whether all those who are planned to be in-country in 2015 will be combat troops with NATO-provided force protection?

Extended exposure to conflict increases the risk of physical and mental health problems. Research for King’s College London has shown the importance of adherence to the Harmony guidelines. Will the Secretary of State say how the Harmony guidelines will be altered for those affected by today’s announcement? Research for King’s College London also shows that if tours are longer than anticipated, servicemen and women are much more likely to report symptoms of post-traumatic stress disorder.

This is a one-off measure which, as I have said, has merit. However, many will note that the 2010 strategic defence and security review stated categorically:

“We need to challenge some of the fundamental assumptions which drive force generation, such as tour lengths and intervals”.

It stated that the single service chiefs would carry out the review,

“completing their work by the spring of 2011.”

Last year, that work was still ongoing. Will the Secretary of State say what work has been done internally on the wider application of longer tours of duty? If there is to be a shift to longer tours on a more regular basis in any future conflict, the military community will want a better understanding of the recommendations of the service chiefs.

Today’s announcement also raises the issue of the UK’s long-term commitment to Afghanistan. As part of an alliance presence, training and support for Afghan forces post-2014 will be essential. There is no word yet on the size and scope of such a force or the UK’s role within it. Who will be responsible for the protection of UK service personnel? Will any commitments that are made before 2015 be open-ended or time-limited? When does the Secretary of State expect more detail to be forthcoming?

Today we are focusing on the temporary extension of two tours. I want to turn, finally, to how we will mark permanently the contribution of all those who have toured and, in particular, those who have not returned. The Opposition believe that there should be a national memorial for all who have served in Afghanistan. We have also proposed that streets be named after fallen personnel, should their families and communities request it, and that veterans champions should be working hard in every local authority to help service leavers with the transition to civilian life. I hope that the Government will take this opportunity to support those and other measures.

As the operation in Afghanistan draws to a close, our nation is rightly showing huge support for those who have served. That public sentiment will prevail beyond any withdrawal timetable and so should the commitment of the Government, no matter who is in power. It is in that spirit that we want today’s announcement to be

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successful. We offer to work with the Government to achieve a fitting legacy in Afghanistan and to support our troops.

Mr Hammond: I am grateful to the right hon. Gentleman for reasserting the bipartisan approach that has prevailed on matters relating to Afghanistan. I welcome his pragmatic engagement with this announcement and his perfectly legitimate questions.

I should say at the outset that when I said that the people who were eligible and likely to be affected by the announcement had been informed, I should have used the military term warned off. Those in the pool from which the people will be drawn have been warned off that they may be affected. It will be some time before we can be clearer about who precisely will be affected. Although the next Herrick rotation is in preparation, we have not yet announced the precise composition of the next brigade. That will be determined by the practical evolution of things on the ground. I am afraid I cannot therefore give the right hon. Gentleman more detail today.

The right hon. Gentleman asked me why the Herrick draw-down allowance is not payable from day one of the tour. It is intended to compensate for the longer period of duty, the uncertainty and the austerity that may exist in the final part of the Herrick campaign. Normal allowances will be payable throughout the deployment. The Herrick draw-down allowance is an additional allowance payable from the seven-and-a-half-month point. That ties in with the current campaign continuity allowance and makes it fair and equitable among those who have served longer than six and a half months historically and those who will do so in the future.

Of course, the right hon. Gentleman’s points about additional risk and the additional potential for physical or mental health issues arising from longer tours are legitimate, and we have considered them carefully. It is worth pointing out to the House that as we draw down, a higher and higher percentage of the troops deployed will be deployed to main operating bases, where they will be relatively much safer than they have been in the forward operating bases, patrol bases and checkpoints that they have occupied in the past. Conditions will generally be significantly better.

The Harmony guidelines will not routinely be breached. Harmony is measured by the number of nights of separated service over a three-year cycle, and nothing that I have announced today is expected to have an impact on the armed forces’ ability to maintain Harmony. I should also say that this is emphatically not a systematic shift in policy with regard to tour lengths. It is a bespoke solution to deal with the final few months of the Herrick campaign and will not affect our standard deployment policy for the future.

On the two generic points that the right hon. Gentleman raised about the timing of our announcements on post-2014 deployment, he will know that discussions are going on with NATO literally right now, as we sit here, on the post-2014 configuration. We will continue to discuss the options with allies, and as soon as we have come to a conclusion we will of course inform the House.

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Finally, I am pleased to say that we are in complete agreement on the question of a national memorial. My expectation is that the memorial wall in Bastion will be dismantled and recovered to the UK, probably for re-erection at the national arboretum in Staffordshire. My personal view is that we should also look at having a fitting memorial in central London to those who have given their lives both on Op Herrick and, before, on Op Telic. I would be happy to enter into a discussion with the right hon. Gentleman about that to see whether we can make it a bipartisan initiative.

Sir Menzies Campbell (North East Fife) (LD): May I begin by associating myself with the remarks of condolence in relation to the three individuals who have recently lost their lives in Afghanistan? The Royal Highland Fusiliers is a regiment to which my family has a particular attachment.

It was never the understanding that bringing an end to combat operations would consist of turning the key in the lock and putting the lights out. Obviously, we need to employ rather more sophisticated means. In that respect, what the Secretary of State has said is entitled to receive the endorsement of the House, since it proceeds upon the military advice and has as its primary consideration force protection at a time when our forces might be particularly vulnerable.

Mr Hammond: I am grateful to my right hon. and learned Friend and should emphasise that our intention and objective is still to compete the draw-down by the end of 2014 if we can. We will certainly make every effort to do so that is consistent with proper force protection and the good order of our forces. However, today’s announcement gives us the flexibility to keep small numbers, primarily of logisticians, in Camp Bastion beyond the end of 2014 if they are needed to complete that draw-down.

Derek Twigg (Halton) (Lab): There is obviously a difference between those who serve in the rear echelon at Camp Bastion and so on, who are important to the whole operation, and those who go outside the operating bases on to the front line. Does the Secretary of State envisage that personnel will be continually asked to do that throughout the whole of their deployment? In particular, what will happen to the medical teams that are sent out to Camp Bastion?

Mr Hammond: It is not our expectation that we will continue routinely to patrol outside the main operating bases beyond the end of this year. By then, we expect to be operating from only four main operating bases, and troops will routinely be operating within those bases. Of course, they will have to retain the ability to go out in support of the Afghans if that is necessary. We intend to maintain the role 3 hospital at Camp Bastion right through to the end of the operation.

Mr James Gray (North Wiltshire) (Con): What the Secretary of State has announced this morning makes perfectly good sense from a straightforward operational standpoint, but does he not agree that if one is deployed for up to nine months, with a six-month pre-deployment training period prior to that—a total of up to 15 months away from the family—particular strains may come to bear on friends and family at home? What extra care

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will he take to ensure that those who are deployed for lengthy times are looked after from a compassionate standpoint? In particular, will he pay great attention to reservists, for whom those stresses and strains may be even greater?

Mr Hammond: First, I do not think my hon. Friend is absolutely correct to say that the six months’ training, together with a maximum theoretical deployment of nine months, would amount to 15 months away from home—certainly not all the training period will involve being away from home. However, I am quite certain that the chain of command will be sensitive to individuals’ circumstances in planning the next deployment.

My hon. Friend makes a valid point about reservists. A period of service that might be extended may clearly be more problematic for reservists than for regulars. Again, we will take that fully into account when planning for individuals to be selected for deployment.

Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC): May I associate myself with the earlier expressions of condolence?

As one who voted against the incursion into Afghanistan, I am obviously pleased that the deployment is drawing to a close. As the Secretary of State knows, history shows that periods of draw-down are especially dangerous. There will be an increased risk of people suffering from conditions such as post-traumatic stress disorder and associated problems, as well as the possibility of increased periods in the field leading to fatigue and potential loss of life. I am sure he is aware of that and will do everything in his power to ensure that it does not happen.

Mr Hammond: I am grateful to the right hon. Gentleman and can tell him that not only those who voted against the operation but those who fully supported it are pleased that we are now drawing down and bringing our combat commitment to an end. He is absolutely right that the draw-down period is a critical phase of the operation with its own risks. One reason for the decision to change the rotation pattern is the importance of maintaining relationships with key Afghans as we have fewer of those relationships. Historically, we have been mentoring and partnering at battalion and company level, but we will not be doing that any more, so we will have fewer relationships with the Afghans. It is important for our own force protection and situational awareness that we maintain and build those relationships.

Sir Nick Harvey (North Devon) (LD): May I thank the Secretary of State for his statement, the logic of which is straightforward? Having spoken socially to some of those who will deploy this October, I think it was widely anticipated that they would serve longer. Perhaps they were warned off, to use the Secretary of State’s expression.

Getting out of Afghanistan safely and steadily requires a great deal of meticulous planning. Does the Secretary of State agree that those who are prone to saying occasionally in the media that we should pack up and get out now are rather missing the point? In the months it would take to rip up the existing plan and devise another one properly, we would probably have got back on to the timeline for the existing plan.

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Mr Hammond: My hon. Friend is of course right. We are packing up and getting out—we are actively in the process of recouping our equipment. Hundreds of containers, hundreds of vehicles and pieces of major equipment have already returned, and it is an ongoing process. To try to do it any more quickly, particularly at a time of significant transition in Afghanistan and through the period of the presidential elections, which can be anticipated to be a difficult period for internal security, would be reckless with Afghanistan’s security but also reckless with the protection of our own forces.

Jeremy Corbyn (Islington North) (Lab): Will the Secretary of State explain why we are planning to keep more troops in Afghanistan after 2014, and say what purpose they will serve while in a place of enormous danger and huge political uncertainty? Would it not be better to say that the whole escapade has not been a great success and that we are bringing everybody out, according to a rapid timetable?

Mr Hammond: The hon. Gentleman’s views on this subject are well known. As I have announced, a small number of people—mainly logisticians—will possibly remain after 31 December 2014 to complete our redeployment from Bastion. In addition, we have committed to providing trainers and life support personnel for the Afghan national army officer training academy outside Kabul, which is a military training academy modelled on Sandhurst. Those are the only commitments we have made at the moment, amounting to a couple of hundred personnel on an ongoing basis. We judge that to be an effective and appropriate way for us to continue supporting Afghan national security forces, together with the £70 million a year cash support that we have pledged as part of the international community’s commitment.

Dr Julian Lewis (New Forest East) (Con): Even before British troops have left, our brave Afghan interpreters have been threatened with assassination. How many of them must be killed before we do what we ought to do and offer those who wish to come to this country the opportunity to do so, as the previous Government rightly did for Iraqi interpreters?

Mr Hammond: The situation in Afghanistan is not the same as that in Iraq. Lessons were learned from the Afghan campaign, and the way that interpreters and other civilian employees have been recruited in Afghanistan has been modified accordingly to take those lessons on board. I assure my hon. Friend, however, that we will not turn our back on those who have served us in Afghanistan as locally employed civilians. We believe that Afghanistan has a future that will require skilled, capable people who are committed to building it post-2014. We want to explore all options for encouraging people, wherever they can, to be part of that future and help to build their country in which we have invested so heavily. We have and will continue to have mechanisms that deal with cases of intimidation or threat, including those that could, in extremis, allow for resettlement in this country.

Mrs Madeleine Moon (Bridgend) (Lab): Employers of reservists who may be deployed in the next two brigades might feel great anxiety about losing staff from their day jobs for considerable periods of time.

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What discussions has the Secretary of State had with employers? If employers feel unable to release an employee for that period of time, what impact will that have on the reservist’s employment record in the military?

Mr Hammond: The hon. Lady raises a fair point, and through the employers advisory committee we are constantly in touch with the views of employers. As we come to the end of the Herrick campaign, we are likely to use fewer reservists in the last couple of rotations of that campaign, and we will be sensitive to the views of reservists and their employers if they do not wish to serve. It is unlikely that many reservists will be required to serve because of their particular skill sets if they express a clear wish not to do so.

Amber Rudd (Hastings and Rye) (Con): Will my right hon. Friend confirm that these changes are based purely on military advice from service chiefs, and are not about cutting costs?

Mr Hammond: Yes, I am happy to do that, and it is not yet clear whether there will be any significant financial savings from the measures announced today. Clearly, we will not have to train a final, much smaller brigade for deployment to Afghanistan. That does not mean that the training will not be conducted;, it means that those troops will be training for contingent operations post-Afghanistan. That will present itself as a dividend to the military in terms of an increased readiness for return to contingent operations.

Nick Smith (Blaenau Gwent) (Lab): Will the Secretary of State tell the House who will be responsible for UK forces force protection post-2014? Will it be the Afghan national army, and does the Secretary of State have total confidence in that?

Mr Hammond: So far, as I made clear to the hon. Member for Islington North (Jeremy Corbyn), we have committed only to providing trainers and life support personnel in the Afghan national army officer training academy outside Kabul. We are, of course, dependent on Afghan national security forces for overall security in Afghanistan after 2014, but we will be collocated at Qargha, at the Afghan national army officer academy, with US forces who will be running a similar academy on the adjoining site. Detailed force protection arrangements have not yet been agreed, but they are likely to include elements of UK and US forces, providing protection to the combined facility.

Dan Byles (North Warwickshire) (Con): Having served a nine-month operational tour of duty in Bosnia, I can attest to how long that is to be away from one’s family. Will the Secretary of State confirm that this is a one-off change to the way we do business, and that it will not represent a slippery slope and a longer-term change in doctrine?

Mr Hammond: It will not represent a slippery slope and it is not a change in doctrine. I am hesitant to call it a one-off since my hon. Friend has just given an example of another occasion on which nine-month tours were served. There are already people in theatre who are

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serving tours of nine months or longer in specific posts, so it is not unknown, but there is no intention to make a general change to the operational deployment of six-month tours.

Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): I endorse tributes already paid across the House to the soldiers from the Royal Regiment of Scotland who were so sadly killed in Afghanistan recently. The Secretary of State spoke about packing up and getting out, but will he indicate the value of the equipment that will have to be left in Afghanistan and gifted to the Afghan forces?

Mr Hammond: The policy on gifting to the Afghan forces is NATO-wide and it is important that we adhere to it. Equipment should be gifted only if it is genuinely valuable to the recipients and within their capability and financial capacity to maintain and operate—in other words, it is a “no dumping” policy, and we will not just leave equipment behind because it is not convenient to take it with us. We have not finally decided what, if any, equipment will be gifted to the Afghans, but we will gift it only in accordance with that ISAF policy.

Mr Tobias Ellwood (Bournemouth East) (Con): May I express a little disappointment that after a decade of involvement in Afghanistan, we never completed the railway line from Kandahar to Spin Boldak, linking to the Pakistani railway and the port of Karachi? It would have been a game changer for the city of Kandahar, and a more efficient and simpler way of getting our kit out. Perhaps it is not too late.

Will the Secretary of State confirm that today’s announcement about lengthening tours will mean that one fewer brigade needs to go to Helmand, which could lead to taxpayers’ money being saved?

Mr Hammond: I am sorry about the railway. If my history serves, we never completed the Cape Town to Cairo railway either, but such are plans. I prefer to focus now on High Speed 2—we should look to the future.

My hon. Friend is right. Today’s announcement will mean that it is not necessary to prepare and train a further brigade to deploy. It is not yet clear whether that will make any significant saving for the taxpayer because most of that deployment, had it taken place, would have been in the back of transport aircraft that would have been going out empty in order to come back with repatriated equipment.

Jim Shannon (Strangford) (DUP): I associate my party with tributes to the soldiers who lost their lives in Afghanistan, and I thank the Secretary of State for his statement. He will be aware of the experience and training gained from Operation Banner in Northern Ireland. Will he confirm that the valuable skills developed through that operation will be made available to the Afghan army to the end of 2014, and indeed beyond?

Mr Hammond: I can confirm to the hon. Gentleman that we are training Afghan troops in various specialist techniques that will be of value to the Afghan security forces in maintaining security in future. Of course, that

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draws on all the experiences that British troops have gained over the years, including many valuable experiences in Northern Ireland.

Jason McCartney (Colne Valley) (Con): I congratulate my right hon. Friend on the introduction of the Operation Herrick draw-down allowance. Last year, following a spate of so-called green-on-blue friendly fire attacks that resulted in casualties from, among others, the Yorkshire Regiment—my local regiment—a number of measures were introduced to remove the threat. Will he confirm that, as the draw-down gathers pace, that the threat from green-on-blue attacks will be minimised as much as possible?

Mr Hammond: As I have sought to emphasise throughout the statement, maintaining force protection during the draw-down period is our primary consideration; thereafter, it is maintaining effective support to the Afghans. The green-on-blue threat has not gone away. As we draw down into fewer and fewer bases and have less and less contact with the Afghans, the nature of the threat changes. In some ways it is diminished, because we have less contact; in other ways it is increased, because we have less awareness. However, I can assure my hon. Friend that the military commanders are extremely focused on how best to manage the situation to optimise force protection during that period.

Sir Bob Russell (Colchester) (LD): The Secretary of State says that between 2,200 and 3,700 military personnel could deploy for more than six and a half months, and for up to nine months in some cases. In addition to the Herrick draw-down allowance, will personnel have additional home leave entitlement during that extra deployment period?

Mr Hammond: It is not intended that an additional R and R period will be incorporated. As with current practice, there will be a single 14-day period of R and R during a tour.

Sir Gerald Howarth (Aldershot) (Con): May I congratulate my right hon. Friend on a sensible move to ensure that the transition is orderly? Does ISAF have any intention of retaining a continuing capability beyond the extra three months of 2015? Will the UK be prepared, beyond the support to the officer training academy, to contribute troops to ensure that the transition period to full ANSF control is achieved?

Mr Hammond: I am sure my hon. Friend is aware that a NATO chiefs of defence staff meeting at which that question will be discussed is taking place today in Brussels. No concrete proposal has yet been accepted, and the UK has made no commitments beyond the Afghan national army officer academy. However, we will consider what ISAF and our NATO allies propose to do in future. We will look at the requirements that any NATO plan involves, make a decision on what, if any, participation the UK should have post-2014, and notify the House as soon as any such decision is made.

Mr Speaker: I am grateful to the Secretary of State and to colleagues.

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Debate on the Address

[5th Day]

Debate resumed (Order, 13 May).

Question again proposed,

That an Humble Address be presented to Her Majesty, as follows:

Most Gracious Sovereign,

We, Your Majesty’s most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

Cost of Living

Mr Speaker: I inform the House that I have selected the amendment in the name of Edward Miliband.

1.13 pm

The Secretary of State for Energy and Climate Change (Mr Edward Davey): I am grateful for the opportunity to discuss the measures the Government are taking to help people and families who are struggling to make ends meet. No party in the House has a monopoly on compassion. We know that there are problems, and that families and people are struggling, not least because of increases in prices, including global energy prices. The issue is that the Government must tackle those problems with no money, as we were reminded by the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), the former Chief Secretary to the Treasury. We must create a better fiscal position while tackling that difficult problem to ensure that we help people. And we are doing just that. We are cushioning people from the impact of rising prices and protecting the most vulnerable. We are trying to make these big, difficult decisions in as fair a way as possible, to be fair to those who work hard while helping those who fall on hard times.

Geraint Davies (Swansea West) (Lab/Co-op): On that very point, does the Secretary of State agree that food and energy comprise the highest proportion of expenditure for the very poorest—they are escalating out of all proportion—and that he is cutting money for those very people, namely those on benefits? Is not the harsh reality of this Government that they are hurting the poor most because of the bankers’ recklessness?

Mr Davey: The picture is rather more complicated than the hon. Gentleman says. We have a range of measures to help the most vulnerable with their energy bills, which I will come to during my speech.

One way to help people is to ensure that work pays. We must ensure that we are creating jobs in the economy and that there are links from benefits into employment. That is rightly one of the Government’s obsessions. We are introducing a range of policies to help people. Interest rates are at record lows. Income tax cuts are making a big difference: this year, 24 million employees will have an income tax cut of £600; next year, the cut will be £700. Some 2.5 million of the lowest paid will be taken out of income tax altogether. The income tax bill for people on the national minimum wage will be cut in half. That is a good record.

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Pete Wishart (Perth and North Perthshire) (SNP): The Secretary of State mentions Government obsessions. Does he believe that the lofty ambitions he describes will be better achieved in or out of Europe?

Mr Davey: It did not take long for someone to mention Europe. The hon. Gentleman will be shocked to hear that, as a Liberal Democrat, I strongly support Britain’s membership of the EU.

The Government are taking other measures. We are cutting fuel duty, we have capped rail fares, and we are helping the most vulnerable with their energy bills. We are extending free nursery provision and helping working parents with child care costs. The Opposition do not like to talk about the Government’s record on jobs. We have helped to create 1 million private sector jobs since we came to power. We have 1 million apprenticeships. That is a record we should be proud of, and one the Labour party was not capable of delivering.

Caroline Lucas (Brighton, Pavilion) (Green): The Secretary of State says he is helping the poorest with their energy bills, yet this is the first time for 30 years that there is no taxpayer-funded energy efficiency scheme. The energy company obligation does not have enough money in it. It is also funded by a levy on everybody’s fuel bills, which is regressive—it pushes more people into fuel poverty than it draws out. When will he put in place measures that will protect the poorest?

Mr Davey: I could talk about the warm home discount or the green deal, which the hon. Lady forgot to mention. There is a range of measures, which I will describe in detail. The picture is not as she describes.

Alec Shelbrooke (Elmet and Rothwell) (Con): My right hon. Friend mentions the creation of 1.2 million private sector jobs. Does he agree that that is probably why, it has now been revealed, that the country avoided a double-dip recession?

Mr Davey: My hon. Friend is absolutely right. It is worth reflecting on the Government’s record on jobs. The Opposition do not like to talk about it, but the truth is that, despite the difficult circumstances—despite the Government having no money because we must pay down the deficit, and despite not having the growth that we would like in the world, European or UK economies—we have created jobs. That is a very good record.

Huw Irranca-Davies (Ogmore) (Lab): Against the glowing backdrop that the Secretary of State paints, why do I now have a food bank in every single village in my constituency when there was only one three years ago? Why has there been a quadrupling of food banks under this Government? His record cannot be that good, given the backdrop of the inexorable rise of food poverty.

Mr Davey: People who run food banks are doing an extremely good job and deserve credit for their work. However, it is completely wrong to suggest that there is a statistical link between the Government’s benefit reforms and the provision of food banks. It is good that people are helping others. I hope the hon. Gentleman supports that.

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I wish to make progress and to talk about energy and climate change policy. My Department has three major objectives. The Department wants to ensure that energy is as affordable as possible for consumers and business; that we keep the lights on with energy security; and that we decarbonise the power sector. With the Energy Bill, the green deal and many other policies, we have the most coherent energy and climate change policy of any Government in Europe—and indeed of any Government in this country for many, many years. Our approach also tries to maximise the jobs and growth potential from our energy and climate change policies. We also try to ensure that the impact on the bills of consumers and businesses is as low as possible, and we have policies to try to meet the climate change challenge.

David T. C. Davies (Monmouth) (Con): The total increase in average global temperatures since we started industrialising is approximately 0.7° Celsius. How much of that is due to carbon emissions and how much is due to the natural warming that was going to take place anyway as the earth came out of a cool period?

Mr Davey: I am disappointed that my hon. Friend seeks to deny the science of climate change. He may have heard Sir John Beddington, the Government’s recently retired chief scientist and a very distinguished scientist, say that the science showing climate change was human-made was “unequivocal”. When it comes to science, I like to listen to the experts.

It is important that we gain jobs, especially green jobs, through our investment in low carbon. We also need to ensure that these are profitable enterprises in which people can invest. We need £110 billion of investment in our energy infrastructure over the rest of this decade. That will be in low carbon, in gas and in other energy security measures.

On prices, we have to drive a wedge between the rising global prices and the bills that people have to pay. We also have to rise to the climate change challenge. We need to recognise that the challenge is serious and that—contrary to what my hon. Friend suggests—the science tells us that we have to act.

Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op): The Secretary of State talked about investments in our infrastructure. The green investment bank could be fuelling jobs in the green sector if it were also investing in SMEs that are developing and bringing to market technology in this area. Why are the Government failing to deliver on that?

Mr Davey: The Government have delivered on the green investment bank. The hon. Lady should know that investment banks are not controlled by Government. They are given a remit to make investments, and the green investment bank is doing so and is extremely effective. Indeed, it is world leading. I am sorry that the hon. Lady is criticising it and I hope that she will look at what it is doing and realise that it is making a big difference. Our performance on green growth and green jobs shows that we are delivering on the coalition agreement promise to build a new economy from the rubble of the old.

We have this massive infrastructure opportunity because nearly a quarter of our capacity will close over the next decade. We have to replace that to keep the lights on,

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but at the same time we can begin, and really go for, the transition to a low-carbon energy economy. We need to do that by investing especially in energy efficiency. I have stressed that from day one as Secretary of State. We have several policies already, such as the green deal and the energy company obligation, but in the last year we have developed some very interesting proposals on electricity demand reduction. We will publish the response to our consultation on that shortly.

Around 1 million people work in the green economy, and the support that we are giving to clean energy will fuel the rise in the area. Between now and 2020, the support we give to renewables will increase year on year to £7.6 billion—a tripling of the support for renewable energy and a record the Government can be proud of. We already have 110,00 jobs in the renewable energy sector directly, and 160,000 jobs in the supply chain. By 2020, we believe the sector will have more than 400,000 jobs.

We also have the prospect of a new generation of nuclear power stations. I am engaged in discussions with EDF for a proposed nuclear reactor at Hinkley Point C. If we reach agreement, it will result in more than 5,500 jobs during construction, more than 1,000 ongoing jobs at Hinkley Point C and more in the supply chain. Our proposals on carbon capture and storage—we have two preferred bidders, Peterhead in Aberdeenshire and White Rose in Yorkshire—will also result in lots of jobs and deliver a pathway to commercial CCS in the next decade, which will be very important in meeting our climate change targets.

We sometimes forget the oil and gas sector, perhaps because it is not as green as renewables, nuclear and CCS, but it will be essential as we make the transition from a fossil-fuel economy to a low-carbon economy. We will still need an awful lot of gas and oil during that process and in the next few decades. I am delighted to report to the House that investment in the North sea is booming. We are seeing record levels of investment in the North sea, which is good for our energy security as we do not have to import so much gas from other parts of the world. I hope that right hon. and hon. Members will welcome that.

I have made it clear that we will also support the development of shale gas. If it has potential—and we do not know that yet—it could be beneficial, especially to our energy security. We are going to need gas for many decades. It replaces coal, so it can help us to meet our climate change targets. At the moment, we have to import increasing amounts as the amount coming from the North sea is declining. If we can exploit shale gas commercially, that will make sense, and I hope that we can reach agreement on that. We are going about this in a way that is designed to keep the public with us. In other countries that have rushed headlong into it, the public have reacted very badly, leading to moratoriums and bans. We want to ensure that we think things through carefully, which will help us do it properly.

Derek Twigg (Halton) (Lab): The oil and gas industry is well represented in the Heath business and science park in my constituency, which is one of the most important employment sites. If the Secretary of State is keen to promote jobs, why does his Department still have a planning recommendation before it that it has had since Easter? It is very simple, involving just the

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removal of an electricity line, but the delay is holding up investment, jobs and housing. Why has he not made a decision on that, given that he has had the papers since Easter?

Mr Davey: The House will not be surprised to learn that I am not aware of that particular planning application. Of course I will go away, look at it and write to the hon. Gentleman.

All our policies, whether on energy efficiency, renewables, new nuclear, CCS or oil and gas, add up to the proposition that my Department is about growth. We are seeing a lot of jobs created and we will see more in the future. However, I am also concerned about the bills and the cost of energy, and how those affect our constituents and industry. We have seen global gas prices increase dramatically. UK wholesale gas prices were 50% higher in the five years to 2011 than in the previous five, and they have continued to rise since then. That is the global context. People talk about the reduced price of gas in north America, but they forget to look at the price of gas in other markets, which has gone up significantly.

We need to provide a cushion or wedge between the prices going up in global markets and the bills that our constituents have to pay, and we have several policies to help. We have direct payments, including the winter fuel payment, the cold weather payment and the warm home discount. This last goes to 2 million of the lowest income households in the UK, taking £130 directly off their bills and helping 1 million of the poorest pensioners. We are trying to promote greater competition in the retail markets through our proposals on tariff reform and the work we are doing on collective switching. We are driving competition in the retail market, which is already having an effect for those who have benefited from the collective switching.

Through the Energy Bill, we are trying to ensure that we achieve wholesale market reform, and this will no doubt be debated on Report and in the other place. We welcome the fact that Ofgem is consulting on proposals to improve liquidity in the wholesale market. We look forward to its conclusions, and they will play a part in ensuring that competition can drive lower prices. When we talk about the cushion and the wedge between the global prices and the bills that people actually pay, energy efficiency is at the heart of the solution, whether in product standards, the green deal or energy company obligation. I am pleased that we are already seeing real interest in the green deal, and a huge number of assessments have already taken place.

John Penrose (Weston-super-Mare) (Con): I am pleased to hear that my right hon. Friend is interested in promoting competition, particularly in the retail and wholesale markets. Does he agree that there may also be significant opportunities, not just in the energy sector, but more broadly across the other utility sectors too, in reducing the infrastructure costs of the transmission network—be they wires or pipes for water, energy or whatever—using investment more effectively and efficiently and trying to regulate down those costs in a much more determined fashion?

Mr Davey: I am sure my hon. Friend is right. In a previous incarnation, I was Minister with responsibility for competition and was extremely keen to make sure that the UK had the most robust and rigorous competition regime in the world. The changes going through this

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House have delivered on that. I am not an expert on every single utility sector, so I will be careful about making any particular points about the water industry, or any other industry, but I am sure he is right that competition has an important role to play.

The impact of our climate change and energy policies has been to reduce household bills by 5%. By 2020, bills will be 11% less than they otherwise would have been. We know, of course, that energy prices are going up globally, but we have the policies to try to cushion people. As a result, people will pay lower bills than they otherwise would have done.

Huw Irranca-Davies: I thank the right hon. Gentleman for giving way, and I will not abuse his graciousness any more. Against that backdrop, why is it that independent analysis from the Fuel Poverty Advisory Group shows that an additional 300,000 people went into fuel poverty last year, and the Hills review suggests that 200,000 will be driven further into fuel poverty in the next four years? Against the glowing backdrop he has set out, why is that happening?

Mr Davey: I agree with the hon. Gentleman that fuel poverty is a real problem. [Interruption.] Opposition Members, from a sedentary position, say that the number of those facing fuel poverty is going up. Indeed, with global gas prices going up we have a challenge to keep bearing down on fuel poverty, but we are completely committed to doing that. Later this year we will produce a fuel poverty strategy, the first to be produced for more than a dozen years. One reason why he can quote the Hills review is that the Government commissioned that review to look into the exact nature of fuel poverty to ensure that it is being measured correctly. It shows that the previous Government could not even measure fuel poverty correctly. We will ensure that we measure it correctly, so that our policies can be targeted far more effectively to help the fuel poor. Opposition Members are not the only people in this House who are compassionate about the fuel poor.

It is important that we are concerned about the high cost of energy for all businesses, and energy-intensive industries in particular. That has to come through greater energy efficiency and we have a number of programmes to deliver that. There also has to be compensation and extra help for energy-intensive industries. I am grateful for the work and co-operation of the Treasury and the Department for Business, Innovation and Skills to ensure that we have a package to address the problem, particularly for energy-intensive industries. We have not had one before.

Mr Nick Raynsford (Greenwich and Woolwich) (Lab): The right hon. Gentleman was critical of the previous Government’s definition of fuel poverty and praised Professor Hills’ proposals. The problem is that no one can understand them. Will he please explain to the House the Hills’ definition of fuel poverty?

Mr Davey: The interesting thing is that that definition has two parts: it tries to measure overall fuel poverty in terms of energy efficiency; and, most importantly—it has not been done before—it looks at the depth of fuel

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poverty. If we consider not just fuel poverty statistics, but income poverty statistics too, we should be most concerned about those in poverty year in, year out—the grinding fuel and income poverty. Unless we have measures that show what is happening to deep fuel poverty and allow us to attack it, we will not be able to deal with fuel poverty. Our measures are more effective and more sophisticated than anything produced by the Labour party.

We must ensure that business energy costs are, through climate change policies, similar across the EU and the globe. One measure that the UK and the EU have pushed is the European carbon market, which is often known as the EU ETS. It is important that the EU ETS carbon price provides incentives and signals to the markets for investment in low carbon, and that it creates a level playing field for industries across the EU. I regret that the vote in the European Parliament on the back-loading proposals was lost by 19 votes. The proposals were part of the reform of the EU ETS. We need to do a lot better. I hope that the ENVI Committee in the European Parliament can come forward with another package so that we can reform the carbon market. That is in everyone’s interest, not just on climate change, but to ensure that we have competitive industries on a level playing field across the European Union.

I want to end by talking briefly about climate change. Some will say that we should put off action on climate change until we get to better financial times, and some will say that we should not be looking at this issue at the moment given our financial and economic problems. I reject those arguments completely. The science of climate change is unequivocal: we have to act now and we should have acted before. That is why we need to reform the EU ETS. It is about not just the back-loading proposals, but structural reform. I am working with fellow EU Ministers and have set up a like-minded group—the Green Growth group—to try to build a coalition at the European Council, so that we can achieve these vital reforms on climate change.

There has been a big debate during the passage of the Energy Bill—a carry-over Bill in the Queen’s Speech—on the proposal for a decarbonisation target, which has a role to play in tackling climate change. Of the general election manifestos from the Liberal Democrats, the Conservatives, the Labour party and even the Green party, guess how many mentioned a decarbonisation target for the power sector? Not a single one. When we published the draft Energy Bill in May 2012, it did not contain a decarbonisation target, and there was no decarbonisation target promised in the coalition agreement. Now we have one in the Bill. The Government have looked at the issue and put the target in the Bill. We are the first Government ever to do that, and it is a very strong move. We are an early mover. The Opposition want to carp at one or two details, but I am afraid that they fail to acknowledge what we have done and what we have delivered.

Alec Shelbrooke: Does my right hon. Friend agree that, whether or not people are sceptical about climate change, reducing our reliance on fossil fuels and carbon is equally as important to energy security as it is to climate change? This policy is very important in making sure that we have energy security in this country.