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Commons Chamber

Volume 511: debated on Wednesday 16 June 2010

House of Commons

Wednesday 16 June 2010

The House met at half-past Eleven o’clock

Prayers

[Mr Speaker in the Chair]

Business before Questions

ALLHALLOWS STAINING CHURCH BILL [LORDS]

Ordered,

That the promoters of the Allhallows Staining Church Bill [Lords], which was originally introduced in the House of Lords in Session 2009–10 on 25 January 2010, may have leave to proceed with the Bill in the current Session according to the provisions of Standing Order 188B (Revival of bills).—(The Second Deputy Chairman of Ways and Means.)

KENT COUNTY COUNCIL (FILMING ON HIGHWAYS) BILL [LORDS]

Ordered,

That the promoters of the Kent County Council (Filming on Highways) Bill [Lords], which was originally introduced in the House of Lords in Session 2009–10 on 25 January 2010, may have leave to proceed with the Bill in the current Session according to the provisions of Standing Order 188B (Revival of bills).—(The Second Deputy Chairman of Ways and Means.)

LONDON LOCAL AUTHORITIES BILL [LORDS]

Motion made, and Question proposed,

That the promoters of the London Local Authorities Bill [Lords], which was originally introduced in the House of Lords in Session 2007–08 on 22 January 2008, may have leave to proceed with the Bill in the current Session according to the provisions of Standing Order 188B (Revival of bills).—(The Second Deputy Chairman of Ways and Means.)

Oral Answers to Questions

Scotland

The Secretary of State was asked—

Electricity Generation

1. What recent discussions he has had with the Scottish Executive on future electricity generation in Scotland. (1835)

The first person I spoke to after my appointment was the First Minister. I have since had further discussions with him and Scottish Ministers, including on the subject of the fossil fuel levy and transmission charging. I remain committed to having constructive discussions with Scottish Ministers.

I welcome the Secretary of State and the Under-Secretary to their new posts. For the Under-Secretary it will be déjà vu, recalling his initial days as a Social Democratic party councillor sitting with the Liberals. On future nuclear electricity generation, can the Secretary of State explain to the House how his position and that of the Energy Secretary squares with the stance taken by the Under-Secretary?

I thank the hon. Gentleman for his warm welcome. I am sure that as a fellow south of Scotland MP, he is delighted to see the region so well represented in the Scotland Office.

On energy policy and particularly electricity supply, my right hon. Friend the Secretary of State for Energy and Climate Change and the Government have set out clearly in the coalition programme our commitment to ensuring that under our policy we tackle the twin issues of climate change and a secure, clean and affordable supply of energy. We have set out how we intend to go about that in respect of all forms of energy, and I am sure the hon. Gentleman will support us in developing that programme to ensure a successful and productive future for Britain’s energy and Scotland’s energy within it.

In those discussions with the First Minister, did my right hon. Friend take on board the great potential that Scotland has for marine renewable electricity generation? In that context, will he make a commitment to an early visit to the north-east of Scotland to see the sub-sea engineering skills that have been developed in the oil and gas industry, which have so much to offer that marine renewable industry?

I thank my hon. Friend for that question. Yes, indeed we discussed marine and other renewables—briefly, it must be said. There are many areas in which, under the new arrangement whereby we will engage constructively with one another under the respect agenda, we can work productively together. I have already had discussions with representatives of the oil and gas industry, who made the very point to me that my hon. Friend makes about the skills and how those may apply to marine renewables. I would be delighted to come to the north-east of Scotland to further my understanding of those issues and discuss them with him and others in due course.

Is the Secretary of State aware that Peterhead power station pays £29 million every year in transmission charges, whereas a similar facility in London would attract subsidy of about £3 million per annum, and that as a consequence Scottish and Southern Energy is planning up to 50 job losses at the Peterhead plant? Does he accept that the transmission charges regime is discriminatory and is discouraging investment in renewable energy in the very parts of Scotland best equipped to produce it? When he comes to the north-east of Scotland, as he has just pledged to do, will he agree to meet me and representatives of the management and work force at Peterhead power station to discuss the transmission charges regime and the future of the Peterhead plant?

As the hon. Lady knows, the transmission charging regime is primarily a matter for the National Grid. It is an issue that others have raised with me and Ofgem. I shall be keen to talk further about it with her and others from the Scottish Government. There have been representations from all sides of the House already—it has been a busy few days—and I look forward to taking forward those discussions in the most appropriate form in the future.

I welcome my right hon. Friend to his position. I am pleased to hear what he said about marine renewables, for which Scotland clearly has a massive potential, yet six years after it was set up, the marine renewables development fund still has £42 million lying unclaimed and unused because of the criteria attached to it. Will my right hon. Friend look into the matter and ensure that under this Government the support announced for green energy becomes reality?

I thank my hon. Friend for her kind welcome. I take on board her observations about the criteria that have been used, and I look forward to having further discussions with her and my right hon. Friend the Secretary of State for Energy and Climate Change.

Expenditure Reduction

2. What assessment he has made of the likely effect on economic growth in Scotland of the programme of expenditure reduction announced on 24 May 2010. (1836)

Dealing with the deficit and continuing to ensure the economic recovery is the most urgent issue we face. We must tackle the deficit to restore confidence in our economy and support the recovery.

Next week the Under-Secretary and his Liberal colleagues will be making massive cuts throughout the United Kingdom. When he has his first meeting with the First Minister of Scotland, could he explain why, when the Scottish Government have got a substantial increase in the amount of money they are receiving this year, they are overseeing thousands of cuts throughout Scotland? Will he do what I think he will do, which is to roll over whenever the First Minister wants him to?

I thank the hon. Gentleman for his, as usual, spirited question. I am sure he will be in agreement with the Scottish Parliament Finance Committee, which called on the Scottish Government to show far greater leadership by discussing in more open and realistic terms the impact that the cuts will have and the options that are available to deal with those cuts.

I warmly welcome the Minister to his new post.

It is really important for economic growth in remote and rural areas to ensure that businesses, particularly small businesses, in such areas have access to broadband. What will the Government be doing to ensure that broadband is rolled out to the whole country, including remote and rural parts of Scotland?

I thank the hon. Gentleman for his warm welcome. He will already know that the Secretary of State for Culture, Olympics, Media and Sport has set out his clear objective of turning Britain into a digital economy. The hon. Gentleman specified with clarity the needs of rural areas, for which the Secretary of State and I will continue to fight within Government.

I congratulate the new Ministers on taking office. However, I draw to the House’s attention the fact that they are huddled together in one section of the country; I hope that they will, at times, travel out to look at other parts of the country, including my own constituency.

What actions have been taken so far to ensure that any expenditure reduction does not result in a cut or a delay in the aircraft carriers upon which so much of the economy of the west of Scotland, and Scotland as a whole, depends?

I congratulate the hon. Gentleman on his elevation to the chairmanship of the Scottish Affairs Committee, on which I was pleased to serve with him. I am sure that he will bring his own distinct style to the Committee’s proceedings.

As the hon. Gentleman will know, this Government’s position on the aircraft carriers is, despite attempts to suggest otherwise, no different from that of the previous Government. There is to be a strategic defence review. The nuclear deterrent is excluded from that review, and it would be wrong to prejudge the review in any other way, other than to say that sea-borne defence is obviously very important to this country.

Commission on Scottish Devolution

3. What recent discussions he has had with the First Minister on implementation of the recommendations of the final report of the Commission on Scottish Devolution. (1837)

5. When he expects to bring forward proposals to implement the recommendations of the final report of the Commission on Scottish Devolution. (1839)

I have had a positive dialogue with the First Minister on a number of subjects, including the Government’s commitment to implementing the recommendations of the Commission on Scottish Devolution. On the question of timing, I have asked officials to work for the autumn introduction of a Bill to take forward legislative proposals, with non-legislative recommendations taken forward on a similar timetable.

Is my right hon. Friend aware of the growing concern at the disparity in public services between England and Scotland? If he wants to retain support for the Union in England, he will have to address this sooner rather than later. Will he set out a timetable to deal with these financial disparities now?

May I congratulate the hon. Gentleman on his new position as Chair of the Foreign Affairs Committee? I am sure that that will be a very interesting and challenging role for him to fulfil, and I wish him all the best with it.

The Commission on Scottish Devolution was set up with the remit of ensuring that it reviewed how devolution was working for Scotland, and particularly whether it was serving the interests of the people of Scotland. It was designed to increase the financial accountability of the Scottish Parliament, and thereby the Scottish Government, and also to secure the Union. On two of those three counts, I am sure that the hon. Gentleman would agree that it is a very well-focused commission. I look forward, later this year, to introducing the proposals that I have set out; we are determined to get on with that as quickly as possible.

I welcome the right hon. Gentleman to his new job, and I very much hope he is enjoying it. When he introduces the Bill in October, will the proposals include a measure either to abolish or to keep the Secretary of State for Scotland?

I congratulate the hon. Lady on her new position as Chair of the Select Committee on Work and Pensions and wish her all the best. Clearly, that will be an important part of Government policy and the Committee will be an important place for debate.

The Calman proposals envisage that at some point in future, a Secretary of State for Scotland will no longer be required. The hon. Lady knows that that was a part of Liberal Democrat policy for a long time, but right here and now the position is important, particularly in delivering that legislation and in focusing on the economy, so it holds.

Does the Secretary of State agree that the fiscal relationship between Scotland and the United Kingdom as a whole is more complex than just the Barnett formula or crude overall spending-per-head figures, and that great care should be taken in any review to consider all aspects of the fiscal relationships between all parts of the UK?

I agree with my hon. Friend, and that is perhaps a broader discussion we can have with some of our colleagues over the next little while. The Commission on Scottish Devolution looked exhaustively at fiscal relationships and the need to ensure not only greater financial accountability but the ongoing equity and stability of finances. All those strands together mean that we have a good package which, under the proposals in the Bill, will improve Scotland’s accountability and the devolution settlement.

I welcome the Secretary of State to his first Scotland Office questions. Of course, it is a very big day for him: it is his 16th day in office, which is exactly the length of time his predecessor survived in the job. I hope the rest of today goes well for him and that he is still here tomorrow. I have always got on very well with him. In fact, I was delighted, just before the election, to meet a delegation that he led, pleading for the extension of the future jobs fund in his constituency.

On the Calman commission, the right hon. Gentleman has previously argued for the abolition of the Scotland Office. When did he change his mind?

I thank the right hon. Gentleman for his typically generous welcome. I am happy to confirm that we were able to work very productively across party lines in the last Parliament, but may I just correct him on a matter of fact? When I went to see him with that delegation, the focus was on bank lending, on which the previous Government, frankly, did not have a good record. If he wishes me to remind him of the specific issues that were raised by those four companies, I would be happy to do so, but I shall not detain the House on that now.

On the position of Secretary of State for Scotland, I am not changing Liberal Democrat policy one bit—it is eventually to see the position abolished. However, in the course of getting the coalition agreement together, and recognising the exciting opportunity to get this settlement through and deliver improvements to Scottish devolution, I was very happy to support the continuation of the office, not least because the economic legacy of the previous Government, of whom he was a member, is something that we seriously need to tackle.

I again welcome the right hon. Gentleman to his position. It is clear that he is one of a minority in the Cabinet and may from time to time find it difficult to have his voice heard—he is, of course, one of the few non-millionaires sitting around the Cabinet table.

Turning to the success of the Calman commission, should there not be an independent commission to look into the abolition of the future jobs fund? Will the right hon. Gentleman support an independent commission, perhaps to be chaired by Sir Ken Calman, on the impact of the shameful decision of a gang of millionaires to turn their backs on the unemployed of Scotland?

Mr Speaker, you will not be surprised that I reject the right hon. Gentleman’s analysis of the situation. Like him, I care very deeply about unemployment, not least among young people, in Scotland and anywhere else in the United Kingdom. The reality, however, is that the future jobs fund was set up on an unsustainable basis. We need to ensure that we get a sustainable basis for the future of youth unemployment support. Those proposals will come forward in very close order. In the meantime, before he sets up too many scare stories, let us remember that existing bids will be honoured under the future jobs fund.

Order. We really do need a bit of order in the House. There are far too many private conversations taking place. It is a very unattractive spectacle so far as those outside the Chamber are concerned.

Firearms Legislation

4. If he will discuss with the Scottish Executive the merits of a review of firearms legislation applicable to Scotland. (1838)

All Members of this House share the sense of shock and disbelief at the tragic events that unfolded in Cumbria on 2 June. The hon. Gentleman must have felt this more than most given his close personal associations with Whitehaven, and I personally offer my condolences to him and to the families that have been so cruelly affected.

In Prime Minister’s questions on 3 June, the Prime Minister confirmed that the Association of Chief Police Officers would be supporting a peer review, to be conducted by national police experts, on firearms licensing, the police firearms response and firearms tactics. Firearms legislation is a reserved matter. As the Home Secretary told the House in her statement on 3 June, we will await the police report before we embark on and lead a debate about the gun laws across Great Britain.

I thank the Minister for his kind words and welcome him to his new post. The House may wish to note the support given by Scottish police forces to the Cumbria constabulary in the immediate aftermath of the incident. Will he agree to meet a cross-party delegation from Scotland once ACPO and its counterparts in England and Wales have made their submission to the Home Office, so that we can convey the very strong feelings of the people of Scotland about firearms legislation?

We are all proud of the efforts of officers from the Dumfries and Galloway police force and others in Scotland after the events in Cumbria. I will meet the hon. Gentleman’s delegation.

Perhaps I should declare an interest as the holder of a shotgun licence, for sporting purposes only.

If any question were to arise of separate legislation for Scotland, would the Minister undertake to consider the difference between the sufficiency of existing legislation and the extent to which it is properly enforced? Further, in view of the geographical position of his constituency and that of his colleagues, will he take account of the considerable cross-border traffic in sporting activities involving firearms?

I shall most certainly take into account the issues that the right hon. and learned Gentleman has raised. He will, however, be aware that the Calman commission has recommended that the regulation of air guns be transferred to the responsibility of the Scottish Parliament, and the Government are committed to doing that in the Bill that we will bring forward in the autumn.

Economic Environment

7. What steps he plans to take to ensure a stable economic environment for businesses in Scotland. (1841)

Tackling the budget deficit and creating a fairer and more balanced economy will ensure a stable economic environment for businesses in Scotland.

Under the last Government, the Scotland Office’s attempts to help to maintain a strong economic environment in Scotland had something of a credibility problem. What is my right hon. Friend doing to dispel the myth promoted by his predecessors that the level of Government borrowing is somehow unconnected to the level of interest rates and taxation?

The hon. Lady makes an important point. We must not lose sight of the fact that the deficit left behind by the previous Government was £155,000 million. We have to establish our credibility not just with the people of Britain, but with the international financial markets. If we do not, we will see higher interest charges that will bear down on the level of public services that we can afford and affect the pockets of everyone in Scotland, both businesses and individuals. We have to tackle that urgently, and I am determined that we will do so.

I am sure the Secretary of State would agree that the crisis in the financial sector was especially detrimental to the economic stability of Scotland. Will he now confirm that the Scotland Office will no longer issue press releases saying that it is taking advice from Sir Fred Goodwin, and will take advice from a more representative group of Scottish financiers?

The hon. Gentleman is correct to highlight the important place that financial institutions play in the Scottish and United Kingdom economy. I assure him that I will be taking as broad a range of advice on these subjects as necessary. Indeed, I am already making early contact with some of the largest financial institutions in the country, including RBS and HBOS.

I welcome the Secretary of State to his new job. On a stable economic environment, one of the key issues is business cost stability, and the area that businesses find most difficult is that of fuel and haulage costs. Can he confirm, therefore, that it remains the policy of at least the Conservative side of the coalition to introduce a fair fuel stabiliser or fuel duty regulator to smooth out the spikes in the cost of fuel and bring some cost stability to haulage for businesses throughout Scotland?

I thank the hon. Gentleman for his opening remarks. He will understand, I am sure, that I am not in a position to pre-empt, and have no intention of pre-empting, the Chancellor’s statement introducing the Budget next week. The hon. Gentleman’s representations, and those of others, are among the many being received by the Treasury and the Scotland Office, and I am sure that he will pay attention when the Budget is announced next week.

I welcome both right hon. Gentlemen to their new positions in the Scotland Office. Given the unique position of the Scottish media and the Government’s disastrous cancellation of the tendering process for provision of local news on Scottish television, despite the winners having already been announced, what discussions has the Secretary of State had with the Secretary of State for Culture, Olympics, Media and Sport about the threat now posed to news on STV?

I thank the hon. Lady for her initial comments. An independently financed news consortium was another idea that on closer scrutiny did not have the financial backing to make it sustainable, either through the pilot stage or in a more general process. I have spoken to members of the consortium, and my right hon. Friend the Under-Secretary has spoken to representatives from STV. We will work with them and others in Scotland to ensure that we get the right local news across the country.

Manufacturing

8. What recent discussions he has had with ministerial colleagues on the support available for manufacturing in Scotland. (1842)

My right hon. Friend the Secretary of State has made it a priority to speak to a number of key individuals in the business sector in Scotland to get an update on the main issues affecting them.

The Minister will be aware of the Dyson report commissioned by the Conservative party in March. It contained many important ideas, such as building esteem for science, engineering, and research and development, and investing in high-tech start-ups. It also highlighted the importance of projects such as those for nuclear and offshore wind power, and, from a Scottish perspective, high-speed rail. Will the coalition Government be implementing any of those proposals, and if so, when?

The hon. Gentleman was a strong supporter of Lord Myners and will know therefore that the latter said:

“The Government cannot create jobs. The Government can create an environment that is conducive to the creation of jobs”.—[Official Report, House of Lords, 8 June 2010; Vol. 719, c. 625.]

That is the priority of this coalition Government.

Energy

9. What recent discussions he has had with ministerial colleagues on Scotland’s future energy needs. (1843)

My colleagues and I are fully committed to ensuring that Scotland is able to continue to play an important role in meeting the UK’s aspirations for climate change and security of supply.

Can my right hon. Friend give us an assurance that Scotland’s energy capacity will remain at the forefront of global renewable advances?

My constituency has three of the five biggest users of energy. Does the Secretary of State agree that the only solution is nuclear power?

As I said earlier, the Government have set out a clear policy on their energy strategy, and arrangements are in place to ensure that we have diverse sources of supply and security for the future.

Economic Inactivity

10. What recent discussions he has had with ministerial colleagues on measures to reduce the level of economic inactivity in Scotland. (1844)

The Government have already announced their plans for a radical reform of the welfare-to-work system and the implementation of the programme, which among other things will tackle the issue of economic inactivity.

The Minister will have noted the comments of Lord Myners, who said that it was wrong for the previous Government to create jobs themselves, rather than creating the conditions for business to create those jobs. Will he encourage the Scottish trade unions to take the same attitude?

I am sure that trade unions in Scotland will share the Chancellor’s view that we are all in this together.

May I, too, welcome the Secretary of State to his new post? I am sure he is aware that his predecessor in the previous Government visited my constituency on a number of occasions to see at first hand the importance of the computer games industry in Dundee. The former Chancellor gave a commitment in his Budget to tax breaks for that industry. Can the Minister guarantee that the Government of whom he is now a member will honour that commitment?

Order. If the Minister could hear that, he has very good hearing. May I make an appeal to the House? I know that it is in a state of eager anticipation of Prime Minister’s questions, but it is very unfair to the Member on his or her feet, and to the Minister. Let us have a bit of order. That is what the public expect.

Like the Secretary of State, I do not want to pre-empt next week’s Budget, but I am sure that the Chancellor will have heard the hon. Gentleman’s representations.

Prime Minister

The Prime Minister was asked—

Engagements

I am sure that the whole House will wish to join me in paying tribute to the Royal Marine of 40 Commando who died at the Queen Elizabeth hospital in Birmingham on Monday from wounds sustained in Afghanistan, and to the two soldiers from the 1st Battalion the Duke of Lancaster’s Regiment who died yesterday. We should send our sincere condolences to their families and their friends. We should also pay tribute to the exceptional work of our armed forces serving in Afghanistan and, perhaps today in particular, to the highly skilled doctors and nurses who work alongside them, as well as to those who treat the injured personnel back in the UK.

This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall have further such meetings later today.

Does my right hon. Friend accept that the millions of people who voted Conservative at the last election in order to make him Prime Minister did not do so in order to see a reduction in the number of people sent to prison or to see those criminals given softer sentences? If he really wants to reduce the budget of the Prison Service, may I suggest that he starts by taking Sky TV away from the 4,000 prisoners who enjoy that luxury in their cells?

May I thank my hon. Friend for that helpful suggestion? He knows that I share his views about the need for a tough response to crime. The challenge is going to be delivering that tough response at a time when the last Government left us absolutely no money. What I would say to him is that we have to address the failures in the system: the fact that half of all prisoners are on drugs; the fact that more than one in 10 are foreign nationals who should not be here in the first place; and the fact that 40% commit another crime within one year of leaving prison. That is the record of failure that we have inherited, and it is the record of failure that we have to reform.

I join the Prime Minister in paying tribute to the Royal Marine of 40 Commando who died on Monday and to the two soldiers from the 1st Battalion the Duke of Lancaster’s Regiment who died yesterday. We honour their sacrifice, and we remember all our servicemen and women who are fighting so bravely for our country.

Although this morning saw the unemployment claimant count fall, unemployment is still too high. Behind the figures are real people and real concerns. Can the Prime Minister promise that none of the policies that he will put in his Budget next week will put more people out of work?

First, I agree with the right hon. and learned Lady that any rise in unemployment is a tragedy, not least for those people desperately looking for work who want to put food on the table for their families. The figures this morning give a mixed picture. On the one hand, the claimant count is down; on the other hand, the International Labour Organisation measure of unemployment is up by 23,000. What I can say to her is that we will bring in our Work programme as soon as we can, which will be the biggest, boldest scheme for getting people back to work, and everything that will be—[Interruption.] Hon. Members should remember why we have had record unemployment in this country: because of the record of failure that we inherited. What I can tell the right hon. and learned Lady is that everything that we do in the forthcoming Budget will be about giving this country a strong economy with sustainable public finances and clearing up the mess left by the person sitting next to her, the right hon. Member for Edinburgh South West (Mr Darling).

In fact, ILO unemployment is down on last month, and the Prime Minister should welcome that. He has criticised our plans, but the Office for Budget Responsibility says this week that, under Labour’s plans, unemployment is set to fall. Will he promise that he will not do anything in his Budget next week that will cause unemployment to rise? We are talking about his policies in his Budget.

First, the right hon. and learned Lady is just wrong about the figures. The ILO figures are up, and the claimant count is down—

Yes, they are; if she looks at the figures, she will discover that. She asked about the Budget. I have to say that I am still waiting for the Budget submission from the Labour party—[Interruption.] Let me tell hon. Members why. Before the last election, Labour set out £50 billion of spending reductions, including £18 billion of reductions in capital spending, but it did not set out where one penny piece of that money was coming from. So, while Labour Members are looking forward to the Budget next week and asking what we are going to do, perhaps they could have the decency to tell us what they would have done.

The Prime Minister did not listen to what I said about ILO unemployment, which is that it is down on last month, and he did not answer the question either. He has already cut the future jobs fund, and he will not guarantee to drop policies that would push unemployment up. He talks about the deficit, but how does putting more people on the dole help to get the deficit down?

Perhaps the right hon. and learned Lady should consider this statement about the importance of sorting out the budget deficit—[Interruption.] Hon. Members ought to listen to this:

“Public finances must be sustainable…If they are not, the poor, the elderly, and those on fixed incomes who depend on public services will suffer most.”—[Official Report, 2 July 1997; Vol. 315, c. 303.]

Who said that? It was the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), when he used to talk some sense, in the old days.

As the Prime Minister is talking about new politics and transparency, will he confirm that the Office for Budget Responsibility has forecast that, under the plans that we put in place, unemployment and borrowing will be lower than we forecast in our Budget, not only this year but next year and the year after? Will he confirm that, and will he welcome it?

First, should the right hon. and learned Lady not welcome the fact that these things are now independently determined, rather than fiddled in the Treasury? What the Office for Budget Responsibility shows is that the structural deficit is going to be £12 billion higher, and that the growth forecast that the Chancellor of the Exchequer produced at the time of the Budget was a complete fiction.

I can answer the Prime Minister’s question, although, to be fair, he is supposed to be answering mine. Yes, I do support the OBR, but he will not say whether he welcomes the forecast that I set out earlier. It is clear what he is doing: he is talking down the economy and the public finances in order to soften up the public for the cuts that he wants to make. Does he not realise that, in doing that, he is also undermining business confidence? How can that be right?

What the right hon. and learned Lady and other Labour Members need to remember is this: never mind talking the economy down, they did the economy down. They left this country with a £155 billion deficit—the biggest deficit in our peacetime history. They are the ones who let the banks go rip. They told us that they had abolished boom and bust, yet they gave us the biggest boom and the biggest bust. They were the ones who told us we were going to lead the world out of recession; our recession was longer and deeper than others. They have not told us about one single penny of the £50 billion that they were going to cut—not one penny. Do you know where they ought to start? Why not start with an apology?

If the Prime Minister thought that our spending plans were so bad, why did he back them right up until the end of 2008, praising them as “tough”? One minute he is praising them, then he is calling them reckless. This is not so much magic numbers as the magic roundabout that he has been on. We all agree that the deficit needs to come down, but will he promise that in the Budget next week he will not hit the poorest and he will not throw people out of work? Does he agree with us that unemployment is never a price worth paying?

The figures were wrong, and the jokes were not much good either. Never mind the magic roundabout, what we are all enjoying on the Government Benches is the Labour leadership election, although it is by day beginning to look more like a Star Trek convention—beam me up! What the right hon. and learned Lady has to answer is this: before the election, her Government set out £50 billion of cuts, but not a single penny was aligned to a single programme—not one pence of the £18 billion they were cutting from capital spending was aligned to one single bit of capital expenditure. Before she starts challenging us about cuts, they should first of all apologise for the mess they have left; second of all, tell us where the cuts were going to come to under their Government; and third of all, recognise that the responsible party, in coalition, is dealing with the deficit and the mess that they left behind.

Despite the huge satisfaction felt in my constituency at the Government’s decision not to proceed with the second runway at Stansted airport, is my right hon. Friend aware that blight and uncertainty still overhang the communities closest to the airport? Will he look to see if other measures can be taken to provide them with longer-term assurance?

First, may I say what a pleasure it is to see my right hon. Friend being able to speak about these issues for the first time in many years. I am sure he will do so often and with great power from the Back Benches. He is right to say that we are very clear in the coalition agreement about Stansted airport. I hope that removes some of the blight and uncertainty; I will certainly bear in mind what he had to say.

Q2. During the general election, the Conservative party distanced itself from remarks made by the right hon. and learned Member for Rushcliffe (Mr Clarke) when he spoke about Government aid and said that it had nothing to do with Vauxhall. Will the Prime Minister take this opportunity to remove the uncertainty not only for Vauxhall but for Sheffield Forgemasters and all the other companies that are waiting for support in properly constructed agreements? (2458)

Everyone wants to see Vauxhall succeed; it is a very important company, employing many people in this country, not least in the hon. Gentleman’s own constituency. As he knows, a £270 million Government loan guarantee to support GM Europe was announced on 12 March 2010. We are reviewing commitments made since 1 January 2010. Projects that are good value for money and consistent with the Government’s priorities will go ahead. [Interruption.] Let me say to Labour Members who are shouting that we have to be clear that there were spending announcements made by the previous Government before the election that need to be reviewed. To take just one example of one scheme operated by Lord Mandelson’s Department—the so-called strategic investment fund: when we looked at the money provided for specific projects, we found that over two thirds of the constituencies involved were marginal Labour seats. So it is right to examine these, but I say to the hon. Gentleman that proper grants properly made for proper reasons will go ahead; fiddled grants for political reasons should not.

The 16-year-old son of my constituent, Lorraine Fraser, died after a vicious multiple knife attack incident six years ago. One of the murderers is trying to use the law to reduce his tariff after serving only five years, and another avoided conviction altogether by fleeing the country. Will the Prime Minister agree to look into this case on behalf of my constituent and meet her to hear about her plight and about the excellent work she is doing to defeat knife crime in this country?

I hear what my hon. Friend says, and I would be happy to meet him and his constituent. We need to take knife crimes in this country incredibly seriously: there has been a huge increase in the carrying of knives, and we must put a stop to that. On lenient sentences, I am not convinced that the power introduced some 20 years ago to allow the Attorney-General to appeal against lenient sentences is used enough. We need to look at that again and ensure that in cases in which people feel that a lenient sentence has been put in place, there is an opportunity to increase it.

Q3. The defence contracts for Astute class submarines signed in March were long negotiated and are essential for our security and for thousands of manufacturing jobs in my constituency and across the UK. Will the Prime Minister honour them? (2459)

First, may I welcome the hon. Gentleman and say that I know how much his constituency depends on the work going on in the submarine yards in Barrow, which I have visited and where I have seen the building of Astute class submarines and the submarines carrying our nuclear deterrent? I know how important that is, but a defence review is under way, and it must include the Astute class submarines—[Interruption]. To those Labour Members who are calling out, let me say that the Labour party was itself committed to a defence review. We asked whether it included everything—even aircraft carriers—and the answer came back yes. It is no good Labour Members bickering now that they are in opposition; it is right to have a defence review and that we consider such matters. I know how important submarine building is to Barrow and to the defence of the nation.

Q4. Labour Members might revere regional development agencies, but is my right hon. Friend aware of the considerable amount of money wasted by some RDAs, especially on unnecessary expenditure on entertainment? Will he confirm that, to get better value for taxpayers’ money, he will take action on RDAs? (2460)

My hon. Friend is right, and I know that a lot of argument and discussion is going on about regional development agencies. The figures about how much money has been wasted, however, should be more widely shared. The East Midlands Development Agency paid more than £300,000 for offices in north America. The Northwest Development Agency shared an office in Newport Beach. One NorthEast spent money on offices in China, Japan, Korea and Australia. The chairman of the South East England Development Agency spent £51,000 on taxis and executive cars in one year alone. We need proper control of costs and spending—there has not been any for the past 13 years, and there sure is going to be under this Government.

May I tell the Prime Minister about my constituent, Nikki Blunden, who is 37, has a son aged four and is dying of cancer. Her consultant wants to prescribe the new drug Lapatinib, which could prolong her life. Last week, the National Institute for Health and Clinical Excellence deemed the treatment not to be cost-effective. Will the Prime Minister stick to his promise not to hide behind NICE, and ensure that the primary care trust funds forthwith this NHS treatment? Nikki Blunden cannot wait; I ask the Prime Minister to act.

I am grateful to the right hon. Lady for asking that question. My heart goes out to her constituent, Nikki Blunden. We want to see these cancer drugs get to patients more quickly, without the bureaucratic wheels taking so long to turn. That is why we are establishing the cancer drugs fund, and I will discuss with my right hon. Friend the Secretary of State for Health how quickly that can be done. If possible, I want it to be done this year rather than next year. If it can be done, it will be, and if drugs can be got to people like the right hon. Lady’s constituent—we all have constituents in such a position—I will do everything that I can to make that happen.

Q5. The Prime Minister knows that I am always and everywhere for referendums. However, will he tell the House why he is planning a referendum on the alternative vote, which was not in the manifesto of either coalition party, but not a referendum on European integration, which all three main parties were recently promising? (2461)

What I can promise my hon. Friend is that we will have such legislation on the referendum lock, so that it will not be possible in future for a British Government to pass powers from Westminster to Brussels without asking the British people first. That is absolutely right. The referendum on the alternative vote was part of the coalition agreement, and he will be free to campaign on whatever side of the referendum he wants. However, the referendum was part of the agreement that put together this Government, who, I believe, are rolling up their sleeves and sorting out the country’s problems.

Q6. About 1.5 million people suffer from involuntary tranquilliser addiction as a result of medical prescribing, and it completely ruins their lives. Will the Government consider investing in cost-effective, supportive, long-term withdrawal treatment programmes to enable them to lead normal lives, come off benefits, and go back to work? (2462)

Let me praise the hon. Gentleman for his interest in the work that is being done. I know that he is chairman of the all-party group that deals with this extremely difficult issue. The last Government set up a review of addiction to prescription and over-the-counter medicines. We are waiting for the report to be published, and will study it carefully when it is.

Let me make two points. First, I think that there is a problem in our national health service more generally, in that we spend too much time treating the symptoms rather than necessarily dealing with the causes. We could probably reduce the level of painkillers and tranquillisers if we did more—through physiotherapy and other therapies—to deal with the problem in the first place. Secondly, all addictions need proper attention, and proper treatment and therapy, to rid people of their addictions, whatever they happen to be. I am sure that the report will mention that.

Q7. Will the Prime Minister respond positively to the uplands inquiry by the Commission for Rural Communities—which reveals the great value and potential of magnificent hill areas such as ours in Northumberland—by stressing the need to ensure that hill farmers have an adequate income, and that there are rented homes, apprenticeships, and services such as broadband to enable young people to stay in those areas? (2463)

I will certainly look carefully at the report. I have every sympathy with what the right hon. Gentleman has said. Upland landscape is as beautiful as it is because it has been farmed for centuries, and we need to recognise the connection between beautiful landscape and active farming. We want our countryside to be a living, working countryside, not a museum.

The right hon. Gentleman mentioned housing. We must also recognise that the top-down target system was not working. Our plans in the coalition agreement to increase the ability of communities, including villages, to decide whether they want to put in extra homes is a good way of helping to keep the pub, the post office, and the local shops and schools open, and I hope we can proceed with that work.

I am sure that, even as we speak, the Prime Minister and his team are seeking to make savings and possibly cuts, hopefully without affecting front-line services. May I commend to him one way of saving £7.2 million a day? Bring the troops home from Afghanistan.

I have to say to the hon. Gentleman that I just do not agree with him. I think that if we brought the troops home precipitately—if we did it straight away—not only would we let down our NATO allies, not only would we let down the Afghan people, but we would create circumstances in which the Taliban would return, and the danger of terrorist training camps in Afghanistan would come straight back.

I know that what we are doing is dangerous and difficult, and that it is costing us dearly. I am, of course, acutely aware of that. However, I think that we must put our effort and our shoulder behind the wheel of the Obama-McChrystal plan to ensure that it works as well as it can, and accompany that military surge with a political surge. We need to seek a political settlement to get Taliban fighters to put down their arms and reintegrate into Afghan society. That is the way in which to create some stability in Afghanistan—never a perfect democracy, but some stability—in which event our troops can come home with their heads held high.

Q8. Will the Prime Minister join me in paying tribute to all who work for the health service, but will he also examine the circumstances in which patients are often discharged from hospital only to be readmitted very soon afterwards? The assessment for continuous health care has become something of a postcode lottery. Will the Prime Minister examine that as well, to ensure that such care is paid for on the basis of clinical need? (2464)

Thank you, Mr. Speaker; the one answer that I will give is this. I know that there is a big problem with hospitals discharging patients, sometimes to meet their own targets—including financial targets—without thinking of the longer-term consequences if those patients have to return. That is why my right hon. Friend the Secretary of State for Health has announced that hospitals will be responsible for patients not just during their treatment but for the 30 days following their discharge, so that we can better link health and social care to ensure that people leave hospital at the right time, in the right way, and for good.

Q9. Siemens is proposing to close Trench UK in my constituency and to transfer its production to France and Germany, despite the fact that Trench UK has a full order book, healthy profits and is exporting all over the world. It is a first-class product. Would the Prime Minister meet me so that we can discuss that illogical decision which could lose the UK a jewel in manufacturing? (2465)

I would certainly meet the hon. Gentleman. I know how frustrating this can be; Siemens is a big investor in my constituency, too. The jobs that he is speaking about are exactly the sort of high-tech, high-skill jobs that we want to keep in this country. Therefore, I will certainly meet him, and we will do what we can in the Budget to ensure that we have in this country a tax regime, support for apprenticeships and support for training that will want to make businesses locate, stay and invest in Britain.

Q10. Every household in Gravesham has inherited a sort of second mortgage of debt. Can the Prime Minister give us some idea of the level of debt per household across the country? (2466)

My hon. Friend is entirely right that every single person in this country is now carrying £22,000 of debt because of the mess that the last Labour Government left us. The fact is this: if we do not do something about it, by the end of this Parliament, we will be paying £70 billion in debt interest. That is more than we spend on schools and more than we spend on defence. It would be a tragic waste of money. That is why, however painful it is, we have to get to grips with the deficit that we were left by the last Labour Government.

Can the Prime Minister explain why the changes to local government funding last week mean that, in Witney in Oxfordshire, people will see an uplift of 1.7%, while children in Brent will see a loss from their education budget of £1.88 million? Can it have anything to do with last week’s statement by the Minister with responsibility for local government, the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), who said:

“Those in greatest need ultimately bear the burden of paying off the debt”?—[Official Report, 10 June 2010; Vol. 511, c. 450.]

I am sure that the hon. Gentleman will welcome the fact that we are going to introduce the pupil premium, so that the money follows our country’s poorest children to the schools that they go to. That is what is going to happen. That is what he should support and I will look forward to him supporting it when it comes.

Q11. As the Prime Minister strives to restore sanity to our national finances, will he give a word of reassurance that the Budget next week will seek to encourage and support those who save and provide for their own future? (2467)

My hon. Friend is entirely right. We have got to make sure that, in what we do, we help those who try to do the right thing, to save and to look after themselves and their families. The first thing that we have to do is keep control of inflation, keep the Bank of England independent and ensure that the Budget supports the tough approach on inflation, which is the worst thing for savers. The second thing that we can do is ensure that we do not discourage saving by having so many people reliant on a means test. That is why we are committed to linking the state pension back to earnings.

There are no easy ways of reducing the deficit. Some people believe that it can be got all from one area or all from another. I am afraid that it is going to be a difficult task. We will do everything we can to take the whole country with us. We will need to have a responsible debate about how we do it, but it has to be done for the good of our country.

Q15. In the past week, I have been contacted by students and parents in my constituency who are devastated to have been told that geography and politics courses at Liverpool John Moores university have been cancelled from September, giving them less than three months to make alternative arrangements. What assurances can the Prime Minister give my constituents that cuts to higher education will not affect students? (2471)

I welcome the hon. Lady to her place. The assurance I can give her is that we are going to increase the number of university places by 10,000 in the coming year, because we want to see higher education expand. The other assurance I can give her is that we are committed to the Browne review that the previous Government set up, on an all-party basis, to look at how we can ensure that higher education is affordable both for the young people going into higher education and for our country as a whole.

Q12. Can I praise the Prime Minister for his staunch support of the NHS and its budget, and use this opportunity to invite him to Malvern to open, some time at his convenience this autumn, our brand-new community hospital? (2468)

Order. It is not against the rules of the House for a Government Back Bencher to support the Government; it is not that odd.

Mr Speaker, we all remember you doing that very well. My hon. Friend’s invitation is a kind one. The commitment that we have made to maintain health spending is very important. I want to see community hospitals and district general hospitals thrive under this Government.

May I invite the Prime Minister to take a trip with me next season from Seven Sisters tube station up to the Spurs ground at White Hart Lane? On that journey he will see a proliferation of betting shops. Will he give local authorities the power to deal with the saturation of betting shops, which are preying on working and poor people?

That is another great invitation this afternoon. I say to the right hon. Gentleman that there is a balance to strike. Some of the deregulation that took place was necessary in order not to have over-regulation of these sectors, but yes I think that there is a case for allowing local authorities greater latitude to decide on some of these things. We made that point in opposition, particularly on the issue of lap-dancing clubs, over which local authorities should be given more power and influence. The issue now seems to be being taken up more broadly by Labour Members.

Financial Services Regulation

(Urgent Question): To ask the Chancellor of the Exchequer to set out his proposals for the future of financial services regulation and for the role of the Bank of England.

In 1997, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), as Chancellor, established, without any consultation and without telling Parliament, the tripartite system to regulate the financial system. In doing so, he removed from the Bank of England its historical role in monitoring overall levels of debt in the economy. It is well known that the late Eddie George was deeply unhappy with that decision. It is also well known that the tripartite system that the right hon. Gentleman created, and that his successor as Chancellor sustained, failed spectacularly in its mission to ensure stability in the financial markets, and the failure of certain banks cost the taxpayer a vast amount of money. Indeed, British taxpayers funded the largest bank bail-out in the world, and it was only in Britain that depositors queued in the high street to get their money back.

The British people rightly ask how this new coalition Government will learn from the mistakes of their predecessor. The coalition agreement commits us to reforming the regulatory system for financial services in order to avoid a repeat of the financial crisis, and that is precisely what we will do. First, on the structure of regulation, our plan is to hand over to the Bank of England the responsibility for macro-prudential supervision, which should never have been taken away from it. The tools for macro-prudential supervision are the subject of ongoing international discussions. We are playing a full part in that process at European and G20 level, along with the Governor of the Bank and the chairman of the Financial Services Authority. It is already clear that the tools will include capital requirements that work against the cycle, rather than with it.

The coalition Government are also committed to handing to the Bank of England responsibility for the oversight of micro-prudential regulation. It is clear that the central bank needs to have a deeper understanding of what is going on in individual firms. My hon. Friend the Financial Secretary to the Treasury will give further details of the institutional arrangements in a parliamentary statement tomorrow. It is important that the institutions involved correctly follow their own internal procedures before those arrangements are made public, and the Governor of the Bank will be talking to the court of the Bank this afternoon.

The coalition Government will also deliver on their promise to establish an independent commission on banking. The previous Government would brook no debate about the future structure of the banks, the relationship between retail and investment banking, and the questions of how best to protect taxpayers and how to ensure greater competition in an industry that they actively sought to consolidate. The previous Prime Minister did not want anyone to challenge his opinions, but we cannot ignore this debate about the future of banking—indeed, I want Britain to lead it. We will therefore establish the commission on banking to investigate those issues. It will be chaired by Sir John Vickers, who is a former chief economist at the Bank of England, was one of the first members of the Monetary Policy Committee and is a former chairman of the Office of Fair Trading. He is a man of unquestioned experience, integrity and independence who approaches this issue with an open mind. I am today placing in the Libraries of both Houses the terms of reference and we await the conclusions of the commission.

Unlike the last Government, this Government are prepared to confront the difficult challenges of the regulation and structure of the banks. We are prepared to learn the lessons of what went wrong, even if they were not.

I am grateful to the Chancellor for that answer, and I wonder whether I might press him on a number of points. First, he says that the Bank of England will have responsibility for macro-prudential supervision, but he also says that the debate as to what macro-prudential supervision consists of is still up for grabs as it is still being debated internationally. When does he expect those discussions to be concluded?

The Chancellor also says that the Bank of England will have some responsibility for micro-supervision. It has been suggested in some quarters, for example, that the Bank of England, rather than the FSA, might have dealt with whether the Royal Bank of Scotland could take over ABN AMRO. Does he not realise that far from clarifying the situation, this is adding another complication? The risk is that we will have a dog’s breakfast of a regulatory system in which no one knows who is making decisions and no one knows who is in charge. Does he not accept that at a time when there is still a great deal of uncertainty in the banking world and a great deal of turbulence, the last thing that we want is a situation in which it is not clear which organisation is responsible for precisely which activity? If both the Bank and the FSA are responsible for regulating institutions, that is bound to lead to confusion and inevitably runs the risk that mistakes will be made.

Will the Chancellor also tell us whether, in relation to the Bank of England’s responsibility, he is planning any reform to the financial stability committee or any internal reforms so that a committee will advise the Governor? If that is the case, will the Governor be making those decisions or will a committee do so, perhaps on a wider basis? Will he also tell us whether or not Lord Turner, the chairman of the FSA, agrees with his proposals and whether he is now prepared to serve, in effect, as a deputy under the Governor of the Bank of England?

In relation to the proposal to break up banks, will the Chancellor explain how Northern Rock, which was a very simple retail bank on the face of it, would have been saved from collapse simply by virtue of the fact that it was a retail bank and not an investment bank? Will he also explain how his proposal would have made any difference to Lehman Brothers, which did not take a single retail deposit but was a complex investment bank that collapsed with calamitous consequences? Will he tell us, too, whether the commission that he proposes to set up will consider the break-up of British banks such as Barclays or HSBC? Will he tell us how the uncertainty that will inevitably be caused by the work of the commission will help to rebuild the financial stability that we want? At a time when there is that instability, does he not think that it would be far better to keep the FSA working on what it is supposed to be doing—that is, the day-to-day supervision and regulation—bearing in mind that some small minor decisions are sometimes very important, especially if they are the wrong ones?

Is it not the case that the proposal was made in the first place because the right hon. Gentleman was looking before the election for a dividing line between him and the then Government? What we have today is something that has been cobbled together, that is ill thought out, that will add to uncertainty and that runs a grave risk that further mistakes will be made with catastrophic consequences in the future.

The dividing line is between a Government who want to learn the lessons of what went wrong and an Opposition who have no intention of learning from all the mistakes that they made in office. I find that striking.

The right hon. Gentleman talks about a dog’s breakfast. What about the dog’s breakfast of the tripartite system that allowed the Royal Bank of Scotland to fail and that allowed Northern Rock to fail? He was the Chancellor at the time and he completely failed to see the growing levels of debt in the economy. He and the institutions that were created by his predecessor completely failed to see what had gone wrong in individual institutions. The thing I find extraordinary—perhaps Opposition Members will reflect on this—is that their shadow Chancellor is setting them against reform of the regulation of banks and reform of the structure of the banking industry. That is what he has just done. What we are going to do is to have an open debate about the structure of banks. That debate is happening in the United States of America, in the newspapers of this country and in parliamentary debates here. The only place it was not happening was in the last Government under his chancellorship.

We think that the sensible approach, in order to resolve these issues—[Hon. Members: “Answer the question.”] I am answering the questions—every single one of them. We think that the sensible approach is to set up an independent commission under Sir John Vickers to examine these issues and to take into account the different, strongly held views. For example, John McFall, who was the Chair of the Treasury Committee in the last Parliament, has in recent days put his name to a report that calls for structural reform of the banks. The shadow Chancellor might want to ignore his views, but I want to listen to them and to take them on board as part of an independent commission, and that is exactly what we are going to do.

When it comes to the international context, I think that all of that will enable us to lead the debate. Of course, we have to agree this at an international level, where some of the macro-prudential tools are. As the shadow Chancellor knows, there is a debate taking place in the G20. We hope, in the Seoul summit in November, to have come to firm conclusions on the capital, liquidity and leverage requirements. When we have come to those agreements and when we have international agreement on what those standards should be, we will need a regulatory system here, at home, that is fit for purpose, so that they can be implemented.

As one of those who strongly opposed the introduction of the tripartite regulation of our financial institutions as soon as it was announced in 1997, may I congratulate the Chancellor on getting rid of the FSA, which has been a major contributor to the disasters in the economic sphere in recent years and which was regarded in the City, throughout the whole of its lifetime, as a thoroughly inefficient organisation?

To be fair to the FSA, it has been rather candid about the mistakes that were made when the shadow Chancellor was the Chancellor and when the former Prime Minister was the Chancellor. We have to learn from those mistakes. As I have told the House, we will set out the details of the institutional arrangements in a parliamentary statement tomorrow.

The Chancellor talks about breaking up the retail and investment banks, but the immediate challenge for the Government is the future of the nationalised banks. Will he consider turning the failed banks into mutuals that focus on long-term returns and not on short-term profits?

We need to take some time before coming to decisions on how to dispose of the bank shares that we own in the Royal Bank of Scotland and Lloyds, and the banks we own, such as Northern Rock, not least because at the moment the British taxpayer would make a substantial loss on many of those share purchases. However, we are prepared to consider lots of options. Sir John Vickers’ commission is going to look at competition in the banking industry. It has become incredibly consolidated in the past couple of years and that is not necessarily the best thing for bank customers, as many of us will know from representing businesses that cannot get access to credit. It is sensible to look at what Sir John Vickers and his commission have to say about this.

Why was so much of this announced on this morning’s “Today” programme rather than here? Who will chair the financial stability committee in a crisis? Will it be, as it should be, the Chancellor of the Exchequer?

There has been quite a lot of speculation, and as we will see in the coming days not all of it has been very accurate. I cannot account for the speculation, because it certainly has not been coming from my office. I am discovering that it is a feature of being in government that lots of people anticipate one’s views before one expresses them.

I congratulate my hon. Friend on becoming Chair of the Treasury Committee and I hope to have the engagement of his Committee in this important debate over the next year. When it comes to the commitment of taxpayers’ money, the elected Government, who are accountable to the House, will remain in charge.

The Chancellor will know that the FSA was created following the closure of BCCI on 5 July 1991, and the publication of the Bingham report. Nineteen years later, some of my constituents are still waiting for all their money back. I think the Chancellor knows that I am about to ask the same question I have asked every Treasury Minister over the last 19 years, so in the spirit of open government, will he do something that the former Chancellor would not do and please publish the confidential parts of the Bingham report so that we can have a proper debate about the issue?

I think everyone would acknowledge the work the right hon. Gentleman has done on the issue, over many years, on behalf of his constituents and other people who were so badly affected by that scandal. I was of course present at the exchange between him and the shadow Chancellor about the publication of the secret Bingham report—if I can put it like that—and I have asked for urgent advice about that and for a copy of the report so that I, too, can read it.

In a similar exchange in a debate last week, did my right hon. Friend hear the shadow Chancellor say that the former Government did not understand the systemic risks in the banking system? Does he share my surprise that Members on the Labour Front Bench are no longer willing to engage in an argument about putting right the system of banking regulation that so spectacularly failed?

I am surprised, and I am not sure whether the shadow Chancellor is committing his party for the rest of this Parliament to be against reform of the structure of banking. I see quite a lot of heads shaking, so perhaps he is not. We shall wait and see. It is worth noting that on 8 June Lord Young of Norwood Green, a Minister at the Department for Business, Innovation and Skills in the last Government, referred to

“the tripartite relationship that was supposed to identify and regulate the systemic risk in British banking—a relationship that we all know failed somewhat spectacularly.”—[Official Report, House of Lords, 8 June 2010; Vol. 719, c. 630.]

Given the continuing difficulties in the banking sector, does the right hon. Gentleman accept that the proposals he is putting to the House today will lead to greater uncertainty and greater blight in the financial services sector, and make it more difficult for banks and financial institutions to recover?

No, I do not accept that. We cannot ignore in this House that a debate is raging not just in our country but across the world about the structure of the banking industry and the best way to regulate it. The hon. Gentleman may have decided that he has all the answers and the Labour party may have decided that the system it established 13 years ago was the right system and we should stick with it, but I think we should be more open. We should have a process that brings that debate to a conclusion. Tonight I am going to the Mansion House dinner, as I believe the shadow Chancellor is too. I have sat at Mansion House dinners as shadow Chancellor and listened as the Governor of the Bank of England said something completely different from what the Chancellor of the Exchequer said on the same occasion. We have to resolve the debate, so we have to set up a process that resolves it, and I believe that an independent commission in which everyone can engage, including Members of the House, is the right approach.

I welcome my right hon. Friend’s approach. Does he acknowledge that it is not just the architecture of the regulation but its quality that has conspicuously failed? It may be understandable that the Labour party wants to defend its creation of the FSA, but do Labour Members not acknowledge that it actually failed? For many people, it too often protected the providers of services and not the consumers who were actually investing in them.

My right hon. Friend is absolutely right. The overall objective is to move away from a process of regulation that is simply about ticking boxes to one where more judgment is exercised and people start to ask those such as Sir Fred Goodwin, “What are you doing with your bank? Is it right that you are taking over ABN AMRO?”, instead of asking him whether he wants a knighthood.

Can the Chancellor explain who will be responsible under these reformed arrangements for the regulation of derivatives—financial instruments that are obviously sometimes very opaque and complex and could present a major risk to our financial system? Is it the Bank of England, the FSA or the Treasury?

The details of the institutional arrangements will be set out in a parliamentary statement tomorrow. As I said, it is right to allow the institutions involved to conduct their internal procedures, such as speaking to the court of the Bank. I know it is a completely novel idea not to bounce every institution in the country into the decisions the Government take, and actually to allow a proper process to take place, but I happen to believe that that is the right approach. The serious issue of the regulation of derivatives is the subject of intense international debate to try to create a better regulated system—or indeed to provide regulation where none existed—and to provide some central clearing operations for derivatives so that we can avoid some of the systemic risks that built up in recent years.

Does the Chancellor agree that the previous Government’s idea of regulating our banks was to have a midnight cocktail party, where they twisted the arm of the chairman of Lloyds Banking Group to take over HBOS?

Indeed, my hon. Friend is right: certainly, if the accounts are true, that was the approach taken by the former Prime Minister. I am not sure whether he did so with the knowledge of the former Chancellor, but I guess that we have to wait for the flurry of memoirs to find out.

This weekend, there was an advertisement for a pay-day cheque service that had an interest rate at the bottom of the screen of 236%. Given that the Chancellor is about to make changes to the FSA’s consumer protection function, does he think that 236% interest is fair, and if it is not, what will he do about it?

The OFT will shortly publish a report on high-cost credit that will address some of these issues, and the hon. Lady is absolutely right to be concerned about them. One of the things that I hope will flow from the institutional arrangements that we are putting in place is a stronger voice for the consumer to ensure that particularly the most vulnerable people in our society are protected from exploitation.

Will the Chancellor assure the House and the country that he will never display the sort of complacency so aptly demonstrated by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), who said in 2007 that we were entering a golden age of prosperity in the City of London?

My hon. Friend is right. I was sitting in the Mansion House when the former Prime Minister, with great prophecy, announced that we were embarking in the summer of 2007 on a new golden age for the City of London. Unfortunately, as with everything else that was golden that the previous Prime Minister touched, that turned to lead.

What systemic risks specifically created the collapse of Lehman Brothers, and how does the Chancellor intend to regulate the top 10 large investment banks and protect the British economy against such collapses?

Suddenly, the hon. Gentleman is interested in the regulation of Lehman Brothers, but there we go.

The risks were pretty clear. No arrangements were in place for winding up a large and complex financial firm. That was one concern. No arrangement was in place that would allow a global firm to avoid dying nationally in the way that it did. It was heavily exposed to, for example, the derivatives markets and other things. That had not been spotted either by the British regulator or, of course, the American regulator, which was in the lead. We need to investigate precisely that kind of issue, not just here in Britain, but across the world. That is being done in the international councils on which we sit. But surely, whether with Lehman Brothers, the Royal Bank of Scotland, HBOS or Northern Rock, we must learn the lesson of what went wrong. Again, I find it breathtaking that, at the beginning of the Parliament, the Labour party has set itself against changing the system of regulation. [Hon. Members: “No we haven’t.”] Labour Members may say that, but that is exactly what the shadow Chancellor did about 53 minutes ago.

My understanding is that the credit rating agencies are not subject to any proper UK regulation at the moment and that some action is being taken at EU level in that regard. Does the Chancellor see any place in the new arrangements for UK regulation of the credit rating agencies, which, of course, bear a large responsibility for what happened in the sub-prime crisis?

The hon. Gentleman is right to draw attention to the role of the credit rating agencies. Of course, all sorts of organisations and products received triple A ratings that they should never have received. That triple A wrapper basically made them immune to investigation by the firms that were buying those products. Certainly, we need to improve the regulation in the domestic sense—here in Britain—but that is also the subject of decision at a European level, and the la Rosière proposals on European supervisory agencies will consider in particular the role and regulation of credit rating agencies.

Will my right hon. Friend commit to ensuring far greater scrutiny of EU regulation concerning financial matters than the previous Administration ever did, to make sure that it helps, rather than hinders, our banking system?

My hon. Friend makes a very good point that we must get the European regulation right, and the United Kingdom has a particular role as the location of most of the wholesale financial services in Europe. We therefore bring some insights to the table, which not all other members of the European Union can do. I am clear that we must do that. It will be under discussion at the European Council later this week and, I suspect, in pretty much every ECOFIN meeting for the rest of the year.

The Bank of England has an inflation target, and I am not proposing to change the inflation-targeting regime.

Thank you, Mr Speaker, for calling me before I have made my maiden speech. For the record, this is not it. [Laughter.]

Given the gravity of the situation in which the last Government have left the finances, does my right hon. Friend the Chancellor agree that it behoves all parties to work together on this? Will he confirm whether he has received any positive contributions from Opposition Members, or whether, as it appears to Conservative Back Benchers, they are now reclined into abject criticism?

Well, it was a very good maiden intervention by my hon. Friend. I find it strange that the Labour party does not want to engage in this debate. One would have thought that the Labour party was interested in how banks will be regulated, in how we learn from the mistakes and what went wrong, and in the structure of banking in the future, but the shadow Chancellor has set it against that. However, individual Back-Bench Members of the Labour party will probably be more interested in this than their Front Benchers. Of course, by setting up an independent commission and, indeed, by having the debate in the Treasury Committee and on the Floor of the House, those contributions will be heard.

The Chancellor says that he is keen to learn the lessons from the economic problems that happened. Is one of those lessons that he was wrong to say that the Government should have let Northern Rock fold?

What I said about Northern Rock was that we should have found a way to have a Bank of England-led reconstruction of that firm. The previous Government then introduced legislation in Parliament that would have allowed that to happen in the future. That is exactly how they proposed to handle future bank failures. [Interruption.] The shadow Chancellor says that we voted against it. We did not vote against the Banking Act 2009, by which he introduced the procedures for a Bank-led reconstruction. He continues to shake his head. I seem to remember that I went to his office in the autumn of 2008, pledged my support and delivered on that support.

As someone who worked with the FSA before I was elected and had to plough through many long consultation papers and then try to help business to understand them, may I perhaps suggest to the Chancellor that the people who are working at the FSA are not the right people to be transferred to the Bank of England and that, in fact, we need people who understand the risks and working in the City of London, rather than those who have just read textbooks about that, as many of the people in the FSA appear to be?

Of course, it is important that we have the right people doing regulation. The FSA made mistakes, and it has been very candid about them. Lots of institutions made mistakes in the build-up to the crisis—including, of course, the British Government. The people at the FSA have worked incredibly hard in the past couple of years, and I should put on record my tribute to the work that they have done. As for the institutional arrangements that we will put in place, there will be a parliamentary statement tomorrow.

Will the changes that the Chancellor envisages have any impact on the bonus culture at the FSA? I understand that it cost us a record £22 million and reached 84% of its staff last year, at the very time when it was calling for curbs on bank bonuses.

I remember that at the time I, too, was surprised by the FSA’s decision. If the hon. Gentleman will allow me to say this, those questions are best asked once we have made clear what the new institutional arrangements are. Then we can get on to the pay and rations.

Does the Chancellor agree that it is surprising to hear Opposition Members talk about Northern Rock as a shining example of micro-regulation, when the FSA’s own report into Northern Rock said that the ARROW process gave it far too low a ranking and that that such decisions would have been better taken in the home of the lender of last resort?

My hon. Friend makes a very good observation. Let me make a broader observation, if I may. She has enormous experience of the financial services. There are Members on the Opposition Benches with real experience as well, including the hon. Member for Leeds West (Rachel Reeves), who used to work in the Bank of England. I would like that experience to be brought to bear in the process over the next year. We have decided not to resolve the issues in the Treasury, in the Department for Business, Innovation and Skills and in No. 10 Downing street, as we could have done. We have decided to have an open commission to which all Members can contribute and with which they can all engage. I think that is a better way to make policy.

Has the Chancellor taken the opportunity to review the Official Report of the Committee stages of the Financial Services and Markets Act 2000 when the FSA was being set up? If so, does he recall that the constant cry from the Conservative Benches in those days was for lighter-touch regulation? Will he take the opportunity to say unequivocally to the City that, as far as his party is concerned, the era of lighter-touch regulation is over?

My right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) was clear about the risks of creating the tripartite system when he was the shadow Chancellor who opposed that legislation. When it comes to light-touch regulation, let me quote what the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath, said in 2006:

“I will be honest with you, many who advised me, including not a few newspapers, favoured a regulatory crackdown. I believe that we were right not to go down that road”.

I am afraid that the regulatory approach taken by the Labour Government when they were in office completely failed, and we will learn the lessons of their mistakes.

Does the Chancellor agree that the Opposition, who sold the gold so wisely and then bought euros, prophesied a golden age and then brought the economy, like a ship, on to the rocks, are not qualified to give us financial advice and seem to have such a poor memory?

May I declare an interest, as I am regulated by the Financial Services Authority? Does the Chancellor agree that boom and bust is part of the human condition, we will never get away from it, and the best that regulation can do is ameliorate extremes, not stop boom and bust altogether?

I am not sure whether the Labour party in opposition will keep its promise to abolish boom and bust, but it proved pretty disastrous in government. All of us welcome the fact that my hon. Friend will no longer be regulated by the FSA, and instead will be regulated by the Whips Office.

Despite some high-profile casualties, does my right hon. Friend recognise the importance of building societies and mutuals to the financial services sector? What steps does he propose to take to encourage that sector to increase?

My hon. Friend is right that building societies and mutuals have an important role to play in the future. We want to strengthen them and support those who want to create mutuals. We will set out the details of how we will do that in the next few weeks.

Speaker’s Statement

In accordance with the Order of the House of yesterday, I will now announce the arrangements for the ballots for the Chair and members of the Backbench Business Committee.

The ballot for the election of the Chair will be held in the Division Lobbies from 9 am to 11 am on Tuesday 22 June. Nominations may be submitted in the Lower Table Office from 10 am to 5 pm on the day before the ballot, Monday 21 June.

The ballot for the election of the members of the Committee will be held in the Division Lobbies from 10 am to 12 noon on Tuesday 29 June. Nominations may be submitted in the Lower Table Office from 10 am to 5 pm on the day before the ballot, Monday 28 June.

A briefing note with more details about the elections will be made available to Members in the Vote Office and published on the intranet.

Opposition Day

[1st allotted day]

Industry (Government Support)

I beg to move,

That this House notes the need for a clear deficit reduction plan, and that such a plan must have at its heart measures to foster growth and create the conditions for a strong business-led recovery; believes Government has a crucial role to play in fostering economic growth and in creating a better-balanced economy; supports strategic decisions to back key sectors such as digital, life sciences, low carbon manufacturing and civil nuclear power; congratulates the previous Government for supporting businesses through the downturn and laying the foundations for the UK to be globally competitive as the country makes the transition to a low carbon economy; expresses serious concern that the Government’s decisions risk removing key support for business and industry at a critical moment in the economic cycle; further believes that cutting investment allowances will pull away vital support for manufacturers seeking to invest and grow; further notes that the Government’s scaling back of the regional development agencies at a time when recovery is fragile will impact on investment vital for regional economies; and regrets the coalition Government’s decision to place a question mark over a number of vital industrial support decisions taken by the previous Government.

Let me make it clear at the beginning of the debate what I said during our initial exchanges at oral questions a couple of weeks ago—deficit reduction is important and I do not say that every decision to reduce expenditure is wrong. The Secretary of State and I both fought the recent election on policies to reduce the deficit. But the Opposition believe that this must be done in a way that supports economic growth, and not in a way that undermines it. It is critical to our future that fiscal consolidation is done in a way that supports rather than undermines growth.

On the timing of deficit reduction, I am still saying what the Secretary of State and I were both saying back at the time of the election, but he is now saying something very different. Just a week before polling day he said that

“it would be foolish to rush into significant cuts now which take the economy down even further, which lead to an even bigger deficit problem”.

Yet just days later, the Secretary of State was signing up to his part of £6 billion of cuts in this financial year—cuts that mean 10,000 fewer students going to university than under the published plans, and £300 million being taken out of the regional development agencies this year.

Such cuts will hit my constituency and those of my hon. Friends the Members for Stoke-on-Trent North (Joan Walley) and for Stoke-on-Trent Central (Tristram Hunt). The cuts will hit places such as Stoke-on-Trent particularly hard—areas that have struggled to come forward from the 1980s. The impact will be devastating.

My hon. Friend makes an important point. Before the election we were told that £6 billion could be taken out in efficiencies, but the announcement proved that that was not the case, and that the cuts will have a real effect on constituencies such as his, mine and many others around the country.

What could be the reason for the volte-face on the timing of deficit reduction? There may be cynics on the Opposition Benches who might think it had something to do with the election result or with the fact that the Liberal Democrats were in coalition talks with the Conservatives, but the Secretary of State leads us to believe that that was not the case at all. He said it was all about events in euroland, but to paraphrase Frankie Valli, “Greece” was the word, although I have a feeling that in the present coalition the Secretary of State does not go into work in the morning singing, “We can be who we are”.

Does my right hon. Friend agree that the uncertainty about the future of Advantage West Midlands, for example, is creating problems for small businesses locally? Does he also agree that if the Government set up a green investment bank—the sooner, the better—that could go a long way to helping industry in the west midlands?

That policy was in our manifesto, and we believe it would make an important contribution to economic growth.

Our argument today is that if we want a successful economy in the future and if we want to rebalance our economy and support strong manufacturing and powerful regions, a focus on deficit reduction alone is not enough. It is not enough just to have a plan for the deficit. The Government also need a plan for growth; and for that to work, we have to understand that they have an important role to play in supporting industry and creating the right environment for success.

Does my right hon. Friend agree that a potential blight is being put on companies such as Airbus and Vauxhall near my constituency, where grants signed by the previous Government to help to support the growth of manufacturing industry are now being reviewed by this Government? That is damaging the long-term potential for growth, and decisions should be reached urgently so that we end that blight and get a move on in creating jobs.

The review of industrial support decisions has indeed created damaging uncertainty that should be brought to an end in a positive way as soon as possible.

The Labour Government knew that we had to play our part if rhetoric about rebalancing the economy and making the most of the shift to low carbon was to lead to new industries and new jobs. That was not, as some Government Members have sought to portray it, some kind of irresponsible bail-out plan concentrated on failing companies. It was a strategy about supporting key national capabilities in the industries and jobs of the future, ensuring that we had strong regional economies, and having the right tax measures in place to foster investment in new plant and machinery and to support research and development here in the UK.

I am sure that my right hon. Friend is aware of how crucial the computer games industry is in my constituency, not only for the number of people the industry employs but for the students who study at the university of Abertay. The previous Government made a commitment to tax breaks for the computer games industry; does he agree that that commitment should be honoured?

The creative industries, including those that my hon. Friend mentions, are absolutely critical for our future economy. As with other areas, I believe that Government have a role in play in ensuring that the creativity of those industries flourishes here in the UK.

Of course, our future economy will be market-driven, and success depends on motivated individuals, great ideas, and enterprising and thriving companies. Our point, however, is that there is a critical role for Government when market gaps occur—a job to do in supporting investment that can pay dividends many times over in future. Let us remember that this is something that many Governments around the world are doing. Do we really believe that if the new Government elected here turn their back on this approach, other Governments who are also trying to attract new industries and new jobs will do the same? I do not think so.

This week, One NorthEast, the regional development agency in the north-east of England, confirmed a grant of £7.3 million to INEOS Bio to construct Europe’s first advanced bioethanol—ethanol from waste—plant in my constituency. That will create 350 construction jobs and 40 permanent skilled jobs, and I am sure that my right hon. Friend agrees that that is another fine example of why One NorthEast should continue its good work with the level of funding that has given it the power to help the north-east’s economy to diversify so successfully.

I absolutely agree. That sounds like exactly the kind of project where Government, through the RDA, and business can come together for the benefit of the local area.

Our concern is that the new Government do not understand the role of Government in fostering new industries or may even be ideologically opposed to it, believing, as the Secretary of State has said, that

“one of the most important jobs of Government...is actually to get out of the way”.

Getting out of the way would have done us little good when we were trying to get Nissan to build its battery plant and LEAF electric car in the north-east. It would not have helped us when were extending a loan guarantee to Ford to make the next generation of low-carbon diesel engines here in the UK. It would not have helped us when we were trying to support world-class aerospace at Airbus and Rolls-Royce. It would not have assisted in our ambition for the UK to move into the world premier league in the nuclear supply chain through the loan for Sheffield Forgemasters. Nor would it have done any good when we were trying to attract manufacturers of the next generation of off-shore wind turbines to make their products here in Britain.

Is not Airbus a perfect example not only of how hundreds of millions of pounds have secured and created thousands of jobs, but of the fact that that money is repayable, and has been repaid, and that royalties are paid on every aircraft sold, which means that this is also a very sound investment for the Government?

My hon. Friend makes a good point. A lot of industrial support is in the form of loans or loan guarantees. The depiction that the new Government have attempted to create of the indiscriminate giving of grants that were not in the public interest is absolutely not true.

Is the right hon. Gentleman aware of last week’s Centre for Cities report, which highlighted the growth, or lack of growth, in the private and public sectors over the past 10 years? Some 69% of the 1.2 million jobs added to city economies over the past 10 years were public sector positions. In my constituency, the growth rate in the private sector fell by 10% over that period, which meant the loss of 4,600 jobs from the private sector while the public sector grew by 7,600 jobs. My city was the fourth worst in the country; the city of Stoke, represented by the hon. Member for Stoke-on-Trent South (Robert Flello), was the worst. May I put it to the right hon. Gentleman that if that is the result of 10 years of massive spending in the public sector, it is simply unsustainable to carry on losing that number of private sector jobs, and that our job is to re-stimulate the economy and the framework for growth in the business sector?

The answer will be shorter than the question. I am aware of that report. However, my point is that if we want to stimulate private sector investment through some of the companies that I have mentioned, Government have a role to play. Simply walking away will lead to fewer, not more, private sector jobs.

Returning to the subject of RDAs, a firm in my constituency wishes to bring the manufacture of ceramic products back into Stoke-on-Trent from abroad, but it is unlikely to be able to pursue that ambition because Advantage West Midlands is now unable to confirm its support. The ceramics industry is trying to bring jobs back into Stoke-on-Trent, and it is quite capable of doing so, but not without a little extra support.

My hon. Friend makes a good point. Sometimes a bit of investment from the public sector can lever in significant extra investment from the private sector.

I want to turn to the criticisms of the approach that I have set out that have been made by the Secretary of State and the Prime Minister in recent weeks. They have made specific accusations, saying that the projects were agreed in a hurry and were politically motivated. Indeed, the Prime Minister repeated that allegation a short time ago at Prime Minister’s questions, when he spoke of fiddled grants for political reasons. Last week, he alleged that we had spent tens of billions of pounds on industrial support. I have to say that it is no wonder that he is sharpening his public spending axe if that is his grasp of the amount of money that we were spending on industrial support.

Let me deal head-on with the accusation about rushed and politically motivated largesse. These projects were not agreed in a hurry. We negotiated for months with the car companies, with the wind turbine suppliers and with Sheffield Forgemasters. All those projects were subject to careful scrutiny by officials and to the usual value-for-money criteria used in decisions of this kind. In the last Parliament, time after time, I stood at the Dispatch Box opposite and was criticised by some of those who are now Ministers sitting in front of me—not for going too quickly on industrial aid or for being rash about it, but for dragging my feet.

In a report published as long ago as July 2009, the Business, Innovation and Skills Committee, which was chaired at the time by the hon. Member for Mid Worcestershire (Peter Luff), who is now an Under-Secretary of State for Defence and a ministerial colleague of the Business Secretary, said that it was

“profoundly disappointed that to date not one single penny has been advanced through the scheme”—

the automotive assistance scheme—and added:

“We hope that this will change rapidly.”

That is the same scheme that has funded Ford and General Motors, so let us have fewer accusations that there was a huge rush in the run-up to the election to spend money profligately.

My right hon. Friend quoted what I intended to say. I was a member of the Committee that produced that report, and when I represented it in a debate on local radio, I repeated the accusations that appeared in our report.

I am pleased to hear from my hon. Friend and I wish him well in his new role as the new Chairman of that Committee.

May I welcome the former Minister’s conversion to a balanced economy? In that past 13 years, the previous Government virtually destroyed manufacturing industry and hung their coats on the financial industry, so this country went down. My constituency has lost hundreds of jobs in manufacturing industry because of the economic policies of the previous Government.

Order. So that I do not interrupt the flow of the right hon. Gentleman, I should say now that there have been a number of interventions whose eloquence—this is the fairest that can be said of them—has been matched only by their length. Interventions do need to be a bit shorter.

The hon. Gentleman sums up the problem with the attitude of the Liberal Democrats. They are determined to say that we are no longer a strong manufacturing country, but I have news for him: we are the sixth biggest manufacturing economy in the world.

I am going to make some progress but I will give way later.

I was speaking about the timing of the previous Government’s decisions, but I also want to address the accusation that the political representation of this or that area was a motivation for our decisions. Not only is that complete and utter nonsense, but the fact that the new Government see it that way speaks volumes about how they see the Government’s role in supporting industry. Our country was faced with a choice of Rolls-Royce manufacturing here or in Singapore, Nissan could have gone to Portugal, and nuclear components could have been made in Japan or Korea. Are the Government really saying that when faced with those alternatives, their first reaction would be not to ask how to secure the investment and the jobs for Britain, but to reach for the electoral map to see who the local MP is? What a dismal view of the Government’s role in supporting UK industry.

I am grateful for my right hon. Friend’s robust point. The Prime Minister said that all that money was sent to Labour marginals, but that did not work, did it? If we want a strong manufacturing sector, will the three and a half pro-Europeans in the DBIS ministerial team—the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Wantage (Mr Vaizey) is the half—keep British manufacturing ahead of that of France? That is their responsibility.

My right hon. Friend makes a strong point, but I want to make progress.

The previous Government’s decisions were neither rushed nor politically motivated, and our manufacturing industries deserve a better future. The Government say that they are reviewing the projects to which I referred. We have already had a welcome confirmation of the Nissan decision, and I pay tribute to my hon. Friend the Member for Houghton and Sunderland South (Bridget Phillipson) for pressing the Government so effectively on that, but damaging uncertainty still exists, so let me ask the Secretary of State some specific questions.

What is the position on the loan guarantees to GM and Ford? What is the position on the loan to Sheffield Forgemasters? The director general of the CBI visited that plant the other day and said:

“It is hugely exciting to see such impressive technology and innovation being developed on this scale, here in the UK. The size and quality of the products being developed at Forgemasters is outstanding and this expansion programme builds on that by making a real investment for the future.”

That was the verdict of the CBI. The previous Government decided to back the expansion of Sheffield Forgemasters not because we wanted to give aid to one company, but because we wanted a greater national capability in the nuclear supply chain, which is critical for Britain when many countries are building more nuclear power stations.

The Secretary of State must confirm the Government’s position on that, because I must tell him that there are a lot of rumours going around about their attitude and response, and that if the loan does not go ahead, it will mean he is behaving exactly like the banks that he criticises for not supporting industry. We said that we would support industry, and it is time that the Government’s position on that loan is cleared up.

The right hon. Gentleman has talked a lot about growth and the need for a growth strategy. Is it still the Labour party’s position to put a tax on jobs in the middle of the recovery?

The proposals we made on the tax to which the hon. Gentleman refers would have kicked in next year. If I were him, I would not be so cocky about tax just a week before his Chancellor comes to the Dispatch Box to tell us his tax proposals.

To return to my specific questions, will the new Government go ahead with the port development competition that was so pivotal in attracting offshore wind suppliers to the United Kingdom? Will the new Government stand by the support to Airbus and Rolls-Royce, which was mentioned by my hon. Friends? The Government have already caused damaging uncertainty by placing a question mark over those projects. If they abandon them, all their words about manufacturing and rebalancing the economy will rightly be seen as worthless.

No—I have already given way to my hon. Friend and I want to make progress.

Support for industry is not just about specific interventions, but about having the right measures in place to foster investment and innovation, and I want to ask the Secretary of State where we stand on some of the key measures in that area, such as capital allowances, which the Government provide to encourage investment in new plant and machinery. The allowances are vital to manufacturing companies, particularly when we want them to be moving to lower carbon production. For those reasons, we doubled investment allowances in our last Budget, which meant that the new allowance—of £100,000—covers some 99% of capital investments made by companies every year.

The new Government, however, are pledged to cut those allowances to pay for their planned cut in corporation tax, a move described by the Engineering Employers Federation as “a disaster”. It has said that if those plans went ahead:

“Any business would have to think twice about investing in the UK.”

Before the election, the Chancellor said that that plan would involve the removal of allowances amounting to £3.5 billion, which would otherwise support manufacturing. Can the Secretary of State confirm that it remains the Government’s policy to cut investment allowances for manufacturing industry?

Another issue is supporting research and development. We are all agreed that we want research and development, and the manufacturing associated with it, to take place here in the UK. For that reason, the previous Government introduced the idea of a patent box—a corporation tax rate of just 10% on future profits made from patents. When we announced that policy, Andrew Witty, chief executive of GlaxoSmithKline said:

“The patent box is exactly the sort of active, long-term and creative support that we need from the government to ensure that the UK remains an attractive place for highly skilled sectors such as pharmaceuticals.”

When the Secretary of State was asked about that a couple of weeks ago, he did not answer, but I want to give him another chance to do so today. If the new Government believe so much in a lower rate of corporation tax, will he now tell the House whether they support that proposal for an extra-low corporation tax rate for that part of the economy engaged in research and development here in the UK?

On innovation, can the Secretary of State tell us where we stand on the Hauser report and Labour’s plans for innovation centres to help the crossover of ideas between academia and industry?

Let me say a word about the regional development agencies. These were introduced by the Labour Government a decade ago because we had seen the success of the Scottish and Welsh development agencies. They have, for the most part, performed well, with independent evaluation showing that for every £1 spent, regional economies benefited on average by £4.50. I know that the Secretary of State agrees that every part of the country should share in future economic growth. Before the election, he said that

“efficiency has become the new politically correct word for sacking people and cutting services”.

But one of his first acts, together with other Departments, was to take £300 million out of the RDAs, so I know that he will not claim that that was about efficiency. Will he admit that that will have a real impact, with business support cut, projects cancelled and delayed, and—as my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) said, less private investment levered in to those projects?

Earlier, the right hon. Gentleman accepted the need to control the budget deficit. Is there any area in which he thinks public spending should be reduced? Can he share just one such area with the House?

The previous Government set out many proposals, including some £900 million over the next few years in the expenditure of the Department in which I was a Minister. We also said that we would save billions more than that on public sector pay and pensions, and we set out many other proposals. I do not stand here as someone who says that there should never be cuts. My point today is that cuts must be made in a way that supports a strategy for growth, not in a way that militates against it. That is why I raised the issue of industrial support and regional development.

Apart from the Budget, what about the future of the RDAs themselves? Government policy on this is in a total mess. We have had statements that they will be abolished, that they will be replaced, and that their replacements will both be different and look the same. Can the Secretary of State tell the House today exactly what the position is and how he is going to make a judgment on this? He talks of business and local authorities deciding in particular regions. How will that be done? Will it be one vote per council or one vote per business? Will it need a 55% majority? If it will be up to the region, how will he make the judgment on this important issue?

RDAs are important, but does the right hon. Gentleman concede that the performance of some RDAs has been patchy—to put it kindly? Does he agree that we can still deliver support for business in a cost-effective way, but more flexibly using local enterprise partnerships? One size does not fit all in all areas of the UK.

I know that the hon. Lady cares about these issues, but I have to disagree with that point. Until the situation is clarified, businesses in various regions do not know with whom they will be working, and a damaging lack of confidence is emerging about how projects that cross local authority boundaries are to be managed in the future.

The right hon. Gentleman has mentioned research and development, but one of the pressing issues in industry today is apprenticeships. We have been promised 50,000 new apprenticeships, but does he agree that they must lead to relevant qualifications at the end of them, so that apprentices are not just going through the process for the sake of it? They need to be relevant to the industry and to the companies involved.

When we were in government we brought apprenticeships back from the near-death state that they were in and made them once more a mainstream part of the labour market. They are valuable, and we increased the number available many times in our time in government. I agree that they are very important in providing opportunities for young people.

We sought this debate because we believe that while it is right to cut the deficit, it is not possible to go forward, as we come out of the recession, on the basis of tax and spending plans alone. Since the election, the Government have been determined to paint a picture of unremitting doom and gloom about the next few years in an effort to manage public expectations about the cuts that they are planning. Of course the situation we face is challenging—I do not deny that—but we do not believe that Britain is broken. We believe that we can have a strong industrial future if we have a clear plan for growth alongside the plan for deficit reduction.

Austerity alone will not shape our economic future. The Government should see their role as being ambitious for Britain, as well as one of managing public expectation about the cuts with which they have seemed to be obsessed in recent weeks. The Government should be ambitious to make the most of the transition to low carbon; to make the most of our excellence in creative industries and the information economy; and to build on what we have done in education and science and ensure that our economy benefits from it. As an MP who represents a manufacturing constituency, I also think that we should be ambitious to ensure that Britain makes things as well as provides excellent services. The Government are fond of talking about manufacturing in terms of decline. The truth is that the output and value of manufacturing have remained constant over the last decade up to the period of the recession, which is a tremendous achievement for our manufacturers as it was achieved in the face of the greatest wave of globalisation that the world economy has ever seen. We are in a stronger position than the Government make out.

The new Government have shown much about how they see things by making inaccurate statements about the amount of money that we spent on support for business, the speed at which the decisions were taken and the political motivation behind them—as I say, it had nothing to do with who represents the constituencies in which our manufacturing is located. The country and the economy deserve better than that. We are clear about the Government’s role in shaping the economy of the future. We have an opportunity before us, because we stand on the brink of a second industrial revolution as we move from a high-carbon economy to a low-carbon economy. We should be ambitious about seizing the opportunities that that represents, and that requires an active role for Government and a proper plan for growth. That is why we have tabled this motion today and that is why we raise these issues today. I commend this motion to the House.