Wednesday 24 February 2010
[Mr. Graham Brady in the Chair]
Motion made, and Question proposed, That the sitting be now adjourned.—(Steve McCabe.)
This Adjournment debate is about maximum workplace temperatures. I shall explain my interest in the subject.
Over the past three decades, there have been a number of bakeries and confectionery manufacturers in my constituency, some of which have unfortunately gone into decline as a result of past recessions. Nevertheless, there remains an element of that sector of industry in my constituency. I have taken an interest in health and safety matters for the work force in that sector in my constituency for a number of years. I am also chair of the Bakers, Food and Allied Workers Union parliamentary group, a cross-party group of about 30 MPs formed a number of years ago that considers problems in the industry in which the bakers union has members.
Health and safety is a key factor for the union, as it is to a number of the MPs in the parliamentary group. In recent years, we have been working on the matter of maximum working temperatures. That is a critical factor for those working in the bakery sector, but we have made links with other trade unions through the TUC; for them, too, it is a key issue. That is the genesis for today’s debate.
I shall explain our concerns about the effects of heat in the working environment. After a long period of campaigning, we have at last seen an increased awakening in the House, within Government and in society to the dangers of working in high temperatures. There is now an acceptance that we may have underestimated the short and long-term psychological and physical effects of what used to be described as non-major health risks in the working environment. We now understand a lot more about the effects of high temperatures on people at work.
Some attempts have been made at giving guidance to employers more generally on the range of temperatures in which it is comfortable to work. The Chartered Institution of Building Services Engineers recommends a range of temperatures; for example, it suggests 13° C for heavy work in factories and 16° C for light work, about 18° C for hospital wards and shops and 20° C for offices and dining rooms.
Those are temperatures in which people will feel comfortable when working, but research has shown that when the recommended temperature range of between 16° C and 24° C is exceeded it has a range of implications for those working in such environments. If people get hot, they may suffer dizziness, fainting or even heat cramps. In very hot conditions, the blood temperature may rise; if it rises above a certain level, there is a risk of heatstroke or collapse. In some instances it can prove fatal. Even if there is recovery, evidence shows that irreparable organ damage can result.
In France, it is the norm for employers to provide fresh drinking water. Even that would be an advance here. Even when suffering from heat and perspiration, people are not always aware that they are dehydrated, or of the damage they may be doing to themselves.
My hon. Friend makes a valuable point. The reason for this debate is to secure clarity in our regulations. There is greater clarity in other parts of Europe, with maximum ranges of temperatures being set for particular industries, but we do not have that here.
I shall explain the current regime and its weaknesses. We should be clear about what we seek. It is not about setting a maximum temperature above which an industrial or commercial process should end. It is about setting a temperature above which the employer should take action to overcome the problem. My hon. Friend the Member for Luton, North (Kelvin Hopkins) gave a good example, which was the supply of water. Ventilation is another.
I have raised the matter before, but a cretin—I can only describe him thus—attacked me in the media, saying that we were trying to prevent people from working in the sun or in hot conditions. Far from it: we were trying to keep people at work, but to ensure that sufficient compensatory action was taken to prevent them becoming too hot and suffering health problems as a result.
I congratulate the hon. Gentleman on obtaining this important debate. I declare an interest in the agri-food sector.
I turn to the other extreme—the contrast of cold conditions. Because of European legislation, employers could face litigation when it comes to cold temperatures as employees could have difficulty with their joints as the years roll on. That, too, is a problem, and employers may need protection on that side of things.
It is interesting to note that a minimum temperature is set. When I first left school, I worked for Birds Eye on the hamburger line—I have not eaten one since. In those cold conditions, action was taken if the temperature fell, cladding was given and people were taken out of those conditions to enable them to warm themselves. It is about ensuring an appropriate trigger mechanism that protects workers and employers and makes clear what action should be taken and at what level. We do not have that for maximum temperatures.
I have touched on the wider health impacts, but it is worth trying to get something more on the record. The effects of heat were not sufficiently acknowledged in previous debates on the matter, nor by the Health and Safety Executive. The effects include fatigue, extra strain on the heart and lungs, and the dizziness, fainting and heat cramps due to loss of water and salt that I mentioned earlier. Hot, dry air also increases the risk of eye and throat infections and breathing problems such as asthma and rhinitis.
Even what we would call medium temperatures can lead, as we know in this place, to loss of concentration and increased tiredness, which means that workers may be at greater risk. Those indirect effects can lead to an increased likelihood of accidents, as can slippery, sweaty palms; and they also lead to an increase in discomfort. Those are the effects that have been recorded. We have an increased understanding of those effects in the short term, but insufficient research has been undertaken into the long-term effects of working in a hot environment and the daily exposure to high temperatures. One plea that I make is for the Government to give the HSE some direction in order to ensure a much greater element of research into the long-term effects of working in hot conditions.
Does the hon. Gentleman agree that the situation could be clarified somewhat if the Government gave the HSE precise directions? At the moment, there seems to be a lack of direction. If that materialised, we could move forward.
I fully agree with the hon. Gentleman. I hope that what results from today’s debate is an acknowledgement by the Government that that is the route that needs to be taken. We have been down all the advisory routes, but none of them seems to have worked.
The extent of the problem is massive and in the past, it was not treated sufficiently seriously. The various trade union groups, particularly the bakers union, have surveyed workers to discover how they feel about the problem. Let me give some examples of the surveys we have undertaken. In 2008, high temperatures were cited as a major hazard by one in five safety representatives in an extensive TUC survey. Interestingly, the survey cut across sectors—central and local government, education and manufacturing. One of the big issues was post-war buildings with a high glass content. The president of the Bakers, Food and Allied Workers Union, Ronnie Draper, who has joined us in the gallery today, said:
“The lack of a solid legal framework makes it difficult for us, as a trade union, to protect our members and leads to vast inconsistencies across the country.”
He told us about two BFAWU members who were working for the same large retailer in different locations. Both complained about the workplace heat, but the management’s control measures were totally different in each case; one was acceptable and one was not. Therefore, even within the same company there are different practices on control measures. As the hon. Member for East Londonderry (Mr. Campbell) said, that is down to a lack of clarity.
A whole range of responses came out of the HSE’s 2010 survey. Let me quote from one bakers union member, who said that
“staff have no control because we can’t open windows. Also if we try to get fans or heaters more often than not we are told no because of wires being across the floor”.
Another member pointed out:
“We have juice in the summer, but it has to be a ‘very’ high temperature before we get it.”
One of the consistent themes that came out of the survey was the inadequacy of the fan units even when they were delivered by the employers themselves.
There was just one survey in Northern Ireland, which revealed that workers at a large food manufacturer were regularly working in temperatures ranging from 28° C to 35.9° C, and that is an intolerable heat environment in which to work. I pay tribute to other unions with which we have worked. The Union of Shop, Distributive and Allied Workers undertook a similar survey in 2009 and had more than 1,100 responses. Some 61 per cent. of the staff working in the various workplaces, shops, offices and warehouses said that high temperatures are a continual problem, and 87 per cent. said they had been complaining about high temperatures for over a year but with little or no response from management. Only 10 per cent. reported that management had taken appropriate steps to alleviate the problems, such as providing fans and cool drinks.
In that survey, 72 per cent. reported that thermometers were not available in the workplace even to monitor the temperature, which is a clear breach of health and safety regulations.
As always in such situations, it indicates that there are good and bad employers, and what we have to do is legislate for the bad employers. We have examples of employers taking the appropriate action, and others of employers refusing to undertake their responsibilities even under the existing regulations.
In the survey, we asked union members to describe the problems they were experiencing. They cited fatigue, feeling sweaty and irritable, headaches, dizziness and nausea, which is not acceptable in a modern working environment. We linked up with other unions in other sectors. A trade union survey among teachers found similar problems. Again, members talked about headaches, particularly when they were based in modern buildings with a high glass content and when summer temperatures rose to 32° C.
We have also had responses from telephone exchanges and call centres. Again, recorded temperatures ranged between 31° C to 36° C. In some places, the average temperature was 28.64° C, which is well beyond what would be considered a normal, comfortable working environment. In cases where the relevant unions sought to gain improvements, there was a failure in back-up, which was partly to do with the HSE or the local authority. Those improvements that had been introduced had taken years to achieve.
The problems in this area relate to the current regulations. The Workplace (Health, Safety and Welfare) Regulations 1992 laid down particular requirements for most aspects of the work environment, but on temperatures they are confused and feeble. Regulation 7 specifically deals with the temperature in indoor places and states:
“During working hours, the temperature in all workplaces inside buildings shall be reasonable.”
Then a code of practice sets out what is deemed reasonable:
“The temperature in workrooms should provide reasonable comfort without the need for special clothing. Where such a temperature is impractical because of hot or cold processes, all reasonable steps should be taken to achieve a temperature which is as close as possible to comfortable.”
“The temperature in workrooms should normally be at least 16 degrees Celsius”—
so we have a minimum temperature of sorts—
“unless much of the work involves severe physical effort in which case the temperature should be at least 13 degrees Celsius”.
It does not specify a maximum temperature. Instead, what we have is a series of thresholds, which is extraordinary. It says that the thresholds are set on the basis of reasonableness, so in air-conditioned offices, it is not reasonable if more than 10 per cent. of employees are complaining of being too hot or cold.
Exactly, and that is why we need greater clarity about what action needs to be taken in such a case. This vagueness of relying upon the subjective judgment of percentages of workers is extraordinary and something that we do not find in other fields. In air-conditioned offices, 10 per cent. of employees have to complain before action is taken. In naturally ventilated offices, more than 50 per cent. of employees need to complain. In retail businesses, warehouses, factories and other indoor environments that may not have air conditioning, some 20 per cent. of employees have to complain of being too hot or too cold. Only then are the workers entitled to request that their employer take action, and only then does the employer have a duty to respond.
The burden of the hon. Gentleman’s presentation is a call for clarity. Does he not acknowledge, however, that we must strike a balance between protecting the workers, which is of vital importance, and protecting their employment? Quite often when it comes to legislation, the pendulum can swing too far, and we must be very careful in the preparation of that legislation.
I fully agree that it is about a reasonable approach. We need to have a reasonable interpretation but with long-stops. At the moment, we have a long-stop at the minimum but not at the maximum. That is as much to protect the employer as the employee. What we find is that good employers will do their best, and unscrupulous employers will undermine the whole sector.
Elsewhere in Europe, maximum temperatures are set. In Germany, a maximum of 26° C is the norm, but the guidelines state that if the outside temperature is higher, there is an element of flexibility. At least a norm is set which can be referred to. Similarly, in France there is greater clarity. In Spain, specified temperatures range between 17° C and 27° C. Again, at least there is a benchmarking exercise that can be done within a particular sector. Let me repeat: this is not about our wanting to say, “We have reached a certain temperature—we have to shut down the shop or the process.” It is about saying, “We have reached a certain temperature, and now it is reasonable behaviour to introduce measures which will enable some form of discomfort to be eradicated.” That is usually by ventilation and increased water.
Is that not the most important point? Legislation should solve the problem rather than create trouble. The unions are leading the call for a change in legislation, but it is those people who are not organised or protected by the trade unions who are most at risk. Unions in organised places can create an atmosphere of complaint, but in places in which the union is not strong, workers have to suffer what is directed at them.
Clear evidence is emerging about the disparities between a unionised shop and a non-unionised one. In most employment situations—we have all been there—it is also better to have a clarity of relationship. Then the union can relate to management and say, “We’ve got a problem here and we will jointly resolve that problem.” However, there is a real difficulty if there is no union organisation to do that. In that situation, therefore, the only fall-back is clear regulation and law. If the legislation is not clear, the individual is vulnerable to exploitation and they are unable to exercise their particular protections.
There are real problems because we do not have clarity on a maximum temperature and those problems have emerged in this debate. There are problems about just regulating the overall workplace itself. What is happening at the moment is that, on an ad hoc basis, there are interventions by both unions and management to resolve matters, but in other areas there are no interventions and as a result employees are having to endure working in what I believe are unsafe and unhealthy working conditions.
I tried to gain information about how the existing regulations are working, so I put down questions about enforcement and monitoring. I asked the Secretary of State for Work and Pensions
“how many instances of stress due to exposure to high temperatures in the workplace were reported to the Health and Safety Executive”.
I chose the years from 2005 to 2008 to ask about, to gain information on up-to-date records from the last four or five years. The response that I received from my hon. Friend the Minister who is here today was:
“Instances of heat stress, as a medical condition, may be included in injuries reported under the Reporting of Injuries Disease and Dangerous Occurrences Regulations 1995 but it is not possible to identify them separately.”
At the moment, therefore, the HSE is not even monitoring the separate issue of instances of heat stress.
I then thought that I would at least see whether there are any examples of prosecutions, because we know from the surveys that have been carried out that high workplace temperatures are a serious issue for many workers. We have also seen from the surveys that, in some instances, workers have failed to induce action from their employers to resolve these problems. Therefore, what is the fall-back? Well, the fall-back is the HSE prosecuting employers who fail to meet the standards set out in the regulations.
So I asked how many prosecutions there had been by the HSE in cases of failure to manage high temperatures in the workplace and again I asked about the years from 2005 to 2008. My hon. Friend the Minister reported:
“From 1 April 2004 to 31 March 2008, the Health and Safety Executive took no prosecutions as a result of employers’ failure to manage high temperatures in the workplace.
Although outside the period specified in the question”—
that is more recently—
“legal proceedings have recently been initiated by HSE in relation to a workplace fatality in 2006-07 in which heat stress was implicated.”—[Official Report, 23 February 2009; Vol. 488, c. 73-74W.]
Let me just remind Members that, from the surveys that were undertaken by the bakers union, the TUC and other unions, we have report after report of heat stress and its serious effects on workers’ health. Yet we now discover that the HSE is not monitoring heat stress and there has not been a single prosecution during the period that I asked about, from 2005 to 2008, and only now has one prosecution been commenced.
I understand my hon. Friend’s concern about the HSE entirely. Without a legal maximum temperature, however, the HSE is working on the basis of what is reasonable, and is it not more difficult to prosecute against something that is unreasonable than it is to prosecute against an absolute, such as a legal maximum temperature?
That is exactly what has resulted in this debate. We know from our surveys that there is a problem out there. At the same time, however, we now know that the HSE is not monitoring it in any detail and we also know that it is not being addressed by legal action. Either our surveys are all wrong and people are working in ideal conditions across every sector of industry, or the regulations are wrong because they are not being implemented or cannot be implemented because of their vagueness and at times—I must say—their vacuousness.
So what has come as a result of all the work that we—the bakers union and other unions, and the trade union group in Parliament—have put in, and as a result of the responses that we have had to our parliamentary questions? Well, what has happened is a major campaign in the last few years, which has taken up the pace during the last year in particular. I pay tribute to the work that has been undertaken by the bakers union itself.
In the last year, the trade union group in Parliament wrote to my hon. Friend Lord McKenzie of Luton, who I must say has been nothing but helpful on this issue; he has made himself available for meeting after meeting to try to help to resolve this problem. My hon. Friend the Member for Luton, North placed an early-day motion before Parliament on a couple of occasions, which received 42 signatures initially and that number is building. We then wrote to my right hon. Friend the Member for Stalybridge and Hyde (James Purnell), the former Secretary of State for Work and Pensions. I see that he is now retiring from Parliament, which I regret because he was very helpful on this issue. He wrote to the HSE and asked it to review the current legislation and guidance.
That review was undertaken and co-ordinated by a Mr. Ray Kemp; indeed he is Professor Ray Kemp. May I say that some concerns have been raised about the nature of that review? I would welcome some response from the HSE about how it appointed the individual who undertook that review. I just mention this point; I do not want to undermine people’s reputations in any way, or anything like that. However, I am anxious. I saw on Mr. Kemp’s website that he advertises himself as someone who
“has also directed large scale EIAs”—
environmental impact assessments—
“and public consultations in support of planning applications”.
Those planning applications have included
“oil and gas processing plant, waste disposal facilities, incinerators, airport expansion”.
I have a slight anxiety about someone who advertises themselves as being “in support of” planning applications rather than as someone who just independently assesses those applications. However, I will leave that point for other Members to consider and I would welcome a response from the HSE about its appointment procedures.
Anyway, what came out of that review was basically a number of stakeholder meetings. What was interesting about those stakeholder meetings, involving both sides of industry, was that although no consensus was reached, a majority of those stakeholders—60 per cent. of them—concurred with the view that the current regulations were confused and not satisfactory, and that there was a need for change. All of us have been in those situations and it is difficult, particularly when there are both sides of industry there, to get absolute consensus. However, to have a majority of 60 per cent. saying that something needs to be done and that there needs to be clarity about the new processes and the new regulations is quite significant, I think.
Unfortunately, the review came out with—well, I give Mr. Kemp’s conclusions:
“On balance, it is suggested that the workplace temperatures issue is not one that justifies active regulatory intervention but rather improved joint working between all parties to the issue—government, Trades Unions and Employers. This best reflects the new HSE Strategy for the Health & Safety of Great Britain”.
As a minimum, he recommends that amendments to the guidance
“should be pursued through joint working and tripartite discussions”.
Unfortunately, that is where we have been for a number of years and it is a system that has not worked. I find that the arguments that Mr. Kemp seems to have put about are not just unconvincing but almost specious in part.
I am afraid to say that that is so typical of successive British Governments. Time and again, they seek some kind of reasonable, voluntary conclusion, which, in the end, does not work and they have to legislate. There is a range of matters, including drink-driving and seat belts in cars, on which Governments have first sought a voluntary arrangement, and when that did not work, they have put forward a statutory proposal.
I fully agree and I will come on to that point. I think that that approach reflects a climate of opinion that has developed in Government and across parties too at the moment.
Let me just briefly go through the arguments that Mr. Kemp has put forward. He argues that thermal comfort depends on a number of factors and that setting an upper limit would be counter-productive from a health and safety perspective. I fail to understand that argument. This is not an issue where we are saying that there must be only a maximum temperature and nothing else. What we are saying is that there must be a maximum temperature that exists alongside a series of other measures that recognise the differentiations that exist in different sectors and also different individuals’ perception of thermal comfort.
Mr. Kemp also said that scientific evidence does not point to a value for a maximum recommended temperature. Well, it is true that people feel heat differently, but they also feel pain and cold differently, and yet in those cases we have been able to put into practice maximum ranges that no employer should allow their work force to be vulnerable to. Again, I find it extremely difficult to accept that argument. It gives the employer maximum discretion but leaves the employee largely unprotected.
Another argument is that
“there is no evidence that thermal discomfort is a significant workplace hazard.”
Our surveys demonstrate that it is. The fact that the HSE is not recording incidents properly and not prosecuting reflects weaknesses within the HSE system. Every other survey undertaken has indicated that thermal discomfort is a significant workplace hazard that needs to be addressed.
Another argument, which has been mentioned in this debate, is that the introduction of a maximum temperature would be costly to employers. The HSE and the Department are engaging in an impact assessment to consider the costs of introducing a maximum temperature associated with measures necessary to produce thermal comfort in the workplace. That argument has been used for decades to prevent developments in health and safety.
I want to speak on behalf of the good employers. At the moment, bad employers are making good employers vulnerable. Bad employers can inflict thermal discomfort and risk on their work force by cutting costs, which also allows them to undercut good employers in the pricing of their products. That has always been the case with issues of health and safety. Regulation tries to create a level playing field for everybody.
However, there are costs involved at the moment for all of us as we pay into the national health service for the treatment of people enduring and suffering from the lack of a maximum temperature. They are vulnerable to working in unsafe environments, and it has an impact on their health.
The report failed to come to grips with the reality of the working environment endured by members of the bakers union and other workers across a range of sectors. My hon. Friend the Member for Luton, North hit on one reason for the resistance to a maximum temperature. We must understand it in the context of what has happened in health and safety over the past 20 years or so. There has been a stepping back from establishing clarity in the regulatory regime for the workplace. We have moved towards risk assessments, which is setting us back decades.
The Secretary of State for Work and Pensions recently stated that
“the UK has one of the best health and safety records in the world”.
That is not the case any more. I do not like to say it, but it is true. In the global health and safety risk index 2009, the UK came 30th out of the 176 countries listed. Among OECD nations, we are ranked 20th. The true picture is that in many instances we are falling back rather than going forward.
Professor Steve Tombs and Dr. David Whyte have identified a lack of reporting. In some instances, as many as 80 per cent. of accidents and even fatalities at work related to the working environment are not reported. Andrew Watterson from the university of Stirling has argued that due to a lack of publication even of fatalities and their links to ill health, the number of people who die from occupational diseases is dramatically underestimated, as is the impact—particularly the long-term impact—of the working environment on health.
The issue also relates to what has happened to the HSE itself. Cuts have been made to the HSE’s overall expenditure, resulting in a fall in prosecutions. The overall picture since 1997-98 is that HSE prosecutions have declined by 32 per cent. and local authority prosecutions on health and safety grounds have declined by 34 per cent.
Inspections by the field operations directorate, the HSE’s largest inspecting section, have decreased by 26 per cent. and regulatory contacts fell by 19 per cent. between 2003 and 2004-05, the latest date for which I have figures. HSE investigations of major injuries fell by 43 per cent. between 2001-02 and 2006-07. In 2006-07, the HSE investigated only one third as many three-day injuries as in 2001-02. Not only are the regulations not clear, inspections, prosecutions and regulatory visits have declined dramatically.
Certainly not. I hope to sum up fairly quickly, Mr. Brady. At the beginning of the debate, we were on our own, but we have now been joined by a number of interested Members. I am pleased. I could make all sorts of puns about turning up the heat on me, but I will move on.
The lack of inspections, prosecutions and visits reflects a cut in HSE resources, which the Government must address. As my hon. Friend said, it also reflects the changing climate of opinion in Government and across all political parties. I fear some of the statements made in recent years. I warn the Opposition as well, having heard some of their statements on what they would do to deregulate if they came to power, that it would undermine the health and safety regime even further, in terms of ensuring successful investigation and prosecution in the work environment, to undermine the HSE’s resources and the direction that it is given.
I urge the Government to reconsider the issue, find a new way forward and give new impetus to the protection of workers from exposure to thermal discomfort. First, it would be useful for the Government to acknowledge the seriousness of the problem that we face and the need for action. In the past years, the Government have come some way on the issue. Ministerial meetings, the commissioning of a review by the HSE and the impact assessment have gone some way towards improvement, but further statements must be made to reassure people in such working environments that the Government take the issue seriously.
Secondly, we must recognise that consensus will not be achieved. It is not achievable across the stakeholder groups. However, a 60 per cent. majority agree that action must be taken and change is needed, and the Government must move forward on that basis.
Thirdly, the Government need to make a statement that the HSE needs to be more proactive in its approach. I will explain briefly what I think the HSE could do. It could investigate the number of times that it has been approached with complaints about workplace heat and the number of other reported incidents in which heat could be a factor. It could also perform on-site investigations of a selection of workplaces across all sectors immediately to give us fresh evidence of the scale of the problem that we face. Finally, it could investigate the wider social implications and long-term impact of daily exposure to heat.
After doing those things within a limited time scale—for example, six months—the Government could then introduce proposals for new regulations setting a maximum temperature and demonstrating clarity for employers and employees about the temperatures in which work should be done. Measures should then be introduced to ensure that health and safety is not put at risk.
We can turn the issue around with good will in the Government’s response today. Many people are looking to the Government to take measures to protect them in their work environment. They have waited too long for clarity and decisiveness of Government action on the issue.
It is a pleasure to speak under your chairmanship, Mr. Brady. I congratulate my hon. Friend the Member for Hayes and Harlington (John McDonnell) on his superb speech, in which he said just about everything that there is to say. It was a veritable tour de force. In my few words, I will add my support for what he said.
With my hon. Friend, I attended the meeting with Lord McKenzie of Luton, who is not just a noble Friend but a long-term one, as we both live in Luton and have known each other for 35 years. The meeting was enjoyable. As my hon. Friend said, I tabled the first early-day motion on this subject, which received 42 signatures, showing the support for this matter among hon. Members.
In the 1970s, I worked in the TUC’s economic department during the period of the social contract, part of the purpose of which was to introduce the Health and Safety at Work etc. Act 1974. We saw that as a beginning from which we would move forward— not a point that would be chipped away over subsequent decades. Perhaps we should revisit the principle of using the 1974 Act as a base for making conditions better for working people over the decades.
My hon. Friend talked about temperatures. I asked colleagues from the bakers union about typical temperatures in bakery workplaces. Sometimes there are temperatures of 38.6° C, or 102° F, and they can even be in excess of 40° C, which in Fahrenheit—I will not say in English money, because Fahrenheit is not English—is 104°. At least if one is working outside in such temperatures, one has the breeze and shade, but in the enclosed space of a bakery, they are simply not tolerable.
My hon. Friend made the point that people feel heat differently. Sometimes when I have an overcoat on, other people are walking around in T-shirts and clearly do not feel the cold in the way that I do. I can tolerate a little heat, but I cannot tolerate cold. Other people are the other way round. In a group of half a dozen bakery workers, it is possible that one would not be able to tolerate heat. The others might say, “What’s the problem, Jim? We’re coping but you’re not.” We have to accommodate everyone and should have a temperature that is reasonable and acceptable for those who find heat more difficult to contend with, not just the average person or the tough guy who can get by in hot circumstances. We must consider human variation.
I have a particular interest in this debate, because my grandfather was a bakery worker and my great-grandfather was the village baker in Blaby in the 1880s. It is a Hopkins family tradition, although I have long since lost any connection to baking. I do enjoy bread, of course, and I want to know that the bread I eat has been produced by workers who are properly accommodated in terms of pay and working conditions. I do not want to feel that the bread I am eating has been produced in situations of extreme discomfort. At times such as this when unemployment is relatively high, people hang on to jobs and might be tempted to accept conditions that would not be acceptable if they were not desperate for work. In such circumstances, we want trade unionism, but we also need statutory protection for workers in the workplace. That is what this debate is about.
My hon. Friend talked about other European countries. Sadly, time and again, the regulations protecting workers are considerably better in many continental countries than they are in the UK. We have to regulate working conditions, particularly the temperatures that bakery workers have to tolerate, and perhaps in other spheres, too. I do not want to make a long speech because my hon. Friend made a wonderful speech of almost 40 minutes in which he said just about everything there is to say. I congratulate him and give him my total support. I hope my hon. Friend the Minister will take note and that legislation will be promised and implemented before long.
I apologise for missing the start of the debate. It was due not to high temperatures, but merely a broken-down bus. It is a pleasure to serve under your chairmanship, Mr. Brady.
I congratulate the hon. Member for Hayes and Harlington (John McDonnell) on initiating this debate. This is an important issue in which, as he is aware, I have taken some interest. In response to a parliamentary question I asked the Minister last year, he said that over the previous four years there had been 53 incidents in which high temperatures were a major problem, including one in which there was a fatality. In the context of the number of industrial injuries that occur every year, that is a relatively low figure, but it is nevertheless significant.
Like the hon. Members for Hayes and Harlington and for Luton, North (Kelvin Hopkins), I find it difficult to understand and accept the arguments made by the Department and the Health and Safety Executive as to why we do not have a maximum operating temperature. In certain jobs, such as work in bakeries and foundries, high temperatures are a problem that affects the workers. For many office workers, it is important that there is a maximum temperature.
When my hon. Friend the Member for East Dunbartonshire (Jo Swinson) asked a parliamentary question last year about what the House authorities recommended as the maximum operating temperature, I was surprised that the reply from my hon. Friend the Member for North Devon (Nick Harvey) was that they work on the basis that it should be 21° C. If that is an acceptable temperature for Members of Parliament and their staff, we ought to set maximum temperatures for everybody else.
I understand the approach the HSE has taken in dealing with the range of factors that affect people’s ability to work, but the same argument ought to apply to the minimum temperature. We have statutory minimum temperatures of 16° C for people working in a sedentary position and 13° C for those doing physical work. There is a range of conditions at the colder end of the scale that affect a person’s comfort. The same argument should apply to the maximum temperature.
In a parliamentary answer that I received last year, the Minister said that the Department had asked the HSE to undertake a review and consult stakeholders. I was therefore looking forward to seeing the same sorts of controls. Whether for a minimum or a maximum temperature, there will always be discussion about what constitutes discomfort. The importance of the minimum or maximum temperature is that it sets the bare limit to which everyone is entitled at work. During a review, the HSE sent out a questionnaire with a closing date of 11 February. I do not know if that is the issue to which the hon. Member for Hayes and Harlington referred.
For the sake of clarity, the HSE commissioned an investigation and report from Professor Ray Kemp. The survey subsequently sent out by the HSE related specifically to the impact assessment, including the impact of introducing regulations. The danger is that the HSE seems to think that it can deal with just one sector, rather than with industry as a whole. Such a sectoral approach would cause even more confusion.
I am grateful for that clarification. I agree that although the review is part of a process, there must be a wider discussion of the value of a maximum temperature.
I agree with the hon. Members for Hayes and Harlington and for Luton, North that it is a worrying trend that the HSE’s resources have been cut and that there has been a fall in the number of inspections and, consequently, the number of prosecutions. A few weeks ago, I addressed the HSE staff conference, which is seriously concerned about how it can deliver the workload expected of it. The net result of further changes can only be a diminution in the ability of the HSE to deal with its statutory responsibilities.
There is great merit in establishing a maximum workplace temperature. As has been done in Germany, it is possible to set an upper limit for people doing physical work and a slightly lower limit for those doing sedentary work, but that will not help with all the other issues that must be dealt with as a result of temperature discomfort. Those issues can still be dealt with, but there should be a statutory maximum and, as I said, I cannot understand the argument for having a lower limit, but not an upper one. We either accept that there must be limits and ranges within which people can work or we do not.
The current position of having a statutory lower limit and an advisory upper limit is clearly unsatisfactory. There have been no prosecutions, and there are no proper records of the number of people affected by higher temperatures, because the existing regulations have no teeth. They need teeth, so that they can protect workers who have to work in higher temperatures.
It is a great pleasure to serve under your chairmanship this morning, Mr. Brady. I congratulate the hon. Member for Hayes and Harlington (John McDonnell) on securing the debate and on his extremely well-informed and considered opening speech. As hon. Members will have gathered, he has long campaigned on the subject and has raised it many times in questions and debates. As he made clear, he has also been the author of early-day motions that have attracted the signatures of a considerable number of hon. Members. Most recently, on 15 December 2009, early-day motion 491 attracted the signatures of 48 hon. Members. If a large number of hon. Members pen their name to an early-day motion, the matter should be taken seriously.
The hon. Gentleman set out in a proper way some of the problems that can arise from exposure to high temperatures and made the case for a maximum temperature. Certainly those are all issues that must be addressed and I will turn to that matter in a moment. We are also indebted to the hon. Member for Luton, North (Kelvin Hopkins) who made some important points, including a crucial remark about individual sensitivity to heat. He spoke with the authority of someone who, as we learned today, comes from a long line of bakers.
Both hon. Gentlemen have made it clear that, as with many other factors in the workplace, there can be no doubt that high temperatures can pose health and safety issues in the workplace in certain circumstances. As was also made clear, the Health and Safety Executive receives complaints about high temperatures in the workplace and, sadly, a small number of accidents at work in recent years have occurred because of the exposure of individuals to high temperatures at work. Very sadly—this was adverted to—there was one fatality as a result of exposure to high temperatures in 2006-07.
On going through the figures, I note that, compared with the numbers for other years, a cluster of injuries and one fatality occurred during 2006-07. Twelve major injuries resulted from exposure to heat in that year, as well as the fatality. I am not drawing things together, but I notice that the Health and Safety Executive has instituted legal proceedings over that fatality.
We agree that we certainly need an appropriate framework so that we can deal with the matter in an appropriate way. I am sure the hon. Gentleman would agree that where serious accidents or fatalities have occurred, there is the question of whether the legal framework has been broken. I do not want to say any more than that because I know that proceedings have been initiated in the case we have mentioned. It certainly catches the attention that there was a cluster of serious cases in 2006-07. I do not know whether they occurred because of a single incident or what the background is, but it certainly underlines the fact that serious health and safety issues can arise from high maximum temperatures.
The question is, how should we deal with those issues? As the hon. Member for Hayes and Harlington has made clear, no legal maximums for temperatures at work are laid down as a binding rule. However, the Health and Safety Executive deals with the issue of workplace temperature within the frameworks of the Health and Safety at Work, etc. Act 1974 and the more recent regulations to which the hon. Gentleman referred, particularly regulation 7 of the Workplace (Health Safety and Welfare) Regulations 1992. Those regulations deal with the temperature in indoor workplaces and state:
“During working hours, the temperature in all workplaces inside buildings shall be reasonable.”
There is an associated code of practice that deals with temperatures in workplaces and sets out the matters that must be taken into account in taking reasonable steps in certain circumstances. The hon. Gentleman made some points about that framework and what he considers to be the disadvantage of it, and those matters will have to be taken into account.
Previous Health and Safety Executive guidance has stated that a defined and acceptable zone of thermal comfort lies roughly between 13° C and 30° C depending on the nature of the activity being undertaken. Again, the hon. Gentleman set out his case relating to that. He and other hon. Members have been campaigning on the issue for some time, and we note that in February last year, the then Secretary of State, the right hon. Member for Stalybridge and Hyde (James Purnell), wrote to the chairman of the Health and Safety Executive to ask her to revisit the reasons for and against a maximum workplace temperature. That came after a process of reviews and debate on the subject.
The hon. Gentleman is setting out the circumstances and the regulations, but I think hon. Members would be interested to hear his opinion—I hope he gets to that. When he does get around to giving his opinion, will he inform us and wider society how his opinion squares with the Green Paper published by the Conservatives during their 2008 conference, when the right hon. and learned Member for Rushcliffe (Mr. Clarke) said:
“The powers of Government inspectors”
in health and safety “will be drastically curbed”? Indeed, the Leader of the Opposition said also last year that they
“will reduce the burden and impact of health and safety”.
What powers will be drastically curbed?
I will not be tempted by the Minister, who is going much wider than the subject of the debate. I have to say that his contribution is not in keeping with the rest of the debate, as he has referred to something much more general. If he wants to put his argument in such a way, I should say that he has heard the hon. Member for Hayes and Harlington go through in some detail what he considers to be the shortcomings of the present Government’s efforts in this regard. They have at their disposal the whole apparatus of the civil service and its controls, and its relationship with the Health and Safety Executive. I was not going to go down such a route, but the Minister chooses to go down it, so I have to say that what the hon. Gentleman said should not make particularly comfortable listening for him.
I have tried to approach the debate by attempting to secure a consensus largely because, if there is a hung Parliament, I am working on the basis that the Socialist Campaign Group will hold the balance of power between the parties. I say to my hon. Friend the Minister that I, too, am concerned about some of the statements made by the Leader of the Opposition and the specific quote from the Green Paper. However, I do not want that to be a matter of controversy today. I am trying to arrive at a position whereby we can move forward on the issue of maximum temperatures that has been signed up to today. Anything he can say that is of comfort about support for maximum temperatures would be extremely helpful in securing that consensus.
I certainly share the hon. Gentleman’s approach in so far as it is factual and evidence-based, as I am sure he would want it to be. We certainly feel that the issue should be addressed, alongside other issues that pose a threat to health and safety. As with every other potential health and safety issue, we would expect it to be tackled in an effective but proportionate, sensible and appropriate manner. We are waiting to hear the Health and Safety Executive’s views in the inquiry commissioned by the previous Secretary of State, so it would be sensible to wait and see what it has to say.
I can assure the hon. Member for Hayes and Harlington that we want the issue to be dealt with in an effective, proper and sensible manner, proportionate to the scale of the problem he has identified. That is our general approach. He cannot expect the Opposition to go much further than that on such a detailed matter, when there is a Health and Safety Executive at play, or to go so far as to set down a detailed maximum temperature today. We would want to approach that in an appropriate, sensible and practicable way, taking into account the seriousness of the matter. If the hon. Gentleman wants to get further than that, he is welcome to try.
Just as a matter of warning, statements such as
“The powers of Government inspectors will be drastically curbed”
send out the wrong message in the health and safety area, so I would like the hon. Gentleman to take that back if possible. Secondly, I suggest to him, as I suggested earlier, that we try to establish a time scale for a set of actions to be taken, so that the Government can make a decision. I would like that to happen before dissolution, but if that cannot be done then at least within six months, because we have been at this for so long. The latest process started last January, so it is over a year later. The hon. Gentleman could indicate that he, too, sees it as a matter of some urgency now, and that a time scale of six months for resolving it would be reasonable.
I might be wrong, but I think we are still waiting for a response to the initiative the then Secretary of State took last February. Perhaps the Minister will have something to tell us about that in a few minutes. I appreciate that the hon. Member for Hayes and Harlington is a doughty campaigner, so what I will say to him is that, were we in a position to form a Government, we would always want to hear Members’ opinions on health and safety matters and take them into account, especially when they are made in the detailed and well-informed way they have been made today. Ministers should always be prepared to listen to the views of the House, and I hope that that was implicit in my opening remarks.
I hope that I have set out our general approach on the matter and look forward to hearing from the Minister—quite apart from his earlier unfortunate remarks—a detailed response to the hon. Gentleman’s speech.
I begin by congratulating my hon. Friend the Member for Hayes and Harlington (John McDonnell) on securing the debate. He referred to the industries based in his constituency and to the work of the bakers union, Usdaw and other unions that are concerned with the matter. I congratulate other hon. Members on their contributions and will come to their points when I conclude. The debate is a good opportunity for the House to consider the report the Health and Safety Executive commissioned on the current approach to workplace temperatures. The HSE is actively carrying out further work in that area to identify those sectors where thermal environment is an issue, and to scope the full extent of the problems presented and identify an appropriate and proportionate solution. I am aware that there has been considerable debate on maximum temperatures.
Before we lose the point, I asked a question about the appointment of the person leading the HSE review. Will the Minister, perhaps by writing to me, clarify the process for the appointment of that individual and the process for appointments generally by the HSE for such key reviews?
It is important that people affected by organisations or individuals undertaking important reviews are confident that there is a proper process in place that identifies their expertise. Of course, it is not a pure equation, and people might not see the information they had hoped for at the end of a report, but they should have confidence in the process, so my hon. Friend makes a reasonable point. I will ensure that he gets those details, and I will publish the letter and put it in the Library so that all hon. Members can see it.
The issue of maximum temperatures in the workplace has been discussed for several years, as my hon. Friend indicated. The TUC has been calling for a change in legislation with the introduction of an absolute maximum temperature, as has been mentioned, of 30° C, or 27 ° C for those doing strenuous work, at which point workers should not have to work unless effective measures are put in place to manage heat, with failure to do so making an employer liable for prosecution.
I certainly support my hon. Friend’s call for clear and coherent requirements for employers on how they combat heat in the workplace, and that has been reflected in comments from other hon. Members. That is what the HSE review has focused on achieving. In considering the best way to achieve that, it is important to understand the existing regulatory approach. Despite the concerns raised today, understanding the scientific evidence must play a key part in informing that. The HSE advises that temperature is only one indicator of potential thermal discomfort in the upper range. The influence of temperature on health and safety in the workplace is dependent on the interaction of several factors: air temperature, clothing, relative humidity, radiant temperature, air movement and metabolic work rate.
I noted the hon. Gentleman’s earlier remarks and I will come to them later in my speech. Although those factors exist in cold environments, air temperature is actually a much better predictor of how a person will feel when cold, meaning that we can predict with much more confidence that controlling the temperature to a regulatory minimum should ensure that a workplace can achieve a safe thermal environment.
The same cannot be said of a hot environment, where factors such as humidity have a much greater effect on how a person will feel. Radiant heat is also an important consideration in that context. As a result it will always prove difficult to identify a suitable maximum workplace temperature for all workplaces. For example, how would that work for a foundry? For those reasons, the HSE currently advocates a risk-assessment approach to working in heat that takes into account the interaction of all factors that will influence how an individual feels in a given thermal environment. Detailed guidance on how to complete thermal risk assessments is provided through the HSE website. Recognising the complexities involved in that issue and the concerns raised about the clarity and application of the current regulations in the workplace, HSE has, as we have heard, undertaken a review of the workplace temperatures policy and guidance.
On the difference between the minimum and maximum, I put it on the record that 99.9 per cent. of the population know when they are too hot or too cold. The complexities that have been brought forward regarding the maximum temperature could have been used for the minimum temperature, because we now use arguments about the wind chill factor and other considerations that affect how people feel the cold. I want to put it on the record that the vast majority of us feel that the process for finding the maximum temperature and the use of scientific evidence is a process of obfuscation and avoidance of responsibility.
I assure my hon. Friend that that is not an attempt to avoid the issue, which is why the previous Secretary of State, my right hon. Friend the Member for Stalybridge and Hyde (James Purnell), undertook to ensure that that work was completed. We take the matter seriously.
The HSE has received more than 445 responses to its initial scoping questionnaire last year from a wide range of sectors. The questionnaire was supplemented by a well-attended stakeholder event in July 2009.
Are a high proportion of the representations from employers? Clearly, there will be costs involved in dealing with new legislation or stricter regulation. There would need to be some investment in workplaces to ensure that temperatures could be controlled. How much pressure has been put on both the HSE and the Government by employers?
When I refer to stakeholders, I include employers’ representatives and employees’ representatives such as trade unions, which have been referred to in the debate.
Along with extensive engagement with stakeholders as part of the further work requested by the HSE board, which I shall touch on later, the work done by the HSE to consult all interested parties is the right approach. It is not fair to say that an attempt to build consensus is the wrong approach. There needs to be discussion. If there were not, there would be a great deal of criticism.
Further analysis was also undertaken as part of the review, including interrogation of the HSE statistics collected under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995 and information on complaints and queries submitted to the HSE information line. The analysis revealed that there was little evidence of health effects caused by high temperatures. Infoline information demonstrated that the number of complaints and queries increased in direct relation to hot and cold spells of weather.
In addition, information was considered from key European Union member states—this has been referred to by hon. Members—on how workplace temperatures are managed in their countries, along with research gathered on the experience of managing workplace temperatures in Australia. It is clear from the report that there is no consistent approach to the matter across Europe. Some member states recommend a maximum temperature but others do not.
I would not say that ours is the most liberal regime.
The HSE board received the report, which concluded that, on balance, workplace temperatures do not justify active regulatory intervention but rather, improved joint working between all parties to the issue: the Government, trade unions and employer representatives. The report included a number of options for consideration, from retaining the current approach to amending the approved code of practice to include a maximum upper temperature limit, in addition to the current lower limit.
The report provided some valuable information and showed that there is a wide range of views on the issue, but the HSE board felt that it was inconclusive. It has asked for further evidence to be gathered to scope the full extent of the problems presented. As part of that further work, the HSE is keen to focus attention on those sectors that are most affected, and to identify practical and effective steps that can be taken to tackle the problem in those workplaces. That will not preclude a review of the regulatory provisions, but will help to address the issue more speedily and effectively where needed, while also helping to inform further consideration of whether a maximum temperature or a legal trigger for action, which my hon. Friend the Member for Hayes and Harlington referred to, would be proportionate and effective. So that matter is under active consideration.
My hon. Friend stated that there is a lack of traditional forms of evidence of incidents or illness caused by high temperatures other than anecdotal reports. In attempting to gather as much evidence as possible to allow a full consideration of the problem and any possible regulatory solution, the HSE has developed a survey to cover employers and employees. It was developed with assistance from the HSE’s occupational hygienists to ensure that the questions were designed to capture the right information. It was developed with the aim not of achieving a consensus of views on the issue, but of establishing whether there is evidence of health effects caused by working in high temperatures.
The survey was sent to several organisations including employers, employee representatives, trade unions and so on. The HSE was particularly proactive in publicising the survey and encouraging people to respond to it, and we have received many responses in different formats. Responses were requested by 11 February, as the House has heard. There was a huge number of responses—more than 3,000—from health and safety representatives, trade unions, employers and so on. The HSE is in the process of analysing the responses and will work with its economists to calculate the costs and benefits of the options proposed. It will use the information gathered from the survey, along with data relating to the age of the building premises and environmental considerations.
The Minister mentioned costs. I would like to place on record—perhaps he could pass this message on to the HSE—the fact that the analysis of costs should not just involve the costs to employers of introducing protective or compensatory measures. There should be an understanding, too, of the costs to wider society of the effects of heat on health. The cost burden falls on the individual and their family, then on the NHS and the general taxpayer.
My hon. Friend makes his point well. Of course we need to consider the wider effects on individuals and society.
We will look at the information on costs that would be incurred through the introduction of measures to manage the issue, and on potential cost savings that would be generated by increasing productivity and reducing the days lost due to illness. That is another part of the equation that we need to factor in. A facility that is operating with good health and safety measures is an efficient facility—the two do not contradict each other. I have seen that through my own experience of working closely with the paper industry in my constituency, in years gone by.
All of that detailed information will be used to complete a regulatory impact assessment, which will inform the future direction of travel. Due to the complexity of the issue and the sheer volume of data and evidence to be analysed, it is not possible to say at this stage what the outcome will be. The HSE board will consider the further evidence gathered at its meeting in April 2010, and a report to Ministers will follow in May 2010.
The HSE is establishing a working group with key stakeholders in the baking industry to discuss the problems caused in that sector by workplace temperatures and to discuss any examples of good practice. The group’s first meeting will take place on 3 March 2010, and the HSE will subsequently engage in discussions with key stakeholders from other sectors affected by thermal environments. I would encourage the bakers union, the TUC and industry representatives to embrace the sector-specific discussions as an opportunity to help address the concerns of their members while helping to further everyone’s understanding of how high workplace temperatures can best be managed and controlled.
We have had discussions through the trade union group with the bakers union, which is keenly engaged in the sector discussions, but let me make the point that has been made to us by the union itself. It does not want to be seen as part of some form of divide-and-rule measures whereby we pass off individual sectors and do not establish across all of industry and commerce a maximum temperature regime. We need to address the fear that participation in one-sector reviews will mean that other sectors will not be involved, or that there will be delays in involving them. By all means, the union should participate in sector discussions, but not at the expense of wider progress on maximum temperature across industry.
I am not expecting the unions to change their position, but equally I am pleased that they are willing to engage. I will ensure that my noble Friend Lord McKenzie of Luton is aware of that.
On the point made by my hon. Friend the Member for Hayes and Harlington and other hon. Members, it is not the case that we wanted to avoid this important issue. We want to see a conclusion for the benefit of workers and employers. The current HSE strategy encourages strong leadership and worker involvement. A number of people commented throughout the review that workers need to feel empowered to manage their working environment. However, I take the point made by my hon. Friend the Member for Luton, North (Kelvin Hopkins): a worker’s ability to be empowered can vary greatly in terms of the relationship with their employer. I accept that.
My hon. Friend the Minister has set out—let me be clear about this for the record—the fact that the regulatory report and the impact assessment will go to the HSE board in April and there will be a report to Ministers in May. May I ask my hon. Friend to be clearer about what the process might be after that if the Government determine that they will go along the line of a maximum temperature? What processes are envisaged in that regard? Will there be delegated legislation? What time scale would be envisaged? This campaign has been going on for a long time. Hopes were raised 12 months ago that this issue would be wrapped up by last December and there is disappointment that the matter has dragged out even further.
I will ensure that my noble Friend Lord McKenzie is aware of the desire for a road map and timetable to be set out to provide some confidence. [Interruption.] I have been handed some inspiration. It would be appropriate to carry out a full 12-week consultation on any proposed amendments. My hon. Friend will be aware that that is in line with Cabinet Office guidelines on good practice. The timetable would be one part of the equation. I will see if my noble Friend is able to set that out in the way described by my hon. Friend.
Just to see if we can inspire some more inspiration from other sources, I should say that that would help. If my hon. Friend cannot provide it today, perhaps he will write to us.
I understand that there will be a ministerial report by May, a decision by Ministers, then the normal 12 to 13 weeks’ statutory consultation on whatever is proposed. It would be useful to know whether delegated legislation would be introduced if a change of regulations is required, whether affirmative or negative resolution in the House would be required, or whether there would be a ministerial signing-off process that might prevent the measure being impeded in any way by attempts to seek parliamentary time.
I will ensure that my hon. Friend receives those details.
In summary, there are a significant number of factors to consider. It is a highly complex issue and further work needs to be undertaken. However, it is important that people work in comfortable conditions and that they feel empowered to be able to report concerns. We monitor heat stress, but it is not possible to isolate cases through the RIDDOR structure, as a result of the related matter of people working in confined spaces.
We have recently surveyed HSE field inspectors to gain a better understanding of the work that they do on heat-related incidents. Inspectors consider what action employers have taken, if a complaint is received in respect of an investigation that they are carrying out, and whether they have followed guidance in relation to temperatures, including provision of water, temporary cooling, additional breaks, worker rotation, and so on. It would be feasible to undertake more in-depth, lengthy studies in this area and we will consider doing so.
The Industrial Injuries Advisory Council has reported that to date no research or evidence on the effect of heat at work on certain occupations has been brought to its attention. I think that hon. Members would agree that the evidence base must be established to inform site inspectors’ decisions. This informed, measured debate is welcome, and it is in such an atmosphere that we improve the lot of workers in their workplaces. I hope that there can be more debates with the tone of this one, because too often, health and safety is characterised by the “gone mad” argument, which is nothing to do with the HSE. Every year, the HSE publishes its calendar trying to bust the myths, but it does not have the budget to compete with some newspapers that want screaming headlines. I raised the point about Conservative party policy with the hon. Member for Hertsmere (Mr. Clappison), because it is important that we have such debates in this type of atmosphere. We cannot have a parallel universe operating in which that party’s key spokespersons talk about dramatically removing powers. That is what they said. If what the hon. Member for Hertsmere said this morning is a rowing back from that position, and shows the Conservatives taking a more measured approach, that is entirely welcome. The hon. Gentleman chastised me for making a party political point. I will happily withdraw that remark if he is saying that he will take a more measured, sensible approach to this important issue.
South-East London Transport
I applied for this debate to highlight the need to increase capacity on our road transport network in south-east London, and our passenger transport network. I acknowledge that there have been some improvements—too many for me to go through in this short debate—but recent events have highlighted that the system teeters on the edge of collapse daily due to demand. The slightest defect in the system has enormous consequences for commuters in delays and congestion.
During the period leading up to Christmas, several events on the roads leading to and in the Blackwall tunnel highlighted the problem. Each event resulted in gridlock for south-east and east London. The impact on the economy and the lives of thousands of people in that area is impossible to calculate. We are all affected, even on the shortest of journeys, because such incidents may cause severe delays.
The recent cold weather exposed the lack of resilience in our rail services, particularly on 6, 7 and 8 January, when services at peak times were reduced to two trains an hour, and the rail service closed down at 8 o’clock in the evening. Southeastern’s response did not reflect customers’ experience, and certainly not my experience as one of its customers. I was one of the passengers at Eltham station who were left waiting in the freezing cold with no information about what was happening, only to see one train come in so overcrowded that only a few people could force their way on to it from a packed platform. The next train was so packed that it did not even stop. There was no warning for the people waiting on the platform that there would be no opportunity for them to get on the trains. The whole episode smacked of panic, and Southeastern’s explanation for what happened between 6 and 8 January was not satisfactory.
Around 6,000 of my constituents travel to east London to work every day. Does the hon. Gentleman agree that the way to tackle the problem on both roads and rail is to increase capacity on the railways, and to enable more carriages to be added to trains by extending platforms and improving the infrastructure? It is time the Government made more investment in that.
I accept that, and the Government have attempted to do just that. The purpose of this debate is to urge the Minister in a friendly way along that route. I do not accept Southeastern's argument, and the penalties to prevent train operators behaving in that way are not sufficiently severe. Its response to the cold spell suggested that it had not planned for it, and it was not prepared to make any effort to deal with it. The Government’s response should be a severe penalty.
The Oyster pay-as-you-go system was introduced in January, and was welcome. It streamlines ticketing between London transport and mainline rail services, but there is a surcharge for using it on Southeastern’s trains, which is not paid on other parts of the network that had pay-as-you-go before January. That is unacceptable, and the Government should address the matter.
I should add in response to the intervention from the hon. Member for Castle Point (Bob Spink) that for a considerable time we have been promised 12-car trains on Southeastern. I have a simple question: when will they arrive? They have been promised, they are essential to increase capacity, and we need a date for when they will be delivered.
The main commute for my constituents has always been from south-east London to central London, and that will continue to be so, but as docklands, the Olympic park, Stratford and other developments in the east Thames corridor develop, more and more of my constituents will want to go directly north across the river.
I congratulate the hon. Gentleman on securing this debate. He is renowned for fighting strongly for improved public transport for his constituents. The route to docklands is also important for many of my constituents who will travel into his constituency and east London for employment. Is it not important to ensure that Transport for London takes over more transport facilities so that there is a better service? TfL is taking over Norwood Junction station on the East London line into docklands, and we hope that there will be some investment and improvement at that station where the subways, for example, are in a bad condition.
I congratulate the hon. Gentleman on bringing south-west London into the debate. I echo his sentiments on wanting expanded public transport options.
The Mayor of London recently held a consultation on a transport plan for London, to which I responded, and I want to highlight a couple of points that he made in his consultation document. In chapter 5, paragraph 403, he said:
“As the economy of east London has changed, developments such as Canary Wharf, ExCel and The 02 have increased the demand for travel across the river significantly. Many of the large new economic drivers for London are located in east London, with the majority of these lying north of the river, such as the Olympic Park and adjacent Stratford City development, Canary Wharf, ExCel and City Airport. Access to these growing destinations from southeast London can be difficult due to the barrier effect of the Thames.”
He continued in paragraph 405:
“However, there are still few road crossings of the Thames in east London, causing difficulties for those who cannot use public transport for their journey, and in particular business journeys.
Drivers are heavily dependent on the congested Blackwall and Rotherhithe tunnels, each of which have restrictions on the size of vehicle which can use them, and the Woolwich Ferry. Beyond London, the Dartford crossing, forming part of the M25 orbital motorway, also regularly operates at, or close to, capacity. There is little resilience in the event of an incident at one of these crossings, and local businesses, particularly in southeast London, suffer from this unreliability. The projected increases in jobs and population in the Thames Gateway will increase the problem of highway congestion and road network resilience at river crossings further. The Mayor is therefore supportive of investigating options for road based river crossings in east London as part of a package of transport improvements.”
Recommendation 39 in the consultation is to develop the Silvertown link between the north Greenwich peninsula and Silvertown in docklands.
I have responded to the Mayor’s consultation in support of that proposal, but urged that any crossing should not be just a road crossing. It is not sufficient just to build road capacity without expanding public transport capacity. It would be folly to build just a road, without including capacity to bring the docklands light railway to north Greenwich. North Greenwich is developing as a transport hub and interchange for south-east London, and the natural progression for that development would be to bring the docklands light railway to north Greenwich.
I have responded to the Mayor with three specific proposals, on which I consulted many constituents. More than 700 have indicated their support for my proposals, and the number is growing. First and foremost, we need to deal with the congestion at the Blackwall tunnel by building the Silvertown link. Secondly, that Silvertown link should include a facility for the docklands light railway to come to North Greenwich station. The third point—which is probably the most important for my constituents—is that once the docklands light railway reaches North Greenwich, it would be more feasible and cost effective to bring it along the A102 and A2 to places such as Eltham, than it would be to cut a tunnel through Shooters hill from the spur at Woolwich town centre. I believe that that has been looked into, but it may have been dismissed.
Those are three specific proposals: the Silvertown link, the DLR to North Greenwich, and the DLR to Eltham. I have had some success with the proposals as they have generated discussion locally, which was part of the objective. Unfortunately, the local Tories have decided that they are opposed to the plans, which is rather short-sighted, and it has prompted the Green party to say that we should not have the DLR, but we should have the Jubilee line. I would not dismiss either, but I am happy that the debate has started.
Most significantly—joking aside—I am delighted that Greenwich council has decided to put a substantial amount of money into a feasibility study to look at the possibility of bringing the DLR to Eltham. That welcome step has a lot of support from local people. Whatever the outcome, whether it is my proposal or something else that comes out of the discussion, we cannot ignore this issue. Doing nothing is not an option.
The Department for Transport forecasts that road traffic will grow by about 32 per cent. between 2006 and 2025. London’s congestion is forecast to increase by 30 per cent. However, over the same period, congestion on highways authority trunk roads is forecast to increase by 37 per cent. My constituency of Eltham is bisected by the A2 and the A20, and we will need to address the problems of congestion and pollution associated with that. For my constituency, “business as usual” is not acceptable because the developments that are taking place along the east Thames corridor and in the Kent area will exacerbate the problems that are already experienced.
Daily congestion is an environmental nightmare. However, I suggest that new technology will change the argument about the environmental and global warming potential of vehicles over the next generation, and increasingly, congestion will become the issue that we want to address because of its impact on people and businesses. Because of the environmental consequences, it is not fashionable to suggest that we build and expand our road network. However, as we see new technologies such as hydrogen cell, hybrid and electric vehicles on our roads, our attention will increasingly be drawn to dealing with the issue of congestion as the environmental impacts reduce. We must begin to plan for that situation.
We have made mistakes in the past. It is fair to say that the previous Mayor was too anti-car and tried to design the car out of all commuter journeys to and from work. However, people desire to use their car for journeys to and from the point of embarkation on public transport, and that is what we have failed to facilitate in the past. The folly of the current Mayor is that he sees the car as an issue of human rights and freedom of choice, and he is blinkered to the inevitable impact that increasing congestion will have. If we, and the Mayor, do not start to plan to deal with these problems now, we will look with envy on the days of the relative high speed of the horse and cart.
We must accept that our road space is finite, and whether we believe that global warming is fact or fiction—and I believe that it is a fact—we will suffer the consequences of congestion. That is why I urge us to deal with the issue where the problems occur. I caution against the grand project of building huge new infrastructures such as new river crossings in new locations. Inevitably, that will create new problems and suck in more resources to deal with those problems. We need to look at the existing road network and make maximum use of the space that we have. Where we identify pinch points, such as the Blackwall tunnel, we should deal with them and try to make efficient use of our resources.
We must ask how we are going to contain growth. The figures in the Transport for London travel report of 2007 show some remarkable facts. For instance, the number of cars entering central London in 1993 was 155,000 per day. That is now down to 78,000—almost half. However, if one looks at the figures before 2002, when the congestion charge was introduced, we see that the reduction in the number of cars entering central London was greater before the congestion charge than it was after its introduction. The number went from 155,000 to 105,000 cars per day during the peak period of 7 am to 10 am between 1993 and 2002, while from 2002 to 2006, it went down to 78,000, which indicates that where public transport is available, reliable and efficient, people will make that choice, even without the stick of the congestion charge. We can achieve a modal shift.
We need to invest more in public transport and not focus so much on the necessity of charges, although they may be necessary in certain places. When the infrastructure is built, and if it is possible to impose a toll for people who are travelling long distances, I would like to see local people favoured and either not charged or charged a minimum amount. Charges for road space might be necessary, but figures show that people will make the switch if we improve our public transport network.
We have had experience of that in Greenwich, and before I conclude, I want to point out to the Minister that we need to review the way in which we assess the cost benefits of major schemes. There are three examples from Greenwich in which we have had to take on the Government of the day—including this Government over Crossrail—to get ourselves included in major infrastructure projects. First, when the docklands light railway was going to Lewisham, there was no plan to have a station at the Cutty Sark location. Greenwich town centre is the biggest tourist destination in London outside central London. Today, the idea of not having a DLR station at the Cutty Sark is frankly ridiculous, but that is what was planned. Thanks to the council taking on the Government and putting in its own resources, we got the station.
There was a similar story with the Jubilee line. One could not imagine having no Jubilee line station for the O2 today—I do not know how most people would have got there on the night of the millennium celebrations if we did not have the Jubilee line. Again, that is thanks to local politicians, who forced the Government of the day to accept that it was necessary to have a station at North Greenwich. As I have already said, that station is now a major transport interchange.
Similarly, there was the Crossrail row over Woolwich. The idea that the line would go under Woolwich but that there would not be a station was ridiculous. It is a major transport hub for south-east London, and we won the argument to force people to recognise the improvements. The first two of those schemes are now among the busiest stations on those networks, and it is unthinkable that we would not have had them. That highlights some flaws in how we assess the value of investing money in such schemes.
Let me make one or two suggestions. We need to think the unthinkable. We need to think about things that until now have not been considered viable or have been considered slightly off the beaten track, if hon. Members will excuse the pun. There are certain things that we need to consider. For instance, in relation to some of our urban motorway networks, we need to assess how we use the space and use motorways to provide more rapid transport networks.
One issue is guided buses or express bus routes. I have been successful in lobbying TfL to introduce the 132 bus from Eltham to North Greenwich, which is a direct bus route that goes down the motorway. The bus gets caught in traffic jams at certain times, but it has been an enormous success. It has opened up a new commuter route for people who want to travel into London via London transport systems or into the docklands. The bus route is now about 15 minutes from Eltham, whereas the previous route took 45 minutes because it was such a circuitous journey. By introducing faster transport links such as those along our urban motorways, we can encourage more people on to public transport.
Hard-shoulder running on our motorways to provide bus lanes is another issue. The M6 scheme has proved very successful at relieving congestion when the road is heavily congested. We could consider providing bus lanes on our urban motorways where appropriate. Park-and-ride schemes around our major cities are something that we have not developed, but if we really want to reduce congestion on our motorways, we, and the Mayor, should look at proposals for car parking around routes such as the M25 and for bringing people in on our motorway networks. Perhaps it would be a good use of the bendy bus to bring it along those motorways. For many years, I have advocated the use of our urban motorways as corridors to introduce light rail, hence my suggestion that we could bring the DLR to Eltham via the A102 and A2 and use the land adjacent to it or even above it for that purpose.
We need to deal with congestion on our roads and overcrowding on our trains. The expansion in capacity is essential, but building roads alone will not be the solution. We also need to expand our public transport network. The biggest cost in all this is to do nothing.
It is a pleasure to speak under your chairmanship, Mr. Brady. I congratulate my hon. Friend the Member for Eltham (Clive Efford) on securing the debate. Let me at the outset, in the short time available, place on the record my knowledge of his unstinting work on transport of all types: roads, public transport, the DLR and, indeed, as I have learned this morning, bus route 132. Those forms of transport are important to those who use them, and I recognise that increasing such options is fundamental.
My hon. Friend spoke about containing growth, but the issue is more about how we accommodate growth. I am sure that what he meant was how we deal with a vibrant city where we want to see job and leisure opportunities, and where we want visitors to our capital city to be able to move around with ease, and how we do that in a way that tackles two goals: dealing with the climate change and emissions agenda, and dealing with the congestion agenda. Both were highlighted in the Eddington and Stern reports and they are two of the critical goals for the Department for Transport in all the work that it undertakes, whether it relates to local transport, underground trains, aviation, shipping or other modes of transport.
I am sure that my hon. Friend is aware that the responsibility for transport in London rests primarily with the Mayor, but Transport for London receives substantial sums of money in the form of a block grant from my Department to deliver transport services. I am sure that my hon. Friend is also aware that in the past nine years or so, that money has more than doubled, increasing to almost £3 billion in 2009-10. As he recognised, that investment, coupled with fare income and other resources, has helped to facilitate a number of substantial improvements. The number of journeys on the tube and on buses has therefore increased. Indeed, bus patronage has grown by almost 50 per cent. in the past 12 years. That is because of the commitment that has been made to investing in public transport. In London, 90 per cent. of the population are within 400 metres of a bus stop. That is about encouraging people to use such transport. Where there is good, reliable public transport, people will use it rather than getting in their cars, as evidenced by figures that my hon. Friend used.
South-east London is served primarily by TfL’s bus and road network, the docklands light railway, local authority roads and Southeastern Trains. It will also be covered by the extended East London line, which will open shortly as part of TfL’s London Overground services.
I recognise what my hon. Friend is saying but, equally, he will be aware, given his comments, that the issue is not just about south-east London, but about wider areas. There are important benefits to the provision and not just for people living in the immediate catchment area. It will bring people in and take people away from other forms of transport, which will then be available for his constituents to use. I am sure that they will benefit from that provision.
As a frequent user of the Blackwall tunnel, I am well aware of the problems relating to it. The Mayor, in his draft transport strategy, has talked about options and progressing
“a package of river crossings in east London”.
There is nothing to indicate how that would happen in terms of funding packages. As my hon. Friend will be aware, in relation to the Silverlink crossing, TfL had provided £351 million-worth of private finance initiative credits, which of course disappeared as soon as the Mayor decided that he was not going to progress. I am delighted that the debate has started, because that is exactly what needs to happen so that we solve the problem. The issue is important for local people, but it is not only important for the capital. It is also important for UK plc.
My hon. Friend may be interested to know that London is part of the work that we have been undertaking on getting congestion levels down on particular routes. Today, we have announced the latest round of awards from our congestion fund, and London has received a further £6 million, bringing the total to some £13.5 million on congestion measures over the past three years to help TfL in that process.
Let me briefly cover some of the other points that my hon. Friend raised. On rail services, he asked about the plan for 12-car trains and when that plan would be implemented. It is due to be completed by 2012. It was interesting that the hon. Members who formerly belonged to the official Opposition could not stay to hear my response. Perhaps that is because I was going to respond on the improved services that they have received because of the investment and commitment given by the present Government.
Southeastern Trains recognises that the pattern of service provided in the adverse weather was not acceptable, which is why a review is under way. The chief executives of Southeastern Trains, of Southern and of South West Trains have written to the director of operations at Network Rail to ask for an investigation of the operation of the third rail during the freezing conditions. The reason why things improved on 9 January was that, overnight temperatures were not as severe as they were between 6 and 8 January. I see my hon. Friend grinning, but let me say that a report is going to be produced. Let us examine it, then make a considered judgment on what we believe to be the case.
Time is pressing. My hon. Friend has raised a substantial number of important issues, not least the need for proper commitment from all concerned to deliver an infrastructure that meets the requirements of a capital city—
[John Cummings in the Chair]
I am delighted to have secured this debate on property taxation. As I shall make clear, I will not cover the whole subject as I am not qualified to do so. I shall focus on two specific aspects—second homes and holiday lets—and the problems that arise as a result of how property taxation applies to those sectors. Some may wish to comment on other aspects of property taxation, such as stamp duty or income tax, as they relate to rental income. I take this opportunity to thank Antony Seely and others working in the House of Commons Library, who have been most helpful in digging out material and information for me.
I start with an apology. If at all possible I try to avoid debates or inquiries on Treasury and taxation matters, as I find the subject deeply esoteric. Indeed, as with the present subject, I often find myself parachuted into the depths of a forest of tax regulations without a map, let alone a sat-nav. When dealing with the issue of property taxation, I find myself in an undergrowth, an impenetrable tangle of inter-related matters on domestic and residential property taxation. If I lose my way this afternoon, I appeal to the House not to be too hard on me. I know that other Members are always keen to engage in the thousands of hours of debate that take place on the Finance Bill every year, but I always avert my eyes, or make sure that I am not in the room when willing victims are selected for that particular torture.
My primary motivation in speaking on second homes is to address the question of meeting local housing needs. In my part of the world, which is shared by my hon. Friends the Members for Falmouth and Camborne (Julia Goldsworthy) and for North Cornwall (Dan Rogerson)—I am pleased to see them here this afternoon—that is the biggest and most chronic of the social problems that we face. It is not as if there is a problem on the supply side. Cornwall has done as the Government said every area should do. We have been prepared to build, and not be nimbys and resist development. We have more than doubled our housing stock during the past 40 years, which has grown faster than pretty much everywhere else, yet housing problems for local people have become significantly worse.
At the macro level, I acknowledge that the Government have identified housing needs for the next 10 years, saying that it requires an extra 3 million properties by 2020. However, areas such as ours must be careful to ensure that properties that are built supply our needs rather than contribute to the still growing demand for second homes. At the micro level, surveys that I have undertaken of estate agents in west Cornwall over the last three years have shown that in any year between three and five times as many properties are sold to second home buyers as to first-time buyers. That is what estate agents have been telling me over recent years.
I congratulate my hon. Friend on securing this debate. I apologise, but I will not be able to stay for the whole debate as I have another appointment.
I listened carefully to what my hon. Friend said about his survey of estate agents. That survey was made all the more necessary because it is difficult for councils to collect information about second home ownership, as many second home owners seem to be transferring their property to allow holiday lets—property that is available to let for 70 days. As a result, those properties fall off the second home register, which makes it difficult for councils to estimate the scale of the problem let alone take action to deal with it.
My hon. Friend is absolutely right. Indeed, I pay tribute to her for having previously raised the uncertainty about the figures, which I will deal with later. Some elect to be charged council tax, but others change because they find it financially beneficial to identify their properties as small businesses, which therefore become eligible for business rates, which they find financially more attractive.
I congratulate the hon. Gentleman on securing this debate. Further to the intervention by the hon. Member for Falmouth and Camborne (Julia Goldsworthy), I endorse the need for better and more accurate information for local councils and others. However, does that argument not cut the other way, in that the genuine holiday rental market is critical to tourism?
The right hon. Gentleman is absolutely right. Indeed, I shall be returning later to that very point, and the Government’s intention in only a few weeks to introduce a change—a reversal—by ending tax arrangements for holiday lettings. However, that is a distinctly different sector. I am talking about people, including MPs who, through desire or necessity, have second homes and who, whatever they may claim, are not running them as holiday letting businesses.
I am not saying that west Cornwall and the Isles of Scilly is any more unique than other parts of the country, such as north Norfolk, the Lakes, south Devon and so on, that have a high number of second homes. If the taxation system fails to discourage or actually encourages a growing desire for second homes in those areas—I repeat a point that has been made many times in debates on this subject—it will have an impact on the housing market and the housing prospects for local people in those areas. The mismatch between low earnings and high house prices in west Cornwall, and especially on the Isles of Scilly, is shown in all assessments to be among the highest, if not the highest, in the country. That raises serious concerns about meeting local housing need, which is why the matter needs to be addressed.
I emphasise that this is not about the politics of envy. I know that many people say that it is part of the old class war, but it is not. Although I have made many remarks on the impact of second home ownership, many second home owners are among my friends. [Interruption.] All right, my best friends. It is not a personal issue. I am talking about the politics of social justice rather than the politics of envy. Many people who own second homes and who have a social conscience are aware of the issue and agree with many of my views.
I would like to address the issues of council tax, small business rate relief and the impact that capital gains tax has on second homes. When the Conservatives first introduced the council tax system, they brought in a 50 per cent. discount for second home owners. I strongly campaigned against the discount from the moment I was first elected in 1997. I saw it as unjustifiable given the circumstances of some of my constituents. Having gained the figures from the Treasury, I pointed out that in any one year, something between £150 million to £200 million of taxpayers’ money was being used to subsidise the wealthy to have second homes when there were thousands of local families who could not afford their first. It had to be emphasised strongly that the treatment of one group in the housing sector was in fundamental contrast to the treatment of another group, which was being subsidised by taxpayers’ money, and that it was having such a detrimental effect.
I congratulate my hon. Friend on securing this wide-ranging debate, which I believe he has undersold. Taxation is a complicated subject and he wants to cover three particular areas. One of the problems of discounting council tax was that it was based on the old idea, which may also have been behind the poll tax, that there is a simple construct between the services that a person receives and how much they should pay for them, rather than there being an issue of a wider sense of contribution to the community around them. We are coming back to the idea of a contribution, and many second home owners accept the fact—except perhaps those who are opting for small business rate relief—that they need to pay that wider contribution for the privilege of having the luxury of a second home in an area.
Yes indeed, and I pay tribute to my hon. Friend for all his work in this area. North Cornwall has very high levels of second home ownership in some areas. His point about the principle of applying a contribution to the local community—a contribution to the local services in general rather than a charge for the services rendered and used by the occupants or the local residents—has often underpinned this particular debate. I have pushed the issue on many occasions. In fact, after chipping away at the issue for years and banging my head against a brick wall of resistance I was delighted when, on 3 February 2000 in this Chamber, the then Minister with responsibility for local government, the hon. Member for Sunderland, South (Mr. Mullin), finally relented and agreed to look into the issue. Although such things do not happen overnight, the Local Government Act 2003 introduced the measures to remove part of the 50 per cent. council tax discount for second homes. The class B properties, which are those that are available for occupation all year round—rather than those that have an occupancy restriction on them, which are the class A properties—were then charged at a 90 per cent. rate. I am pleased to say that in places such as Cornwall those moneys have been effectively hypothecated by the local authority to be invested in affordable homes for local people.
Since 2004, when the measure was first introduced, millions of pounds have been invested in local housing need. Of course 10 per cent. is still unpaid. Those people who pay council tax rather than small business rates very often claim single person occupancy as well, which means that they are still not paying at the same level as local people. There was a strong feeling among many local authorities, that instead of paying 10 per cent. less second home owners should be paying double the council tax, but that might push them in the direction of small business rates, which an increasing number of people with second homes are choosing to do. I congratulate my hon. Friends the Members for North Cornwall and for Falmouth and Camborne on raising the issue in previous debates.
I believe that it should be addressed in each area. If someone has a property, they are charged on their income within that area. If they have two addresses, they pay two lots of local income tax. That is how I would wish to see it introduced. From my point of view, a local income tax is very attractive, because many second home owners are better off than some of the people who live permanently in the area. On that basis, they can make a significant contribution to the local communities in which they have purchased their properties.
The business rating system allows second home owners the benefit of tax breaks. Owners of second homes can avoid paying council tax by claiming that the property is available to let for 70 days of the year, which therefore means that it is classed as a small business, and the owners are entitled to small business rate relief. Moreover, second home owners can avoid paying capital gains tax by claiming roll-over relief when they sell the property. The issue that arises is the loss of benefit to both local councils—in the form of income—and the local economy. Clearly those who pay council tax are contributing to the local authority; those paying business rates are contributing to the Treasury. There appears to have been a significant shift from council tax to business rates since the 50 per cent. discount was removed.
I want to come on to that point. There is a need to tighten up some of the loopholes that have been created. That may require greater tests of the accuracy and the honesty of the claims made by those who opt to pay business rates rather than council tax.
I am very conscious of the time and I have two fairly substantial issues to cover, including that of capital gains tax. It is worthwhile emphasising the relationship between second home ownership and capital gains tax, which was brought into sharp relief as a result of the so-called MPs’ expenses scandal. As far as this issue is concerned—flipping the home that one elects as one’s primary private residence—there exists what appears to be a pattern of behaviour among some MPs, and therefore the assumption is that it is happening outside the Houses of Parliament too. Clearly, flipping has provided a mechanism to allow a large number of people to avoid paying capital gains tax.
Private residence relief allows an individual to be exempt from tax when they are selling their only or main residence. If the individual has more than one property, they may nominate which property is their main residence for tax purposes. That choice can be changed; however, it cannot be backdated more than two years. The process of nominating the property to be taken as one’s main residence provides people with more than one home with an opportunity to mitigate their tax liability, flipping their designation from one home to another to ensure the gain from selling either of those houses is tax-free.
As I have mentioned, the issue of flipping arose controversially last year. Some MPs appear to have flipped the designation of their main home to mitigate the tax charge when selling one of their properties. For example, one makes a simple election, stating that one of the properties is the main home. Once the nomination has been made, it can be varied as much as the owner likes. The tax manual of Her Majesty’s Revenue and Customs states that it is possible to switch the election from one property to another after just one week, and thereby claim the exemption for the last three years of ownership on both properties.
Principal private residence relief is the tax relief that allows home owners to sell their main property without incurring the tax on any rise in value that it has acquired. Potentially, people with a holiday or second home can reduce the capital gains tax bill that they would otherwise have to pay on sale.
Although it is possible to have only one main home at any one time for the purposes of the PPR relief exemption, gains attributable to the last three years of owning a property are ignored if the property has been the main residence at any time during the ownership.
On the issue of married and unmarried couples, it is currently assumed that a married couple or civil partners live in the same house and therefore have only one PPR relief between them. In contrast, an unmarried couple can each own a property, so effectively they get two allocations of PPR relief. People often choose as their main residence the property they feel they are most likely to sell first, or the one they believe will rise most in value.
What happened last year highlighted the flipping of homes for all the wrong reasons, when in fact flipping can be a legitimate way of providing oneself with a tax break. It was originally designed to protect those who had to move for work, and home owners with second properties can use it to their tax advantage.
On 3 December 2009, I asked the Financial Secretary to the Treasury, the right hon. Member for East Ham (Mr. Timms), whether he would undertake a review of these issues. He responded:
“Tax policy changes are considered through the Budget process in the usual way. The Government consider a range of factors when formulating tax policy and keep all aspects of the taxation system under review.”—[Official Report, 3 December 2009; Vol. 501, c. 947W.]
On 25 January 2010, I asked the Financial Secretary
“what recent assessment his Department has made of the extent of the practice of re-designating property ownership to avoid tax liability on the sale of second homes; and what estimate he has made of the likely effect on revenue of such practices in the last 12 months.”
The Financial Secretary responded:
“No such assessment has been made, as it is not possible to distinguish between the cost of private residence relief attributable to nominations of main residences for avoidance and non-avoidance purposes. HMRC apply a risk-based approach to investigating any cases where they suspect an individual has nominated a property as the main residence on a spurious basis.”—[Official Report, 25 January 2010; Vol. 504, c. 608W.]
That raises questions about how much flipping is going on outside Parliament, quite apart from the cases identified in Parliament in the way I have just described.
I am tempted to note in passing that, as the change programme that has gone on in HMRC has probably got rid of quite a few compliance officers, it must be harder for HMRC to track these things.
However, the substance of my intervention is that we increasingly use the tax system to reward certain types of behaviour and to try to dissuade people from other types of behaviour—an approach that is being looked at in the environmental field, for example. I am sure that there are those who still argue that second home ownership has a positive effect on local areas because it brings people into those areas. However, the argument that I have always had to make—I know that my hon. Friend has also made it consistently—is that that is just not the case. Holiday lettings, as the right hon. Member for Oxford, East (Mr. Smith) pointed out, are a very different category and when they are occupied for far more of the time throughout an increasingly extended holiday season, they have a positive impact. However, empty second homes are different, and this tax system is incentivising something that is a disbenefit to a local area.
My hon. Friend’s intervention stands in its own right, so I need not add to it; and just to make it absolutely clear, I agree with him on that point; it is not that I disagree.
The reason why I am mentioning council tax, business rates and capital gains tax is that we are looking for a solution to the housing problems in areas such as mine and in other parts of the country. There are chronic housing problems in those areas and the existence of second home ownership can only have a detrimental impact on the life chances—and, indeed, the life choices—of local families who are desperate to find a decent home of their own.
What has been proposed for many years is the introduction of a new use class order that would identify the distinction between properties that are occupied on a permanent and on a non-permanent basis—in other words, second homes. Under that system, those who wish to go for the latter category would have to apply for planning permission for the lifetime of that particular occupancy, which would give the local authority the opportunity to regulate the amount of second home ownership in any area through the planning system. However, the only problem with that system has always been how we define what is and is not a second home. The reason why this issue is relevant to the Treasury is that a range of tools is now available to help us make that definition, but they need to be more robustly used.
I commend the hon. Gentleman for securing this timely debate. His area, like mine, is affected by second home owners, as I think many of the coastal resort areas are. However, the one issue he has not homed in on is current permanent dwellings that are the subject of intense scrutiny by possible developers. They acquire the homes—existing homes with families in them—but then those homes become subject to possible redevelopment as second homes. The price then subsequently rises as a result of the acquisition by developers. How would the use order address that type of activity, which is prevalent in my constituency and doubtless in others?
I am grateful to the hon. Gentleman for making an important point. In fact, as well as the new builds and the change of use to existing properties, there are many instances in my constituency, particularly around the coastline, of blocks of flats or former hotels being purchased and demolished, and a suite of properties being built that, invariably, is not marketed locally but in wealthier parts of the UK as holiday residences. As far as I am concerned, the use class order should apply to that change of use as well as to properties that are not otherwise changed. I hope that will happen.
The starting position must be to define what a second home is. We are looking to the Treasury to assist in creating more robust constraints, controls and regulations in this area. We can identify where second homes are through council tax records, electoral records, the business rate records, from when people elect to apply council tax on their second properties and through local knowledge, but there is a weakness in the council tax records. The council tax system needs to be more rigorously and robustly enforced. We need to find a way to enable communities in areas such as mine to differentiate between properties that are genuinely for permanent occupancy and those that are second homes.
My hon. Friend is being very generous and I promise that this will be my last intervention. Does he share my concern that the Government have a tendency to work in silos? Some of these issues relate to the Department for Business, Innovation and Skills, others to the Department for Communities and Local Government and others to the Treasury. Given the lead that the Treasury has taken on Total Place, is it not ideally placed to co-ordinate the tackling of this problem?
I agree entirely. I believe that the Government genuinely follow the mantra of joint thinking and cross-departmental co-ordination. This is clearly an area where they can ensure that Departments work in concert. I am afraid that that has not happened over the years.
I began by saying that I find this area of taxation incredibly complex. As a novice, my intention is not to make it more complex. I hope that regulations can be brought in that simplify the systems. It is the complexity that allows for many loopholes. Greater simplicity would allow us to be more robust and rigorous in achieving the objectives I have outlined.
In view of the time, I will not give the background. I am sure I do not have to explain to the Minister and other hon. Members the impact of the Government’s changes in relation to furnished holiday lettings on a genuine business sector. I wrote to the Financial Secretary about the announcement in the 2009 Budget of the change to the arrangements introduced in 1983 under the Conservatives. Those arrangements were welcome and appropriate for people who work hard to ensure that this country has a vibrant holiday letting sector.
I will give the example of one business, which is not untypical of the kind of holiday letting business that exists in my part of the country. I am talking about not single second homes that may occasionally be made available through an agent to the holiday trade, but large holiday letting businesses. I will not name the business in my constituency, although it is one of those that I have discussed with the Financial Secretary. It is a large holiday park not far from where I live which offers a whole holiday experience. Every week, 200 families use the chalets in the park and 9,000 people visit it every summer. Its facilities include a swimming pool, entertainment, catering establishments, security, cleaning, linen, and an information and reception area that opens at 8 am and closes at midnight. Other than its being made up of chalets and not contained in one building, it is similar to a hotel.
The business has asked the Inland Revenue for a decision on whether it receives a trading income or an investment income. The regulations the Government intend to introduce in April rely on the difference between investment income and trading income. The Revenue has so far refused to give that clarification. I wrote to the Financial Secretary on this issue last month and emphasised that since the publication of the HMRC technical note of 9 December 2009, which explained to businesses how the change would apply to them, there has been increasing alarm throughout the legitimate holiday letting sector, in that the rules will have a serious and detrimental impact on it. Worse than just seeking compliance with the European tax rules on furnished holiday businesses, HMRC appears to be going further and has made clear its intention to treat such businesses as investment companies rather than trading companies.
The impact of the changes will be far-reaching in areas such my constituency and the rest of Cornwall and the Isles of Scilly, where many businesses are demonstrably not investment companies because they operate as holiday parks that provide whole holiday experiences, rather than property lettings. Properties that are fundamental to purpose-built holiday complexes, such as chalets, cannot be sold separately as part of investment activity. Of course, the rules will not apply to bed and breakfasts and hotels, even though they clearly compete in the same environment. As a result of the rules, there will be no encouragement for holiday businesses to invest in improving and modernising their facilities.
I understand that the Government thought this was simply a matter of tidying up an area of regulation, but I hope the Minister realises the far-reaching impact there will be on genuine holiday letting businesses, as distinct from second homes, which I described earlier.
I apologise for missing the first few minutes of the hon. Gentleman’s excellent speech—I was being lobbied by homeopaths. I do not know if he mentioned this before I arrived, but his namesake Henry George would have said that the answer to this issue was to have land value taxation in this country. I know that the Liberal Democrats are not unsympathetic to that argument. Does the hon. Gentleman agree with me that we can sort these problems out by moving to a form of land value taxation?
That opens up a much wider area of debate. Perhaps we should reserve some time for a further debate on that. I have much sympathy for that argument, having kept in touch with my namesake through the Henry George Foundation, which regularly debates pushing this issue.
I welcome the Government’s introduction of the community infrastructure levy. When a field worth £3,000 is allowed to be turned into unfettered domestic property worth, say, £1 million an acre, that is the gift of society through creating the planning rules and of the local community through the assent of the local authority. It is not unreasonable to ask for a proportion of that money, although the impact on the agricultural sector is a separate issue. That relates to the point made by my hon. Friend the Member for Stroud (Mr. Drew)—I call him my hon. Friend deliberately.
I apologise for taking up so much time, Mr. Cummings, but this is a complex issue and I have covered a wide range of areas. I apologise to other Back Benchers who wish to contribute to the debate. I look forward to the winding-up speeches.
It is a privilege to serve under your chairmanship, Mr. Cummings, and to be speaking so soon, although I cannot promise to go on for the required length of time.
I congratulate my hon. Friend the Member for St. Ives (Andrew George) on securing the debate, although I should point out that he has seriously undersold himself. I believe that he is a legend in Cornwall, where he is seen as the scourge of the effete, opulent metropolitan elite who distort his local economy and housing market. I know from his activities in the House that he has been most assiduous in pursuing this topic. Far from being financially illiterate or challenged, he has shown a detailed, encyclopaedic knowledge, which might, in part, exceed the command of these issues shown by those on the Treasury Benches. My hon. Friend did, however, make one small error, although he can be forgiven for that because it was in connection with Liberal Democrat policy on local income tax.
My hon. Friend dealt with a very difficult subject—property taxation—and he acknowledged that it is complex. Taxation is never a popular proposition, but in the case of property taxation we are trying to use a variety of fiscal tools—council tax, the small business rate, capital gains, capital allowances, trading loss relief, roll-over benefits and so on—to bring about certain desirable effects. That is exactly what the furnished holiday lettings rules endeavoured to do; they were there to encourage greater tourism and the development of the tourism economy. That is to be approved of in most of the areas that we represent, including Southport, which is a seaside resort.
My hon. Friend wants the appropriate use of said tools to have certain clearly beneficial effects. The first is to discourage second home purchases and thereby increase the local housing supply, although he indicated that the local authority has done a fair amount through planning measures to increase local supply. The second is to encourage local rentals. I understand, although this has not been mentioned, that there is a fair drive under way to get farmers to diversify and to use their property to supplement their incomes in one way or another.
The third is to discourage non-occupancy, which means that property is not used at all, but is simply dead, vacant and locked up, despite the clear need for property in the area. That can, and in fact does, mean that home owners occasionally become holiday-letting people. Second-home owners will also become holiday-letting people, which means, paradoxically, that they will be more likely to be able to afford another home. To some extent, that shows how complex it is to use fiscal tools appropriately to achieve the right effect.
In any case, it is hard to distinguish between a metropolitan absentee, whom we might regard as bad, and a small landlord working with a short season which, unfortunately, is what people in the UK will mostly be working with. In fact, those two people may be the same person, which illustrates the complexity of the issue and the fact that tilting the rules in favour of the desirable case could also indirectly advantage the other case. A metropolitan absentee, if I can use that expression, might endeavour to rent at a price that is slightly above the commercial rent, but which does not look too bad, to secure certain benefits to make their property more affordable, essentially using tax devices that were put in place for other purposes to defray their own costs. That was discussed very effectively by my hon. Friend, who noted that clamping down on such practices was a matter of vigorous compliance. However, we would all acknowledge that compliance and catching people who are up to such tricks are complex matters, that they are not easy and that they often do not repay the energy involved.
The rental market is the one that most interests me and it is probably the one that most affects the housing economy. Treasury figures on tax and profit show that it appears to be expanding, and the figures in the debate pack indicate that profits from furnished lettings more than doubled between 1997 and 2007. What is not apparent, however, although it was discussed in the Finance Bill Committee, is what effect the Government’s recent changes to the rules will have.
No Minister worth his salt would go anywhere without a proper impact assessment for any legislation that he introduced, and that is certainly true in this case. The Treasury impact assessment seems to indicate that the change to the FHL rules will not damage business and will in fact eventually increase Government tax revenues by £20 million, which is a tidy sum. On the other hand, the Tourism Alliance has a completely different take on the matter, and estimates that the Government’s changes to the rules will cost £110 million and more than 2,400 jobs. That is a conservative estimate, and the alliance suggests a larger estimate if other things are factored in. I am not quite sure what its estimate is based on, but it is pretty grim when presented in those terms.
Generally, we would be happier and more comfortable about how the fiscal tools are playing out and about their effects if we knew more and if the Treasury’s impact assessment was more broadly based—Treasury impact assessments can sometimes be somewhat narrow. Anything that encourages tourism and that encourages people to rent property in this country is a huge social good at the moment, and tourism is one of the few genuinely effective exports that we have. It reduces payments made outside this country and increases those made in it; it also has wholly healthy consequences for employment, benefits and taxation.
I therefore wonder whether the Treasury impact assessment on the recent change in the FHL rules is sufficiently broadly based or whether it is not in fact too narrow in its overall view of the pluses and minuses. The benefits to Cornwall, Southport and Northern Ireland of growth in the tourism market are appreciable. A more active tourism market would bring more property into use and, in doing so, presumably bring prices down. We could perhaps challenge Spain some day in terms of cheap accommodation, if not in terms of the sun.
The Minister will reply that any worries about changes to the fiscal regime, particularly with regard to holiday lettings, will have to be put aside, because the Government have no option. This is an endeavour to bring British legislation into line with European legislation, and these things are dictated by the single market and by the demand for tax unification. However, as the Financial Times noted on 25 April 2009, when it looked at this issue, the Government are inconsistent in their consistency. In some cases, they can, for good reason, be tardy in bringing our regime into line with the one that exists throughout Europe.
All that makes the case for a broad review, which is precisely what the Liberal Democrats called for during the passage of the Finance Bill. However, we probably also need to look specifically at the south-west. Although we talk about fiscal effects, they are set against the background of other changes in the market, particularly in supply. In that respect, the south-west must be an extremely interesting area to study, because it has valiantly endeavoured to increase supply; it is not just relying on fiscal tools to solve its problem. As my hon. Friend highlighted, it has also tried to be creative with the council tax regime. In a sense, therefore, it has pulled most of the levers necessary to resolve the problem. It now wants to know what the Government can do to make its endeavours more successful and to help it achieve the social effects that I described and which my hon. Friend and most people in the room wish to see.
It is a great pleasure to serve under your chairmanship, Mr. Cummings. I congratulate the hon. Member for St. Ives (Andrew George) on securing the debate. When I saw the title was “Property Taxation”, I thought that that could cover a multitude of areas, so I am also grateful for his kindness and courtesy in indicating what he wanted to cover. I will focus the majority of my remarks on those specific points. He set out two key aspects: first, second homes, both within his constituency and the south-west as a whole, which is an issue that he has spent considerable time focusing on since 1997, and, secondly, furnished holiday lettings.
What lies behind the second homes issue is the significant concern that local people are unable to find local homes. In the south-west as a whole, figures suggest that house prices are typically eight times the local average salary. Those numbers are particularly significant in the south-west because it is hugely popular and the sort of place where people want to buy second homes. There is no doubt that that demand has played a considerable part in the housing problems. The hon. Gentleman is right to say that the south-west is not an area where there has been no house building; there has been an expansion of supply.
It is difficult to use the tax system, and specifically the council tax system, to address that issue. I take the point that there was originally a discount, but I am not sure how effectively the council tax system could be used, and whether the hon. Gentleman was getting support from his Front-Bench colleagues on whether it could be used. Given that Liberal Democrat policy is to replace council tax with a local income tax, it was interesting to note that it is not the case, as he suggested, that that would double the income tax, but I am still not sure what the answer is.
I expressed my personal view on the application of additional layers of income tax, because I think that that would be perfectly fair. The party takes a different view on that, which I did not expand on in answering the right hon. Member for Oxford, East (Mr. Smith). It would apply a locally collected business rate on second homes.
I am grateful to the hon. Gentleman for providing that clarification. The way to address the genuine concerns that he has assiduously highlighted is to do more to encourage the building of local homes for local people. In recent weeks, we have set out our proposals for local housing trusts. Individual communities could bring forward limited development in their areas outside the local planning process. If there was strong local backing, it would be possible to develop local homes that local people would want, the make-up of which could be decided locally. We anticipate that some of that housing would be held in perpetuity for local people. Therefore, although I sympathise with the hon. Gentleman’s concern, I am not convinced that the tax system is the right way to address it, but we can look at the planning system.
The second area that he highlighted was furnished holiday lettings, and I have great sympathy with his concerns. As the hon. Member for Southport (Dr. Pugh) pointed out, the Liberal Democrats requested a review when the Finance Act 2009 was being considered, as did the Conservatives on the Floor of the House. The background to that is that the regime in place since 1983 treats furnished holiday lettings as trading businesses rather than property investments. The significance of that is that it gives them a favourable tax regime through the availability of capital allowances and certain loss reliefs that would not be available if the lettings were treated as property investments.
At the moment, the regime applies to property based in the UK. The Government’s advice says that, were they to be taken to the European Court of Justice, they would have to apply exactly the same regime to properties held elsewhere within the European economic area, which would involve an additional cost. Extending it more widely would involve a cost to the Exchequer—not necessarily a huge one but certainly a cost—so they are looking at removing the regime. There are concerns that that would have a knock-on effect in particular localities.
It is better for local communities that a property is let out, rather than used as a second home. There may be an argument, although not a particularly strong one, that those properties might go on to the market for local people if they were not used as furnished holiday lettings. If that were the case, it would change the nature of the argument, but what we hear is that, largely, those properties would simply become second homes used very occasionally by people living some distance away and adding very little to the local community. There is a legitimate concern.
I was attempting to emphasise that there are large numbers of purpose-built holiday chalets and other properties, with planning restrictions on their occupancy, that are clearly run within the curtilage of a holiday park. We are primarily concerned about those businesses. They may be using the business rating option to avoid the council tax option, in the manner that I described earlier, but they are clearly on the fringes of what we are talking about as they provide a holiday experience. They are trading rather than simply collecting money for the occasional letting of the property.
The hon. Gentleman makes a good point and those cases are clear. In the one that he identified, I wondered at one point if he was going to provide the contact details as well. It sounded like a very tempting location for a holiday. I do not want to overstate the case that I was floating. Many of the properties are cottages that are likely to be bought as second homes. The likelihood is that they would not be bought by locals, but his point is fair; there are properties for which the changes are not an issue at all.
There is a lack of joined-up government on this. As I understand it, the Minister of State, Department for Culture, Media and Sport, the right hon. Member for Barking (Margaret Hodge) was first informed of the developments in the taxation regime in public and she had no idea that there was to be a change. There does not seem to have been any consultation between the Treasury and the Department for Culture, Media and Sport. Therefore, one suspects that there was no proper assessment of the impact on local communities.
The hon. Gentleman is making the case for serious research into the effects of the change in fiscal measures very well. It strikes me that the effect may not be general but may vary from area to area depending on the attractiveness of the property, its proximity to London and so on.
The hon. Gentleman is right, as he was in his earlier point about this being a particular issue for the south-west. Other parts of the country will clearly be affected, but one suspects that the problem is considerably concentrated in the south-west. If the Minister is able to shed any light on that in his remarks, it would be helpful.
We have raised the point in the past about whether there are other ways of dealing with the issue of the location of the properties. For example, the current rules require properties treated as furnished holiday lettings to be occupied for a minimum of 10 weeks and to be available for 20 weeks. By and large, we understand that—this was shown in the work produced by the Tourism Alliance—in the UK, those sorts of properties generally tend to be available for longer and occupied more than properties based elsewhere in the European economic area. Therefore, rather than scrapping the regime, if the minimum occupancy threshold was simply extended to more than 10 weeks—for example, to 15 or 20 weeks—the likelihood is that the Government could include most of the UK properties and exclude most of the EEA properties.
That would be a less disruptive change of regime than that proposed by the Government, which may have a knock-on effect on rural areas, as we have heard. I would be grateful if the Minister could say whether any work or research has been done on that matter and whether there are alternative approaches to dealing with the regime. The proposal depends on the numbers and the Treasury is well placed to do such research, but certainly the work produced by the Tourism Alliance suggests that such a system is a way of dealing with the matter.
Finally, very briefly, given the subject of the debate, I cannot resist highlighting the position of the Liberal Democrats on the broader issue of property taxation. I understand that the Liberal Democrats would scrap the council tax and replace it with a local income tax because the council tax is not based on ability to pay. That was certainly in their campaign at the last general election, and seems to be a move away from property tax per se. On the other hand, the policy of introducing a mansion tax on homes worth more than £2 million was announced at the last Liberal Democrat conference. That raises a few questions about how those properties will be valued, whether there will be distortions in the housing market, what would happen in relation to pensioners on low incomes and how improvements would be taken into account. The Liberal Democrats seem to be moving in favour of property taxes in that regard.
I recalled hearing a quote from the leader of the Liberal Democrats broadcast on “The Westminster Hour” on 29 November 2009, so I had a look for it. He stated that he has a
“very simple philosophy. I think the tax system should reward work, initiative, enterprise. And it should discriminate against vested unearned wealth. That is why we are opening, if controversially, a new front in the tax debate to say, hang on a minute, if you have been sitting on a rapidly inflating asset in an exploding property market over the last 10-15 years, maybe you should chip in a little more.”
That appears to be a move away from taxes on earnings to taxes on property, which may well be the general direction that the Liberal Democrats want to go in. We can debate whether that is right or wrong, but I am curious about how that is reconciled with a policy of moving away from a council tax system towards an income tax system. I shall leave that mysterious matter in the air. I am grateful to the hon. Member for St. Ives for raising an important issue and for initiating a helpful and informative debate.
It is a pleasure to serve under your chairmanship again, Mr. Cummings. I congratulate the hon. Member for St. Ives (Andrew George) on securing the debate and on the thorough and detailed way in which he presented his case.
I shall make a few introductory remarks about the importance of tourism to the UK economy and the need for affordable homes, both of which I recognise are hugely important to the hon. Gentleman and his constituents. As he will be aware, tourism is a crucial industry to the UK. I do not need to repeat some of the statistics because they are well known. However, I emphasise that the Government continue to provide support to the industry and have provided £130 million between 2008 and 2012 for marketing Britain overseas, and England to the British. In addition, some £3.3 million to £3.5 million is being provided annually to the regional development agencies for tourism support.
Last year, we announced significant investment in skills in the tourism industry, including an additional £210 million to the sector through Train to Gain and £350 million to help small businesses—including small and medium-sized tourism enterprises—get the training they need through the economic downturn.
It is also important that we do what we can to encourage the provision of affordable housing. The hon. Gentleman talked about the politics of social justice, and affordable housing is certainly an area where the Government want to see social justice. We remain committed to the delivery of affordable housing, including through both shared-equity and shared-ownership schemes. We want to maximise our efforts in relation to the building of new affordable homes, and our low-cost home ownership programme is being directed at schemes that support new build homes. Over this year and next, we will be investing a further £1.5 billion to build an extra 20,000 new affordable homes for rent and low-cost home ownership. I hope that a number of those will be in the hon. Gentleman’s constituency.
Let me turn directly to the property taxation issues that have been raised. I acknowledge the contributions made through interventions by the hon. Members for Falmouth and Camborne (Julia Goldsworthy), for North Cornwall (Dan Rogerson) and for East Londonderry (Mr. Campbell), and by my right hon. Friend the Member for Oxford, East (Mr. Smith). They all made useful contributions to the debate, which reflects the widespread interest in the issue—from the middle of England, to Cornwall, to the north and to Northern Ireland.
As we have discussed, hon. Members are aware that principal private residence relief means that the great majority of home owners do not pay capital gains tax when they sell their main home. That ensures that home owners have the flexibility to move home without the fear of incurring a tax charge. I understand where the hon. Member for St. Ives is coming from: he faces a particular problem in his constituency and he is suggesting that we ought to look at how the tax system is used in relation to second homes as a way of solving that problem. However, although that proposal might help to ensure that we have more affordable homes, particularly in his constituency, it does not work for the country as a whole.
The Government think it only fair that those making a capital income from property other than their main home should pay a fair share of that income in taxation, in the same way they would be expected to do if they were making a capital income from other assets. That is why CGT is charged on disposals of second homes and other properties, such as buy-to-let and commercial properties. As the hon. Gentleman is aware, we also ensure that those making smaller gains do not pay any capital gains. We have set an annual exemption amount worth up to £10,100, and married couples and those in civil partnerships can transfer assets to each other without incurring a CGT charge. The annual exempt amount means that they can make gains in the tax year of up to £20,200 without having to pay any CGT.
Given the difficulties in the market, and recognising that it might be more difficult for home owners to sell their previous homes, there is, as the hon. Gentleman is aware, an exemption from CGT for the final three years of ownership of a previous main residence, even if someone is living elsewhere. As he knows, that is the result of changes that took place in the 1980s and 1990s during previous recessions when people had difficulty selling their homes but found employment in other locations. We believe that that is fair and gives people a reasonable period in which to sell their previous property. The flexibility in the rules covers those situations in which people find alternative employment.
I understand the hon. Gentleman’s points about flipping the main residence, but any change to the three-year rule would need to be considered carefully, as that could have unforeseen impacts on the housing market generally and would impose a tax charge on people who have to change their main residence for the reasons I have mentioned, and for many other valid reasons.
The hon. Gentleman also referred to the two-year period in which individuals may vary the nomination of their main home, and in response I say that people change their main residence for a wide range of reasons, and not just because of CGT impacts, although I appreciate his concern. They might not have tax at the forefront of their minds, especially if they have not disposed of any property. The period for varying the nomination of a main home gives people time to remember the CGT implications that they need to consider, and change their nomination if they want to. However, as the hon. Gentleman reported, my right hon. Friend the Financial Secretary to the Treasury will always keep those issues under close review.
I am grateful to the Minister for explaining the Government’s thinking. Does he not accept that, as painful as it is to go back over the issue of flipping second homes for CGT purposes—perhaps for avoidance purposes—that matter is close to home for us in the House and that, for the majority of people in this country, it is unacceptable? If that has been going on with some Members, it will certainly have been going on much more widely. We are talking about a substantial income that this country is foregoing as a result of that ruse.
I want to draw a distinction between Members making a profit from their second homes, which has been the subject of much debate recently, and the wider operation of the three-year rule. That has been debated in Parliament on previous occasions, and a decision has been taken because people sometimes have to have two homes for a variety of reasons. Someone might have a job in Birmingham, for instance, and then decide to seek employment elsewhere, and because that is the only place they can work they need to have another main home there. It has been accepted for some time that flexibility is needed in that regard. We need to draw a distinction between the political situation that Members have faced—the hon. Gentleman knows that there has recently been a consultation on the principle of that, and that authorities are looking into it—and the wider issue of how CGT operates on residences other than the primary residence.
I will move on to the taxation of holiday lets. To ensure that any tax relief is targeted appropriately, and to provide a cost-effective tax system in which the tax relief available is suitable for the type of activity being undertaken, UK law has for a long time established a separation of property income from trading income, and many of the hon. Gentleman’s comments were really derived from that distinction and how it operates in practice.
Letting out furnished holiday accommodation is normally classed as a property income business, so to allow those who let out qualifying holiday accommodation to claim specific tax reliefs available to traders, we implemented the furnished holiday letting rules. That means that those letting out holiday accommodation can obtain more flexible loss relief, additional capital allowances, certain CGT reliefs and relevant earnings treatment for pension purposes.
To address the points made by hon. Members on changes to the taxation of furnished holiday lettings, I will briefly set out why those were made, because much of that issue has been covered in the debate. It was announced in the 2009 Budget that those rules would be withdrawn from April 2010. That was a necessary change, given that the rules might not be compliant with EU law, as the hon. Member for South-West Hertfordshire (Mr. Gauke) rightly noted. After that change, furnished holiday lettings businesses will continue to calculate their business profits in much the same way as they do now. I believe that some of the issues raised, including those raised by people outside the House, are due to a misunderstanding, as many believe that this change takes away their entitlement to tax relief and their business expenses, such as mortgage interest, utility bills, the cost of repairs and employee wages. That is not true. They will still be entitled to all of those.
The withdrawal of the furnished holiday lettings rules will change the way tax relief is given for capital expenditure and for any losses incurred, but relief will still be available. It will also change the tax relief available when the property is sold. That might mean that the business will pay more tax on the sale, or that it cannot defer the tax it has to pay. However, business will not be disadvantaged when compared with others who sell properties that they rent out.
The alternative option, as has been mentioned, was to extend the special treatment to cover properties located in the European economic area but outside the UK, which would have channelled public money to businesses seeking to attract tourists outside the UK. That would not have been welcomed by the UK tourist industry. Indeed, it would have been a poor use of taxpayers’ resources and would have extended the perceived unfairness in the treatment of property businesses, which might undertake similar activities differently. Instead, we have chosen to level the playing field.
I acknowledge that that change has not been universally welcomed by the tourism industry, but when we were considering the impacts of the changes, which were published in an impact assessment report, to which the hon. Member for Southport (Dr. Pugh) referred, alongside the pre-Budget report, we carefully considered the impact on the UK tourism industry. In our assessment, that will mean that many tourism businesses, including hotels, bed and breakfasts and those who let caravans or carry on material trading activities connected with the operation of the caravan site will not be affected by the changes. Also, those who let holiday property will still be able to make tax deductions from their profits, such as mortgage interest, costs of repairs, rates and utilities, and they will still get an allowance for capital expenditure.
The hon. Member for St. Ives referred to a meeting he had with the Financial Secretary to the Treasury on a particular case. I am not aware of the details of that case, but I will ensure that I follow it up and that he gets a speedy reply.
I should clarify that I have requested a meeting with the Financial Secretary to discuss that case. The primary point I was making was that at one end of the scale there are holiday parks of the type I have described, which are tantamount to a hotel dispersed around a park and therefore cannot in any way be described, as some people imply, as merely investment income. At the other end of the scale there are single properties that were originally purchases for investment or recreational purposes but that are simply used on a minimal basis in order to be able to take advantage of the business rating and other tax advantages. Surely the Government must be able to differentiate between those two types of uses to benefit genuine holiday letting establishments of the type I have described.
I understand what the hon. Gentleman says. I cannot comment on the specific example, but my understanding is that HMRC accepts that furnished holiday letting businesses that are akin to hotels are trading, and they will be taxed in the same way as other traders. However, letting businesses will be treated in the same way as other property businesses. It might be helpful if I give some examples that illustrate how the changes might work.
A is employed in the City and is a higher-rate taxpayer. He bought a property in Cornwall as an investment and intends to retire there. He lets the property as furnished holiday accommodation through an agent for 10 weeks a year and generally makes a loss. He has no other income. Currently, A can set his furnished holiday letting loss against his employment income, and so pays less tax in the year that he makes an FHL loss. After the FHL rules are withdrawn, he will be able to set his loss against future profits of his FHL business or any other rental income. Generally, there will be a timing impact: A will not be able to reduce his employment income tax bill in the year he makes the loss, but he will pay less tax once his FHL business returns to profitability. However, if his FHL business does not return to profitability, and if he does not have any other rental income in the future, he will not be able to claim tax relief on the loss.
B—let us call him Fred—is a farmer who has converted three barns on the edge of his farm into self-catered holiday accommodation. He generally makes a profit, but in one year he makes a loss. The impact would be one of timing. Instead of setting his FHL loss against his farming profits in that year or the previous year, he will set it against his FHL profits in future years. Fred will receive the same amount of tax relief, but he would get the relief earlier under the FHL rules.
Carol decides to sell her FHL property in order to buy a larger one and makes a £150,000 capital gain. Under the FHL rules, the capital gain can be rolled over into the larger FHL property, which means that the tax charge on the smaller property will be deferred until the larger FHL property is subsequently sold. Carol will pay no tax on the capital gain now, but she will have a larger tax bill when she sells the new FHL property. Once the FHL rules are withdrawn, roll-over relief will still be available, but it will be limited on a time basis. Periods before April 2010 will qualify for roll-over relief, but periods after April 2010 will not. That means that Carol may have to pay some capital gains tax if she sells the smaller property after April 2010, but she may be able to defer a proportion of the gain until the larger FHL property is subsequently sold. For example, if she sold the smaller FHL property in April 2011 after owning it for 10 years, she could roll over nine tenths of the £150,000 gain, which is £135,000. Only £15,000 of the gain would be immediately liable for CGT.
To get away from the singular to the general, a claim was made that £20 million in tax privileges has gone out of the FHL industry, or out of the tourism industry in general. Henry Aubrey-Fletcher, who is the president of the Country Land and Business Association, said that the changes were a bombshell that will cost the industry millions of pounds. It may be an inevitable bombshell because European legislation is what it is and we need to comply—or the Government feel that they need to comply—but is it the case that £20 million will come out of the industry and into the Exchequer? If so, what is the Treasury’s anticipation of how that will affect the market?
I refer the hon. Gentleman to the impact assessment that we produced. Overall, we think that the costs are very small indeed. Giving some specific examples helps to illustrate how the changes will be implemented. Let me give a further example that relates to capital allowances.
Jo converts a barn that she owns into self-catered holiday accommodation. She spends £60,000 on qualifying plant and machinery and receives £12,000 a year in net rents. In year five, she sells the barn at a profit, at which point the plant and machinery are valued at £50,000. Under the FHL rules, in year one, Jo’s taxable profits are reduced by £50,000 under the normal annual investment allowance. In year two, her taxable profits are reduced by £2,000; in year three, by £1,600; and in year four, by £1,280. In year five, her taxable profits increase by £44,880. That represents the excess capital allowances that she has received. As a result, over the life of the business, she was entitled to £10,000 tax relief for her capital expenditure. Under the wear-and-tear allowance in the new regime, her taxable profits are reduced by £1,200 a year. Over the life of the business, she was entitled to £6,000 tax relief for the capital expenditure.
One brief further example is of someone who owns a house, perhaps in the Lake district, which she lets furnished to a local family. They move out and the owner decides to convert it to furnished holiday accommodation. She spends £25,000 replacing the kitchen and the bathroom and redecorates throughout. She receives £8,000 a year in net rents. This is revenue expenditure, and so taxable profits are reduced by £25,000. Therefore, she makes a £17,000 loss. Under the FHL rules, no capital allowances are due. Under the wear-and-tear allowance, taxable profits are reduced by £800 a year.
Those examples show some of the complexity of this issue, but I think that they are helpful. People who run such businesses need to understand how some of the changes will be implemented.
I shall move on and cover some of the points that the hon. Member for St. Ives raised about council tax. I understand the spirit in which he raised them: he does not think that there should be any reduction in council tax for a second home. Local authorities in many areas where there is significant tourism have reduced the second home allowance to 10 per cent. I understand that he might make the point that even the 10 per cent. reduction should not be allowed. That is a perfectly legitimate point to raise and debate. As he is aware, under current legislation, there can be a 10 per cent. discount.
Overall, we have had a good debate. I appreciate the concerns of the hon. Gentleman’s constituents, many of whom may be struggling to find accommodation at an affordable price in the area where they were born and brought up. That is an important policy issue, and the Government have sought to take steps to address it. We want more affordable housing in areas with high levels of tourism and in rural areas, and increased numbers of properties need to be made available so that our young people can get roofs over their heads at a price they can afford.
I do not believe that changing the second home allowance would provide the kind of solution that the hon. Gentleman suggests it might—it could lead to many unintended consequences. However, he rightly raises an important policy issue on behalf of his constituents, and it has been useful to debate it today.
Hastings Rail Service
Following the huge disruption to local train services after Christmas, when snow and bad weather hit our rail system, the poor state of the railways and their failure to respond adequately to that bad weather event has been a hot topic in Kent and East Sussex. However, for my constituents in Bexhill and Battle, this winter has brought more concerns, not about the temporary cancellations caused by that weather event or by the delays, or by the chaotic information or the platforms that were not cleared of ice and snow, but because a huge axe is now hanging over an important part of the direct rail service to London as a result of the publication of the Kent rail utilisation strategy on 22 January, jointly developed by Network Rail and the Department for Transport.
The Kent and East Sussex RUS document focuses predominantly on the rail services in Kent, but the scope of the strategy also extends to the London to Hastings line. Effectively, Hastings and stations south of Tunbridge Wells to Hastings are the poor relations in a strategy that focuses overwhelmingly on the area over the county border in Kent. The track about which I am concerned heads south from London through Kent and crosses the East Sussex border south of Tunbridge Wells into my constituency and rural East Sussex, where it passes through stations in places that I represent—Stonegate, Etchingham, Robertsbridge, Battle and Crowhurst—before reaching St. Leonards and the terminus at Hastings.
The RUS document sets out proposals for changes to rail services over the coming decade, and at their heart lies the expansion and improvement of the fast inter-urban Thameslink service. Some £5.5 billion of investment is being pumped into the Thameslink project, with improved infrastructure, higher-speed lines, new trains and longer platforms. This is undoubtedly an exciting and hugely beneficial scheme—I do not want to knock it—but there is a big catch for my constituents and those who live south of Tunbridge Wells, because to make way for the new Thameslink trains travelling through central London, the RUS document proposes the removal of peak rail services between Hastings and London Cannon Street from 2015. That Thameslink service will only benefit passengers boarding at Tunbridge Wells and stations to its north who are going to London. It completely misses out my constituents.
The new Thameslink service would not be a problem if it simply replaced the current Cannon Street to Hastings service, but it will not do so. The lower power supply on the track south of Tunbridge Wells will not be enough to carry the 12-car Thameslink trains. Instead, the new service will terminate at Tunbridge Wells. In short, the RUS proposes to axe services to stations south of Tunbridge Wells all the way to Hastings. As a result, those stations will have their peak service to London cut by a third. Their only direct route to the City of London will be entirely removed. With no exciting Thameslink alternative to replace it, my constituents rightly feel that this represents a real downgrading of the existing rail service.
My constituents are being asked to sacrifice their vital link to London in return for the knowledge that others up the line will have a faster and more pleasant commute. To add injury to insult, the Hastings to Charing Cross service—the remaining two trains an hour during peak hours—will no longer have an extra four carriages added at Tunbridge Wells to accommodate the extra passengers who board further up the line. The existing system was designed to ease regular congestion. In other words, those services that are not being scrapped stand to become even more overcrowded. It is no surprise therefore that during the consultation on the RUS, Network Rail found that the London to Hastings line proposal was the single biggest issue that was raised.
What are the consequences? It should be borne in mind that East Sussex, contrary to popular opinion, is a poor county. Per capita income in East Sussex, just 50 miles from London, is equivalent to per capita income in Hull. The deprivation in Hastings is well documented. Time and again, this relatively rural and unindustrialised corner of the south-east is overlooked. The main road down from London to the coast through this area is still single carriageway for much of the journey, while to the east lies the much more prosperous country of Kent with its high-speed Javelin trains, and to the west lie Brighton and the Gatwick corridor, with fast trains down from London, easy access to Gatwick airport and the M23 and A23 enabling easy access to and from London.
For my constituency, the rail link to London has never been more important. Local economies and communities are disproportionately reliant on the resident commuters in comparison with other areas. The direct route to the City of London—the financial district where so many commuters work—is a crucial factor when people are deciding whether to move to the area and whether to stay. The removal of the direct rail link to London during peak hours may cause the commuters on the Hastings line to up sticks and move altogether, either up the track into the suburbs or towards Kent, into better-serviced areas, or west towards Brighton. That would be a disaster for my local towns and villages.
Like many others, I have written to the Secretary of State for Transport highlighting the great concern about these proposals. In a reply to me, the Under-Secretary of State for Transport, the hon. Member for Ipswich (Chris Mole) wrote that he was
“surprised you should expect the removal of just six trains a day”
to be enough
“to register sufficient socio-economic dis-benefits to cause a change in policy”.
I am surprised that he should so underestimate the importance of a direct service for people working in the City when making decisions about the worth of a commute from outside London. I am also surprised that he underestimates the importance of these commuters and their families to the economies of these communities. That is why there has been so much correspondence from the parish councils, not only in my constituency, but in Wadhurst, over the border in Wealden. For that reason, my hon. Friend the Member for Wealden (Charles Hendry) is keen to associate himself with this campaign. The effect on those rural communities clustered along the line and on Hastings at the end of the line is not to be scoffed at.
The Minister’s rather high-handed response to the letters he has received on the matter shows little consideration for the efforts put in over the years to try to transform the economy in this area by improving connectivity to London and, in particular, for the work on regeneration that has been done by his Government to improve employment prospects, business conditions and economic opportunities in Hastings.
I would understand the hon. Gentleman’s point better had there been any suggestion that the all-day Hastings to Charing Cross service might be reduced or withdrawn. As it is, even if the RUS recommendation were implemented, the only dis-benefit is that the Cannon Street commuters would have to change trains at London Bridge.
It is clear that the Minister does not understand the point. What possible benefit is there of a midday, afternoon or mid-morning service up the line from Hastings to someone who works in London? What possible benefit is that to somebody who works in London and has to do a full working day? The Minister clearly does not understand the points that have been repeatedly made to him, not just by me, but by his many correspondents, including the leader of Hastings borough council, and East Sussex county council and many parish councils. The peak-hours service is crucial if we are to retain the business people and the commuters who work in the City or who need access to the City during the working day. It is not good enough either to ask them to then make an additional change at London Bridge on top of a 1 hour 20 minute commute or to expect them to face crowded trains because cars have not been added at Tunbridge Wells. I am afraid that the Minister’s response is typical of the way in which he has dealt with this matter in correspondence.
It is clear from the representations that the Minister has received that a strong rail link to London and the City is vital for successful regeneration of the area. That is why Amber Rudd, the prospective parliamentary candidate for Hastings and Rye, has campaigned so hard on the issue. She wrote to me saying:
“The loss of the Cannon St service from Hastings would be particularly damaging for a town that already suffers from high levels of unemployment and low wages. The Cannon St commuters are some of the best paid in the town and losing that service would be disastrous for a community that needs the wages of these people to support other businesses in the town.”
The community needs people who are economically active to live in it.
What are the solutions? We must retain the Hastings to London Cannon Street service, instead of diverting a service that might benefit from the Thameslink trains; we must procure eight-car Thameslink trains that can continue past Tunbridge Wells down the line to Hastings; procure 12-car Thameslink trains, which have a lower power draw, again allowing the trains to continue to Hastings down that part of the track with a lower power supply; and upgrade the power supply south of Tunbridge Wells to allow the proposed 12-car Thameslink trains to travel down to Hastings.
On the possibility of procuring eight-car Thameslink trains, the Minister has stated that he
“cannot contemplate the possibility of committing future operators to running 8-car peak trains into London Bridge in the peak hours—8 car trains simply do not carry enough people to be considered seriously as a long-term solution.”
Despite that, he seems content with the prospect of the existing Hastings to Charing Cross Southeastern service no longer having extra carriages added at Tunbridge Wells but having eight cars all the way through to London. Will the Minister clarify whether or not eight-car trains are acceptable?
I impress on the Minister the importance of the direct rail service to Cannon Street. The commute to East Sussex is a long one, and at the margin of acceptability for people considering doing it daily. It is a tenuous commute—it is not like commuting from Sevenoaks or Tunbridge, where there is a rapid, regular and easy service. People in Hastings and the villages clustered around it are at the margin, and any further disruption to that service will seriously compromise their ability to travel to work in a reasonable time, and to access their workplace without undue hassle or the uncertainty that comes from having to change trains. We all know that if a journey to London requires a change, one must allow not just the additional time for that journey, but build in a significant buffer element to allow for disruption or delay at the transfer station. Changing at London Bridge station is not an attractive option. It is viable to do so, but it would not be an attractive option for commuters, and would make all the difference between whether people chose to commute from Hastings and stations south of Tunbridge Wells.
I urge the Minister to take on board the representations that he has received. Crowhurst parish council has written to him saying that the
“route provides a direct link to the City from Crowhurst and its existence is an important factor for many residents when they decide to move to the area, or indeed stay here. Commuters are a very important part of the economy and social infrastructure in the area and any deterioration in the existing service will have a serious impact on the East Sussex economy generally, and Crowhurst in particular.
Highlighting this proposal in the Strategy is likely to have a damaging effect on the local economy in anticipation of the loss of the service.”
That came from Mrs. Pat Buckle, clerk of Crowhurst parish council.
There is a chink of hope, because the Minister has insisted that the RUS document is advisory at this stage, which is encouraging. He has also suggested that we should wait until 2012, when the specification for the next franchise will commence, but procurement of the Thameslink trains is already under way. Of course, we could wait until 2012, but the decision would, de facto, be made for us. The Thameslink trains will have been bought and they will all be 12 cars.
We need a wider, more forward-looking picture of the future of our railway system. If we always put off decisions until the deadline is upon us, if we only ever look with blinkers at one area and one network at a time, and if we never take wider account of the unintended consequences of policy, that will be at the expense of a sensible, efficient and fair rail service. Time and again, the Hastings to Cannon Street and Hastings to Charing Cross line is overlooked because the Department for Transport, under this Labour Government, deems it a poor relation of the more exciting, more attractive and larger Kent railway system. I do not begrudge the services from Ashford, and I am delighted that we now have access to the channel tunnel rail service. I am delighted that there is a faster service to London from Brighton, but I constantly question whether the Department understands the importance and significance of the rail service on the Hastings to Charing Cross and Cannon Street line.
It is understandable that track pathways in the London Bridge area are congested and that existing services must be displaced to make way for Thameslink trains, if Thameslink is required. I would be interested to know what demand there is to travel to Bedford from Tunbridge Wells. I have certainly not heard of anyone who is desperate to make that journey. Yes, it may be difficult to find a solution that will benefit suburban commuters without penalising the rural commuters of East Sussex, let alone improve their service, but surely that is all the more reason to tackle the problem now and not put it off until 2012 or later, by which time the Government’s hands will be tied. Will the Minister at least assure me that his Department will consider seriously and urgently the options now, while the RUS is fresh, while it at least has the appearance of a consultation document, while investment decisions have yet to be made, and while long-term action has yet to be determined?
It is a pleasure, Mr. Cummings, to serve under you as Chair, as we used to share a role on a former Select Committee. I congratulate the hon. Member for Bexhill and Battle (Gregory Barker) on securing this debate and providing an opportunity for the House to discuss the route utilisation strategy for Kent that Network Rail published recently. I understand his concerns about the future of rail services on the Hastings line—indeed, my hon. Friend the Member for Hastings and Rye (Michael Jabez Foster) has spoken to me about the matter. I intend to demonstrate in the next few minutes why those concerns are misplaced.
I begin by reminding the Chamber of the purpose of route utilisations strategies. They provide a strategic framework and recommendations which guide the rail industry’s development of plans for train service changes and investment, but they are not firm commitments to implement changes. Early RUSs were prepared by the former Strategic Rail Authority, but in 2004 in the White Paper, “The Future of Rail”, the Government explained the rationale for transferring responsibility for production of RUSs to Network Rail as part of its enhanced role in co-ordinating the industry’s planning and delivery. However, the same White Paper and the Railways Act 2005, which followed from it, made it clear that the specification of rail services would remain with the Government.
Production of a RUS takes around 18 months, and involves stakeholders from across the rail industry, including passenger and freight train operators, and passengers’ representative bodies, such as Passenger Focus. Although the Office of Rail Regulation and funding bodies, including the Department for Transport, have been represented on RUSs’ stakeholder management groups, we have sought not to restrain the industry players from developing their own ideas and drawing their own conclusions. That should not be portrayed as lack of interest on the part of the Government.
During the preparation of a RUS, details of current train services, levels of demand, infrastructure constraints and performance records are collated, and future demand forecasts are prepared for the stakeholder group members. Any gaps between demand and physical capacity are identified, and options are developed to address them. A key requirement is that the options are subject to economic appraisal, and consideration of affordability and strategic fit with other schemes. Any scheme that fails to achieve a satisfactory benefit-cost ratio is discarded. That allows a draft strategy to be produced and, following formal consultation and further refinement, the final RUS is published.
The final Kent RUS was published in January this year. It covers the heavily-used commuter routes between Kent and London, together with more lightly-used routes in Kent. It also considers the potential role of the High Speed 1 line in providing additional capacity to relieve the classic network. Unsurprisingly, the most difficult issue in the Kent RUS area is providing sufficient train capacity to meet the forecast level of commuting into London. The Kent RUS forecasts that peak demand will continue to outstrip capacity on the main routes into London during the next 10 years. There is limited scope for running extra trains on the classic network, and many trains are already at the maximum practical length of 12 cars. However, the RUS has identified some scope for train lengthening to provide additional capacity, particularly in the two hours either side of the peak rush hour.
One of the common findings of the route utilisation strategies that Network Rail has completed so far is that, in many cases, the ultimate constraint on the capacity of a route is the physical capacity of its London terminus. The obvious alternative to expanding those stations at ground level is to go underground and continue the railway under London. That expedient led to the inception of both London’s major rail infrastructure initiatives—Crossrail and Thameslink—which have been taken forward by this Government. Thameslink is relevant to today’s debate, and the Kent RUS assumes implementation of the Thameslink programme, which will enable new 12-car trains to run between various locations in Kent and routes north of London. The Thameslink programme will provide the next significant upgrade in the capacity of the railway, from not only south London, Kent and Sussex, but the northern home counties. I note that the hon. Member for Bexhill and Battle said that a Thameslink train is a satisfactory alternative. If he accepts that for passengers for Cannon Street, they will have to change at London Bridge.
For all their virtues and benefits, Thameslink and Crossrail force some compromises on today’s accepted standards of rail travel. One is the design of the trains, which will have to be suitable not only for the requirements of medium-distance commuters and leisure passengers, but for the demands of high-frequency metro services. That means that the trains have to be capable of carrying very high volumes of passengers in tolerably decent conditions for short distances, as well as smaller numbers of people seated for longer distances. The result will be fewer seats per carriage than we would normally expect for national rail trains, but more than we would normally expect for an underground train, so most people can be satisfied most of the time.
It is accepted that in metro services, people joining from further afield will generally have access to a seat, although those who join later on the journey are unlikely to get a seat for a short distance and will have to stand. That is an understood aspect of metro rail services the world over.
As I said, that is an accepted feature of the operation of metro services in the UK and worldwide. I must return to the point. As I made clear to the hon. Gentleman, the procurement of these trains is at an advanced stage, and I expect that one of the Government’s first tasks after the next general election will be to announce the preferred bidder for those trains. To alter any aspect of the specification of the new trains at this late stage would entail cancellation of the procurement, and delay the arrival of new trains on the network by two years or more. That would create complete disruption for those who anticipate relief from overcrowding.
What does that mean for passengers on the Hastings line? Just as with the sizes of the London stations, many of the difficulties on that line have been bequeathed to us by the early generations of railway pioneers. The extension of the railway from Tunbridge Wells to Hastings in the 1850s was completed in a hurry by the South Eastern Railway company to compete with the London, Brighton and South Coast Railway, which had established a presence in Hastings through a line along the coast from Eastbourne. It is said that when extending the line south from Tonbridge towards the coast, South Eastern Railway’s contractors cheated the company by building the seven tunnels through the sandstone hills of the Weald with four layers of bricks instead of the customary six layers. That was not discovered until the Wadhurst tunnel collapsed in 1862—I do not know who were Government at the time, but it was certainly not this Government. It was too expensive to re-bore the tunnels, so the South Eastern Railway company simply added the two missing layers of bricks. That, of course, reduced the width of the tunnels, and for over 100 years meant that the line had to be operated with specially-commissioned, narrow-bodied rolling stock. It also meant that electrification of the route came later than it did to neighbouring routes, partly because there was insufficient space in the most restricted tunnels to install electrified rails, and partly because there was no narrow-bodied electric rolling stock.
The most recent solution to all those problems came in 1986—I know who were in Government then—when the narrow-bodied Hastings diesels reached the end of their days and electrification became inevitable. The solution was to make the track single through the tunnels so that the electrification rails could be installed and conventional electric trains could be run. However, as I said, that was in the 1980s, with a Government who famously did not believe in the future of railways, and who ensured that every line of every investment proposal by the British Railways Board was challenged for every last pound. The result was that the railway that had been built in a hurry in the 1850s was electrified on the cheap in the 1980s. Only two trains an hour ran in each direction, and they did not need to be more than eight coaches long. The electrification scheme was designed down accordingly.
In 2009, when developing the Kent RUS, Network Rail came to consider the conundrum that on the one hand the Thameslink rolling-stock procurement programme depends on 12-car trains to satisfy its capacity objectives, while on the other hand there is an important stretch of railway on which Network Rail believes that the power supply is capable of supplying only enough power for traditional eight-car trains. Furthermore, in order for the Thameslink programme to deliver its maximum number of 24 trains per hour through London Bridge at the height of the rush hour, the number of trains into Cannon Street has had to be reduced from 25 to 22. Faced with a combination of circumstances that required all Thameslink trains to have 12 cars, Hastings trains to have only eight cars, and three trains to be withdrawn from Cannon Street, it is perhaps unsurprising that the Kent RUS recommended that the Hastings to Cannon Street trains be withdrawn.
My postbag in recent weeks has contained a large number of letters from organisations and individuals—such as those referred to by the hon. Gentleman—who believe that the threat of such changes will be enough to provoke some City commuters to seek to live elsewhere. It is unfortunate that some of those letters have found their way into the local press, which is the surest way of ensuring that the prophecy will be self-fulfilling. Even so, I find it surprising that people would forgo the opportunity to live in the towns and villages of east Sussex simply because they had to change trains at London Bridge.
However, the fact that the RUS has made a recommendation on the Hastings to Cannon Street service is far from the end of the story. It is clear that my correspondents do not understand the underlying principles behind the Railways Act 2005, so I am glad to have this chance to remind people that the railway is now publicly specified, albeit privately delivered. That means that when the time comes, the Government will make the final decision on whether to require the relevant train operator to run direct trains between Hastings and one or more of the City stations. The time for that decision does not come until the existing integrated Kent franchise—which requires the operation of those services at least until March 2014—is due for replacement. The Kent franchise is due to run until 2014. The Thameslink franchise runs until 2015, and the Thameslink programme will not require any revisions to train services before the end of 2015. Decisions about what services those franchises will be required to run will not be taken until 2012, or even 2013. Our practice has been to expose decisions about the content of franchises to full public consultation.
What alternatives will face the Ministers on whom those decisions will fall, probably late in 2012? First, they could adopt Network Rail’s proposal to withdraw the three trains in the morning and four trains in the evening that run direct between Hastings and Cannon Street. Scrutiny of the loading records of those trains suggests that although there is plenty of demand for most—if not all—of them, withdrawal or redirection of one or two might make sense. Those loading records also make it quite clear that running eight-car trains into London Bridge is unsustainable as a long-term option.
Secondly, Ministers could decide to divert the trains to Charing Cross, changing trains at London Bridge. If Cannon Street is the final destination, that is not a huge problem. Thirdly, despite today’s power-supply problems with 12-car trains south of Tunbridge Wells, it remains likely that the new Thameslink rolling stock will be able to run through to Hastings. Not only will the new Thameslink stock be lighter than its present day counterparts, it will have the capability to regenerate the energy used in braking, thus reducing its net power draw by at least 15 per cent. Those issues need to be worked through in detail with Network Rail over the coming years. As the first input for the decisions to be made in 2012 or 2013, we have a recommendation from the RUS. Over the next two or three years, there will be many more inputs from several sources, leading to a final train service specification for the next generation of Southeastern and Thameslink franchises.
I encourage the hon. Gentleman and his constituents to engage with those processes in order to secure the best possible services for the people in the areas of Hastings, Bexhill and Battle.
Mongolia (UK Relations)
I am a very happy man this afternoon for three reasons. First, it is my birthday and I am not yet 50—I am well under 50, one might say. That is one good reason to celebrate. Secondly, Mr. Cummings, if I had chosen the Chairman for the debate from the Chairmen’s Panel myself, I could not have chosen a better man than your good self—a fellow member of the all-party group on Mongolia, a visitor to Mongolia and possibly the only other Member of the House who has had an intern or member of staff from Mongolia in the past, just as I at the moment have an intern from Mongolia called Mr. Bakhyt, who has assisted me with preparation for the debate.
Thirdly, looking back in the annals of this place, I find it hard to place a previous debate on Mongolia, certainly in recent times, yet the United Kingdom has a proud record of relations with Mongolia, dating from when we were the first nation in the west to recognise Mongolia, in 1963. When the previous Prime Minister, Tony Blair, met the Mongolian President in April 2007, part of the declaration stated:
“This long association has given the UK a special position in Mongolia, with the Mongolians looking to Britain for advice in their transition to democracy and a market economy.”
Therefore, I thought I would use the minutes available to me to list 10 basic facts about Mongolia—some perhaps surprising, some perhaps well known and all of them pretty well known to you, Mr. Cummings. The first is that Mongolia is now a proud democracy. That is something we share with the nation of Mongolia. It is something not only to be proud of, but to be cherished in the part of the world where Mongolia is situated. One cannot really say the same about China. One cannot say the same about Russia. Mongolia became in effect independent in 1911, when the Chinese left. It was the second nation to become a communist nation after the Soviet Union, and was dominated by the Soviet Union for many years. It suffered dreadfully through Stalin’s purges and the oppression of Buddhism.
If we fast-forward to 1990, Mongolia was not perhaps the most likely candidate to be an emerging democracy, but in 1990, as the Russians pulled out, 3,000 people gathered in Sukhbaatar square in Ulan Bator and demanded democracy and, within a few weeks, democracy had begun to emerge. Since then, we have seen the rotation of power quite regularly. Fairly recently, we saw the transition of power from President Enkhbayar of the Mongolian People’s Revolutionary party, which is a sister party to the Labour party, although it is having a healthy debate about its name at the moment and whether it is time to go back to the party’s original name, which was the Mongolian People’s party. It is perhaps the only example remaining of a party that existed under communism that has modernised and retained the support of a large proportion of the population. Anyway, President Enkhbayar lost the election and there was a peaceful and successful transition of power to President Elbegdorj, who was involved in 1990 in some of the demonstrations for freedom.
At the moment, there is a Government involving both main parties. There were some very unfortunate riots in July 2008, following the last parliamentary elections. That was a big shock to the political system. A number of people died, and I think that all political parties realised that they had to govern in the interests of all the people of Mongolia. The coalition emerged from that and was a specific Mongolian response to that time. There is a free media. The elections are judged to be free and fair by international standards. There is still much to do on combating corruption and improving the judicial system, but Mongolia holds its place among the democratic nations.
It is perhaps worth mentioning that when the United Kingdom recognised Mongolia in 1963, a previous Member of the House called Sir Fitzroy Maclean, who some people say was Ian Fleming’s inspiration for James Bond, wrote an article. He was a Member of the House until the 1970s. The first lines of the article were:
“As far as I can remember, I first became aware of the existence of Outer Mongolia twenty-five years ago, in Moscow. Idly looking through the list of my fellow members of the diplomatic corps not long after my arrival there, I came upon the Legation of the People’s Republic of Outer Mongolia, headed by the Minister, Monsieur Sambuu, and at the next official reception I was able to identify him by his characteristically Mongolian countenance and his charmingly Mongolian-looking wife.”
That could almost be something from an Ian Fleming novel, but at the time it was an extremely progressive move by the British Government to recognise Mongolia. We had an enormous embassy there at one stage, which I suspect was full of spies rather like James Bond as much as diplomats during the cold war, but that has stood us in good stead and it brings me on to the second point, which has to do with the economy.
It is perhaps not known widely in the House that various newspaper articles, particularly in the financial press, have recently been comparing Mongolia to Dubai. That was before the Dubai crash; they were saying that it would be the new Dubai. The comparison was made on the basis of Mongolia’s small population of just 2.5 million people and its rich mineral resources. Its gross domestic product per head is only about $2,500, but it is rising. Currently, the economy is largely based on mining, which dominates the industrial sector, and on agriculture. Just before Christmas, an historic agreement was reached for the Oyu Tolgoi mine, which is a complex in the Gobi desert. It has a mixture of copper and gold. Ivanhoe Mines, the Canadian mining company, was leading on that, but Rio Tinto has a stake in the mine that could rise to nearly 50 per cent. should it so choose. That means that there is very much a British interest.
It is important to note that the Mongolian Government have retained a 34 per cent. stake in the mining company. There has been a long debate in the country about ensuring that the local population get proper benefits from mining. People there have looked at the experience of other countries, perhaps where the local currency has appreciated, destroying the rest of the manufacturing sector, and I think that all political parties in Mongolia are determined to ensure that ordinary Mongolian people get a benefit.
The mining complex to which I am referring is huge. There are 440,000 metric tonnes of copper and 337,000 oz of gold there, and it is just one of many potential deposits. The Tavan Tolgoi coking coal mine is not too far away. The Government have said that they would prefer to retain ownership of that, but involve foreign companies in extracting the coal. Altogether, there are possibly 8,000 deposits of 440 different minerals across Mongolia and only 200 of those are currently being exploited.
However, that is only part of the picture of Mongolia, because half the labour force still work in the countryside. Just under half live in Ulaanbaatar and a good deal of the rest live in the countryside. Some 250,000 families have extensive livestock. Three quarters of those rely entirely on the livestock and their income from them. It is worth mentioning at this point that one reason why I wanted to have the debate now was that this has been a very harsh winter in Mongolia and more than 1 million—perhaps 1.7 million—livestock have died. The very heavy snow has followed the drought of last summer, which is the worst possible combination because food has not been stored up for the livestock.
The United Nations warned just a few weeks ago in late January that Mongolia’s severe weather threatens lives. The statement said that 19 of Mongolia’s 21 provinces had been hit by heavy winter snow and temperatures that had plunged below minus 40°. That puts our own winter in context. The UN’s resident co-ordinator in Mongolia, Rana Flowers, said:
“The poor did not have the resources to stockpile food or fuel for heating and the supplies in the now inaccessible villages as a whole are stretched.”
I am very pleased that the European Union has responded, and that the United Kingdom is playing a major role. The Mongolian President met José Manuel Barroso a few weeks ago. The EU has increased aid, pledging €150,000 to help Mongolia tackle the severe winter. Mr. Barroso also said that that the EU plans to increase assistance by 40 per cent. to €5 million a year, or $7 million, to support the Mongolian national development plan. It is worth noting that extensive efforts are being made in London. The Mongolian Association in the UK is organising a dinner at the Renaissance Chancery Court hotel to raise funds to help with the difficulties suffered in Mongolia.
I am aware of the time, Mr. Cummings, so I shall rattle through the remainder of my 10 points to enable the Minister to reply. It is a matter of pride that the Mongolian President recently took the brave decision to abolish the death penalty. Since coming to office, he has commuted all death sentences to a 30-year jail sentence. That was not an easy thing for him to do. I hope that the Mongolian Parliament will debate the matter in the near future, and that it will back the President and abolish the death penalty for good. That was a difficult decision, but it is a measure of the quality of debate on human rights that is now occurring in Mongolia. It is worth noting that the hon. Member for Orkney and Shetland (Mr. Carmichael) has tabled a motion commending Mongolia on that action, which has been signed by 33 Members.
It would be remiss of me not to mention Genghis Khan, the Mongolian national hero. A few years ago, we celebrated the 800th anniversary of his rise to power; he united the Mongolian people and conquered most of the known world. A recent study suggested that Genghis Khan’s direct descendants constitute 8 per cent. of men in a large part of Asia, and 0.5 per cent. of the world’s population. His reputation is twofold—he was obviously a conqueror, but Mongolian people take great pride in the fact that he introduced the rule of law, written language and education. Some of those traditions have lasted down the centuries, so his legacy is in many ways a positive one.
I invite any Members who want to come to the annual reception of the all-party group on Mongolia on 8 March in this place, and I am sure that you will attend, Mr. Cummings, if you can. We are also having a joint seminar on the Mongolian economy with the British-Mongolian chamber of commerce, which I co-chair with the hon. Member for Banbury (Tony Baldry).
Tourism has great potential in Mongolia. I understand that about 7,000 British tourists a year visit Mongolia. It is a starkly beautiful country. I hope that MIAT, the Mongolian airline, will introduce direct flights to Ulan Bator before too long, which would reduce journey time to about nine hours. Mongolians coming here realise that they will need visas and to meet the necessary requirements, but I hope that our embassy in Beijing and the subcontractor that considers visa applications will be aware of the different context for Mongolia. I know that there have been various discussions at an official level about that.
The sixth point is that Leeds and Mongolia have many links. Cashmere cloth was supplied to Burton’s factory in Leeds, and the previous President of Mongolia was educated at Leeds. Point number seven is that we should not forget our military links. Mongolia has an efficient army, which has been in action alongside British troops in Iraq and Afghanistan.
As for sport, it is a matter of fact that Mongolia is one of those nations that voted at the last minute for London to host the Olympics. It rejected the blandishments of Paris, and we are eternally grateful for that. Mongolia won its first gold medals at the Beijing Olympics and it had a team of two in Vancouver, but I think we will have plenty of boxers, wrestlers, judo players and archers in London.
Point nine is that many institutions in Mongolia look to Britain for advice and examples. The old public service television channel has remodelled itself on the BBC, and is independent of Government. The Education Minister, who visited Britain only a few weeks ago, is very keen to introduce some of the Cambridge education board’s standards to Mongolia.
I pay tribute to some of the people who have been crucial to relations between Britain and Mongolia in recent years. Mr. Altangerel is the Mongolian ambassador, and Mr. Davaasambuu was his predecessor; and Mr. Bill Dickson is our ambassador in Mongolia.
I end with what may be a little-known fact—that the Mongolian community in London and worldwide celebrated its new year last year. The dates are not the same as the Chinese new year. It is appropriate for the House to wish a happy new year to all Mongolians who contribute to London—at least 6,000 or 7,000 of them study or work here—and also to the people of Mongolia.
It is a delight to serve under your chairmanship, Mr. Cummings, not least because of something that I did not know—that you are interested in Mongolia and are committed to the cause.
I pay tribute to my hon. Friend the Member for Selby (Mr. Grogan). Given the many activities that he undertakes in the House, I find it difficult to believe that in a few months’ time he will no longer be a Member. I hope that the House manages to find a suitable replacement for him as chairman of the all-party group on Mongolia, even if it is a pale imitation. All-party country groups do an invaluable job not only for Parliament but for British interests. They maintain long-standing relationships, which Ministers, who change with monotonous regularity and ludicrous frequency, sometimes find more difficult to achieve.
I congratulate my hon. Friend on his birthday. He said that Mongolians celebrated their new year last year. They celebrate it every year; I think that he meant last week. I too wish them a happy new year.
As my hon. Friend said, Mongolia has a proud and long history. The Mongol state was created by Genghis Khan in 1206. My hon. Friend alluded to the country’s legal systems and the rights of the individual, which may seem to have been lost during the years of Soviet domination. However, they are now flourishing in a way that has not been possible for many years. The Mongolian People’s Republic, founded in 1924, gave way to the democratic revolution in 1990. That may have had many strengths, but we all recognise the dramatic improvements that have come about in the short time since 1990.
We should remember that Mongolia is not a wealthy country. It is the 19th largest country in terms of its geography, but the most sparsely populated. As a result it faces particular difficulties. My hon. Friend referred to the problems that Mongolia has had over the past two years—the drought and then the zud, which is the Mongol name for the very harsh winter that the country has suffered this year. I was in Moscow last week, and it felt cold enough at minus 10° C. The temperature in 90 per cent. of Mongolia is between minus 35° C and minus 40° C. That is very rough. As we heard, more than 1 million animals have died, which represents about 2 per cent. of the country’s livestock, 73 people have been transferred to hospital for frostbite and a couple of people have died. Such events are not new to Mongolia; they occur regularly, as do the problems in relation to drought. When we talk about the effects of climate change, we tend to focus on the bits of the world that we know best, but we also need to consider areas such as Mongolia. People tend to think that the warming of the world will be a good thing, but there is a real danger that Mongolia will suffer from further levels of drought, and that the intensity of the winters will get worse rather than better. Yet again, we have another reason why we need to tackle the important world issue of climate change.
The one issue that my hon. Friend did not refer to was the festival of Naadam, which runs from 11 to 13 July. It is a big, important festival that is specifically Mongolian. In this House, we rarely sit down and write the rules of football, but I gather that at last year’s discussions the Mongolians decided to change some of the categories and awards that are given for success in the three main parts of Naadam, which are archery, wrestling and horse racing—long-distance horse racing and not our polite version of going around a track once.
My hon. Friend also referred to the BBC and the reforms that have been introduced in Mongolia in relation to broadcasting. He is absolutely right; there are now some 300 different outlets, including broadcasting and newspapers. That is a very important part of ensuring that the 3 million people who live in Mongolia have not just the structures of democracy but the freedom of expression and association that go with them. Anything that we can do to help in that process, we stand ready to provide.
My hon. Friend also referred to the issue of the death penalty. I wholeheartedly congratulate the President on bringing forward his announcement on 14 January of a moratorium on the use of the death penalty and of its abolition from 2011. Such an announcement must have been of particular delight to him because he first brought forward a resolution on the matter—unsuccessfully—in 1991. To be able now to abolish the death penalty in Mongolia is a very dramatic personal achievement. He has invested a great deal of his political life into ensuring that all Mongolians can enjoy the same human rights as those elsewhere in the world, and it is a significant achievement. Those who have already been sentenced have had the death penalty commuted to 30 years’ imprisonment.
In 1993, we were the first country to open up diplomatic relations with Mongolia and we are very proud of that. We have a strong relationship with the country, thanks to our commercial links. Changes in the investment law will mean that not only will Rio Tinto be able to open the mine at Oyu Tolgoi for copper and gold, which could be worth something in the region of $300 billion, but there will be significant extra possibilities for a whole range of other British companies that would like to invest in Mongolia. There are many other countries in the world that would benefit from a similar change in the law. If Mexico, for example, went down the same route as Mongolia and changed its investment laws, it might be possible to extract some of the oil that is presently available in the Gulf, for the benefit of Mexicans.
We have had a large number of high-level visits recently. The Minister for Minerals and Energy visited in December and saw the Minister of State, Foreign and Commonwealth Office, my hon. Friend the Member for Bury, South (Mr. Lewis), who would normally be here to lead this debate, but is abroad. He also met Ministers in the Departments for Environment, Food and Rural Affairs, of Energy and Climate Change, and for Business, Innovation and Skills to discuss climate change and business developments. Last February, the Minister for Education, Culture and Science also visited the UK and, as I understand it, had particularly interesting discussions with colleagues in Cambridge. In January, the Duke of York had a bilateral meeting with the President of Mongolia at Davos where he was awarded an honour for his continued service to Mongolia. I am absolutely certain that if Mongolia was to give out any more awards, the next one would go to my hon. Friend the Member for Selby.
I am grateful to my hon. Friend for raising this debate today. We are conscious that we need to do more to reinforce our relationship with Mongolia. I am delighted with the recent formation of the UK-Mongolia chamber of commerce, of which my hon. Friend is vice-chair or vice-president. We look forward to working closely with it to ensure that the reciprocal interests between Mongolia and the United Kingdom are upheld, and I look forward to attending the presentation of the honour from Mongolia to my hon. Friend.
Question put and agreed to.