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Commons Chamber

Volume 491: debated on Tuesday 28 April 2009

House of Commons

Tuesday 28 April 2009

The House met at half-past Two o’clock

Prayers

[Mr. Speaker in the Chair]

Oral Answers to Questions

Treasury

The Chancellor of the Exchequer was asked—

Credit Unions

The Government strongly support credit unions and have announced in the Budget an extra £18.75 million for the growth fund, bringing the total to almost £100 million. The extra funding will allow further assistance through accessible, affordable loans to be made by credit unions and community development financial institutions in addition to the 160,000 loans made so far.

The Minister will be aware that I have written to him about my local credit union, Wearside First, which helps thousands of people across Sunderland to save and to access affordable loans. Those people would otherwise, unfortunately, have to use illegal loan sharks, and we all know the road that that would take them down. However, that wonderful credit union is facing closure due to a lack of funding. Will the Minister agree to meet me and representatives of Wearside First to discuss the situation?

As my hon. Friend knows, Wearside First is one of the credit unions that is participating in the growth fund, and it has been doing good work. I would be very happy to meet her and a delegation from the credit union to discuss the issues that it faces. Obviously, she will also want to discuss the matter with her local authority—perhaps she has done so already—but I would be very happy to have a conversation with her about this issue.

If the Government are serious about helping the poor, why are Ministers allowing some credit unions to charge up to 27 per cent. interest? That is far higher than the rate charged by many leading retail banks. Given the large taxpayer subsidy to which the Minister has just referred, are the Government not complicit in making the poorest in our society suffer?

No; I do not accept that. The Government strongly support the credit union movement across Great Britain. There are 532 credit unions, which have two thirds of a million members and somewhere in the region of £500 million-worth of assets. I would have thought that the hon. Gentleman would welcome the extra resources that the Budget has provided to make additional loans available to vulnerable people at very affordable prices. By 2011, an additional 85,000 people will be able to be helped as a result of the actions announced in the Budget last week. That is good news for people who need affordable credit; the credit unions play a tremendously important role in keeping such people away from doorstep lenders and loan sharks. Credit unions should be supported, and that is what the Government are doing.

The extra financial help from the growth fund is extremely welcome and will be of great assistance to many credit unions, but they sometimes need help that does not have a price tag. In some instances, they simply need a place in which to deliver their services in the community. Through the ministerial work that my hon. Friend does with other Departments, will he look into the possibility of using Government buildings such as Jobcentre Plus and Sure Start centres to give credit unions more places where they can deliver their services in the communities in which those services are now greatly needed?

My hon. Friend makes a good point. The Government are very interested in examining how we can extend the coverage of credit unions throughout Great Britain—they are already very strong in Northern Ireland, as he is well aware—and considering whether certain premises could be made available. We are also looking into other routes that would ensure the necessary coverage of credit unions in all the most vulnerable neighbourhoods across Great Britain. We will indeed look at the inter-ministerial level at what more can be done.

My constituent, Tony Massarella from Otley, is an accountant to many credit unions, and is something of an expert on their structure. Along with many credit unions, he is concerned that the Government’s approach favours the very large credit unions, when surely the point is to keep them close to the very communities that the Minister says they should serve. Will the Minister assure me and Mr. Massarella that the Government do not believe in a “biggest is best” approach to credit unions?

As a Government, we want to see a range of credit unions and, in recent years, we have worked very closely with the credit union movement. The hon. Gentleman will probably be aware of the legislative reform order that we have consulted on, which we hope to launch before the summer. He might also be aware of the Co-operative and Community Benefit Societies and Credit Unions Bill introduced by my right hon. Friend the Member for Croydon, North (Malcolm Wicks), which we discussed in Parliament last Friday. It provides for further changes to support the modernisation of the credit union movement. However, that should not be taken to mean that we want to see overwhelmingly big credit unions. We want to see a range of credit unions performing a range of functions that will benefit people in local communities and local organisations.

I know that my hon. Friend will want to join me in congratulating the Livingston credit union, which is opening a new office in Livingston on Friday. Does he share my concern, however, that the Scottish National party Government have abolished the £3.5 million ring-fenced funding that was set up to establish and develop credit unions in Scotland?

I certainly welcome the opening of Livingston credit union’s new office. Credit unions are as important in Scotland as they are in the rest of the United Kingdom. Obviously it is a matter for the Scottish Administration where they put their resources, but I would like to think that they would want to support the credit union movement, just as we have done through last week’s Budget.

Government Infrastructure Investment

2. Pursuant to the written ministerial statement of 3 March 2009, Official Report, columns 47-8WS, on Government infrastructure investment, what assessment he has made of the implications of Government policy for the private finance initiative funding provided for the extension to the waste contract let by East Sussex county council and Brighton and Hove council. (271127)

There are no such implications. The announcement made on 3 March is targeted at PFI projects that have not yet reached financial close. This particular project reached financial close in 2003.

I thank the Minister for that, but is she aware that the European Commission has indicated that it is minded to uphold my complaint against East Sussex county council for failing to follow public procurement rules in respect of a contract extension that has recently been undertaken, for which PFI funds have been made available? Can she assure the House that East Sussex county council sought specific approval from the Treasury before entering into the contract extension in order to confirm that the terms of the original PFI award were not breached and that all obligations in respect of public procurement have been properly discharged?

My understanding is that, as the extension required no further PFI credits or further money from Her Majesty’s Treasury, those decisions were a matter for the local authorities concerned.

I am usually happy to call the hon. Gentleman, but Brighton and Hove is a good train journey to the south of Luton, is it not?

Lending to Business

The Bank of England published a new report on lending just last week. It suggests that some lenders expect the overall availability of credit to the corporate sector to improve over the coming months.

We also have the impression locally that the position is improving somewhat, but does the Chancellor agree that public support for the rescue of the banks is very much conditional on the banks’ willingness to support the rest of the economy? Will he be doing all he can to ensure that our colleagues in the newly nationalised banks are aware of that public feeling?

I agree with my hon. Friend; the reason why we decided to intervene to restructure and rebuild the banking sector was the need to ensure that credit keeps flowing—that is vital for business. RBS will lend an additional £25 billion this year and next, the Lloyds group an additional £14 billion this year and next, and the figure for Northern Rock will be about £5 billion, which mainly relates to mortgages. Even the banks in which we do not have a stake have benefited from the support that we have given: HSBC has said that it will lend another £15 billion, while Barclays will lend another £11 billion this year. That money will be made available—although obviously it is important that we do everything that we can to ensure that credit keeps flowing—and will complement the measures that I announced in the Budget last week that are specifically designed to help businesses.

Why is the Chancellor proposing to sell the good parts of Northern Rock this year when under current market conditions that would almost certainly guarantee a very large loss, rather than wait for market conditions to improve and get better value for money for the taxpayer?

I assume that the hon. Gentleman is referring to the reports that I have seen in the newspapers over the past few days. I have always been clear that my objective, once we get through this, is to return those banks to the private sector, because I do not believe that the Government ought to be in the business of running banks in the long term—I think that he agrees with that view. The question is when we should sell those banks back to the private sector. The answer will be determined by what represents the best value for money for the taxpayer, so I am in no hurry to do so. It is far better that we ensure that when we sell we are satisfied that what we are getting represents the best possible deal. I can tell the hon. Gentleman that it is not something that I would rush into; I want to ensure that we get a good price for the assets that we have.

The chemical process industry in my constituency makes the point that although excellent investment is available for research, very little investment is available for projects that are being made ready for market. What are the Government doing about that?

I agree with my hon. Friend that it is important that we support research. She will know that through the research and development tax credits we have done a great deal in this country, particularly in those areas that are very dependent on research. She is also right to say that we need to ensure that, having got the research worked up, we can then convert it into something that is ready to go into the market. That is why, for example, we have put more money into the Technology Strategy Board, which helps to develop such products. We have also made sure that there is a range of measures available to help with funding. My hon. Friend is right to identify the problem, which is shared by many countries. It is right to try to address it in every possible way, because we are very good at inventing and innovating in this country. The key is to convert that into products that can be sold in the marketplace.

Does the Chancellor agree that the objective of the announced programme of quantitative easing is to increase and facilitate lending by banks to businesses? The Bank of England has warned against another fiscal stimulus, so why is it proceeding with QE in such a half-hearted manner that it has actually raised the yields on gilts? It was also very slow to lower interest rates on the eve of the crisis. Would not Montagu Norman be proud of them?

I will leave that discussion for another day. The Bank of England has authority to put money into the economy to kick-start credit, and it has agreed to spend £75 billion. Part of that will involve buying commercial paper to help ease lending conditions between companies, but it takes time to build up that activity. The Bank has operational independence for doing that; although, obviously, I had to authorise the operations in the first place, the Bank decides when and where to intervene. I know that the Governor is very aware of the fact that, as part of the process of putting money into the economy and getting credit going, he must ensure that he helps the commercial sector. I know that he is looking at various measures to help him to do that, and he set all that out when he last appeared before the Treasury Committee.

Does my right hon. Friend agree that the flow of bank lending to smaller companies would be considerably improved if banks would stop imposing impossible conditions? I refer specifically to those banks that want personal guarantees from owners and directors who are applying under loan guarantee schemes that will be met in default by Government. Is it not wrong that when the Government are doing all that they can to improve the flow of money to small businesses, banks are impeding that flow by making the loans conditional on personal guarantees?

My hon. Friend is right: the Government are doing a great deal to help to increase the amount of money available to small businesses, and over the past few months some 2,000 businesses have been offered some £240 million of additional lending. Other measures are in place. Banks need to be reasonable with their customers and balance the need to ensure that they do not repeat the mistakes made over the past few years—when credit was given with too few questions asked and not enough security—with avoiding the situation in which conditions are so restrictive that the schemes do not actually work. A degree of common sense is required. It is important that we do everything that we can to get credit going, because it is an essential precondition to recovery, and that is why we decided to intervene to support the banking sector.

Although the base rate is only 0.5 per cent., the real cost of borrowing for business is much higher. The banks put that down to a combination of the LIBOR rate, the requirement to strengthen balance sheets and, to some extent, the cost of the various Government insurance guarantee and asset protection schemes. Given that the cost of the latter is within the Government’s control, is the Chancellor prepared to look again at the pricing policy for the insurance guarantee and protection schemes to determine whether a change might bring down the cost of money to the banks and therefore lower the cost of borrowing for business?

The hon. Gentleman raises an important point. The Government have put in place substantial schemes to deal with the problems of assets for which there is no market, or where prices have fallen, that were restricting the ability of the banks to lend. The Government have also made available funds through the special liquidity scheme and other measures. However, we have to make a charge for doing that, and we must also ensure that there is some discount, so that it is not just seen as a free good. The obvious other side is the need to ensure value for the taxpayer.

I think that one reason why the IMF withdrew its initial calculations when it tried to calculate our potential liabilities was that it had not quite realised that we had made provision against debts or provisions that might go bad. I have always made it clear that there is a fee to be charged and a price to be paid, because the banks cannot expect to receive this as a free good. Obviously, I will keep all these things under review, because my primary objective is to ensure that we get credit flowing through the economy again, and the banking system is essential to that. I appreciate the hon. Gentleman’s general point about what businesses pay. We will do everything we can to try to keep that price as low as possible, but I have to have regard to the general security of the taxpayer’s position.

I welcome the progress made on new lending, but is my right hon. Friend aware that some banks, including those of the Lloyds group in my constituency, are taking a punitive approach towards some existing loans? That has included telling one local business that it should mothball a housing development. Will my right hon. Friend say how the Treasury will use its leverage with the banks with which it has holdings to ensure that they do not take such a punitive approach towards existing borrowers and that they continue with the loan arrangements that have already been made?

As I think that I have said on a number of occasions, we cannot second-guess the judgment of every bank manager on every customer. However, we say to the banks that we have made substantial support available and that we want to see that support translated into support for businesses. I would be very happy to look at the case that my hon. Friend raises—obviously, I have no knowledge of it, so I cannot possibly comment on it. It is important, as I said to my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) earlier, that we should ensure that there are funds available but that there has to be a degree of judgment in each individual case about whether the loan is a good prospect and about whether it can be repaid. We do not want to get into the very problems that brought about this situation in the first place, where loans were given without enough questions being asked and with disastrous consequences for the banks and for the wider economy here and across the world.

The Chancellor is being complacent about the flow of credit into the economy. The enterprise finance guarantee scheme is under fire from businesses up and down the country. The working capital scheme started a month late, with only RBS signed up to it. In the Budget, after months of pressure, the Chancellor finally announced the trade credit insurance top-up scheme. Did the British Retail Consortium not sum up the Government’s attempt to get credit flowing again when it said that the trade credit insurance scheme was “too little too late”? While the Government have dithered, the help that they have offered has come too late for many businesses and their employees.

I would say that the support that we have made available to the banking system is fully justified. It was necessary—as I said, it is a necessary precondition of recovery. We have also put in place a number of measures: the hon. Gentleman mentioned the enterprise finance guarantee scheme, which is helping 2,000 businesses. We now have support for exporters and other measures of support, too.

I hope that when the hon. Gentleman spoke to the BRC he pointed out what would have happened had he had his way, as he was against every single one of the measures. I am always interested to hear his concern about what we are doing, but he ought at least to stand up and say, “By the way, I would not have done any of these things”, as his Leader of the Opposition made clear at the weekend.

Government Shareholdings

4. How much financial obligation the Government have undertaken as a consequence of taking shareholdings in banks and building societies. (271129)

The Government have to date invested £37 billion in Lloyds and RBS. The Budget estimated that the one-off long-run fiscal impact of all the interventions to ensure stability in the financial system will be between 1.5 and 3.5 per cent. of gross domestic product.

If the Prime Minister can express anger that the Royal Bank of Scotland should make an acquisition without fully understanding the extent of the commitments that it was taking on, how much more angry should we be that the Government have taken on commitments and made investments in banks without knowing, even now, the full extent on the taxpayer’s behalf?

I am not quite sure what the hon. Gentleman is saying. The implication is that we should not have stepped in to save the financial system from collapse because of the uncertainty to which he refers. The cost of doing nothing would have been far, far greater. We took decisive action. We acted quickly and we saved the system from collapse; indeed, in the debate yesterday, the shadow Business Secretary recognised that those steps were right.

One of the many damaging aspects of the greed and recklessness of the bankers is that markets do not know the extent of the losses that they made in deals. In cases where the British taxpayer now has a stake in banks, are we getting to the bottom of those losses so that we can start to restore confidence in markets?

Yes, we are. A great deal of detailed work is going on at the moment to negotiate the specific terms for participation in the asset protection scheme. My hon. Friend is right; in particular, the future valuation of assets is very difficult, but I know that he will agree that the cost of not acting would have been far greater than what we have done.

Is there any limit to the amount of financial risk and debt that the Government should assume? Can the right hon. Gentleman tell us if they are using any prudential rule at all to stop us heading towards national bankruptcy?

The right hon. Gentleman will have seen what my right hon. Friend the Chancellor said in the Budget about returning the public finances to balance by 2017. He will also have seen the estimate I have mentioned already that the overall cost of all the interventions we have set out in the Budget will be between 1.5 and 3.5 per cent. of gross domestic product. It was absolutely vital that we took those measures.

A moment or two ago, our right hon. Friend the Chancellor confirmed the Government’s intent to return state-owned banks to the private sector as soon as it was expedient so to do. Does my right hon. Friend the Minister agree that the problems of organisations such as Northern Rock and Bradford & Bingley started with demutualisation back in the ’80s, and would it not be a good idea, rather than just floating those two organisations back into the private sector without wider consideration, to consider remutualisation of at least part of their business, as at the moment that model has greater attraction and confidence among the wider community than does traditional banking?

That must be a matter for the management and shareholders of those organisations. [Interruption.] I would say to my hon. Friend that we certainly need to learn lessons in regulation from what went wrong in the past, and Lord Turner’s report has been valuable in that regard. We need to make some changes, and we need to agree them internationally, to avoid repeats of those mistakes. In particular, we need to avoid the calls of those who, over many years, wanted minimal regulation of the financial sector.

Although I appreciate that the Treasury is reluctant to commit to any timetable about divesting its interest in the banks, how will we all know when the financial system has been fixed?

What we are looking for is a restoration of the flow of credit, in particular to mortgage borrowers and to businesses. We are some way from that position yet, but as my right hon. Friend the Chancellor mentioned, the Bank of England is now publishing a monthly report on trends in lending. We shall be scrutinising those reports carefully, as I am sure will the hon. Gentleman. We want to see the flow of credit go back to normal.

Fiscal Framework

The pre-Budget report set out the Government’s approach to the fiscal framework as a result of the recession and the global credit crunch. That approach has continued as part of the Budget.

Given that the Government’s fiscal framework has been shown to be pure fantasy, why should we have confidence in any fiscal framework that the right hon. Lady wants to put in place for the future? Will she adopt our policy for an office of Budget responsibility?

If that is the hon. Gentleman’s only proposal—to create a quango—I do not think that it will create a proper approach to the fiscal framework. We all know that the global credit crunch and the worldwide recession are affecting the public finances, and they are affecting revenues from the City and from other sectors, too, but the right thing to do is to support the economy through the downturn, to invest so that we can bring borrowing back down because the economy is growing, which will obviously save us more in the long run.

My right hon. Friend has wisely relaxed the rule on public borrowing—[Interruption.] Necessarily so. Would it not now be sensible to abandon entirely any future private finance initiatives, given that they were apparently justified on the basis of restraining public borrowing? Would that not be a sensible time to start to bring PFI services back in-house and to look at ways to bring all PFI schemes back into the public sector, which would save billions of pounds for the public purse over the next 30 years?

The PFI schemes that were introduced have improved timeliness and cost-effectiveness in many cases. There is still interest in putting private sector equity into such projects, but there are difficulties with private sector debt due to the condition of the credit markets. That is why we are providing additional support to ensure that the PFI projects that are close to closure can go ahead.

How many times have the time spans of the so-called golden rule and the sustainable involvement rule changed in the past 10 years?

We made it clear as part of the pre-Budget report that we are not following the previous fiscal rules at the moment. It would not be appropriate to do so now because, for the first time since the second world war, the entire world’s economy is shrinking, which we did not expect even 12 months ago. That is having an impact on the public finances, which is why all countries throughout the world are increasing support for their economies. No country would support such a tight approach or cutting public spending during a recession, as the hon. Gentleman’s party advocates.

Government Borrowing

6. What assessment he has made of the level of UK Government borrowing compared with those in other OECD economies. (271131)

Is it because the IMF thinks that Britain’s deficit next year will be worse than Japan’s and America’s that one of the Chancellor’s senior Cabinet colleagues apparently believes that going to the IMF would be like getting well-being care or even going to a spa to recuperate?

I do not visit spas or well-being clinics, so there we are.

The hon. Gentleman has to realise that we and every other country in the world face the problem that something that started in the banking sector has led to a real global banking crisis, and that that has now spread into the wider economy. We can see the consequences of that: world trade has fallen—for example, exports from Japan are down by almost 50 per cent. That has had severe consequences for borrowing in not just our country but others. The question is what we do in the face of that. I believe that it is right to support our economy now, because if we did not, the situation would be worse for businesses and people. However, I have also made it clear, both in the pre-Budget report and last week’s Budget, that our country must live within its means, and that is why, for example, I announced measures to halve the deficit over the next five years. The two things are absolutely necessary, but I am clear that simply standing back and letting nature take its course would be disastrous and would cost far more in debt and borrowing than the action that we are taking.

Given that the Government intend that borrowing will be in excess of £1.4 trillion over the next four years, will the Chancellor please tell us how much debt the Government would be willing to take—both on and off balance sheet—before it became unsustainable?

As I was saying a few moments ago, it is important that we support the economy now. As I think the hon. Gentleman knows, as a result of what is happening, we, like other countries, have experienced a substantial drop in our tax revenues. For example, more than 25 per cent. of our corporate tax revenue used to come from the banking sector, so what has happened has had a consequence. In the face of that, he might argue that we should embark on wholesale cuts now, but that would be absolutely nonsense—

The hon. Gentleman says no—I agree with him—but that means that borrowing will be allowed to rise, which has a consequence on debt. At the same time, however, we must take action to ensure that we bring down borrowing and debt, and we have announced how we propose to do that. It is right and sensible to support our economy while ensuring that we have sustainable public finances in the long term.

Is the cost of this borrowing to the economy not substantially less than it was the last time that this country had substantial debts, which was under a Conservative Government, when interest rates were in double digits for five to 10 years?

My hon. Friend is right. Part of this country’s problem in the 1980s and 1990s was high inflation, which meant that the Bank of England had to raise interest rates to 16 and 17 per cent. In addition, many of the problems then were home grown. As my hon. Friend says, the difference now is that the effective rate at which we borrow is a lot lower then it was in the 1980s and 1990s. However, I come back to the same point, which is that we and other countries, faced with a worldwide problem, have a choice either to stand back and do nothing, as the Conservatives seem to advocate, or to take action. When one hears the Leader of the Opposition, as he did on Sunday, criticise the fact that our spending is increasing by £20 billion a year and imply that he would cut it, and when one realises that much of that spending is on unemployment benefit and other support for people, one really does wonder about the Conservative party’s approach.

The Budget revealed the worst borrowing figures in our peacetime history and the Government’s projection that they will not get back to a balanced budget for another eight years. However, the day after the Budget, it emerged that the Treasury’s projections include an unexplained fiscal tightening from 2014 of £45 billion, the equivalent of £1,450 in tax rises per household. Why was there no mention of that in the Chancellor’s Budget statement?

I did set out a path to reduce our borrowing over the next five years. The number the hon. Gentleman uses came from the Institute for Fiscal Studies last week. At this stage, when there is an awful lot of uncertainty out there, it is sensible to set a path that shows that, yes, we are supporting the economy now, but we are taking action to ensure that we reduce our borrowing over the next few years. To attempt to write a detailed Budget for 2015, 2016, 2017 or 2018 would be ridiculous when there is so much uncertainty, but it is important that we set out a clear direction of travel. The hon. Gentleman criticises me for saying that I will halve the deficit over the next five years and implies that he would go further. If the Conservatives think that we ought to reduce borrowing faster, I would be interested to know when they intend to spell out in detail what they would do to meet that target, instead of just hinting.

Taxation (Households)

7. What estimate he has made of the amount of tax that will be paid by the average UK household in 2011-12 in comparison with 2008-09. (271132)

For a household with a single earner on average male earnings, the proportion of income paid in direct tax was approximately 19 per cent. in both 2008-09 and 2011-12, a little more than 20 per cent. in 2007-08 and more than 21 per cent. in 1997.

Does the Financial Secretary understand that my constituents were fed up with paying more taxes under this Government, even before the Chancellor doubled the national debt? No one is fooled: a 50 per cent. tax rate may make it look as though the rich are paying more tax before the election, but after the election it will be average earners who are paying even more tax, because of increases in fuel duty and national insurance contributions, which by 2012 will cost every family in this country an additional £1,000.

Among the pieces of information that the hon. Gentleman gives his constituents, I hope that he will point out that they will pay less as a proportion of their income in direct tax in 2011-12 than they did in 1997 and that every basic rate taxpayer is, with effect from this month, benefiting from a £145 tax cut, thanks to the increase in personal allowances, which exceeds future national insurance rises. I hope also that he will have the courage to admit to his constituents that the Conservative party’s only tax promise to date is to increase the inheritance tax threshold to beyond £1 million, which would do nothing at all for 97 per cent. of estates, but would give on average a £200,000 tax cut to a tiny handful—3 per cent.—of estates. His constituents might have second thoughts when he explains that to them.

On the question of tax, specifically fair tax, is it not entirely consistent with Labour values and principles that those who have benefited most over the past 15 years—during the good times—such as the 17 millionaires on the Tory Front Bench, should be the ones who pay their fair share now that we are in a downturn? Does the Minister agree?

I think that my hon. Friend is absolutely right, and indeed the vast majority recognise that it is fair that those whose incomes have risen fastest, and those in the best position to do so, should contribute more.

To pick up the question asked by the hon. Member for Liverpool, Walton (Mr. Kilfoyle), why does it fit with Labour values to tax everyone earning more than £20,000 a year by increasing their national insurance contributions—that is nothing more than a tax on jobs—and to save that increase until after the election?

The hon. Gentleman should perhaps have paid a little more attention to what I said a moment ago: the increase in personal allowances in income tax—that is, in the tax-free proportion of people’s income—gives every basic rate taxpayer a tax cut of £145 from this year.

I read with interest at the weekend that certain celebrity millionaires, such as Sir Michael Caine, are considering leaving the country because of the Government’s tax moves. Could they be reminded that it is ordinary, hard-working people, who pay money to watch their films, who put them where they are? We should give those celebrities the message that if they cannot support services for those hard-working people, such as the national health service, when the country is going through a bit of a problem, good riddance to them, and we should say, “Don’t come back.”

I say to my hon. Friend that I hope that Michael Caine is not going to leave the country, but I agree with him that at a time of crisis in the world economy it is fair to ask those who are in a position to do so to contribute more.

I think the situation is even worse than my hon. Friend the Member for Billericay (Mr. Baron) fears. My hon. Friend the Member for South-West Hertfordshire (Mr. Gauke) put his finger on it: the small print of the Budget Red Book shows us that if we fast-forward a couple of years, even with roaring growth in line with the fantasy forecasts that the Chancellor gave us last Wednesday, a further £45 billion-worth of tax increases would still be required. Will the Financial Secretary to the Treasury confirm that that equates to £1,450 a year extra tax per family? Is not the truth that behind the spin about taxing the few with a 50p tax rate, the reality is a secret Labour stealth tax bombshell, targeted at the many and timed to go off after the next general election?

I think I remember that poster. I can say to the hon. Gentleman that for the household that the hon. Member for Billericay (Mr. Baron) asked me about, and that we talked about—the household with the single earner and two children—the proportion of income spent on tax has gone down since 2007-08. It has gone down significantly since 1997, and we will protect the well-being of those families in the years ahead, both through our investment in public services and through the way in which we manage the tax system.

Savings

The Government recognise the importance of saving in providing people with independence throughout their lives, security if things go wrong, and comfort in retirement. Budget 2009 announced that from April 2010 the annual individual savings account investment limit will rise to £10,200, up to £5,100 of which can be held in cash. Those new limits will apply from October 2009 for people aged 50 and over. The Government also announced an extra £100 a year for the child trust funds of disabled children, with £200 per year for severely disabled children. In addition, the saving gateway will be introduced nationally in 2010 to encourage saving among people of working age who are on low incomes.

The measures outlined by the Minister are in no way commensurate with the huge loss to senior citizens’ savings as a result of the cut in interest rates. A great concern of the Shropshire Association of Senior Citizen Forums, which is 6,000 members strong, is the fact that members’ incomes have been cut so drastically as a result of the cut in interest rates. What specifically are the Government doing to help those people?

As I just said to the hon. Gentleman, people over 50 will be able to see an increase in their ISA limits by October 2009. He will be aware of the capital disregard for pension credit and pension-rated housing and council tax benefit, which was raised from £6,000 to £10,000 when the Budget was announced. Again, that will come into effect in 2009. I recommend to him the Moneymadeclear website, which offers free, impartial advice on a range of savings products that have rates significantly in excess of the current Bank of England base rate. That is on top of the measures that we announced in the pre-Budget report to increase the basic state pension. We want to do the right thing by pensioners in this country, and we are doing that. I am sure that they will welcome the increase in ISA limits that we announced last week.

If the Government believe so strongly in encouraging saving, why are they treating the Equitable Life victims so shabbily?

The hon. Gentleman will be aware of the report that we produced in response to the ombudsman’s report on Equitable Life. We have announced that we want to make progress as speedily as possible, and we have asked Sir John Chadwick to provide us with advice. We are committed to introducing an ex gratia payment scheme as quickly as possible. We want to treat those who have suffered a disproportionate impact as a result of the events at Equitable Life, for which we have apologised, fairly and as quickly as possible.

Topical Questions

The UK is in a deflationary period at present, but when the billions of pounds of taxpayers’ money feed through into the economy, especially money that has been quantitatively eased or printed, inflation will follow, as night follows day. What action will the Chancellor take to minimise the effects of inflation, especially for the most vulnerable in our society, who are always the hardest hit?

The hon. Lady is quite right that we always need to be mindful of the harm that inflation can cause, which is why we set the Bank of England an inflation target of 2 per cent., which I confirmed again last week in the Budget. The Bank of England has been operationally independent of the Government for more than 10 years, and that has been widely supported and accepted. However, the Bank has a responsibility to meet that target, both in setting out how much it will put into the economy through quantitative easing and in its interest rate policy. The key is to make sure that we keep inflation low. At present, as the hon. Lady would accept, the objective is to make sure that we get credit flowing through the system, particularly for businesses but also for individuals. The Bank of England has that responsibility, so that is the answer to her question. That regime has worked, and it will continue to work in future.

T2. A company called IPS (First) has won a contract to build and operate a packaging plant at the Nestlé factory in York. That will create 100 jobs initially, rising to 200 over time. There are plenty of small and medium-sized enterprises such as IPS with good business proposals that want to invest and create jobs, but they need support from their banks. What are the Government doing to get the banks lending again to those small and medium-sized businesses? (271152)

I congratulate IPS on its expansion. Only last week I visited a company, Vectura, in the south-west, where I opened a new factory. There are businesses that are continuing to thrive and expand during these difficult economic times. It is right that we put pressure on the banks to ensure that they make lending available to businesses at competitive rates, which is why my right hon. Friend the Chancellor announced the legally binding commitments that RBS and the Lloyds Banking Group have made, totalling £27 billion this year in additional lending to businesses. We monitor that lending—the Bank of England produces monthly reports that look at it very closely indeed—and we want to make sure that it is available to viable businesses that want it. We want to see more companies such as IPS expanding in the UK in future.

As the Chancellor knows, the growth forecasts that he gave us in the Budget last week, which predicted a return to boom levels of growth in just two years, and that the economy would stay at those boom levels, were greeted with near-universal derision, yet they were the fiction on which he constructed every other Budget forecast. When he gave those forecasts, did he know that the IMF was planning to contradict them flatly just an hour later?

Yes, of course I knew the IMF forecasts. The IMF takes a more pessimistic view, not just of our economy but of every economy across the world. However, we ensure that our forecasts are based on the information that we have. If hon. Members look at the IMF and its forecasting over the past three months, they will see that it has downrated its forecasting three times since last October, which demonstrates the uncertainty in the system. However, I believe that because of the action that we are taking, because of the fact that we have low interest rates, because inflation will be coming down this year, and because of the action that most other countries are taking to look after and support their economies, that will have an effect, which is why I remain confident that we will see growth return towards the end of this year.

Frankly, I do not think the Chancellor is in any position to lecture anyone else about downgrading their forecasts after last week. Is not the truth this—that the dishonest Budget has completely unravelled in the space of just a week? We have seen the IMF produce those growth forecasts, which were wholly different from the ones given an hour earlier to the House of Commons. We have the CBI saying that there is no credible or rigorous plan to deal with the deficit. We have the Institute for Fiscal Studies pointing to the black hole, and yesterday a former member of the Cabinet, beside whom the Chancellor sat at the Cabinet table, said that his tax plans were a breach of a manifesto promise that is damaging not just to the Labour party, but to the economy. Today we had the Prime Minister getting a lecture in prudence while he was in Warsaw. We are used to Polish builders telling us to fix the roof when the sun is shining, but not the Polish Prime Minister as well.

Does not the collapse of the Budget in the past week and the damage to the Chancellor’s credibility make an almost unanswerable case for an independent office for Budget responsibility, so that we get independent forecasts on Budget day and the assumptions of the Budget are believed by the public?

No. The big difference between us is on the action that the Government should take, faced with a downturn of the magnitude that we see today and the problems that we and every other country are facing at present. The hon. Gentleman’s solution is to stand back and let nature take its course. That is a price that I am not prepared to pay. I have set out in the Budget measures to help not only individuals, especially those who may be facing unemployment and need help to get back into work quickly, but businesses in this country. We also ensured over the past few years that we went into the downturn in a position where the Bank could reduce interest rates, unlike in the past, when interest rates had to be increased. The action that we have taken to help the economy now and the action that I set out to get borrowing down again is realistic and sensible, given the situation that we face. The question that the hon. Gentleman will have to answer sooner rather than later is, if he is critical of all that, what exactly is he proposing in relation to public spending? What exactly is he proposing to do to help people and businesses in this country? At present that is absolutely opaque.

T4. Many small businesses in my constituency have suffered from the problems of the credit crunch. However, they have benefited from the “time to pay” initiative, which is a Government initiative that allows them to defer tax. Has any assessment been made of how many businesses in Carlisle have benefited from that? (271154)

Yes; we are monitoring carefully the impact of that service around the country. I can tell my hon. Friend that more than 1,200 businesses in Cumbria have benefited, enabling them to defer, between them, £15 million. Across the country 116,000 businesses have deferred £2.1 billion in tax, very often with a single phone call. I met a company chairman last week who described the service to me as “brilliant”. We are providing real help now for businesses in my hon. Friend’s constituency and across the country.

T3. My hon. Friend the shadow Chancellor mentions the joint press conference in Warsaw this morning, but is the Chancellor aware of what the Prime Minister of Poland said? He said that the Poles had fared so well because they behaved with “full responsibility in terms of their deficit”,that “the method to cope with the financial crisis was not to increase expenditure”,and that Warsaw had “efficient supervision to banks and sticking to the rules...not exaggerating with living on credit. These are the most certain ways of avoiding”the consequences “of the financial crisis.”Does the Chancellor agree that the Polish Prime Minister made our Prime Minister look a bit of a novice? (271153)

Sadly, I did not have the benefit of listening to the Polish Prime Minister, but I am glad that Poland has managed to do so well over the past few years. I am sure the hon. Gentleman will recognise that there are differences between Poland and other countries. If we look around Europe—I am glad that Opposition Members are now prepared to look at Europe and cite other European countries with approval; that is certainly different from how it used to be—the more developed economies in Europe have experienced exactly the same difficulties as we have, as America has and as Asian countries have. There is no country in Europe, Poland included, advocating the present policies of the Conservative party.

T5. May I ask the Chancellor and his Ministers to show their support for the UK arm of the global business, Caterpillar, a much valued manufacturer and exporter of construction equipment, diesel and gas engines and electrical power generating equipment, employing more than 10,000 people in the UK, including many hundreds in Stafford? It is taking all the right decisions to weather the economic downturn and to keep together its business, skill sets, supply chain partners and research and development, but it shares many of the same stresses and strains of the car and commercial vehicles sectors. The company says to me in a briefing today that the inability of— (271155)

I am certainly aware of Caterpillar, which is a globally organised company and a significant employer in the United Kingdom. It is in the same market segment as the automotive industry and companies such as JCB, which is not far from my hon. Friend’s constituency. Caterpillar is eligible for the Government’s £2.3 billion guarantee scheme through the automotive assistance programme, and I am not aware whether, for instance, it has contacted the European Investment Bank for loans, but it might want to consider that. I should be very happy if Caterpillar wanted to meet Department for Business, Enterprise and Regulatory Reform officials to talk about the automotive assistance programme and the support that we can offer.

T6. In view of the increasing pressure on the budgets of public bodies, what will the Chancellor do to ensure that match funding is available for the European funding programme, and particularly the convergence programme? There is a shortage of money for those areas, particularly for the convergence regions, which are, after all, the poorest in the UK, and there is a need to mitigate the sharp depreciation in sterling, given that European aid is drawn down in euros. (271156)

The hon. Gentleman makes an important point. He will know that we have supported many of those programmes, which include funds from Europe, to support regeneration throughout the country. That is why we are honouring and supporting the three-year budgets that we set for local councils and continuing with support for regional development agencies and other agencies throughout the country. It is right to continue to invest to support the recovery, and not to cut public spending in the middle of the recession. That would be devastating not only for recovery but for the public finances, because it would push up costs in the long term.

T10. Mr. Graham Whiteman, managing director of Aerotech Design Consultants, and Mr. Michael Pedley, managing director of Middleton sheet metal, two growing aerospace companies in my constituency, are keen to access bank loans as soon as possible, especially to encourage their export potential. Can the Chancellor offer them any hope at all? Would it be possible for a Treasury Minister to meet me and the two directors? They have some really good ideas. (271160)

My hon. Friend rightly points to the importance of the aerospace sector to the UK economy. It is one reason why, through BERR, we have for a number of years had an aerospace innovation and growth team approach that has been highly successful. Aerospace companies have been accessing funds through the Technology Strategy Board for long-term research and development. He points to the need for bank finance and particular loans, but for small companies with a turnover of up to £25 million the enterprise finance guarantee is a potential route. None the less, I should be happy to meet my hon. Friend and representatives of the two companies, along with officials from BERR and the Treasury, if appropriate, to discuss whether further assistance might be available.

T7. My hon. Friend the Member for Croydon, South (Richard Ottaway) raised with the Chancellor a very important point about the Polish Prime Minister’s extraordinary criticism of the UK Government. The Chancellor dismissed Poland out of hand—almost as though it were a developing country. But it is not; it is a very important European economy. What is his answer to the Polish Prime Minister’s very robust critique of this Government’s mismanagement? (271157)

The hon. Gentleman is rather twisting what I said. I said that Poland has made very good progress over the past few years. As he very well knows, Poland, like so many other countries in eastern Europe, was saddled with being under the Soviet union for many years after the war. It has come through that, and it has established itself as a successful economy. Like all economies, it has had problems. The wider point that I was making is an important one: that across Europe, countries are being affected in the same way as we are because of the banking crisis that has spread into the wider economy. Whether in Poland, France, Germany, this country, Asia or America, the question is the same: what do Governments do in the face of this? Do they stand back and hope for the best, or do they do something to support their economies so as to support families and businesses? That is the right thing to do, and Poland recognises that as well.

As I am sure that my right hon. Friend the Chancellor is aware, I have recently been involved with setting up the all-party group on insolvency. With that in mind, will he tell me what he is doing to fight the culture of fear around insolvency which often prevents businesses and individuals from seeking help before it is too late?

As my hon. Friend will be aware, we announced in the Budget a package of reforms that we want to consult on with regard to insolvency legislation. We have great strengths in our insolvency system, but she is right to point out that these extraordinary economic times are putting major pressure on insolvency practitioners. We have learned some lessons from that. I would be more than happy to come to the all-party group to discuss insolvency issues, and I am sure that the Minister for Employment Relations and Postal Affairs, my right hon. Friend the Member for Wolverhampton, South-East (Mr. McFadden), who leads on insolvency in BERR, would be happy to do likewise.

T8. On a number of occasions during the past week, the Chancellor has stated that he wants to reduce the burdens on business. Bearing that in mind, does he agree that now is definitely not the time to be pushing ahead with the Equality Bill, which will pile extra costs and regulations on businesses of all sizes, and will he join the Business Secretary in pushing to have the Bill abandoned? (271158)

I do not think that there is any contradiction between ensuring fairness and freedom from discrimination and good business practice. I am discouraged, to say the least, but not surprised that that attitude still thrives on the Conservative Benches.

Will my right hon. Friend the Chancellor look to holding a job and finance conference in which we can get banks, businesses, manufacturing industry and trade unions around the table to see how we can ensure that jobs are protected; and will he look to introducing the short-time working subsidy in order that manufacturing can survive to the end of this recession?

I will continue to do everything possible to ensure that we help people who lose their jobs to get back into work. In relation to my hon. Friend’s point about job subsidies, I repeat what I said in the Budget last week: for people who have families and children and whose incomes go down, the tax credit system compensates for that. In March alone, more than 355,000 people got £35 a week extra as a result of the measures that we have taken. That marks a difference between Labour Members and the Conservatives: we are prepared to help people, because all the experience shows that if people are left on their own, without help, as we saw in the 1980s and 1990s, that can have disastrous social and economic consequences.

T9. Last year, the Chancellor planned to borrow £120 billion by 2013, and this year he announced plans to borrow £606 billion by 2013—a sum greater than the GDP of Australia. What threat to Britain’s sovereign triple A debt rating does that level of borrowing pose? (271159)

As I said earlier, the reason we have allowed borrowing to rise is that in the face of the downturn and the problems that every country is having to confront, that is the right thing to do. It is equally important, though, that in the medium term, like every country, we have to live within our means, and I set out how we propose to do that.

Reserves (Review)

With permission, Mr. Speaker, I would like to make a statement about the report on the strategic review of reserves, which I am publishing today and which has been placed in the Library of the House.

I know that the House will join me in paying tribute to Britain’s reserves. They make an important contribution to current operations, serving with dedication and commitment alongside our regular forces. As I speak, more than 2,000 reservists are on operations in Afghanistan and Iraq on tasks ranging from fighting on the front line to force protection and medical support. That is 8 per cent. of our forces deployed. Reservists have served with distinction in all the conflicts that our forces have faced in recent times, from the Balkans to Sierra Leone. Some 18,000 have been deployed to operational theatres since 2003. Since then, 15 have made the ultimate sacrifice by giving their lives on our behalf. When I visit operational theatres, I never fail to be impressed by the men and women of our reserve forces who give up their time to serve their country.

However, it is not only the armed forces that benefit from our reserves. Society does too. Individual reservists learn and develop leadership, problem-solving and confidence-building skills that make them more capable employees and citizens. They also make a crucial contribution in the United Kingdom, helping out in emergencies from foot and mouth to flooding to providing cover during the firefighters’ strike.

The demands faced by our reservists have changed considerably, and we are using them more than we have before in peacetime. We need them to do more than simply prepare to defend the UK in the event of major conflict. We require them to augment our regular forces on expeditionary operations, yet the structures, training and organisation of our reserve forces have not changed to match that requirement and now need to be overhauled.

We owe it to our reservists, their employers and their families to ensure that they are supported to face the challenges of today and the future, not of the past. People wrongly say that this is about tackling stretch by using the reserves to plug gaps in the regular forces. That is not the case. It is, in fact, about optimising the contribution of all elements of defence today and in the future. The reserves are an integral part of that, and are themselves overwhelmingly keen to play a relevant role in current operations.

That is why last year my right hon. Friend the Member for Kilmarnock and Loudoun (Des Browne) commissioned a strategic review of reserves. As a result, for the first time in recent years, the reserves have been the subject of a review in their own right. The review was conducted by a small team led by Major-General Nicholas Cottam, which consulted openly throughout defence and beyond. It listened carefully to the views of the reserves community, including the reserve forces and cadets associations.

General Cottam’s comprehensive review addressed all strategic aspects of reserve service. I am today placing copies of it in the Library of the House and on the Ministry of Defence website. As one would expect from such a careful analysis conducted over several months, it is very detailed. We have therefore produced a summary of the review, which will also be placed in the Library today. General Cottam confirms that the summary report accurately reflects his review. It also indicates how we shall take forward this important work.

General Cottam’s work offered seven strategic recommendations. I am pleased to announce that we are accepting all of them. They flow into more than 80 detailed recommendations. General Cottam was not asked to produce an implementation plan, as his review was properly designed to be strategic. Consequently, some of his detailed recommendations will require considerable further scoping work, taking into account resources and priorities across defence. That will make for difficult choices, but the review provides the solid foundation on which they can be made. I am, however, pleased to announce that around half the recommendations will be implemented immediately.

The review has redefined the “purpose” of the UK’s reserves, and notes that they provide defence with a cost-effective way of retaining certain specialised skills. Precisely those niche capabilities and that depth of personnel prove so invaluable in our current operations. The review also acknowledges that reservists may remain vital for supporting national resilience and it recognises the very important role that they play in connecting the armed forces with the nation.

A key tenet of the review is bringing greater clarity to reservists about what we expect of them and what they can expect in return. That has been captured in the “Proposition”, which sets out for the first time what reserve service offers. Specifically, it states that we must ensure that

“we continue to offer the challenge and reward which attracts people to volunteer, while giving a firm undertaking to provide them with effective training and the best possible support throughout their service, including when mobilised and recuperating.”

Part of that challenge is the opportunity to lead and command, which is why General Cottam’s detailed recommendations include proposals for officer recruitment and education. If we deliver the “Proposition”—I am determined that we will—the outcome should be a better trained, better organised reserve, better able to deliver its tasks.

I should like to give the House a few examples of what we are doing now to help achieve that outcome. We shall develop better and more flexible terms and conditions of service, which will allow a range of different forms of reserve service as well as easier movement between the regular and the reserve services by removing complexity and administrative barriers.

Reservist training will be refocused, with a greater emphasis on preparation to support current operations. Initial training will be restructured so that new recruits receive sufficient military skills to participate in their units’ collective training within six months of joining, and are fully trained and eligible for mobilisation in three years. Routine training will also be reviewed and sufficient man training days allocated to ensure that annual military competency standards can be achieved by all.

The Territorial Army will be better integrated with the regular Army to ensure that, combined, they are best structured to support current and future operations. That will include stopping reservist tasks that are no longer needed, thereby bringing efficiencies and enabling manpower to be used for higher priorities. Some tasks of that nature have been identified during separate work as part of the Department’s annual planning round.

As mentioned in the review, certain elements of 2 (National Communications) Signal Brigade are identified as no longer having a clear operational role. That is partly because they hold capabilities that are no longer current, and partly because their tasks can be achieved elsewhere in defence, not least because of improvements in wider national resilience.

In addition, some TA signals units operate communications equipment that is now obsolete, and those posts will be removed. They include Headquarters 12 Signals Group and 33, 34 and 35 Signals Regiments—it is logical to reallocate those resources to higher defence priorities. That decision has not been taken lightly and we are very aware of the exceptional contribution made by the Royal Signals within the TA. However, we must focus resources where we need them most. Where possible, those affected by the decision will be offered other opportunities in the TA, and we will conduct further work to determine the most effective configuration for the TA Royal Signals. As I said, those decisions were taken separately from the reserves review, but they are entirely consistent with it.

We shall also rationalise and improve the way that we approach the civil contingency reaction force and the part that it plays in wider national resilience tasks. That will make it more effective and less burdensome to the units involved. We shall also be working closely with the Department for International Development to determine how best to employ niche reservist skills in support of stabilisation operations.

We need to rationalise the reserve estate. Some of it is underused, out of date and in poor repair; some of it is simply unacceptable for modern military use. In some places, sites sit near to one another, while elsewhere the reserve has no footprint at all. I am therefore setting in train work to deliver a modern, better managed and fit-for-purpose volunteer estate. This important work will take time and I am determined that it be done properly.

Employers play a vital role in delivering and supporting our reserves. They bear the gap while an employee is training and an even greater one when reservists are away from the workplace on deployed operations. We are very fortunate that so many of our employers are so accommodating of the demands that go with a reservist commitment. They recognise the additional skills and qualities that individual reservists can bring to any organisation, but we want to work better with employers. We shall continue to provide assistance and support to them through our employer support organisation, Supporting Britain’s Reservists and Employers, which is commonly known as SaBRE. In addition, we shall give greater direction to the reserve forces and cadets associations, to ensure that their excellent work in support of the reserves is more coherent and co-ordinated.

The review that we publish today is important for our armed forces and for Britain’s reserves. It makes it clear that the two are not separate; rather, that the reserves provide an integral part of our military force structure. The review provides a firm basis from which we can work further to develop and improve our reserve forces and how we support them. I believe that this is an exciting opportunity for our reservists. The review’s outcome is a comprehensive piece of work that has been welcomed by the single service chiefs. The review is a blueprint to ensure that our reserve forces have a clear and bright future to match their illustrious past, and I commend it to the House.

The whole House can and will take pride in the achievements of our reserve forces. We pay tribute to the sacrifices that they have made for the security of our country. Like many hon. Members, I have met our reserves in Iraq and Afghanistan, and I have never failed to be impressed by their professionalism and courage.

I am slightly surprised that the Minister failed to acknowledge the important role of the 234 TA troops currently serving on the green line in Cyprus, as part of Operation Tosca, although I am sure that that was an oversight. This is the first time that Op Tosca has been fully resourced by the TA, which deserves congratulations on the work that it has done.

The main focus of the Minister’s statement was the TA. Very little—in fact, I think nothing at all—was said about the Royal Naval Reserve, the Royal Marines Reserve or the Royal Auxiliary Air Force. How will the report impact on those forces? I am sure that the members of those reserve forces serving in Iraq or Afghanistan will be surprised, to say the least, that they seem to have been omitted today.

We welcome the genuine attempt to improve and expedite basic training for both soldiers and officers, but could the Minister tell us what assessment the Government have made of the attractiveness to potential recruits and, more importantly, employers of condensing basic training into six months? It also surprised me a little that there was no mention in the Minister’s statement of the welfare issues affecting our reservists and their families. Perhaps he can tell the House in his response what measures in the report’s recommendations will improve the welfare of our reserve forces and their families.

I am sure that the Minister would agree that it is a major disincentive when regulars take a disproportionate number of places at the top of TA units. Will he assure the House that, when reservists can carry out a role, they should do so, and that, when appropriately qualified, reservists will have priority?

The Minister said at the beginning of his statement that the reserve forces make a crucial contribution in emergencies. Surely it would be more accurate to say that they have made such a contribution, because the Government are effectively abandoning their own plans, set out in 2002, for the civil contingency reaction force. Who is going to carry out that role, if not the TA? The assumption seems to be that the blue light services and the regular services will assume that responsibility, but the regular Army is already overstretched and is increasingly being concentrated into super-garrisons. So, let me get this right: with a potential flu pandemic at our door, the Government are abandoning their own civil contingency reaction force and, instead of using the widespread footprint of the TA across the country, they intend to depend more on the regular Army, which they are concentrating in fewer and fewer geographical locations. Are they kidding us?

No one can argue with the need to rationalise the reserve estate, but the Minister says that detailed work needs to be done first, and that it could take some time. Hmm. Will he then tell us why the Government have a figure of £75 million in the MOD budget for financial year 2011-12 as a contribution made by the reserve estate? How did they arrive at that figure? Has some work already been done, or has that number simply been borrowed from the fantasy figure library that the Chancellor has been putting to such good effect recently?

I have a further point about money. In the discussions that the Minister has had with the Department for International Development on using reservists in support of stabilisation operations, has he discussed transferring any elements of DFID’s funding for that purpose? If so, how much?

In 1997, the establishment figure for the TA was 59,000. Today, the figure is 58,500, even though the current strength is only 28,920. Following the Minister’s statement today, what will the establishment figure be? Given that the TA has been funded to only 83 per cent. of its capacity in recent years, what will that figure be today? Simply put: how much is the TA being cut by, and how much money will it get?

Despite General Cottam’s excellent work, changes to the shape of our armed forces should be made within the context of a strategic defence review—which is hugely overdue—and not in this piecemeal fashion. I am afraid that this statement is short on detail and indicative of a Government who lack direction. If the Minister really wants to abolish obsolete bodies and make them disappear, I am sure that the voters will be only too happy to help.

It is traditional to thank the hon. Gentleman for his response. He is right about Op Tosca; I am sorry that I did not mention it. He is, however, totally wrong about my omitting other reservists. I mentioned the reserve throughout. Obviously, I concentrated on the TA because the measures that have been taken in the spending round apply to the TA. He should not be surprised that I majored on that issue and did not try to hide it from the House.

The hon. Gentleman asked about the establishment. There are no plans to take any further cuts in the establishment. Indeed, the report proposes increases in the establishment of the other services—the naval and air reserves. However, the figures for the deletions that are being made in the Signals Regiments amount to around 2,000 individuals. Of course, that would come off the establishment—[Interruption.] The hon. Member for Woodspring (Dr. Fox) is right: there will be more than that in terms of posts, but in terms of individuals in place, about 2,000 people will be affected.

With regard to welfare, paragraph 3.5 on page 21 of the report says that we must recognise the needs of reserves during their deployment and through into their period with the reservists. We have made commitments in the service personnel command paper to improve welfare provisions, and those will apply to regular forces as well as to reservists.

The hon. Gentleman mentioned money and I wondered whether he would. He knows that I am trying desperately to help him at the moment by getting information out of the shadow Chancellor that might be of use to him, and I shall continue in those endeavours. He is right to say that the review does not print money, but it does spell out a strategic framework against which the reserve will have an opportunity to bid for defence resources more effectively than it otherwise would.

On the civil contingency reaction force, the important thing is that we keep the command and control mechanism in place so that people can be called up when they are required. We need to relieve the reserves from burdensome training that they do not really need to do, and which they do not welcome, in order to give them more effective, higher level training that will make them better reserves and more able to augment our regular forces.

I thank my right hon. Friend for his statement, and may I ask him to pass on my personal thanks and appreciation to General Cottam and his team for a job that I am sure was extremely professionally and well done? I have not had the opportunity that the hon. Member for Woodspring (Dr. Fox) may have had to read the whole report; I have not seen it at all, but I shall study it carefully and I may have further observations to make.

I agree with the points that have been made, and I am sure will be made by those on both sides of the House, about how our admiration for our reserves increases by the day. From my experience in the last year in which I was Secretary of State for Defence, I know that increasingly, on every operational visit that I made, it became impossible to tell the difference between the regular members and the reserves of any of the three services. That is the highest compliment that I can pay reservists and, indeed, it was the compliment paid to them by regular members of all three services in my presence on many occasions.

The strategic review’s strength was that it was wanted by the reservists; the loudest voices of welcome for it came from reservists themselves. That strength was augmented by the way in which General Cottam conducted the review in a transparent and inclusive fashion. I just wish to ask my right hon. Friend two questions. First, can we continue that inclusiveness and transparency by developing an implementation group, as we did in the Department on other occasions to ensure that those who were consulted were included in implementation? The second is a plea on behalf of the south-west of Scotland, which gives a lot of people to the services, but has very little footprint of the reserves in its communities. Can we have some please?

I thank my right hon. Friend for that; indeed, he established this review in the first place, so he understands better than anyone the need for it. As he rightly says, the members of the reserves are extremely impressive and highly capable people who have a real desire to serve in today’s operations. What we are really seeking to do is to catch up with the movement that has been effectively made on the ground by putting in place, through this review, the systems that are necessary to serve them in doing that.

My right hon. Friend raises two specific points. I can tell him that an implementation group is set up to look at the individual recommendations, and I assure him that I will see to it—I am sure that those involved will want to do this in any case—that it will be as inclusive as possible in how it goes about its work of deciding which of those recommendations should be taken forward and in what way.

The point that my right hon. Friend makes about Scotland can be made about many other parts of the United Kingdom too, and this is why there is a need to modernise the estate. I heard hon. Members talking about flogging it off, but much of the estate is not even owned by the MOD. We bear the costs of the maintenance of that estate, and it is not appropriate and not fit for purpose, so we need to spend in new areas.

I, too, wish to put on record my respect and admiration for the reserves, who are undoubtedly a valuable part of our armed forces. We have used them more and more in recent years, sending them to the front line much more than previously, and it is no surprise that the National Audit Office observed in its report that there are parts of the armed forces that simply could not manage without the reserves.

I thank the Minister for his statement and for advance sight of it, but it poses more questions than it answers and it is scant on detail. He tells us that there are seven strategic recommendations and 80 detailed ones. I notice that he was on his feet for 14 minutes and I should have thought that he could at least have told us what the seven strategic recommendations are in that time. Can he guarantee that we will get a further chance to ask questions when we have had sight of them? We have no idea of the extent of the changes that are being considered, or whether they will cost more or less. Nor do we have any sense of the time scale for the introduction of the measures or the likely impact on the wider armed forces.

The NAO also observed that reserve forces cannot be a substitute for the regular armed forces, given the inherent limitations in training time and the fact that they are not able to deploy as quickly as high-readiness forces. The Minister must surely accept that nothing in this review can change that.

We know that we will have an ongoing role in Afghanistan for many years, and we will be involved in the Balkans for some time yet. Given the burden that we have placed on the Territorials in recent years, can the Minister give us some indication of what that will mean for their numbers? If after everything that they have done their numbers are cut, it will feel like a slap in the face.

The hon. Gentleman says that we cannot manage without the reserves as if we should try to do so—

I am glad to receive that response, because we should not be managing without the reserves. We should see them as part of our armed forces, and we should try to make them as relevant, as competent and as useful as they can be. That is what the enthusiastic individuals who volunteer for the reserve want, so it should be no surprise that we are using them. They are enthusiastic about being used, and the report is about enabling them in that regard.

The hon. Gentleman complains about lack of information. The report should have been passed to him before the statement. I acknowledge that he has not had sight of it and I apologise for that administrative error. I meant to get both my statement and the report to both Front-Bench spokesmen before we started. I have tried to be as open as I can and I have engaged with the all-party group on reserve forces. We have another meeting later this afternoon and I know that there is a level of interest and expertise in the House that needs to be fed into this review. I also know that General Cottam appreciated the information that he received.

The hon. Gentleman talked about numbers. It is difficult to predict what will happen, but there are no proposals for cuts in the reserves other than those that I have mentioned in the two areas. If we make the reserve as relevant, capable and deployable as we can, and if we put the work into understanding that capability, the potential is that the reserve will grow, because we will understand the risks that are associated with giving any particular issue over to a reserve capability. That will develop over time, and I hope that the reserve will at least give options to planners in providing capability.

I am very concerned about the announcement made by my right hon. Friend as regards the Crown Gate Territorial Army training centre in Runcorn. It is a modern purpose-built facility and is the home of 80 Squadron, part of 33 Signal Regiment, which he has announced will be disbanded forthwith. It is also the home of the Army cadets and the Navy cadets. As he will be aware, Runcorn is very important for recruitment to the armed services in the north-west. I am extremely anxious that we maintain the reservist footprint in the town. Will he give me some assurances about the future of that centre in my constituency?

I thank my hon. Friend for that question and I am not surprised that he is concerned. The decision that we have taken is not about the facilities in his constituency, but about the capability provided by the Signals Regiment that is only a part of, and only one user of, those facilities. As I have said, it uses equipment that is now obsolete. I am happy to meet my hon. Friend to see whether we can find ways of continuing to use the facilities—if they are as good as he says, we should certainly do so. We need to maintain our support to the Army and Navy cadets.

Will the Minister forgive me if I say that I found his statement a little thin on detail? I am sure that when we read the report of Major-General Cottam, who has done extremely good work, we will find it very meaty. However, the impression that I have from the Minister is that he is managing decline rather than inspiring recovery. What will come out of this statement that will bring the reserves up to their complementary strength?

Two things more than any other will help us to continue to inspire people to volunteer, both of which I mentioned. I am sad that the right hon. Gentleman did not recognise that. The first is the proposition to lay out for the first time what we expect of our reserves—it is strange that it has never been spelt out, but it has not—and what we offer in return. The second is the need to bring better quality, more relevant training to people. If we do not give them support and opportunities, as well as the training that is needed to exploit those opportunities, who will be surprised if we struggle to attract the volunteers that we need? I think that the right hon. Gentleman will find, as he digs into the report, that far from managing decline, these moves have the potential to make the reserves relevant for the next century, as they have been for the last.

May I first put on record my appreciation of the work done by the two Territorial Army units in my constituency? Will my right hon. Friend explain exactly how these new and additional resources will be made available to them? Like my right hon. Friend the Member for Kilmarnock and Loudoun (Des Browne), may I too make a bid, in this case for the super-garrison to be in Central Ayrshire?

My hon. Friend is a supporter of the reserve forces, as he is of the armed forces overall. Our statement today does not cover super-garrisons, I am afraid, but his bid is noted. We are trying to ensure that we shift resources so that we better cover the geographical area of the country by remodelling the estate—that is central to the changes that we are making today. If we improve the training, make it relevant and drop that which is irrelevant—the unnecessary burdens—we will give people a far better offer and be able to attract them to the reserve units in his constituency.

The Minister cannot expect the House to be impressed by his suggestion a few moments ago that the reserves might actually grow in strength, on a day when he has just announced a further 2,000 cuts in their manpower. He will not deny that since this Government came into power, the reserves have virtually halved from 62,000 to 33,000. If, for perhaps sensible reasons, it is necessary to terminate the three Signals Regiments, would it not be fair to the reservists, when they are being used to a degree that is unprecedented in our history, for the 2,000 manpower that is being saved from the Signals Regiments to be allocated elsewhere in the TA?

Where individuals are affected by the changes to the Signals Regiment, which I think the right hon. and learned Gentleman recognises are necessary, we will seek to use them and absorb them in the reserve. That will not be possible in every circumstance. Those people may not want to do other jobs, but where they do we shall do our level best to continue to use their enthusiasm. The point I was making about potential growth is that, better managed and better understood, the risk of allowing some capability to be rested entirely within the reserve will be reduced. Over time, there will be potential for the reserve to be used in areas where people have not dared to use it in the past and, therefore, the reserve might grow.

May I say to my right hon. Friend that this leaves a dark cloud over the TA? We have uncertainty and a lot of questions that need to be answered. We ought not to be reducing the strength of the TA; it gives us the best value for money in the British armed forces and certainly backs up our full-timers. As he has rightly acknowledged, if there is a difference between the regulars and the TA, it is the valuable work the TA gives us at a very low cost. Will he consider re-badging and re-rolling the Signals, and will he tell us about the implications of his statement across the country? May I have an assurance that it will not affect C Squadron in Chorley—my TA unit?

I am sad that my hon. Friend sees a dark cloud. I urge him to read the review where he will see that there is no such thing. We are standing down the elements that are not relevant to defence requirement. For us to continue with that would be ridiculous in the extreme. No other cuts are proposed; this is a strategic review, designed to put the reserve in a better place. It ought to be seen not as a dark cloud but as an opportunity.

My interest is in the register.

Will the Minister reflect on recommendation 50? Although the result may have more the character of an agreed merger than a hostile takeover bid, ultimately the outcome will be same: we will have lost an Army with its own ethos and acquired a mere reserve, and something of value will have been lost.

This is an important issue. The balance between enabling a career structure for reservist officers and appropriately integrating and using them alongside regular forces will be difficult to strike, but there are times when reserve units should be and are commanded by regulars—there are times when the chain of command decides that is a good thing for a particular unit—but if that is overdone, the hon. Gentleman is quite right: we turn off the talent that could be coming into the reserve wanting to be officers and to progress as officers. I give him an assurance that it is the intention to try to get that balance right.

Does my right hon. Friend accept that before changes are made to the real estate, it is always useful to talk to local Members, because they have knowledge about accessibility to those premises and how a sudden change could dramatically affect both recruitment and the willingness of those in the TA to continue to serve?

My hon. Friend is right, but if there is one thing about which I have absolutely no doubt it is that given the level of interest and expertise in the House, any changes to the estate will be discussed with local people, whether proactively or reactively. There will be no attempt to run away from that.

The Scottish National party pays tribute to our reserves. We welcome the review but, like everyone else in the House, we are yet to see the details, so we will reserve judgment on them.

Has the Minister had the opportunity to read this weekend’s comments by the head of the Territorial Army in Scotland, Brigadier David Allfrey? He talked about plugging a serious gap in the recruitment of reservist officers and said that after a period of paid TA training, at no cost to their employer, employees facing redundancy could return to their companies in better economic times with new or improved management skills. In these difficult economic times, does the Minister agree that that sensible proposal merits closer inspection?

I have not read those comments but it sounds like they merit inspection. I think that the hon. Gentleman and others will be interested in a number of proposals in the report, such as military gap years and other ideas that individuals might wish to exploit.

I welcome the statement, mainly because the Department accepted all the strategic recommendations, which represents a refreshing approach.

May I make a plea to my right hon. Friend that he never says that we are disbanding part of the armed forces because their equipment is obsolete, because that might make many parts of them feel under threat? Will he assure us that when we reconfigure the Territorial Army, we will do all that we can to ensure that its members receive all the technological support and equipment that the British armed forces can offer so that when they move into the armed forces, they are not put at a disadvantage by having to retrain on new equipment?

I am sorry that my hon. Friend was annoyed by what I said, but the fact is that the units that I was talking about exist, and are structured, to use the Ptarmigan communications system, which is now obsolete. It was in place to support the Allied Rapid Reaction Corps, but that is now supported by separate communications systems, so we no longer use or need the equipment. However, my hon. Friend is quite right to put forward his well-made point about integration and the need for interchangeable equipment.

Does the Minister agree that a pull-through from university officer training corps to the TA is extremely important, and will he confirm the great value that he attaches to OTCs? Secondly, does he realise that the reserve forces will become most attractive if they are properly funded and have the equipment that they need to do the job that they can do?

The hon. Gentleman is right that funding for equipment is important. People want to be properly equipped when they join both the regulars and the reserves but, as he knows, that is not the end of the story. The right and relevant training is key to the offer that we make to the reserves, and that is central to the proposals in the report.

I agree with the aspirations set out in the statement, but I am concerned that I am no wiser about some of the points that have been made because the statement was thin on the proposals, although I will read the report when it comes through. Will the Minister assure us that before we get into the details we will have a full debate in which we can not only discuss the acquisition or relinquishing of property, but cover the whole thing at one time? I get the feeling that we are talking about getting rid of some of the property without dealing with the bigger issue.

My hon. Friend is quite wrong. It will take anything up to 10 years to implement some aspects of the review, so I am certain that they will be discussed in the House again and again. I will remain engaged with the all-party group on reserve forces, and we will make written and oral statements whenever they are necessary.

May I thank the Minister for all the review’s courteous exchanges with my all-party group on reserve forces?

The review brings good news in the form of innovative ideas for training, especially basic training, but that is balanced with extremely bad news about numbers, especially given that the establishments of several units do not provide the critical mass for training. May I press the Minister on the point raised by my hon. Friend the Member for New Forest, West (Mr. Swayne)? The right hon. Gentleman rightly said that critical to the offer is opportunities for command. I urge him not to depart from the rule that most TA and Royal Naval Reserve units are commanded by reservists, where adequate reservists are available, so that we avoid a repetition of the truly shameful exercise whereby a group of senior regular officers in the Navy were able to brush away four strong reservist candidates and impose a regular officer, on the basis that he had more time available.

The principle espoused in General Cottam’s review is that we should have the best person for the job. That is the recommendation against which the hon. Member for New Forest, West (Mr. Swayne) reacted—recommendation 50. General Cottam and I have already discussed the matter and we agree that, in deciding who is the best person for a job, we should take account of the unit’s being a reservist unit, and the fact that the commander is a reservist will often be part of that assessment. As I said, sometimes the chain of command will decide for good reason that, at a particular point in time, it is appropriate that a regular officer commands a unit. However, we do not want to damage the career path—the ability to bring capable individuals into the officer corps—and we will do that if we take that too far.

I welcome the statement and look forward to reading General Cottam’s comprehensive review of the strategic aspects of the reserve forces, but I have one question. In his statement, my right hon. Friend mentioned flexible terms of engagement or employment. Will he confirm that he may use such language? Will he explain how those terms will benefit medical reservists, who are essential to our deployed forces?

To be frank, I am not sure what impact they will have on medical reservists. I shall come back to my hon. Friend on that point. However, there are considerable barriers to flexibility in the terms and conditions of employment in the reserves. For instance, it is detrimental to an individual, on leaving the regular service, to go straight into the reserve. Is that sensible? Such people have all the skills and are capable soldiers, sailors or airmen, but the effect of the current terms and conditions is to discourage them from transferring straight into the reserve. I do not think that that is sensible, and nor did General Cottam.

May I read back to the Minister part of his statement? He said, “People wrongly say that this is about tackling stretch by using the reserve to plug gaps in the regular forces.” Although we understand that he has to put a brave face on the decisions that he is having to take today, will he at least be realistic? Where would we be without the medics, the helicopter pilots and even the infantry reservists, and the professional Army had to try to manage current operations on its own? The reserves are filling gaps, and reducing reserve and TA forces further means that fewer gaps will be filled when we need to fill them.

The hon. Gentleman talks as though we should not augment the regular forces with the reserve—as though we should stand them aside in readiness for the old cold war scenario of the Russians coming over the western plains. That was the purpose of the reserves for a period in our history, but that is not what they want to do or what they have been doing for some time. We will not attract the individuals we want to attract if we do not make them relevant to current operations. Yes of course we want to use the reserve, and it is appropriate that we do so.

My right hon. Friend mentioned the Defence Estates review. In 2006, the National Audit Office’s report found that there was “little understanding” in defence of the overall “costs of Reserve Forces”. Will he say whether the review has cast light on those costs, either apart from or including the Defence Estates part of them, and will the money freed be used for the investment that must be needed if the new proposition is to be achieved?

The review team looked at the National Audit Office findings, and there is comment on that. Of course there is potential in some areas to make savings, if not on the properties themselves, then on the overheads for things that are under-utilised. However, there is a need for investment, so we have to try to see to it that the reconfiguration gets due priority in our planning rounds in future. We also have to see to it that reserves get the funds that they need, so that they can have the estate that they need, so that they can get the training that they need to be effective.

Is the Minister aware that his statement this afternoon was deeply unreassuring? I fear for the future of General Cottam’s careful report. The Minister made many references to using reserves to fill gaps in the armed forces; he made no reference at all to formed units, which are absolutely essential if we are to continue to develop leadership and have the structure around which our armed forces can be re-expanded in times of emergency. History has shown that we need that insurance policy. Not to insure is a false economy.

The hon. Gentleman might remember that I said to the House that we would reconfigure training so that people would be able to train as a unit within six months. He now tells me that I did not mention units at all.

I echo my right hon. Friend’s praise for our remarkable reservists and the employers who support them, and echo what I thought sounded like an expression of regret for the loss of TA numbers in Signals. May I ask him to say a little about his ambition to improve training, which he mentioned in his statement, with regard to the times and places of training and, where appropriate, the engagement of reservists’ employers in planning it?

Throughout the review, training plays a central role. Providing training that is better placed geographically; integrating training with regular training, where appropriate, so that reserves can train alongside regulars; and reservist units and sub-units being able to use regular training capacity and facilities, and take up that capacity effectively, are all issues covered by the review. One of the things that we will need to talk to employers and reservists about is our growing need to try to attract people into the reserves to provide niche capabilities. Generally speaking, people want to go into the reserves to do something different; they do not want to do what they do in their day job. In stabilisation operations, we will sometimes need them to do what they have an expertise in. They and their employers will need to be consulted about that.

I remind the House of my interest, which is in the Register of Members’ Interests.

The reduction of the TA estate is a mistake, and I fear that the driver is financial. In 2002, I took command of a bomb disposal squadron that had recently been amalgamated with another squadron. The assumption was that the personnel from the closed TA centre would commute to the new TA centre. That never happened, and the new unit was immediately under-strength. Given that the Minister has repeatedly reassured the all-party group on reserve forces that cost was not the driver for the review, will he simply confirm to the House that the £75 million that will be saved, as a result of selling off that estate, will be reinvested in the TA, not the regular Army?

The review was not cost-led, and I have repeatedly told the all-party group that. The review could not and did not seek to protect the reserves entirely from the pressures on the rest of defence. The proposals that came forward from the planning round were not of General Cottam’s making, and not of the reserves’ making. It would have been wrong to say, “Because we have a strategic review, we’re going to ring-fence the reserves, and they will not bear any of the pressure for change within the rest of defence.”

The TA, alongside which I had the pleasure of serving as a regular soldier, will regard the statement as an insult—not the review, but the statement—because of its complete lack of content. The Minister could not bear to say that 2,000 soldiers—it will be over 2,000 soldiers—will be cut from the British Army. That was not in his paperwork. The way forward is to have a review about how we will keep those soldiers in the TA. That should have been done before the cuts were announced today.

If the hon. Gentleman is suggesting that it is good practice that individuals or the TA would want to maintain capability that is no longer required, I disagree, and I think that every sensible individual listening to him would disagree too.

May I just ask the Minister whether he has ever heard of retraining? If people are in the TA, we should keep them in the TA, not cut the numbers, because at the moment we desperately need them. However, may I ask him whether it is possible to calculate in the review the exact number of volunteer reserve mobilisations in any one year, because we cannot do so currently? Will he bear in mind, while praising the reservists for all that they do, that they can choose whether or not they go on a deployment, but regulars cannot do so? It is important that the relationship between the regular Army and the reservists is kept on an even keel.

I have said it before, and I will say it again: where we can keep those individuals who are affected by the proposals on the Signals Regiments in the TA and offer them other opportunities, we will do so. That applies to all of them, so the point that the hon. Lady makes has been taken on board. I do not think that we should discard those individuals in any way. Some of them may choose not to do other jobs—that is a matter for them—but we will do everything that we can to keep them.

Regarding mobilisation and the way in which we mobilise, the hon. Lady will see that there are proposals for changes in mobilisation in the reserves, and she will want to look at them.

Points of Order

On a point of order, Mr. Speaker. Please, please, may we have a statement on sixth-form funding? Many Members have expressed concern, both before and after the Easter recess, but we have not yet had a statement from the relevant Minister. Would you use your offices, Mr. Speaker, to bring the Secretary of State to the House?

On a point of order, Mr. Speaker. You have often dealt with points of order from Conservative MPs complaining that other MPs visited their constituencies without giving them proper notice. The hon. Member for Wimbledon (Stephen Hammond) visited my constituency last week, but I learned about it from my local Echo, receiving notice from the hon. Gentleman only today. This is the third time that Conservative MPs have visited my constituency in recent months to electioneer without giving me proper notice. Perhaps all hon. Members ought to practise what they preach.

I have to be careful, but I shall make it quite clear for the record that if a Member of Parliament goes to a private constituency meeting—in another life, I used to be in the Labour party, so I know about these things—there is no need to notify the local MP. As for any public engagement—and I appeal to all Members of Parliament, as they have enough to do in their own constituencies without worrying about others—if Members believe that they have to go into another Member’s constituency, proper notice is important. I do not expect an e-mail on the day of the visit—proper courtesy is all that we ask for. I appeal to Members, so that I am not brought into this argument.

On a point of order, Mr. Speaker. May I echo the request from my hon. Friend the Member for Broxbourne (Mr. Walker) for clarity regarding the Learning and Skills Council? I have three schools that are confused about the situation, and that will continue until a Minister comes to the House to tell us exactly what is happening regarding the funding shortfalls that our schools do not deserve.

Further to what I said to the hon. Member for Broxbourne (Mr. Walker), the matter will appear in Hansard and the Minister will have heard. Hon. Members can ask for an Adjournment debate in Westminster Hall, which can give them an hour and a half in some cases, or half an hour here on the Floor of the House, where I usually chair proceedings and enjoy very much the contributions that hon. Members make.

Protection of Children (Publicity)

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

I beg to move,

That leave be given to bring in a Bill to prevent the exploitation by parents of their children by means of seeking publicity, primarily for the purpose of financial gain, in respect of the actions of such children; and for connected purposes.

It would be a rare adult who was not appalled to discover that a mother could plot with other members of her extended family to kidnap her daughter for financial gain, and I, for one, was relieved that the plot was discovered and the mother and her accomplice jailed. Not much later, the story broke of the alleged 13-year-old father, and we had to endure the spectacle of him, the baby, the mother and other claimants to fatherhood all over the world’s media.

I ought to declare an interest as my husband is leader of East Sussex county council, which was involved in that case. Senior officers in the council have done much devilling work for me and I am grateful to them for their help and advice, as I am to the Clerks and the Library of the House. I am also grateful to my hon. Friends the Members for Eastbourne (Mr. Waterson) and for Wealden (Charles Hendry), among others, for sponsoring the Bill, and I hope they do not think I am treading on their toes. I regard this as potentially a nationwide issue.

I also alerted the Under-Secretary of State for Justice, the hon. Member for Dewsbury (Mr. Malik) to the fact that I was planning this Bill. I quite understand that, as a Minister in the Ministry of Justice, he cannot be involved, but I hope he hears my argument and acts on it. I am also hugely grateful to the Centre for Social Justice for its analytical work, which has opened up the whole debate on the impact of family breakdown on society

Those two cases had in common the misguided desire of a self-interested adult member of a dysfunctional family to profit by exposing their child to a media storm. I shall not refer any more to the details of those cases as those involved have had the protection of the law to regain their anonymity. What alarmed me about them was the damage that would inevitably be caused to the youngsters who were exposed to the full glare of publicity.

I want to emphasise that this is not a routine attack on the media. I used to be in that business, and when I was I would have given my eye teeth to be in on such a story. Luckily, however, I have not had to face the media pack in full cry and I hope I never have to, but I have heard about the horrors of it from adults who have had to endure it, whether for good or for bad reasons. For vulnerable children to be exposed to it is appalling. To have lots of strangers doorstepping them, asking for comments and interviews, shouting at them, having flashing cameras pointed at them and being followed by the press pack must have been a nightmare, and I commend the relevant authorities for acting as quickly as they could within the ponderous processes of the law to protect the youngsters in a way that any normal person would expect the parents to do.

What concerns me more than anything else is that the parents could even dream that they could make money from their own vulnerable children. This is a new extension of the many abuses that children have suffered over the years and which we have tried to address. We have spent many hours in the House and much printers’ ink in trying to come up with foolproof systems of protection for children from physical abuse, and I am fairly certain that we have not succeeded yet.

Such abuse by the media is an extension of the abuses to which children are already subjected. I do not want to see other adults thinking that there may be some financial gain to be had by doing this. I want to stop a terrible trend of abuse that could be emerging, and I want to stop it before it can take hold. In this simple Bill, therefore, I want to put in place a measure of protection for any other children who may become the victims of their parents.

We all know of dysfunctional families from our constituency casework. I doubt that there is a single Member who has not met in their constituency large, extended and informal families: some work as families, many do not. We are probably all aware of the impact on families of lack of work and benefit dependency, debt and financial challenges, drug or alcohol addiction, mental health problems, poor neighbourhoods and poor parenting skills. I have not designed the Bill to sort out those fundamental problems; that will take a Parliament of legislation and work on the ground across many years and many generations. It is not a Bill to control the media, and I do not want it to stop child prodigies and their parents benefiting from their achievements in music, maths, dance, sport or whatever they excel at—good luck to them. We will need them to do well in the Olympics and to get us out of our current economic mess.

My Bill simply puts back on parents the responsibility not to exploit their vulnerable children by amending the Children and Young Persons Act 1933, so that anybody who has responsibility for any child or young person and causes the publication of any information in respect of the child, including photographs or digital images, that is likely to cause significant harm to the child should be guilty of an offence and liable on summary conviction to a fine and/or imprisonment of up to two years. I define a child or young person as someone under 18 years old. I also include in significant harm both physical and psychological harm.

We protect our children in the family courts from publicity, notwithstanding the changes that were brought in yesterday. We also protect those involved in the youth justice system, however horrible the crime they may have committed. Most young people in trying circumstances are already protected from media exposure, and none of us probably expected or envisaged that this horrible loophole would emerge, whereby parents intentionally try to make money out of their children in ways that would harm them. I doubt that in 1933, when the Act to protect young people was drawn up, anybody thought that we would need to extend it to stop parents exploiting and abusing their children for the money that they could make from publicity. It is a sad indictment of our society that, some 70 years later, we need to introduce such an amendment.

It is our responsibility as legislators to ensure that our young children are able to grow up as normally as possible, but that, as we all know, is quite a stretch, given the record of family breakdown and dysfunctionality throughout the UK. The wider challenge is to help to heal those wounds, but that is well beyond the scope of the Bill. This is a small Bill; it is a one-paragraph Bill, but it could prevent more abuse of young and vulnerable children by their parents. I commend it to the House.

Question put and agreed to.

Ordered,

That Mrs. Jacqui Lait, Charles Hendry, Mr. Nigel Waterson, Mr. Iain Duncan Smith, Mrs. Maria Miller and Tim Loughton present the Bill.

Mrs. Jacqui Lait accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 26 June and to be printed (Bill 88).

Ways and Means

Budget Resolutions and Economic Situation

Amendment of the law

Debate resumed (Order, 22 April).

Question again proposed,

That,—

(1) It is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.

(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

(a) for zero-rating or exempting a supply, acquisition or importation,

(b) for refunding an amount of tax,

(c) for any relief, other than a relief that—

(i) so far as it is applicable to goods, applies to goods of every description, and

(ii) so far as it is applicable to services, applies to services of every

description.

This debate should not be about statistics; it should be about people. I am sure that statistics will be bandied around, but we are talking about real people who are worried if they have lost their job and worried about how to support their children, and workers worrying if they might be next. The welfare state is here precisely to support people at times such as this. We have strengthened the safety net so that we pay people’s mortgages if they cannot get back into work, we pay their pensions if their company goes bust and—thanks to tax credits, which the Conservatives have said they want to dismantle—we are paying more than 300,000 people an extra £35 a week to soften the blow of losing overtime or work.

For the record, perhaps the Secretary of State will acknowledge that we have said no such thing: we have said that we would like to make the tax credits system work more effectively.

The hon. Gentleman’s leader told GMTV that he wanted to dismantle it, and the hon. Gentleman has made it absolutely clear that his party wants to look at cutting tax credits. The fact that 300,000 people are getting an extra £35 a week is softening the blow, and that would not happen under the Conservatives.

At times like this, the overriding role of the welfare state is to help people to find a job. The choice before us is between a Government who are investing £5 billion extra to get people back in to work and an Opposition who cannot say that they support that help, because they are committed to cutting spending now. I predict that they will want to run away from that during the debate, but that is the consequence of their policy, and they cannot run away from it.

I wonder if I could quote my hon. Friend the Member for New Forest, West (Mr. Swayne), who intervened early in yesterday’s debate to say:

“Is this really what this day’s debate is about—the Opposition? Is it not extraordinary that the Government begin with an attack on the Opposition rather than with an exposition of their own case?”—[Official Report, 27 April 2009; Vol. 491, c. 595.]

I repeat that today: why do we not stick to the Government’s plans? In the interests of scrutiny, let us hear them.

There is someone else who wants to run away from the consequences of his party’s policy. [Interruption] The Opposition do not want to listen to the debate. They do not want to have the consequences of their policy spelled out to them, because they want to pretend that it is possible to cut spending now and increase spending at the same time. During this debate we will expose why that is simply not possible.

These are extraordinary times.

I will make a little progress and then give way.

Unemployment has been rising across the industrialised world—in the United States, France, Canada, Japan and Italy. In Spain, it is over 15 per cent. Everyone in this House will be worried about the rise in unemployment to 6.7 per cent. in this country. Yes, of course, we started from the lowest claimant count since 1975; yes, there are still nearly 3 million more people in work than in 1997. However, that is no comfort to people who have lost their jobs—they want to know what Government will do to help them now.

When the Chancellor said that there would be an extra £20 on tax credits, some people might have thought that he meant £20 a week. Will the Secretary of State confirm that he meant £20 a year, which is about 40p a week—barely a pint of milk? He looks confused, but that is the figure that the Chancellor cited in the Budget statement. Does he think that that is sufficient for the Government to hit their child poverty target for 2010?

I am not even sure that the hon. Gentleman’s party is committed to that target. We are committed to abolishing child poverty. Clearly, these are extraordinary times. However, we took decisions in the 2007 Budget that will take another 500,000 children out of poverty, and we have already taken 600,000 children out of poverty on top of that. If we had just continued the Conservative party’s policies, 2 million more children would be in poverty. We continue to be committed to this policy, which would never have existed if the Conservatives had been in power.

I will make some progress with my argument and then give way to my right hon. Friend.

Labour’s policy is to invest now to protect jobs now and to get people back into work as quickly as possible. We estimate that because of our actions half a million jobs will be protected. People who would otherwise be out of work are still in work because of our actions. In contrast, the answer of the right hon. Member for Maidenhead (Mrs. May) would be to cut spending now, and that would mean helping the unemployed less. That is the choice—a Labour Government who believe that we are in this together and will only come out of it together, or Opposition Members, who believe that someone who loses their job is on their own and should not be helped by the Government of the day.

Some of my constituents have asked me to put this question to the Secretary of State this afternoon. They do not doubt that the Government’s measures are about helping people to get back to work, but those measures do not wash with them, because work is part of their DNA. They are scrambling for any job that they can get, but there are now simply not enough jobs for those who genuinely want to work. Their wives work a small amount, and they are now faced with their national insurance-based jobseeker’s allowance running out. Should they tell their wives not to work, so that they can claim benefits, or should they tell their wives to continue working while they scramble for work, and lose their homes because they simply do not have enough money to pay the mortgage? What advice would the Secretary of State give my constituents?

Clearly, we want to help people get back into work as quickly as possible, and the tax credits policy is intended precisely to help women in that situation so that they can have extra work. [Interruption.] The hon. Member for Runnymede and Weybridge (Mr. Hammond) mutters from the Opposition Front Bench, but these are exactly the JSA rules that his party introduced in 1996. The difference between now and then is that, on top of that, there are tax credits to help people who want to work more, so I have answered my right hon. Friend’s question precisely.

I shall make some further progress, as I am going to come to my right hon. Friend’s point about real jobs.

The Opposition’s policy would increase the human costs of this recession, but it is also economically illiterate. In a banking crisis, we have to get lending going again, support the banks and strengthen confidence. The Tories, of course, would do the opposite. They would take money out of the economy at precisely the time when it needs to be in the economy. They would cut borrowing and would therefore be unable to stand behind the banks, savers, businesses and homeowners in the way we are. Their policy would risk the vicious spiral that the Japanese economy entered in the 1990s. That would be the consequence of their policy, and they cannot run away from it.

Unfortunately we have lost some jobs in my constituency, including in one business that we were able to help with the banking problems. Does my right hon. Friend agree with what was said in the discussion that I had with my local jobcentre manager last week—that, unlike in the previous recession, we now have an active labour market intervention strategy? Will he accept my thanks that there is now a much broader suite of measures that can be used to try to help people who do not have a job to get back into employment? For example, they can be helped to go into business for themselves, look for other employment or enhance their skills. Does he accept that that strategy is very different from what happened in the previous recession?

That is absolutely right. I am sure that my hon. Friend will accept that that costs money, and it was precisely because the Conservative party did not put in extra money in the ’80s that the active labour market was relaxed. The link between claiming and looking for work was eventually completely abandoned, and studies suggest that that meant that unemployment was 4 per cent. higher than it needed to be. That is the consequence of the Opposition’s policy, and they cannot run away from it. They are ideologically against the extra spending, so unemployment and the recession would last longer and cost more, precisely as they did in the past.

I will make some progress, then I will give way to hon. Members.

What is really extraordinary about the Opposition’s policy is that they want to spend less on helping the unemployed. They must be the first Opposition to say at a time of rising unemployment that the Government should be spending less, not more. Of course, it is reasonable for the Opposition to say, as they did at the weekend, that they want to spend less. That is a reasonable policy, but they cannot in the next breath say that they want to spend more. They cannot say in the run-up to the Budget that we should be cutting spending, and then when the Government announce extra money for the unemployed say, “Oh, well, we’d have done that too.” It simply does not add up.

We have set out our position on spending clearly in this Budget, and we have been clear about the consequences of our decisions and of asking those who earn more to pay more. The Opposition have made their overall position clear. They would not support the £5 billion that we have invested in unemployed people, and they have said that they want spending restraint now. But they have yet to admit the consequences of that choice, so I shall spell it out for them. We are investing around £3 billion extra in Jobcentre Plus and our private and voluntary providers. That was our choice. The right hon. Lady’s choice to oppose that would mean people getting less help to find a job, less time with job advisers and less help with job search.

The right hon. Gentleman seems to pursue the argument that, when people say that they want public sector spending to be restrained, it means cuts. The Government will restrain public sector spending by billions of pounds next year. Where will the Government’s cuts fall?

The problem with the right hon. Lady’s argument is that she opposes even the efficiency savings that we have made in the past few years. We have saved £2 billion a year through extra efficiency savings. [Interruption.] The hon. Member for New Forest, West (Mr. Swayne), who is the Leader of the Opposition’s helper, may be interested to know that the right hon. Lady goes from television centre to television centre, opposing our changes. She cannot say that she opposes the efficiency savings that we have made in the past few years and criticise us for that, while claiming that she will find more efficiency savings in future. The shadow Chief Secretary may be interested to know, for the right hon. Lady’s job prospects, that she has got herself into a position whereby she was against efficiency savings in the past, saying that she would not preside over any in the future, but she still believes that she can spend more money than us. She may have noticed that the leader of her party said at the weekend that he wanted people who would find less money and achieve more. She proposes to spend more money and do less.

The right hon. Lady asked where our cuts were. We set out in our three-year plan last year exactly how we achieved the £2 billion of efficiency savings and we will set out in our three-year plan in the next couple of weeks exactly how we will continue to do that. We will continue to save on IT, telephony and estates. We have reduced jobs in back offices and put them in the front line, where they are most needed. The right hon. Lady opposed all those changes, which shows that the Conservatives want to talk generally about saving but have no idea about how to achieve it. [Interruption.] I think that the hon. Member for Runnymede and Weybridge is twitching.

Let me get this straight to make sure that I have understood the Secretary of State’s argument. When the Labour party makes cuts, they are efficiency savings; when the Conservative party proposes the same reductions, they are front-line service cuts. Is that his argument?

That is exactly what has happened in my Department—we have reduced back-office jobs by 30,000 to 100,000. The right hon. Member for Maidenhead opposed that because she wants to present easy arguments about—[Interruption.] She says no. She goes around talking about 750 jobcentre closures. That was a result of putting together the Employment Service and the Benefits Agency, thereby improving the service, reducing the time that we take to process benefits and improving the advice that we give people to get them back into work. They now get back into work far quicker than in the past, yet the right hon. Lady opposed that. Conservative Members have no idea how to make the system more efficient—they are simply ideologically committed to cutting spending.

The Secretary of State speaks continuously about cuts and confidence, but I want to ask him about his responsibilities for employment. The figures for public sector debt, on which the Government rely, are not, in every respect, those that the Office for National Statistics presented. Does he agree that, according to ONS figures, including the banking sector and public sector pensions, the actual amount of net debt is more than £3 trillion, not the amount of around £1 trillion that the Government presented? On ONS figures, that is between 175 and 205 per cent. of gross domestic product. Does he agree that the ONS says that—yes or no?

Not at all. If the hon. Gentleman wants to discuss debt, the International Monetary Fund says that we are the second lowest for debt in the G7. We will remain in that position even at the top of the amount that we will borrow. No one denies that borrowing needs to rise so that we can invest more now. That is precisely to ensure that we return to growth and reduce debt as quickly as possible. The problem with Conservative Members is that, because they would not take action now, unemployment would last longer and the debt would be higher. They made that mistake in the 1980s and the 1990s, and they still have not learned the lesson. Clearly, they do not want to hear about the consequences of their policies, so I will continue to make them clear.

Our policy is to recruit an extra 6,000 people. We announced that in the pre-Budget report, and we have done it. Those people would be fired under the right hon. Lady’s policy. She could not hire the thousands of additional staff that we will recruit as a consequence of the Budget. Fewer workers threatened with redundancy would get help through the rapid response service. There would be no pre-redundancy service for small and medium-sized companies.

I will make some progress because Front-Bench Members want me to elucidate our policy.

In January, we announced £500 million for people who are unemployed for six months to provide recruitment subsidies and help with starting a company or with training. The new help started this month, on time, exactly as promised. Again, the right hon. Lady could never promise to do that, because she was against the fiscal stimulus in the Budget. More than 6,000 people have already been referred to that help. She criticises us for not doing that quickly enough; under her it would not happen at all.

The right hon. Lady goes around talking about the flexible new deal. The Budget means that we can invest hundreds of millions of pounds extra to secure the flexible new deal. We will deliver that—[Interruption.] It has gone up because, owing to the world recession, we predict that there will be an increase in numbers. She, I am sure, agrees with that. We are putting more money in; she would not do that. If she were now Secretary of State, which would be a terrible thing, she would have—[Interruption.] We announced an increase in the Budget in my Department—one that, because of the policy of the hon. Member for Runnymede and Weybridge, she would not be able to match. She would be sitting there, having to work out either how she would put the flexible new deal back by a year or how she would cancel it. That is the consequence of her policy. Today we are announcing the next stage in that extra help.

Does the right hon. Gentleman accept that as a result of the inability to secure much needed investment many small firms are cutting back on staff, placing even more people in unemployment?

Actually, because of the tax deferral policy that we have put in place, £2 billion has been deferred. That is helping 100,000 companies and more than 600,000 people. Because of the policies that we are putting in place overall, we think that the jobs of 500,000 people are being protected. Because the hon. Gentleman’s party is against that extra help, the consequences under his policy would be far worse. [Interruption.] Again and again, the Opposition want to say that they will cut spending, but they do not want to live up to the consequences of that, which would be less help now.

The next stage of the extra spending is what we have announced today, which is a future jobs fund, which responds to the point that my right hon. Friend the Member for Birkenhead (Mr. Field) made about what we do if there are not enough jobs. What happened in the ’80s and ’90s when there were not enough jobs for young people was that they were simply abandoned and left on the scrap heap. Many right hon. and hon. Members will have seen the consequences in their constituencies. They will know that often those people never got back into work again and that often their children never got into work when they grew up. That was the root of many of our welfare problems, which we have been starting to put right.