Tuesday 27 October 2009
[David Taylor in the Chair]
Motion made, and Question proposed, That the sitting be now adjourned.—(Mark Tami.)
It is a delight to serve under your chairmanship this morning, Mr. Taylor.
This is a niche debate and has been described by some people as chip fat and bonkers anomalies in regulations. I am hoping that we can move on somewhat from that, as the debate concerns a valuable fuel source that we should be considering as a contribution to reducing our carbon footprint and meeting some of our stringent obligations.
There is some dispute about the environmental impact of producing some biofuels, and Friends of the Earth raised some concerns in April, pointing out some worrying information that it had come up with during research on biofuels. Soy crops from the United States, Argentina and Brazil are used in the most common UK biodiesels and all contribute to the deforestation problem. The Friends of the Earth study assumed that 10 per cent. of the food crops displaced by biofuels would be pushed on to land created by clearing forests. The researchers allocated the additional land to various agricultural uses and calculated the resulting extra emissions using established models. For example, clearing 1 hectare of Amazonian rain forest can release up to 1,000 tonnes of carbon dioxide into the atmosphere, according to the United Nations Intergovernmental Panel on Climate Change.
In response to those concerns, a spokesman for the Department for Transport recognised that there was some controversy and, while acknowledging that the biofuels evidence is evolving, said:
“What is not in dispute is the need to develop new, cleaner fuels and break our dependence on oil if we are to tackle climate change.
Some biofuels have the potential to help us achieve this. So whilst there is no case for pushing forward indiscriminately on those that may do more harm than good, it would be foolish to ignore any potential they do have.
We have always been clear that biofuels can only make a useful contribution to mitigating climate change if they are sustainably produced.”
That is the crux of today’s debate. Are we foolishly ignoring a potential biofuel that is indeed extremely sustainable and sustainably produced?
Few would argue that the production of biodiesel through the recycling of used cooking oil of UK origin is not a sustainable way to produce energy. We have only to look at our high streets to see how many restaurants and fast food premises use large quantities of cooking oils and fats, which then become a waste product—quite a tricky waste product, which is costly to deal with and dispose of. Within the manufacturing industries, the use of fats and oils is also huge. Significant quantities of waste food oils result from processing. It cannot be stressed too often that those oils have already been produced and used for food, and have become a waste product. In the domestic environment they are often literally poured down the drain, much to the annoyance of plumbers and other people who have to come and unblock those drains.
Is my hon. Friend aware that in Royston, in my constituency, a flood was caused by a build-up of fats, oils and greases, as she describes? It caused misery to many people, and Anglian Water has now started a fats, oils and greases campaign in Royston, to encourage people to recycle their cooking oils exactly as she suggests.
I thank my hon. Friend for that welcome intervention, because I was not going to major on the domestic aspect of cooking oil. If the technology were to take off, waste cooking oils and fats from households could easily be collected. After all, we are all being encouraged to recycle as many as possible of the putrescibles and other products of family living. My hon. Friend is right; pouring the oil down the drain can cause enormous problems, and if we can get the technology to take off and become sustainable, we can end those problems at the same time. That would be a win-win for all.
I am sure that few hon. Members would disagree that simply disposing of the waste oils—I am thinking mostly of the commercial side of things—is not the best use of a valuable recyclable resource. To discuss the issue, I recently met Richard O’Keefe, the director of Green2Go—a company established in 2007 to provide renewable and sustainable heat and power solutions. Green2Go is a key proponent of the method of using recycled cooking oils that I am discussing. It estimates that about 250 million litres of used cooking oil is available from commercial sources, leaving aside the domestic sources that my hon. Friend has referred to, which also produce significant amounts. Green2Go pointed out that the oil could be used to generate about 1 billion kWh of electricity a year. That is a significant amount of energy and would make significant carbon savings, and that potential is mostly wasted at the moment.
I was shocked, when the figures were explained to me, at the sheer volume of cooking oil that appears to be available to us as a resource. We may think of the chip pan fryer at home and say that we do not use it any more; many of us do not, because of oven chips and the like. However, there is no getting away from the fact that commercial production of crisps, biscuits and other products routinely found in supermarkets and in high street takeaways and fast food outlets results in masses of used cooking oil. Under current legislation, that oil is not fully utilised.
The hon. Lady identifies an important point. Does she agree that a ludicrous aspect of the situation is the fact that not only do we import unsustainable biofuel, but companies such as Green Fuels in Gloucestershire that provide the technology to convert the enormous wealth of surplus cooking oil into a sustainable biofuel, find that their UK market has collapsed, and they are exporting the technology as well?
I thank the hon. Gentleman for pointing that out. I was not going to go too much into the collapse of the biofuel industry, but the point is a valuable one. Germany formerly had full tax exemption on liquid biofuels, and now, because the Government wanted to go back to getting the tax on it and increased it, the technology is starting to collapse. Unless there is a sustainable market, and where something is becoming price-sensitive, things will happen exactly as the hon. Gentleman said. We shall export the technology and oils and will not have a market here. In Germany, since 2009 and the Government’s decision to take the retrograde step of imposing high taxation on biofuels, more German biodiesel plants have faced closure. We must be sensitive to the impact on an industry that I am sure the hon. Gentleman would want to grow in his constituency. It would be a great thing for his constituency and the UK as a whole if we were not to export that resource and technology and if we were not to do anything to jeopardise that growing industry. Waste oil is not fully utilised because of current legislation.
Biodiesel manufactured from used cooking oil is a particularly sustainable renewable fuel. It can reduce life cycle carbon emissions by 90 per cent. As used cooking oil is a genuine waste product, which would have to be disposed of by professional collectors, at significant cost, it does not cause any additional deforestation, such as that which caused concern to Friends of the Earth. Neither does it lead to changes of land use in developing countries, away from the crops that they should be growing for their own use and towards fuel crops, which is another effect about which concern has been expressed. Consequently, the fuel is one of the lowest-carbon forms of biodiesel available to us. Converting used cooking oil that might otherwise have gone to landfill to biodiesel is an excellent example of the production of a truly sustainable biofuel. It contributes to reducing carbon emissions and minimising waste and landfill, which I hope we are trying to move away from.
Does the hon. Lady agree that what she proposes would be a good way to try to reduce the dumping of oils? I am sure that in her area, exactly as in mine, many unscrupulous people dump used oil in the drainage system, polluting the water system, rather than paying for its disposal.
We are somewhat beset by fly-tipping in St. Albans, but thankfully, we do not have that problem. However, it is something that has been brought to my attention. Used oil is not only poured down the drains, but left in cans by the side of the road and dumped in inappropriate areas. That is a big problem. In these hard-pressed economic times, we are likely to see more fly-tipping and—I hate to say it—unscrupulous outlets that use cooking oil may be tempted to do what the hon. Gentleman mentions, instead of paying to have used oil taken away.
As I say, used cooking oil is a waste product; there is no resulting pressure on land use and no impact on food prices, and vital resources are not diverted from a valuable existing use. The Renewable Fuel Agency calculates that the default carbon saving from using it is about 85 per cent. That is much higher than the saving of 46 per cent. realised from using palm oil or American soy, which are often used as biodiesel in the UK. Ensuring that used cooking oil is collected and used as a biofuel will, as hon. Members have pointed out, do away with the considerable cost to utility companies of clearing drains and sewers that have been blocked with improperly disposed of oil.
Biodiesel production in the UK in 2007 stood at 484 million litres against that year’s diesel market of 24 billion litres. Approximately 40 million litres of biodiesel are currently produced from UK cooking oil every year. Methanol is commonly used to produce biodiesel from used cooking oil. However, in March 2009, Ofgem reversed an earlier decision, ruling that using methanol made from natural gas in the production of biodiesel would prevent that fuel from being included in the renewables obligation scheme. That is the rub, and the reason for today’s debate. As the hon. Member for Cheltenham (Martin Horwood) pointed out, anything done to jeopardise the making of biodiesel from sustainable fuels, such as cooking oil, will have the same effect as in Germany and biodiesel production will collapse.
Ofgem’s 2009 ruling, made following consultation and discussions with the Department of Energy and Climate Change, results from the presence of a small proportion of fossil fuel in some biodiesels derived from methanol. The ruling is based on a literal interpretation of the law, which classes the entirety of biodiesel produced in that way as a fossil fuel, even though the proportion of fossil fuel within the blend is small. Under our interpretation of article 9 of the renewables obligation, it is entirely a fossil fuel, despite the fact that the fossil fuel element is potentially only 11 per cent. by mass: nearly 90 per cent. is a truly sustainable and reclaimed resource.
The UK biofuels industry believes that Ofgem’s ruling on biodiesel is likely to have a significant effect on the UK industry and that it will have ramifications for the future domestic supply of renewable energy. That is the crux of today’s debate. Are we truly committed to moving away from fossil fuels? If so, why are we standing by? We can see the fuel’s potential, but if nothing happens, the industry will collapse.
UK energy production has been set ambitious long-term targets for renewable sources, yet many feel that the renewables obligation, or at least Ofgem’s interpretation of it, offers no incentive for using that form of renewable fuel in the generation of electricity and heat. Without incentives, I doubt whether any of us would do anything in life. We cannot expect people to make the investment necessary for making renewable fuels if there is no incentive for people to use them.
The renewables obligation came into effect in April 2002 to support renewable electricity projects. Under the obligation, suppliers are required to meet their obligations by presenting sufficient renewable obligation certificates—ROCs. They are green certificates issued to accredited generators for the eligible renewable electricity that they generate. The 2008 consultation by Ofgem that led to its 2009 decision focused on the detail that the methanol used in the process was normally derived from natural gas—itself a fossil fuel. Ofgem therefore said that it was difficult to view biodiesel made in that way as a renewable fuel. That is where we are now.
Given that Ofgem cannot treat the biofuel as being renewable, as set out under the Electricity Act 1989 and in specific parts of the 2007 renewables obligation order, the fuel is not eligible for an ROC. Instead, Ofgem argued that biodiesel produced from that reagent would, in turn, fall within the term “fossil fuel” under article 9 of the renewables obligation. It concluded that biodiesel produced in that way should be classed as fossil fuel generation under articles 9 and 18. That is a technical and literal interpretation, but the man in the street would say that it was nonsense. The public would not want such a waste product—something that we pour down the drains, and cannot wait to dump, get rid of or export—suddenly to be turned into what many would regard as something that could have been dug out of the ground or that had cost a lot of money to find.
Ofgem’s ruling stated that, if fossil-fuel derived alcohols are used, no renewable obligation certificates will be issued, even for the biomass-derived portion of the biodiesel. That is illogical. We should allow 90 per cent. of the ROC, because 10 per cent. had not been made from reclaimed fuel. To have nothing at all makes a nonsense of the situation. Electricity generators therefore cannot receive renewable obligation certificates on electricity produced from recycled cooking oil, despite the fact that the fossil-fuel element of the fuel produced in that way is comparatively small and that the majority of the fuel is from a recycled waste stream.
There was widespread industry reaction to the Ofgem ruling, based on the fact that exclusion from the scheme would not encourage the generation of renewable energy, and Ofgem concluded that its ruling ran counter to the desires of the majority of respondents to the 2008 consultation. Again, the public will wonder why on earth there should be consultation when what is done runs counter to it; they will ask what the point was of consulting. Ofgem has further admitted that the issues raised by many of the respondents were policy decisions of the Department of Energy and Climate Change and outside Ofgem’s remit in its role as administrator of the scheme. I think of the greenhouse gas and societal benefits that biodiesel can claim over fossil fuel.
I am not a chemist; nevertheless, I know that the methanol on which Ofgem has ruled is not 100 per cent. renewable, as it comes from natural gas, which is at source a fossil fuel. Is there not a renewable source of methanol that the industry could use in place of that produced from natural gas?
I am not a chemist either. However, it has been pointed out to me—this point comes in my brief in about three lines; the Minister anticipates my speech—that there are such bioethanols, but that it costs five times more to use them. There are alternatives, but that takes us back to the German example. If we start making such fuels totally cost-inefficient, it will not happen. The alternatives are costly, which will add pressure to the industry.
Renewable companies have made extensive efforts to address the requirements of the Ofgem ruling with attempts to source recycled methanol—itself a waste product. The use of recycled methanol is encouraged elsewhere in Europe and certified by the European Union as a sustainable second-generation fuel. However, the Ofgem ruling excludes the biodiesel from the renewables obligation scheme despite contributing to renewables generation and waste re-use. The recycled methanol is not acceptable either.
I raised the matter only 10 days ago at a meeting of the Select Committee on Energy and Climate Change, which was discussing low-carbon technologies in a green economy with Greg Archer of the Low Carbon Vehicle Partnership. Mr. Archer did not hold back, describing the situation as a “bonkers anomaly”. He is not the only expert who has misgivings about the situation. The Renewable Energy Association—the industry body for renewables in the UK—agreed that the anomaly could be counter-productive. It stated in its response to the Ofgem consultation that, even if those substances could be interpreted as fossil fuels under the legislation, it
“does not make them fossil fuels. It simply demonstrates that the legislation is poorly drafted.”
The association went on to criticise the drafting of the legislation on the matter, pointing out that
“The ceasing of issue of Renewables Obligation Certificates for a fuel that was formerly regarded as renewable (and for which Renewables Obligation Certificates have been issued in the past) undermines investor confidence in the Renewables Obligation… Any continued adherence to poor drafting, when it has been demonstrated to be poor drafting, undermines investor confidence in the Renewables Obligation”.
There we have it—poor drafting and the bonkers anomaly have undermined investor confidence. Energy producer E.ON backed that view and stated in its response to the consultation that it is
“considered an anomaly that these fuels should be classified as fossil fuels when they are almost entirely of biomass origin. However, it is accepted that the existing legislation can be interpreted in this way. Excluding these biomass fuels from the Renewables Obligation would reduce their utilisation within industry, and could potentially hinder the advancement of novel technologies... The ultimate aim of the Renewables Obligation is to incentivise C02 emissions reduction, but the exclusion of these fuels could in fact lead to C02 emissions increases, as less fossil fuel would be displaced by biodiesel and/or glycerol..”
EDF Energy’s response to the consultation also supported that view. It stated:
“We would support amending the legislation to allow biodiesel to be treated as 100 per cent. biomass within the Renewables Obligation legislation.”
The Renewable Energy Association also raises questions about the ability of the ruling to interact with the draft renewable energy directive from the European Commission. It stated:
“It is questionable whether it will be permissible for the RO to exclude biodiesel…after April 2010.”
In July, in a response on this very issue to the hon. Member for Lewes (Norman Baker), the Under-Secretary of State for Energy and Climate Change was somewhat evasive when he stated—
If it helps the Minister, I will amend my remark and say that he was somewhat unclear when he stated:
“In practice the ruling by Ofgem is not expected to alter the production of biofuels from used cooking oils to a great extent.”
Therefore, he did not expect it to happen, but the industry is telling us that it did. However, it was at least acknowledged by the Minister, who was being somewhat unclear, that the Government
“are currently considering whether the implementation of the Renewable Energy Directive into national law has implications for the treatment of biodiesel under the Renewables Obligation.”—[Official Report, 21 July 2009; Vol. 496, c. 1625W.]
So it is obvious that the Government are fully aware of the anomaly surrounding biofuels from cooking oils, yet they do not appear to have any great impetus behind wishing to alter that unsatisfactory anomaly, and that is restricting the UK’s ability to maximise the use of a genuinely sustainable resource: used cooking oils. That indecision on behalf of the Government to alter the Ofgem ruling is not without cost to the renewable energy industry. I am told that the Ofgem ruling is already having a significant effect on the UK’s renewable energy industry that, alongside other challenges, could cause many small innovative producers to go out of business.
Although producers have moved ahead with the use of biomethanol and bioethanol, which are allowed under the Ofgem ruling, it is a much more costly alternative, which adds further pressure to the already struggling industry and has led to a significant number of microgeneration schemes being halted. I cannot believe that the Minister did not expect it to have a poor effect on the industry. If he can hear from the industry itself that a significant number of microgeneration schemes are being halted, are struggling or are worried about their future, I hope that today he may give us the impetus that is lacking. The negative effect of the ruling is, I am told, putting the UK at a competitive disadvantage, which is surely something that none of us wants in these difficult economic times. By comparison, other countries, such as Germany and the United States, are committed to supporting their domestic renewables industries.
I understand from talking to the industries that are interested in using such biofuel that British used cooking oil is being exported at considerable cost and use of resources. I seem to be going right back to the beginning of my speech. We are importing soy and palm oil and other oils into our country to turn into biofuel, and we are exporting what is our own resource in this country. Many companies on the continent or elsewhere are not affected by the ruling. Germany’s decision was of its own making. I understand that approximately half the biodiesel used on UK roads is being produced outside the UK and mainly in the US.
It seems to me that Ofgem has been criticised for the current situation. However, it has only been interpreting the legislation as it stands. As we have learned, used cooking oil can produce significant carbon savings and is an excellent way to use a waste product and to create energy. However, it seems that it is uneconomic for many producers to do so at present, because of the bonkers anomaly that has been pointed out. I therefore wonder whether the Minister would consider re-examining speedily—in fact now—the legislation that covers the treatment of biodiesel produced from used cooking oil. We need to iron out the anomaly. Pushing it into the long grass is, in effect, condemning this emerging industry to failure.
I should welcome a statement on the implementation of the renewable energy directive into national law. I also feel that there is an argument for a much clearer distinction between sustainable and non-sustainable biofuels in Government policy and for the Government to incentivise the production of the latter group more effectively, such as through the new proposed feed-in tariffs for electricity generation.
I want to conclude this debate by restating the views of the Department for Transport. In April 2009, it said that
“there is no case for pushing forward indiscriminately on those that [biofuels] may do more harm than good, it would be foolish to ignore any potential that they do have.”
I do not believe that the Minister today wishes to be, in the words of the Department for Transport, foolish, or indeed, in the words of the industry, bonkers. I believe that he wishes to be incisive and decisive and to cut through this vague anomaly. I should like to hear from him that UK biofuels from recycled cooking oils have a rosy future and that we can look forward to a greener future, because action has been taken to do away with something that was never intended in the drafting of the legislation.
I want to make one brief point in support of my hon. Friend the Member for St. Albans (Anne Main), whom I congratulate on obtaining this important debate. It relates to what happens if we do not recycle cooking fats, oils and greases. In my constituency in Royston, we have a thriving night-time economy. There are 30 places in which one can go out to eat a meal. In fact, there is one for every day of a typical month. Many of the restaurants, particularly the newer take-aways, use fats not just for chips but for any manner of stir frys and other meals. The proprietors of such establishments do not want to cause any environmental problem and would like to be responsible, but the issue has not been adequately highlighted.
In Royston, the main town drain became very blocked with fats, oils and greases. About two years ago, we had a flood that damaged a number of homes. A number of people had to leave their houses while they were repaired. When the blockage was investigated, it was found that there had been a build-up of fats, oils and greases and 10 tonnes were removed from the pipes at the end of the town drain. That issue has now been highlighted.
Anglian Water put a great deal of effort into looking into what happened and seeing what the way forward was. It has promised to monitor that particular area of piping annually, which is welcome. Moreover, it has started a major campaign on fats, oils and greases to persuade and explain to people who own restaurants and take-aways that they can dispose of the fats and greases responsibly. Companies have come to Royston and offered to take away the fats, oils and greases and to recycle them.
My hon. Friend highlights the important issue of the illegal or careless disposal of cooking fats and greases—what one might call fly-dripping. Ultimately, those costs will not be picked up by Anglian Water, or another water company, but will be socialised and paid by all people who have a water utility bill. Has Anglian Water estimated the cost of such clean-up activities in my hon. Friend’s constituency?
My hon. Friend makes a useful point, which I will investigate. I do not know what the figure is, but I know that this problem has happened elsewhere. I believe that in Southend, a fats, oil and greases campaign was needed to tackle the problem of the night-time economy. In general, the citizens of Royston, including me, are relatively responsible in how we dispose of our fats, but there is a case for wider public information.
About a year ago, I was at the launch of a campaign that demonstrated ways in which the domestic user could use their fats to create food for birds, for example, or at least dispose of them in a way that would not block the drains. This is an issue of solidarity between people in a town. If the result of a build-up of fats, oils and grease is that people’s homes are flooded, everybody has a duty to act responsibly. If we can help the environment at the same time by recycling those products, that is better still. I just wanted to make a short contribution in support of my hon. Friend the Member for St. Albans, and to say that it is important to look at ways of avoiding such build-ups and floods.
Let me say what a pleasure it is to have the opportunity of contributing to the debate under your chairmanship, Mr. Taylor. I also want to compliment the hon. Member for St. Albans (Anne Main) on securing this important debate.
This is not the first time that the House has addressed these issues, and I dare say it will not be the last. In June last year, I contributed to a debate in Westminster Hall following the production of a report by the Environmental Audit Committee on biofuels. I think I was the only person present on that day who is present in the Chamber today, and I will repeat one brief comment that I made, because it gives a clear indication of the Liberal Democrat position on this matter.
At the time, the Environmental Audit Committee called for a moratorium on biofuel development. Our stated position was not to support that call, because we believed that there was an important role for good, sustainable biofuels to play in the UK transport fuel market. Abandoning targets completely, which was being proposed at the time, would have been a step backwards for the UK’s sustainable energy industry and its ability to control its carbon footprint.
That was in June 2008, but things have moved on. That debate was quickly followed by the Gallagher review, which has already been referred to. My hon. Friend the Member for Lewes (Norman Baker) said in July 2008, after the publication of that review, that
“the broad conclusion that we should not abandon but amend the policy on biofuels is correct. Clearly, some biofuels are being produced unsustainably, but we should not throw out the biofuel baby with the bathwater, as some apparently would wish.”—[Official Report, 7 July 2008; Vol. 478, c. 1173.]
I would like to make three comments. The first is on the distinction between first and second-generation biofuels, which is hugely important. The second point concerns the 20p tax differential, which is key to the debate, and my third point is on the desirability of consistency in Government policy.
I will start with the distinction between first and second-generation biofuels—a distinction that is sometimes lost in the wider debate. Those of us interested in biofuels, who have attended the debates and done the research, understand that there is a hugely important difference. As we have heard, some first-generation biofuels, such as biodiesels, are produced from animal fats. There is also rapeseed oil, palm oil and bioethanol, which is produced by fermenting any kind of food stock, including cereals such as wheat, barely, sugar cane and maize. Those are the most controversial types of biofuel, and the Liberal Democrats have said that much more research is needed on them.
There are concerns about many of the first-generation biofuels. They contribute to higher food prices due to competition with food crops. They are an expensive option for energy security, if one takes into account total production costs when Government grants and subsidies are excluded. They do not meet the claimed environmental benefits, because the biomass feed stock might not always be produced sustainably. In many cases, they accelerate deforestation, and there are other possible indirect effects on land use to be accounted for. They have a potentially negative impact on biodiversity, and they compete for scarce water resources in some regions of the world.
Therefore, there are many serious questions to ask about first-generation biofuels. That is why it is important to distinguish them from second-generation biofuels—about which we now hear much more—which are those biofuels produced from crop and forest residues and non-food energy crops. Second-generation biofuels include those from recycled substances, such as those that feature in this debate. In my opinion and, I guess, in that of most hon. Members, they are far less controversial. We are supportive of second-generation biofuels, not least because they do not compete with other crops.
The hon. Gentleman makes a valid point about the distinction between the two types of biofuel. Does he believe that the public have enough information? Have they been buying into the headlines that we have seen screeching about some of the non-sustainable biofuels? Could the public be more educated about the differences between the two? It is an important difference that I am not sure is always highlighted as well as he would like.
The hon. Lady makes a fair point. When I introduced the distinction between first and second-generation biofuels, I said that I do not think that it is widely understood by the great public out there, who have many other concerns to occupy them. It is an important distinction, and I think that more could be done. I look not only to the Government, but to industry and to all of us. We share responsibility for trying to educate the public about the distinction between first-generation biofuels, where the case is not satisfactorily made, and second-generation biofuels, which most of us in the House would agree have a future. Her point was well made.
My second point relates to the 20p tax differential. As we know, the Government have decided to abolish the current 20p per litre duty differential for biodiesel in 2010. That will make biodiesel significantly more expensive than road fossil fuels, and therefore it will become commercially unviable in many instances. In short, it will hinder the development of the biofuel market as a whole, when we should be doing more to encourage it.
Since coming into effect in 2002, the 20p mechanism has enabled the commercial supply of some biofuels to the UK market. That has given many consumers the opportunity to run their vehicles on biofuels or biofuel blends. In combination with other measures, which include regional capital grants, that has led to the construction—and planned construction—of some biodiesel plants. There are indications that the product might be exported abroad. Sales of biodiesel rose dramatically following the introduction of that incentive, but since early 2003, they have been relatively static, fluctuating between 1 million and 3 million litres a month.
The key point is that it depends on the biofuel. We oppose the abolition of the 20p differential where genuinely sustainable—that is, second-generation—biofuels are concerned. In our view, it will not help the biofuel industry to grow and might hinder its development, which will not help in the long term.
My third and final point relates to consistency in Government policy and the stopping and starting that has gone on over many years. It is fair to say that the Government’s biofuels policies have chopped and changed constantly in the past couple of years. The 20p differential is one instance, and the Gallagher review is a second. I emphasise that point. My hon. Friend the Member for Cheltenham (Martin Horwood), who is not, sadly, in his seat any longer, mentioned a drop in UK sales for companies involved in the manufacture of equipment for biodiesel plants. The statistics ought to scare all of us. GreenFuels Ltd, the world’s largest small-scale biodiesel equipment manufacturer, has seen a drop in UK sales of more than £1 million in the past 12 months and is now focusing primarily on exports. That is a sad statement, but it is true.
The Government cannot keep stopping and starting. It is not fair to the industry. We need more consistency. It is time for the Government to decide their line and to stick to it.
It is a pleasure to serve under your chairmanship, Mr. Taylor. This has been a short but excellent debate. I praise my hon. Friend the Member for St. Albans (Anne Main) not only for securing this debate but for clearly articulating the issues in a way that will be readily understood by people outside Westminster and the narrow biofuels debate as involving obvious and common-sense points. That is greatly to her credit, and is perhaps overdue in the debate on this issue generally. I congratulate her.
We have heard two other likewise worthwhile and sensible contributions. My hon. Friend the Member for North-East Hertfordshire (Mr. Heald) highlighted the damage that wasteful or thoughtless disposal of cooking fats and greases can do. It is often inadvertent, not deliberate, but fats build up over time and can end up not just doing damage to our sewerage infrastructure, which is crumbling in many places and could well do without the added stress, but welling up and giving rise to floods that inflict misery and financial damage on families. I know that my hon. Friend has done a lot of work in his constituency to ensure that such families get the help that they need. I am also sympathetic to the sensible points made by the hon. Member for Cheadle (Mark Hunter), who highlighted a number of issues that must be addressed.
I hope not to go over the same ground too much but to examine some of the issues behind this debate. [Interruption.] The reason why I am struggling is that I am trying an environmental innovation by printing my speech on both sides of the paper. If I keep getting confused and muddled as I go through, Mr. Taylor, I hope that you will understand that this rather fumbling performance is due to a commitment to the environment rather than just my ineptitude.
We hear increasingly frequently from politicians and the media about the opportunities of climate change, the benefits from a shift to a low-carbon economy that will come to investors, innovators and entrepreneurs alike and the dangers of climate change if we do not act decisively. It is easy to imagine that the starting gun has only just been fired in the scramble to beat climate change and develop new low-carbon business sectors, but that would overlook the small but world-class UK cooking oil recycling business, which has been going for quite a long time. As my hon. Friend the Member for St. Albans said, it produces approximately 40 million litres of biodiesel from spent cooking oil each year. Entrepreneurs up and down the country have seen the opportunities that lie in exploiting clean, safe energy from waste technology.
I believe that in the 21st century, resource efficiency—by which I mean the careful and efficient economic use of all resources, including waste resources—will be a key benchmark of a globally competitive and successful economy. Many of the wasteful business practices of the last century simply will not be sustainable economically, let alone environmentally, in this century. I hope to have the chance to put a couple of innovators into the context of the broader challenges and look ahead to their future.
Ultimately, both ethanol recycled from industrial processes and biodiesel recycled from cooking oils perform the same essential functions: to extract the energy value of what would otherwise be waste products, reduce fossil fuel-derived emissions and make a profit. It must be worth while. Whether it involves reclaimed energy from household waste through anaerobic digestion, which the national grid estimates could supply up to 50 per cent. of our space heating needs, or wood pellet-fired heating and electric generation—a by-product of the timber industry that is undergoing huge growth—energy from waste will have a large part to play in decarbonising our economy.
Recycling cooking oil and ethanol has little potential for the controversy that many energy-from-waste technologies seem to attract. It is just a no-brainer. I am told that buses powered by cooking oil may emit a faint but pleasant aroma—perhaps of Mum getting the tea on—rather than the heavy and poisonous diesel fumes that it replaces. UK companies are now marketing products to allow large institutions such as schools to recycle their waste oil on site to power things such as minibuses and lawnmowers. If we could end up with fully or partially closed-loop energy economies, what a step forward it would be.
Such technologies also weigh favourably in the biofuels debate. The Conservatives have supported the renewable transport fuel obligation and would consider a more progressive extension of its obligations given satisfactory sustainability criteria, which has been a concern. We understand that investment in the development of the all-important second generation of biofuels needs optimism and boldness in our approach to the first. We all know that the first generation has not been without its problems, but that is not the endgame.
The Government’s launch of the sceptical Gallagher review only months after the start of the RTFO did much damage to the growing sector and caused untold damage to a field of research and development in which the UK has a genuine global lead. However, land use and agriculture are increasingly at the forefront of the international climate change debate. They form the focus for much of the disagreement around the Waxman-Markey Bill in the US Congress, and at the Copenhagen summit next month rainforests will be an issue which is one of the most important and hardest to pin down. It is clear that we do not fully understand the carbon dynamics of large shifts in global agricultural production and land use. As a result, biofuels will continue to be a highly controversial and challenging policy area globally.
However, recycling our ethanol and cooking oil sidesteps all those bigger and wider concerns. It is simply not part of the same debate. Perhaps the only sustainability question it poses involves how much fried food we consume as a nation, but that is a question for another day. Biofuels will become a key technology in aviation and industrial petrochemicals only through the widespread adoption and requisite understanding of less high-tech biofuel technologies such as recycled cooking oil. When will the Minister respond to the Industrial Biotechnology Innovation and Growth Team report that was launched earlier this year by the First Secretary of State? Biofuels and the nascent use of bio-feedstocks in the chemical industries must play a vital role in a decarbonised UK economy. We must not lose sight of the importance of that.
The development of transport biofuels must not be used as a vanity shield for a lack of clear direction and leadership on electric vehicles. Only the Conservative-controlled Westminster council has delivered a serious number of electric vehicle charging points. The Mayor of London is driving that agenda at a city-wide level. Meanwhile, the much-needed plan to implement a nationwide network of charging points has disappeared from the Government’s list of priorities.
Despite the successes in the recycled biofuel sector, progress is being stymied by red tape and onerous regulation. The certification of waste storage and the handling of waste substances can be hugely bureaucratic. Rather than encouraging the uptake of the systems, that can put off enthusiastic newcomers. What steps is the Minister taking to streamline those processes? How is he encouraging public institutions such as schools and prisons to adopt such systems? How many councils offer or support local cooking oil recycling schemes? How is he helping them to put pressure on local transport providers, such as bus contractors, to use such products where possible? There is no point in trying to expand the market further when regulatory and fiscal constraints are pushing the market in the other direction.
Does my hon. Friend agree that the public will fail to understand why the matter is being dealt with in the way it is? They are being asked to alter their lifestyles and to pay ever-higher taxes on things that are not sustainable and that pollute. They will therefore wonder why we are dealing with the sustainable fuel that we have in this way. It seems mad. As he said, this issue is a no-brainer.
My hon. Friend has put her finger on it. It does not make sense to ask for schemes to encourage the uptake of low-carbon fuel while refusing to make sensible minor changes to its fiscal treatment so that it makes commercial sense to produce it. Her suggestion of a 90 per cent. renewables obligation certificate would be a sensible way to reflect the fossil fuel element in such fuel.
The role of Ofgem in this matter must be questioned. I am meeting Alistair Buchanan this afternoon and will put it to him that Ofgem’s position runs contrary to common sense. Although it can be argued that recycled cooking oils are not a purely renewable source of fuel, they are undoubtedly a low-carbon alternative to fossil fuels. We must embrace that. It is not a purist ideology but a route map to a low-carbon economy. There will be not a totally carbon-free economy but we could have a low-carbon economy.
Either the Government are hiding behind Ofgem and failing to provide the clear policy leadership that we have a right to expect on this important topic, or they are taking the jobsworth, pedantic, apathetic approach that is typical of all Governments who have run their full term. The failure to grip something that is commonsensical is symptomatic of that third-term malaise. I assure my hon. Friend the Member for St. Albans that we will grasp this issue. It is a no-brainer, it is not a big deal and it ought to be a key part of the low-carbon economy. It will be addressed in our energy Green Paper. I hope that the Minister will respond positively and that we will not have to wait for a change of Government to get the common-sense change that we need.
I have 35 minutes, which hon. Members may use to examine this issue in detail. However, I do not plan to waffle just to fill up that time. Hon. Members are welcome to intervene if they want to explore particular points.
I congratulate the hon. Member for St. Albans (Anne Main) on securing this important debate at an important time in the development of policy on this issue. She showed a tremendous command of her subject. I was planning to say that she put her case sensibly and reasonably, but I revised my view when she carried out an unjust personal attack on me. I have lost any sympathy for her and the case that she made. However, let us continue to examine the issues, devoid of personality.
The hon. Lady focused on what she called the “bonkers anomaly”. I accept that there is a debate to be had about part of the policy in this area. However, she did not mention any of the good things that have been done. The industry has reached the position it is in because of the support that has been mentioned, but no credit has been given to the Government for giving that support. The Government’s future direction in this area is consistent, makes sense and hangs together. I would have liked some credit for the way in which this country virtually leads the world in reporting requirements for sustainability in this sector. We have one of the best systems and are trying to encourage the rest of the world to adopt similar standards.
We established the Gallagher review when concerns were expressed about sustainability. That is a valuable resource. I am not sure whether the hon. Member for Cheadle (Mark Hunter) was criticising the Government for setting up the review or for responding positively to its conclusions, but I think that both were the right things to do. We slowed down the progress of the road transport fuels obligation in response to Ed Gallagher’s report. “The UK Low Carbon Transition Plan” and the renewable energy strategy that we published in July show a consistent and stable pattern for Government policy.
There have been questions over the sustainability of biofuels and ethanol that are imported from the developing world and over whether they are farmed at the expense of natural rain forests. Does the Minister agree that those issues are a million miles away from the sensible and pragmatic re-use of waste cooking oil? It is an almost entirely separate debate.
At several points in the debate, hon. Members have raised the sustainability of the international bioenergy industry, the importance of protecting the environment by diversity and the food supply. I agree with those points. I will not go into those areas in this debate, but refer hon. Members to the well-informed Adjournment debate in the Chamber on 13 October, which was secured by my hon. Friend the Member for Brent, North (Barry Gardiner). I dealt with those issues during that debate. The Government are worthy of credit for chairing the working group of the Global Energy Partnership that is developing the sustainability criteria for the future of biofuels throughout the world.
The hon. Lady’s complaints are a tale of two regulators. She mentioned the description of used cooking oil as a waste product. She said that it is a tricky product to dispose of. I agree. The regulator responsible for the safe disposal of tricky waste is the Environment Agency. It has made decisions about the definition of waste that have caused difficulties in the industry—I accept that. However, it is an independent regulator set up by Parliament to make such decisions. Who am I to try to override or second guess its judgments? We have to work with the agency’s conclusions, and we have tried to do so in relation to this matter by developing a series of end-of-waste protocols that are acceptable to the industry. Those protocols enable the industry to get around the obstacles put in its way by the Environment Agency’s rulings, and are acceptable in terms of our international obligations, including under European Union law.
In response to the Minister saying, “Who am I,” I am delighted to say that the Minister is the Minister. I would love to think that if the Environment Agency is putting obstacles in the way of the Government and he wishes to deal with the matter differently, with his good offices, he could sit the agency down and say, “This is what we wish to achieve. Please don’t put obstacles in our way.”
No, I am sorry. The Environment Agency is not putting obstacles in my way; it is putting obstacles in the way of people who might dispose of tricky wastes in unacceptable ways. That is a public good and I want it to do that. However, I do not want the agency inadvertently to get in the way of good businesses that we want to support—hence the development of the end-of-waste protocols, which are currently in train. That is something I am doing now, as the hon. Lady asked me to.
The Environment Agency is one regulator. The hon. Lady mentioned the other regulator—Ofgem—which is the guardian of the renewables obligation system. When we in this House make our decisions about promoting renewable energy in this country, it is important that we can reassure the public and give them confidence that they are, indeed, renewable sources of energy. On the use of methanol derived from natural gas, it is true that, last year, Ofgem made the decision that it is from a fossil fuel source and therefore is not a renewable source. Ofgem is an independent regulator and is responsible to Parliament. It made that decision and ruling after taking independent expert advice and consulting the industry and the public at large. Again, I say who am I to overrule the decision of the regulator?
I am concerned that the Minister seems to be a bit confused about who he is. Let me tell him who he is: he is the Minister in the Department that should have policy oversight. Is he telling us that the Department of Energy and Climate Change and his ministerial team have ceded responsibility for strategic direction, policy and decision making to unelected quangocrats? That does not come as a great surprise because that is what it feels like, but I am surprised to hear him admit it in Westminster.
With respect, I think it is the hon. Gentleman who is confused. Parliament sets the law on waste disposal and on renewable energy, and it establishes independent regulators to uphold the law for us. If they uphold the law for us, we should not complain when they do their job properly. If as a result of their conclusions, we think that the law needs to be changed, this is the place in which to do it. I welcome the hon. Lady’s suggestion that there is one change of one law that might benefit a particular industry, and we will debate that later during my contribution. However, I want to assert the independence of regulators to do their job free of political influence, when we, the politicians, have given them a job to do.
I have no idea what the answer to that question is. I will examine whether I can get such a figure from the Treasury, and if I can, I will write to the hon. Gentleman with an answer to his question.
While we are on the subject of the 20p differential—there is a train of thought in my mind, but I have been diverted to deal with this—although no credit for the measure has been given to the Government by hon. Members, people are now complaining that it will come to an end. The decision for it to come to an end was taken in Budget 2008 and the judgment was made that, by the time it came to an end, the industry would be sustainable without it. It was thought that replacing the differential with the road transport fuels obligation for transport power and the renewables obligation for heat and light energy would be sufficient to take the strain in terms of giving support to the industries concerned. We also recognised that there was a sustainability issue, and the RTFO and the renewables obligation both include mandatory reporting of sustainability standards, whereas, clearly, an across-the-board 20p reduction in duty has no such requirement.
The hon. Member for Cheadle made an intelligent point about whether we could in some way modify the duty differential perhaps to take account of particular subsections within the industry that we thought were particularly desirable and had continuing support for. That is a good point to make as a Budget representation, and I shall pass it on to my right hon. Friend the Chancellor. So the duty point is certainly not simply about clawing in lots more money; the decision was made in the Budget two years ago.
On the question about the bonkers anomaly, I would like to ask whether it really is an anomaly. If Ofgem’s conclusion that a source of the reagent for converting the biomass into a biofuel is methanol produced from natural gas—a fossil fuel—is reasonable, are there alternatives to methanol from a natural gas source that could do the job just as well? The hon. Lady said that there is a recycled methanol and that Ofgem would also claim that that was not eligible for the renewables obligation. I think that she is wrong about that, but I will check the point with Ofgem. It seems that if we have a recycled methanol source, instead of a methanol from natural gas, which is a fossil fuel, the objection that Ofgem has to that particular reagent would be overcome and there would not be an obstacle. So, as I said, I think she is wrong, but I will check the matter with those who know.
I would be delighted if the Minister sought clarity on the matter. However, whatever the source of the methanol, it is a small proportion of the product—about 10 per cent. Does he agree with Ofgem that having a small proportion of something derived from a fossil fuel in a product makes it entirely fossil fuel? That is the bonkers anomaly that most people do not think is reasonable.
The point is that we are talking about renewable energy and Ofgem has concluded that that particular biofuel is not 100 per cent. from a renewable source. What are we going to do? Should we make an exception for that one source but not for others where fossil fuel is mixed or is part of the process for producing a renewable energy? Are we going to make an exception just for this one industry, or are we going to say that sources other than renewable are acceptable for support from a renewables obligation? We might want to do that and we could do so if we wanted.
My current opinion is that the renewables obligation supports 100 per cent. renewable sources, not less than that. However, as I said, I am open to the argument being made in the debate, and I will take away the hon. Lady’s suggestion of, for example, a 0.9 renewable obligation certificate, because it is 90 per cent. I will consider that suggestion, because it is constructive.
On a more general point, the hon. Lady mentioned that we will be implementing the European Union’s renewable energy directive in 2010. We intend to draw up a national action plan to show how we will implement that directive by June next year. Everything we have said in the debate will inform the preparation of that national action plan, which will be done across Government and will include contributions from the Department for Transport, the Treasury and my Department. This debate has also been valuable for that reason.
My final direct response to the points made relates to the hon. Lady’s comment that she wanted me to hear from the sector itself. I am perfectly willing to meet sector representatives if they want to talk to me about their concerns and make constructive suggestions. I hope that that is helpful to her.
I want to say something about bioenergy generally. It does, indeed, have a hugely important role in delivering the UK’s renewable energy and climate goals. We expect that the majority of the UK’s 10 per cent. renewable transport target for 2020 will be met from biofuels, and that about 30 per cent. of the overall UK renewable energy target could be delivered through biomass heat and electricity. Taken together, those figures equate to about half of the UK’s overall 15 per cent. renewable energy target for 2020 being met from bioenergy. We certainly see that as a considerable, substantial and mainstream contribution to renewable energy. Bioenergy offers exceptional opportunities for the UK. It can create new business and green jobs, particularly in the agriculture, forestry and distributed energy sectors. It can provide greater diversity for the UK’s energy mix, and so increase our energy security. It can also make a large contribution to the UK’s ability to meet its carbon budgets.
Before I get to the main body of the speech, let me explain the terminology. I am taking the European Commission’s approach that biofuel refers to transport fuel made from biomass, and that bioliquid refers to liquid fuels that are made from biomass and used for electricity or heat generation. Fuel made from recycled cooking oil or recycled ethanol may be a biofuel if used for transport but a bioliquid if combusted for electricity or heating. Bioenergy is a flexible catch-all phrase that covers solid, liquid and gaseous biomasses and their use for any energy purpose—transport, heat or electricity.
First, let me address the potential use of bioliquids for electricity generation. The renewables obligation is the Government’s main mechanism by which to support renewable electricity generation. It places a requirement on licensed electricity suppliers annually to provide Ofgem with a certain number of renewables obligation certificates or to pay a buy-out price for any shortfall against that target. The obligation increases year on year. Since its introduction in 2002, it has successfully tripled the level of renewable electricity in the UK from just 1.8 per cent. to 5.4 per cent. last year.
Before April this year, the renewables obligation offered a flat-rate support of one tradeable ROC per megawatt-hour of eligible renewable electricity generated. However, in response to changing circumstances and representations that were made to the Government, and in order to make the obligation a more effective and efficient mechanism, in April this year we made changes. The main change was the introduction of banding to provide differentiated levels of support to different technologies and to offer a greater incentive to those that are less well developed and further from the market. It is that mechanism which enables the hon. Lady to argue that we should differentiate for the technology we are discussing. At the same time, we introduced mandatory sustainability reporting for all generators above 50 kW that use biomass for electricity generation.
The mandatory reporting criteria for renewables are as follows. Generators have to report available data on a range of criteria, including the source and format of the biomass, the volume used and the country of origin, as well as details of any environmental standard that has been met and land use change. Those data will provide necessary information on the type of biomass being used in the UK and whether it comes from sustainable sources.
Secondly, I want to discuss the Government’s main mechanism of support for renewable transport and biofuels—the renewable transport fuel obligation. The RTFO, which was launched in April 2008, places an obligation on fossil fuel suppliers to produce evidence that a specified percentage of their road transport fuel in the UK comes from renewable sources such as biodiesel and bioethanol. That annual obligation will increase in stages. The RTFO for 2009-10 is 3.25 per cent. of total fuel supplied. In light of Professor Gallagher’s recommendations in his 2008 review, we have slowed down the planned rate of increase to 4 per cent. in 2011-12 and 5 per cent. in 2013-14. As the hon. Member for Cheadle has said, there were calls for support to that industry to stop completely because of concerns about sustainability. His Committee resisted those calls, and so did the Government, and I think that we responded proportionately to Professor Gallagher’s concerns.
The RTFO includes mandatory reporting on carbon and sustainability, making the UK one of the first countries in the world to establish a reporting system for the sustainable performance of our biofuels. Current data show that 99 per cent. of British biofuels are meeting our voluntary sustainability standards and are achieving average greenhouse gas savings of 47 per cent. The UK was instrumental in successful agreement being reached on the renewable energy directive, with its challenging overall target for the whole EU of having 20 per cent. renewable energy by 2020. In particular, we played a significant role in setting mandatory sustainability criteria for biofuels and bioliquids in the directive. Those criteria include minimum greenhouse gas savings, good agricultural practices and controls on land use change.
We recognise that land is not a boundless resource, and that population growth and lifestyle changes in both the developed and developing world mean that the demands on our planet are greater than ever. Sustainability is at the heart of Government policies and actions to build a competitive low-carbon bioenergy sector in the UK. We aim to maximise the many benefits of that to biodiversity, farming, forestry, rural communities and employment, while also managing and minimising any risks to the environment both in the UK and worldwide.
Let me address the other support that the Government will give to those sectors. By December, we will consult on our proposals for a renewable heat incentive. The Energy Act 2008 allows the incentive to provide financial assistance to generators of renewable heat and to producers of renewable biogas and biomethane. Our aim is to make the incentive as accessible, flexible and user-friendly as possible to potential investors in renewable heat at all scales, from industrial to domestic. We intend to introduce the incentive in April 2011.
In contrast to the renewables obligation, we are considering allowing all forms of biodiesel to be eligible for the renewable heat incentive. That would allow homes that currently use heating oil—about 9 per cent., many of which are fuel-poor—to switch very quickly and at a relatively small cost to a less carbon-intensive fuel when the RHI is introduced. In a sense, the hon. Gentleman is making the point that we have listened to past criticisms and are doing something different for heat. However, there is also a policy priority here. Heat generation is the least well-developed when it comes to the renewable sources that we need to take up for the future.
It rather looks as though one hand does not know what the other is doing. We have the sensible adoption of a policy that recognises the low-carbon nature of biofuels, whereas other parts of the Minister’s Department either do not have access to the same thinking or are not capable of following the same decision-making process. Why are there two strands of thinking in one Department? I thought we were supposed to be getting beyond such things.
That is a totally unfair characterisation of the position. There are strong policy reasons why we ought to go the extra distance that I have described for a renewable heat incentive in 2011. By that time, arguments such as those we are having today might have brought about change to the renewables obligation criteria, and the two might be consistent by then. At the moment, however, only the renewables obligation is before us. The hon. Member for St. Albans has made the case that there is an anomaly in the legislation that we could do something about. She has made some sensible suggestions for alterations that we might make, which I shall consider. That does not mean that I am not aware that there are differences or that I do not appreciate how we might overcome them.
I appreciate the Minister’s complimentary words. Cooking oil could also be used for district heat and power if we decide to go down the route of ensuring that facilities are built to use that technology. That could dovetail nicely into what the Minister wishes to achieve, using a source that is infinitely preferable to some of the biofuels that are currently utilised.
I agree, and let me be more helpful. If that step were taken—this issue is still subject to consultation, so let us see what people think—and we designed the renewable heat incentive in that way, it would help the heating oil industry to diversify, with a move towards renewable fuels, by blending heating oil with biodiesel. The industry’s technical body, OFTEC—the Oil Firing Technical Association—is currently conducting trials and has operational plants running with a 15 per cent. blend. It hopes to have a 30 per cent. blend available by 2010 and a 100 per cent. blend by 2015. That is exactly the point that the hon. Lady was making.
I would like to take a slightly different tack. The Minister has spent the past few minutes talking optimistically about the future for biofuels, which is good to hear. The whole debate has been conducted in a non-partisan manner, and I am particularly grateful that he accepted my earlier point about the 20p duty differential. However, despite his generous offer to forward that to the Treasury so that it can be looked at for the Budget, I am still a little concerned that the optimistic future he talks about could come too late for many of the companies that produce biodiesel—
I hear what the hon. Gentleman says. As policy makers, how often do we hear dire warnings of disaster if something happens? The Treasury is weighing up the warnings from the sector on the effect of the complete removal of the 20p duty differential next April, and I am sure that my right hon. and hon. Friends at the Treasury have that at the forefront of their minds—it was certainly at the forefront of the Chancellor’s mind when I spoke with him about it on Monday evening. With regard to the RTFO, when the 20p differential is due to disappear, the buy-out rate for the RTFO will increase from 15p a litre to 30p, which in our judgment compensates for that loss.
I understand that and refer the hon. Gentleman to my earlier comments about how that was weighed up at the time of the 2008 Budget, and I have said that that will be taken into account between now and the 2010 Budget.
By December 2009, the European Commission is due to report on the need for sustainability criteria for solid biomass used for electricity and heat generation, thus keeping the thread that I have described about the reporting of sustainability criteria. We are looking ahead, and in April 2010, which is not so far away, we will introduce the feed-in tariffs that will provide support to renewable electricity generators of up to 5 MW. Our consultation proposed including generation from biomass in dedicated electricity plants, combined heat and power plants or for anaerobic digestion. The consultation recently closed, and we received more than 750 responses, which we are currently analysing. That is a very large number, showing the keen interest in the subject.
We hope that the increased certainty that feed-in tariffs will provide will encourage a wide range of people and organisations, such as householders, community groups, businesses, schools, hospitals, universities and all the examples the hon. Member for Bexhill and Battle mentioned, to consider installing low-carbon electricity generation.
The Minister has been extremely generous in allowing interventions, and I promise that this will be my last as he is running out of time. The feed-in tariff is a welcome development, although one that the Government were not very keen on initially. Can he confirm that, unfortunately, it appears that the Government anticipate that only 2 per cent. of the UK’s total electricity generation will be supported by feed-in tariffs by those methods by 2020, and is not that a pathetically unambitious—
To bring those points together, by December 2010, we are due to bring the sustainability standards applied to biofuels under the RTFO and to bioliquids under the renewables obligation into line with the requirements of the renewable energy directive, and that is where the national action plan that I mentioned earlier comes in.
On the specific points made about recycled cooking oils and recycled ethanol, the use of waste and residues for energy is promising. With our concerns on direct and indirect land use change, it is a clear no-brainer, as everyone has said, to do much more with what we already have and to capture more of the UK’s organic waste and residues that currently end up in landfill or, worse still, being disposed of illegally in rivers, as was recently exposed by a court case in Watford that concerned an incident last year in Welwyn Garden City. Instead, that waste should be used for bioenergy, whether for transport, heat or electricity. Next year, we will consult on potentially banning some organic waste from landfill, so that such materials can only be reused, recycled or used for energy generation.
Bioliquids, which are 100 per cent. renewable, are rewarded through the renewables obligation. It is not the purpose of the renewables obligation to support fuels that are directly or indirectly derived from fossil fuels. Therefore, biodiesel produced using methanol derived from natural gas is not eligible for renewable obligation certificates, but it is eligible for support under the renewable transport fuels obligation, given the more limited potential sources of renewable transport fuel.
The Government are keen that our package of financial incentives for bioenergy provides coherent and appropriate long-term signals to the market. With the planned introduction of the feed-in tariffs and the renewable heat incentive, which will join the renewable transport fuels obligation and the renewables obligation, we are looking carefully at how we can best achieve that.
In conclusion, achieving our ambitious targets on renewable energy and on emissions reduction will require the participation of all parts of our society. The Government are working hard to support the wide range of emerging technologies, such as advanced biofuels and bioliquids, and remain vigilant that the UK’s biomass supplies are sourced sustainably. We hope that, in the coming years, everyone from the largest multinational company to the individual householder will play a full and rewarding role in the UK’s move to a low-carbon economy.
I have finished my prepared text and do not want to waffle to fill time, and I have taken a large number of interventions, which I hope has been reasonable, so if it is all right with the hon. Member for St. Albans, I would prefer to finish early.
Military Vehicles and Aircraft
It is a pleasure to introduce the debate under your chairmanship, Mr. Taylor, and I am delighted to have secured it on my first attempt—normally I try for months to secure debates, but on this occasion I was lucky first time.
I wanted to have this debate not least because my years in the House of Commons are drawing to an end after nearly 27 years and I shall not be around when the next defence review takes place. I would like to use the opportunity to pull together matters raised in defence debates I have previously initiated and those to which I have contributed. I will set out a narrative and throw what I hope are constructive points into the melting pot, which I trust will be pursued in the next Parliament when the defence review is taken forward.
I have never regarded defence as a party political issue and have always tried to praise or, at times, constructively criticise both Government and Opposition parties on their defence policies. I apologise to the Royal Navy for not including ships in this debate and hope that the senior service will not be miffed, but Back Benchers sometimes have to focus on a narrow brief rather than take a broad-brush approach to all defence matters. I believe that the issue of vehicles and aircraft offers a clear insight into military thinking and direction, and it is pleasing to note that some of the issues I raised when I began to be more active in defence matters in 2004 are now bearing fruit and perhaps are being taken more seriously in some quarters.
In July this year senior figures from the British military and from coalition countries, together with Ministry of Defence scientists and engineers, gathered to discuss strategy and tactics for countering the threat from improvised explosive devices in Afghanistan, an issue I had raised three years earlier in the House, predicting what would happen based on our experience in Iraq. I pose the following rhetorical question: why did it take three years for the experts to catch up?
I begin with the issue of Snatch Land Rovers in Iraq. General Jackson thought that the aftermath of the Iraq war could be handled with the tactics used in Northern Ireland by sending in Snatch Land Rovers. Once casualties started to mount up and criticism of the vehicle’s vulnerability to explosive devices began, we entered a propaganda phase with all the great and the good averring that a small vehicle was required to win hearts and minds and to be able to access narrow streets. Then Snatch patrols were escorted by Warriors through the most dangerous places, which obviously gave the game away in respect of the line that had previously been taken.
However, because of the lack of a suitable vehicle, a bunker-down approach was taken which eventually led to our failure in Iraq. Convoys became so unsafe that they withdrew to their bases, where they were mortared and rocketed, until they withdrew from those places as well. We lost manoeuvrability and tactical advantage and were put on the back foot.
The Mastiff arrived too late to turn the tide of the damage that had already been done, but that is a story in its own right. Why was the first built-for-purpose mine-protected vehicle—the Mastiff—built at the opposite end of the scale to that which was required? In other words, why was it so large when something smaller like the Ridgback, or something even smaller than that, would have been more appropriate from the outset? It was clear that the Army did not want that design of vehicle at all. It plumped for the death trap Vector, which we thought had been withdrawn from service but will not be withdrawn until next year—too late, sadly, for the last RAF fatality.
The politicians, though, were right to support the procurement of Mastiff, which has been a great success in saving the lives of so many troops.
I congratulate the hon. Lady on securing this important debate. She rightly makes the point that we did not react quickly enough. Does she blame the Army chiefs or civil servants in the Ministry of Defence for that? Where does she feel the blame lies for our failure to react with the speed that we should have?
I am grateful for that intervention. I do not feel that I should blame either of those two bodies; certainly it was a combination of both. The problem so often in the procurement of vehicles, aircraft or whatever, is that the process is convoluted and complex, and there are people such as the hon. Gentleman who campaign for certain projects that affect their own constituency. I think, too, that there is perhaps a mentality in the armed services, because of their loyalty and the way they are trained and so on, which means that they are not always able to think quickly out of the box—except when they are in the field, of course, and that is totally different. I believe that that is why the present situation has arisen, but I am not accusing anyone. I am just making what I hope will be a jolly good case for change in the future.
Just like the Snatch-Warrior combination in Iraq, we recently saw two Mastiffs of the counter-IED team escorting a Brigade Reconnaissance Force convoy of 26 Jackals during Operation Panther’s Valour in Afghanistan. The lead Mastiff was struck by a massive IED that would have obliterated a Jackal. This vehicle, like the Vector, is one that I have been critical of in the past.
We ought to remember that the Mastiff was initially purchased for use in Iraq, where there are paved roads, but it has since been deployed in Afghanistan.
I know that my hon. Friend has a great interest in promoting Israel. I am not aware of the attributes of that vehicle, but I am sure that those who are present today will have heard what he says about it.
The sales pitch for procuring the Vector and the Jackal was based on their off-road performance and manoeuvrability, which is fine for special forces and true reconnaissance. However, when it comes to general duties, using off-road vehicles that are not suitably armoured is suicidal. When the Jackal first came into service, there was no intention to add armour, but when it was later heavily criticised, the usual cycle began of adding to a vehicle armour for which it had not been initially designed.
Of course, young lads, who are always boy racers at heart, love driving the Jackal—that is, until they or their mates are killed or maimed. The Ministry will not reveal how many vehicles have been lost for the good reason that it is the Army’s prestigious toy, and the figure is high.
If convoys have to be taken off road, what signal does that send to the local population? The international security assistance force regards the roads as unsafe, but expects local people to use them for business and commerce. The difficult and varied terrain of Afghanistan, with its canals and pinch points, is not conducive to manoeuvrability, and many Afghans have also been killed by IEDs.
Meanwhile, because the UK gave away its mine-clearance equipment from Bosnian days—that is, the Chubby sets and engineering plant—it has had to purchase Talisman, which is due in 2011. There is still no mine-detection vehicle such as we had in Bosnia. That vehicle was called the Husky, which is confusing, as two vehicles are coming on stream with the same name. Even the Rhodesians had mine-detection vehicles more than 30 years ago with the Pookie, which had been developed from a Volkswagen Beetle. We now have to resort to foot patrols using hand-held mine detectors and, believe it or not, we do not have an armoured bulldozer.
Until recently, the problem has been the Army’s obsession with the future rapid effect system concept—this partially answers the question of the hon. Member for Chorley (Mr. Hoyle)—including the futuristic medium-weight vehicle and electric armour, which is far ahead of its time as far as the technology is concerned. The design structure has proved useless for the form of warfare being pursued in Afghanistan.
While not officially a FRES vehicle, the disastrous Panther was part of the overall package. It is highly complicated—one just has to lift the bonnet and have a look. I will admit that I have not done that, but a friend of mine has and assures me that that is so, in case anyone challenges me on that point.
The Panther has been upgraded at enormous cost to try to make it work in Afghanistan. The cost has been £20 million for 67 vehicles, and therein lies the problem. The Army chose unsuitable vehicles that look futuristic but cost a fortune, bearing in mind the cost of loss of the vehicle plus its replacement, and not forgetting death and serious injury compensation.
The Panther is quite a large vehicle, and now is probably top-heavy. If it rolls over, there is no rear exit. There are only side doors, so those inside rely on the air conditioning—not a pleasant scenario to describe. Compare the Panther with the Mastiff and Ridgback, which work on blast deflection rather than blast absorption. If I had £5 for every time I have used those two phrases, I would be a wealthy woman by now. And Mastiff and Ridgback are not written off when they have been hit. They may not be easy on the eye, but they are practical and have saved life and prevented injury on innumerable occasions.
From the same stable as the Mastiff comes the Ocelot light protected patrol vehicle, which was launched at the Defence Systems and Equipment International Exhibition held in London in September. The Ocelot is based on simplicity and quick change of modular use and, like the Snatch, has a rear dismounting capability. Its competitor from the Jackal camp is a future model of the Supacat, the SPV 400, which, interestingly, has a curved windscreen. I wonder if that has a practical purpose or whether it is just a bit of window-dressing for marketing purposes, because curved armoured glass would cost a small fortune to manufacture.
I hasten to add that I am not favouring one manufacturer over another. One should always consider the basic overall design. That issue was obvious from the start with the Vector and, as a result, affected its performance, because more weight was added to armour it, which caused problems once it was operational, as the number of injured and the number of body bags that have resulted show.
Money has been poured down the drain because of poor procurement decisions on vehicles. So is it any wonder that the United Kingdom cannot now pay its Territorial Army? After the propaganda of the past two years, promoting one Army of regulars and reservists, we are now experiencing massive discrimination against reservists and we could be portrayed as a country that cannot pay its soldiers.
Another flawed vehicle is Tellar, the totally unprotected bomb disposal vehicle, which is discreetly being replaced by a variant of the Mastiff, which was seen in Operation Panther’s Valour. I also have doubts about the new Husky vehicle, which will probably not survive an IED attack, but which is the preferred choice of the Army.
Insurgents always find the weak spots in vehicles, and they know which ones are vulnerable. That is why it is so important to understand the physics in blast deflection—to save life and limb. Just like the British public, I am a complete outsider on military affairs, but we are all becoming wary of the unreasonable level of death and injury, the human costs involved and the financial cost of the military’s choice of vehicles and platforms. It is becoming increasingly apparent that the military’s belief that state-on-state conventional high-intensity warfare equipment can be used in long-term conflicts, such as Afghanistan, is flawed. No nation on earth can afford to put such equipment through such long, drawn-out warfare.
Since the hon. Lady has mentioned Afghanistan, does she agree that safe mobility is the key issue for British troops there? She may not be aware that three companies of the Royal Anglian Regiment from my constituency flew to Afghanistan last week and are probably engaging the enemy right now, in their usual brave, totally professional manner. Does she have any estimate of how quickly we can improve safe mobility and armoured mobility in Afghanistan? Does she expect the Minister to give her answers on that this morning?
The whole tenor of my speech is about safe mobility of one sort or another. I commend the hon. Gentleman’s constituents, who are fighting and are probably in an engagement in Afghanistan as we speak. It is for the Minister to reassure those Members of Parliament present about how quickly some of these vehicles and aircraft—I have not got on to those yet—can be brought into theatre. Certainly, safe mobility is what we are all about. That is why Ricardo and Force Protection Europe have produced the Ocelot for ease of maintenance, versatility and a low centre of gravity. How many personnel have been killed or injured, including, sadly, being drowned, when their vehicle has turned over into a canal and they have been trapped underneath? The overturning of a vehicle can be an exceptionally difficult thing to handle and is a horrible way for people to die.
A typical example of using expensive equipment is the use of the Nimrod maritime reconnaissance aircraft, which costs a cool £30,000 an hour to operate. Compare that with the Iraqi’s using a Sama CH2000, which can be purchased for about the cost of 12 hours of Nimrod flying and can be operated from theatre, unlike Nimrod, which clocks up massive airframe usage. Of course, the Sama uses the same camera. I think that it takes a considerable time for Nimrod to get to theatre from wherever it is based, so there is a lot of unnecessary wear and tear.
I will gloss over the A400M airlift aircraft and those original six or eight not-fit-for-purpose Chinooks, the history of which goes back over successive Governments.
Yet another suspect case is the Merlin helicopter, about which reservations have also been expressed by others. I understand that the Danish Merlins that we purchased are not the same version as ours, so they will require different training to be involved. At RAF presentations, that aircraft was presented as the most brilliant going, but it still has to be upgraded to go to Afghanistan, no doubt including Carson blades. I am concerned that this aircraft is so complex that, in the heat and dust of Afghanistan, it will be a nightmare to service, just like the Typhoon Eurofighter. Getting spare parts is difficult, as they cannot be bought off the shelf, as most equipment can be. Therefore there are delays in getting parts to keep the aircraft in the air.
For the money that has been poured into helicopters that are still not working, and in trying to make the Army’s Lynx version work at huge expense because of the Navy requirement, we could have had the US Blackhawk helicopter at a third of the cost and a fleet of Hueys—Bell 212s or 412s. To call those cheap and cheerful might be a slight exaggeration, but they work in high and hot environments and their size makes them ideal for counter-insurgency work, as the concept of the Rhodesian Fireforce tactics teaches. There is no need for a helicopter shortage. Do not let us forget that, in the Rhodesian conflict, damaged helicopters were often repaired by the crew when they landed in the bush. These days, it seems that we only blow up our damaged Chinooks, which could only have been airlifted out of the unsecured areas that they were in by the Russian-built Mi-26. The one that the UK hired was blown up by the Taliban and was described as a transport aircraft at the time; but of course, it had a much more important role.
Many areas of present helicopter use could be undertaken by single engine, fixed-wing aircraft, such as the PC-6 Pilatus Porter, which would be safer, more practical and cost-effective. What an asset such aircraft would be, operating as an integral part of the brigade reconnaissance force. There is no doubt about the future and benefit of unmanned aerial vehicles, but again we must not forget how much has been squandered on such projects as the Phoenix—is it millions or billions of pounds? There are so many noughts on the end that one gets confused, but I believe that the actual sum was £350 million. For the same sum, we could have had small, fixed-wing aircraft undertaking surveillance work, which would also have tied in with future Afghan air force requirements.
I have often mentioned the Super Tucano ground-attack aircraft simply because the RAF presently uses the Tucano trainer, but there are many other types of fixed-wing aircraft available. Boeing, for example, is considering restarting production of the OV-10 Bronco turboprop, which is a twin-engine aircraft upgraded with modern defensive suites. That is a Vietnam-era light attack and observation aircraft, which was last produced way back in 1976. In contrast, in future, we will use up the airframe time of the Eurofighter at £90,000 an hour. In addition, the Tornado has to be massively upgraded to increase its shelf life: the first aircraft will cost £28 million and, if successful, a further 40 aircraft will be upgraded at £5 million each. For a further £1 million, we could have had a fully equipped, brand new EMB-314 Super Tucano, which can carry the same ordnance as a Harrier but with greater endurance.
Time after time, I have suggested that the use of hi-tech, high-intensity warfare equipment, designed for short-term conflict operations, sets the wrong tactics for counter-insurgency, or however we want to describe long-term stabilisation wars. Horrendous present and future financial problems face us, with money coming from different budgets, but all of it coming finally from taxation or borrowing and with the Territorial Army being one of the victims. General Sir David Richards has said that
“we simply can’t afford to retain a full suite of capabilities for all eventualities.”
That is the crux for consideration in the defence review.
What does the United Kingdom want the military to do? That is what must be decided—not what the military believe it should do—and that will not be easy. Hon. Members are campaigning for the two new aircraft carriers, but will we have any aircraft to put on them? Did we need all those Eurofighters, or is the contract so expensive to break that we are stuck with them? A correspondent told me recently that
“they fly over us at work in fours, and they are”
“for about ten seconds so we see a thousand pounds worth of cost fly by.”
Those are large sums. I also wonder what will happen to the A400M.
If the military continue to be obsessed with high-tech, high-intensity warfare, pushing aside practical alternatives, they will bankrupt themselves and us. Some people seem to believe that they have a divine right to an unlimited pot, but General Richards seems to think differently.
If we are not careful, our defeat in Iraq may be repeated in Afghanistan, so a decision must be made on whether we should ever again be involved in anything similar. On present performance, we should stay out of conflicts unless we have equipment and platforms that are simple, practical, cost-effective and able to be sustained in the long term.
I thank the hon. Lady, who is being generous in giving way. The A400M is not high tech—far from it. It has a joint Rolls-Royce-Snecma twin-turboprop prototype engine, which will be very good. It could be the workhorse, as it comes midway between the C17 and C130 jets, and it could have a civil application throughout the world, as well as a military application. There would be many benefits if we went ahead with it.
The hon. Gentleman has made his case and almost made his speech. I am sure that all hon. Members hung on his every word. He is a very good salesman, or should I say a good member of the marketing team? I shall leave that rhetorical question. I do not propose to go into it today, because I have had more than enough to say on different vehicles and aircraft.
Simple, practical and cost-effective platforms that can be sustained in the long term should enable sensible tactics to evolve to win without having to enter a propaganda war to pretend that we won, when in reality, we lost. The new Parliament and the new Government will face some difficult decisions following the defence review, which will set the agenda for decades to come. I trust that I have added some food for thought to the process, and I wish those hon. Members who will be involved in that review and its aftermath every success.
I congratulate the hon. Member for Congleton (Ann Winterton) on securing this debate. She raises some important issues. I agree with her general principle that we need a strategic defence review, that we must decide our objectives, and that we must put an end to the ad hoc arrangements.
I am reminded of a Christmas cracker that I opened many years ago. As with all crackers, it had a motto in it, which said that all we learn from history is that we learn nothing from history. It is a cheap little joke for Christmas, but there is an element of truth in it, and when it comes to military campaigns and procurement there may be more truth in it than is comfortable.
The principle is exactly the same. Those are two ways of saying the same thing.
We must examine our defence needs, and try to find the equipment that fits them. That is why we need the strategic defence review. As politicians, we must be truthful about the cost, but we have not been. We have always said that we must work within the defence budget, but then expected people to pull the proverbial white rabbit out of the hat without giving them the money to buy the white rabbit to put in the hat in the first place. That makes it difficult for our commanders, the Ministry of Defence and the forces on the ground who ultimately pay with their injuries or their lives because we have not provided them with the right equipment at the right time. We had a phase of the “just in time” principle, but I heard it said in Iraq that the “just too late” principle would have been more accurate.
I take issue with the hon. Lady on a couple of matters. She said in ePolitix that
“we were virtually defeated in Iraq and are sadly heading the same way in Afghanistan.”
She is not contradicting that, so I take it that it is an accurate reflection of her view. I thought that the war in Iraq was illegal, that it was immoral, and that we should not have gone there, and I voted against it. However, I do not hold the premise that we were nearly defeated, because that would make an assumption about what we were trying to do while we were there. That raises an important point. When examining our equipment and what we are trying to achieve, the equipment will not necessarily achieve our objectives. The Army, Navy and others have understood what is required, but politicians and those in Departments often did not understand what was required in Iraq and Afghanistan.
I visited Iraq in 2003 with the armed forces parliamentary scheme, which is excellent and I recommend it to any hon. Member who has not been on it. We were there in the June just after the President of the United States had declared the fighting to be over. I went out in Snatch Land Rovers, and on top of a Challenger 2 tank, so I know the difference between heavy and light armoured. Both were appropriate for what they were being used for. The Snatch Land Rover was perhaps the right vehicle at that time and in that place. However, we were quite unprepared for what to do with the peace. We might have won the war, but we lost the peace that followed. That is the danger in Afghanistan—that we will lose the hearts and minds because we are not putting enough in to secure basic resources.
In Iraq, we tried to put in electricity, but local people dug up the cables that we put in, stripped out the copper and sold it over the border because they needed the money. The Iraqi army’s containers full of munitions were left unguarded, so kids went into the containers, stripped out the mortar shells, left them on one side, and took the wood back to their houses because they needed to boil water. They also played genie games by opening up the mortars. Our preparedness after Iraq was totally lacking. We did not put in enough resources, the Americans did not put in enough resources, and we thought that we could operate on a shoestring. We nearly lost Iraq—at one point I thought that we had—because of that lack of preparedness.
We followed exactly the same pattern in Afghanistan. We diverted ourselves by first going into Iraq, so we did not have enough troops and resources on the ground, and we did not do enough on the ground to secure the peace, to rebuild, to replace the opium poppies and so on.
I have spoken about that in debates, and I agree with the hon. Gentleman on the reconstruction, bringing civil enterprises into being, and so on, but that is a different argument. When we went into Iraq, we were inadequately prepared militarily because we simply did not have the vehicles to save soldiers’ lives. We had Snatch Land Rovers, which were deployed because we had nothing else at the time.
That point is right. We had no other replacement, but this is about the pre-planning; we were not prepared. We knew we were going in, but we did not work out in advance what we required to build the peace. This is where hindsight is a wonderful thing. We did not see the insurgency that was to follow. In not securing the peace and security afterwards, we allowed the insurgency to grow. We left those people all the armaments in the containers, so they could take the explosives and use them. We did not do the other things required, so we created, politically, the circumstances that meant that the vehicles that we put there were inadequate, and in addition we did not plan to replace those vehicles.
The point that I am trying to get to in a roundabout way is that circumstances change. Sometimes they change because of our lack of planning—I think that in Iraq it was our lack of planning—and circumstances are changing in Afghanistan, in a way because of our lack of planning and lack of determination to build the peace.
Generals have to deal with that change on the ground. They also have to deal with—the hon. Lady referred to the high end—future war. I do not know what the next big conflict will be. I do not know the type of weaponry that we might need if there is a major conflict elsewhere in the world. I would like to think that the idea of Russian tanks rolling across the plains of western Europe is something of the past, but military planners must assume the worst and certainly until the early 1990s, they were still working on the basis that there would be that type of major conflict. Military planning is in tramlines; it is blinkered at times—the hon. Lady made her point in that regard—and is slow to change. She also made a point about FRES. Sometimes military planners have been slow to get away from that kind of thinking, but that does not mean that they should think, “We don’t need the high tech”, because at some point we might. If we discard that totally, we will perhaps do an even greater disservice to our services than we are doing by our rather blinkered thinking at the moment. I shall come on in a moment to the detail of what the hon. Lady said.
The fact is that the next Government, after the defence review, have to decide what we need as a country because we cannot afford to have it all. My point is that we have ensured that young men and women have served in Iraq and are serving in Afghanistan and while they are in mortal danger, we should do our best to support them with appropriate vehicles and aircraft. In the long term there may be different decisions, but frankly, bearing in mind the economic situation in this country, we cannot afford a full suite of capabilities, as General Richards said.
Unquestionably we cannot afford the full suite; that is the purpose of a defence review. That is perhaps why we need to consider working more with our European allies and colleagues in the European Union and others so that we can examine where we can make savings in costs and bring together resources to ensure that we are more effective.
The hon. Gentleman has just made a point that I cannot let go without challenge. He suggests that the solution to our budgetary problems might be to engage in more extensive co-operation with our European partners. I gently point out to him that it is that collaboration with our European partners that has resulted in equipment taking an inordinate time to produce and coming in at vastly excessive cost. It has been much more expensive and taken much longer to bring in than it would have if we had gone it alone in the first place.
The hon. Gentleman makes a valid point. Certainly in the past what he describes has been the case, but that does not mean to say that it has to be that way in the future. We just have to have smarter procurement, which I will come to. The term that applies is pork barrel politics. There has been a lot of that in past European programmes and in the collaboration that we have had with the United States, which has its own problems.
We are able at times to change equipment. The Challenger tanks were seen as unfit for purpose when they were in Oman. We managed to change them so that, as I was told when I visited Iraq in 2003, they were exactly the right vehicle for the time. The SA80 guns that we gave our forces were deemed not fit for purpose. We have managed to change them and, when I spoke to our forces on the ground, they said that the SA80 is a wonderful gun, second to none. There are perhaps one or two other rifles that are as good if not slightly better, but it is in the top tier.
We have mentioned the Snatch Land Rover. Clearly, we needed to bring in other vehicles such as Mastiffs. The difficulty comes with the procurement programme and its ability to change fast. We are looking at changing circumstances and this is about how we can have the structure in the Ministry of Defence and in procurement to allow rapid change and for Ministers to sign off rapid change. They have tried to do that under the urgent operational requirements programme. That has worked to a point, although it has diverted money from the other programmes, which leaves the MOD short for some of its preferred options.
Let us consider the conflict and the threat. A few years ago in Afghanistan, the threat was very different from what it is now. The terrorist tactics—insurgent tactics—in Afghanistan have changed from conventional, almost all-out conflict to try to gain ground and territory, to the simple terrorist attack involving IEDs, which were used in Iraq. However, even the technology of IEDs has changed, which requires a change in our vehicles. We need to look ahead to such changes. The conventional mines were replaced. The IEDs changed and then people started using shaped projectiles, which are very high technology. They have a convex shape. When the explosion goes off at the side of a road, they can penetrate through extra layers of armour plate, so we ended up having to put extra layers of armour on some of our vehicles—we had not done that before—because the risk was increasing. Again, the debate comes back to how we deal with that.
I thank the hon. Gentleman for his kindness in giving way. He is coming on to a point that is of some interest to me and many others. It relates to adaptability. Of course, it was a completely different conflict in Northern Ireland, where the security forces had to learn over time to be exceptionally adaptable as the terrorist regime changed course, but that is equally so in Iraq and Afghanistan. How does he consider that such adaptability can be pencilled in with regard to procurement and trying to ensure that sufficient resources are made available for the future?
I will come on to that, because the Gray report, which has just been published, covers the procurement process. It is a very important point. The main thrust of what I am saying is that we must be able to adapt rapidly to changing circumstances. There is no point in just blaming generals for not having the right equipment at the right time, because we do not always have the structures in place that allow them to respond in that way. In dealing with Northern Ireland, which is—
My apologies, Mr. Taylor. The hon. Member for East Londonderry (Mr. Campbell) made his point, but in Northern Ireland the circumstance was slightly different; it is smaller. Dealing with a country of the size and complexity of Afghanistan is much more complex, and the adaptability for different circumstances is changing. We were dealing with lower-altitude fighting in Iraq. The average person reading a paper in the pub on a Sunday in the UK might think that Iraq and Afghanistan are the same, but the altitudes are very different and how the helicopters and other equipment perform at altitude is entirely different. It is not always obvious to a lay person exactly how we should deal with that.
There are two or three specific points on which I am in a lot of agreement with the hon. Member for Congleton. She referred to the Chinooks. Why the Chinooks are still sat, having their digital wiring ripped out for analogue to be put in, I do not understand. Will the Minister give us an update on those Chinooks and when they will be ready for service? My understanding is that only a few people are working on them. Will the Minister explain how progress can be speeded up so that those important Chinooks can come into service?
There has always been criticism—the hon. Lady referred to this—of the number and types of vehicles that we have. That is a very valid point: we have too many types. She talked about simple equipment. It is not necessarily a case of having simple equipment, but having equipment that is the same, so that people do not have to work on a series of different vehicles in theatre, is easier. It will save on training and all the other costs if there are fewer models of vehicle and people do not have to move from one to another.
I have to wonder why the Ministry of Defence is looking to do a life-extension programme for the Puma and the Sea King. The Minister has responded on this, and the Defence Committee is still debating the issue. However, in its 11th report of this Session, the Committee wrote:
“Given the age of both Sea King and Puma and the poor survivability of the Puma, extending their lives at considerable cost is not the best option”.
My understanding is that the MOD has not yet accepted that point, and I hope that the Minister will reflect on it. Other, off-the-peg vehicles are available.
Conclusion 4 of the Committee’s report said:
“We are also concerned that operational commanders find they have to use ground transport, when helicopter lift would be preferred, both for the outcome and for the protection of our forces.”
That is probably one of the most significant sentences in that document. Not providing commanders with the equipment that they need on the ground will put lives at risk—indeed, it will actually take lives. The hon. Member for Congleton referred to pinch points, and that is exactly the problem in Afghanistan. Troops can go off road, but they will come to a narrow point at some stage. That is what the terrorists tend to concentrate on and what poses the greatest risk to our forces. Our troops cannot always do a helicopter lift over something, but if they can, they can reduce the risk of people being targeted on the ground.
To conclude, the Gray report said:
“Balancing this equipment programme, and keeping it in balance, is clearly a very significant objective of this report. As a result, the report recommends routine Strategic Defence Reviews, to be conducted in the first session of a new Parliament, as a mechanism to ensure periodic ‘resetting’ of the MoD’s plans.”
That resetting and the ability to be flexible are vital if we are to ensure that we have the right equipment at the right time for our forces on the ground.
I am delighted to follow the hon. Member for Teignbridge (Richard Younger-Ross) and I will pick up some of the points that he made. However, I want, at the outset, to congratulate my hon. Friend the Member for Congleton (Ann Winterton) on yet another masterful piece of debating and on bringing intelligence about our armed forces to the Chamber. That intelligence is hugely valuable to us all, and I am just sorry that there are not more hon. Members in Westminster Hall to hear what she has had to say or to participate in the debate, which is crucial to the men and women of our armed forces. They are all our constituents and they are out there fighting for their lives and for our country as we speak.
I have no doubt that when my hon. Friend, sadly, leaves this place, she will apply to take part in that excellent competition “Mastermind”. We have no doubt what her specialist subject will be or that she will be able to see off virtually every question that is put to her on it. She has taken a great interest in the issue before us, and we have all been the beneficiaries of the contributions that she has made. That is not to say that I have always agreed with everything she has said, but she has provoked a debate that we need to have.
My hon. Friend was right to set out the deficiencies with much of our equipment. She rightly started with the Snatch Land Rover, and it was perfectly clear quite early in the Iraq campaign that that vehicle was not up to the task. It is not as though that was something new, because we had precisely the same problem in Northern Ireland. There, however, we addressed it by bringing in helicopters, rather than more heavily armoured vehicles, as we have in Iraq and Afghanistan. Using helicopters allowed us to avoid the improvised explosive devices, or the roadside bombs as they were then known, and to lift troops to the front line at Crossmaglen, Armagh and further west. Like many of us, my hon. Friend will have flown in a Puma into what, in Afghanistan, would be called a forward operating base, thereby avoiding any risk from roadside bombs.
The hon. Gentleman alludes to the usage of helicopters in Northern Ireland. The loss of life, particularly in South Armagh, was significant over 30 years, but it would have been vastly more so had it not been for the deployment and usage of helicopters in particularly troubled parts of Northern Ireland.
I am grateful to the hon. Gentleman for making that point, which speaks for itself. It also rubs in the fact that the Prime Minister has failed to show any vestige of understanding for the needs of the armed forces. Despite all that experience in Northern Ireland, where we had a body of knowledge, the Prime Minister, when he was Chancellor of the Exchequer, refused properly to fund the helicopter programme. Indeed, he cut £1.4 billion from it, and we have suffered the consequences ever since. Notwithstanding the advice of the Public Accounts Committee at the time, he persisted with a ruinous policy, which has undoubtedly cost lives.
I am grateful to my hon. Friend for giving way. May I just tell him that the situation in Northern Ireland was completely different from that in Afghanistan? The problem in Afghanistan, as he will well know, being a pilot himself, relates to flying helicopters hot and high. We have nothing that is totally suitable for the environment there, so many helicopters spend masses of time on the ground. The spare parts situation is critical, and it takes a huge amount of effort, money and time to keep those helicopters in the air that are in the air. The choices that the military and the MOD have made regarding helicopters have been a bit of a disaster.
Yes, some of the helicopters are not adequate, and the Lynx, which my hon. Friend mentioned, is an obvious example. That is why the future Lynx is important, because it will have an upgraded engine and will be able to operate hot and high. However, I have to tell her that the Chinooks and C-47s that are operating in Afghanistan are doing absolutely sterling work. Yes, there is a shortage of spares, to which I will come in a moment, but there simply are not enough aircraft in theatre. My hon. Friend mentioned the Merlin, which is about to be deployed. The six aircraft bought from the Danes are of a slightly different specification from the Royal Air Force Merlins, but I have no doubt that they will add hugely to our capability. Above all—I want to emphasise this—they will give commanders in the field the range of choices that they need. Simply giving them a narrow range of choices is not the answer. We are talking about a complex military operation, and we owe it to our servicemen and women to give them and their commanders the range of air and land vehicles that they need to adjust to the enemy’s changing tactics.
I entirely agree with the point that the hon. Gentleman has just made. On flying hot and high, it is surely understandable that we had problems when we were first in Afghanistan in 2001-02, because we may not have expected the conflict. Given that we have now been there for a long time and that we knew that this would always be a long-haul campaign, does the hon. Gentleman agree that the failure to supply the right equipment is an appalling indictment of MOD procurement?
I think so, but in this case I am going to leap to the defence of the Ministry of Defence, because it was the Treasury and the then Chancellor of the Exchequer who were at fault. The then Chancellor was personally responsible for what happened, and it is only fair to pin the blame on him—he starved the Ministry of Defence of the money it needed to provide kit that was identified as necessary. As Prime Minister, with his current Chancellor, he is responsible for starving the Territorial Army of the money it needs now. It is grotesquely unfair to blame the service chiefs. They have no money. They have got to find the money from somewhere, and wherever they found it they would have been criticised; but we shall debate the Territorial Army tomorrow and I do not want to stray out of order today, Mr. Taylor. Nevertheless, the point made by the hon. Member for Teignbridge is valid.
The only other observation that I want to make about helicopters is that it would be helpful if the Minister told us why he decided to proceed with the Puma life extension programme, by which the helicopter, the accident record of which is not a happy one, is being upgraded in France and Romania, and will take three years to be fit to enter theatre. It is a damning indictment of the Government that they have gone for that programme, which I am told by the manufacturer could be accelerated if they wished. Those of us who have seen operations in Afghanistan know that our forces could certainly do with more Chinooks in the field. They have proved to be extremely capable and resilient aircraft, and perhaps the answer would have been to order more of them. We shall see about that after our defence review next year.
In fairness to the Government, since 2005 they have responded. I think that my hon. Friend the Member for Congleton knows that when I came back from Iraq in September 2005, having seen the inadequacy of the Snatch Land Rover, I picked up the phone to the then Secretary of State and said that something had to be done about producing better armoured vehicles. He said that the matter was in hand. Sadly, at that stage, it was pretty well the Vector, which my hon. Friend rightly criticised. Since then a new range of vehicles has been introduced. My hon. Friend mentioned the Mastiff, which has proved extremely effective. However, that protective kit is not cheap. The Mastiffs are about £1 million a copy. Inside, yes, they are bank vaults on wheels, and the Mastiff in particular has a fantastic record of saving lives, but they are not suitable for all operations. They have limited off-road capability.
[Mrs. Joan Humble in the Chair]
The point that I want to make to my hon. Friend is that there is a vast amount of highly technical equipment in a Mastiff, including communications equipment, none of which comes cheap. There is the equipment for electronic counter-measures, which are one way of trying to deal with some IEDs. A lot of work has to go on ensuring that the latest iteration of the electronic counter-measures equipment does not interfere with the radio communications equipment. I hope that that thumbnail sketch shows the huge complexity of producing those vehicles to what is called theatre entry standard. It is very expensive.
My hon. Friend the Member for Congleton referred to the Ridgback. I have driven in a Ridgback at DVD, the defence vehicles display, which is a great exhibition. This year there was a self-contained area just parading the armoured vehicles so that one could see their range at a glance. It was truly impressive. We have certainly moved on in the past four years, since my hon. Friend and I first expressed our concerns. However, at £650,000 for four seats, one must ask how much value for money that is, to achieve the military effect. There is a further problem because from inside those vehicles it is pretty difficult to see outside. In a Warrior, of course, one cannot see anything. Situational awareness is very important to the soldier. That is why the Jackal is so popular. It is not an expensive toy. It is a very serious bit of kit, which has tremendous off-road capability—and off road one has less chance of giving the enemy the planned route, and in theory that extends the options. We now have a range of equipment, but we should keep costs constantly under review, because what matters is not the individual platforms but the capability, and capability can be delivered in different ways. I slightly resile from concentration on individual bits of kit, although of course that is the Minister’s responsibility. As the shadow Minister, I have responsibility too, but I should want us to focus in our mind’s eye on capability. What do we need to do to achieve the effect? We may do something in a Ridgback, but we may do it in a helicopter.
The scene is one of constant change; it is not static. It was very interesting to talk to a soldier at DVD. He had come back from Afghanistan earlier in the year. I asked him about the Viking. The only time I went out in the desert outside Camp Bastion I was in a Viking. I thought it was a horrible bit of kit—claustrophobic; I did not like it at all. However, when it was introduced about three years ago it was the bee’s knees. Everyone thought the Viking was a superb bit of kit. The guy I spoke to said, “Our equipment only has to be out there for a couple of weeks and the enemy has ascertained exactly where its vulnerable points are.” That makes the challenge to policy makers and procurers very demanding indeed. The enemy have a vote in this. It is easy to think of the enemy as primitive. Their attitudes are primitive, but their ability to use every bit of modern technology to advance their cause is not.
We, too, must adjust. Our procurement programme must be much more adaptable and agile than it is. The issues are highlighted in the Bernard Gray report, which we all regard as being in part the statement of the blindingly obvious, but also a good encapsulation of where the problems are. There is a need for agility in decision making. The good news is that industry is responding. I do not know whether my hon. Friend the Member for Congleton was able to go to the defence equipment exhibition at London docklands last month. I know that the Minister was there. There was a fantastic array of the capabilities being produced by industry, which is really responding. My hon. Friend mentioned Ricardo and its kit. There are many others coming forward offering a plethora of vehicles, and my hon. Friend will be pleased that most have V-shaped hulls; people have been reading what she and others have said. Industry is responding. It is necessary to have a procurement system that can also respond quickly.
My hon. Friend has a point when she says that we need things cheap but cheerful. It is a rather inadequate expression, for me, but it encapsulates the things on which we need industry and the services to focus their minds: they should not over-specify. It is not relevant to this debate, but we shall have a new future surface combatant—a new ship. I and my colleagues keep telling the Royal Navy not to over-specify it. What the Royal Navy needs is ships, but we should not over-specify its equipment.
I repeat what I said earlier about Afghanistan. It is easy to say that the enemy is primitive and that we need only a few turboprops.
Defensive aid suites would have to be put on and would add weight. The Tucano has a payload of 1.5 tonnes, and I think that the Harrier’s is about three times that. The defensive aid suite does not deliver payload, it is expensive and adds to the cost, and it renders aircraft more vulnerable as they are slower flying and so on. I have flown the Tucano and the PC-21. I commend the latter to the Minister as the best aeroplane for the future training of Royal Air Force pilots. As the first non-company man to fly it, I can say that it is a magnificent bit of kit. There is a real role for less sophisticated equipment, but we must be careful.
I turn to a point raised by the hon. Member for Teignbridge, which is that military planners have to plan for the worst. It is important that we are not seduced into saying that Afghanistan is “the” war not “a” war. Yes, there is an imperative to win in Afghanistan, but it is a seriously dangerous world out there. Not only do we have Iran, but Russia has invaded a sovereign country, laying claim to 450,000 miles of the Arctic seabed, and North Korea is developing and selling nuclear weapons. We live in a dangerous world, and the idea that we should surrender some of our capability at this time would, it seems to me, make it more dangerous.
General Richards is a superb chief of the general staff and a good man. I know him well and like him, and he makes many intelligent points, including about the range of capabilities, something that I shall touch on as I conclude. However, I believe that we must to try to adapt our equipment to whatever military operations are immediate. We have the Tornado and Harrier for close air support, which is vital, and both aircraft have performed well in that role, but they have a role also in the more strategic campaign, so adaptability will be an important factor. However, we cannot afford to make do without an air superiority fighter. We do not know what is around the corner. In recent conflicts, the air environment has been benign; there has been no serious air threat and our ground forces were therefore protected from air attack. If our ground forces are vulnerable to air attack—well, I need only mention the name of Simon Weston to make people realise what can happen if we do not have air superiority.
My hon. Friend the Member for Congleton did not, I think, touch on the subject of our continental partners. However, I can say that it is pretty reprehensible that our NATO partners in Europe have failed to come to our support. At a meeting with the German Defence Minister earlier this year, I asked, “Why didn’t you send us some helicopters?” He said, “Oh, we have an election coming up, and in any case we need the approval of the German Parliament.” Our European partners should understand the need to step up to the mark. They have helicopters, and they should make them available to support the campaign in Afghanistan, which is at the heart of military operations.
I have some criticism of the Government. They were slow to respond, as I said. In a spirit of reasonableness, I can say that they have now produced a range of vehicles. However, I do not like the way in which Ministers are lauding the fact that they have spent £3.6 billion on urgent operational requirements as if it were some kind of fantastic largesse. It was the very least they could have done for our armed forces, given the nature of the war that we are fighting. The idea that it should have come from the core Ministry of Defence budget is utterly perverse. That is exactly what urgent operational requirements are for, and that is what they should have delivered.
If we are at war, then of course we need the kit, but there is a price to be paid. There is no through-life capability management attached to urgent operational requirements. As we heard from the hon. Member for Teignbridge, the lack of fleet commonality is another problem, so kit does not fit into the core programme but stands alone. There is also a lack of spares, which was summarised by the Public Accounts Committee in its report earlier this year. That includes a shortage of spares for the Mastiff, which, as my hon. Friend the Member for Congleton said, is doing a fantastic job out there.
Finally—I wish to leave the Minister plenty of time to answer the many points that have been made—the defence review that the Government want to hold and which we will hold if we are returned to power next year must be based on foreign policy. However, it must take account of threats and potential threats in the wider world. My hon. Friend cited General Sir David Richards as saying that we could not afford the full range of capabilities. Yes, we know that the Government have destroyed our economy, but we are nevertheless one of the major economies in the world. Instead of asking whether we can afford to remain a major world power, we should ask whether we can afford not to. Serious consequences will flow if the nation should decide that it wants to concentrate on Afghanistan and retreat from the rest of the world. Given that the world is such a dangerous place, that is something that we cannot afford to do. We must resist it. Serious consequences would arise were we to retreat into our shell.
I conclude by thanking my hon. Friend the Member for Congleton for all that she has done in highlighting the importance of kit for our troops in the field. She has done the House, and those on the front line, a great service by doing so.
I congratulate the hon. Member for Congleton (Ann Winterton) on her success in securing this debate. It is not only right and natural but highly desirable at a time when our forces are fighting in a distant country in the interest of the security of this nation and given the tragic losses that have resulted, that Parliament should focus on that conflict and that Members of Parliament should probe the Government on matters such as our procurement policies and our choice of vehicles and helicopters. I congratulate her on doing so. As the hon. Member for Aldershot (Mr. Howarth) rightly said, the hon. Lady has a superb mastery of her brief. I am always amazed by the detail of her knowledge and the homework that she does on all kinds of equipment—not merely what equipment has been procured but what we might have procured. It is a complex and wide field, so I sincerely congratulate her.
The Government are, of course, 100 per cent. committed to and focused on doing the very best for our fighting men and women, but I sometimes think that we tell the enemy too much about what we are doing and about our capabilities and what we are planning. On certain subjects, such as counter-IEDs, I shall be discreet and cautious in what I say, but as the hon. Lady raised that important matter at the outset, I can say that not only are we focused on the subject—I meet the team who work on it systematically every two months to go through exactly what is being done—but we collaborate closely with our allies on the subject. Without going into detail, I can say that our relationship with the Americans on that subject is about as close as it possibly could be. I hope that we are not leaving any stone unturned. The hon. Lady sounded anxious about whether we had close co-operation with our allies, but I assure her that we most certainly do. It is essential to all of us because we all face the same threat, fighting as we are in the same cause.
Not entirely surprisingly, the hon. Lady dwelt at some length on the armoured and protected vehicles that we have in Afghanistan, and she mentioned the Snatch. I do not want to disagree with anything she said about Snatch, but it was not a vehicle that was conceived for the Afghan campaign. As I have said before in the House, it is inevitable in every war that we do not start off with exactly the kind of equipment that we would ideally like to have. We take into account the terrain, the threat and the enemy tactics, and improve things as we go.
My philosophy is that our procurement programme should be actively managed and that we should aim to secure a constant pipeline of improvement, whereby at any one time, we buy the best equipment that money can buy, we ship it to theatre as rapidly as we can—after we have trained people on it—and, while we are doing that, we plan for the next improved generation of equipment. When I say generation, I mean a cycle lasting one or two years.
During the time that I have had my responsibilities, our vehicles in theatre have been pretty much transformed. We are replacing Snatch with Snatch Vixen. Over the next year, we will bring in Snatch Vixen Plus, which is an important move. In 2011, we will replace the lighter vehicles with the new light protected patrol vehicle, to which the hon. Lady referred. At the moment, that is the subject of a competition. We have identified a small number of potential candidates, and we will take a decision in the next few months. We will sign a contract, get the vehicles manufactured, tested, adapted and integrated with communications and electronic counter-measures equipment, provide them as training vehicles to our troops who plan to go out to Afghanistan and deliver them to Afghanistan in the course of the next two years, so that they will be there some time in 2011. I am sure that the hon. Lady will agree that the timing is ambitious, but we will stick to it. If our commitment in Afghanistan continues longer, as it may sadly do—I have no idea and make no prediction on that—we will have a new generation after LPPV.
The same thing applies to the slightly heavier vehicles. The hon. Lady mentioned the Jackal—Jackal 1 and Jackal 2 are both in theatre—and it is very much improved in the protection that it offers. I will not go into any detail about the improvement. Some of it may have appeared in public—on the internet and so on. I am always slightly nervous about such things, because I do not want to make it any easier for our enemies. If the hon. Lady has been talking to manufacturers, as I think she has, she will know about some of the improvements.
As the hon. Member for Aldershot has generously accepted, Vector was much welcomed by the armed forces at one time, as was Viking. We have improved vehicles now, and we plan to withdraw Vector during next year. We also plan to replace Viking with the new Warthog.
The Minister is absolutely correct about Vector being welcomed. I remember attending a briefing at the Ministry of Defence in which a young army officer—I cannot remember his name—recommended Vector. He and I had a slight clash of opinion. I said to him that having the driver’s seat over the front wheel would be absolutely disastrous. I do not know about such things, but, as a rank outsider, that point seemed to be obvious. I cannot understand the mentality of those who brought the vehicle into existence.
There will always be different views about any armoured vehicle. The hon. Lady will understand that I am not a technical expert; I do not present myself as one, but one hears different arguments from the experts and one has to try to take a view. I have no doubt that our current procurement programme reflects the consensus among professionals. I go to great lengths to ensure that the capability analysis that we undertake is very thoroughly conducted, that I talk not only to our capability people but to Permanent Joint Headquarters and those on the front line whom I visit every six months at least. So we do what we can to ensure that we make the right choices, but we have to make constant choices. We are in the business of making constant improvements. The hon. Lady mentioned the Mastiff, which is viewed as a well-conceived vehicle by everyone in theatre. She rightly said that it was quite large; if I remember it is about 28 tonnes. We have now delivered to theatre a smaller version called the Ridgback, which has been mentioned several times in this debate.
We are now bringing into theatre a whole range of new logistic vehicles, some of which are adaptations of the fighting vehicles or patrol vehicles that I have already mentioned. The Coyote, for example, which is being delivered, is a version of the Jackal. We have the Wolfhound, which is a logistic version of the Mastiff with a dump truck at the back, and another logistic support vehicle called the Husky. The hon. Lady expressed some scepticism about the Husky. We have to take advice from the best technical experts, and I can assure her that the Husky has been thoroughly tested; it has been blast tested. I am assured that it is the best choice of vehicle for that role, and I trust that that will be the case when it is deployed. The hon. Lady may be comparing the Husky with some other American vehicle, not entirely similar to the Husky, which did not do quite as well in blast tests on the other side of the Atlantic.
The hon. Lady also raised the issue of helicopters, which has been mentioned by all those who have participated in this debate. I will deal with that subject in a moment when I address the remarks of the hon. Member for Aldershot, who made particular reference to the subject, because I do not want to have to go over the same ground twice.
The hon. Lady also raised the idea, which she has put to me before, of using light aircraft—often single-engine, turboprop aircraft—in an intelligence scanning role or to weaponise those aircraft and deliver weapons from them. As the hon. Member for Aldershot said, the problem with doing the latter is that, because those aircraft are light, they do not carry a great payload, so they are not very efficient in that role. The problem of using them in an intelligence scanning role is that they are nothing like as versatile and as sustainable in the air as the unmanned aerial vehicles. UAVs can stay much longer and their endurance, to use the technical phrase, is much greater. What we essentially want with such vehicles is endurance. They have to be in the air for as long as possible, so that commanders can use them and direct them to some new objective. UAVs remain in the air for the whole time and do not have to come back and be refuelled. Incidentally, the Tucano cannot be refuelled in flight, so its endurance is pretty low; I think that it is about a maximum of seven hours. Therefore, that does not compete with the endurance of our UAVs, which I will not specify in the Chamber, because I do not wish to give the enemy information that they might not already have.
We are investing in a range of UAVs. Next year, we will replace the Hermes 450, which has done superb work, with the Watchkeeper, which has rather better all-weather capabilities, greater endurance and a number of other qualities such as improved sensors and so forth. We are in the process of purchasing more Reapers, which are a development of the American Predator. If we can avoid using a pilot and putting a human life at risk, that must be the desirable way in which to go.
I put it on the record that QinetiQ is producing the Zephyr, which is an amazing UAV. It holds the world record both for altitude and endurance. To the uninitiated, it looks like a huge Keil Kraft kit, and it is solely powered by solar power. It is a British innovation, and I hope that the Ministry of Defence will continue to back it. I have a vested interest because some of my friends in Farnborough are responsible for developing the excellent programme.
I am sure that hon. Members will be grateful for that plug for the Zephyr. It is a vehicle I know about. We have a great many vehicles that are presented to us and the points made by the hon. Gentleman in favour of the Zephyr will be noted, not least by QinetiQ.
The hon. Member for Teignbridge (Richard Younger-Ross) wisely said that it is impossible to know what threats one will face in the future. I agree with him. He implied something that I strongly believe in and have often said explicitly, which is that it is important that someone in my position is not entirely focused on the current campaign. It would be a great mistake and, in my view, would be in breach of my responsibilities if I were to do that, however tempting it might be given the enormous public pressure—quite rightly so—regarding our performance in Afghanistan. All of us are equally affected by the thought of those brave men and women, who are not only risking their lives but all too often losing them in this terrible, but I am afraid unavoidable, conflict.
That is why the Government have continued with some of the mainstream programmes, including the naval programmes and the decision last year to build the carriers and to go ahead with the escorts necessary for those carriers, both the Type 45 destroyer and the future surface combatant mentioned by the hon. Member for Aldershot. There is also the Astute class submarine programme and investment in combat aircraft, fast jet aircraft, the Typhoon and the joint strike fighter. None of those are directly related to Afghanistan, although the Typhoon would be suitable for a ground-support role and might be deployed there in that role. However, we are going ahead with a range of capabilities, because we cannot predict exactly what the future threats will be.
If ever we deploy troops on the ground in the future, we will certainly need air support and air superiority. I believe that it is humanly and politically impossible for us to deploy troops on the ground without air superiority, so we must invest in efficient combat aircraft. We must invest in ISTAR—intelligence, surveillance, target acquisition and reconnaissance—assets. It is inconceivable that we would have a campaign that did not require good intelligence gathering and surveillance capability. We are investing in those things as part of the core programme, and we will continue to do so. We live in a world in which we do not know where the threat is coming from. We must be prepared to deploy in different areas, and we might need to carry our airfields with us. That is why we need carriers, and support and escorts for those carriers. That is the essential logic, and I assure the hon. Member for Teignbridge that we are not neglecting it.
The hon. Gentleman also said that in times of financial stringency, we need to look carefully at where we can make savings through collaboration with our partners in the EU. I thoroughly agree with him, and we are trying to do that. I am in a high-level working group, which I co-chair along with my opposite number from France. At the moment, we are focused on a number of concrete possibilities for collaboration, and we are looking for synergies where we find that we have the same requirements. We are facing the same threats, so it makes sense to find mechanisms to procure things jointly, to get the benefits from economies of scale and share the risks in research and development. That is what we are trying to do.
There was a characteristic outburst from the hon. Member for Aldershot, but I think he is quite wrong in his ideological hatred of all things European. I think that he blinds himself to a lot of important facts, one of which is that there are certain programmes that we could not possibly conceive of undertaking on our own. It would be utterly ridiculous to suppose that we would ever have had a Typhoon aircraft, which the hon. Gentleman believes in, if this country had had to bear the full costs and risks of the development programme. It is the same for the A400M and, in their day, was true for the Tornado, the Jaguar and other historic programmes.
I would like to say, quite frankly, that other European countries have made a great deal of money out of those contracts. Most ordinary men and women in the United Kingdom would like to see more people—not just a few more—present on the front line. We very much resent the fact that it is British, Canadian, Estonian, Dutch and Danish troops who have paid the price in Afghanistan, and we do not see any of the other major European countries participating at all.
That is not entirely fair. The French, for example, have doubled their commitment to 4,000 troops over the past year. We welcome the German commitment, although I agree that we would like them to remove the caveats. We have discussions with the Germans about those matters, but we have to respect other people’s constitutional issues. However, we believe that any contribution is better than none, and the contributions that Germany has been able to make to our deployments since Bosnia have been very positive. Before that, there was a total ban on all foreign deployments, which was a worrying situation.
The hon. Member for Aldershot has an obsession with attacking the Prime Minister. Obviously, there are always financial constraints, and always will be—Chancellors have to be good housekeepers of the nation’s resources. However, it is up to the Ministry of Defence to decide how to arbitrate between its various programmes and where the priorities should lie. It is not for the Chancellor to intervene—he did not intervene in the cases that were referred to—and direct the Ministry to spend more money on one programme, or less money on another.
Hon. Members across different parties—except perhaps the party of the hon. Member for Aldershot—and people throughout the country are becoming increasingly cynical about the Conservative party criticising the Government for not spending enough money on defence, when it has not committed to spending one more penny on defence than the Government. I will give way for the last time, as time is running out.
If the Minister reads Bernard Gray’s report, which the Government suppressed when it was made available in June, he will find that Mr. Gray concluded that about £2 billion could be made available if the Minister ran the Department more efficiently.
There are many aspects to Mr. Gray’s report. Some give an interesting and valuable insight, and some are more controversial statements. Some statements are not backed up by any evidence at all. Such reports are extremely useful, and we are grateful for them. However, they do not necessarily represent the end of wisdom.
The hon. Gentleman completely failed—perhaps he has not noticed—to pay tribute to the immense investment that we are currently making in helicopters for Afghanistan. There is already something like an 80 per cent. increase in the number of helicopter hours available now, compared with 2006 when we entered Helmand, and that is before the deployment of new helicopters that is about to take place. Before the end of the year, we will deliver the first Chinook Mark 3 to the RAF, and others will be delivered over the course of next year. Next month, I trust that we will deliver the first Danish Merlin—which was mentioned by the hon. Member for Congleton—to Afghanistan, and the others will follow before too long.
We are engaging in the Puma upgrade, which the hon. Member for Aldershot did not approve of, and I will give him an explanation for that. I looked carefully at various alternatives over the summer and decided that the best value for money solution for getting the maximum helicopter lift capability out to theatre as rapidly as possible was to go through with the Puma upgrade, so that is what we are doing. Far from being a bad aircraft, Puma has a good performance record and is particularly good in the hot and high conditions of Afghanistan. That is not the end of the story, and I continue to look at the Sea King upgrade, and at whether we should spend that money on other existing platforms and deliver them to theatre as soon as possible.
Several hon. Members mentioned the need for greater speed and agility in defence procurement. I entirely agree, and I have tried to ensure that we draw conclusions and lessons from the urgent operational requirements programme for use in the core procurement programme. In the time available, I will give one or two examples. For armoured vehicles, for example, we are procuring the Warrior upgrade and the new reconnaissance vehicle using a different time scale from usual. We decided what we wanted to do in February or March this year, and we went out to industry in June with an invitation to tender. We expect those tenders to be in rapidly, and we intend to take a decision by the end of the year and to sign the contracts early next year. To return to the point made by the hon. Member for Teignbridge, that is an area where we are collaborating with the French. We are procuring the same cannon for those vehicles as the French are obtaining for some of their vehicles—the 40mm CTAI cannon. It is produced in France through a joint venture between BAE Systems and Nexter, and it is a good example of European collaboration.
The whole House will be deeply grateful to the hon. Lady for giving us the opportunity to go into these matters in greater detail than we usually have time for. I pay tribute to her once again both for her knowledge and for her persistence and energy in bringing these important matters before the nation.
Swindon to Kemble Railway
I am delighted to have the opportunity for an Adjournment debate at this particularly important time. I am even more delighted that so many colleagues have come to a half-hour debate, including the hon. Members for Cotswold (Mr. Clifton-Brown), for North Wiltshire (Mr. Gray) and for Meirionnydd Nant Conwy (Mr. Llwyd) and my hon. Friend the Member for Gloucester (Mr. Dhanda).
I wish that the debate were an hour and a half long so that we could all add to it, but my comments will be short because, to be honest, we all know what the issue is. I have spent more than 20 years of my life on it. To be clear, the line is not in my constituency, but the Stroud valley line, as I refer to it, has a huge impact on my part of the world. At the moment, we have only four trains a day on that line because Sapperton tunnel has fallen in yet again, which shows the need for investment.
However, that is not the point of this debate. The point of this debate is, I hope, finally to move forward on an issue that has dogged us all for a long time now: the 12.5 mile-long single line between Swindon and Kemble, which needs redoubling. It was a huge mistake to have singled it in the first place, but we are now trying to put that right. It is great to see my hon. Friend the Minister here to listen to our plaintive pleas. We think that we are almost there, but there are a couple of hurdles in the way and it is vital that we clear them. As I said, I will not make the argument, because it has been made so many times. We know it so well that I dream about it.
I congratulate the hon. Gentleman on obtaining time for this important debate. He realises that we in Plaid Cymru have no designs on Swindon, but the impact on south Wales would be severe if there were no redoubling. I remind him that an emergency such as a crash or a tunnel collapse would also have a severe impact. More to the point, redoubling would mean an hourly service for 17 hours a day between London and south Wales, which would be important economically. What he is saying has broad acceptance and goes much wider than the Swindon area.
I thank the hon. Gentleman for that. I am sure that others will want to speak as well, so I shall be even shorter.
Why is this an acute time? There are two specific reasons. First, we know that we must make a decision by December, or the team working on the North Cotswold line in the constituency of the hon. Member for Cotswold will probably be reassigned, and we will lose the moment of opportunity. Secondly, the money must be secured. That is why time is important. There seems to be a move, which I support totally, towards viring the money that will not be spent on the Westbury bypass, for all sorts of reasons that I will not pursue, into the scheme to give us the money for which we have long argued.
I bear a grudge about the original Office of Rail Regulation decision to prioritise the North Cotswold line. I got wild about it, but that time in history is past and we need to concentrate on the argument now. When the hon. Member for Cotswold and I went to meet the noble Lord Adonis, we met for the first time a kindred spirit who saw what needed to happen; it was just a question of how. We are now at the “how” stage.
I am grateful to my neighbour for allowing me to intervene, and I congratulate him on securing the debate. When we went to see the noble Lord Adonis, who was then a Minister, he gave us a strong steer that he wanted the scheme to happen. Since becoming Secretary of State for Transport, he has given the regional development agency an even stronger steer that if it makes the scheme a priority and allocates the funding, it will happen. Is it not the case that what we really want from this debate is for the Minister to say that the regional assembly has accepted that advice and will allocate funding to the project?
I agree totally. In his letter to the chairman of the RDA, whom I saw last week, my right hon. Friend the Minister for the South West gave the clearest steer possible that the money should be allocated, if for no other reason than that it could be lost anyway. If we do not get the money, it is not as though someone else in the south-west will—it is likely that it will be lost. That is why this debate is crucial. I refer to that letter, which my hon. Friend the Minister knows about. As far as I can see, all the ducks are in a row, but the sad thing is that we have had them in a row before and lost out nevertheless.
That is the key issue. Where is the money, how do we secure it and who might not have reached the same stage as us? It is genuinely an all-party issue. All parties would gain by it, because it directly and indirectly involves a whole range of constituencies, including in south Wales.
By pure chance, I happened to chair the South West Regional Select Committee yesterday, which was not surprising as there were only three of us and I drew the short straw. In the papers that we received on the issue, it is clear that not all the environment directors across the different local authorities represented have necessarily given their go-ahead. However, the key body seems to be the South West Strategic Leaders’ Board. I hope that my hon. Friend will have some interesting things to say about how central Government are lobbying to redouble the line. It must be done for the reasons that I have said.
I am grateful to my hon. Friend, who has been campaigning on the issue for a considerable period. He knows that if we can get the money to deliver the scheme, it will make a massive difference to the journey from my constituency to London.
My hon. Friend is right to point out that the South West Strategic Leaders’ Board has a role to play. If the cross-party consensus is as strong as the Minister can see in this room, should any hurdles appear from the leaders’ board, will he take action to ensure that money is provided for the scheme, regardless of what the board ultimately says?
I will come to the funding, but I want to refer to information I received from Chris Irwin of TravelWatch SouthWest as a result of the meeting yesterday. He has been enormously helpful in making the arguments and going out to persuade people. According to Chris, the key thing is that this particular redoubling seems to tick all the necessary boxes. It is within the Great Western route utilisation strategy. Like other Members, I have a paper from Network Rail that says basically, “This can be done; we just want the green light.”
However, we need to be clear who is providing the money and what the real cost will be. The funding has risen from some £38 million to more than £60 million and now seems to have fallen to about £50 million. We need clarity about the funding, and we need to know where it fits in regard to regional funding advice 2. Everyone seems to be arguing for it, but nobody seems to know the total sum that we are dealing with or how it breaks down. It is clear that if the £30 million, if that is the sum available, could be vired over from the Westbury bypass, that should do it, but there are issues with the Welsh Assembly and whether it wishes to help paying for GRIP—guide to railway investment projects—stage 4, which involves research and studies proving that the work needs to be done. The Welsh Assembly may have been approached; the line is such an important reserve and freight route, coming not just from south Wales but from further south.
Who is paying, and what are central Government putting in? I know that in a sense the money is coming from central Government anyway and that it has been churned, but central Government must be clear what they expect to happen to the money and what money is available. I mentioned £50 million. I have heard estimates that the cost might be as low as between £40 million and £45 million. Considering the benefits of the intermodal journey shift, the freight opportunities and the reserve line to south Wales, it seems like an absolute shoo-in.
I ask my hon. Friend to be clear about how important the scheme is. To get five Members to a half-hour debate—many others have expressed support—says something about where it fits in our priorities. Will he make it clear who is making the decision? Will it be signed off by the Government? Will the South West Strategic Leaders’ Board or the Welsh Assembly be part of the decision on the funding stream?
Who is in support of the other side? I have had lobbying for the scheme from all manner of organisations.
I congratulate the hon. Gentleman on securing the debate. Nearly all the engineering work between Kemble and Swindon is in my constituency, although there are no stations in it. We are keen that a number of improvements be incorporated when the work is done. In particular, the culvert at Minety should be widened to reduce flooding and a high-speed train station could be built at Purton. Those are both urgent issues that I hope the Minister will mention in his response.
There are all sorts of bids in this debate. The last one is that the Cheltenham to Swindon line was identified by the Association of Train Operating Companies as one of 10 schemes for electrification. I do not want to be greedy, but the line cannot be electrified until it has been redoubled and made fit for purpose. That means that there is an even greater reason to carry out the redoubling.
I was not going to intervene, but one important point should not be lost in this debate. I understand that when the south Wales line is electrified, the Severn tunnel will have to be closed for a considerable time. The Kemble to Swindon line will be an important diversionary route when that happens, which makes the redoubling even more important.
The term “diversionary line” is important given the current difficulties because the Sapperton tunnel is shut. Yesterday, I learned from the South West Committee how important it is that the rail system, like the road system, has diversionary routes. That must be thought about. That is why the Kemble to Swindon line is so important. It is a diversionary line for south Wales and potentially for the south coast, which is even more reason why we should get on with the redoubling.
I will not say more. I could have said very little. All I am here to say is, give us the money and give us the hope. Let us get the job done because everybody is calling for it. It is about time we did it. As somebody who uses the line all the time, I know it is a good line full of the potential I have spoken about. I hope that the Minister has heard our pleas and will come up with the money. I hope that he supports Lord Adonis, with whom I had one of the best meetings I have attended. It was a can-do meeting. Let us do the can-do stuff and turn this opportunity into reality.
I hope that the lurgy that has descended on me allows me to continue for the next 15 minutes.
I congratulate my hon. Friend the Member for Stroud (Mr. Drew) on securing this debate. He has been diligent and determined in promoting the case for redoubling the Swindon to Kemble route. I welcome the presence of other colleagues.
I am pleased to have the opportunity to explain how a redoubling scheme might be delivered with the help of the south-west region and Network Rail. The Secretary of State for Transport and the Minister for the South West have written to regional partners to outline their strong support for the scheme. We recognise the value of the extra capacity and improved train performance that redoubling would create.
Before I turn to the detail, I remind hon. Members how the region and passengers on the Great Western main line are benefiting from our ambitious rail plans. The performance of First Great Western has improved greatly over the last year. Network Rail reported that 92.3 per cent. of trains arrived on time in the four weeks to 22 August 2009. On 23 July, we announced a £1.1 billion electrification programme for the Great Western main line between London and Swansea and between Liverpool and Manchester. That is great news because it will boost jobs, cut journey times, make the service more reliable, increase capacity, contribute to greener transport and build on recent improvements in train performance.
From 2016, commuters travelling between London, Slough, Reading, Newbury, Didcot, Oxford, Swindon and other intermediate stations will benefit from the reliability and comfort of electric trains. By 2017, the route will be electrified to Bristol, Cardiff and Swansea. Electrification will mean that minimum journey times between London and Swansea will be reduced by 19 minutes and capacity will be increased on inter-city services during the morning peak hour by at least 15 per cent.
As we have heard, Network Rail identified the redoubling of the Swindon to Kemble line as one of several options that would improve the performance of the Great Western main line and the wider network. Network Rail believes that it would improve performance especially when it acts as a diversionary route for London to south Wales trains when there is engineering work on that line or in the Severn tunnel. The south-west region and local authorities believe that redoubling is essential for an improved Cheltenham and Gloucester to London service.
The Office of Rail Regulation concluded that there was not sufficient evidence to justify the inclusion of the Swindon to Kemble enhancement as a funded scheme to deliver the high-level outputs specified by the Government. That decision has been debated frequently in the House. We have responded positively to hon. Members’ representations.
My predecessor, my hon. Friend the Member for Glasgow, South (Mr. Harris), committed officials to working with the rail industry and regional partners to make the case for redoubling. More recently, the Secretary of State for Transport wrote to the regional partners outlining his strong support for the scheme. In response, the south-west region, the Department for Transport and the Welsh Assembly Government have funded a rail investment study by Network Rail, which should report on the main costs by December 2009. That is a good example of different bodies working in partnership and I commend them for their contributions. The region offered a contribution of £20 million from its regional funding allocation towards the cost of redoubling. That was very welcome. Pending the outcome of Network Rail’s study, there is still a shortfall of well over £20 million.
I recognise that redoubling the Swindon to Kemble line is a regional priority that could facilitate growth and support resilience and performance. In our recent response to the region on its regional funding advice, we asked that consideration be given to taking forward a fully-funded Swindon to Kemble major scheme. However, despite the benefits, there is still reluctance from some partners in the region to commit additional resources from the regional funding allocation to fund the scheme fully.
The Network Rail study is due to report in December and the main prices and design will be firmed up. We look to Network Rail to develop an efficient price for the enhancement works. The national rail budget remains fully committed up to 2014 and cannot bridge the funding gap. That means that the £20 million that the region has allocated to the scheme from the 2010-11 regional funding allocation could be lost to the region and not recycled back into the RFA.
As my hon. Friend the Member for Stroud knows, a number of hon. Members spoke in favour of redoubling at the South West Regional Grand Committee on 3 September. The Minister for the South West was asked to help. Following the Grand Committee, the Secretary of State for Transport and the Minister for the South West agreed an offer to the south-west region that would see the redoubling scheme come forward without any other regional schemes being displaced. If the region submits to the Department for Transport by 16 November an agreed, realistic and deliverable five-year programme, the funds previously allocated to the Westbury bypass, which are due to be lost by the region, could be reallocated fully to fund the Swindon to Kemble scheme. By way of explanation, the Westbury bypass scheme was recently refused planning permission following a public inquiry.
In conclusion, the spotlight is on Network Rail to achieve an efficient price for the scheme. It is working hard to do so, but until it has worked through the detail and shows that an affordable price can be achieved, further work cannot go ahead.
So we have another date, which is 16 November. I ask the Minister in the nicest possible way whether, if no proposal comes forward, he will engage with the parties, including the hon. Members who are present, so that we can sit around a table and find a way to bring the scheme forward. It is so important that I do not want it to be lost because a date comes up and nobody puts forward a proposal. It would be helpful if he opened his door so that that process could take place.
I think that I have said to my hon. Friend and other hon. Members present that the Department is hugely supportive of the scheme. We are obviously currently working with the time frame and, if it is not met, we will have to look at the matter again. I am more than happy to talk to him and other colleagues about finding a way forward in that eventuality.
In the Minister’s considerations, will he kindly bear it in mind that all the engineering work for the Kemble to Swindon redoubling would be done in my North Wiltshire constituency? People in my constituency broadly welcome the move, and I very much support hon. Members who have spoken this afternoon, but will the Minister bear it in mind that the engineering work is in my patch and that there are two or three detailed things that we would like to be done during the engineering work? We must not lose sight of the fact that those things—the widening of the culvert at Minety, the possibility of intermediate stations and two or three other minor engineering matters in North Wiltshire—must be taken account of.
I can assure the hon. Gentleman that Network Rail always seeks to take the opportunity to do works where it is efficient to do so. However, I would not want to see elements being added to the scheme that undermine the basic affordability of the dualling of the line. We will have to look carefully at what he is proposing before committing to any additional works.
The region is reaching a key decision point. We have set out the way forward very clearly and the funding outcome is now in the hands of the region. I commit the Department’s officials to working with the region on the matter. The Strategic Leaders’ Board and the board of the regional development agency will need to consider the approach and the offer we have made. I hope that they will respond positively to the offer made by the Minister for the South West by 16 November, as we have requested.
If I understand what the Minister has said today correctly, the region has already committed £20 million and has, at least, a further £20 million to commit if the scheme is given priority because the Westbury bypass can no longer be funded. Would it not be churlish of the region not to make the submission by 16 November because, if it does not do so, it is likely that it will lose the entire amount of money back to central Government?
The hon. Gentleman has summed up the situation well. I can only say that we have the best chance now to take advantage of the window of opportunity to which my hon. Friend the Member for Stroud referred. I pledge to continue to keep an oversight on the matter, along with the Minister for the South West. We need to see that Network Rail is proposing something affordable. If the region accepts the Government’s offer, spending could be completed in the fiscal year 2011-12. Our aspiration for commissioning the doubled track would then be December 2012.
Central London Businesses
No one can dispute that the past year has been tough for businesses large and small nationwide. Their future will remain uncertain, as the climate in which they operate continues to be unpredictable, and any signs of sustainable economic recovery are likely to be tentative. One might therefore have hoped that any further tax burden on our nation’s commercial enterprises would be avoided at all costs, but the business rates burden for many companies, especially some of the small, diverse retailers in central London, is deeply disturbing. Business rates in the city of Westminster have already risen by 5 per cent. following an inflation-linked increase that kicked in this April. Although the Government have made the concession of allowing that increase to be spread, I fear that many of the businesses with the most vulnerable profit margins will struggle. Much worse is to come, however. In the financial year beginning 5 April 2010, the average business rates bill in Westminster is expected to soar by 38 per cent. The increase is designed to raise an extra £456 million for the Treasury, provided that those enterprises all stay solvent, as a result of the five-yearly revaluation of commercial properties. In addition, larger businesses face the prospect of paying a supplementary business rate to pay for Crossrail, so many Westminster firms will have to absorb a triple whammy of taxation.
The revaluation exercise has been spread across the nation and is designed to be fiscally neutral, creating a system of winners and losers. London’s businesses have traditionally subsidised other regions—the net outflow of tax from the capital in 2007-08 was estimated at somewhere between £14 billion and £19 billion—but companies in my constituency are being plundered to such a degree that their success is being taken for granted. Central London’s businesses are not a cash cow, and as the Member who represents both the City of London and the city of Westminster, I cannot ignore the huge burden that is about to be placed on local businesses, largely as a perverse penalty for the district’s long-term success. With trading conditions so tough, such taxation could scupper the city’s fragile economy. Given that London is the ongoing engine of the nation’s economy, this is not simply a parochial issue, but one of national importance.
The impending burden on businesses in my constituency was brought into sharp focus when I was informed earlier this year about the dire situation for the booksellers of Cecil court. It would be difficult to represent my constituency and to love it the way that I do without being sentimental. Amidst the brash modernity of a global financial city, with its fast-moving cosmopolitanism, lies a timeless history, seeping from every last court and alleyway. Antiquarian booksellers and map shops pepper some of the busiest tourist streets at the heart of Westminster—nowhere more so than in Cecil court, which is literally a stone’s throw from Leicester square and the world-renowned Charing Cross road.
My first encounter with Cecil court came a decade and more before I entered Parliament. As a fresh-faced graduate, I would frequently meet friends in Leicester square, but I usually contrived to arrive a few minutes early in order to pop in to Cecil court or wander down Charing Cross road. Its most famous address, No. 84, which was immortalised by the touching, eponymous Helene Hanff book, has long since ceased to be a book shop, but the plaque to Marks & Co. and the delightful Frank Doel stands there proudly to this day. Anyone who loves books will adore reading about the sentimental journey of British and US life together in the 1950s and 1960s that it so beautifully describes.
Among others, the famous actor, Simon Cowell—I am sorry, I mean Simon Callow; I am getting my X Factors mixed up—shares my fondness for that corner of London. Back in April, he highlighted in his Guardian column the plights of Cecil court tenants who are struggling with business rates. I thank that newspaper for doing such sterling work in highlighting this issue, which is particularly important because we will host the Olympics in 2012, and culture is an integral part of the Olympics. I very much hope that our Dickensian side streets, courts and alleyways will be an important part of our cultural offering to the world at large. Mr. Callow implored readers to write to Cecil court’s local MP to give their support, and I soon found myself inundated with letters from across the country, each with a charming and individual tale to tell about the warm memories that that tiny corner of London evokes. I also received correspondence from other small businesses in my constituency, which informed me of their difficulties in absorbing the impact of new business rate levies on their tiny profits.
As the Minister knows, business rates are collected by local councils but are set by central Government using a complex formula that adjusts the rateable value of a property, which is established independently by the Valuation Office Agency, by a multiplier. For those who are unfamiliar with taxation speak, the rateable value is the official estimate of the value of a property. The multiplier is set by the Government and usually changes each year in line with inflation. Although the main changes in business rates occur around the five-yearly revaluation of a property, the review of the multiplier can inrease business rates significantly for individual businesses. Such was the case for many Cecil court tenants.
Given that the 2009-10 multiplier is based on the retail prices index figure for September 2008, when inflation was 5 per cent.—that was before the recession had begun to bite and before the RPI tumbled to zero—those traders had anticipated a financial shock when April came. They had received transitional business rate relief in the past four years, but that was due to cease as well. I appreciate that there can be perverse results whenever a formula is used, and, clearly, the fast-changing economic situation has played its part in this situation. Thankfully, the Government have taken on board some of our concerns, and there will be only a 2 per cent. increase this year; the remaining 3 per cent. of that inflation element will be spread between 2010 and 2012.
Businesses of the size of those in Cecil court are fragile. Several shops in the court have gone out of business this year and countless niche stores are disappearing from other areas of London. The worry is that such shops will be taken over by Tesco Express or Starbucks. I like both those brands, but we need to protect the integrity of areas such as Cecil court. As the excellent Tim Bryars, secretary of the Cecil Court Association, has said:
“For some years transitional rate relief softened, masked even, what the full impact of the policy of exaggerated business rates would be. We grumbled at small rises, from 5-15 per cent., but absorbed them. Then, with no limit this year, my bill rocketed. In 2008-09 I paid a total of £4,325.72; this year I’m paying £7,696. My rateable value, based loosely on rent, is £16,000 and the multiplier is 0.481—in other words nearly half of my rent again.”
Now that the threat of an up-front 5 per cent. increase for the current financial year has been staved off, a larger threat looms on the horizon—further change to business rates as a result of the five-yearly revaluation. As the excellent magazine, Retail Week, has reported:
“If 2009’s bills are likely to be greeted with a grimace, 2010’s are set to be a horror show”.
Since the system was set up, revaluations have been based on the increase in property values between the April of two years before and the April of five years before that. In other words, the revaluation for 2010 is based on the difference between property values in April 2008 and April 2003—a somewhat notional, random five-year period in which rental values rocketed as the economy seemed to go endlessly from strength to strength. New business rates in Westminster will therefore be levied at a time of economic woe, having being calculated using figures from the peak of an economic high. I fear that when they are eventually issued in April, they will bear little relevance to the ability of struggling businesses to pay. Such rates could put many companies into a kind of negative equity.
As I have said, the revaluation exercise is designed to be fiscally neutral and is not supposed to raise any additional income across the country. Revaluation simply redistributes the burden of taxation—in this case putting it more firmly on the shoulders of businesses in central London, where rental values have increased the most between 2003 and 2008. Understandably, the Government will no doubt proudly declare that the rates of more than 1 million businesses will fall this year, but those decreases will have to be paid for and they are coming out of the pockets of my local business people and, to a lesser extent, of other companies in the capital.
Although London accounts for only 12.5 per cent. of the country’s residential population, around 28 per cent. of business rates are levied here, reflecting the capital’s importance as a place of work and play and as a tourist attraction. With the latest revaluation, the Treasury is expected to collect an additional £565 billion from the capital.
Westminster has the largest economy of any local authority in London and accounts for 2.2 per cent. of national gross domestic product. A colossal £1.1 billion is collected by the Westminster local authority on behalf of the Government, which is more than the combined collections from the City of London, Birmingham and Manchester, although the City of London of course also pays a significant amount in that way. In return, Westminster received only 12 per cent. of that money back through grant funding. I imagine that many people would try to square that by assuming that that money is being sucked only from big businesses based in the city centre, and we all know that some huge businesses and the headquarters of many international companies are based in both the City of London and the city of Westminster, but it needs to be stressed that around 70 per cent. of all business premises in Westminster are occupied by firms employing four people or fewer.
Let us look at some specific examples of how significant the new burden will be. As a result of revaluation, the rates for an average office in Westminster will rise by 38 per cent. in the next tax year, but for somewhere like the Marylebone road that figure will be 72 per cent., and it could be over 100 per cent. in Knightsbridge. For a large store on Oxford street, the estimated increase in the business rates bill will be £3 million a year in the next tax year, in addition to what is already a fairly hefty sum. A small business somewhere such as Soho will face an additional £1,500 on top of an £11,000 bill—I am sure that that is particularly close to the Minister’s heart.
It should be kept in mind that those businesses will receive no extra services for that additional money. Richard Dickinson of the New West End Company—one of the business improvement district creations of recent years—has said:
“The scale of these increases in chilling. Given the West End’s contribution of the wider economy both in London and nationally, this will impact everybody.”
Every business rate system has a transitional relief scheme that runs alongside it, but I fear that there remains a lack of clarity, which I hope the Minister will be able to remedy, over the Government’s plans for the 2010-11 scheme. There will apparently be around £2 billion of support to reduce the average rate increases for nearly 112,000 London businesses, but the increases will be so large for some firms that I find it difficult to believe that that fund will make any significant difference.
As is always the way with these things, there have also been some basic errors in how the transitional relief has been dealt with. The closing date for its consultation was 23 September, predating the release of data from the valuation office for England on the new rateable values. Therefore, those responding could not accurately assess their potential liabilities. That has threatened the confidence of Westminster’s 47,000 businesses in the Government’s handling of the whole business taxation issue. Furthermore, Westminster city council is concerned that the increase of 19 per cent. to the threshold for small business rate relief for London’s companies is still less than the 20 per cent. increase for the rest of the country.
Also, the increase in valuations will push many local businesses above the £50,000 threshold for the supplementary rate to pay for Crossrail, which we hope will be built in the years to come. Before the revaluation, Westminster city council estimated that some 8,979 companies were liable for the supplement, but we believe that that will soar to around 12,448 by April 2010. Although the council supports Crossrail, it is concerned about the additional 3 to 4 per cent. hit on businesses that previously would have been under the threshold.
A supplementary business rate levy for Crossrail, a 5 per cent. increase in business rates and a huge revaluation will conspire to create a triple whammy for Westminster’s businesses in April 2010. That is incredibly worrying for those struggling already with uniquely difficult trading conditions. It also defies logic that rateable values can increase by an average of 60 per cent. in the city and business rates can increase by 38 per cent., while the threshold for receiving small business rate relief has increased by only 18.6 per cent. Those rate increases simply do not reflect the reality of current business activity and serve to highlight the weaknesses of a system that makes revaluations and enacts those changes at entirely different points in the economic cycle. I accept that we are in a very unusual economic situation and do not wish to point out blame as a formula is in place, but there are times when we need to look carefully at whether a formula will have the perverse impact to which I have referred.
Ideally, Westminster city council would wish the rate changes to be deferred until the economy improves and, at the very least, to have the threshold raised to a point where business rate relief schemes apply. With rate relief and revaluation, small businesses will be treated like bigger businesses simply because of the value of the buildings that they occupy. Come April 2010, therefore, many small enterprises in my constituency will find that their premises have supposedly increased so much in value that they will jump over the threshold for rate relief, even though the operation or profitability from March 2010 to April 2010 will not have changed and, indeed, might have worsened. Such a system, I fear, creates a huge disincentive to starting a small business in my constituency. Furthermore, if the Chancellor fails to raise the thresholds, many businesses will find themselves above that £50,000 marker and will be liable for the burden of supplementary business rates. The council believes that it is absolutely crucial that the supplementary business rate be included in the transitional arrangements and that any caps on increases be set at a level that includes those increases.
Overall, the transitional arrangements mask the fundamental flaws in the business rate scheme. The system works in a somewhat perverse way, penalising businesses and local authorities that invest in an area and its infrastructure through schemes such as business improvement districts. For instance, efforts in my constituency to increase street security and improve the appearance through hanging baskets and better lighting are likely to be taken into account during the revaluation process and result in higher rateable values and an increased business rate burden. Therefore, Westminster city council would prefer a complete overhaul of the system, rather than somewhat inadequate attempts to mitigate business rate rises. Should the Government decline that option, I would like to have at least a commitment to the review over the next two years of the transitional arrangements.
In the longer term, I would challenge the sense of a scheme that takes two years from valuation to billing. Surely, it would be better that at least an element of localisation is introduced to ensure that businesses obtain some local benefit from the rates they pay. At a time when the Government are encouraging local authorities to work closely with businesses through schemes such as business improvement districts, the deficit between taxes paid and the link to services provided threatens seriously to undermine the relationship between the public and private sectors.
Put simply, the revaluation of 2008 will lead to a bad tax change that will be implemented at a time of unprecedented uncertainty in the economy. There are so many businesses teetering on the edge of viability that Westminster city council really must ask that the changes be deferred until the wider economy improves, and I reiterate its words. The sums of money already being sucked from central London businesses to other parts of the country are huge, and the latest changes will simply accelerate that trend. Most firms in the capital accept that their location comes at a cost, but if such huge levies are to be imposed, it seems only fair that some part of the business rate is retained locally to give a real link between businesses and local authorities that provide their setting and many of their services. The Government must look urgently at reviewing the rate relief scheme to assist businesses that are being pushed over the threshold simply because of the supposed value of their premises.
Without the kind of changes that I am proposing, the Government are in danger of prolonging and deepening the economic slow-down for Britain’s largest economy. London’s largest businesses will suffer, but those with premises nationwide might have their increases partially off-set by decreases in other sites. For shopkeepers such as those in my beloved Cecil court, small office workers and the burgeoning city centre enterprises, there is no such compensation and their future is grim.
I wish to raise one final point, as representatives of the City of London have asked me to address an issue that arose during a House of Lords debate on the Business Rate Supplements Bill. From a somewhat tangential angle, it relates to a clarification of the tax deductibility of voluntary contributions, as opposed to payments made compulsorily by rate supplements that are made by businesses for the Crossrail scheme. As the Minister may be aware, the Corporation of London is putting in its own money but is also raising money from businesses based in the square mile. We are keen to know whether there will be a tax deductibility element for that. I appreciate that I have not had a chance to speak to her in advance about this, so I would be happy to take a written reply in due course. I hope she will be able to address some of the other issues that I raised today.
I congratulate the hon. Member for Cities of London and Westminster (Mr. Field) on securing this timely debate. The issue exercises my Department and many businesses across the country. Like him, I love London, and I share his interest in and enthusiasm for its many and varied businesses, especially those in Cecil court where, like him, I spent a large chunk of my youth. Sadly, Foyles is no longer there, but I have good memories of it.
The businesses in Cecil court, along with the myriad large and small businesses that make London one of the most important drivers of our economy, use community services such as transport, lighting, the police and education. As I am sure the hon. Gentleman will agree, it is only right and proper that, as they do so, they pay their rates.
As the hon. Gentleman said, rateable values are reassessed every five years. The next revaluation will take effect from 1 April next year and will be based on the rateable values at 1 April 2008. As he explained extremely clearly, thanks to the current economic turbulence and changes, and because London has experienced the highest rise in property values in England over recent years, the city will almost certainly experience the highest rise in rateable values in the country. Unlike the hon. Gentleman, who puts the increases at around 35 per cent., we estimate that they are likely to be about 10 per cent. on average, before inflation and other reliefs are taken into account.
However, before everyone, including me, takes a sharp breath, that does not mean that rateable values across London will all increase at that rate. We estimate that ratepayers occupying almost 45 per cent. of properties in London—about 124,500—will in fact see their rates liability fall as a result of revaluation. In fact, small shops in London such as those in Cecil court could see their rates liability fall by 3 per cent. on average in 2010-11. If the hon. Gentleman would care to look at some of the figures we have that detail that, I would be happy to share them with him. Overall, there would be a reduction of some £6.5 million.
I am glad to say that 56 per cent. of properties in outer London—about 72,000 in total—will also benefit from the revaluation. We estimate that they should see an average decrease of £950 in their rates liability for 2010-11.
Those liable for business rates in London, including me, can also take some comfort from the fact that looking at rateable values in isolation does not always give an accurate indication of the bills that businesses will be expected to pay. The multiplier that the hon. Gentleman mentioned, which is used to calculate bills, is adjusted at the same time that new rateable values take effect. If they go up across the country, the multiplier is adjusted downwards. For example, at the 2005 revaluation, the multiplier was reduced by 4p in the pound.
Then there is transitional relief. There is more comfort here, even though the hon. Gentleman does not see it as a solution to the problems. The Government consulted on the 2010-11 transitional relief scheme over the summer. Under their proposal, rates on small properties will be capped at 5 per cent., and at 12.5 per cent. on larger properties. We estimate that that should reduce the average increase of 10 per cent. in rates in London to about 3 per cent.—in other words, a 7 per cent. drop—and that the businesses that see the biggest rise in their bill as a result of revaluation will gain the greatest amount of relief. In total, we expect that 112,000 properties in London—24 per cent.—will benefit from transitional relief. In fact, we estimate that 16 London boroughs will see the total rates liability fall due to the revaluation and transitional relief.
As the hon. Gentleman knows, the Government do not share his view that business rates should be relocalised. Pooling the proceeds of business rates on a national basis and redistributing them between authorities ensures that the revenue that is raised is allocated fairly. If local areas kept all the business rates they collected, those with a firm business base would be over-resourced in comparison with those with a smaller base.
I am sure that the Minister would not wish to characterise my proposal for an element of localisation as saying that the entire rates amount should be retained. Clearly, ratepayers in both the city of Westminster and the City of London are not unrealistic about the huge amount of money that is at stake, much as many of them do not like the present arrangements, but does she share my concern that, if there is literally no nexus whatever between local authorities and those who pay rates locally, that could do great damage to the whole democratic process, and that trying to introduce an element of localisation would be a sensible way forward?
Successive Governments—not just my own, because this system came in in 1990 under the hon. Gentleman’s party—have tried to ensure that the distribution is as fair as possible. It is obviously not always feasible to make it totally fair, but we believe that at present we have the fairest system possible.
The hon. Gentleman expressed concern about the impact of the Greater London authority’s business rate supplement, which is due to be introduced across London at the same time as revaluation in 2010. As he knows, the supplement will play a key part in funding Crossrail. The London Mayor, who is responsible for levying the supplement, has recently consulted on the detailed arrangements. While it is for him to argue the merits of the case for introducing a supplement in April 2010, I believe that many hon. Members on both sides of the political divide agree that London has waited too long for Crossrail, and that we have to do what we can to reap its benefits. It should also be remembered that businesses are not being expected to contribute something for nothing: Crossrail will bring huge benefits to the London economy.
The hon. Gentleman asked why the Government have not committed to increasing the £50,000 threshold in line with the revaluation in 2010. Rateable values are unlikely to rise equally across the country. Indeed, as I said, in some areas they are likely to reduce, and any upward revision of the threshold would mean that councils saw a reduction in their ability to raise revenue, thereby limiting the size of project that they could fund using the supplement.
I accept that, but, equally, it is widely recognised that the Business Rate Supplements Act 2009 is there, first and foremost, for Crossrail, a project that is already on the stocks. Therefore, this is a London-related issue, not one that necessarily will initially have an impact on other parts of the country.
I understand what the hon. Gentleman is saying, but, again, the problem is getting fairness in a hugely varied picture. Given the regional variations, we believe that the £50,000 threshold sets a minimum level of protection for businesses. Any further exemptions would have to be decided locally, and, to that end, levying authorities such as the GLA have the power to increase the threshold. It could be done, but it would have to be done locally.
I understand that businesses are going through particularly difficult times at present, and that is why my Government have taken steps to ensure that business is supported through the recession—
I am grateful for the opportunity to debate this important subject, which goes to the heart of public concerns about the recession.
All of us know just how hard it is for hard-working families to cope in the recession, and adapting to the changing circumstances has produced some major changes in family life that I suspect will become permanent—more women as breadwinners and more men caring for children. These and other changes are set out in a research project that I ran in my constituency from March until September, which is written up in a report titled, “Northampton Families and the Recession 2009”.
I want to ask the Government what they are doing to meet those changing circumstances and family roles and how the welfare state and the different forms of support that the Government provide will adapt to them. Let us look at the stark statistics of the recession. Unemployment has risen to 7.9 per cent. nationally and to 7.2 per cent. in my constituency of Northampton, North—up by nearly 83 per cent. on the same period last year. It is not only unemployment that is hitting family incomes hard. Family budgets are squeezed because people are losing hours at work and overtime shifts and are sometimes also agreeing to wage cuts so that they can keep their jobs.
It did not take long for the effects of the recession to be seen in my advice surgeries, where constituents, many of them women, told me about what was happening to their families. They were fearful about how they would manage to weather the financial storm, about what was happening to their husbands and, particularly, about the future for their children. Due to the number of people who came to the surgeries, I commissioned research to investigate and chart the financial and social effect of the recession on the working families of Northampton, North and to look at the policy implications for the Government. The project included quantitative and qualitative research, through a survey and group discussions, to gain insight into the experiences and concerns of the community and to find out what Government action was helping and what else needed to be done.
Some of the results were surprising. More than 40 per cent. of the people who took part in the survey had experienced a change in their work status, in the form of reduced hours, going from full-time to part-time work or losing their job entirely. Many of those who had not faced job changes themselves spoke of changes in their partner’s employment. In Northampton there is a high track record of both partners working: both men and women work.
One of the most startling results was finding that more than 40 per cent. of women described themselves as the breadwinners for their families; this was nearly the same number as men. It is a change in the notion of the male—the man—as the primary breadwinner, which has been accepted as a social norm and on which many of our benefits and support systems have, to a great extent, been based.
Although there has been a shift in economic power in the family, the responsibility for caring for the children is not changing so fast. The survey demonstrated that, although caring responsibilities are certainly being shared by partners, the vast bulk of them are still being borne by women. This has meant that the women have carried a great burden in this recession.
A constituent told me that her husband had been made redundant, so she decided to go back to work, but was still expected to care for the children. Others spoke about the challenge of flexible working. Although the Labour Government have made enormous progress over the past 12 years in providing flexible working and family rights at work, many women spoke of the increased pressure that they faced as a result of the recession, which sometimes meant that they were not able to take up their entitlements. I was told by a constituent that the many redundancies at her company were pushing people to work ever longer hours and that there was a lack of understanding of those who needed to work part time to care for children. Another woman wrote about the juggle that she and her partner performed on a weekly basis after having their first child. She did a remarkable amount of work. She said:
“I had to go back to work full-time when my daughter was nine months old I work 6.30 to”
“My husband works”
from 4 pm to midnight.
“Both of us work Monday to Friday. We can’t afford to pay childcare and the mortgage. We don’t have a family life, just see each other 15 minutes each day. CHILDCARE IS TOO EXPENSIVE.”
It is clear that child care must meet the needs of families in which people are having to work extended and flexible hours. This means providing facilities for families out of hours—in irregular hours—and ensuring that it is affordable, so that work pays. It is no good if child care costs eat up most of the wages.
Pensions were raised over and over in the survey and in the group sessions. In fact, pensions came second only to children in the concerns raised by people who took part in the survey. Many people said that they had not considered how to pay for retirement until their children had grown up, but were now concerned about their pensions. Others expressed anxiety because they worked part time in different jobs and so did not qualify for a state pension. Of course, many of them work past pensionable age. In the past, the focus has been on ensuring that women get equal pension rights. Now and in the future, with men moving from full-time to part-time work or into unemployment, there will be concern over men and women losing their entitlement to a state pension.
Action is needed to protect the post-retirement income of households affected by the recession. With people losing hours at work, the Government need to ensure that they are not penalised in retirement for working fewer than 18 hours. Many of my constituents, particularly women, do a number of different part-time jobs but do not qualify for a state pension as they do not meet the threshold of 18 hours a week. Thus far it has not been possible to find a way for people to pool the hours that they have worked in a number of small part-time jobs to reach the threshold. The Government need to look again urgently at a pooling system, so that those working part time can pool the hours from their different jobs and couples can share credits towards their future pensions, effectively supporting incomes in retirement and enabling couples to plan together for their post-retirement income.
A further acute set of problems face people who are self-employed. The Government must ensure that those who opt for self-employed status because they are in the building industry or who are in another form of self-employment understand that their pension rights are different from those of people who are employed. We must ensure that pensions advice is included in all state-funded money advice services.
The outstanding finding of the research was that tax credits were vital in supporting family incomes. More than 50 per cent. of the families were in receipt of tax credits and this has been key in supporting families in the recession. Most people in Northampton are still in work, albeit sometimes on reduced hours, and tax credits are succeeding in keeping them afloat.
The findings of the research present some challenges for the Government to ensure that families can manage their way through the recession and beyond. I am sure that, for many people, the recession will be a temporary phase, because families in Northampton have long track records of working. The task is to support them so that they can get back into employment.
I should like to make a number of recommendations to ensure that the needs of families are met. Working families fall off a cliff edge if there are two earners and one loses their work. What happens then is that the unemployed person gets jobseeker’s allowance for six months, but after that the families can face real pressures, particularly if the other partner works but is not entitled to support. It might help if the contributions-based jobseeker’s allowance were extended from six months to a year.
Flexible working arrangements and affordable and flexible child care are paramount. It is easy to say, as the Opposition have often suggested, that the Government can ill afford that, but if women are breadwinners and fathers take on part-time work and more responsibility for child care, more flexible working is needed for men as well as women so that women can make the most of their careers and earning power and fathers are supported in caring for families. It is ironic that the recession could achieve what years of progressive social policy has not—a more equitable sharing of financial and caring responsibilities between parents.
Research has shown that tax credits are extremely effective in supporting family incomes, but the Opposition plan to cut them for 130,000 families. Any steps that can improve and build on tax credits would be greatly welcomed, particularly if the tax credit could be put at the heart of other benefits. That would be a simpler way for families who are already on tax credits to access the extra help that they need during the recession, particularly support for mortgage interest. Many families have benefited from support for mortgage interest, but many are excluded because of how it works.
I was a member of the Select Committee on the Treasury, which produced a report suggesting that the support for mortgage interest scheme should be linked to tax credits if it is to provide more effective help for families in my constituency. I urge the Government to reconsider the proposed link of the SMI to the tax credit system, and extend much needed support to more families.
I also urge the Government to change the education maintenance allowance to a real-time benefit. At present, it is assessed on parents’ income in previous years, but if one or both parents lose their job, they may no longer be able to provide any or as much support for their children’s schooling, so the children in turn may suffer. Assessing EMA on current income would ensure that children whose parents lost their jobs did not miss out on education and the qualifications necessary to succeed in future.
The recession has had a profound impact on families. It has aggravated some old inequalities, and created new pressures. That has affected working families, and some pensioners. Some people have had to defer their retirement because they need to support their families. One woman wrote:
“I am past the age of retirement. Still working, and looking after grandchildren and elderly parents. I have saved for my old age, but am unable to enjoy it as my savings have gone down…so I am still working. When will my time come after working for 42 years?”
Another woman wrote:
“I am a 61 year old working full-time, claiming state pension. I get taxed £5 a month which means I don’t benefit from having my pension.”
“to continue in full-time employment to help my son and grandchildren who spend their days”
looking for work.
The Government have done exceptionally well over the past 12 years in introducing changes to employment rights, pensions and benefits that have helped families not just to make do, but to prosper and to juggle the combined pressures of work and families. However, the recession has set back some of that progress, and it has created a whole new set of pressures of its own. As we come out of the recession, society will have changed substantially and many of those changes will be permanent. Women who have become used to being the breadwinner will not want to return to the kitchen. People who have seen their pension contributions disrupted by unemployment or have had to work part time will want to maintain their living standards post-retirement age, and the changes to their pension rights will be permanent.
I very much hope that in moving forward, it will be possible for the Government to consider some of the experiences of families in my constituency, and to ensure that changes to the benefits system and the taxation system support families, so that people can continue to work to support their families and to enjoy a good quality of life.
I congratulate my hon. Friend the Member for Northampton, North (Ms Keeble) on securing this debate. The people of Northampton, North are exceptionally lucky to have a Member of Parliament who is so committed and so capable, and who combines the expertise that she has gained as a member of the Treasury Committee with passion for her constituents’ concerns. She has produced an excellent report on the recession’s impact on families, particularly women.
The Government have responded to the recession with a number of measures. First, we have cut VAT by 2.5 per cent. for one year to benefit households by an average of £275. Secondly, we have increased tax-free allowances above the inflation rate, so 22 million basic rate taxpayers are paying £145 less tax this year. We have brought forward the planned increase of £20 a week in child benefit by three months, which benefited another 7.5 million families, and we also brought forward by one year the increase in child tax credit, which benefited 4 million families. As my hon. Friend said, we made mortgage interest support, which is paid as part of income-related benefits, more generous. The changes, which are targeted at people of working age, demonstrate the Government's commitment to provide additional support to those facing financial difficulties and to help to protect them from repossession.
My hon. Friend raised some concerns about how the benefits system operates, and what more can be done. She referred to the difficulty during the recession of families with women who must go out to work and look after their families, and who may have to work longer hours. Ensuring that parents can balance work and family life is crucial at this time, and a win-win for business, individuals and children. That is why the Government have introduced significant reforms to encourage flexible, family-friendly working.
From April this year, the right to request flexible working was extended to working parents with caring responsibilities for children aged up to 16 years. The Government plan to help more people off benefits and into work in a way that supports families. We are not in any way using the recession as an excuse to put the matter on the back burner. Only yesterday, I issued a written statement dealing with lone parents’ entitlement to look for work that fits in with their children’s school day, so that when they move on to jobseeker’s allowance they can balance their work and family responsibilities.
My hon. Friend referred to the importance of child care. As I am sure she knows, the Government have invested more than £25 billion on early years and child care services since 1997 as part of an unprecedented expansion of provision for young children and families. In England, that has resulted in the number of child care places more than doubling since 1997. We now have more than 3,000 children's centres and more than 70 per cent. of schools offering extended services.
My hon. Friend referred to the needs of people in retirement. Overall, we do not anticipate that the current downturn will have a significant impact on future basic state pension entitlement because the rules will become much more generous from April next year. Both men and women will need only 30 years of national insurance contributions or credits to get a full basic state pension.
That change is part of the major reform that will make the state pension fairer and more generous and tackle the historical inequalities in entitlement, especially for women. As a result of the reform, about three quarters of women reaching state pension age are expected to be entitled to a full basic state pension by 2010, compared with less than half now.
My hon. Friend referred to women who work fewer than 18 hours a week, do not pay national insurance and therefore do not build up a state pension. If they earn less than the lower earnings limit and have children or are caring for someone who is ill or disabled, they should receive home responsibilities protection or, from next April, the new credits for parents and carers. Home responsibilities protection reduces the number of qualifying years that a person needs to receive the full basic state pension. Otherwise, people earning below the lower earnings limit have the option of paying voluntary NI contributions. A voluntary class 3 NI contribution costs £12 a week, but the actuarial value is £45 a week, so the contributions are good value for money for the people choosing to pay them.
My hon. Friend also referred to women with several jobs, each paying below £95 a week, who are not building up a state pension. If someone has more than one job, each job is treated separately for NI purposes. If the person earns less than £95 a week in each job, NI will not be deducted from their earnings, but they have the option of making voluntary NI contributions.
My hon. Friend made it clear why it is a serious concern that the Conservative party proposes to push back, on a very early timetable, the date at which women will be allowed to retire. That highlights the huge financial impact that there will be on many families.
We would have to consider that suggestion very thoroughly before going down that route, because obviously we do not want to move back from independent taxation of men and women.
I would like to deal with tax credits, because my hon. Friend pointed out the impact that they have. At the moment, tax credits are operating as a particularly flexible and responsive system, in that as people’s incomes fall, possibly because of fewer hours or less overtime, their tax credit entitlements ramp up. That means that tax credits are an even more effective fiscal stabiliser than the traditional tax and benefits system. They are obviously helping people to weather the recession.
In March, 355,000 households whose income had fallen were receiving on average £35 a week more in tax credits. That is 55,000 more households than were receiving extra tax credits at the same time last year. Take-up of tax credits is now the highest ever for an income-related system of financial support, ranging between 81 and 92 per cent.
In talking about tax credits, my hon. Friend referred to the timing of the changes in entitlements. She made the same point in respect of the education maintenance allowance. I am a Department for Work and Pensions Minister and I cannot speak for the Treasury or my colleagues in the Department for Children, Schools and Families, which is responsible for the EMA. This is an ironic situation to be in, obviously. When the economy was booming, everyone wanted us to stabilise people’s incomes by giving long-term fixed awards and not changing tax credits frequently. Now, of course, we are in a different phase of the economy and the pressures go the other way, but notwithstanding the points that came out of my hon. Friend’s research, it would not be right to return to a system of more frequent changes to tax credits entitlement, because the uncertainty that that produced for people was very problematic. I would be concerned that a more flexible approach would lead us into the administrative problems that we had in the early years of developing tax credits.
My hon. Friend referred to people who are entitled only to the contributory jobseeker’s allowance and she asked whether we could extend access to that benefit to 12 months as an effective way of tackling poverty. It is not clear that extending contributory jobseeker’s allowance to 12 months for one person in a couple if one or both are suffering unemployment is the most effective use of public money to reduce poverty. We can do other things that will have a better impact on that.
My hon. Friend made clear the important responsibilities that women have and are increasingly taking on in the recession. Indeed, they are often left to manage the family budget and debts, as well as to juggle work and child care, so the Government have provided impartial debt advice and money guidance in every major town and city throughout the country through an additional 500 debt advisers. We have increased access to affordable credit through the growth fund investment of nearly £100 million in credit unions. That is ensuring that nearly 200,000 people on low incomes have been able to obtain affordable loans, rather than paying the exorbitant interest rates charged by home credit companies and illegal lenders. Three quarters of the people taking those loans were women and many were mothers.
I am especially pleased to be able to announce today that the growth fund credit service is to be extended from Corby, Kettering and Wellingborough into Northampton as quickly as possible, with a further £250,000 available to ensure that the families in my hon. Friend’s constituency can benefit from the service that that provides.
My hon. Friend suggested linking support for mortgage interest to tax credits. Linking help in that way would clearly be a major change, with cross-Government implications. We would need to consider that long-term option as part of a more fundamental revamp of the benefits system. We have already taken steps to support home owners who are in work and do not qualify for help towards their mortgage through the benefits system. In April, my right hon. Friend the Prime Minister announced that home owners mortgage support was available to help home owners who suffered a temporary income shock. That means that eligible home owners will be able to make smaller mortgage repayments for up to two years, without the risk of losing their homes.
To conclude, I remind everyone of the measures that the Government have introduced to help people and families to survive the recession and to come out at the other end ready to benefit from the recovery that we hope to see shortly. We have introduced Sure Start children’s centres and child tax credits. We have enabled credit unions to serve another 300,000 people. We have made loans to 200,000 poorer families who could not obtain affordable credit elsewhere. We have reduced the number of people without bank accounts from nearly 3 million to under 1 million. We have increased the number of cash machines in poorer areas by nearly 600. We have introduced 500 more face-to-face debt advisers. We have introduced a money guidance service and we have started putting loan sharks in jail, where they belong. That shows a significant commitment to supporting families in the difficult economic situation at the moment.
Question put and agreed to.