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Westminster Hall

Volume 482: debated on Tuesday 4 November 2008

Westminster Hall

Tuesday 4 November 2008

[Mr. Joe Benton in the Chair]

International Banking Regulations

Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Dave Watts.]

It is a pleasure to serve under your chairmanship, Mr. Benton. I am grateful to Mr. Speaker for giving me this opportunity to discuss Government policy on international banking regulations, not only because of the experiences that we have all just been through but because we look forward to the meeting of the G20 in Washington DC on 15 November. This is a timely opportunity to hold what I hope will be a constructive discussion about the issues that are on the table for that meeting of world leaders and all the work that will follow, and I hope to hear something about what the Government’s approach will be.

There is no doubting the scale of the challenge before the G20 as its members plan the meeting. Clearly, it is huge. There is even talk of a new Bretton Woods. If one thinks about the context in which that system came about—it was almost the aftermath of the second world war—one can understand the scale of the challenge that is before us. There is some urgency to it, because of the remaining weaknesses and faults in the international banking system. It is clear that huge stakes are involved, not least because the leaders will discuss the future stability of the world’s financial system and, through that, the future prospects of virtually every nation on the planet. The rewards for getting a new regulatory structure, whatever it turns out to be, right are enormous, but, equally, the costs of getting it wrong are huge.

One thing at stake is what I call the regulatory culture. I do not think that there is now any question in anyone’s mind about the fact that there was a massive regulatory failure in the run-up to the culminating events in October, but the issue is what failed within that regulation. There are already competing views on that, and competing camps will converge on the Washington meeting later this month. Three views are emerging. One group anticipates that reform will lead to some grand new global regulator: one regulator, one set of rules, one set of enforcement proceedings. At the other extreme is the group that wants to stick to the do-it-yourself approach to banking regulation, leaving nations to work out their own salvation. Finally, there is a group coalescing around the middle that wants multiple systems of regulation but with some measure of co-ordination between them to ensure consistency across the different platforms.

It is evident that some of the leaders who will go to Washington will talk up the idea of a new global and interventionist form of regulation of the banking systems in different member states—micro-management, if one likes—but that others who are preparing to travel there are anxious to defend the light-touch regulatory approach. I believe that the United Kingdom Government are in that camp. They would take the view that the light touch of the past has benefited the UK by producing growth in the financial sector and thus making a contribution to the economy, but set against that is the question of whether it contributed to some of the problems that have exploded before our eyes. There is not a straightforward bipolar choice between the two options. It is clear that a tension underlies the debate, and I have no doubt that it will surface in the Washington discussions.

The first question is what exactly went wrong, and with the advantage of hindsight, it is now relatively easy to answer that. It is worrying that the regulatory systems that were in force did not call time on what was going wrong, or, if they did, that they did not do it sufficiently loudly or with sufficient weight to bring certain practices to a halt. The sequence is now clear: there was a steady decline in banks’ capital asset ratios. At the time of the Bretton Woods agreement that set up the broad framework that regulates the system, typical capital asset ratios were between 15 and 20 per cent. They have declined steadily since the 1940s and 1950s and are now down to about 8 per cent. That decline in itself need not have led to a catastrophic outcome, but it combined with other things that were happening to become a toxic mixture.

There were ever more complex financial instruments, many of them emerging from the application of new technologies to the markets; ever-increasing leveraging was used by the banks; more bank assets were packaged and distributed internationally; and, in many instances, the risk assessment attached to all of that was effectively outsourced to credit rating agencies that were remote from the actual world of banking. It is generally accepted that that combination led to the catastrophe in the banking system this year.

The extent of the leveraging was dramatic. The Bank of England’s financial stability report published in October showed that UK customer lending by the banks was equivalent to customer deposits in those banks as recently as 2001. By 2008, UK bank lending to customers exceeded deposits by £700 billion—about one half the size of the UK economy. That was a dramatic shift in just seven years, with most of the extra lending offered by UK banks to UK customers sourced from overseas money washing around the international banking system.

With the integrity of much of that funding uncertain, and the fact that its structure was not transparent, we can now see that the whole thing rested to a large extent on asset price inflation, which everyone surely knew could not continue uninterrupted for ever. I suppose that there was an intellectual realisation that that was the case, but it seems that nearly everyone in the banking system was carried away by the exuberance of asset inflation that apparently would not end.

I congratulate my hon. Friend on securing this debate on international banking regulations. He said that the structure is not transparent. Does he hope, as I do, that when our astute and highly regarded hon. Friend the Minister replies to the debate, she will refer to financial accounting standard No. 157, which was introduced in the US almost a year ago this week? It looked at the valuation of bank assets and put them on three levels, the third of which deals precisely with the collaterised debt obligations that brought to the surface the fact that sub-prime mortgages underpinned much of the American boom. That realisation triggered what we have seen during the year or so since. Perhaps we should be more open about the valuation systems that banks use which sometimes even they do not understand.

I am grateful to my hon. Friend for making that point. He is absolutely right. Of course accounting systems and procedures are very much part of the suite of issues that must now be examined. I shall touch on that subject again when I come to the Basel accords, as there is an overlap between the point that he made and the issues that arise in that context.

I was discussing the asset price inflation that drove all the recent occurrences, and the chain of causality that began to unravel. It is now well known that the problems were initially exposed by the downturn in the US housing market, which in turn exposed the sub-prime lending that had been going on. Those issues were rapidly transmitted through the international banking system and led to banking collapses in some instances, as well as the threat of collapses on a wider scale. That in turn led to a crisis of confidence in the banking system, which in turn sent LIBOR spiralling, thereby producing the current global slowdown in economic activity.

All those events almost brought the international banking system to the brink of a catastrophic collapse, which was averted only by the concerted and co-ordinated action of Governments around the world injecting £3 trillion of resources into the banks. It is worth recording the scale of the losses, as is it known, although those figures may change as time goes on. Government intervention at the moment is designed to cover potential known losses in the UK banking system alone of some £122 billion; in the euro area, the loss is estimated at $784 billion and in the United States it is $1.57 trillion.

To return to the UK, the Government recapitalisation that I just mentioned, which averted a complete catastrophe in the banking system, has lifted the capital ratios a bit, from an average of about 8.5 per cent. to about 10 per cent. However, we learn from the Bank of England’s financial stability report that even at these levels, UK banks would still need to shed about £1 trillion-worth of assets—almost equivalent to the size of the UK economy—to get their leveraging levels back to what they were in 2003. That is a striking illustration of the extent of the problem and the degree to which that overhang is still there and remains to be dealt with, even after the banking rescues have taken place. That will only be done either by a very long-term correction, which would mean correspondingly tight credit and slow growth for a long time, or, possibly, even more state support on top of what we have already seen.

We also have to address the moral hazard question that has come about as a result of the Government intervention. Put simply, banks now know that they will be bailed out. What has long been suspected has been confirmed; they are too big to fail. Does that raise a question—I am interested to know what the Minister thinks about this—about the incentives for banks to behave responsibly in future, knowing, as they now do, that they are too big to be allowed to fail? The Government intervention, which was clearly the right thing—I am not questioning that for a moment—has brought into existence the concept of shadow equity which, in effect, is behind every banking institution and is funded by every taxpayer.

The next question, as I mentioned at the outset, is what exactly happened on the regulatory side and what can we learn from it. It breaks down into three sub-questions. First, who are the key players in setting international banking regulation? Secondly, were the failures administrative or systemic? Thirdly, how can the failings be corrected? The first and most obvious key players are the International Monetary Fund and the World Bank, which were brought into existence in 1944 under the Bretton Woods agreement. Those institutions were established to step in where markets failed and to mitigate the anticipated excesses of global capitalism. They were also designed to prevent beggar-thy-neighbour policies, which everyone meeting at Bretton Woods believed had contributed to the economic and political catastrophes of the 1930s. I am sure that they were right in that conclusion, but it is interesting to look at the IMF’s remit, because it reflects what the debaters at Bretton Woods were trying to prevent from happening again—their perspective was the need to avoiding the problems of the inter-war years. The IMF’s remit focuses heavily on trade and trade regulation, as well as on exchange rates, but it says little about preserving financial stability.

Looking at the history of Bretton Woods, there was an interesting argument at the time between those who wanted to bring out of the conference global institutions, global rules, global financial governance and, possibly on the part of some, a global currency—an interesting echo of the debate around the table in Washington later this month—and those who argued for sovereign independence for states in their banking and trading systems, but with the means of co-ordination and general oversight and with the existence of reserve funds to give support to countries in trouble largely as a result of trade deficiencies. That is a different context from the one that we now face.

I think that people can see structural weaknesses in the IMF. I raise that point because if the discussion is going to be about the IMF as a key player in the restructuring of the regulation of international banking, other questions need to be addressed before reaching that conclusion. The first problem with the IMF as currently constituted is that it is seen around the world as the advocate of the Washington consensus. The US dominance of the IMF as an institution is undeniable. The US is the only member of the IMF with a 17 per cent. vote on the board, and that 17 per cent. is crucial, because most major decisions taken by the IMF require an 85 per cent. vote and the United States alone has the veto. In addition, US influence over the IMF has been ramped up over the years. Every time the IMF wants to renegotiate the quotas it has to gain US congressional approval to do so. Congress, not unreasonably, poses ever more conditions as a quid pro quo for supporting the revamping of the quota system, so it has its hands on the IMF’s policy stance, and that is recognised around the world.

The IMF, in the present context, is seriously underfunded. Discussions are taking place, in which our Prime Minister is involved, to try to resolve its funding situation. However, even if the funding is sorted out, questions still have to be asked about the IMF as an institution and about its stance, because the Washington consensus is now damaged goods after the sub-prime catastrophe. One wonders whether the IMF will suffer reputational damage and whether that can be put right. It is not just about recapitalising the IMF; it is also about revising its role. People are calling for it to have an enhanced role in the supervision of international banking and to provide early warnings; to be a genuinely global supervisor and to have a strengthened brief on financial stability. All those things are needed—I do not think there is any question about that—but if any of that is to be achievable in a robust, sustainable way, there must be fundamental reform of the governance of the IMF. I am interested to hear what the Government think about that.

The second major institution that we have to consider is the Basel Committee on Banking Supervision, including the accords that have grown out of it, which was not set up by the G10 until the 1980s, long after the Bretton Woods discussion. The Basel accords eventually plugged the gap in the IMF’s remit, but they did so a long time afterwards. They have not come out of this saga very well either, yet a great deal of store is being set on their coming to the rescue of the international banking system. Basel I, the first set of accords, was long ago acknowledged as weak, which led to all the negotiations that ultimately resulted in Basel II, which is still advocated by many as the gold standard of financial supervision. However, the experiences of the past year show that Basel II, too, has fundamentally failed. Long negotiations led up to Basel II, throughout which the banks lobbied hard for a system based on two core principles: internal risk rating—the banks doing their own assessment of their exposure to risk—and low capital thresholds. In the negotiations that led to Basel II, the banks got both those things, so they really won again.

It is worth looking at some of the detail of Basel II, which allows banks with sophisticated risk-taking models—that is now most of them—to select their capital adequacy ratio from an à la carte menu of options provided by the Basel Committee. Basel II also means that banks can use their own measures to determine their exposure to risk. There is no independent, externally verified risk measurement. The banks measure their own exposure to risk.

Basel II also allows the banks to allocate their risk weighting to each of their assets, including off-balance sheet assets. To read what the banks said when Basel II was negotiated gives the impression that they thought that they were moving into a world with a huge regulatory hurdle, but Basel II was the guidance that told banks that it was fine to reduce capital charges on lower-risk lending—that is Basel II’s phrase, not mine—which was defined as retail loans and residential mortgages. It is extraordinary that it said that it was okay to have lower risk protection on those loans because they were safe.

I entirely agree with the hon. Gentleman’s sentiments about the weaknesses of Basel II, but if there were a revision, it might be worth keeping one of the benefits—releasing the banks from the obligation of relying on oligopolistic suppliers of credit ratings—and having some discretion, because of the great failings of those American rating agencies.

The hon. Gentleman makes an absolutely valid point. I am not trying to suggest that the whole Basel system should be dumped in the basket and forgotten. I am merely raising a suite of concerns about the content of Basel II, because I am worried that if world leaders, when they discuss re-engineering the architecture of banking regulation, assume that everything must proceed in the way that the accords previously proceeded, that will not be enough. That does not mean that there are not robust and important features in the Basel system, because there are, and they will want to retain them. I am pointing to the weaknesses, which will have to be addressed if we are all to have confidence in the new system, and if it is to be a permanent, not a temporary, fix.

I am running through some of the consequences of Basel II. Adam Applegarth cited Basel II compliance when he told the Treasury Committee last October that it was fine for Northern Rock to increase its dividend rather than to shore up its capital. He said that that decision was based on the regulations implied by Basel II. The accord’s weaknesses have also been identified by the Bank of England in its financial stability report, which points to the weak treatment under Basel II of trading book assets and risks relating to off-balance sheet exposure. Many analysts argue that if Basel II were fully implemented, it would lead to lower capital asset ratios—even lower than the average 8 per cent. that it envisages.

Despite that, the Basel system in general has many advocates, and many of its features are perfectly respectable, but important institutions around the world still address the current issues of banking regulation using Basel II as the platform on which to build everything. For example, the European Commission proudly cites Basel II as the foundation on which it is writing its capital requirements directive, which is currently being debated by MEPs. Further refinements are being made to Basel II, some of which were set out in documents published in September. They call for regular stress testing, ensuring the alignment of risk-taking with liquidity exposure, and maintaining a cushion of quality liquid assets as insurance. Those are welcome reforms, but they are based on the core principles of Basel II, some of which are now exposed as fatally weak. It is worth remembering that the Basel accords are not law; they are simply guidance. They have no direct enforcement mechanism, and are entirely dependent on the interpretation of each country’s central bank or regulatory authority. Nor is Basel II’s remit comprehensive enough to embrace all aspects of the toxic mixture of banking practices that have imploded.

That tour of the institutions is the main part of what I want to say. It is relatively easy to agree a list of weaknesses: inflated balance sheets, assets of uncertain value, complexity of new instruments, dangerously high levels of leverage, too much dependence on wholesale funding, dangerously low capital asset ratios, and insufficient understanding of the level of global interconnectivity between the different practices and instruments that banks have introduced.

Will my hon. Friend add to his list of problems the fact that all the banks that failed in the US, Britain and the EU had a clean bill of health from auditors who were dependent on those banks for their appointment, fees and other income? Should we not have a more independent process? For example, PricewaterhouseCoopers charged Northern Rock £2.4 million in 2007, of which £1 million was for consultancy. How can those auditors—other examples proliferate—be as objective as they need to be in the interests of depositors and the economy?

I anticipated that when I reached this stage of my speech other hon. Members would want to add to my list. I do not disagree with my hon. Friend, and I am happy to take on board the point that he made. Whatever is on the list and whatever anyone wants to add to it, it points in its sum to systemic failure on the part of regulators. In reply to my first question on whether the failure is administrative or systemic, the evidence points more to systemic failure.

Regulators did not, or could not, keep up with the pace, extent and technical nature of changes in financial markets. They did not have the right tools for the job. It is relatively easy with increasing hindsight to agree on what is needed. Hon. Members may want to add to this list, but I shall give my requirements: timely early-warning devices, higher levels of transparency across the system, more cross-border supervision, counter-cyclical instruments, and re-engineering of risk measurement and management. How that can be done is the hard question. The main tools in the box are the International Monetary Fund, the World Bank and the Basel accords, and beyond that the interpretations by a host of different regulatory systems of what those accords say. However, they could also be described as the major contributors to the 2008 financial disaster.

I said that aspects of the matter are urgent, and in seeking an urgent response, there is a tendency to grasp the tools to hand. Clearly, there is urgency about the agenda, but in seeking to bring about a new global regulatory framework, there is a necessity for a great deal of reflection and careful building because there is so much at stake, but that calls for time, so there is tension in the discussions between time to get this important matter right, and the urgent need to avoid further calamities. That is a key tension, and I am sure that it will be a feature of the discussions in Washington and the follow-up work.

It is not easy from our perspective to know how those tensions in the system will work out, but it is important that Parliament considers, and engages in, the issue. That is all I am trying to highlight today. I hope that it will give the Government an opportunity to say more about their thinking as they prepare for the Washington meeting. If it will help the Minister, I will collapse all that I have said into three basic questions. What is the Government’s analysis of what went wrong, and does it match mine? What are the key components of any new global regulatory architecture that is fit for purpose? Can they be securely based on existing institutions, or does a workable reform require us to conceive new institutions for global financial governance?

I have declared my interests in the Register, but we all have additional personal interests. I currently enjoy the pleasure of a NatWest overdraft and mortgage, and I hope that the credit crunch will not immediately impact on those. I am also prospectively a Royal Bank of Scotland pensioner.

I congratulate the hon. Member for Warwick and Leamington (Mr. Plaskitt) on securing the debate. His speech was an example of Parliament at its best—pre-scrutiny work on the challenges that the Government will face in upcoming meetings, during which how to deal with the medium-term implications of the current credit famine will be considered.

The hon. Gentleman emphasised particular issues that are worthy of consideration. He said that additional state support for the banking system might be necessary further down the line, and he rightly emphasised how we need to bear in mind that there are many national interests in the debate about the altered regulation that might be introduced. We must be aware of and cautious about the implications of change to regulation, because that will impact on our country’s interests.

I should declare an additional interest: the World Bank has been and is a client of mine, and I know people at that organisation. For those who have not been to Washington, it is notable that it is only a two-minute walk from the White House to the World Bank headquarters buildings on I street. The closeness of that institution to the Washington consensus is important. Crucially, the hon. Gentleman mentioned how there is a real debate about what the new regulatory regime will be like; will it be unipolar or will it be diverse? I wish to take this opportunity to caution strongly against the dangers of adopting one overall system of regulation.

Following the theme of globalisation in relation to regulation, we must recognise that one issue connected to the financial crisis is that of financial contagion. If one goes down the route of ensuring that there is similarity in terms of regulation across financial markets and the globe, that contagion is more likely to be enhanced in any future crisis. To some extent, the degree of semi-detachment of the Asian financial markets from the rest of the financial global system means that they benefit from having some protection from the current problems. I wish to press upon the Government that when they seek to protect our interests during international debates on regulation, they should be aware that there is an argument for what might be described as regionalised circuit breakers and that there is an advantage in having some difference.

We must also bear in mind that if there is complete similarity in terms of regulation, it is possible that, geographically, businesses will find it easy to move from one place to another within the international financial system. Clearly, we have an interest in defending the concerns of the City of London. That is particularly important because, in terms of employment in Greater London as a whole, the financial industry has become dominant in our capital city—almost to the extent that it is the cuckoo in the nest.

There is a danger in following one solution to rescue the international banking system. There is no doubt that the Government have shown real leadership—even just in terms of installing confidence in financial markets—by taking vigorous and rigorous action. They have created an economic value by ensuring that they are seen to take quick and speedy action. However, I have some doubts about the medium-term efficacy of the equity capitalisation that has taken place. Unfortunately, there is a great danger that such an approach is badly flawed. In my constituency, the south London economy is dominated by small businesses, which are being crushed by the credit famine. As Members of Parliament, we all complain and rail at Ministers from the Treasury and the Department for Business, Enterprise and Regulatory Reform about why the banks cannot deliver on providing 2007 levels of credit. However, it is quite unreasonable of us to complain in that way to Ministers. We are saying, “We own the banks; why can’t they deliver?” However, the reality is that the banks cannot do so because they are badly wounded institutions, as the hon. Gentleman has mentioned.

Prospectively, up to £1 trillion of additional damage and risk might have to be considered for coverage. I earnestly believe that in their desire to be seen to act as quickly and responsibly as possible, the Government have alighted on the wrong solution. We should have followed what happened in 1992 in Sweden in terms of trying to remove the bad debts that exist on bank balance sheets and transferring that into a bad bank. That is the same model recently employed by the Swiss National Bank regarding UBS. The crisis in Sweden in 1992 was especially severe. The overall private sector bank defaulted debts were the equivalent of 15 per cent. of gross domestic product. On the basis of the figures in the hon. Gentleman’s speech, our crisis could prospectively be even more significant. I cannot speak with the same clarity as him, but I shall try to bring the matter down to a simple comparison: the Government’s policy is like someone saying, “I will buy your house because you’re in trouble,” when in reality the patient is bleeding to death and needs to go to hospital.

In many ways, the current level of confidence in financial markets is dependent on the credibility of the Government’s actions. I fear that if the Government are driven to make a second round of bail-outs, their credibility will be greatly damaged and we will all suffer as a result. The Government made a good announcement yesterday about the creation of the new UK Financial Investments Ltd. That institution will be well positioned to form the new bad bank structure that has operated so successfully elsewhere—it was greatly successful in Sweden and proved to be profitable for the Swedish taxpayer.

In terms of the proposals for a singular global regulation, I fear that we might unknowingly end up successfully proselytising the unfettered free market style of markets that has brought us into this mess. I know that I am well away from the political consensus when I say this, but there is always a danger that as politicians, we will try to cling on to one or two items of consensus in a storm. We have to recognise that the free market fashion of central bank independence has failed. Central banks have shown an incapacity to deal with the issues of asset price inflation, which the hon. Gentleman so rightly emphasised in his speech. The Bank of England’s performance has not exactly been stellar, so it amazes me that in the process of blaming the Financial Services Authority, people suggest that we should transfer powers to the Bank of England.

The hon. Gentleman rightly emphasised the issue of transparency. I am also worried about that to some extent.

I am very interested in the hon. Gentleman’s comments on Bank of England independence. Clearly, that is his view, but will he spend a couple of minutes explaining how he sees the system working instead? If he does not want the Bank of England to be independent, how does he see the regulatory system working?

I am grateful for the Minister’s intervention. A weakness in British politics is the way in which we, as politicians, have been happy to devolve many decision-making powers away from Parliament. My suggestion is that we should have confidence in our Ministers and politicians to make very good judgments themselves. I propose returning to the situation that existed pre-1997.

I was about to move on to transparency, which the hon. Member for Warwick and Leamington mentioned. I want to mention the issue of dark pools, which does not concern the swamp on the way to Mordor. It is the issue of off-stock exchange trading, whereby temporarily, for a few hours, information will not immediately be provided on large block trades that are going through exchanges. After the recent financial crisis, it would be wrong of us to continue to pursue that type of approach. The importance of transparency is a message that we clearly want to send to the financial sector, and it should be retained.

I am also concerned that the International Monetary Fund still shows a capacity to repeat the mistakes, in its obsession with free market solutions, that it made in 1998 as a consequence of the 1997 Asian financial crisis. That was seen yesterday in its determination to ensure that the 84,000 people of the Seychelles went through an immediate launch of their currency into free float at a time when the financial markets are absolutely crushing emerging markets. A country that already had a 175 per cent. debt to GDP ratio was yesterday forced to float its currency, and it saw that currency devalued in those markets by 43 per cent., so that the debt to GDP ratio today is 250 per cent. It cannot be right to expose those countries to that type of free market exposure, and that trend should not be pursued.

We must also recognise that in a unipolar financial market, those countries with very significant trade surpluses have been forced to invest those with just one choice of large liquid supply of US Government and US agency debt, and they have found themselves locked into a financial structure that is not necessarily to their advantage. The obvious Government policy as regards the US is to inflate and devalue their way out of the significant debt that they have secured. It must be a very strong argument, in terms of trying to recreate a structure for a new international financial system, to be able to provide an alternative large pool of investments for large trade surplus countries to be able to invest in.

One of the things most significantly to blame for the current financial crisis is the conduct of Japanese financial policy in the 1990s. That left us with the legacy of very low interest rates in Japan, which has meant that the carry trade has done so much damage in providing extra liquidity in the financial system internationally. Therefore, it is important that in any new structure that is created, there are responsibilities on Government in respect of the way in which that liquidity is provided.

I return to the point about there being an alternative large Government issuer. That large Government issuer of debt could well be the European Union. President Sarkozy is having a good war—perhaps a bit like our Prime Minister. His comments about the implications of the financial crisis are interesting:

“The eurozone cannot continue without a well defined economic Government.”

That hints at the logic that comes with the euro: ultimately, if people have a common currency, they need a concentration of common governmental powers. It is incumbent on us to help our European partners by saying that it is not in our interests to join that cause and to let them run ahead with their desire for a much more centralised system.

It is clear to me that many of our European partners are so angered by the damage that has been done by what they see in this financial crisis as a fault with the Anglo-Saxon nations that they will be determined, in their regulation, to stifle the Anglo-Saxon model of freewheeling financial markets, for good or for ill. We must ensure that in being determined to introduce heavy-handed regulation, they do not stifle the financial markets in the City.

This debate is timely and important, as others have said. I congratulate my hon. Friend the Member for Warwick and Leamington (Mr. Plaskitt) on securing it and on his speech. He is undoubtedly right on the scale of the challenge and the urgent need for action. He set out with characteristic thoughtfulness and clarity the key issues and options.

On the question of what went wrong, we have to ask, along with all the other questions, what executives, boards and auditors were doing signing off balance sheets loaded with financial instruments, many of which they evidently did not fully understand and whose value or lack thereof they clearly had not properly appraised. One issue that certainly has to be examined more closely is the penalties for those who fall short on that scrutiny, both internally and externally.

In the spectrum of options that my hon. Friend set out, from light-touch regulation to micro-management, we need to establish clear rules. I take the interesting point that the hon. Member for Croydon, Central (Mr. Pelling) made about regional circuit breakers. That is a valuable concept, but we need some clear, objective and enforceable rules on the issues that my hon. Friend went through, on capital thresholds, the integrity of balance sheets, exposure to risk and transparency, as well as the points about reform of the IMF that he mentioned.

My hon. Friend invited us to add to his list of things that were wanted, and I propose to do just that because I want to focus my remarks on another aspect of international banking regulation which has not received much mainstream attention but which is vital to many of the poorest people on our planet. My attention was drawn to it by an article in The Guardian on 7 October written by Paul Collier, who is director of the centre for the study of African economies at Oxford university. In it, after an amusing but telling analysis—I will not repeat it now, but I recommend it to others—of why crooks can more or less safely be left in charge of fish and chip shops but not banks, he homes in on the crucial issue of how well banks have done out of banking secrecy and how that aids and abets the looting of enormous sums of money from Africa and other poor areas.

The article states:

“The loot-seeking elites that control parts of Africa illicitly send capital out of the region to the tune of $20 to $28bn per year.”

Paul Collier bases that on a new study undertaken by Raymond Baker of the non-governmental organisation Global Financial Integrity. He then points out that a capital flow of that size is more or less equivalent to the total overseas aid to the region, so if it could be closed off, that would give rise to a similar amount of money as the doubling of overseas aid. Obviously, one would have to get the money out of the hands of the corrupt elites and use it for the benefit of the people, but it is an essential step in getting that enormous resource back where it belongs.

It is clear that current rules on banking transparency and supervision are unequal to the task of keeping track of, exposing and returning money taken from Africa and shifted around the global banking system and in and out of offshore accounts. The world has started to address the need for better scrutiny and accountability in the wake of 9/11, when the need to combat the financing of international terrorism became evident. However, as the article points out, some banks resisted even that. It is right to ask whether the same scrutiny should not now be extended to the salting away of the products of corruption, bribery and extortion from poor countries—and those countries that ought not to be so poor—that are governed by corrupt political and business elites.

The banks, not only here but around the world, now need Governments to use their citizens’ money effectively to give retrospective guarantees, bailing them out in respect of practices that, as we have heard, should never have been allowed to grow in the first place. In return, should we not insist that the global financial system stops facilitating the exploitation of poor people in Africa and elsewhere? Now that the banks are over a barrel, is it not time to force greater transparency upon them?

I therefore ask my hon. Friend the Minister to say first whether she agrees that that is a serious and pressing issue. Secondly, will she undertake to look further into that aspect of international financial regulation? Thirdly, will she let me know what the Government are doing to put it on the international agenda, at the forthcoming G20 meeting and more generally? We cannot allow banking secrecy to collude in the looting of wealth from the world’s poorest, and I very much hope that the Government will do something about it.

I add my congratulations to the hon. Member for Warwick and Leamington (Mr. Plaskitt), not only on securing the debate but on giving us such an excellent resumé on its context. I also congratulate the hon. Member for Croydon, Central (Mr. Pelling) on his interesting comments. I entirely agree with the right hon. Member for Oxford, East (Mr. Smith) that it is timely to consider the fact that banks have clearly facilitated corrupt Governments and businesses putting money beyond the people that they should serve. That aspect is just as urgent as the others, and it should not be lost in the mix.

We all agree that urgent regulatory reform is necessary. It is salutary to realise that the tightening of rules usually follows a failure. I remember all too well the BCCI scandal. The question is why we do not seem to be able to get ahead of the curve. Why do we have to go through failures, large and small, before getting a grip on what needs to happen? Then, of course, circumstances change, the whole situation goes full circle—and again we find ourselves seeking to regulate something that has already happened.

There is a lively debate between Europe and America over rules-based and principles-based regulation. I doubt whether there will be much meeting of minds. We believe that principles-based regulation seems to be the way forward, although it may have contributed somewhat to the problems. However, the Americans clearly want to insist on a rules-based system, although in many respects that does not seem to have worked well either.

Everybody is blaming everyone else, but it seems that there has been a collective group think between regulators, banks and auditors and that they are standing behind each, or beside each other, supporting each other in saying that everything is okay and that no one has been shouting out that the emperor has no clothes. It seems that no one has been waving a flag, saying that something is wrong that needs to be dealt with quickly. A combination of complex instruments, probably faulty accounting standards, a reliance on credit ratings agencies, substantial leveraging, off-balance-sheet items and internationalisation—the way in which banks now straddle the globe and therefore straddle individual regulatory authorities—has given rise to the problems that we are seeing today.

However, even after yesterday’s Treasury Committee, with the Chancellor, the Governor of the Bank of England and the Chairman of the Financial Services Authority giving evidence, we cannot say that there were no warning signals. Although everyone could see them in hindsight—that is easy—I believe that the signals were clear.

Those signals should have been picked up by those charged with the responsibility. Initially, that was the banks themselves—and not only the boards of the banks but the risk committees. Then there are the internal auditors. The external auditors rely significantly on internal auditing. I suspect that some internal auditors had been waving the flag, but they were drowned out by the need to push on—partly because of the structures that rewarded people and partly because of the share prices and the fact that everything was looking well. None the less, I suspect that there were some who should have been listened to. I do not believe no one was flagging up the problem.

The current situation is indeed dire. Getting back to prudent levels of capital ratios will be extremely painful. If we are not careful, the so-called nice decade will be followed by a very nasty decade, and heading it off will be difficult. Although international regulation is clearly important, domestic regulation is vital. I suspect that it may be much more difficult to get international agreement, but each country ought to be clear that it is important to get its own regulations in place. The Banking Bill now being debated in Committee is a good attempt to get some of these changes on board, but I do not believe that it is necessarily the final solution. As I said, the warning signals were there in Northern Rock, Bradford and Bingley, Lloyds TSB, and HBOS and RBS. However, they were not heeded, not picked up, not acted upon.

There seems to be a sort of paralysis, with each country doing its own thing domestically unless it fits in with some international regulation. I fear that if we wait for some sort of international consensus we will not be able to put our as much of own house in order as we should. Delay is dangerous. Although international co-operation and regulation are important in harmonising our efforts, we should not divert our attention from putting our own regulatory structures in place.

Urgency is the key, and the forthcoming meeting in Washington will be extremely important. Examination of the roles of the International Monetary Fund and the World Bank will put the system under pressure. There appears to be a need for fundamental change. I will be interested to discover what approach the Government are taking and what their solutions may be, as they join those discussions.

I believe that two major issues must be tackled—those things that have changed so significantly in recent years. The first is the international operation of banks generally; their enormous size enables them to straddle all sorts of markets, and we need to regulate them effectively across the globe. The second is the variety of activities that those global institutions now undertake, of which banking is only a part. For instance, they deal in insurance and have all sorts of financial departments and sections. In a way, it is that combination of relatively recent factors that have exposed the current regulatory system to failure.

We have not grasped the significance of the increased internationalisation of banks, and we have not grasped the importance of their expansion into all sorts of new areas and the creation of all sorts of instruments. Things have reached the point where we are floundering around trying to find a way to regulate and supervise the system. That prompts the question—and this is the other side of the coin—about whether the regulators should try to grab hold of the banks’ coat tails as they move out into new areas of financial instruments and global operations, or whether we require the banks to reorganise themselves so that they can be more effectively regulated.

We recognise that banks are not the same as any other sort of commercial operation; they are clearly important for the world economy and we require them to act in a certain way. However, if they have constructed themselves into entities that are almost impossible to regulate and supervise, should we not seek ways in which they can be de-aggregated or split apart rather than centralised, so that we can look more clearly at the differing requirements of their individual activities?

Basic banking on the high street is significantly different from the derivatives market in capital terms. However, 99 per cent. of people in this country who require an ordinary, basic banking service from their high street bank, perhaps with a mortgage attached, have great difficulty in securing a new mortgage or obtaining loans for a small business. That is purely because of the activities in another part of that large bank, which have caused these failures. Is it time to look at such mega-institutions and realise that effective supervision, control and regulation is simply not possible under their current construction?

If the international community is going to be the lender of last resort with the bail-out provided by the taxpayer, it should require banks to change the way that they operate and de-aggregate some of their activities. We need a fundamental reassessment of the way that current banking operations work internationally. If we look at the current size of enormous banks and their range of activities across many different countries and regulatory systems, I severely doubt that we can be sure that we will not encounter a similar situation in around a decade’s time. It is time for a new approach.

I am grateful to the hon. Gentleman for taking an intervention, as he is coming to the end of his remarks. Does he agree that there is a certain historical circularity about this? There was a time when banks were legally obliged to operate in separate spheres. I think particularly of the legislation that was passed in the United States after the great depression, and the Glass-Steagall Act that prevented banks from crossing the line that the hon. Gentleman mentioned, and doing retail banking as well as other things. Do present circumstances suggest that perhaps it is time to revisit the issues and the debate that took place when that legislation was repealed, and see whether something similar needs to be introduced and whether that would in fact be possible?

I thank the hon. Gentleman for his intervention. That is exactly what I was suggesting. What we have allowed to happen so quickly and over such a range of different issues means that our somewhat shaky regulation is now totally out of place. I wonder whether we should be looking at some of the older models.

The financial services compensation scheme was never designed to bail out a huge high street bank. It was intended for smaller operations that might fail due to poor lending decisions or a structural problem—the big banks would put their hands in their collective pocket and bail such operations out, as they did not want a systemic failure. Can we consider a financial compensation scheme that will require pre-funding for the sort of potential problems that might occur with another RBS? It is almost unthinkable. Investment banks have been allowed to leverage up to such an enormous extent that it has put under pressure their normal banking business, which affects so many of us. The irony is that those who have supported their local bank with their business are the very people who have to put their hands in their pockets through their taxes and bail out the other part of the bank. It is untenable, and we must revisit the idea of separation rather than continuing with the current aggregation.

I would like to start by congratulating the hon. Member for Warwick and Leamington (Mr. Plaskitt) on securing this vital and timely debate. As has been mentioned, his contribution was thoughtful and articulate, and I thank him for giving us the opportunity to debate the issue. He was right to focus on his hypothesis about what went wrong, which largely centred on the banks but included the regulators and the regulatory framework.

A further aspect that I will mention before moving on to the substance of my remarks, concerns those Governments who, with the amount of credit that was being pumped into the economy, saw the short-term benefits from greater spending and apparent economic growth. It was difficult for Governments to call time on that, which perhaps challenges the point raised by the hon. Member for Croydon, Central (Mr. Pelling) on where the responsibility should lie.

There is no doubt that underlying all of this is the importance of the financial services sector, particularly to our country, but also broadly across the world. Britain is no different from any other country in that the financial services sector is the financial heart that keeps the economy going. Over the last year and a half since the credit crunch first hit, we have experienced a form of financial heart attack that is now having painful effects on the broader economy. When the capital adequacy rules, which were meant to ensure that banks, credit institutions and investment firms had a minimum capital base in order to protect them against such risks, were stress tested, they failed the test. The crisis that we are debating has shown up our flaws not only at home but internationally.

Let us look at our home economy and at what has happened and gone wrong. The Opposition are working with the Government on the Banking Bill, which should address some of the issues that have come out of our own experience. The reforms in that Bill, which will enable banks and regulators to act sooner through the special resolution scheme, will be important. It will be easier for authorities to rescue banks that have got into trouble by using the bank insolvency procedure. That will enable an orderly wind up and will be of benefit. Behind that is the issue of the tripartite approach. When the hon. Member for Warwick and Leamington was speaking, it struck me that in a sense, the question we face in Britain is the same as that faced the world over, although at a different level.

In Britain, one institution, Northern Rock, was challenged and essentially went down. It had been looked after by the Financial Services Authority as a single bank, but it ultimately posed a systemic risk. The problem with the tripartite scheme was that that broader systemic risk was not picked up and addressed rapidly enough by the Bank of England. At the international level, if there are stresses in one country—Iceland, for example, or the United States where the problems started—it impacts across the world. A similar challenge is understanding how one localised problem, whether a bank within an economy, or a particular economy within a global system, will impact overall and what difficulties will occur.

One measure that we have proposed, which would address one of hypotheses raised by the hon. Member for Warwick and Leamington about the inflation of banks’ balance sheets, is for the Bank of England to have oversight on debt and credit levels in the overall economy. In terms of responsibility for flagging up problems or having an early warning system, as the hon. Member for South-East Cornwall (Mr. Breed) has suggested, there is no doubt that giving the Bank of England a remit to look at overall levels of debt and credit flowing around the economy would be a welcome change. The Bank could make regular reports to the FSA, which could look at how that overall risk might impact on individual institutions. Obviously, some of those issues were addressed, as the hon. Member for Warwick and Leamington has said, by the Bank of England’s financial stability report last month.

Even so, setting aside some of the more domestic difficulties that we have faced, reforms clearly need to take place at the global level. As the hon. Gentleman has said, we have relied on the Basel accord and the Basel II reforms when it comes to capital adequacy rules. However, in practice, that has caused problems—we can see that simply by looking at what happened. We can look at the theory and have an intellectual debate, but the adequacy rules have demonstrably not provided a sufficient guarantee against banks failing.

I should like to touch on some key aspects of that—I know that the hon. Gentleman wants to listen to the Minister’s response to his questions—the first of which is the fact that liquidity risk was possibly ignored too much. Therefore, banks that had very low liquidity, such as Northern Rock, were still able, as the hon. Gentleman has said, to stay within the rules. That is clearly a problem. We need also to look at how the existing rules can lead to what seem to be sub-optimal or dysfunctional asset allocation, for example, because of zero-weighting of AAA-rated assets.

The hon. Member for South-East Cornwall has mentioned forcing banks to compartmentalise their operations. I understand why he takes that view, but I wonder whether it would not be jumping to a solution too quickly. Banks could be compartmentalised into retail and investment banking for example, but, actually, the genesis of the problem was ultimately in retail banking and mortgages. When we look at the problem, we see that there was a bad understanding of risk—we keep coming back to that. It is therefore about understanding the reality of risks faced by, and capital structures of, the banks concerned.

Was not the real problem the avarice of banks, which determinedly pushed out securitised obligations that were not properly checked? Many of the tranches were given automatic AAA-ratings, so senior management and investors did not really look at the detail of the real risks that they were taking.

The hon. Gentleman is, of course, right. I have set out some aspects of the problem, but a range of things went wrong collectively to lead us to today’s situation including, of course, the ability of the credit rating agencies and the way in which they rated some of the debt when it was being packaged and sold on. It seems that because of the way in which the credit rating agencies are incentivised and how their businesses run, they signed off more debt, which is part of the problem that we are dealing with. That, combined with—I am sure that banks would challenge this—an excessive reliance on the risk ratings given by agencies, as has been said, may appear as the sub-contracting of risk assessment to outside agencies. If such ratings are done as an independent check, and if ratings simply validate an internal assessment of risk, they can be of benefit. However, there is no benefit if there is no internal initial assessment of risk.

Overall, market risk was not effectively measured. We had backward-looking models that looked at what had happened. Clearly, nobody is ever more sure about a trend than the prevailing market wisdom the day before the trend stops. There was a growing certainty about the continuation of asset price inflation. That raises the question of introducing rules that are more counter-cyclical when it comes to credit and capital adequacy, rather than the pro-cyclical environment in which we found ourselves.

Transparency was part of the problem. Consumers will, in the coming years, be far more willing to ask whether a bank is a sound financial institution. The big thing that we have not talked about today is how the public will view banks—they may be far keener to see financial information on banks with which they plan to make debt, mortgage or savings transactions. That could be one of the more fundamental—and helpful—changes. A critical consumer eye could now come into the equation, alongside any regulatory reforms that might be introduced.

A final caveat is that we must be careful that we do not use a regulatory-reform blunderbuss to tackle the problems. There are several problems, and we therefore need a more sophisticated approach than saying simply, “Let’s have more regulation.” Rather, we need smart regulation. If we look at the recent US experience of the Sarbanes-Oxley legislation in response to Enron, we can see that inappropriate, heavy-handed regulation often does not achieve its objective. We need to be careful that we do not go down that route, and it is especially important for us to be watchful.

Obviously, there will be a new US President this week, and we must carefully ensure that we work at an international level. The Prime Minister has pointed out that we will need leadership from the US to navigate us through these challenging times. Up to now, we have had a vibrant financial sector in the UK, which is important to our economy in terms of jobs as well as providing its lifeblood. We need to ensure that any reforms do not unnecessarily hinder competitiveness without providing more financial stability. We do not want to jeopardise our financial sector’s future success and growth, and we have to get it right first time.

We need to find a blend between international co-operation and domestic reform. There is no doubt that a one-size-fits-all regulator would be an excessively constraining and over-the-top response. We need something a little more sensitive than that—something that results more from co-operation. It is clearly in the common interest to achieve co-operation in new reforms, rather imposing something on countries. We need to get this right. As the hon. Member for Warwick and Leamington has pointed out, the challenge is momentous and immediate, and we need to rise to it. Clearly, over the coming months, we will focus on it and, hopefully, get it right first time.

I should like first of all to congratulate my hon. Friend the Member for Warwick and Leamington (Mr. Plaskitt) on his great foresight and timing in managing to get a debate on this crucially important topic. We have had a fascinating glimpse in the debate of the complexities of the issues with which we are dealing. That gives a great deal of credit to my hon. Friend and to everyone who has contributed.

Current international financial conditions are unprecedented. In addition to the work that the Government are doing domestically to restore faith in the banking system, there must be a global response to what is a global economic crisis. My hon. Friend mentioned Bretton Woods and Basel, and I will deal with both, but he was right to bring them to the attention of the Chamber. The Bretton Woods framework of 1944 reflected the determination of leaders and economists such as J. M. Keynes to avoid the disastrous economic nationalism that led to the great depression and which helped lay the groundwork for the rise of fascism and ultimately the calamity of the second world war. In the decades since, the Bretton Woods institutions have been a key element both in supporting international co-operation and countries that have been hit by negative shocks, and in providing the long-term financing and assistance necessary for sustainable growth. At the same time, the way in which the institutions work has certain drawbacks. As my hon. Friend pointed out, they are anachronistic in many ways and reflect a different world. If I have time, I will outline how the Government intend to approach the reform of such institutions.

Over the years, we have added to the Bretton Woods framework. In the mid-1970s, the Basel Committee on Banking Supervision was created to set common standards for financial regulation around the world. Following the Asian financial crisis, we created what is now known as the G20 to bring together emerging markets and developed countries to address the serious economic problems of the time. In the late 1990s, we created the Financial Stability Forum, which has improved the quality of banking regulation and promoted a more international approach to financial market developments. Nevertheless, recent events have confirmed that the world economy has changed irrevocably. The Bretton Woods framework was created for a world of 50 relatively sheltered states. We must now consider whether it is time for another wave of reform—I think that the case for that is overwhelming—to create a global financial system that is fit for a modern and more interconnected, globalised, IT-driven world. We must do so while we continue to address the immediate effects of the ongoing financial crisis at home and abroad. Effectively we need to do both things in parallel, and that approach has been reflected in all of the comments in our debate.

The turbulence in international financial markets has the potential to affect every country around the world, so a co-ordinated international response is required. We need national action, but that will not solve the problem on its own. National systems of supervision are simply not in an adequate position to respond to the huge cross-continental flows of capital in this different, more open, more globally interdependent world. The first step has been taken to stabilise market conditions. The British Government, as part of a co-ordinated international effort, have taken rapid and well-targeted action to recapitalise the banking system. The Bank of England has doubled the amount of liquidity that it provides to banks, and we have guaranteed new lending between the banks so that we can get lending working again. That action has strengthened confidence in the banking system, put financial institutions on a firmer footing and provided support for the real economy.

Britain’s fast action has been widely applauded, and many other countries have followed our lead and taken similar action. The G7 action plan, which took a lead from the UK plan, has provided a framework for effective co-ordinated international action, which has resulted in more than £300 billion being approved from public funds to recapitalise banks worldwide. We remain committed to taking all action necessary to restore confidence and stability in the financial system. International co-ordination is a central part of the Government’s response and we will continue to work with international partners going forward. My hon. Friend is right to say that international financial institutions, too, have a role to play—I am not just referring to stabilisation, but I do not wish to talk too much about that in the time that I have left.

I want to move on to the points that my hon. Friend made about how we can reform the system so that it is more fit for purpose. After initial stabilisation, the next step is to achieve a global financial system that is fit to meet the challenges of the future. As many hon. Members have said, the financial crisis has revealed problems at the heart of the international financial and regulatory system that we must rectify. That means addressing not only reforms to the supervision and regulation of financial markets but global governance arrangements. The Prime Minister has stated that the reforms must be guided by five principles: transparency, integrity, responsibility, sound banking practice and global governance with co-ordination across borders.

Strengthening of the supervision and regulation of the banking sector is essential. Significant steps have been taken that build on the recommendations of the FSF and that are in line with the road map agreed with European Union partners. For example, the FSF recommended strengthening Basel II capital requirements for banks using off-balance sheet vehicles. We should move forward with that proposal as it represents an important step towards restoring faith in the banking system. Beyond those immediate challenges, more progress is needed to establish globally applied standards of financial regulation and supervision for the future.

We have made a number of proposals to international partners, including improving incentives in financial institutions to manage risk; improving transparency in financial markets; ensuring appropriate regulation of all financial institutions and markets; and ensuring that the financial system supports economic stability. Better supervision and regulation need to be coupled with better global governance. Events have shown that global financial markets present challenges that no one nation can solve in isolation. We have to strengthen global co-operation and build a new global financial architecture for the years ahead. The new global governance should deliver a global early warning system so that future risk to global economic and financial stability is identified and mitigating action is taken early. There should be effective cross-border supervision of global firms, including through international colleges of supervisors, globally accepted standards of supervision and regulation applied consistently across countries, and mechanisms for co-operation and concerted action in a crisis through international cross-border stability.

I know that the debate is drawing to a close, but does the Minister agree that action must be taken to deal with the proceeds of corruption and exploitation and the collusion of the international banking system? If she does not have time to address the matter now, will she write to me and tell me what the Government will do to put it on the international agenda?

I agree that it is a vital issue and my right hon. Friend has done us all a service by raising it. I am happy to write to him, but we have strongly supported international efforts, both against money laundering and terrorist finance and to enhance the transparency of the banking system.

A number of positive steps have already been taken in recognition of the global change that we need. For example, the IMF recently established a new macro-financial surveillance unit, and reviewed its global financial stability report. We believe that more needs to be done to strengthen its role. The IMF’s statement of surveillance priorities agreed by Ministers at the annual meeting sets out a clear strategic focus for IMF surveillance. We believe that the IMF must work more closely with the FSF to provide a clear warning of risks to global macro-economic and financial stability.

While the Minister is on the subject of the IMF, do the Government think that it is time to consider the governance structure of the IMF and the issue of US dominance, especially as the Prime Minister is now leading efforts to bring in funding from states that are not appropriately represented on the structure of the board?

The UK has been at the forefront of the debate to try to get some kind of reform of the voting structures and architecture of international institutions, including the IMF and the World Bank. However, achieving such reform is almost as challenging as getting things agreed at the European Union when vetoes are used. It is clearly an important matter and we will continue to take forward our ambitions in that area.

We have entered a new era for the global economy. We need a new international system that is fit for purpose, both to deal with the many different and evolving challenges of the system of global banking, finance and economics and to stabilise the current situation. The Government are determined to make important progress in both areas and have been leading those efforts both at home and abroad.

Fire and Rescue Services (South-West)

It is a pleasure to serve under your chairmanship, Mr. Benton. I welcome the Minister to his position. This is certainly the first time that I have spoken in a debate with him in his current post; I do not know whether it is his first outing in the role. I am also pleased at the good turnout from Gloucestershire, including my hon. Friend the Member for Cotswold (Mr. Clifton-Brown) and the hon. Member for Stroud (Mr. Drew). I am particularly delighted to see the hon. Member for Gloucester (Mr. Dhanda) who was of course responsible for the issues in question before recent changes. I commiserate somewhat with the present Minister for the rather poor inheritance that he has to deal with.

Local fire and rescue authorities throughout England face the prospect of having to make cuts to their fire services, or raise the amount of council tax that they must charge, if the fire control regionalisation process continues. There is no guarantee that any of the measures that are proposed will improve fire services.

In a moment, when I have finished my opening remarks.

Major problems have been revealed with the Government’s plans for regionalisation.

I am surprised that the hon. Gentleman, my neighbour, has not discussed the matter with our chief fire office, who would tell him that with respect to FiReControl, all new burdens are being met from central Government, not by local taxpayers. I am not sure where he gets his information.

It is helpful of the hon. Gentleman to raise that subject. He will know that the Government have made a commitment to meet the incremental costs only for the first three years of the project. After that, local taxpayers will bear the burden. It is a typical case of the Government putting burdens on them and covering the cost for the first few years, after which costs must be met by those local taxpayers. They have seen through it, and so have councillors—I think that hon. Members have seen through it, too. I want to make a little progress now, and then I shall be happy to take further interventions.

The Government’s proposal is to close the existing 48 control centres, and replace them with nine large regional control centres. That move was announced at the end of 2003. One of the stated objectives is to improve efficiency. A further aim, which is the one by which I am unconvinced, is increasing public safety and enhancing national resilience. The Government’s chief fire and rescue adviser, Sir Ken Knight, who will, I suspect, be oft-quoted by the Minister, as he was by the Minister’s predecessor, highlighted the excellent response of the fire services to last year’s floods, despite very difficult conditions. That is something about which we know well in Gloucestershire, as we were at the epicentre. Sir Ken has said:

“My review shows that there was a magnificent response by the Fire and Rescue Service’s firefighters, control room and support staff. Firefighters responded with their renowned professionalism and complete dedication to the challenges faced in very difficult conditions. The national coordination of the high volume pumps across the country worked well, helping to protect infrastructure and homes.”

My hon. Friend knows that I want to pay tribute to Chippenham fire service, which provided the boats for Gloucestershire during the crisis last summer, demonstrating that cross-border co-operation works extremely well at the moment without the creation of the new fire control centres that the Government propose.

I am happy to join my hon. Friend in paying tribute to his local fire service, which performed extremely well, as did the Gloucestershire fire and rescue service.

To be fair, Sir Ken went on to say that there were problems; but my contention is that those problems have different solutions, and that it would be better to consider an alternative—co-locating fire and rescue services with other emergency services. That approach has worked extremely well in Gloucestershire.

Unlike many aspects of local government, fire and rescue services are generally efficient, well run and popular with residents. They have adapted to significant change since the publication of the Bain report in 2002. The 2007 Audit Commission report on the majority of fire services would be the envy of many council chief executives. Indeed, I have already highlighted what Sir Ken Knight said about how well authorities coped with the floods last year.

I agree with the hon. Gentleman about how the service coped in Gloucestershire. Its members did incredibly well with the system available to them, but the hon. Gentleman is being very partial in his quotations from the chief fire and rescue adviser’s report. He made it very clear—and the chief fire officer of Gloucestershire made it clear to the Department—that thousands of calls came in that could not be answered by the system, because the system that exists is not resilient enough. That must be changed, and Sir Ken Knight made it clear in his report.

I did, as well as quoting Sir Ken’s positive remarks, say that he acknowledged that there had been problems. My contention is that the way to deal with those is not to remove the very good locally-based systems, throw them away and set up something new and untested, but to build on what we have. In Gloucestershire, for example, we benefit from a tri-service centre at Quedgeley, in the constituency of the hon. Member for Gloucester, with the police, fire and ambulance services co-located next door to the police headquarters, which, together, operated as gold command during the emergency last year. The tri-service centre was set up in 2003 at a cost of £3 million and it enabled the emergency services and county council, and other bodies, to provide a co-ordinated response. Following last year’s events, Gloucestershire’s deputy chief fire officer Chris Griffin said in response to Sir Ken Knight’s comments:

“The arrangements between the three emergency services worked well during the summer’s flooding crisis and the working relationship was strengthened and enhanced by their close proximity.

It’s always been my view that emergency services work better when they train together and are co-located together.”

The chief constable of Gloucestershire, Dr. Tim Brain, who was the gold commander last year, defended the service and the tri-service control centre by saying:

“To lose the close inter-agency working which the centre affords the county can only have a detrimental impact upon our collective ability to effectively deal with crises affecting residents and visitors to the county.”

That does not, of course, mean that there are no improvements that can be made. However, it would be more sensible to build on what works well in what we have. I shall come back to that point.

It could only be the present Government who would choose to put the south-west fire control centre—something that is supposed to improve resilience—on a site on a flood plain that is at high risk of flooding. That was pointed out and there has been a bit of jerry-rigging on the site, putting defences around the fire control centre to protect it from flooding; but it is only the present Government who would put such a fire control centre on a flood plain when only last year we had to protect ourselves from a major flood. If we had another major flood the new fire control centre would be one of the first places to flood, and even if protections were built around it, instead of pictures of Tewkesbury abbey as an island in the middle of a flood, we would have pictures of the south-west fire control centre in exactly the same position.

I do not want to turn the debate into a dialogue, and I shall try not to intervene on the hon. Gentleman again—I shall make my own points later; but that myth has been kicking about for more than a year. The site is not in an area of flood risk. The hon. Gentleman mentioned the word “jerry”; well, there is a Jerry who is a key figure in the debate—a Conservative councillor called Jerry Willmott, in Wiltshire where there is also a tri-service centre. He made it clear that we need FiReControl to save people’s lives. It is all very well co-locating a command centre, which is something that can continue to happen—it would happen again in the city of Gloucester if a major event were to occur—but at the same time Jerry Willmott makes it clear that we must put other measures in place to save lives.

Thank you, Mr. Benton. To respond—I shall not dwell on it for too long—the Environment Agency’s flood risk website shows the location of the proposed south-west fire control centre to be in an area of flood risk, on a flood plain. That does not appear to be a wise place to put a fire control centre, one of whose key purposes is to provide resilience. It is not where I would have chosen to put it.

I am most grateful to my hon. Friend for giving way. I will not keep interrupting. Jerry Willmott, who is indeed a Conservative councillor from Wiltshire, is wholly opposed to the notion of a single fire control centre in Taunton. I have no idea where the former Minister got that information from. Jerry Willmott has gone to great lengths recently to say that we are operating under huge demand with limited resource, and to attack the Government of which the hon. Member for Gloucester is a Member.

I am grateful to my hon. Friend for intervening to put the record straight on behalf of Councillor Willmott.

There is also discontent within the fire service itself about the Government’s plans. A leaked letter from the head of the new south-west regional fire control to the former Minister, the hon. Member for Gloucester, revealed widespread discontent about the Government’s plans. The head of FIReControl warned that local fire and rescue services would not voluntarily submit to the Government’s regionalisation and criticised delays in the project that led to “immense frustration” and “profound disappointment”. Ministers were told that

“confidence amongst the company directors, our hard working officers and, we suspect, fire authorities is now rock bottom.”

The cross-party Select Committee on Communities and Local Government has already sounded the alarm, saying that

“there is no evidence to suggest any overall saving…we are unconvinced that the Government can offer the assurance of maintained or improved service quality resulting from the FiReControl project”.

Another worrying sign, apart from the lack of evidence that service to the public will improve, is the escalating cost of the project. The Government belatedly published a new regional business case in July, and an updated national business case has yet to be published. Last year’s business case admitted that the costs of the project were £400 million over its original £1 billion budget. By any measure, such an escalation in cost is significant, and it indicates that the project has been poorly managed, at least financially.

The Fire Brigades Union commissioned an independent report from the Institute of Public Finance on the business case for the FiReControl project. The report forecast that between October 2006 and June 2007, the total invested in the project by the Department for Communities and Local Government would have risen £180 million from £160 million to £340 million, a rise of 112 per cent. Annual efficiency savings were forecast to fall 80 per cent., from £115 million to £23 million. The costs are rising considerably, and the forecast financial savings are falling at almost the same rate. That is incredibly worrying for taxpayers in general and for local taxpayers in Gloucestershire and the south-west specifically.

Has my hon. Friend contrasted what is proposed for our fire and rescue service with what was proposed and implemented for our ambulance service? We were told when the Gloucestershire, Wiltshire and Avon ambulance services merged that we would get lots of savings and a better service. Does he not think that the Government are making exactly the same statements now, and that we will end up with a worse service in Gloucestershire that puts people’s lives at risk, which is exactly what has happened with the ambulance service?

I am grateful to my hon. Friend for that intervention, to which I will respond briefly, as I do not want to stray too far from the subject of this debate. He is quite right. Claims that regionalising services—taking smaller services and joining them all together—improve services and lower costs have proved over the years to be false. The example that he gives is a pertinent one, as it involves emergency response. At the time of that merger, we were all promised better services and lots of savings from efficiencies. Those savings would be ploughed into front-line services, and the public would see a better response, faster response times and an improved service.

As my hon. Friend said, that simply has not happened, and there is a great lack of confidence that it will. A significant amount of extra money now has to be invested to deliver those improved services. He has demonstrated that there is simply no evidence that there will be tremendous savings from the project to pay for it all and deliver improved services. The Government’s track record on the subject is very poor.

I hear what the hon. Gentleman says about the need to preserve what we have at the moment, but I do not think that he would disagree that we need to invest in technology as well. Gloucestershire in particular does not have the ability to trace where its engines are. It does not have satellite navigation systems and it has no way to trace a call, let alone obtain floor plans for buildings that are burning down. If he wants to replicate the required technology in all 46 control rooms, will he commit his party to it and urge his Front Bench to commit to spending at least an extra £2 billion to do it?

The hon. Gentleman is welcome to look at the record of Gloucestershire’s fire and rescue services, which is very good and has continued to improve. They have worked incredibly closely as part of the county council to deliver excellent services. He posits a false choice. The Scottish National Party Government in Scotland, in a move largely unnoticed south of the border, has cancelled the regionalisation of Scottish fire control centres, but Scotland is still going ahead with improvements to IT, infrastructure improvements such as digital radios and GPS and interoperability with other emergency services, demonstrating that improvements in technology for resilience can still be achieved without flawed regionalisation plans.

Perhaps the UK Government might take a lesson from the SNP Government. I know that they find that painful, and sometimes the arguments in Scotland between the two parties are painful to watch, but perhaps they could accept that the SNP Government have made a sensible decision in that particular case.

I am grateful to my hon. Friend for giving way; I will not trouble him again. Is not the answer to the hon. Member for Gloucester proved by the Government’s large-scale IT failures, for example in patient records? Is it not much better to have smaller high-tech projects? Are not smaller units that can talk to each other in a high-tech way much more likely to produce better results than one large national scheme?

Indeed. My hon. Friend is absolutely right for two reasons. First, a parliamentary answer given to Lord Hanningfield in the other place about why the costs of the FiReControl project had escalated stated that a significant amount of the extra cost was due to certainty on costs arriving once the Government had awarded the IT contract. Clearly, IT and the failure to manage it properly is one of the key drivers.

The other significant reason, given the Prime Minister’s admission yesterday that the Government simply cannot be trusted not to lose personal data and information, is that we cannot trust the Government to manage large-scale IT projects or have confidence that they will be under budget and well managed. That confidence is deservedly low, and my hon. Friend is right to be sceptical about huge projects. More sensibly scaled projects are much more likely to be successful.

To return to the costs, as I said in answering the intervention by the hon. Member for Gloucester, although the Government have pledged to fund centrally the increased running costs of the regional control centres, they have pledged to do so for only three years. After that, local fire authorities are likely to have to pick up the bill. In the case of Gloucestershire, where fire services are part of the county council, other services will have to be cut to fund them or the precept on the council tax payer will have to rise. Neither of those choices will be welcome to council tax payers in Gloucestershire or elsewhere.

July’s regional business case admits that

“additional efficiencies and/or revenue generating”

will be needed. One need not look very hard to notice extra taxes in there, which are not welcome at any time, particularly in the straitened financial circumstances that we face.

Indeed, in May the Government instructed the new regional management board to deliver more sharing of functions at a regional or sub-regional level, in order to deliver efficiencies. That raises the prospect that local fire stations will face cuts that are imposed at a regional level and outside the democratic accountability of our local councillors, to pay for this flawed process.

It is not just myself and other colleagues here today that have concerns about this process. The Communities and Local Government Committee said in its 2006 report, “The Fire and Rescue Service”:

“We are unconvinced that the Government can offer the assurance of maintained or improved service quality resulting from the Fire Control project…and there is clearly widespread doubt across the FRS”—

that is, across the fire and rescue services. That is very worrying. The hon. Member for Gloucester drew attention to the importance of saving lives. However, if there is no benefit of improved service quality from these changes, it is even worse if the Government cannot offer the assurance of maintained service quality. If current service quality deteriorates, that would put lives at risk. The Communities and Local Government Committee also said in the same report:

“There is no evidence to suggest any overall saving. As a result we, like many within the FRS, do have not full confidence in the Government’s claim that Fire Control will achieve enhanced efficiency.”

As I say, that report is very worrying. The Communities and Local Government Committee obviously undertook a thorough investigation into this process and its report should cause us to pause and think again.

My final point is to examine what an alternative system might look like. Coming from Gloucestershire myself, I think that we should look at the option of having more tri-service centres to improve resilience; I am surprised that the hon. Member for Gloucester, who is a former Minister in the Department for Communities and Local Government, did not pay more attention to this option. As I have already mentioned, in Gloucestershire we have a tri-service centre that links all the emergency services and it played a crucial role in co-ordinating the response to last year’s floods. Such service centres could do a lot more to enhance local resilience than distant regional fire control centres.

The Government’s business case has never properly examined the merits of such joint working between emergency services. Indeed, the Government’s full business case simply says that

“tri-service controls may remain an option for the long term”.

However it seems to me that in those parts of the country that already have a tri-service centre, such as Gloucestershire—

My hon. Friend points out that Wiltshire has such a centre too. As I was saying, in those areas that already have such a centre, which would have been built at a significant cost, to get rid of those structures in order to set up something that is untried and untested, while only considering tri-service centres at a later date, seems to be very short-sighted.

The report from the Communities and Local Government Committee said:

“Greater collaboration between emergency services is crucial to enhancing civil resilience. The failure of Government to include an element of collaboration, or at least co-location, in its model of Regional Control Centres represents a missed opportunity for civil resilience.”

The Committee went on to say:

“We consider that achieving a common location for command controls for the three emergency services would facilitate greater collaboration in responding to incidents.”

I do not favour greater collaboration at regional level, but at local level it would be sensible, and that applies not just to emergency services but to many other services too. Last year, when I visited gold command at Quedgeley, to look at what had happened in Gloucestershire with the flooding, it was very noticeable that not only were the three traditional services co-located at Quedgeley but there were also other services: Her Majesty’s armed forces; representatives from the health service, including from the primary care trust; Gloucestershire county council; social services, and highways. All those services were co-located in one location and all of them were working together as a team, delivering the emergency support that was necessary during last year’s floods. It seems to me that looking at Quedgeley and learning the lessons from it would be much more sensible than carrying out this piece of vandalism to our emergency services.

In conclusion, it seems that the Government have undertaken a flawed analysis of the problem; they have come up with the wrong solution; the solution has been poorly managed, is significantly over budget and out of control, and they have ignored a potentially better solution, which is to examine collaboration and co-location of services, as we have in Gloucestershire. When the Minister responds to the debate, I hope that, as well as dealing with the specific points that I have made, he will be able to tell us that the Government will look at the example of the tri-service centres in Gloucestershire and elsewhere to see how collaboration and co-location has worked locally and to determine if those lessons can be learned now, before it is too late and all the expertise that has been built up in this field is just thrown away.

Order. Before I call the next speaker, I would like to point out to hon. Members that this debate only lasts for an hour and a half. A lot of hon. Members have indicated that they wish to speak. Obviously, I will do my best to get everybody in and to let them speak. However as I have said, the debate is only one and a half hours long, so I appeal to hon. Members to try to keep their remarks as brief as possible.

Thank you, Mr. Benton, for the opportunity to speak in this debate. I congratulate the hon. Member for Forest of Dean (Mr. Harper) on securing the debate. It is a pleasure, too, to congratulate my hon. Friend the Member for Tooting (Mr. Khan) on his new post as Under-Secretary of State for Communities and Local Government.

I want to start by applauding, as I am sure we all would, the work of the fire and rescue services in our region, the south-west. Naturally, I know the Avon fire and rescue service better than others and I would like to pay a particular tribute to the work of its firefighters, other staff, the relevant trade unions, the members of the fire authority and the chief officers, who provide an excellent service to my constituents and to others in Avon. In the few minutes that I have, I would like to focus on a specific issue in relation to the funding of the Avon service, although I am sure that my comments will be relevant to other authorities in our region.

Before I do so, I would just like to make one point. My comments will be critical of Government in relation to the funding of my fire authority in recent times. However, it ill-behoves those who argue that we have had too much taxation and public sector borrowing in the last 11 years to turn around and pretend that they would have not cut public spending significantly. They cannot have it every which way. I congratulate the Government on what they have done in the past 11 years in their overall approach to funding public services, including fire and rescue. They have provided infinitely greater resources—let us not exaggerate: I will say “far greater resources”—than would be the case if the Conservatives were in office and, indeed, than the Conservatives provided when they were in office. I hope that that contextual comment will be taken on board by the Minister as I move into more critical mode.

I would just like to say that Avon fire authority was shocked, at every level, and I think it would be fair to say that the other nine members of the “at-floor authorities”—those authorities that had very low increases in Government grant for the current year and very low proposed increases in grant for next year—were shocked when those increases were announced. Dorset is the other at-floor authority in our region, so there are real issues for Dorset, too.

In the case of Avon, there was an increase in Government grant of a mere 1 per cent. for the current year, with proposed increases of a mere 0.5 per cent. for next year and the year after. All of us were amazed that that increase could be considered by the Government as a serious proposition. In cash terms, those increases are clearly below inflation and below the level of pay awards. Indeed, to be specific, at the time that the grant was announced, consumer prices index inflation was running at 2.1 per cent. and retail prices index inflation, on which pay deals are based, was running at 4.2 per cent. Given the events of more recent times, an inflation figure of 5 per cent. is probably a more reasonable figure with which to compare the cash increases.

As my hon. Friend the Minister will know, last week, a number of hon. Members from the 10 at-floor authorities met the chairs of their fire authorities and chief officers, and they will seek to make a case to the Department for Communities and Local Government for fairer funding for these particularly badly hit fire authorities. Briefly, what is the impact of the financial situation on Avon fire authority? As a single service authority, we do not have anywhere to go. We all know that there are local authorities that have more direct responsibility for the fire service, but we are a single service authority; we have little alternative but to reduce variable expenditure and that basically means expenditure on staff. I cannot see any alternative for the Avon service but to impose a freeze on recruitment, which is not good news for our service. I hope, therefore, that the Government will reconsider the level and distribution of funding and, at the very least, reinstate last year’s funding floor of 2.7 per cent.

The increase that the Avon fire and rescue service will receive over the next two years is just one fifth of the increase that it received last year. The hon. Gentleman has mentioned the effect that that might have on pay and recruitment, but what about the number of fire engines in the authority? There are already concerns in Bristol that following the large growth in housing in the city centre, there are not enough pumps to ensure that everyone is safe. There might be also a detrimental effect on the future procurement of equipment.

There is little doubt that the financial situation is seriously challenging.

I want to focus on three issues. First, as the Department has been made aware by Avon fire authority, there is a problem with transitional grant recovery. The authority’s treasurer has made representations to the Department arguing that it has treated the adjustment for the transitional grant incorrectly. Every floor authority can prove that it has repaid the grant, but the money has not been put back into the base budget. In the case of Avon, that means that this year’s apparent grant floor of 1 per cent. has become a reduction, in cash terms, of £360,000 on last year’s grant. If that is not corrected for this year and for the future, we will be repaying that money for ever. That is not only unfair, but it is the most expensive loan imaginable. This issue has to be addressed. I have looked at the papers that the treasurer submitted to the Department, and although I am not an accountant, I am entirely persuaded by the argument. I strongly hope that the Minister will respond constructively to those representations.

The second issue that I want to discuss is equality and diversity policy, which has attracted some attention in the media in our area. Chief fire officers and fire authorities are rightly being asked to recruit more female staff and more staff from minority ethnic communities, for the simple reason that we must have public services that reflect the communities they serve. That is the right thing to do. In Avon, officers, members and trade unions are enthusiastic about committing to those higher targets, because they fully understand the value that diversity adds to the service. The problem is that a grant settlement of the kind that we are discussing will inevitably mean a freeze on recruitment, so how on earth is Avon to meet its equality and diversity targets?

Avon fire authority has been subject to some pretty vicious and inaccurate comments in the media. The hon. Member for Bristol, West (Stephen Williams) will be aware of the newspaper articles to which I am referring. To their credit, the chief fire officer, authority members, trade unions and staff have made serious attempts to ensure that the make-up of the authority’s firefighters and staff reflects the diversity of the community they serve. I strongly support them, but they will have a very difficult job in future. They have made progress in the past five years, but I fear that that progress will now come to a stop, and that is unacceptable.

My final point is about the local integrated risk management plans that all fire authorities have been required to produce since the Fire and Rescue Services Act 2004. The plans are based on local risk, and are supposed to determine the way in which services are provided, which they usually do. However, I cannot see any link between the plans and the methodology behind the allocation of funding to fire authorities. If that is correct, we are in a bizarre situation in which the plans are the driver for the services to be provided, but not the driver for allocating the money to enable those services to be supplied to local communities. To put it mildly, we need more transparency in relation to funding, so that we can understand and address these problems.

I am conscious that other colleagues wish to speak, so I shall conclude. Along with other floor authorities, Avon has been put into an unacceptable position through no fault of its own. The Government need to reconsider the level and distribution of funding and, at the very least, to reinstate last year’s funding floor of 2.7 per cent. Adjustments to the floors and the transitional grant position need to be made as a matter of urgency, and I urge the Minister to consider doing so.

I congratulate the hon. Member for Forest of Dean (Mr. Harper) on securing this important and timely debate. The Minister recently visited the new fire station at Marshes End in my constituency, and I suspect that he might already have heard some of the points that I shall make today, but they are so important that they are worth reiterating.

First, I have a few comments to make on the FIReControl project, which is expected to offer enhanced physical and operational resilience, but the costs and savings are highly questionable, as we have heard. We have also heard that the timing of delivery is problematic. Dorset disputes several of the current assumptions, and predicts that there will be a net cost to the authority from moving to the regional control centre. Even if the Department for Communities and Local Government could meet in full the deficit between steady-state RCC costs and current costs on a regional basis, the vagaries of the regional cost apportionment model, based on the council tax base, have led Dorset to believe that it would still face additional costs of £125,000 a year.

The Dorset authority is concerned about cost apportionment across the south-west, and does not see how it can possibly end up not being a net loser unless protection is built in, or unless more attention is paid to each authority. Its members are concerned that the costs for out-of-scope activities and data management have been underestimated. The capping of regional resilience payments to three years is absolutely unacceptable.

Does the hon. Lady agree that it is extremely difficult to find anyone in Dorset who thinks that, on the other side of the balance sheet, there is any advantage to the measure?

I have detected a distinct lack of enthusiasm from everyone with whom I have discussed the project.

Three-year funding is another problem that is simply being deferred to the future. What will happen when the three-year funding ends? We will have yet more cuts. There is significant disappointment about the business case, and we now have the impact of the delays to consider. I hear that the project has to be “reprofiled”—I think that that means delayed—because the deliverables are not going to be delivered on time. It is no surprise that that has to do with an IT contract; that is nothing new. My big concern is the impact that all the problems with the regional control centre will have on poorly funded authorities. In a sense, the delay is delaying the extra cost, but there is serious concern about work force morale.

Returning to cost, Dorset is one of the 10 authorities that the hon. Member for Kingswood (Roger Berry) has mentioned will have particularly low funding for the next few years. I agree that it is vital that the 2.7 per cent. funding floor is reinstated, so that front-line fire services are kept at a level that is safe for both the public and fire fighters. Dorset originally assumed, for planning purposes, that there would be 2 per cent. growth, but it then faced severe shortfalls on its original budgeting. I have been anxious throughout about the implications for safety. That issue has been discussed in detail with civil servants and, indeed, with Sir Ken Knight. Some 80 per cent. of the service’s budget goes on salaries, so there is little room for manoeuvre. Dorset has only six whole-time stations, and opportunities for shift arrangement and redeployment are limited. It really is difficult to find savings. Sadly, there have been 10 fire-related deaths in 10 separate incidents since December 2007; six of those people were over 70. Studies have identified lone pensioners as being the most at risk in our community, and that is true in other parts of the south-west. It is sad that that risk has been confirmed by the recent spate of fatalities. Dorset has the highest proportion in the country of people over retirement age, with an average of 27 per cent. and an incredibly high proportion in certain pockets. That compares with 18.7 per cent. nationally. The proportion of elderly people is likely to increase in future, so there is a real need to address the formula. We need the floor reinstated now, and within the next few years the formula must be reformed. The proportion of elderly people is one of the many factors that need to be taken into account.

The chief fire officer of Dorset tells me that as a consequence of the firefighters’ pay and conditions agreement, fire authorities were loaned a sum of money over a two-year period to ensure that pay increases could be made prior to efficiencies being found. For Dorset, that represented a sum of £350,000, to be paid back in two consecutive years, 2006-07 and 2007-08. The chief fire officer asked Dorset MPs to press the Government on why there is still to be a deduction of approximately £175,000 a year in the base budget. I think that we would all agree that that works out as a massive rate of interest.

Dorset’s fire and rescue service is acknowledged as a good performer, with comparatively low budgets and cost per head of population. It achieves a good overall performance, and in the national comprehensive performance assessment of 2007 it was stated as having the highest performance nationally. Locally, we are proud of our fire and rescue service, but we are deeply concerned about the pressures and worries that are put on it.

It is a pleasure to follow the hon. Member for Mid-Dorset and North Poole (Annette Brooke), who will not be surprised to learn that I will cover some of the same issues.

I congratulate my hon. Friend the Member for Forest of Dean (Mr. Harper) on securing the debate and on addressing the important issue of flooding as well as tri-service co-operation, which needs to be improved. I welcome the Minister to his new responsibilities. I am a little surprised to see the previous Minister, the hon. Member for Gloucester (Mr. Dhanda), in his place, considering the efforts that many of us from the south-west made to secure a better deal. There is no flooring, and there is no security to ensure that fire services receive an inflationary increase at minimum. As we have just heard, Dorset has received one of the worst increases in the country. It will be just 1 per cent. next year, 0.5 per cent. the year after and 1 per cent. the year after that. How can we possibly survive on such a budget set by the Government?

I shall not give way to the hon. Gentleman. He has taken up far too much time on the matter already. He had plenty of opportunity when he was responding to debates to answer questions about why lives were being put at risk in the county of Dorset by the ridiculous numbers that we face.

Like other hon. Members, I pay tribute to the fire service across the country, and particularly in Dorset. I spoke this morning to Darren Gunter, the chief fire officer, to confirm the concerns that still exist. Fire services are expected to be of the highest standard. If bins are not collected on time, it matters, but it will not cause any deaths. If potholes are not repaired, it is an annoyance, but it is not vital to life. When it comes to the fire services, however, we expect the highest standards. Unfortunately, if we are not willing to pay for those services, lives will be put at risk. I am sorry that party politics has come into this, but we in Dorset cannot help but look over our shoulder and see what is happening in other parts of the country. Nottingham, for example, will receive a 17 per cent. increase.

The hon. Member for Kingswood (Roger Berry) expressed concerns about the total amount of money that is in the pot. I do not dispute his case, but I am asking not for more money but for even sharing of Government funding. That has not been forthcoming, which is why Dorset is suffering. There is to be a national increase of 7.5 per cent. over three years, but in Dorset, as I have just explained, it will be only 2.5 per cent. We cannot exist on that without the standard of service being affected.

As we have just heard, Dorset is constantly ranked in the top five authorities in the country, but it has the lowest cost per head of population and is already one of the worst funded in the country. Why are we being picked on in this way? I simply do not understand. I believe that Dorset is a special case and deserves extra funding, or at least an inflationary increase.

I am not going to give way to the hon. Gentleman, as I have made very clear. I shall say it to him directly—no, I will not give way. You can speak yourself in a few minutes.

There are vulnerable groups in Dorset. We have an above-average number of elderly people, as we heard from the hon. Member for Mid-Dorset and North Poole. They often live on their own and need extra care. Sadly, 11 people, mostly elderly, have died in the past nine months in fire-related incidents, and I am afraid that that is because of the limitations that have been placed on the fire service.

I am saying that there must be a direct correlation. I would be grateful if I could meet the Minister, perhaps with Darren Gunter, the chief fire officer, so that we can look into the matter in more detail.

I am really surprised by what the hon. Gentleman has just said. I raised the matter with Darren Gunter when I went to Dorset last week, and he confirmed that there was no link between funding or the settlement and any of those deaths. The hon. Gentleman should be careful about what he says, because the implications are serious.

Of course these are serious matters, and I do not believe that they can be answered in full in this debate. I would be grateful if I could meet the Minister to consider the issues affecting Dorset. The service has had to make cuts in the Weymouth area and across the board, affecting its ability to meet needs. I wish to make it clear to the Minister that we cannot manage in the current situation. I hope that my hon. Friend the Member for Bournemouth, West (Sir John Butterfill), will have an opportunity to speak about the implications of the cuts. People living alone are affected, and there are many of them in Dorset. That is why I plead with the Minister to reconsider the settlement that we have received. Creating a regional centre in Taunton will not save any money, but it will increase costs, which will not benefit our area at all.

An argument that I had with the previous Minister concerned the additional burden placed on Dorset, because of the Olympics in 2012, to provide safety at sea. Yet Dorset fire and rescue service does not even own a boat. Only after we raised the matter with the then Minister was some funding finally forthcoming, but even that only takes us up to 2009, not even clearing the Olympics year, so we may not have the funding when the big event comes in 2012.

The consequences are simple: cut the budget and lives will be threatened and possibly lost. I urge the Minister to think again and examine what is actually happening in Dorset. A 2.5 per cent. increase is an insult, and we look over our shoulder to other parts of the country that are getting 10 per cent., 12 per cent. or 17 per cent. increases in their settlement. It just does not seem right, so please will the Minister introduce some fairness before more lives are put in danger?

I shall be quick, because I know that other Members wish to speak.

First, I disclose an interest: my son-in-law is a retained firefighter trying to enter the full-time service, and I am a member of the Fire Brigades Union parliamentary group and receive some support from the FBU. However, I speak on my own part and from my own experiences.

Memories are somewhat short, because I remember on more than one occasion under the previous Government having to fight to save various pumps, appliances and even fire stations. I shall be fair to the Government, who have put some serious resources into Gloucestershire. Our two main fire stations are being rebuilt, and a boat has recently been provided. I wish the hon. Member for Bournemouth, East (Mr. Ellwood) well in that regard in Dorset, and I hope that other improvements will follow.

One of the issues of most concern to FBU members is the commutation scheme. I shall say no more, because the Minister knows what I am talking about and now might not be the time for that debate. It is fair to say that people are rather upset by what has happened to their pension scheme. I also wish to pay due regard to the work of firefighters, about which we know only too well in Gloucestershire due to the 2007 floods and their repercussions. I would commend to anyone who has not read it the FBU’s report on the 2007 floods, which affected Humberside and Sheffield as well. It shows why we need firefighters, and points to their bravery and commitment. Of course, we have lost some of them—not many, thankfully, but some—in the past few years.

Is the hon. Gentleman aware that recent correspondence with the Department has revealed that personnel who transfer to the regional fire centre will not actually be part of the fire service at all?

I am aware of that, which is one reason why the FBU has serious misgivings about the move. However, I shall not pursue that because of the shortage of time.

As someone who has been a consistent critic of regionalisation, I think that I can speak with some authority on the issue. I do not know whether any Opposition Member would like to confirm this, but I was concerned that in the last meeting the cabinet member for Gloucestershire either signed off the agreement on the regional centre or was about to sign it off. I gather that the Liberal Democrats also are protesting but still signing it off. I would like to think that that is not happening, but perhaps it is.

I am a critic not only of regionalisation but of the FIReControl project. It has merits, and I have always argued that we need regional back-up. Anyone who was around during the floods will know that what happened was of such a scale that no control centre would have been able to cope, and we have a very good tri-service centre. One of the things that the Minister might like to dwell on is why Mott MacDonald, the wonderful consultants who have underlined all the things that have happened, has never published its investigation into the tri-service arrangements. It has published many other reports, which have cost millions of pounds. I do not know whether those reports have saved any lives, but they have certainly cost millions. I would like to know what Mott MacDonald says about the tri-service arrangements in Gloucestershire.

I hope that the Government will have another look at their proposals. I do not have any problem with regional back-up—we need it. The scale of possible disasters—whether floods or, dare I say it, a big security issue—means that we need the best available provision for our fire and rescue service. I still believe that that should be provided locally, and that we should listen to the people who work in the service and, indeed, the chief fire officer in Gloucestershire, who has been put in a difficult position.

However, we have to go from where we are, and that is the regional centre in Taunton. It is not working yet, but it has cost rather a lot of money. I worry about who, if anyone, will relocate, but, more than anything, I think that that centre should be the back-up to front-line local services, which have worked very well. I hope that that the Government will consider that, despite the money that has been spent and, obviously, despite some loss of face. We can always learn from our experiences.

It is not helpful if people say one thing in public and do other things in private. The person who has been most trenchant, as my hon. Friend the Member for Kingswood (Roger Berry) knows, is Terry Walker, one of his predecessors on Avon county council, who spent his life—and I mean his life—as the chairman of the Avon fire authority. He still has strong opinions not only on whether the centre is the right thing but on whether it will work. I hope that the Minister will listen to such comments. Other people will have views that are slightly different from mine, but it is important that we hear from those who work in the service as well as those who represent or manage it.

Order. Before I call the next speaker, there is provision for me to request that the Opposition spokespeople confine their winding-up speeches to five minutes, and the Minister to 10 minutes. Because this is such a localised debate, I want to let as many Members speak as possible. If the Opposition spokespeople are agreeable to that, I will proceed in that manner.

I begin by endorsing everything that the hon. Member for Mid-Dorset and North Poole (Annette Brooke) and my hon. Friend the Member for Bournemouth, East (Mr. Ellwood) have said.

Dorset is in a uniquely disadvantaged position. Based on the cost per head of population, it has one of the most efficient services in the country. Cost per head in Dorset is the lowest, at £31 per head, compared with Cleveland, at £63 per head. Such a disparity is extremely difficult to explain, particularly as Dorset has a high proportion of elderly people, as has been said. I believe that my constituency may have the highest proportion of retired people in the country, at about 30 per cent. of the population, yet the grant per head of population for Dorset is the third lowest. It is £16 per head, compared with Cleveland, which is £40 per head. Again, it is hard to explain such a disparity.

Even Avon county council, which was mentioned by the hon. Member for Kingswood (Roger Berry), gets nearly £25 per head, compared with Dorset’s £16, so something is going badly wrong somewhere. The county is being discriminated against in a way that I find difficult to understand.

Will the hon. Gentleman acknowledge that risk assessments may suggest that there are greater needs for services in some parts of the country than in others? With respect, one cannot simply use crude figures and draw conclusions from them as easily as he is trying to do.

The figures are extremely crude, but it is evident that we are getting less than one half what many other authorities get, yet we have a high-risk profile. That is inexplicable.

[Janet Anderson in the Chair]

Similarly, our settlement, which is exactly the same as that described by the hon. Member for Kingswood, is 1 per cent. for next year, 0.5 per cent. after that and then 1 per cent. after that. It is extremely low, and I sympathise with his council having to manage with it, because Dorset has to do the same. Without the floor, our grant would have been cut by 1.8 per cent.—nearly 2 per cent. Again, that is rather difficult to justify.

The consequences for Dorset are dire indeed. I have been told by Darren Gunter that it is necessary to abolish whole-time crewing and go back to day-time crewing only. Since many fires occur at night, particularly those involving the elderly, that is a worrying situation. The service has to combine whole-time stations, so the time that it will take to get to fire incidents will be longer, and it has to close retained stations. Again, cover is being reduced.

There are also impacts on community safety activity. I have been told by our chief fire officer that the service will have to reduce safety events in schools, and funding for Streetwise, which is dear to my heart. I am a trustee of Streetwise. It is a safety centre that has been built and financed by Dorset county council, Bournemouth borough council and Poole borough council. It provides training for schoolchildren, who come at two stages during their school career to see where the dangers lie in an urban situation. It has been extremely effective and is now being rolled out around the country. It is supported by the Government, thankfully, but not through this funding. If funding disappears from the fire and rescue service, there will be severe complications for Streetwise. Streetwise also has groups of elderly people come around the centre to learn about risks in the home in an effort to prevent terrible fires.

Frankly all of this is inexplicable. Other support services that will be affected are training and development, including fire safety courses, welfare provision, recruitment, fleet and equipment maintenance—we will not have such well-maintained equipment—and property maintenance. Dorset is now being cut to the bone, and there will be a real impact on the ability to save lives.

I warmly welcome the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Tooting (Mr. Khan), to his place as the fire Minister. Whatever else he does in government, being the Minister with responsibility for the fire and rescue service is a true honour and something that he will enjoy, regardless of the fact that it can sometimes feel like a bed of nails. He will find that firefighters are unique people of whom we should all be proud, wherever we live in the country.

The number of fire deaths is actually down to its lowest level since 1958, and the recent advances are the result of some of the investment in the past 11 years. We have seen a complete restructuring of the way in which the fire service does its work. The advent of the regulatory reform order and the local risk management plans has made a real difference and has allowed the fire service to look outward to local communities.

We see far more of the kind of important work done by Streetwise, for example, which the hon. Member for Bournemouth, West (Sir John Butterfill) has mentioned. I join the hon. Gentleman in saying that people such as Darren Gunter do a terrific job. When I tried to intervene on the hon. Member for Bournemouth, East (Mr. Ellwood), I was going to make that point and mention something that has not been mentioned by Dorset colleagues. Although I appreciate that the settlement was tight this year, when Dorset Members came to see me, I mentioned that the extra money—the £250,000 for the Olympics—would make a real difference. Darren has made that point clearly as well. I understand that that money has arrived, which is important.

We have never seen the like of the investment over the past decade. We live in a new world now. The £200 million of new dimension investment—the high volume pumps, the urban search and rescue equipment and the decontamination units—are there to cope with the new threats, whether in the south-west of England or anywhere else. Yes, we are having an in-depth debate about fire control, but that is part of the new and emerging—

I want to point out that I was a bit misleading a little earlier on. Councillor Jerry Willmott, as the hon. Gentleman correctly said, is in favour of the plan, but that is because he is chairman of the new company. But I apologise.

The hon. Gentleman is right, and I am glad that he has made that point. Jerry Willmott supports FIReControl, not because he is chair of the company, but because he is a man of real integrity who understands the fire service and the risks better than most people in this Chamber, including, I am afraid to say, the hon. Members for North Wiltshire (Mr. Gray) and for Forest of Dean (Mr. Harper). It is interesting to note that when the Front-Bench spokesmen had the opportunity to debate this matter in July in Committee—we did so in some depth—neither the Tories nor the Liberals voted against this measure. At that point, we had the opportunity to flesh out the arguments.

Before speaking about fire control, I wish to add to a point made by my hon. Friend the Member for Kingswood (Roger Berry) about the importance of having a diverse fire and rescue service. I went out of my way in my time as fire Minister to congratulate Avon on the work that it has done in this regard. I am sure that, because this subject is a passion of my hon. Friend the Minister, he will continue this work on diversity in the fire and rescue service.

We are working with the unions and other stakeholders to push the barriers and to call for representation to increase from 2 per cent. to 5 per cent. of the local minority population to be recruited into the fire service with an incentive grant, and we are also calling for women to be brought into the fire service at operational levels so that they comprise 18 per cent. at that level. That can only be good for the fire service and, ultimately, good for our local communities.

There are hon. Members in this Chamber who will never agree with me about FIReControl. Some will not agree for the right reasons and some, I fear, will disagree for the wrong reasons, knowing that this is an easy cheap shot in terms of frightening the electorate and winning good headlines with newspaper editors. It is not the newspaper editors’ job to understand the detail; it is their job to make good headlines. I accept that this makes good copy, but there are far more important issues here.

I went to Sweden to see the changes made there, which involved reducing the number of control rooms from 120 to around 20. That rationalisation was introduced not only to make savings but because a single network to improve resilience was wanted. We have 46 control rooms, many on different networks. That is why, when the hon. Member for Bournemouth, East talks about resilience and the tri-service centre, he needs to understand that the tri-service provision is incredibly good and would remain as our gold command. However, resilience is about networks and systems. That is why we had more than 1,000 calls when the flooding was serious. I know about that. I did not just pop into gold command and say hello; I was there. I had a seat at the table, and I was in there every day. I know that people’s lives can be put at risk if they cannot get through and speak to an operator when they dial 999. Having a single resilient system where all parts back each other up will make a huge difference.

I ask hon. Members to put politics aside for a moment and think about themselves and their families. If their child or partner were caught in a burning wreck on the M5, what would be the key thing? They would want a fire service that mobilises the engine nearest the scene. When that engine arrived on the scene, they would want systems in the cab—the technology—to say where to cut into a particular type of vehicle to avoid air bags, rescue a person and get them out in one piece.

I urge hon. Members—

No, because I want to complete my point. The hon. Gentleman should get out with the fire and rescue service in Gloucestershire, as I have done, and get it to take him into a mock burning building, then he would learn a little bit more about the role of a firefighter. When doing that, crawling around in the dark in a smoke-filled room, totally and utterly reliant on colleagues—[Interruption.] He says that he knows that. I urge him to try it, actually, because the kinds of stresses involved—

No, I will not give way because I want to finish this point. On getting out of that room and talking to the point man or woman on the floor, they will map out and draw the burning building wreck that the firefighter has been in. Fire control will provide those people with the floor plans of the buildings, so that the shape and structure of a building, the location of the nearest hydrants and information about chemical risk can be known.

I have already said that I will not give way to the hon. Gentleman. [Interruption.] If he wants to learn about the fire and rescue service in Gloucestershire, he should read some of the stuff that is sent to him and listen a little more closely to chief fire officers, because the Chief Fire Officers Association is backing the plan, as is the Retained Firefighters Union.

We always discuss every criticism by the FBU of the FIReControl plans. From my experience going round the country, however, the majority of FBU members to whom I have spoken support the changes, because when they go into dangerous circumstances, they want more knowledge about the situation. They want mobile data systems that—lo and behold!—they do not have in my patch at the moment. However, they will have those systems under FIReControl.

Order. I remind hon. Members that we want to get one more speaker in before we start the winding-up speeches, so I would be grateful if the hon. Gentleman were to bring his remarks to a close.

I will do so.

We do not have status managing, automatic vehicle location systems and satellite navigation in our local fire and rescue service. Our constituents believe that we have them, but we do not, and we will only have them if we are brave enough to make these changes. Our challenge is to join people such as Councillor Jerry Willmott, Pete Roffey and, yes, the Conservatives and Liberals in Gloucestershire who say one thing but do another—I have seen them doing it—and who privately support the plans for FIReControl.

I, too, am grateful to my hon. Friend the Member for Forest of Dean (Mr. Harper) for calling for this debate.

I had not intended to speak—I intended only to make some interventions—but the speech by the former Minister, the hon. Member for Gloucester (Mr. Dhanda), compels me to say a few words. Of course, I echo the comments of Dorset colleagues from all parties about the terrible effects of our settlement, which we tried, but failed, to bring home to the former Minister when he was in place, and which will result in threats to safety that the current Minister will have to take seriously.

It is clear that, as an emergency measure, the floor needs to be raised. However, I want to say just a few words about the regional control centre, because the former Minister has now illustrated the source of the problem with which we are dealing. He clearly exists in an alternative universe—

Yes, the hon. Member for Gloucester exists in a universe where it is necessary, in order to mobilise the vast resources of networks, to co-locate vast numbers of people in particular centres. We are no longer in that universe; we are in a different universe in which it is perfectly possible to achieve all the technological shifts that he was describing at a local level. That is precisely the character of an open network age. The complete failure to recognise that has helped to generate the mayhem caused by an ineffectual and ill-designed computer programme and an ineffectual and ill-designed regional control centre. I accept and agree with the point about regional back-up that the hon. Gentleman made, but that does not imply a need for regional control centres, still less the need to denude Dorset of extra funds when it is already so hard-pressed.

It is interesting that the Conservatives are indicating that they want to provide all the fire control and fire link technologies to all the local control rooms. It is fair to say that that is what the right hon. Gentleman implied. He must realise, when he makes such implications and suggestions, he is also suggesting that an additional £2 billion would have to be found if his party came to office.

That is total junk. The Minister is—[Interruption.] The ex-Minister is, as usual and as was the case with the NHS computer, the identity card system and many other computers, living in an age in which mainframe was the right approach. That is not necessary now, because it is perfectly possible to operate on a network basis, but I regret to say that his ex-Department and many others have not yet recognised that. We must go back to the drawing board and recognise that we are in a Google and network age and that we do not need the sort of physical infrastructure that he so wrongly and unfortunately imagines is necessary and which is leading to real problems on the ground.

It is a pleasure to serve under your chairmanship, Mrs. Anderson. In the few minutes available to me, I shall try to develop some of the points that have been made, and which I was hoping to make.

First, I congratulate the hon. Member for Forest of Dean (Mr. Harper) on securing this debate. It is evident from the number of hon. Members from the south-west, including Labour Members, that there are strong feelings on many of the issues, including regional control centres, which is the topic of most discussion, and, crucially, funding. He was absolutely right to raise inconsistencies between what was promised for regionalisation and what will be delivered in savings and improvements to service. If neither of those boxes are ticked, we must call the policy into question, as my party and his have done ever since it was first posited.

The hon. Member for Kingswood (Roger Berry) rightly referred to diversity and important work on that issue, as well as to the funding problems that affect his authority, as did my hon. Friends the Members for Bristol, West (Stephen Williams) and for Mid-Dorset and North Poole (Annette Brooke). My hon. Friend the Member for Mid-Dorset and North Poole also raised some important demographic issues, which are particularly acute in her county and throughout the whole south-west, where there is a huge amount of inward migration . Demographic changes towards the older end of the age spectrum will present challenges.

I want to focus on the fantastic job that the fire service does. Information from people on the ground, whether through the Fire Brigades Union or people in fire authorities who are concerned about the programmes towards which the Government are pushing them, suggests that they are achieving fantastic results with the available resources and focusing very much on preventive work. At a recent open day at the fire station in Bodmin, I heard more about the fire service’s work with young people to encourage them to play a more active role in ensuring that communities are safe, as well as their work with smoke detectors, local businesses and the Flashpoint Lifeskills Centre, which is similar to the street light facility in the constituency of the hon. Member for Bristol, West—[Interruption.] I am sorry, the hon. Member for Bournemouth, West (Sir John Butterfill).

Absolutely. I have in fact referred to my hon. Friend the Member for Bristol, West, and I am sure that he will continue to be the MP there.

Full-time and retained fire services offer a valuable whole service in many of the rural communities that we serve, and it is important to recognise the challenges facing the retained service. Local authorities that have retained services are considering ways of improving their responsiveness and ensuring that they are efficient, as well as providing the technology to people who do a wonderful job in addition to what they do in their ordinary lives to ensure that their communities are safe. There are sometimes challenges in recruitment and affordability in rural communities, and we need a bigger steer from the Government on how areas such as the south-west, which have many rural communities, can be supported.

My party is not convinced, and never has been, that regionalisation will be effective or deliver the savings that have been promised. The former Minister, the hon. Member for Gloucester (Mr. Dhanda), both in robust interventions and his own contribution, was keen to point out his belief that that is the only way of delivering new technology. However, if it is clear that regionalisation will not deliver savings, that calls into question the whole promise of delivering the new technologies. In fact, the Government should consider other ways of delivering improvements without going down the regionalisation route. I want to put on the record the fact that during a Standing Committee debate on fire and rescue services in which I participated, my party did not call for a vote on the national framework—we were debating many other issues and not just regionalisation—but I made it clear that my party remains opposed to it. I thank you, Mrs. Anderson for the opportunity to speak, and I am sure that those who are listening outside the Chamber will focus on the fact that the former Minister’s position does not seem to have moved in line with business models and the evidence from people on the ground.

It is a pleasure to serve under your chairmanship, Mrs. Anderson. I warmly congratulate my hon. Friend the Member for Forest of Dean (Mr. Harper) on securing this vital and timely debate. I pay tribute to him and to my hon. Friends in the south-west for their campaigns over past months and years against fire control centres and the underfunding of local fire and rescue services, which will have such a big impact on their constituents.

I also welcome the new Under-Secretary of State for Communities and Local Government, the hon. Member for Tooting (Mr. Khan), to his post, which is something of a hospital pass, as the former Minister, the hon. Member for Gloucester (Mr. Dhanda) acknowledged. I had intended to discuss the wider issue of funding as well as the FIReControl project, but I must be circumspect in my comments. My colleagues are concerned about the discrepancies and massive disparities in funding in the comprehensive spending review period, such as those between Avon and Dorset, which received 2 per cent. in revenue support grant in this CSR period, and Humberside, which received 12 per cent., Derbyshire, which received 15 per cent., or Nottinghamshire, which received almost 18 per cent. Additionally, there are big variations in grant per head of population during that period. Devon, Somerset, Wiltshire and Dorset will receive less than £20 per capita compared with other local authorities, while the average is £19.64. The Government should consider factors affecting grant allocation, such as relative resources based on the tax base of population and tax base per head, which militate against authorities in the south-west.

It is as well to step back a little and consider the issues raised by the hon. Member for Kingswood (Roger Berry). It is all very well for him to say in his little homily how much was spent—[Interruption.]or not under a Conservative Government, but his Government have been in office for 11 years. Terry Walker and the Avon fire authority feel that they have been unfairly treated by his Government as a result of the floors and ceilings mechanism and the transitional grant repayment in Avon.

I am happy that the hon. Gentleman confirms that that is the case.

I do not have time to discuss the review that the Department will undertake on the formula spending share by 2010, but many authorities believe that it must be speeded up as a matter of urgency. The floors and ceilings mechanism has led to major problems in the south-west, as we have heard. In the wider context, during the CSR period, south-west fire and rescue services must deal with inaccurate data on inflation, and above-inflation pay awards. Local initiatives that need discrete funding, such as civil contingencies, community fire safety and new dimensions funding, will be a significant burden.

It is important to mention Fireguard, which is an ongoing issue for fire and rescue authorities. At its board meeting last Monday, it collapsed, so local fire and rescue authorities have no means of dealing with fire cover in the event of a pandemic, national firefighters strike and so on. They will therefore fail in their legislative duty under section 7 of the Fire and Rescue Services Act 2004 and section 2 of the Civil Contingencies Act 2002. The reality is that most fire and rescue services are faced with real-term cuts in their funding. They have been forced to view the integrated management plans as a fig leaf for real cuts in services, job losses and the removal of appliances.

The hon. Member for Gloucester (Mr. Dhanda) did not break off from his tirade long enough to take an intervention from me, so I am grateful for the opportunity to mention that I, too, have spent time with my fire and rescue service officers—the retained officers in Cinderford. I have gone into smoke-filled buildings with them and have been incredibly impressed by their dedication. If this project is so good and compelling, why is it that the men and women whom we ask to risk their lives and go into burning buildings find it so unconvincing?

My hon. Friend makes a sound and accurate point. I do not recognise the picture that the hon. Member for Gloucester paints of widespread support for the project—not least because it is not true. Even if people such as Councillor Willmott in Wiltshire support it, they do so only because of the threat that the Government will use reserved powers under the 2004 Act. It is hardly surprising that they support the project when they are faced with that difficulty.

My hon. Friend the Member for Forest of Dean has comprehensively demolished the case for the FIReControl project. All we heard from the hon. Member for Gloucester were platitudinous comments and vacuous sound bites that show that there is no empirical data to back up his comments about, for instance, the number of calls received during the floods.

Order. I ask the hon. Gentleman to draw his contribution to a close so we have time for the Minister to respond.

The case has not been made, either in terms of cost savings or resilience. The project is not only opposed by the Fire Brigades Union, but by ordinary firefighters and councillors on local fire authorities. The Government need to look again at two pertinent issues: the funding formula and the need to scrap the FIReControl project. The project will be a disaster and will encumber local fire authorities and council tax payers in the future. The Government need to be honest about that and scrap the project.

It is a pleasure to respond to the many points that have been raised. The comments of hon. Members deserve respect, and I will deal with as many points as I can as swiftly as I can.

I congratulate the hon. Member for Forest of Dean (Mr. Harper) on securing the debate. Aside from his congratulations to me, I did not agree with anything else in his speech. However, it is important to thank him for initiating this debate, because it gives me the chance to put on the record something with which I am sure we all agree: through their commitment and professionalism, the fire and rescue services play a crucial role in keeping our community safe. Indeed, the timing of today’s debate is a powerful reminder of the bravery and dedication that firefighters persistently demonstrate when fulfilling their duties. Today is the anniversary of the warehouse fire in Warwickshire in which four firefighters lost their lives. I beg the indulgence of hon. Members, as I shall name them: Ashley Stephens, John Averis, Darren Yates-Bradley and Ian Reid—the youngest was 20 and the oldest was 44.

It is appropriate that the hon. Gentleman secured this debate—and I am pleased he did so—which has provided an opportunity for hon. Friends and members of the Opposition to raise important points. I want to do those points justice in the short time I have. On my first outing as the Minister responsible for fire, I visited the fire station referred to by the hon. Member for Mid-Dorset and North Poole (Annette Brooke). It is an excellent station with excellent facilities and is proof, if it is needed, of our investment during the past 11 years. The station is the first building in Dorset to be completed through the private finance initiative as part of the joint police and fire service initiative.

I shall make a swift passage through some of the investment we have made, because people have short memories. For example, during recent years, we have invested more than £400 million in a PFI programme to help to deliver 21st-century stations. Fire and rescue authorities will benefit from a further £130 million in PFI credits. In fact, Dorset is receiving nearly £28 million in PFI funding to support new building projects, and other fire and rescue authorities in the south-west have benefited from PFI. Much has been made of Gloucestershire and Avon, both of which, with Somerset, were part of the collaborative PFI project to provide joint training in Avonmouth. Nearly £17 million of investment has been made through PFI. Gloucestershire has also received £40 million for new community fire stations—not for one, two or three stations, but for four of them—and a community life skills centre. I respectfully advise those who have amnesia to try to recollect what life was like before the improvements that have been made during the past 11 years.

Much was made by my hon. Friend the Member for Kingswood (Roger Berry) and others about the three-year settlement for fire and rescue services. The architect of the next Conservative manifesto, the right hon. Member for West Dorset (Mr. Letwin), is here, and I am happy to take an intervention from him if he will make spending commitments in relation to what his party will do over the next period. The Opposition are not willing to make commitments for the next few weeks and months, let alone for three years’ time.

Let us be clear that under the three-year local government settlement, which was announced at the beginning of this year, single-purpose fire and rescue authorities will receive an average increase in formula grant of 2.4 per cent., 1.4 per cent. and 1.4 per cent. during the three spending review years. No fire and rescue authority will receive—[Interruption.] I can hear chuntering. I am not sure if Opposition Members wish to make an intervention; I am happy to take one if that is the case. No fire and rescue authority will receive an increase of less than 1 per cent., 0.5 per cent. and 0.5 per cent. It is worth emphasising that over the comprehensive spending review 2007 period, councils will receive an additional £8.91 billion. The factors and criteria by which the grant is allocated are well publicised and we know about them. We heard from the hon. Member for Bournemouth, West (Sir John Butterfill), who is involved with Streetwise, that there are benefits to having a floor, as otherwise there would be a loss, so I am glad that we have heard an endorsement of the need to have floor.

The intention of our financial policy in relation to local government has always been to provide fairness and stability. Our goal is to ensure that the three-year settlement is a three-year settlement; not a settlement that changes each year because we are lobbied to change the data or methodology that is used. The Government and I believe that it is important to provide stability for local government, so that it can have more time for planning its income and expenditure. That creates a greater degree of certainty and that is our goal.

If the Minister is so concerned about transparency and clear planning, why has he disaggregated the national business case to regional FIReControl boards and delayed the publication of that case? As a result, local fire authorities are not in a position to make proper planning past the comprehensive spending review period post-2011, which will put them in a difficult financial position.

If this were not a serious debate, that would be a laughable point. The hon. Member for Bournemouth, East (Mr. Ellwood) made a point about the commitment to £300,000 for fire service facilities in relation to the Olympics. The idea that we can predict what will happen in four years’ time is absurd. There is a three-year spending commitment and those plans are reviewed towards the end of that period. Plans are made for the following three years.

Does the Minister appreciate the predicament that Darren Gunter finds himself in because that was the very issue he raised with me on the phone this morning? He asked me to plead with the Minister for some form of guarantee. It is great to have the boat now and to be able to run and maintain it, but there is no point in training the fire service to provide security and safety at sea if we cannot have the money to continue doing so during the Olympics in 2012.

If the hon. Gentleman is suggesting that we have the CSR 2010 now, I cannot give him that commitment. However, there has been scaremongering about the ability of Dorset fire and rescue services to provide facilities for the Olympics—we had a section 31 grant of £300,000—but I am confident that, if this Administration is in power in 2010, we will ensure that his authority has the facilities it needs to do the job it needs to do. We have always done that until now and that will always be the criteria that we use to give funding. The idea that we can somehow give commitments until 2010 is absurd. Darren Gunter will know—and the hon. Gentleman should know—that Dorset has already received £77,000 this year to do the sort of work that he is concerned the authority cannot do. The allegation that we cannot fill the hole for the work that is needed is not accurate.

We are not talking about future funding. If the Minister takes his mind back to the comments of Dorset fire authority cited by the hon. Member for Mid-Dorset and North Poole (Annette Brooke), he will understand the current funding situation and the fact that, as recently as February 2007, 30 per cent. savings were anticipated for the fire control project for the south-west. Those savings have not materialised, and there is no likelihood that they will do so.

I do not accept those figures. In the time I have left, there are two things worth saying. The capital grant, which is new money for which Dorset will receive the fruits, is £35 million next year and £45 million the following year. That can be used to buy fire engines, which should deal with the scaremongering comment blurted out by someone in relation to the inability to buy fire engines. An important issue I have had not had the chance to address is that of FIReControl, and the fire and resilience programme. There is no better argument and justification for that than the comments made by my hon. Friend the Member for Gloucester (Mr. Dhanda)—my predecessor as the Minister for fire. He completely destroyed the points made by four separate Opposition Members—

UK Skills Agenda

I am especially pleased to be here with my hon. Friend the Minister. This is my first chance to see him in action and it gives me particular pleasure to be doing that today. I am aware that quite significant parts of the UK skills agenda have been devolved, so although I will mention Scotland’s policies, I shall try to err on the right side of the rules and avoid straying into the tricky territory that is devolved policy.

The skills agenda is perhaps the most important single area of public policy today. The Government in many respects set the terms of progress by commissioning the Leitch review of 2006. The resulting report, “Prosperity for all in the global economy—world class skills”, was a practical piece of work that stated fairly orthodox facts of life about the future of our economy in the world and our need for a more highly skilled population. It also made a series of recommendations about how our education and training structures should be developed to meet the challenges at hand. That report has been followed through by the Government pretty much lock, stock and barrel, most notably through the creation of the UK Commission for Employment and Skills—the UKCES.

From my perspective as the Member for Falkirk, a Scottish constituency, the UK element of the UKCES needs a bit of unpacking. It is clear that the imperatives of the Leitch report apply across the UK and, indeed, much more widely in many respects—in the widest sense, they apply to any developed economy in the world today—but devolution means that different parts of the UK are carrying forward the ideas and philosophy central to Leitch in their own ways. Certain strands apply across the UK equally. The sector skills councils apply across the UK, which is very important. The Department for Innovation, Universities and Skills leads on those matters. However, there are also significant parts of the agenda on which it is for the devolved Administrations to make their own decisions and policies. As I said, I will refer to Scotland, but I shall endeavour to stay on the right side of the rules.

I shall examine the issue of skills through the prism of my own constituency. Falkirk sits in the central belt of Scotland between Edinburgh and Glasgow. Historically, it provided labour for the iron industry, which in turn served the shipbuilding industry on the Clyde and elsewhere in Scotland. Employment, skills and human capital in general revolved around a number of fairly simple assumptions about how a working life would normally pan out. Women tended not to work and men tended to be trained on the job. People tended to enter employment on leaving school, often staying with the same employer, in the same location, for their entire working lives. There was a tradition in Falkirk of skilled employment for some, as the iron industry required skilled artisans and engineers at one end of the spectrum, but much of the employment was semi-skilled and quite a lot of it was unskilled, even though people did it for their entire working lives. The schools turned out many kids who expected to enter similar employment to that of their parents, and the college sector, as it was then, often provided day release for them once they entered the foundries and associated employment.

Employment was available but, despite the fact that people often look back through rose-tinted lenses, it was not plentiful. Unemployment was much higher, employment was much lower and women tended not to work. Unemployment was a feature of life for greater numbers of people then than it is today, and working lives were often cut short by ailments caused by the industrial conditions in which people worked.

There is a danger here of presenting a monochrome, over-simplistic version of the local economy at the time. It is nevertheless fair to say that the essential nature of the local economy and people’s working lives can be understood only against the backdrop of the foundries and the industrial landscape that they formed.

Interestingly—I think it is interesting anyway, because I did it—I sent 10,000 questionnaires to local households. I should have said that I and my massively capable staff did that—they did it and I take credit for it. We asked various questions about life in the Falkirk area, and many of the norms and figures that we got were pretty much the same as those that people would get not only across Scotland, but across the whole of the UK. From a policy point of view, Falkirk is in many respects a typical place that we can generalise from outwards to the whole of the UK—I like to think so, anyway. People can see the results of the survey on

My predecessor in the House, Harry Ewing, who subsequently became Lord Ewing of Kirkford, said in his maiden speech that Falkirk was “solely an iron town”. That was in 1971. He pointed out that there had been recent investment in the industry and that it was well equipped for the tail end of the 20th century. However, within about 10 years of that speech, most of the foundries were either closing or had closed, and by the time I came on the scene, just over 10 years after that, they were all gone. There was one left, but it has now gone as well, which shows just how quickly the nature of employment has changed in my part of Scotland and, indeed, across the UK.

Let us fast forward to today. All those foundries are now closed and on the sites of the old foundries are new build housing estates. Indeed, it sometimes seems that if planning permission permitted, pretty much every available square inch in Falkirk would have a house built on it. That is because Edinburgh and Glasgow are only half an hour away and Falkirk sits in the middle of three motorways, so people live there and travel to work. Clearly, there are still many jobs in Falkirk—including those at Alexander Dennis, which builds the red London buses, one of which we saw at the Beijing Olympics—but there is far more commuting and there is a far greater flow of people moving into the new build houses than moving on elsewhere. That impacts on the local economy, and I will come to the skills base.

Employment in Scotland is relatively high. The number of people of working age who are not on incapacity benefit and are in employment is slightly higher than it is across the UK as a whole, but working lives are characterised by far more uncertainty than they were in the days of the iron industry. The patterns of increased mobility and reduced time horizons in terms of how long someone might expect to stay in a job, a particular appointment or even a particular industry have, in common with a range of other features of life in the 21st-century global economy, placed the value of human capital—I believe this and I think that the Government do—at the top of the political agenda, and this is where the skills agenda comes into play.

It is more or less an article of faith within the skills agenda that higher levels of skills lead to higher levels of individual and collective productivity, yet as the UKCES has noted, Scotland apparently has higher levels of skills per capita but lower levels of productivity than the UK as a whole. Quite a lot of work needs doing to get to the root of why that should be the case, but it seems to me quite likely that there are important differences in the nature of available jobs. If people are upskilled and highly educated but fail to find jobs that suit their level of skills and education, they will be less productive by definition and perhaps even in terms of their own motivation. In addition, some OECD comparisons and some productivity measures, particularly those directed at the public sector, seem to me to need quite a lot more work before they can be considered properly valid and reliable. I know that the UKCES has commented on that and has made a pretty good start in that respect.

Another important variable is capital investment. New equipment virtually by definition drives productivity improvement, so older industries or service industries that have relatively low levels of investment in state-of-the art equipment will show lower levels of productivity even if the people who work in them are more highly trained and educated.

That point was made to me by Wendy Livingstone, the associate principal of business and innovation at Forth Valley college. Wendy is responsible for a new development in vocational education, which I think has implications across the whole UK. Often we speak of parity of esteem in relation to education and training, yet esteem is not really something that can be ascribed by politicians. It is essentially up to the “esteemers”, if I can put it that way—young people, employees and employers and what they think of particular qualifications. We cannot really define it; they have to decide what they value themselves. Vocational education can be a hard sell when it comes to people with considerable academic potential. Sometimes even the Government and hon. Members are guilty of over-emphasising academic qualifications and the importance of people entering higher education at the expense of a more vocational route. Wendy and Forth Valley college are running an innovative scheme in conjunction with Ineos, the large chemicals company that is a major employer in the Falkirk area and sits just outside my constituency, in that of my hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty).

Ineos has noticed that graduate trainees often lack physical skills and practical orientation in their early years. It has also noted that many skilled people in the oil gas and chemicals industries are very smart, like my brothers; they have not had a formal higher education but it could easily be thought that they had been educated to that level. Indeed, their salaries are commensurate with that belief.

Forth Valley college and Ineos have designed a regime that will see local school leavers being recruited directly into jobs that will lead them to Master of Engineering status within six years. That is a year more than through the traditional higher education route, but crucially it includes six years of applied industrial experience. That is at the top end of the vocational market, but is shows that there can be a significant overlap between the vocational and the academic routes. That is particularly important.

The Forth Valley college and Ineos initiative needs to be seen in the context of skills development across the UK. As I said, the UKCES has a UK-wide role, although it is technically only advisory in Scotland. Nevertheless, I am struck by how Scotland’s principals are seized of the whole agenda, and all those to whom I have spoken seem very well acquainted with the work of Chris Humphries and his team at UKCES.

It is worth mentioning the fact that many things are done differently in Scotland. Some initiatives are precisely the same—for instance, the Catalyst series applies across the UK; and the sector and skills councils, too, cover the UK. Scotland can sometimes be guilty of the “not invented here” syndrome, but I wonder whether these things sometimes apply the other way around. Essentially, we have two systems; but each should learn from the other. That may sound hackneyed, but in this case it is true.

The Scottish credit and qualification framework is a case in point. It is widely recognised by employers, colleges—and, to a fair degree, by parents and schoolchildren. However, its corollary in England has yet to be embedded to the same degree. I wonder, when looking back to 2006, if it was necessary for England to change the structure; it seems to me that it could have used the SCQF system, which was already in place, was recognised and which now seems to work well. That is important, because people need to understand that a number of Government objectives impact upon the higher national certificate level on the vocational side when it comes to funding, and in how they measure its success. My hon. Friend the Minister may have a word or two to say about that.

England can clearly learn from a number of things that are going on in Scotland. I have spoken to a number of principals over the past few months, both in preparation for the debate and for other reasons, and in the broadest sense they believe that they have more room for lateral movement and local decision-making than their English counterparts. That enables them to have a stronger relationship with local employers. Indeed, initiatives such as that between Forth Valley college and Ineos are a case in point. I cannot back that up, but that is certainly their opinion, and it is probably worth further examination.

I have mentioned the role of the Scottish Government. I would not wish, knowingly, to be too enthusiastic about a Scottish National Party Administration, but the reality is that the party has many capable and competent officials, who are doing a really good job. Many of the structures work really well. I do not have a quibble with officials over the professionals, who are virtually all of an extremely high grade, but I sometimes have a quibble about the funding. I have one or two concerns in that respect. However, it is not for me to criticise Scottish funding for something that is devolved. Indeed, I would prefer to do the opposite.

For example, Train to Gain is a good initiative; it is directed through employers, and its focus is up to level 2, on literacy and numeracy; it is basic stuff, but it is important to get everyone up to that standard. Train to Gain does not exist in Scotland; instead, it has individual learning accounts, which are means tested. Without wishing to confuse matters by referring to the two qualification frameworks, the higher awards are directed towards the HNC level. It seems that the English regime is much better in respect to its commitment to funding. It is also clear that the Department for Innovation, Universities and Skills is fully committed to funding apprenticeships—essentially making them available to anyone who wants one. Scotland does not. Unfortunately, in Scotland it has been cut. The impact will be seen in several years in workplace productivity.

In conclusion, I shall mention one other organisation. I have received advice about the subject from a large number of people and organisations, and it would be good to mention them all. It would be more fair to reel them all off. However, one organisation with which I have had contact over the last couple of years is the Edge Foundation, of which the Minister is aware. The Edge Foundation places an emphasis on applied skills and entrepreneurship, and it has an especially close relationship with the all-party group on skills, chaired by my hon. Friend the Member for Blackpool, South (Mr. Marsden), the National Skills Forum and a number of other leading skills organisations.

I have had the privilege of being briefed by a wide range of skills-related organisations, and it seems to me that the Edge Foundation has been in just the right place when it comes to taking an intelligent and highly enthusiastic approach to the skills agenda. The Government can lay the foundations for a skills agenda, but it has to be taken forward by all sectors—both the public and private sectors and what I would call the third sector. The foundation is a fine example. I have read its comments on the Apprenticeships Bill, and the Government would usefully take note of many of their comments in one way or other.

I have tried to present the UK skills agenda from the perspective of Falkirk and I have tried to emphasise how important the agenda is across the UK. I now leave the subject for my hon. Friend the Minister.

I congratulate my hon. Friend the Member for Falkirk (Mr. Joyce) on securing this debate. He is an outstanding Member of Parliament with a broad range of interests. We are talking today about skills, but it could have been defence or even foreign affairs. In every area that he touches upon, he displays an exemplary depth of knowledge and commitment.

I agree with much of what my hon. Friend said. I share his admiration for organisations such as the Edge Foundation. The project that he described between Forth Valley college, an outstanding college in his constituency, and Ineos is interesting and innovative. It is a cutting-edge way of doing things.

Having spoken to people in this sector over the past few weeks, I realise that there is clearly a demand from the business community for even more Government resources, not only for level 3 but for level 4 and above. Questions of parity and esteem, and the snobbery that sometimes afflicts the vocational sector, can be addressed by exactly the kind of project that my hon. Friend has mentioned. I am certainly be keen to find out more, and to see whether the Department could learn from what is going on in Falkirk.

As my hon. Friend says, they are devolved matters, but I am clear that we in England can sometimes learn from Scotland. Perhaps on qualifications structures—although perhaps not—but certainly on forging local agreements on those matters in which college principals in Scotland believe that they have more flexibility than their counterparts in England, I am keen to learn more. My hon. Friend and I have had separate discussions about setting up a forum to discuss and investigate the matter, and if Scotland’s practice is better and more flexible, we in England must certainly learn from it.

The rest of my remarks today will necessarily relate more to England, but we should indeed be clear that the broader skills challenges are nationwide, covering the entire United Kingdom. When Lord Leitch issued his report on skills in December 2006, he noted that for the UK as a whole changes to the global economy had significantly increased the importance of skills; that skills levels in the UK had been improving, but still lagged behind other countries; and that UK productivity levels had also improved, but not as much as elsewhere. Compared to the UK, output per hour worked was 17 per cent. higher in France and Germany, and 19 per cent. higher in the US. Up to one fifth of the UK’s productivity gap with France and Germany can be attributed to poorer skills.

In his report, Lord Leitch set out the number of people whose skill levels must improve—and by how much—if we are to be in the world-class bracket for skills by 2020. He highlighted the potential benefits of raising our game and growing our economy by at least £80 billion over 30 years, and he recommended that we as a nation focus our help on those who can least afford and are least likely to pay for their own training. He was also clear that the training system would not work unless it was genuinely responsive to both employers and individuals. The thrust of what we have been doing over the last two years has been about making the system more flexible, demand-led and responsive. We have come a long way, but we still have a long way to go.

Government funding is big and getting bigger. It will rise from £4.6 billion in 2007-08 to £5.3 billion in 2010-11. That is a 7 per cent. increase in real terms and it will apply to more than three million learners. We have shifted resources towards those courses that have proven, sharp end, work-related benefits.

My hon. Friend the Member for Falkirk was delicate and sensitive when he touched, very elliptically, on whether our ambition in this Parliament is matched by that of the Scottish National party in its area of responsibility. I cannot fail to note that it has been reported that funding for apprenticeships in Scotland has been cut by the SNP Government from £52.8 million to £50 million, that adult apprenticeships have been refocused into three sectors and that apprenticeships outside those areas have been abandoned.

My hon. Friend will know that Labour colleagues in Scotland—not least John Park MSP—have been trying to do something about that situation, and an Apprenticeships Bill has been introduced that mirrors that of the UK Parliament. It has been well received in Scotland by employers, trade unions and colleagues in the Scottish Parliament. As we hope to do in England, the Bill will give apprentices in Scotland rights that currently do not exist.

At a time when there is a call throughout the UK for public procurers to support apprenticeships, Glasgow city council—a Labour council—is leading the way with plans to offer 30,000 apprenticeships to young people in the city. That is a tremendous aspiration and we wish those involved luck and support. In England, as my hon. Friend said, we are expanding and improving Train to Gain so that it is more accessible, responsive and flexible for small and medium-sized enterprises. We try to put employers at the heart of skills provision and by 2010-11, the budget for Train to Gain will rise to more than £1 billion. As my hon. Friend could not help noting, subtly but sadly, there is no Train to Gain in Scotland, and its lack is acutely felt by employers and organisations north of the border.

In the current climate, all those needs and challenges are more pressing. During previous downturns, training has too often been one of the first budget lines to be cut. However, evidence shows overwhelmingly that we cannot reserve investment in skills for periods of growth. The research evidence is unequivocal: firms that cut training during downturns are two and a half times more likely to fail than those that do not. Firms that invest are demonstrably more likely to pick up more quickly in subsequent upturns. We must get that crucial message out.

Much of the response to the current economic situation must come from the UK perspective. Businesses across the whole of the UK that do not invest in staff will suffer. The economic downturn is a global problem, not a devolved issue. Above all, that message must come from business itself. Companies invest vastly more in skills and training than the Government do. Last year, we estimate—although it is not easy to count—that employers invested about £38 billion in training their staff. That compares to £5 billion from the Government for adult skills and £5 billion for universities. That is why we wish to make the support for small and medium-sized businesses under Train to Gain available now, so that it is flexible whenever and wherever it is needed.

The reforms tie in with the support for small and medium-sized enterprises that was part of last month’s financial restructuring in the banking sector. UK banks using the recapitalisation scheme have committed to market and maintain competitively-priced lending to small businesses and home owners at 2007 levels for the next three years. My hon. Friend was right to highlight the UK Commission for Employment and Skills, and I wish to associate myself with his commendation of it. As he mentioned, it is led Sir Mike Rake and Chris Humphries and it has already had a positive impact and plays a major part in delivering skills strategy in England. As far as I know, there is no such strategy in Scotland. The strategy brought forward in September 2007 as a response to Lord Leitch’s report was overwhelmingly rejected by the Scottish Parliament. It was brought back to the Parliament the following May and rejected again, leaving Scotland waiting—even now—for a skills strategy in response to the 2006 report.

Meanwhile, the UK commission has produced an important report on simplification. It is a key piece of work with strong ministerial support. It will encourage greater collaboration between employers and between Government and employers on addressing skills needs. That is crucial in raising skills levels at the right place and the right time. It is not something that the Government or any one player will be able to do alone.

My hon. Friend pointed out that the Scottish economy has higher skills levels but lower levels of productivity. That is an interesting phenomenon about which he made some interesting points. The skills utilisation study under way now by the UK commission might be exactly what is needed to shed some light on that matter.

I hope it is clear that the Government share my hon. Friend’s belief that skills are a top priority and are at the forefront of our efforts to ride out the present global challenges, generate long-term economic success and promote opportunity for all. I agree with him that skills are a devolved matter but the challenge is for the whole UK to raise its game and respond appropriately and effectively to current economic conditions. Again, I congratulate my hon. Friend.

Isle of Wight Council

It is a great pleasure to serve under your chairmanship today, Mrs. Anderson. The case that I want to highlight is the Standards Board for England investigation of six councillors on the Isle of Wight, which, so far, has taken more than a year, and there is no end yet in sight.

In September 2007, allegations were referred to the board. It was claimed that a number of island councillors fell below the expected standards. There were no allegations of criminal activity and the complaints related to a planning application made by one of the councillors. I will not go into the substance of the allegations—they are still being investigated—but the process has been unduly lengthy and therefore harrowing for those involved.

The accused councillors are Anne Bishop, Vanessa Churchman, Patrick Joyce, Lora Peacey-Wilcox, Andy Sutton and Brian Mosdell. Sadly, Brian Mosdell died 13 days ago, and I will be attending his funeral tomorrow. The allegations against all six councillors are still outstanding. I do not suggest that the situation caused Brian’s death, but the considerable stress and worry that he suffered as a result of the process, in the eyes of many, may have hastened it. I should like to put on record my absolute conviction that Brian was an honest and honourable man and a good local councillor. My sincere condolences go out to his family and friends. It is an absolute disgrace that the board did not reach a conclusion before his death, even though it knew that he was seriously ill. Everyone involved accepts the need for due process to be followed and understands the need for a thorough investigation. However, I wish that the board really understood how hard and painful the process becomes, rather than merely paying lip service to the idea. For instance, it would help if it kept its promises.

Let me summarise what has happened so far. After the original complaint was made in September 2007, initial investigations took place. In February 2008, it was said that a draft report of the findings should be ready within six weeks. That could have led to a final report being issued in April. The case would then have been completed within the board’s six-month target. That failed to happen. Even at that time, Melanie Carter, the solicitor acting for five of the accused, registered her dismay at the length of time over which the investigation was taking place. On 27 February, some eight months ago, Miss Carter outlined the intolerable burden that the investigation was placing on her clients, pointed out that they had been removed from positions of responsibility in the council, and said that they were subject to politically motivated attacks reported in the local media. She also informed the board that some of her clients were suffering from serious health problems. Another client was trying to deal with the death of her partner, which happened during the investigation.

On 14 March, Tim Bailey, the investigator on the case, advised that a draft report was to be considered in the following week. That did not happen. On 9 April, Miss Carter was told that Mr. Bailey had left the board, that a new investigator was being allocated, and that the latter was

“currently away from the office and”—


“her return date is unknown”.

On 10 April, in response, Miss Carter outlined the real human and health costs of the delay for her clients. She pointed out—quite rightly, in my view—that those issues really ought to be taken into account and that the case should be given priority. It then appeared that the board listened to her plea: on 17 April, the director of casework, Hazel Salisbury, wrote to confirm that the new investigator would

“notify you of the outcome of the investigation within ten working days”.

That promise, of course, was not kept.

On 30 April, Hazel Salisbury gave only an update. She said that the case was receiving “top priority”. It certainly was not. She also said that board aimed to complete even complex cases within six months but, of course, the board had already missed that target. She wrote again on 8 May to say that she hoped to be able to issue draft reports for comment by mid-July. On 26 July, the new investigator, Natalie Birtle, confirmed that that was still on schedule.

On 15 July, Hazel Salisbury seems to have changed her role from casework director to ethical standards officer. She wrote to say that significant new evidence had been received and that she needed “further oral evidence”. Miss Carter pointed out that, at this late stage, the delays were such that they may constitute a breach under article 6 of the European convention on human rights, which assures the right to a fair trial within a reasonable period. Instead, those involved were set to face questions about things that happened long ago. The passage of time leads memories to fade.

It was confirmed that the new evidence did not affect the case against at least some of the accused—the cases against them are different. Miss Carter urged that the cases that were not affected by the new evidence should be brought to a conclusion. On 10 October, some three months later, Hazel Salisbury, who had by this time changed back from being ethical standards officer to director of casework, claimed that she had considered severing the cases “at every stage”. However, she now says that she has recently taken legal advice, and finally concedes that

“if it is possible to conclude any of the investigations earlier then I will do so”.

It is a great pity that she seems not to have looked more thoroughly into that before.

The most worrying aspect is that, in the same letter, she says, yet again, that she has received new telephone calls concerning “further information” relevant to the case. Yet more interviews will be needed. At least one of the councillors has received a letter stating that the investigators will visit the island on 19 or 20 November. That councillor will be away on those days. There was no discussion about fixing a convenient date, and no reason why a further interview was necessary was given. The councillor has not yet received transcripts of the interview that he gave on 1 August. Is that really how a serious investigation should be conducted?

Disgracefully, there is still no time scale—not even a provisional one—for the final conclusion of the case. The behaviour and attitude of the board throughout this case has been reprehensible. The investigation has been subject to wholly unacceptable delays. The board has failed to communicate in a timely fashion with those being investigated and to consider properly severance of the different cases.

There is another basic injustice. The board initially failed to meet its target of six months. The files were therefore open when new evidence materialised 10 and 13 months into the investigation. With the passage of time, it becomes harder for those involved to have accurate recall of conversations, meetings and events that could clear their name. In criminal cases, an accuser must stand in open court and face the person whom they are accusing. It is a basic common law right for the accused to hear in full the evidence against them. The original allegations made to the board were clear and attributable, and names, dates and details were provided. Yet, in accepting the late evidence, in which no criminal activity is alleged, the identity of the accusers is being kept secret by the board. I challenge those who have submitted late evidence and who hide behind anonymity to have the courage to stand up and be counted in public. Without knowing the source of the new material, it is hard not to reach the conclusion that the allegations may be motivated by political purposes, rather than by any desire to reach the truth or to see justice done. Without knowing who is making the accusations, my constituents have no opportunity to question motives or integrity.

The timing of this matter may affect the outcome of the local elections, and the flawed and iniquitous process may fundamentally undermine our democratic rights. The Minister and I understand that the selection of candidates takes place not in the days before an election, but in the preceding months. I am not sure that the ethical standards officers know that.

I turn now to the considerable financial cost. Five councillors applied for indemnity against legal costs, and four of them were granted it subject to their being cleared. In January, East Hampshire district council standards committee was asked to examine the initial evidence to judge whether indemnity should be granted. It made its decision in two weeks. What on earth is taking the board so long?

The legal costs have mounted as the case has progressed. One of the councillors has already paid more than £14,000 in fees and can no longer afford to take proper legal advice. The others owe various amounts, currently up to £8,000 each and still rising. Disgracefully, the tribunal that may eventually hear the case has no power to award costs against the board.

I have supported a complaint that has been made to the parliamentary ombudsman, Ann Abraham. I believe that she will reach the same conclusions that I have about the way in which the case has been handled. However, I felt that it was important to bring the case into the public domain and also to let the Minister know about the very real suffering that it has caused. The chief executive of the Standards Board, Glenys Stacey, wrote to me recently. She says that once these investigations are complete, she intends to

“review our procedure with a view to seeking improvement in the future.”

The Minister may remember the case against the five Islington councillors. All were acquitted after a two-year process. The outcome of that investigation was a review. Has nothing been done? While I accept that it is very important for the board to review this investigation, it is clear that such a review will give little comfort. Councillors Bishop, Churchman, Joyce, Peacey-Wilcox, and Sutton are suffering still, and the situation is painful to the family and friends of Brian Mosdell. All those councillors are decent, honest people who work hard for their local communities. The very worst of which they could be guilty—and I emphasise the worst—is an error of judgment. They do not deserve to have been treated in such a way. The board has now dropped the case against Councillor Mosdell. With Brian dead, the opportunity for him—and for everyone else—to know that his name was cleared has gone, which is very sad and a travesty of justice.

I congratulate the hon. Member for Isle of Wight (Mr. Turner) on securing the debate. I also congratulate him—I say this in a non-patronising way and hope that he accepts it in the spirit in which it is intended—on the tenor and manner of a speech that was made in difficult and emotional circumstances. The hon. Gentleman has conducted himself with a huge amount of dignity, and I congratulate him on his contribution.

I am grateful to have the opportunity to discuss the work of the board and the role that it plays in maintaining high standards of conduct. The debate also gives me the opportunity to address the issue of investigations into alleged misconduct. You will agree with me, Mrs. Anderson, that when councillors need to be investigated, the investigation should be done in a fair, thorough and impartial manner.

I shall make it clear from the outset that I cannot intervene in individual cases. It is right that I should not be able to do so, because that guarantees the impartiality of the conduct regime and the investigation process. In addition, although I am happy to discuss the process of a board investigation in general terms, I will not comment on, make reference to or engage in debate about any specific ongoing investigation. I hope that the hon. Gentleman understands why it would be inappropriate and unwise for me to do so.

Will the hon. Gentleman convey my condolences to the bereaved family of Councillor Brian Mosdell? Moreover, I want to assure him that two very senior members of the board are listening to this debate and that they will have heard his comments. The hon. Gentleman referred to the letter that he received from the chief executive of the board in which she said that the ethical standards officer is committed to completing the investigation and reaching a final conclusion as soon as possible. He also referred to the review. Without prejudice to the investigation, I undertake to take a personal interest in the review to ensure that it is not of the standard to which he alluded—not that I am saying anything about the previous review.

I want to do four things during my speech—promote high standards, address the issue of the conduct regime, consider the role of the board and consider investigations and their time lag, which relates to a specific point made by the hon. Gentleman. Almost a month ago today, on my first outing as a Minister, I discussed the conduct regime. As someone who served on the planning committee of a council for 12 years—I know that the hon. Gentleman was a councillor, too—I can say that the vast majority of people who are elected to serve as councillors observe the highest standards of conduct, as do the officials who support them. Trust in our local authority members is one of the cornerstones of healthy local democracy. Voters expect that the members who have been elected to represent their interests will behave with honesty and integrity. Many men and women devote their time and energy to the service of their communities as local authority members, as stated in the recent White Paper “Communities in control: real people, real power”. We want more people to take on civic roles and stand for office for their local authority, thus ensuring that local authority members are an able, enthusiastic and diverse group and that local representatives reflect the communities which they serve.

In this country, we have high standards of probity, accountability and objectivity, both as natural expectations of those we vote for and enshrined in the conduct regime. However, we cannot ignore the fact that failings occur from time to time and that there have been cases, albeit rare, in which the conduct of local authority members has fallen short of the expectations placed on them. When it occurs, such misconduct damages the community that the local authority members were elected to serve and also damages the wider reputation of local government, thus undermining the public’s trust and confidence in the democratic system as a whole. We should, and do, take allegations of misconduct seriously. That is why we have put in place a robust conduct regime, which is supported by local authorities and the board.

I want to touch on the conduct regime. People expect a conduct regime that is serious, reasonable, robust and fair. The regime has to be fair to the public and to local authority members. It is worth reminding ourselves that the regime was introduced in the Local Government Act 2000 to promote high standards of ethical behaviour by local authority members. It gave a clear ethical framework for local authority members to work within, and clarified for the electorate the standards of behaviour that they can expect from those they vote into office. It gave clarity about what constituted acceptable standards of behaviour; it introduced an independent, robust, efficient, fair and effective means of investigating allegations of misconduct; and it gave a proportionate regime—proportionality is the key word—for dealing with those who had fallen short of those acceptable standards of behaviour.

A revised code of conduct for local authority members was issued last year. The idea was to provide a clear, simple and more proportionate code for members. The code removed barriers to members speaking up for those whom they represent on issues such as planning and licensing, and it has been well received by the local government world. It is that code by which all local authority members must abide. In May this year—I appreciate that the complaint that the hon. Gentleman has discussed was generated in September 2007—the Government fulfilled their White Paper commitment to introduce a more locally-based conduct regime for members and co-opted members of local authorities in England. Devolving responsibility for conduct issues to local authorities provides them with greater ownership of the conduct regime and local conduct issues, and it boosts their role in promoting and maintaining a culture of high standards of behaviour in local authorities. That belief is shared by the local government world.

The Standards Board, which until this point was responsible, as in the current case, for investigating alleged breaches of the code of conduct, assumed its new responsibility as the strategic regulator of local authority standards committees, responsible for monitoring their performance and issuing guidance on the conduct regime. Under the devolved conduct regime, allegations that a member of an authority has failed to comply with the code of conduct are initially assessed by the local authority’s own standards committee. That assessment is in essence a filtering stage. No decision is taken about whether a member has or has not failed to comply with the code of conduct. Any decision on whether there has been a failure to comply with the code—in other words a decision about guilt or innocence—is determined by a hearing of the standards committee after a full investigation of the allegation has been undertaken by the authority’s monitoring officer.

It was the hon. Member for Southport (Dr. Pugh) who secured last month’s debate, which I referred to earlier. During that debate on 7 October, at column 60WH, he made a colourful reference to an incident in a local authority when one councillor threatened to “rip the arm” from another. I hasten to add that neither was a Labour councillor—I will let the hon. Member for Isle of Wight guess to which parties the maker of the threat, and the person on the receiving end, belonged. Thankfully the threat did not turn into action, but I think that we can agree that the cut and thrust of debate should be free of threats of dismemberment, even partial. Simply put, misconduct by local councillors and officials is not acceptable.

To address unreasonable behaviour we have the conduct regime, underpinned by the code of conduct and enforced through standards committees and regulated by the Standards Board. One of the roles of the board is to offer advice and guidance about the conduct regime to local authority standards committees. That is an important part of its work, but it is by no means the limit of its scope. The Standards Board still investigates the most serious allegations of misconduct. That is not to say that local authority monitoring officers lack the will, ability or experience to conduct a fair and thorough investigation into a serious allegation; it is simply that the Standards Board has people who are willing and able to investigate serious allegations of misconduct and who are experienced at doing so. In addition, the Standards Board has powers, should it ever need to use them, to compel witnesses to give evidence.

The Standards Board has investigated more than 4,000 cases since it was established and, while in its new role as a regulator it passes on its knowledge and experience through training courses and guidance, it remains ready to investigate when required. The hon. Gentleman may be interested to hear that at the beginning of October—during my second week in my present job—I was pleased to be invited to give the opening address at the Standards Board’s annual assembly in Birmingham. Speaking with officials of the Standards Board, I was struck by their professionalism and enthusiasm. I believe that those attending the assembly—more than 700 councillors, standards committee members and monitoring officers—found it informative, useful and even enjoyable. That is because as well as holding seminars, plenary sessions and breakout sessions, the Standards Board brought together more than 700 members of the conduct regime community, which provided an ideal opportunity to share knowledge and best practice.

The Standards Board has the challenging target of completing 90 per cent. of its cases within six months. Last year, the board not only met but exceeded that target, completing 96 per cent. of cases on target within six months. My officials meet members of the Standards Board monthly, to discuss, among other things, its performance against its targets. The hon. Gentleman will have heard my commitment to take an active interest in the review that I mentioned earlier. I realise that for those who are the subject of an allegation awaiting the outcome of an investigation can be a stressful time. Performance against targets is, as the hon. Gentleman said, of little comfort to those who fall into the small minority of investigations that take longer than six months.

Investigations can become protracted for a number of reasons. Some cases are complex. There are investigations where an allegation is made against a member about an incident; that is about as simple as it gets and under the devolved conduct regime we would expect such an investigation to be conducted by a local authority’s monitoring officer. However, investigations can involve multiple allegations and counter-allegations involving up to half a dozen councillors. It takes time to be thorough and fair. The availability of witnesses, for instance, may be a problem, especially in large and complex cases. Of course, the Standards Board recognises that a protracted process can be stressful, but haste is not an option.

We must also, consider, unfortunately, that the process of investigation can be protracted by malicious behaviour by the subject or subjects of the allegation, who perhaps have reason to fear the outcome. Findings of guilt can be damaging not just to individuals but to the political parties they are associated with. Delaying tactics, such as not attending scheduled meetings for interview, can push back the conclusion of an investigation, and it is all too easy to understand why a finding of guilt might be better for certain parties after a local election than before it.

The Minister has said that he can understand delay that is favourable; has he thought about delay at the other end, when people interfere and enter late information?

Without talking about specific cases, of course I can. There can be malicious complainants who understand that delay prejudices proceedings against the person complained of. I appreciate that, and so does the Standards Board. My point is that there are sometimes reasons, which we need to understand, for delays, particularly in protracted cases. I was trying to make the point—although I did not do so clearly enough—that although a delay of more than six months occurs in a small number of cases, there are usually reasons for that, albeit that the hon. Gentleman and I would find that delay unacceptable, because we want investigations to be fair, swift and dealt with as soon as possible.

The hon. Gentleman mentioned that an investigation process might be protracted by new evidence coming to light. New evidence arriving and changing the direction of an investigation is not just the stuff of fictional courtroom melodrama; in real life new evidence can complicate matters as well as resolving them. New evidence means further investigation, and thorough further investigation takes time. That is crucial if we are to ensure that the process is fair to all involved.

The outcomes of the investigations have an impact on reputations, careers and lives. They are not undertaken lightly. The Standards Board realises its responsibility; it realises that councillors trade with the public in the currency of trust—a currency as vulnerable to devaluation as any other. We believe that the current system—a locally based conduct regime with local authorities responsible for holding their own members to account, regulated by the Standards Board—is the right approach to underpin a functional, proportionate, effective conduct regime and a healthy local democracy.

I congratulate the hon. Gentleman once again on raising the issue, and on the tenor and manner of the speech in which he did so.

Schools (Stoke-on-Trent)

It is a great pleasure to see you in the Chair, Mrs. Anderson. I applied for this debate amid great sadness, and it is a tragedy that it is necessary—a £250 million tragedy, to be precise.

When I rose in Parliament on 24 November 2005 to ask the then Parliamentary Under-Secretary of State for Education and Skills about the huge investment in education in Stoke-on-Trent, hon. Members on the Government Benches turned in amazement on hearing that so much money was being made available to my city. Looks of jealousy were all around me, but now we are in a sorry state. Stoke-on-Trent council, Serco and, sadly, even the Department for Children, Schools and Families have turned that good news into disaster. Why? Because the council thinks that it knows best and does not trust residents with a genuine say in how Building Schools for the Future funds are used. In that question three long years ago, I asked that the council engage with local people in spending BSF money. Those three years have passed with a lamentable absence of engagement, as I will illustrate in the time available to me.

We had three or more false starts with laughable activity, such as the council issuing draft plans only to withdraw them quickly and pretend that nothing had been issued. In July last year, the city’s Members of Parliament discovered by chance that the council had briefed the local media that it intended to close all 17 high schools in Stoke-on-Trent, as well as—almost as an afterthought—the special schools. I found out about the closure of schools in my constituency during a chance conversation in the Library corridor. At that point, the council said that it would open just 12 new high schools, with a reduced number of co-located special schools. After a speedy intervention, we managed to buy time last summer for the council to engage in proper dialogue not only with city residents but with specialists, educationalists and health professionals—indeed, with all who have a stake in the future of our great city.

Despite that, we had a summer of inactivity. A token event held on 12 October last year was nothing more than a sham. It was to some extent a gathering of interested stakeholders, but it by no means included all of them. Ironically, we witnessed a presentation about the importance of engaging with all stakeholders that gave no opportunity to hear the views of those gathered, let alone those not invited.

I will not detain those present with a blow-by-blow account, but suffice it to say that at every turn, fellow Members of Parliament and I were told one thing while the council did another. We were told that discussions with head teachers would take place at the start of this year, but we then found out that those meetings were held without our input and that head teachers were simply told what was happening to them, with no dialogue taking place. As a result, Stoke-on-Trent, South, which currently has five non-faith schools, will have just two if these hare-brained plans go ahead.

Let us look at what is planned for my constituents. The council, aided and abetted by its henchmen from Serco—I will turn my attention to that lot in a moment— plans to close Edensor, Longton, and Trentham high schools. Blurton high school is to be rebuilt, which is good news. Sandon has been rebuilt and, at my invitation, was formally opened last week by Lord Mandelson. That school is to be extended to take even more pupils. A new school in the constituency of my hon. Friend the Member for Stoke-on-Trent, Central (Mark Fisher) is planned for the Park Hall site. Incredibly, the Park Hall site is currently occupied by the hulking mass of an old gasometer. It is on a busy traffic island and opposite a main bus garage, with buses pulling on to and off a busy main road. So much for safe routes to school.

Pupils from the Meir North or Weston Coyney areas of my constituency will now have a choice. They can travel to Sandon high, which is a good school, but the journey will involve crossing the very busy A50, which has an average of one serious accident every week just in the stretch that runs through my constituency. Or they can journey some miles to the Park Hall site, with all the problems that I have mentioned. Why? Because local Longton high, which head teacher Jan Webber has successfully brought out of special measures to be a nationally recognised specialist arts college, is reckoned to be surplus to requirements.

Pupils from Sandford Hill and Meir Hay will have to travel along the narrow, congested, dangerous Anchor road, which has a narrow pavement on one side and no pavement at all on the other to the aforementioned Park Hall site. Alternatively, they can travel through Longton town centre, avoiding all the traffic, cross the A50 as I have mentioned and go down into Blurton to their new school. Pupils in Trentham or Hanford will have to travel along Longton road, over the west coast main line railway track, over a canal and on to the bottom of the Trentham Lakes industrial park. There, no doubt, they will have to compete with the lorries that use Sir Stanley Matthews way to access the major distribution warehouses on that site.

Those listening to this debate may be wondering by now how the council chose the sites. That is a good question, especially considering that Serco and the council did not even bother to visit at least half the schools before announcing their plans. The next thought might be, “Why reduce five non-faith schools in Stoke-on-Trent, South to just two?” The council has projected that the city will have about 12,000 pupils by 2014. That is an easy equation—12,000 pupils divided by, let us say, 1,000 is 12 schools—but it is supposed to be a plan for our children’s future, not a primary school maths lesson.

Let me unpick those figures a little. According to the BSF guidance for pupil place planning, the council should be using the number of pupils forecast for 10 years in the future, so we should be looking at the number of one-year-olds in the city, as they will be the pupils entering high school at age 11. According to Stoke-on-Trent primary care trust, there were 3,181 one-year-olds in the city last year, and in the first nine months of 2008, 2,852 babies were delivered. That suggests about 3,000 children each year or, for a five-year high school, 15,000 children aged 11 to 16.

According to the House of Commons Library, Office for National Statistics figures show that this year there are around 14,100 under-fives in the city. It is projected that by 2018—that, not 2014, is 10 years’ time—that may have fallen to 13,000, so between 13,000 and 15,000 children in Stoke-on-Trent will need a high school place in 10 years’ time. But the council is looking at 2014, which is not in 10 years’ time, and it has not taken account of the increased birth rate in Stoke-on-Trent, which even it admits has risen noticeably.

The BSF funding guidance for pupil planning goes on to say that where rolls will have fallen at the 10-year projection point but a BSF school opens in advance of that, BSF will fund the extra places up to 5 per cent. Even if we take the lowest figure of 13,000 and add 5 per cent., that still gives us 13,650 pupils compared with current pupil numbers of about 15,000. The council in its gross simplicity said, “Okay, let’s call it 13 schools,” without any rational thought. We should have places for at least 13,650 pupils, or more likely 15,000, based on current birth rates.

Let us turn our attention to the other part of the Mickey Mouse equation, the 1,000-pupil schools. Where does that magic number come from? Put bluntly, the figure was come up with simply to maximise the funds available to individual schools, without any regard for the effect on pupil well-being and the challenges faced by my city. It also ignores collaborative working, which even the council, with its travel to learn partnerships, suggests that it wants to engage in. A pupil in an intake of 250 can never be an individual, but must be an element of a teeming mass. So much for Every Child Matters. Again, the council has ignored Government guidance that local authorities should use local needs when modelling projects.

All the way along, Serco and the council have said that the programme is not about buildings but about improving education, but all their attention so far has been on buildings. All that we have heard from them is closure, closure, closure. To look more closely at Serco, the company says on its website that it designs innovative solutions. Really? Serco told parents of pupils at Longton high that to get children to activities outside the normal school day, it would provide taxis or buses. Well, that is innovative.

Serco states that

“our vision is to deliver shared success by understanding the needs and challenges faced by every school, teacher, learner and parent.”

So why has it run a programme of misinformation, division and information control? Why has it failed singularly to engage with schools, parents or teachers in any other way than by taking an arrogant “We know what’s best for you” approach? Perhaps it is because Serco also runs everything from the Atomic Weapons Establishment to the Woolwich ferry.

Serco’s website also says that if

“you haven’t heard of Serco”

in the context of BSF, it might be

“because we just get on and do it”.

Those of us in Stoke-on-Trent, South know that that is true—Serco just gets on and does it—because it certainly has not listened to the needs and wishes of local people.

There is no dispute that we in Stoke-on-Trent, South, like the rest of the city, need to improve how our young people are educated—no one has ever disputed that—but let us not pretend that it is a complete disaster at the moment. Longton high used to be a failing school, but instead of being helped, it has been cut down at every opportunity. It has been said that the Department’s role, through the national challenge programme, is to support the efforts of schools that are improving from a low starting point. Who said that? It was my right hon. Friend the Secretary of State for Children, Schools and Families.

Jan Webber and her team at Longton high have done a fabulous job of improving the school, despite the death sentence that has hung over it for the past three years or so. Longton high had a proud history, but council bully boys have seen an end to that.

Trentham high school is the second-best performing school in Stoke-on-Trent and the best performing non-faith school. The head teacher, Sue Chesterton, was brought in by the local authority to bring the school out of special measures. The results that she has achieved speak volumes about how effectively she has done that. But how are she, her team and her pupils rewarded? Well, the school serving the Trentham and Hanford communities is to close. How pathetic.

Because of schools such as Trentham high and Longton high, Stoke-on-Trent is now in the top 20 most improved school authorities. My right hon. Friend the Minister will know that there have already been demonstrations, a walk to Westminster and numerous fundraising activities to fight the madcap ideas that I have described. In his letter dated 20 October, the Minister asked me whether I will now support Stoke-on-Trent authority with its plans for reshaping their schools under BSF. I must say to my right hon. Friend that the answer is no. Those are not the authority’s schools; they are the parents’ and pupils’ schools; they are future generations’ schools; and I will only support plans that are in the best interests of current and future generations, not plans that serve the convenience of Serco or council officers.

I facilitated an alternative proposal for Stoke-on-Trent schools. It involved a plan drawn up by teachers and parents based on educational needs rather than mathematical simplicity. I did what Serco and the council should have done, but in their ignorance failed to do. I am not an education expert, but as a local MP my role is to pick up the pieces when people are let down by those who are paid to serve them. That alternative proposal could have formed the basis of a more sensible plan to improve education in my city, but it was dismissed out of hand. I then had copious meetings to find compromises to find a way through our difficulties, but of course Serco and the council were never interested in anything other than their supposedly innovative bulldozing schools for the future plan.

Indeed, I have a copy of a glossy booklet produced by the city council, which is called “Our Vision for a Learning City”. It is fascinating reading. In the introduction, it says:

“This is not a short-term vision.”

Well, I agree with that. Instead, it says that it is a vision that has been

“developed by councillors and officers within the local authority who … have been working over the past five years with a wide range of stakeholders”.

I do not know whether the Trade Descriptions Act applies to a document such as this, but if it does then the document will be kicked out.

The council’s “vision” goes on to outline key principles. It says:

“Our aim is to create a family of schools.”

It talks about “‘travel to learn partnership’” and also, amazingly, about:

“Placing the school at the heart of the community”.

If that were true—sadly, it is not—why not have a ranger of smaller schools, or a school that is spread over several sites?

My hon. Friend has referred to the Park Hall site, which is in no community whatsoever. It is a gasometer site poised between his constituency and mine, and it has no population around it whatsoever. It is the antithesis of a community school. My hon. Friend’s critique of the local authority and Serco has been so devastating that anyone listening to it might feel that it was overstated. I would just like to put on record that I share every single one of his reservations and criticisms. He has put a very intelligent and comprehensive case. The plans, as they are at the moment, will damage both communities and education in his constituency and in mine in a devastating way.

I am most grateful to my hon. Friend for those words.

Moving on through the so-called document—I can think of better uses for it—it states that

“the transfer to new schools and academies will be carefully planned and properly managed. We will work closely with school staff and their unions”.

So far, I have seen no evidence whatsoever of that happening. In fact, I have seen quite the opposite; I have seen places such as Longton high being abandoned just to get on with things.

The document goes on to talk about

“Ensuring that young people’s access to learning is not limited by the length of a school day or access to facilities”.

That is a further joke in this supposedly serious document. It continues:

“The new schools and academies will be located on sites to serve communities throughout the city with safe and accessible routes and at reasonable travel distances.”

Quite how the Park Hall site or the site at the bottom of an industrial location can be considered to be “safe and accessible” beggars belief.

The document continues on the subject of parent choice, talking about

“increasing diversity of provision to meet parental choice”.

What parental choice? How can there be parental choice when a popular, well-performing school, one of the best schools in the city, is closing and one of the most improved schools in the city is closing? I fail to see how parental choice comes into that context.

The Trentham parents action group is now pursuing the excellent idea of forming Trentham high school into a co-operative school. After all:

“Engaging parents is, of course, important - and it was this government which helped set up the first parent-promoted school last year and will now fund 100 co-operative trust schools.”

Those are not my words; they are the words of my right hon. Friend the Minister in his article in The Times Educational Supplement on 24 October.

I say to my hon. Friend the Minister that the time for warm words is over and that the game of ping-pong is over. No longer can the council say that its hands are tied as the Government are dictating the number of schools, and no longer can the Minister say that the matter is all in the hands of the local authority. We now have a newly appointed, very excellent and capable acting chief executive officer at the council, who I hope will see the sense in our proposals.

In conclusion, I would like to ask my hon. Friend the Minister a question. If the council proposes allowing Trentham to become a co-operative, parent-promoted school, will he allow them to do so? Furthermore, if proposals come forward for a school to serve Longton, Meir North and Weston Coyney, will he allow that too? A simple yes will suffice.

I thank my hon. Friend the Member for Stoke-on-Trent, South (Mr. Flello) for raising this important debate. It is particularly important for his own constituents and those of my hon. Friend the Member for Stoke-on-Trent, Central (Mark Fisher). I know that they have both been involved in this issue, particularly my hon. Friend the Member for Stoke-on-Trent, South, and in a series of discussions that we have had. We have met on a number of occasions, including with the Stoke MPs as a whole. I have always been grateful for his ideas and those of the other Stoke MPs, and I can assure him that they have never been dismissed out of hand. From the tenor of what he has just said, he accepts that we need to get on with realising the benefits of this substantial investment in education in the city.

Nothing could be more important than making sure that every child in every area is able to go to a good school. The landscape of our communities is dramatically changing, with regeneration seeing a transformation in public buildings, services and homes. New health centres are springing up, as are Sure Start children’s centres, libraries and schools.

Schools are at the heart of their communities and they are intrinsic to this process of change. It is right that they are at the heart of their communities, because children and young people should be the focus of our communities and at the centre of everything that we do. Building Schools for the Future is the biggest Government investment in school buildings in five decades.

In September, tens of thousands of pupils started term in new buildings or new schools, with the highest number of new or refurbished schools for at least 30 years; more than 20 of those schools across the country were BSF schools. After decades of under-investment in school buildings, we are saying to children, “Your learning environment matters, your communities matter and your future is worth investing in”. We must achieve that investment in a consistent way for every child.

In Stoke currently, education provision is not consistent; some schools are working well and improving in their pupil attainment, but others are not. Seven schools in Stoke-on-Trent are currently achieving below the 30 per cent. threshold for GCSE pupils gaining five higher level grades, including in English and maths, or are in danger of falling below that threshold.

I will come back to the issue of pupil projection in a moment. However, falling pupil numbers, which result in surplus places in schools across the city, is preventing schools from making the best use of their resources, from providing a consistent standard of education across the city and ultimately from driving up standards and pupil attainment.

Real change for children and their families sometimes involves radical decisions by local authorities. We cannot shy away from those decisions. Last month, I visited James Brindley high school in the north of Stoke-on- Trent and I saw a school where the standard of accommodation—the quality of the buildings—was frankly not good enough for the generation of pupils that is currently there, let alone for future generations. That visit convinced me of the urgency of getting on with things in the city. I suspended the BSF project there some time ago, to try to see whether or not further discussion and consultation locally would help to achieve a consensus. However, I am convinced now that we need to get on with things.

The council has made a number of proposals: reducing the number of secondary schools from 17 to 13, as we have heard; opening five new academies, and new buildings funded by BSF will make schools more accessible to children and their families. None the less, I understand that there are geographical constraints in the city, which makes achieving that accessibility more difficult in some areas than in others, and the council will need to address those constraints. There will be greater strategic direction and leadership through the academies model, and real local commitment to the children of Stoke will be demonstrated.

I am pleased to say, although I know that it will not be universally celebrated, that yesterday I approved the Stoke-on-Trent “Strategy for Change” part 1 document, which outlines the local authority’s aspirations for change, and I look forward to the sequel, part 2. I am keenly aware that the decision to close schools is a difficult one that is unpopular in parts of the city and certainly with my hon. Friends. That is particularly acute in relation to Trentham high, where results have risen in the past two years. I congratulate teachers, pupils and the head teacher, Sue Chesterton, in particular, on progress there. However, the local authority faces a significant challenge with the fall of pupil numbers in the south of the city. In common with its clear legal duties, it has taken the decision to reduce the number of schools in order to rationalise places.

My hon. Friend the Member for Stoke-on-Trent, South talked about pupil number projections. In January 2008, there were 13,113 pupils aged 11 to 16 in Stoke-on-Trent’s mainstream secondary schools, which have a net capacity of more than 15,500. The mainstream secondary school population in Stoke-on-Trent is projected to decline, over the next 10 years, to 11,790 at its lowest point, in 2013-14, and rise to 14,642 by January 2019.

I suspect that those figures are a little disingenuous given that huge volumes of pupils are leaving the city—indeed, they have been encouraged to leave—because of the council’s appalling behaviour in recent years. A school on the outskirts of Stoke-on-Trent currently has only about 50 per cent. of its pupils from Stoke-on-Trent. The figures that my hon. Friend has quoted relate to the number of pupils currently in the city’s schools, and are based on the assumption that the flow out of the city will continue.

I am certainly aware that there is a migration to neighbouring authorities. However, our delivery body, Partnerships for Schools, has confirmed that the methodology being used is sound and in line with national best practice. The council has taken into account, among other factors, live birth data from the local primary care trust, and the migration of pupils to secondary schools in neighbouring authorities. The PCT’s figures are cumulatively greater than those from the Office for National Statistics, which my hon. Friend quoted. Such differences are quite normal and are generally acknowledged by the ONS as being due to local knowledge. The figures are more up to date. I have had to consider this issue, and we have had discussions about the council’s earlier ideas, so we have challenged some of the projections, but I am now convinced that the projections are right. They have therefore informed the decisions on school organisation that the council has had to make.

If I heard correctly, my hon. Friend just said that the PCT’s figures are more accurate because they are more up to date. According to those figures, we should expect there to be about 15,000 11 to 16-year-olds at the 10-year projection point, which is the point for BSF. Is he saying that the funding going to schools in the area outside Stoke-on-Trent will be increased because they are getting pupils who should be being educated in Stoke-on-Trent? He is obviously acknowledging that 15,000 young people will require schooling in 10 years’ time, at the age of 11.

I am saying that the methodology, based on national best practice and in line with that practice, says that the high point will be in just more than 10 years’ time, when there will be 14,642 pupils across the city. That is the high point on which the planning has had to be based.

The local authority feels that the new site at Blurton school, because it is more centrally placed, will allow more pupils in the south of the city to benefit from high-quality educational provision. Statutory responsibility for school planning rightly lies with local authorities. It would not be right for us to impose central solutions to local problems. My job as a Minister is not to judge school organisation matters. Under the Education and Inspections Act 2006, that is a matter exclusively for the council. My responsibility, as the Minister for Schools and Learners, is to ensure that the huge investment in Stoke’s schools that my hon. Friend talked about at the beginning of his speech will raise standards, particularly where they are patchy, as they are in the city. I am satisfied that the plans pass that test.

BSF’s success will be measured not in bricks and mortar, but in community improvement, pupil achievement and brighter prospects for all. Clearly, the nature of the public debate in the city on BSF means that there is a lot to be done on community cohesion and bringing people together when decisions have been made. As the report of the Select Committee on Education and Skills on BSF said, we must make sure that its impact is sustainable and that it continues to inspire long after the smell of fresh paint has faded.

BSF is not a facelift to make schools look 10 years younger. It has to be a permanent solution to make them last for decades. For the pupils of Stoke-on-Trent, great buildings, strong leadership and renewed direction will bring an impact that I am confident will last long into their futures and will build a strong platform for success now and for generations to come. I know that it has been difficult locally to get to this point, but, as I have previously discussed with hon. Friends, now that it has been necessary to make the decisions, I hope that we can urge local people in the city and their representatives to move forward and get behind the plans, rather than continue to oppose them and create that sort of division.

Will my hon. Friend take up the opportunity offered by last week’s referendum, in which the elected mayor, who has pushed through the plans, was hugely rejected? The plans, which are very much the mayor’s creation, have been rejected by parents at almost every school in the city—in my constituency and in those of my hon. Friends the Members for Stoke-on-Trent, South and for Stoke-on-Trent, North (Joan Walley). Now, the mayor who pushed the plans forward has been rejected by the general population. Is not this a moment to spend a little more time considering the plans and to see whether a plan that has the support of parents, teachers and governors can be shaped? That would not require a great deal of alteration, but it would be a constructive move and would be widely welcomed across the city.

I have noted the decision in the referendum on the principle of whether to proceed with the mayor. People who have more local knowledge will judge whether that was a referendum on the personal performance of the mayor who was in post or an answer to the question of whether to proceed with the principle of having a mayor. As I have said, decisions about school organisation, such as which schools should be where and what capacity they should be, are, by law, decisions for local authorities. It is not inconceivable that the local authority will, given the referendum result, listen to what my hon. Friend says.

I should like to underscore my impatience that we should proceed. I would not want anyone listening to the debate to take any comfort from any of my remarks in feeling that I want any more delay. I was struck by my visit to the north of the city, and if I have an opportunity to visit the south, I shall do so. I have a responsibility to all the pupils in the city to allow them to gain from the investment and for it to go ahead. As long as the council is coming forward with plans that improve school standards, I will approve them and allow the city to move on. I hope that everyone understands that and accepts my impatience for the children of the city.

Question put and agreed to.

Adjourned accordingly at one minute to Two o’clock.