Tuesday 8 February 2011
[Mrs Linda Riordan in the Chair]
Independent Debt Advice
Motion made, and Question proposed, That the sitting be now adjourned.—(Angela Watkinson.)
I am pleased to have secured this important debate and to serve under your chairmanship, Mrs Riordan.
Research from Money Advice Trust suggests that at any given time up to 5 million people report being in arrears with consumer credit and mortgage payments or find that their credit commitments are an unsustainable burden. However, planned cuts to funding will significantly reduce the capacity of independent advice agencies to assist such people, which could result in potentially serious consequences both to the individual and the state.
I shall quote an example from my local citizens advice bureau in Wigan. John—not his real name—was receiving numerous letters from creditors. He came for assistance when his debts were beginning to get on top of him. He had even mentioned suicide. His community psychiatric nurse was concerned that the increasing pressure from his creditors was causing further harm to John’s mental health. An urgent home visit was arranged. A specialist debt adviser went through John’s benefits and discussed his options. John had wrongly believed that bailiffs could take all his goods and that he could be imprisoned and evicted. Time was taken to reassure him and to go through both his options and rights, and those of his creditors. He decided that bankruptcy would be the right option for him. The adviser completed the forms and accompanied John to court. The creditors can now no longer contact him. Moreover, the adviser helped to reinstate John’s benefit entitlement, which had been the reason why he got into debt in the first place.
John now needs less input from his care co-ordinator. He said, “I was in a real state, but I am now no longer afraid to answer the telephone, open my door or open my post.” John needed face-to-face advice to help deal with his problem. Without it, he would still be a suicide risk, living in isolation and fear.
More than 500 specialist advisers in independent local advice agencies are funded by the financial inclusion fund. Since 2006, more than 380,000 people have been helped to manage debt worth more than £6 billion in an extensive network of outreach settings, community centres, GP practices and Sure Start units. People who do not normally feel comfortable about seeking advice are able to go to such centres and speak in a place where they feel comfortable.
The CAB service managed the largest proportion of that funding, and it supports 338 advisers in local bureaux. Loss of the funding reduces the capacity of the CAB service by more than 70,000 cases a year, which is a cut in casework capacity of between 40% and 50%.
I thank the hon. Lady for being generous so early in her remarks. I completely agree with everything that she has said. The financial inclusion fund is of immense importance to my citizens advice bureaux in South Lakes. Most people think that the CAB is a state service; they do not realise that it is a charity, and that its ability to raise funds from other sources is incredibly limited. The fund is critical to its survival and to its ability to help people who are often in the most desperate circumstances.
I totally agree. Having worked for a CAB, I know that people are extremely confused about where the funding comes from. The organisation gets very few donations. The depth of its service is often misunderstood as well. I have heard people say, “Oh, CAB, they tell people where to go.” We did not often do that.
My hon. Friend has given us some of the current statistics. Looking ahead over the next few years when hundreds of thousands of public sector workers will be sacked by the Conservatives and Liberal Democrats, what burden does she think that will place on Citizens Advice? In my constituency of Vale of Clwyd, some 50% of workers are in the public sector, about 4,000 of whom may be laid off. What effect will that have on citizens advice bureaux in my constituency and elsewhere?
Indeed, over the past year, the number of debt clients seen by the CAB has risen by 23%, and a significant increase is expected in the next few years as well, so the loss of skilled advisers in local bureaux will have a catastrophic effect. It is essential that local links are retained. The trust that has been built up between local agencies, such as that between the bureau and the local authority council tax collection department, will be lost, to the detriment of local people who are struggling to pay. St Helen’s citizens advice bureau had regular meetings with the head of finance and the bailiffs to discuss tactics and to raise issues from clients’ experiences. It developed a protocol to assist residents, particularly those entering employment who found that all their creditors immediately descended on them, causing quite a number to leave work, feeling that they were better off on benefits, despite their increased income, because their debts had come back to haunt them.
Does my hon. Friend not agree that debt problems often come with clusters of other problems, including some related to employment and welfare benefits, as she suggested? Is it not therefore regrettable that neither legal aid funding, which we have previously been able to look to, nor—now—funding for debt advice will be available to support people with a multiplicity of difficulties?
I completely agree. The idea that there were clusters of problems was identified at least 10 years ago. The legal aid cluster of social welfare law was developed so that the person could be addressed as a whole and not just seen as a set of individual problems.
A national telephone advice system could not help with our current problem of debt. Local knowledge, particularly about bailiffs, is vital. That was evidenced on Saturday in an article in The Times, which highlighted the different practices of bailiffs employed by neighbouring local authorities. The cuts cannot, however, be taken in isolation, as my hon. Friend pointed out. The consultation paper on legal aid proposes to remove debt from scope for all cases except those with an
“immediate risk of losing their home”.
That flies in the face of all the research demonstrating that early and timely intervention is crucial and actually saves the public purse money. For every £1 of expenditure on debt advice, the state potentially saves £2.98. Indeed the figure could be higher, particularly for the NHS.
Last Thursday in the Chamber, I mentioned a project that had been funded by my local primary care trust, which I managed until last May. It measured stress levels on a recognised NHS scale before and after the debt advice process. In the first nine months of the project, the PCT estimated that three suicides had been prevented. The project was a finalist for a national NHS innovation award due to its low cost and good outcomes for clients and the NHS.
Local authorities are also cutting the amount of money available for advice. The CAB in England and Wales faces an expected cut of 10% in 2011-12. If that is factored in with cuts to the financial inclusion fund and the proposed changes in legal aid from 2012, local bureaux can expect, on average, a 45% cut in funding.
With the cuts that we are seeing right across the spectrum, whether in local government or, in my case, the PCT, which part funds some of the posts in CABs in my area, does my hon. Friend agree that the only way to resolve the matter is for the Government to make a direct grant to citizens advice bureaux so that they can handle the massive increase in demand caused by the cuts imposed by the Tories and the Liberal Democrats?
I have long been a supporter of a statutory duty to fund advice services, and I still believe that it is the only way in which the absolute importance of advice can be highlighted to local government and other funders. The cut to debt advice funding and the proposed cuts to local authorities and legal aid will be felt most significantly in urban areas, which have the greatest numbers of clients. To whom are those people expected to turn for advice on their debts?
The Government have announced their intention to establish a national money advice service to deliver free financial advice and an annual financial health check to provide people with a holistic overview of their finances.
I am grateful to the hon. Lady for giving way and I congratulate her on securing the debate. I think that she will agree that it would be wrong to characterise the issue as simply an urban issue. Rural areas in west Wales, such as my constituency, are served by only two citizens advice bureaux. She is right to highlight the cuts that such bureaux will suffer; those cuts will make access to the existing services even more difficult for people.
I thank the hon. Gentleman for that intervention. I agree. There are already “advice deserts” and people in rural areas already have difficulty getting access to face-to-face advice. They have to travel long distances to get it. These cuts will only make that situation worse.
I welcome any expansion of financial education but I would like the Minister to answer two questions. First, where will people who are identified as being in debt by the financial health check offered by the national money advice service go, as the number of local debt advisers will be dramatically reduced—to nil in many cases?
I congratulate my hon. Friend on securing this debate. Merton and Lambeth citizens advice bureau operates in my constituency. We have one caseworker, whom we are to lose as a result of what the Government are doing. That caseworker has dealt with more than 400 debt advice queries. I asked what the effects of their loss would be and Merton and Lambeth CAB was very clear: without that debt adviser there will be nowhere else for people to go. Does my hon. Friend agree that that situation will be repeated up and down the country?
I am very grateful to my hon. Friend for giving way and I too congratulate her on securing this debate. On the issue of where people will go for their debt advice, I suspect that they will have somewhere to go, which will be into the arms of fee-charging providers who advertise their services and, according to the Office of Fair Trading, mercilessly use every opportunity to recruit people inappropriately to use their services.
I thank my hon. Friend for that intervention; I will come to the issue of fee-paying debt management companies shortly.
As I was saying, I have a second question for the Minister. Does he expect financial education to eradicate the need for debt advice in the future? It is my experience that most people fall into debt due to unplanned events, for example bereavement, illness or the loss of a job. People do not plan to get into debt, and borrowing is only debt when people cannot afford to pay the money back. At such stressful times in people’s lives as dealing with a bereavement or an illness, timely advice is vital. Indeed, one of the most distressing cases that I have dealt with personally was that of a family who had a child with a severe disability. They received all the disability and carers’ benefits, and they had taken out loans to adapt their home and car to enable their daughter to be cared for at home rather than in residential care. However, she died suddenly and unexpectedly, and they were left on vastly reduced benefits and facing a high level of debt.
Where are those people to go in the future? Like my hon. Friend, I fear that they will be thrust into the clutches of the fee-charging debt management companies, the same companies that the OFT found flouted debt management guidelines by misrepresenting their services as free when they are not free. The OFT also reported that many front-line advisers working for those companies lacked competence and provided poor advice based on inadequate information. Unfortunately, urgent action was not taken to address the problem and the issue is now being considered as part of the consumer credit and personal insolvency review. Unless action on the regulation of debt management schemes is fast-tracked, it is very unlikely that the necessary protections will be in place until autumn 2011 at the earliest, if they are put in place at all.
Vulnerable people should not be put into the position of paying unregulated and often incompetent providers to deal with the fact that they do not have enough money to pay their bills. The situation is becoming more urgent daily, with more and more advice agencies closing their door to new debt clients, so I urge the Minister to consider extending the financial inclusion fund programme until the review of advice services is complete, or to provide sufficient alternative funding for free face-to-face debt advice to continue in local agencies. Not to do either of those things will have a great cost—both in human terms and for the state.
I congratulate the hon. Member for Makerfield (Yvonne Fovargue) on securing this very important debate. To some extent, it follows on from the Opposition-day debate that we had in the main Chamber last week.
Obviously, everyone in this room wants to see the same thing. We want to see a fair and open system of financial support for people who get themselves into financial difficulty. I know personally that the National Association of Citizens Advice Bureaux is a wonderful organisation. It took on the role of providing specialist debt management advice and it has done a really good job, so I share the hon. Lady’s concern regarding the financial inclusion fund.
Local authority cuts will mean that the citizens advice bureaux will not have as much support as they have had. That is having a drastic effect in my own region, the west midlands, where all five bureaux are destined to be closed. I hope very much that the Minister will be able to intervene in some way to ensure that that vital service for the Birmingham area is maintained. In Solihull, we have faced cuts to our citizens advice bureaux before and we have managed to survive them.
I am grateful to the hon. Lady for giving way, but I must say that it is not good enough for Liberal Democrat MPs to come along to these debates and complain about what this Government are doing while they are supporting them. What has she said to Ministers? Has she threatened not to support the Government’s proposals? Has she told them that if these cuts go ahead she will not vote for something else that they are proposing? What have she and her colleagues done to try to prevent these cuts from happening?
I am glad that the hon. Gentleman made that intervention, because his Government caused cuts to be made to citizens advice bureaux. It is how the Government manage that is important. He asks what I have done and I will tell him. I have worked quite considerably on the issue of debt. In fact, I advise the Government and I am putting in my help and advice, as much as I can, to Government. That is what Governments do and that is what responsible coalition Governments do. We can make our points independently as Liberal Democrats, but we support what the Government are doing because of the financial situation that the hon. Gentleman’s Government left us in and everyone has to bear a share of the pain.
Despite the heckling from a sedentary position, I will continue.
In 2009-10, citizens advice bureaux experienced a 23% rise in demand for their services. Of the queries that they dealt with, 150,000 were about quite complex debt problems, as outlined by the hon. Member for Makerfield. It is estimated that the loss of the financial inclusion fund reduces the debt advice capacity of citizens advice bureaux by 40% to 50%. So I am looking forward to hearing from the Minister today about what steps are being taken, particularly in relation to the national money advice service and how that service will help people and make up the shortfall.
If the hon. Lady will forgive me, I will not give way.
So how will the citizens advice bureaux replace that loss of support, because as I said we have faced such losses before? In relation to Birmingham, I am hopeful that the Minister will have some good news.
I also wanted to pick up on what the hon. Member for Makerfield said about debt management companies. I am absolutely delighted—as I am sure she is—that the licences of a number of debt management companies were withdrawn by the OFT. I think that 42 companies in all had their licences withdrawn. Those companies can lead to a spiral of debt. Some debt management companies operate free of charge to the recipient. They do that because they are able to be paid by the creditors. It is much better if those who stand to gain pay, rather than those who stand to lose.
The spiral of debt that comes with companies that charge up front is clear. Two months’ repayments are made up front, the company promises to get creditors off people’s backs, but often that does not happen and six months later the company says, “We’re very sorry, but we can’t do anything for you now. We think you should file for bankruptcy.” They then charge for bankruptcy, and the spiral continues.
In many respects, is not the hon. Lady seeking to face two ways at once? She makes these welcome comments on unscrupulous lenders, but she failed to vote in favour of the motion that was tabled by my hon. Friend the Member for Walthamstow (Stella Creasy) last Thursday. She says that she agrees with my hon. Friend the Member for Makerfield (Yvonne Fovargue), yet she refuses to vote against the measures to abolish the financial inclusion fund. The money will run out in March, so will she vote against the Budget if it does not reinstate the funding?
I was deeply disappointed by last week’s debate. In her last sentence, the hon. Member for Walthamstow (Stella Creasy) accused the coalition Government of being in the pocket of loan sharks. If any hon. Members imagine that we will vote for being castigated in that way, I am afraid that they have another thing coming. [Interruption.]
My hon. Friend is generous to let me butt in. Perhaps I could help Opposition Members. They spent 13 years in power towing the line and voting for things such as cuts in CAB funding—as they did in South Lakeland—and they do not seem to understand that it is entirely possible to be within a Government and at times be a critical friend instead of constantly being told what to think.
Thank you, Mrs Riordan, I am grateful.
I am disappointed with Opposition Members. I am sure that there must have been moments, in the 13 years during which they built up the biggest structural deficit in the G8, when it occurred to them that perhaps their Government were not going in exactly the right direction. We are a united coalition Government—[Laughter.] Opposition Members may laugh, but we are seeking to work together to help people in bad financial situations, situations that have been hugely exacerbated by the actions over 13 years of Members who are now in opposition.
In conclusion, I very much welcome the national money advice service. I ask the Minister: how will it help, and how will the Government help CABs to manage the shortfall caused by local authority cuts, and the cut in the financial inclusion fund?
I congratulate my hon. Friend the Member for Makerfield (Yvonne Fovargue) on securing this very important debate. I am extremely concerned about the ending of the financial inclusion funding, as is my local CAB, which has asked me to put forward some of its sincere concerns about the proposals.
There was a record number of insolvencies in England and Wales in 2010, which was an increase of 0.7% on the previous year. The 2010 figures have not yet been broken down by constituency, but in 2009 my constituency of Newcastle upon Tyne North had the highest rate of personal insolvencies in England and Wales, closely followed by North Tyneside, Newcastle upon Tyne Central and Newcastle upon Tyne East, in that order. Furthermore, the top 11 constituencies for personal insolvencies all fall within the north-east of England. I want to convey to the Minister that those are not just figures; they are real people with real lives. We all know that debt can expose vulnerable people to the threat of homelessness, to bailiffs seizing their possessions, and to the loss of essential services and even their liberty. Therefore, having access to free, confidential and trustworthy debt advice is absolutely fundamental.
As my hon. Friend set out in detail, the financial inclusion fund was established in 2004 by the previous Labour Government to support fact-to-face debt advice services, in areas of deprivation where there had been difficulty in accessing debt advice. At Newcastle citizens advice bureau there are eight full and part-time debt advice workers whose work has been supported by the financial inclusion fund, and in 2010 they supported more than 1,000 local people in relation to £14.3 million of personal debt. I was shocked by those figures. In the last quarter of that year alone, the service saw more than 300 clients, which was the highest number in the history of the project in Newcastle; the appalling weather at that time did not prevent people from getting to their CAB for help. However, as a result of the coalition’s decision to end the financial inclusion fund, there is huge uncertainty about what will replace it. On 4 February, the CAB stopped offering advice supported by the financial inclusion fund.
There are many similarities between the city of Newcastle and the city of Sheffield, which I represent. We have 12 specialist face-to-face debt advisers supported through the financial inclusion fund, and they process similarly staggering amounts of debt casework. During 2009-10, which is the last full year for which information is available, they dealt with £25.6 million of debt. Crucially, they prevented the loss of homes for 110 clients, through negotiation with lenders and landlords, or through interventions in county courts, and successfully negotiated 655 payment plans. Does my hon. Friend agree that the withdrawal of the financial inclusion fund, which will mean that all those posts in Sheffield will disappear and all that help will go, is a particularly callous decision at a time when debt is rising as a result of this Government’s policies?
I strongly agree; that is precisely the point that I want to make today. With no news of any funding beyond March, the service in Newcastle is winding down, and so are bureaux right across Tyne and Wear. The situation is deeply worrying because of the personal insolvency figures and also because people, particularly in places such as the north-east where more than 50% of the population is employed in the public sector, will find themselves in even more worrying financial circumstances.
Areas such as my hon. Friend’s constituency and mine, which have been hardest hit by the recession and are taking the longest to recover, will be most affected by the cut. In the west midlands, 62 staff are employed as a result of the financial inclusion fund, including five at the CAB in Dudley, and the staff there told me that it is hard-pressed families, the most vulnerable and people with learning difficulties who have got themselves into debt, who rely most heavily on the services. They also told me that their clients will have absolutely nowhere to go if the funding provided by the financial inclusion fund is withdrawn.
I thank my hon. Friend for reiterating the point that I am trying to make, which is that the cut is ill thought through and ill-timed for places facing an uncertain financial future. Unemployment in the north-east is rising, youth unemployment is at a record high and one in three young people in my constituency are out of work, compared with one in five nationally. At the same time, public sector workers face redundancy, the VAT rise and increasing fuel and energy prices. People will only get into more financial difficulty. It is shocking that at a time when increased demand on personal debt advice services is inevitable, funding for those services should be cut. It is also of concern that we are likely to lose highly skilled and trained staff who have built up a wealth of knowledge and expertise in helping people. Eight staff members in Newcastle are being made redundant, which is deeply worrying and shocking.
As I am sure the Minister is aware, in February 2010, the National Audit Office concluded that the face-to-face debt advice funded by the financial inclusion fund delivered good value for money. Indeed, the NAO found that the financial inclusion fund project was helping more people at slightly less cost per person than originally planned, and that the advice given was well regarded by those receiving it. That has certainly been the case in Newcastle, where 90% of clients who filled out a feedback form said that they would recommend the citizens advice bureau debt advice service to somebody with debt.
I recently saw at first hand the excellent advice services provided by the CAB during a special advice service day at a local community centre in the west end of Newcastle, the area that suffers the highest levels of deprivation and personal bankruptcy. The CAB brought together a series of advice services under one roof and took them out into the communities suffering the most. It was an impressive and productive day, and I know that it helped an awful lot of people in my constituency.
I support that point. I did a similar joint exercise with the citizens advice bureau in my constituency, which trained my staff and me so that we, who are in some cases the first point of contact, could address the issues and work in conjunction with the CAB. I fully support that action.
I agree. I too have been working closely with the CAB and taking its advice. The difficulty is that the office is losing eight staff members and will struggle to provide the same level of service. The suggestion that such expertise and advice can be delivered by a Member of Parliament comes from cloud cuckoo land.
The advice service day exemplified the importance of the CAB’s services and the fact that it can reach out to people. The CAB knows that people will not use telephone or online advice services. They need face-to-face, personal advice, because they cannot manage the paperwork and the complexity involved in dealing with debt issues.
For all those reasons, I have written to the Chancellor to urge him to rethink his decision or, if it is suggested that a fund continue, to ensure that face-to-face debt advice through the CAB continues to be properly funded. I believe, as I have said, that the problems in places such as Newcastle will only get worse; they must be seriously addressed.
I pay tribute to the hon. Member for Makerfield (Yvonne Fovargue), who made her arguments in a consensual, sensible and detailed way, avoiding unnecessary party politicking. I congratulate her on securing this incredibly important debate. It is sad that a debate about debt has become a little too polarised at certain points, and that silly comments have been bandied back and forth. That does not help the people struggling with debts whom we should be here to protect. As important and emotive as the subject might be, reasonableness is key to making progress at all times.
On whether personal debt levels are rising, I must confess that I am not aware whether they are at the moment—I have seen suggestions in both directions—but we do know that personal debt levels have risen substantially over the past 10 years. I am not making a political point; I think that it is due to how society has changed. Debt is much more a part of our lives these days, which perhaps demonstrates why it is so important to have appropriate measures in place to protect people who cannot manage their debt. Managing debt is undoubtedly a reality of life now, and we as elected politicians must ensure that there are processes, procedures and services in place to protect people with debt.
I will comment specifically on the role of the financial inclusion fund in my constituency. I see that my friend the hon. Member for Scunthorpe (Nic Dakin) plans to speak, so I will leave it to him to deal in more detail with Scunthorpe citizens advice bureau, which serves a large part of my constituency. However, I will discuss East Yorkshire CAB, which provides services across Hull and the East Riding, including through a centre in Goole.
East Yorkshire CAB helped 13,600 clients in 2009-10, and it tells me that more than half of those cases involved debt management issues. During that period, it assisted with about £14.5 million in debt, which gives the scale of the problem that we face in this country. As other Members have said, CAB advises face to face, which is key. I note the comments of the hon. Member for Newcastle upon Tyne North (Catherine McKinnell). Like my hon. Friend the Member for North Swindon (Justin Tomlinson), she and her staff have been trained in debt management. That is certainly something that I plan to do with my staff. People come to us with a range of complex issues, and the more we can skill up our staff, the better.
I have been going to a lot of law centres and citizens advice bureaux recently while considering legal aid cuts. The Mary Ward Legal Centre, which manages a big contract in London, is losing 57 debt advisers due to FIF cuts. Does the hon. Gentleman believe that it is realistic to think that training my three staff members and two caseworkers can replace the 500 expert staff across the country who are being cut? It is insulting people’s intelligence to say so.
Hon. Members should listen to what I have to say before jumping up and down. All that I am saying is that training our staff to assist people who come to us with a complex range of issues is important, and that part of that training might involve directing people to the most appropriate services.
Of course all Members of Parliament ensure that our staff can provide advice to constituents, but surely the best way to help the most vulnerable people who rely on those services is to ensure that those services are not cut. Government Members have come here to go on about how serious the problems are and how valuable the services are that CAB provide, so why are they queuing up to walk through the Lobby to support a Budget that will remove that assistance?
No, let me finish. If the hon. Gentleman is going to make a point, he should at least have the courtesy to listen to the response. He was part of a Government that ran up massive debts that the coalition Government must repay. Tough decisions have been made, but even when we are not necessarily happy with some of those decisions, our job as coalition Members is to come here and make it clear what we think our constituents deserve. In saying what I have, that is exactly what I have tried to do. I am trying to support exactly the point that Opposition Members have been making, which is that we need face-to-face debt advice.
The hon. Gentleman must have come across the same sort of cases that I have as an MP, in which people have been given bad advice. My worry about training someone for one day, or even one week, is that it will not provide the level of skills required to advise people in the best possible way. Bad advice is worse than no advice at all.
I thank my hon. Friend for giving way. In the spirit of trying to work together and helping Opposition Members, we need to be clear that this strengthens the argument for citizens advice bureaux. Help on the telephone and online cannot help provide training to other people who assist the most vulnerable. That supports the argument.
I thank my hon. Friend for that intervention. Perhaps Opposition Members will now reflect upon what some of us on this side of the Chamber are trying to do.
I shall move away from the help and assistance that I am trying to ensure that my staff are able to give people who contact me, and on to some of my concerns. The move away from a face-to-face debt advice service to a telephone or internet-based service has already been commented upon. I have bitter personal experience of debts. A few years ago, I tried to access assistance on some debts and, as much as I do not like to air my washing in public, it was incredibly difficult to access the correct advice on where to go with particular problems. I accrued debts through funding my postgraduate studies, as is the case with many people—in no way am I alone in that. [Interruption.] It was postgraduate education, which has had fees for a considerable number of years and is not affected by any current changes. It was incredibly difficult to access advice on where to go. As the hon. Member for Newcastle upon Tyne North has said, it is not always easy to interact properly with someone in a telephone conversation, and it is difficult to talk about one’s personal financial situation. Talking with somebody over the telephone is no substitute whatsoever for talking with someone face to face.
In support of the point made by the hon. Member for Makerfield, when searching for debt advice, particularly online, it is unclear who provides it at a profit to themselves and who does not. If a company calls itself a national debt or advice helpline, the natural assumption is to conclude that it is a charity, when in fact, as others have commented, it is out to make profits from people’s debts.
We had an interesting debate about debt in the main Chamber last week. I was sorry that we could not get to the point where everybody was in agreement, even though I think that everyone was—the procedures and processes of this strange place meant that we ended up with a Division that we should not have had. We should certainly be looking at the way in which we manage people who want to put us into debt.
The issue has three parts. First, we need to deal with the companies that make money out of debt. They will always exist and, as I have said, that is part of life. Secondly, we need to deal with the sort of debt advice available to people who get themselves in trouble. Thirdly, we have to look at the provision for ensuring that people do not get into such a position in the first place. That is why the all-party parliamentary group on financial education for young people, which is chaired by my hon. Friend the Member for North Swindon, is so important. Only yesterday, I was at Goole high school and spoke to its deputy head about the delivery of financial education in schools and how he thinks we could roll it out nationally. That is certainly something in which I plan to play a big role in the all-party group, which he was so key in establishing.
In conclusion, it is not hypocrisy for us to say that people involved in citizens advice bureaux—
I must say that, sometimes, the debate in this place is worse than when I taught year 1 last year—the children gave more sensible responses. I have tried to make an important point on behalf of my constituents and have ended up being heckled in a childish way on an issue that is so important to people outside this place.
The reason that I have taken part in this debate is to say that the work that my local debt advisers have been doing through the financial inclusion fund is incredibly important. I know that the Minister shares my huge concern about the issue, so how exactly will the system that we propose to implement work, and what is his response to the comments made by Members on both sides of the Chamber about the face-to-face element? We need to know more.
As I said at the beginning—I will end where I began—this is such an important issue. Managing debt is a part of life now and, unfortunately, people get themselves into debt simply by making bad choices, which we have all made in our lives. We have to make sure that the support available to them is appropriate. I end with that plea. I am less concerned about the mechanism and more concerned about what is actually delivered to my constituents. In my view, that requires some sort of face-to-face interaction, whoever that interaction is with.
I apologise, Mrs Riordan, that I will have to leave before the debate’s conclusion in order to attend a Public Bill Committee. I am pleased to follow my neighbour, the hon. Member for Brigg and Goole (Andrew Percy), and I welcome the concerns expressed by Members on both sides of the Chamber. Our analyses may differ, but that does not alter the fact that we share a common concern. The reason why we are taking part in this debate and why it is so well attended is to get answers from the Minister to the points so ably made by my hon. Friend the Member for Makerfield (Yvonne Fovargue), whom I congratulate on securing this timely and important debate.
We are in a time of falling growth, rising unemployment and rising prices fuelled by the VAT increase. That may well mean that, notwithstanding the past, more families and people are more likely to get into financial difficulties in the future. They are, therefore, in danger of becoming prey to organisations that take advantage of the financially vulnerable, putting desperate people into a state of greater desperation.
My hon. Friend the Member for Walthamstow (Stella Creasy) has done much already in this Parliament to raise awareness of the need to control the actions of loan sharks. We also need to ensure that accessible, independent debt advice remains available for people so that they can square up their affairs and remain healthy and effective in society. Statistics nationally show that demand for debt advice is already on the increase. Last year, Citizens Advice assisted 580,000 people with £2.4 million-worth of debt problems, which is an increase of 23% on the previous year. In addition, 1.4 million people—one in every 33 UK adults—received advice from charities such as National Debtline.
The financial inclusion fund was deliberately located in areas such as Scunthorpe to meet the needs of communities that had difficulty accessing debt advice. The vision was to create a step change in the availability of face-to-face debt advice services, and Members on both sides of the Chamber who have spoken so far have insisted upon the importance of those services in addressing the issues. Every year, the FIF debt advice services have directly helped more than 100,000 people nationally to resolve their debt problems. Audits and evaluations show that the services have been effective and well targeted at people who need such advice.
The situation in relation to the provision of independent debt advice in my Scunthorpe county constituency is particularly concerning, and I fear that it is typical of many other parts of the country. Some 200 people a year are currently being supported by FIF debt advice, and many of them have problems or communication needs that require face-to-face support for it to be effective.
An additional problem in the Scunthorpe area is that there is currently no legal service contract for debt advice, which exacerbates the problem for all advice agencies. The previous contract allowed for 400 new matter starts, or cases, per annum. The local firm of solicitors who provide this service tell me that all their clients were referred to them from other agencies, such as the CAB and North Lincolnshire Homes, which do not have the capacity to provide that advice themselves. To its credit, that solicitor’s practice is providing advice on a pro bono basis, but that is clearly not sustainable.
Does my hon. Friend agree that a significant concern about solicitors providing debt and other forms of advice as part of a package is that the legal aid changes will narrow access to advice, so that it is given only when a family home is at risk? As we know, creditors like to negotiate the whole package of debt together, including mortgage debt and other personal debt. However, that will no longer be possible because we have no single funding stream through which all debt advice can be provided.
My hon. Friend is completely right. Early intervention in providing debt advice saves money, saves homes and saves lives. There is a real danger that the legal aid changes will exacerbate an already difficult problem. I hope that a new contract will be agreed in the Scunthorpe area, but when the contracts expire in 2014, no further debt advice of that sort will be provided locally.
All welfare debt legal aid will be taken out of scope if the Green Paper’s proposals go ahead. The financial inclusion fund provided a complementary service and was of a highly technical nature. Advice was provided on consumer credit, insolvency, mortgage arrears and other matters of that kind. The double-whammy of these cuts and the local authority cuts will be absolutely fatal to advice centres across the country. The type of advice provided shows that it is ludicrous for Government Members to say that the matter can in some way be picked up by amateurs. We are talking about highly technical issues that are for professional people to advise on.
I thank my hon. Friend. I think all hon. Members agree that these are specialist advice services with specialist staff. One of the points my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) made was about the danger of losing specialist expertise. That is another consequence I am sure nobody wants to see. In Scunthorpe, the part-time debt adviser at Crosby community association was withdrawn in December. The area is now losing the FIF debt advice, and the debt advice provided through legal aid is not in place. North Lincolnshire credit union does not provide debt advice, so the local situation is bleak.
As my hon. Friends have pointed out, there is a direct correlation between debt advice and ill health. My hon. Friend the Member for Makerfield mentioned the case study of John. Grant Thornton’s recent study, “Psychology of Debt,” demonstrated that one in two adults with debts have a mental health problem and one in four people with a mental health problem is also in debt. It is therefore clear that the time spent helping people to address their debt problems can help their overall health and well-being. Money spent by the Government on debt advice is likely to save money being spent on the health service. Research by Friends Provident found that the provision of free debt advice allowed creditors to recover in one year £1 billion more than they would otherwise have done.
I am about to finish.
Independent free debt advice is good for the individual, good for the public and private sectors and good for UK plc as a whole. I hope that the Minister will take this opportunity to spell out the Government’s plans to ensure that independent debt advice remains available and accessible to all those who need it. It is crucial that the Government do not abandon people with debt problems at this time.
I add my thanks to those given to the hon. Member for Makerfield (Yvonne Fovargue) for initiating a debate on an issue of massive concern for my constituents. As Members of Parliament, we often have to deal with constituents who, for one reason or another, have fallen into debt and are going through a difficult and distressing time. They need support and advice that is tailored to them directly because that can make the difference between getting back on track or falling off the rails completely.
I am sure that I speak for everyone in the Chamber when I say that one of the most important resources that we call on in our working lives is the local citizens advice bureau. I particularly call on the CAB in Warwick and Leamington, and I thank those who work for the CAB for their contribution to our local communities. Since becoming a Member of Parliament, I have been continually impressed by the work of my local citizens advice bureau, especially its professionalism and dedication. Through the CAB’s work, individuals are able to get the support that they need, and consequently overcome the difficult situations in which they find themselves.
Last year, Warwickshire citizens advice bureaux helped nearly 26,000 individual clients and resolved more than 92,000 problems. Nearly 300 local people gave up their time to help Warwickshire CAB and they generated unpaid work worth nearly £1 million. At my local CAB for Warwick district, 5,000 local people were helped with around 22,000 problems. Around 80% of CAB work is taken up with debt, benefit, housing and employment issues. We simply cannot afford to lose that service. Reductions in funding will damage citizens advice bureaux across the country, particularly in south Warwickshire. Such cuts threaten to create an advice desert for those who have problems with debt and social welfare law. Thousands of individuals could be without the help of organisations such as the CAB, and they will be prevented from receiving the vital help that they need.
It is not as if citizens advice bureaux do not provide value for money. In Warwick district CAB, over the past year, just one money adviser dealt with 217 new clients who owed a total of more than £3 million—an average of more than £20,000 per client. The CAB has saved tens of millions of pounds in the long term and it has brought considerable benefit to local communities across the country by helping people to move forward with their lives and access the support that they need. There is a clear case for maintaining spending on such things, and it makes no financial sense to push problems from one place to another. People’s problems will not go away merely because we stop funding help for them. Such problems will get worse, until the point when the state has to intervene in more expensive and intrusive ways. We are talking about a short-term saving at long-term expense.
I am hugely enjoying the hon. Gentleman’s speech. Does he agree that it is imperative that we do not lose the highly skilled and trained staff who are employed by the financial inclusion fund, because that too would be a short-term financial gain at the expense of a long-term loss to the service?
I am trying to impress upon the Minister that these services need to continue and that they are important to our communities. It is important to make that case today. Again, I thank the hon. Member for Makerfield for initiating a debate that gives us the opportunity to raise the profile of our CABs and the important work they do.
Organisations and institutions will still be required to channel their support. The CAB is an example of an organisation that is able to turn the desire of local people to help those in trouble into practical action. Warwick district CAB is assisted by more than 50 volunteers, who are able to make a huge difference to their local community. That capacity will diminish and the opportunity for individuals to help will be reduced if there are not enough full-time staff on hand to train, organise and manage volunteers. The loss of full-time staff will therefore have serious consequences that cannot simply be picked up by extra volunteers. If we reduce the funding given to such important organisations, it sends the wrong message at a time when we are looking to galvanise people into doing more for their local community and spend more of their time helping worthwhile causes. I appreciate why the Government are looking to reduce spending, but I do not believe that the calculus of cost has been accurately measured in this case.
My hon. Friend will be aware that only today the Government have announced that a one-off revenue of £800 million will be generated through changes in taxation on the banks. The interest alone that the Government will save on their own debt financing as a result of that move is enough to continue funding the financial inclusion fund in perpetuity.
My hon. Friend makes a very interesting point, which I am sure other people will pick up.
When we were campaigning during the last election, we made a promise to protect the front line. It does not get much more front line than the CAB. I urge Ministers to think again and look elsewhere for reductions in public spending. They should engage with the local legal profession, voluntary and community groups and other stakeholders to see whether other long-term savings can be made in an area of justice that will not impact heavily on our front-line services.
It is a pleasure to see you in the Chair this morning, Mrs Riordan. I congratulate my hon. Friend the Member for Makerfield (Yvonne Fovargue) on securing this important and timely debate.
A few months ago, I spent a morning in the court—which, incidentally, is also to be closed by the Government—in Bishop Auckland with a CAB adviser who was helping people who were in court because their rents or mortgages were not paid, and they were under threat of losing their homes. That morning I saw how vital the service provided by the CAB is to people at the critical moment when their homes are at risk. I was, therefore, absolutely appalled to discover that the Government are proposing to end the financial inclusion fund in March.
Last year, 1.5 million people were given advice on debt by citizens advice bureaux. Those services were concentrated on people who are most in need in deprived and low-income areas. In my constituency, there are three CABs. The Wear Valley CAB lost a grant of £95,000 in the FIF cuts, together with the legal aid cuts and the cuts that have been forced on the county council by the Secretary of State for Communities and Local Government. It will lose half its workers, which means that there will be no debt advice whatever in the whole of the Wear Valley district. The branch manager, Carol Shreeves, wrote to me in an e-mail:
“We have this week begun to tell clients coming to the bureau that we cannot take them on. Many have been very upset, as it has taken a lot of courage for them to come and seek help. The cut means that the bureau will have to reduce the number of hours it opens and will need to make approximately half its staff redundant. The difficulty is that since Christmas we have seen rise in demand for our services as various statutory agencies trying to save money at this difficult time have been referring clients to us…It seems to be generally accepted that debt advice is needed but the support for it is being withdrawn from all sides.”
Does my hon. Friend agree that when there is an expansion of debt relief orders, requiring skilled advisers who have to take a complex examination to qualify to be an intermediary in the scheme, it is completely the wrong time to take funding away from skilled debt advisers? The CAB deals with 70% of debt relief orders, so there is no point in expanding the scheme and then leaving people with nowhere to go. There is no point in the expansion of the scheme.
My hon. Friend has made an extremely well-informed point and demonstrates to us all the complexity of this area and the significance of losing that kind of advice. Of course, the one group of people providing more advice are the loan sharks and the independent debt advisers, who are going round my constituency putting cards through letter boxes, saying, “Come to us”. If people go to them, they will be directed to precisely the people who will put them into a worse situation.
At the same time that that is happening, the Government are cutting the growth fund, which is the money that the Labour Government put into support for credit unions—another place where people can get low-cost finance and have a chat with somebody about how to manage their money.
This is not just about CABs or other advice agencies. The benefits advice shop in Dudley does really important work to get local people the help they need if they have been made redundant or face losing their home, and helps many pensioners receive the benefits to which they are entitled. Is my hon. Friend aware that it is under threat from the local authority as a direct result of the Government’s cuts to local council spending? Does she agree that it is complete nonsense to cut such a service? It costs £300,000 to run but it brings in £2 million to local people, £1.5 million of which is spent in the local economy supporting local businesses.
My hon. Friend is absolutely right. Although Dudley is very different from Teesdale, which is another part of my constituency, the situation there is similar. The Teesdale CAB also lost its grant and will have to cut the jobs of two people. Last year, it dealt with 220 cases and a total of £2.7 million of indebtedness.
The third CAB in my constituency is in Sedgefield. It too lost its financial inclusion fund grant of £150,000. Last year, 41% of its work was debt-related. All the debt workers in the Spennymoor CAB will be made redundant in April. The CAB social policy officer in Sedgefield, Martin Jones, said:
“The effect of ending the FIF scheme…will be catastrophic. The level of services that we can provide to our clients will be totally decimated as the CAB will lose over half of our debt team. And all this at a time when unemployment and inflation are rising and putting increasing stress on our clients, many of whom are the most vulnerable in society”.
I confirm that that is correct. On Friday, I learned that in just one part of my constituency, housing benefit cuts will mean that people will have to find another £1 million from their own pockets to pay their rents.
The Minister does not seem to understand that it is all very well to talk about the big society, but the vision of the big society is collapsing. In these communities, where incomes fall and businesses do not do very well due to the Government’s irresponsible policies, CABs will not be able to raise alternative funds to replace Government grants. Furthermore, this is a policy of total financial lunacy. It costs £150 to give a family debt advice. It costs £15,000 to re-house a family. I shall be very interested to hear how the Minister can defend such a lunatic policy.
It is a great pleasure to serve under your chairmanship, Mrs Riordan.
I begin by congratulating my hon. Friend the Member for Makerfield (Yvonne Fovargue) on securing this debate on the very serious subject of debt advice, and on the important work that she herself has carried out to highlight the devastating effects that debt, and worrying about debt, can have on people’s lives. I will not repeat the excellent comments made by hon. Members who have outlined the problem clearly.
The number of people seeking debt advice is increasing, and the statistics are alarming. In 2009-10, the CAB dealt with some 2 million debt issues. The main non- fee-charging advice agencies offering debt advice are the CAB, National Debtline, Consumer Credit Counselling Service and Payplan. The CAB and National Debtline receive no money from the credit industry, whereas the CCCS and Payplan do. Of the four agencies, only the CAB offers an intensive, personal counselling service on debt.
Citizens advice bureaux, as we know, are generally staffed by volunteers, most of whom are generalist advisers, with some paid specialist advisers. Specialist advisers deal with the most complex cases, but they also supervise volunteers who undertake simpler casework in the specialist’s area of expertise. In the majority of cases, when a specialist adviser is made redundant, the bureau concerned generally no longer offers an advocacy service in that advice area. The bureau cannot expect volunteers to carry on without that back-up. The CAB is a highly professional organisation that recognises the considerable risks of people proffering advice that they are not qualified to give. Without the back-up of specialist advisers, they know that they have to limit the advice they can offer to clients.
In many cases that may mean that generalist advisers can only give the client access to information about the options and procedures that he or she might pursue. Providing information for a client to follow is a path used by bureaux when a client considers themselves sufficiently articulate, literate and confident to proceed on their own. However, most debt advice clients who approach the bureau for advice feel unable to communicate effectively with their creditors. They need the advocacy that specialist advisers provide.
Bureaux do not offer debt advice in isolation. The client also benefits from benefit, housing and employment advice. At the CAB they know that they are not just dealing with a debt problem; they are dealing with a human being. A person has their own unique set of circumstances: work circumstances such as losing their job or being put on reduced working hours, or retirement or giving up work to care for a family member; or personal circumstances such as relationship breakdown, dependent children and so on. People may not initially present as debt cases, but it may become apparent in talking through their other problems that they have an underlying debt problem.
Citizens advice bureaux have a highly trained network of volunteers who understand what they are and are not qualified to advise on. They know that if a client has complex debt problems that they are not qualified to advise on, they can arrange for them to see the appropriately qualified member of the team. CABs have led the way in using volunteers but making sure that they have proper training, and that they are backed up by qualified teams. In that way, they are able to make the most of their volunteers and to offer real value for money.
As Dame Elizabeth Hoodless, who is retiring after 36 years in charge of Community Service Volunteers, said:
“We know we need to save money, but there are other ways of saving money without destroying the volunteer army.”
She used the example of libraries and pointed out that people may want to help in a library but do not want to run it. The same is true of the CAB: volunteers are happy to come along and carry out clearly defined duties for which they have been trained, but they know that they can be more effective because they can call on a team of professionals when they recognise that a problem is beyond their competence. They certainly do not want to run the business.
We all appreciate the idea of a one-stop shop; we yearn to simplify matters, and we recognise that people often find themselves in a Catch-22 situation and have to deal with several different agencies. One of the vital features of CABs is their ability to deal with the whole range of problems that a client may have. That is why taking away any one of their streams of funding will have such a serious knock-on effect.
Let us look at the overall funding of the CABs. First, there is huge input from local councils, which provide some 43% of the total income of CABs. We all know that councils are facing severe difficulties in planning their budgets for the next few years and that in order to protect their statutory services, they will look at all options, including cuts to funding for CABs and similar organisations in their area.
Then there are the cuts in legal aid. A cut of one sixth of the legal aid budget will mean that some £350 million out of £2 billion will be cut. That, too, will have a serious effect on CABs because of the franchise work that some bureaux do. It is completely incomprehensible that legal aid will be available for debt work only when a person’s home is at immediate risk. One does not need to be a specialist adviser to recognise that early intervention is far preferable, much cheaper and more effective.
My hon. Friend is absolutely right. In my constituency, three of the four advice agencies have lost all their local government funding, and if the Green Paper goes through, they will lose 90% of their Legal Services Commission funding. Even services that the Government say they will protect will not be available because the advice centres will have closed, and areas such as my constituency will be advice deserts. There simply will not be any advice available to anyone in most parts of the country.
My hon. Friend vividly highlights a serious problem; that is exactly what will happen.
There will be cuts to advice on education, employment, family, housing, immigration and welfare benefits. Those cuts will have a direct impact on funding for CABs and their ability to provide a comprehensive service, but they will also have a direct impact on clients’ debt problems. If clients are unable to fight for the welfare benefits or extra provision for a special needs child to which they are entitled, they may be faced with a worsening debt problem.
Given the cuts to legal aid and to CABs through the withdrawal of the financial inclusion fund and local government funding, CABs will struggle, and many will close. The Government’s Office for Civil Society has a transition fund that will apparently provide grant funding to bridge any gap, at least in the short term, but it applies only to England, and it applies only to organisations with an income of between £50,000 and £10 million, which excludes some CABs. Can the Minister clarify whether any of the transition fund will be used for debt advice and, if so, how much?
What are the alternatives to organisations such as the CAB? How else can debt advice be delivered? Are the Government expecting the Consumer Credit Counselling Service and Payplan to deal with all the additional workload of clients who will no longer be able to go to a CAB? Those organisations receive funding from the credit industry, and although Payplan has considerably expanded its services in recent years, it is simply unrealistic to expect it to be able to expand quickly enough to deal with an additional 2 million cases a year. Moreover, it deals with debt; it does not deal with the full range of clients’ problems, which are often inextricably linked to their debt problems.
We have to ask the Government what alternative they propose. Is it debt management companies? The record and practice of many such companies gives rise to serious concern. In September 2010, the Office of Fair Trading told 129 debt management firms that they faced losing their consumer credit licences unless immediate action was taken to comply with its debt management guidance. The OFT found misleading advertising; in particular, firms fail to disclose that a fee is retained by the business. In fact, firms misrepresent debt management services as being free when they are not. That is serious, as clients already have enough difficulties without being exploited still further.
I certainly share that very real concern, because not only is the advice not free, it is poor. The OFT found that front-line advisers working for debt management companies lack competence, and provide poor advice based on inadequate information. Not only is the client landed with having to pay a fee that is not made clear in the firm’s advertising, they are then poorly advised. Receiving poor advice on debt management is a serious business; it can cost the client considerable amounts of money.
Furthermore, the OFT also reports that there is low industry awareness of the Financial Ombudsman Service rules for resolving consumer complaints. Even with all the work that CABs and similar providers are doing at present, we currently have a situation where 129 companies that are not fit for purpose are trading on people’s debt problems.
What will happen to a CAB’s clients when the funding for debt advice is withdrawn? Some may not seek debt advice at all, perhaps because they do not know where else to go, or perhaps because they realise that debt advice companies will charge them fees and they worry, rightly, about being exploited and getting into yet more difficulty. Many will be driven to seek advice from debt management companies.
Indeed I do.
People may not go to debt management companies because they realise that the advice given could be substandard, and that they will be charged fees and could end up in more difficulty, but many will be driven to seek advice from such companies, many of which have been shown to be doing a poor job. We could see a mushrooming of similar companies, out to profit from the loss of CAB advisers, and many more clients being charged fees for poor advice. No responsible Government should push forward policies that will allow that to happen.
What are the Government proposing as an alternative to the excellent work that CABs do? Can the Minister tell us how the proposed national money advice service will improve on the debt advice service that is currently funded by the financial inclusion fund and delivered through organisations such as Citizens Advice? Can he explain how clients who are currently being helped by CABs will be better served by the national money advice service?
Debt advice is a specialist area, and it is time-consuming and labour-intensive. No matter what expertise and computer programmes a debt adviser has, every client will have slightly different circumstances. It takes time to work through the problems, and for the client and adviser to discuss what the possible solutions might be and, when appropriate, for the adviser to arrange advocacy. Can the Minister explain what will happen to clients if the national money advice service is not up and running before CABs have to make their debt advisers redundant?
One of the problems for any new service is getting known and reaching the people who really need help. Citizens Advice is a well-established organisation—it is an established brand with a good reputation—and many people know that they can go to it to seek advice. People from all walks of life know where their local CAB is. Can the Minister explain how people will know about the national money advice service, and where they will go to access it? Can he explain the rationale for destroying an established service?
Given the economic outlook, with many more workers likely to lose their jobs due to Government cuts and the knock-on effects in the private sector, why does the Minister want to destroy a competent, independent, local, user-friendly service such as Citizens Advice and leave people bereft? At the moment, it is offering people very much needed and valuable debt advice.
I congratulate the hon. Member for Makerfield (Yvonne Fovargue) on bringing the subject to the attention of the House, and it is a pleasure to serve under your chairmanship, Mrs Riordan.
Many important questions have been asked in this debate. At the outset, let me commit the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), who is responsible for this area, to writing to Members who raised questions that I am unable to deal with giving specific answers. That is the least that Ministers can and should do in response to Westminster Hall debates.
I am not usually terribly critical about Back Benchers making comments. The contribution of hon. Member for Bishop Auckland (Helen Goodman) was pretty intemperate, so she will understand my response being in the same vein.
I made a commitment that the Minister responsible will write to Members who have raised sensible questions, as the Opposition spokesman, the hon. Member for Llanelli (Nia Griffith), did, and will deal with them in a particular and specific way. I shall restrict my comments to some points of principle and detail, and make one or two further commitments.
Before I make the points of principle, let me add this: three points have emerged from the debate. First, debt is closely related to more general well-being, and that needs to underpin the Government’s approach. Secondly, our approach should be co-ordinated and, thirdly, coherent. That has come across strongly from Members on both sides of the Chamber. We heard a speech from the hon. Member for Bishop Auckland, which I critiqued earlier, and speeches from my hon. Friends the Members for Solihull (Lorely Burt), for Warwick and Leamington (Chris White) and for Brigg and Goole (Andrew Percy) and from the hon. Members for Newcastle upon Tyne North (Catherine McKinnell) and for Scunthorpe (Nic Dakin). The hon. Member for Scunthorpe made one point particularly clearly when he rightly said that debt was related to well-being and mental health in a very broad sense. Other Members pointed out that we need a consistent and coherent approach.
I shall make six points of principle and then move on to some points of detail that inform the Government’s position.
I appreciate the Minister’s approach, but will he answer the central question? Face-to-face advisers cover up to £2 billion of debt every year and about 100,000 people are advised. Who will do that now that all those people will lose their jobs? Who will pick up the burden?
I said that in the second part of my speech I would try to come to the specific measures the Government will take. I hope I will have time to do so.
The first of the six points of principle is that we want to ensure that the debt management regime means that those who can repay debt do so and those who cannot pay get appropriate debt relief. Debtors and creditors should benefit from a system that is clearer about expectations and provides good advice in advance; I will come to how that advice might be provided later. The picture painted by a range of hon. Members of an entirely haphazard system is not the Government’s intention and it would not help either responsible lenders or debtors. I understand that and it will inform what we do.
Secondly, we want to see empowered debtors accessing good quality preventive advice, as well as advice to deal with debt, to ensure that the most appropriate solutions are found for the debtor’s particular difficulty. Thirdly, some stakeholders have called for a review of the whole lending and borrowing landscape—a point that has been echoed today. I think such a wholesale review is necessary, and the Government will go about that.
Fourthly, we are told that some debtors and, potentially, their advisers, are confused by the array of choice. We heard today about independent debt advisers. We are aware of the issue, and I take the point about the OFT’s condemnation. Fifthly, it is important that we clarify the responsible options available to people rather than allowing a free-for-all in which the advice they receive is of varying quality.
I will deal with that specifically in the second part of my speech.
The OFT survey, as the hon. Lady said, points out that many players in the field are less than scrupulous, and that must be dealt with. Finally, we are looking for evidence on how the regime should work. We have called for evidence, and much has been received. I invite the hon. Member for Makerfield, who has expertise on this issue because she managed the CAB in St Helens, and others to play their part in the review.
On the specific measures, the House will know that the Department for Business, Innovation and Skills has been responsible for face-to-face debt advice on behalf of the Treasury for about five years. I am sure the House also knows that the financial inclusion fund, which provided funding for that project, was always due to close in March 2011. I understand the worry about the decline of face-to-face advice, which all contributions today seemed to reflect. Face-to-face advice must support online and telephone advice, and we will look at how to reinforce that.
Funding of £1 million has been confirmed for next year for the National Debtline, as has been acknowledged. We need further work on how to support some form of continued additional face-to-face guidance. I will ask the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton, to clarify as soon as possible, in a statement to the House, precisely how, when, why and whether that might happen.
Secondly, the Government are working with the Consumer Financial Education Body to provide better advice on debt. As hon. Members know, it will shortly be renamed the money advice service. It was set up to take over responsibility from the Financial Services Authority to promote understanding of the financial system and raise levels of financial capability across the UK. It is funded by a levy. We will launch the new service in spring. That preventive approach is critical to stop people getting into difficulties, with the results we heard about today.
The Government will also review the framework for financial services regulation. Two new regulators will replace the FSA: one focused on prudential issues with the Bank of England and the other on markets and consumer protection—the Consumer Protection and Markets Authority. We see this as an opportunity to improve how consumer credit is regulated and to create a simpler, more responsive regime.
As Members know, we have also launched our review of consumer credit and personal insolvency. It is taking an end-to-end view of consumer credit and personal insolvency, from the decision to borrow money through to how we support people in difficulty and help them to resolve their debts.
The feature that characterised most contributions to the debate was the CAB. As a constituency Member of Parliament, I am very aware of its work. I visited the CAB in Spalding to discuss these issues. Indeed, one of the many virtues of our system of parliamentary representation is that Ministers are also constituency MPs. I heard what was said today about the CAB and its importance in providing not only debt advice, but a holistic approach to advice that reflects the connection between debt, well-being and the wider range of challenges that many people face.
I welcome the announcements the Minister has made, but does he see that it is somewhat incongruous for a Government who are, rightly, concerned about getting their own debt under control to cease funding for voluntary sector support to people to get on top of their own debt?
Indeed. I think of John 8:7,
“he stood up and said to them, ‘Let him who is without sin among you be the first to throw a stone’”.
As the hon. Gentleman said, it is right that we should be consistent.
I shall make one further commitment on the CAB: as a result of representations received, and this debate, we commit to looking at what to do about the CAB on a cross-governmental basis. Ministers and Governments should be responsive to these debates and to arguments, which were sometimes well put, although at other times slightly partisan. They were no doubt put with a passion that reflects constituents’ concerns. On that basis, there will be a cross-departmental examination of what to do about the CAB.
Economic Regeneration (West Midlands)
I thank hon. Members for attending this debate. I have wanted to speak about the future of economic regeneration in the black country for some time. It is a pertinent matter that I am sure all hon. Members present deal with in their constituency case load. It is a topic high on everybody’s list as we seek to promote economic growth in the black country constituencies that we represent.
Government plans for planning policy and economic growth contain a strong emphasis on local powers and decision making, and it is important to look at how such tools can be used to promote economic regeneration in our area. As hon. Members are aware, the black country has missed out on some capital regeneration projects that we have seen across the country. I want this debate to raise the profile of our region at national and parliamentary level, provide a forum for discussing how to encourage private and public investment in the black country, and look at how to assist local businesses and communities to get involved in future ideas for the region.
Within Wolverhampton, the proposed £300 million Summer Row development has recently collapsed. That is a huge disappointment for the city as it would have provided new shops, cafés and much-needed jobs for the area. With one of the highest numbers of vacant shops in the country, regeneration in the area is desperately needed. However, I want not to dwell on the past, but to learn the lessons from what has gone before and move forward. As councillors in Wolverhampton have said, we must signal a new dawn for the city and, to quote the city’s motto, “Out of darkness, cometh light.” I am pleased with the attitude of the council and the local business men and women of the city who are looking forward to what the future can bring for Wolverhampton.
Previous Government plans have sought to close the gap between the greater south-east and the rest of England. In truth, however, the economy is still as regionally unbalanced as before—perhaps even more so at the moment. It is important to focus on projects that are already under way in the region and look ahead to what future investment can be attracted to our area.
In Wolverhampton, the council is currently implementing two main regeneration projects—the Wolverhampton Interchange, and the i54 technology park. The Wolverhampton Interchange is a great proposal for the city, but only the first phase of the project has currently received funding and is under way. It seeks to create a new transport hub for Wolverhampton, while also revitalising the station and the entrance to the city that people see when they arrive by train. The plan includes a new hotel, offices and canalside bars. It provides a great opportunity for the city, creating not only jobs but an important first impression when people arrive. I have looked into the funding options available, and I hope that by working with fellow MPs and the council, we can see the whole project succeed. I am aware that retailers such as Debenhams are interested in locating to Wolverhampton, and it is important that any future retail developments are well managed and receive support.
The Government have outlined their plans for promoting economic growth and regeneration across the country. I want to pick up on some of the points raised by the Localism Bill and the White Paper on local growth from the Department for Business, Innovation and Skills, which provide important tools and guidance for driving regeneration in the black country.
Before the hon. Gentleman moves on from his list of important projects, I am sure that he will not miss out Bilston urban village, which is based in the part of the city that I represent. It is crucial for providing future homes, bringing former industrial land back into use, and providing new leisure facilities for people in Bilston.
I will refer later to Bilston, and I echo the right hon. Gentleman’s sentiments completely. There has been very good work there.
For regeneration of the black country it is important to give power to local authorities. I also want to talk about business rates and reforming the apprenticeship system. The important focus of the Localism Bill and the White Paper on local growth is the emphasis on giving power to local authorities and communities. That provides an important opportunity for the black country to lose some of the burden of nationally driven goals and targets, and allows instead for a tailored approach that reflects the needs of the region. The open source planning system will ensure that local governments can create sustainable and attractive places to live. I have no doubt that reforming the planning system is important to creating the confidence to invest.
Some people have expressed doubts over how localism will work in practice, such as how projects can be financed locally, and whether communities will have the will or the information to get involved in the planning process. On the first point, I think that the changes provide an important opportunity to encourage private investment into our region. I am confident that with the right co-ordination and guidance, we can see real involvement by communities, and investment by business in the future of the black country.
I have met many local people who are passionate about regenerating Wolverhampton into a more thriving city. Henry Carver, a local business man, has recently launched the Wolverhampton business group that aims to bring together businesses in the city, and put forward policies on what it believes the city needs. I have also met with the Black Country Reinvestment Society, which provides loans to small businesses that have struggled to get finance from the banks. It is pleased with the success it has seen so far, and I have supported its application to access the regional growth fund so that it can support even more businesses in the city. I hope that with increased money in the regional growth fund, it will be successful in its bid. Recently, I also met representatives from Lloyds bank and the Royal Bank of Scotland in Wolverhampton. I am encouraged that in these difficult times, I have seen practical examples of things being pushed forward. We are all conscious, however, that lending is not as free-flowing as we would wish.
The right hon. Member for Wolverhampton South East (Mr McFadden) referred to Bilston. I visited a business in Bilston called Tile Choice, which has been through a tough time over the past few years and reduced its number of staff from 80 to 60. I met the managing director and was encouraged to see that the business was being built back up, and that it was looking forwards rather than backwards. That is important; we must change the mindset. We can get immersed in looking at what has gone before, but I was struck by the optimism of a business that seemed to be going places and was looking forward to how it could take on new members of staff.
The Government plan to provide further incentives for councils to attract investment and economic growth, and the proposed business increase bonus will provide an incentive to all councils to seek long-term sustainable growth in their business rate base. Local enterprise partnerships may create an important link between businesses, communities and local government, and help to achieve economic growth and regeneration plans for the region. Too often, regeneration projects have been slowed down by time-consuming and complex planning procedures. For example, UK Trade and Investment has stated that complexities in the planning system are among the top five issues that deter inward investment into the UK. The Government are to introduce a national planning policy framework that will place a priority on economic growth through simplifying planning procedure and reducing guidance. Furthermore, the Localism Bill seeks to include communities in planning decisions from an early stage.
All such measures seek to change attitudes and foster a pro-development approach that will remove barriers to development and allow communities to get involved in planning proposals so they do not feel that developments are forced on them. Providing local authorities with a general power of competence gives them the freedom to implement proposals that work specifically for their area. Neighbourhood plans also provide an important opportunity for residents to be involved in the future of their areas. I understand that both the British Chambers of Commerce and London First believe that those proposals could be used in town and city centres and business parks, allowing whole communities to be involved in creating local ideas for their local areas.
An important new proposal, which in hindsight might have helped with some of the difficulties with the Summer Row development, is that large-scale developers will have to consult people in the local community before submitting planning proposals. That could help to ensure that communities get the development that they want.
I shall now move to my second point. The local growth White Paper outlines plans to change the nationalised system of business rates. It hands over more power to local governments, allowing them flexibility in respect of funds and business rates. New proposals will allow local authorities to offer local discounts on business rates, provided that they are funded locally. The Government recognise that different areas have different needs and economic circumstances. That policy will allow councils to respond to the economic circumstances in their area.
I will, however, enter a caveat in respect of business rates. At one of my weekly surgeries recently, I was approached by a constituent—a gentleman who owns a retail unit in the centre of Wolverhampton. He spoke to me about his situation. He felt almost at his wits’ end because of business rates. He felt driven almost to remove the roof from his shop because he felt that business rates had been particularly punitive. I ask my hon. Friend the Minister to pass on a message to the Government to be very conscious of that issue. It is very much about a mindset. The difficulty that we have with some of the investment angles for Wolverhampton is the perception that we are dealing with a problem. Having been in business for 20 years, I know that it is important to look at things as an opportunity rather than a problem. When it comes to business rates and the current system for empty properties, and industrial property in the black country and the wider west midlands, investors and business people are sometimes almost preoccupied with avoiding paying business rates, rather than looking at development, getting a tenant into a property and getting a thriving business going.
Let us turn to more optimistic things. In Wolverhampton, the council plans for a Wolverhampton technology corridor could benefit from the proposal under discussion. As the Municipal Journal notes, it could help new technology start-ups to access discounts. The i54 technology park has secured Moog, which is relocating to the park, and the council is in talks with the Indian aerospace industry about moving in. However, they need to address more businesses. The proposal under discussion could help to achieve that.
We are all aware that this is a time of economic austerity. In such times, regeneration may appear to be a difficult task. However, the local growth White Paper outlines approaches such as tax increment financing, which can assist councils to obtain the extra funds that they may need for regeneration projects. That approach allows councils to borrow against future additional uplift in their business rates base. Obviously, that will need to be managed to minimise risk, but it could provide the means for additional investment to go ahead. A point that I have previously made in the main Chamber is that in the US, where many of these business rate projects were piloted, they were often developer led. An article in Estates Gazette highlighted the fact that the Government might consider such an approach to financing: rather than the onus being put on local authorities and councils, perhaps the developer could move forward.
Linked to attracting new investment and businesses to our region is ensuring that we have the skilled work force to fill the new job vacancies created. The strategy for sustainable growth highlights the importance of skills in creating the conditions needed to reduce the deficit and to stimulate growth. Reforms to the apprenticeship programme, creating up to 75,000 new apprenticeship places, investing up to £250 million during the spending review period and increasing advanced level apprenticeships, will improve the skills of the potential work force and help to meet our target of having a world-class skills base. We need to ensure that training providers work with businesses to ensure that training meets the needs of employers and that businesses are helped to offer apprenticeship placements.
Recently, Professor John Bryson from the university of Birmingham has highlighted the fact that insufficient attention has been paid to equipping the work force with the skills required to take advantage of new high-tech, high-value engineering opportunities. There has been a lack of forward thinking. He estimates that 90,000 hard-to-fill manufacturing jobs will appear in the west midlands during the next five years. That is in line with research conducted by the region’s councils, which found that two thirds of the work force lack the technical skills required by employers. It underlines the importance of reforming the apprenticeship programme—creating more advanced level apprenticeships and ensuring that training matches the skills that the job market wants.
Let me illustrate the point. I remember being on vacation a few years ago with my son. We were at an event and at one point all the children were invited on to the stage and asked what they wanted to do in the future. Some said “journalist”. Most said that they wanted to be on TV. My son proffered the idea that he would like to be an engineer. I remember the look of incredulity on the faces of the parents in the audience, which illustrates the problem that we have in relation to engineering. I know from talking to lecturers at the university of Wolverhampton as well that there is huge demand from the engineering sector. We need to break down the perception that engineering is the sort of job where people have to roll up their sleeves and do difficult manual work. It is not. It is a very creative aspect of our economy at the moment and will offer great potential.
I shall return to the main point. Manufacturing is doing quite well at the moment. We have had encouraging figures in relation to manufacturing, and I would like to see the Government embed that for the future. Much of the discussion on this issue relates to the fact that sterling is quite low at the moment, but let us consider the German analogy. A few years ago, the Germans were in a similar situation. The question is how we can embed the progress that has been made, so that manufacturing becomes something that we can sing really loudly and proudly about, especially in the black country and in the west midlands in general.
I am listening to my hon. Friend’s speech with absolute fascination because it is a very good analysis of where we are at the moment. I am from the black country myself, hence my interest. On the importance of sterling and the manufacturing figures, which those who maintain the purchasing managers index say are the best since they started keeping records 19 years ago, does my hon. Friend agree that the figures relate also to extra demands, extra exports, more jobs being created and new orders coming in? It cannot just be down to sterling. It is because manufacturing is finally getting off its knees, and of course the black country is the home of manufacturing.
The hon. Lady makes an excellent point. She has pre-empted, as is always the case, something that I was going to come to. We in the UK are uniquely positioned in the global market to tap into the new emerging markets in India, China and south America. To go down to an even more specific level, the black country, with the significant community from the Indian sub-continent who have settled there, has a unique and wonderful opportunity to take that forward and expand on it. I wholeheartedly agree with the hon. Lady. There are great opportunities. It is not just a sterling issue.
I am confident that the Government are implementing plans that will put this country back on track financially. I know that the tools that they are providing for local growth will help the black country immensely. I sincerely hope that this debate will allow us to put a focus on the region that we all represent. I welcome everyone’s views in the debate and their opinions on how we can kick-start the investment that our area so desperately needs.
It is a pleasure to see you in the Chair, Mrs Riordan. I congratulate my constituency neighbour, the hon. Member for Wolverhampton South West (Paul Uppal), on securing the debate. My other neighbour, my hon. Friend the Member for West Bromwich West (Mr Bailey), the Chair of the Select Committee on Business, Innovation and Skills, said that he would have liked to be here, but he has Select Committee business.
This is an important debate because it is really about the hinge between the area’s past and its future. Wolverhampton and the wider black country rightly are proud of the industrial heritage that they enjoy. They are proud of the great names that put their stamp on the area. In my constituency, those names include Stewarts and Lloyds, Sankey’s, GKN, Rolls-Royce and Sunbeam. Those names ring through the years. Those names matter, and history matters, because it is from history that people draw identity and meaning. The question today, however, is what the black country will do for a living in the future. Where will people find jobs? How will they make a living? That matters very much in my constituency, which is, sadly, among the top 15 constituencies in the United Kingdom in terms of unemployment. In the time I have, I want to make a few points about that.
First, we should not pronounce manufacturing’s death rites, as we are sometimes too ready to do. Many of the big names I mentioned a few moments ago have gone, as have the individual sites that used to employ thousands of people, but manufacturing still employs a greater proportion of people in the local economy than it does in the national economy. In my constituency, companies such as Nuclear Engineering Services, Mueller Europe, Fortress Interlocks, Bilston Engineering, Barnshaws and many others do an excellent job and provide valuable local employment. As the hon. Gentleman said, we also have an important aerospace cluster, with firms such as Goodrich, Timken and Moog. That is a potential growth area, which can be nurtured and built on.
What the Government do on manufacturing can help or hinder it. If we want to support an economy that makes things—I think that that desire is shared across the House—it is a mistake to abolish programmes such as grants for business investment. Over the past six years, those grants amounted to £400 million across the country, they secured about 10 times that amount in private sector investment and they protected or created about 80,000 jobs. There is good news in manufacturing at the moment, but that is a reason to support it, not to withdraw help.
I make the same point about the changes that the Government have announced to capital allowances. Just because this complex issue is not widely understood, that does not mean that it does not have an effect. The Government are keen to talk about the cut to corporation tax, but it is actually being paid for by cuts in the tax support to manufacturing industry. The Budget Red Book makes it clear that the £2.8 billion that will be taken from manufacturing is exactly the same as the amount that will be given in corporation tax cuts. In effect, there will be a shift, with the help being given to the whole economy, rather than directly to manufacturing. To put it another way, manufacturing will pay for a tax cut for the rest of the economy, which is not in the interests of the economy in my area or the companies that I mentioned.
The second point I want to make is that, when it comes to the area’s regeneration, its future and investment, we should use the local population’s diversity as a source of economic strength. Some years ago, I co-founded the Wolverhampton India project with other partners in the city, such as the city council, the university and Wolverhampton college. It was founded precisely to build on the fact that we have a large Indian population and to see what more we could do in the fields of trade, education and sport. We had fantastic support from the city’s educational institutions and the Punjabi Wolves supporters club—a fine body of people, who have driven and created a groundbreaking friendship agreement between Wolverhampton Wanderers and Jagatjit Cotton and Textile Mills football club of Punjab. Such cultural and sporting links can help with future commerce and trade. The fact that the city has a large Indian population gives us a strong and living link to a country that is one of the economic giants of the 21st century. We should build on that for future trade and commerce, and the city is already trying to do that through aerospace work with the Bangalore area.
The third issue I want to raise is skills and equipping people for the future. We have made progress on skills. There has been a lot of investment in Wolverhampton university, as well as significant investment in Wolverhampton college, and we have some excellent schools. However, in too many cases, achievement in Wolverhampton and the black country is still lower than it should be, and opportunity is denied. Governments —of either colour—cannot make globalisation go away, but they should leave no stone unturned in equipping people for globalisation. That is why educational improvement is essential. Put bluntly, we need higher standards, better results and fewer excuses for underachievement.
In that light, it is a mistake to abolish education maintenance allowances when it is crucial in today’s labour market that people can get the skills and qualifications they need. In Wolverhampton, the abolition of EMAs will affect 4,000 young people. It will affect 2,000 16 to 18-year-olds at Wolverhampton college. I recently met its students, who told me that that will make it harder for them to achieve the skills and qualifications they need. We should remember that many of these young people are not from families with a history of people going on to further and higher education and that they are sometimes the first generation to do that. The Government’s role should be to help those young people, rather than to take away the support that is there.
Does my right hon. Friend agree that it is not only short-sighted and wrong to end the education maintenance allowance, but that the so-called evidence base that was used for the decision did not take into account the particular circumstances of students who go to further education colleges such as Wolverhampton college? Many of my constituents travel there and back every day. Leaving school and going on to a further education college is difficult, and the costs involved are significant, but the Government’s decision has not taken that into account.
My hon. Friend makes a good point. The Institute for Fiscal Studies said that the maintenance allowances paid for themselves, given the benefits of higher participation in further education in the future. Issues such as transport have an important impact when families are often making decisions in difficult financial situations. The question of skills and equipping people for the future is therefore absolutely central to the economic future of Wolverhampton and the wider black country.
I want to touch on a point that the hon. Member for Wolverhampton South West made about decision making and planning, because it is crucial. He mentioned the Summer Row development, which dragged on for years. The fact is that the economics never really stacked up in the recession in the way they did beforehand. It is sad that the project is not going ahead, but we at least have clarity now, and we can plan for the future. However, I have an important question for the Government. I do not really expect the Minister to go into this in much detail, but if I was a betting man, I would say that robust discussions were taking place between his Department—Business, Innovation and Skills—and the Department for Communities and Local Government. There is a legitimate desire for localism and for people to be more involved in local decision making, but the Minister and the hon. Gentleman will also know that major investors want clarity and speed. Sometimes those two things are in tension, which is why the Labour Government made planning changes towards the end of their period in office to try to speed up the granting of permission for major projects, which has been too slow. My question as regards the rhetoric and practice of more localism is whether that tension will lead to businesses becoming frustrated about future planning and decision making. The truth is that we cannot say for certain at the moment, but it would be wrong to deny that there is a danger, because there is.
Although projects have been cancelled—in addition to Summer Row there has been the announcement by Hilton Hotels—there are also projects going ahead. On Friday I had the pleasure of being at the opening of the new Bilston police station, a development of several million pounds at the heart of the town. The increased visibility of the police presence in the town is very welcome. Of course it is a pity and an irony that we are opening a new police station at the moment when the number of police in the West Midlands police force is set to be cut significantly; but the police station itself is of course welcome. I was also able to tour the partially built new Bilston leisure centre. That is also a multi-million pound project. It is part of the Bilston urban village project, which is so important to the future of my constituency. It will have a new swimming pool, a training pool, indoor sports courts and a gymnasium. It is a crucial investment, not just because of its construction, but for quality of life and the future health of the local people. After I went there I visited a private sector development along the black country route, where a new car auction will be opened. The owners told me that at least 15 new jobs will be created there. Although we have had bad news, therefore, developments are going ahead in the city and we must build on that fact.
We must do better in decision making. The supermarket wars that affected the constituency of the hon. Member for Wolverhampton South West and my own constituency dragged on far too long. The problem was that although the different supermarkets may have owned the land they were not the only owners of the interest in the matter. The people of Wolverhampton also had an interest, which was in major sites not lying fallow for years while landowners fought battles in court, and in not having such blight on major parts of the city.
The city council has produced new plans, including the plan for the Bilston corridor. I recently attended a meeting of the Metro business partnership, which represents businesses sited along the Metro line, between the city centre and Bilston. It was ably chaired by Anna-Maria McAuliffe of the McAuliffe construction group. The concern expressed by a number of businesses was about whether we get the right balance between allocation of land for housing and for future employment. I think that in a constituency that is in the top 15 for unemployment it is important to allow potential for business to locate, and for jobs to be created. We should not get that balance wrong.
As to the local enterprise partnership, we could go back over Government decisions but I do not propose to. They made their decision to abolish the regional development agency. I would not have made it, but it has been made, and the question is what to do in the future. I pay tribute to the business people from around the black country who have worked so hard to put the local enterprise partnership project together. As we were briefed by Mr Stewart Towe last week at a meeting with the black country chamber of commerce, those people have identified a serious agenda involving skills, planning and some of the issues that we have been discussing, including transport, on which they want to take action. However, they need resources to do that, and the regional growth fund is already heavily oversubscribed. I believe that the Government will have given a false prospectus to businesses in the black country and, indeed, elsewhere in the country if, having worked so hard to put the partnerships together, they do not get the resources to deliver. We shall watch closely to see whether their effort is matched by Government effort to provide those resources. If that does not happen, it is not only the business people who have worked so hard, but our constituents, who will feel very let down.
These have been tough times for the black country economy. It was hit hard by the recession. Although unemployment is high, the interventions made by the previous Labour Government had an effect in stopping recession turning into depression. The figures for unemployment, business failure and home repossession are all significantly lower for the recession we are coming out of than they were in the previous ones. Our challenge now is to take the strong history and identity that I mentioned at the beginning of my speech and bend it to a new purpose. Our opportunity is there. We have a strong aerospace cluster: let us use it to win more trade and business. The economy is shifting towards lower-carbon purposes. Let us use the excellence and creativity of the manufacturing tradition, so that we can take opportunities in the automotive field and other low-carbon fields. The creative industries are a growing percentage of the economy and they should also be supported and nurtured in the local economy, as should distribution industries and retail, and many more. We need the right skills and the right decision-making framework, nationally and locally, and we need the backing of Government to make it happen.
It is a pleasure to serve under your chairmanship, Mrs Riordan. I congratulate my parliamentary neighbour, the hon. Member for Wolverhampton South West (Paul Uppal), on securing this important debate. Each of the three Wolverhampton MPs agree, I think, that driving regeneration in our city is a priority. There has been recent frustration about the Summer Row project to which the hon. Gentleman referred. If anything good can come out of bad news it will be the mood of co-operation in Wolverhampton—the sense that we need to pull together to make regeneration happen.
I know that in last week’s and previous council meetings there have often been heated debates, but councillors of each of the three parties understand how difficult it is to bring about regeneration. It might be easy to draw up the plans but it is hard to deliver, and lessons should be learned about the lack of progress on Summer Row, and other projects, which my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) mentioned. I pay tribute to my right hon. Friend in particular for his work as Business Minister in the Labour Government, and I want to echo some of his concerns, and the questions he put to the Minister today.
As a Member for the north of the city I shall, as the House might expect, concentrate my first remarks on the aerospace industry because there is an aerospace cluster in the north of the city. We have three major aerospace companies: Moog, Goodrich and HS Marston. We also have Timken in the south of the city. The hon. Gentleman mentioned the i54 business park and the importance of that site in creating and sustaining jobs in the city.
One of my first meetings as a Member of Parliament was with Moog, which was considering moving out of Wolverhampton, or to the i54 business park. We were determined to make sure it stayed in Wolverhampton so that we could retain the hundreds of jobs it supports. I thank Advantage West Midlands not only for working with Moog to ensure it stayed in Wolverhampton and moved on to the i54 site, but for getting the project off the ground. A lot of decontamination work was done on the site, thanks to the work of Advantage West Midlands. As my right hon. Friend said, we understand that the decision to abolish the regional development agency has been made, but I should like the Minister to comment on how to retain some regional strategic vision for the west midlands, and the black country in particular. I think that the i54 is central to that. Will the Minister say how the Government will see that vision once Advantage West Midlands has been abolished?
I would also like to comment, as did my right hon. Friend, on the work of the local enterprise partnerships. It is important that LEPs in the black country and elsewhere in the region work together. Like the i54 technology park, they have a strategic importance.
I have another question for the Minister about the i54. I know that consultation is taking place at the moment, but what will happen to the assets of Advantage West Midlands? Wolverhampton city council and South Staffordshire council have a stake in the i54 site, but most of it is owned by the RDA. I would prefer the state to retain ownership of that significant asset, as the cost of security there is substantial and I doubt whether a private sector company would want to take it on at the moment.
I turn now to exports and inward investment, which were mentioned by both of my parliamentary neighbours. I wish to speak specifically about exports. Last year, I went on a parliamentary visit to China. On my return, I was inspired to ask the manufacturing advisory service in the west midlands if it would organise a meeting for local businesses in Wolverhampton and more widely with the aim of helping them to export to China, as it is not always easy to export there. The meeting took place two weeks ago in Birmingham and there was a great turnout, with great demand from local businesses. Will the Minister say a little more about the Government’s overall strategy on driving up such exports, and ensuring that local businesses have the necessary advice and are given it on a timely basis?
My right hon. Friend mentioned partnership work with India, which is incredibly important. I know that the leadership of the council—both the Labour leader, Roger Lawrence, and the chief executive—are determined to ensure that we exploit the cultural and trade links, referred to by my right hon. Friend, between our city and India and other emerging economies around the world. Will the Minister reassure this House that when the Government finally set out their growth strategy they will take account of the strengths and weaknesses of the regions? I agree with the hon. Member for Wolverhampton South West that many of the opportunities presented by globalisation have in the past gone to London and the south-east, and that we have not always been able to grasp them. The Government should take account of those strengths and weaknesses and of the needs of the regions, and particularly of the black country. As my right hon. Friend said, the black country is shaped by its history. We used to be the beating heart of the industrial revolution. Although we still have a large manufacturing base, we have lost jobs in that sector. There is much talk about rebalancing the economy, but will the Minister tell us how much work is going on to make it happen?
I declare an interest, in that the manufacturing advisory service is based in my constituency at the Wolverhampton business park. However, that is not the only reason why I would like MAS to have a continuing regional focus. Will the Minister tell us something of the Government’s intentions? Various rumours are flying around about wanting to centralise MAS in London, but I would advise against that. Local businesses need advice that is tailored to their specific needs, and it should be delivered locally. I have received that message from several businesses in Wolverhampton, and I urge the Minister to take it on board.
I deal now with the regional growth fund. We know that that there is a substantial decrease in the money being made available. The RDAs used to receive in the region of £2 billion a year, and the regional growth fund is set at £1.4 billion over three years. If my maths is correct, that is a little over £500,000 a year, which is barely a fifth of what we had before. Like my right hon. Friend, I do not want the Government to give local business organisations a false prospectus about how much money they will receive from this pot. Will the Minister clarify the timing of decisions on bids for the regional growth fund? As expected, I support the bid from the black country local enterprise partnership, as well as that of the Black Country Reinvestment Society mentioned by the hon. Member for Wolverhampton South West. Will the Government give special consideration to those parts of the country whose needs are greatest and who were hit particularly hard?
I endorse what my hon. Friend said about the Black Country Reinvestment Society. Every time we meet businesses, they question us about access to credit, difficulties with the banks, the terms of loans and all sorts of other conditions being changed—and sometimes refusals, which makes life harder for them. The society plays a crucial role in filling that market gap by lending to small businesses that cannot otherwise get credit. It helps them to survive, to grow and to employ. I am sure my hon. Friend will acknowledge that many in our region have supported the society’s bid to the regional growth fund precisely because it fills that gap. Daily experience tells us that the banks are not filling it.
I could not agree more. The Minister will doubtless take on board the strong message that he has received from the three Members for Wolverhampton about our support for the bid from the Black Country Reinvestment Society. As my right hon. Friend said, it is important that the Government fill that gap, to ensure that loans are available to enable local businesses to grow, and thus to employ more people. Frustration is felt across the House—this is not a party political point—that the banks are not lending to viable businesses that need money to be able to flourish. The Minister will have received that message loud and clear.
Some projects have been set back by various problems, the main one being planning. My right hon. Friend mentioned the fact that two supermarkets are wrangling with each other over sites in his constituency and in that of the hon. Member for Wolverhampton South West. As my right hon. Friend so eloquently said, it affects not only the two supermarkets but our constituents. We have seen those sites lying redundant for many years while the supermarkets fight it out in the courts. I hope that progress will be made, and that the Raglan street and the old Royal hospital sites can be developed. There is a great need and a demand for that.
Another site in my constituency that has gone through this process, with bids and projects falling through, is the Springfield brewery site near the railway station. It is another example of plans being frustrated. The hon. Gentleman mentioned phase 2 of the Wolverhampton interchange project. I would like to see the railway station completed, but the work has been put back. There are uncertainties about whether it will take place, but I hope we can get it back on track.
My right hon. Friend made the good point that there is a tension between the drive for localism and the demand of business, which we hear loud and clear, for clarity and speed in the planning process. I would like to hear the Minister’s thinking on this. If we are to drive regeneration in Wolverhampton, it is essential that some of these planning problems are resolved, and that businesses have the certainty necessary to invest in Wolverhampton. We need to think about these things clearly. Is there a tension between the spirit and the provisions of the Localism Bill, and in some of the issues that we have outlined today?
It is great to see you in the Chair, Mrs Riordan, and to be taking part in this debate. I congratulate the hon. Member for Wolverhampton South West (Paul Uppal) on securing the debate, and the two Wolverhampton MPs on their brilliant contributions. My right hon. Friend the Member for Wolverhampton South East (Mr McFadden) was absolutely correct when he said that the central issue that faces us is how to restructure our economy to exploit the opportunities provided by the new industries to bring new jobs and prosperity to Wolverhampton and the wider black country, including to my own constituency.
My right hon. Friend listed a series of great 19th and 20th-century companies that have made a huge contribution to the British economy. I represent Dudley, which lit the spark that fired the industrial revolution. It was the first place to learn how to smelt cast iron using coke, without which the industrial revolution would never have taken place, changing not just Dudley and the black country but the whole of the world. The central question now is how we learn from those great innovators, who were thinking not just about the future but how they could bring in new industries and new jobs to change the region in which they lived and worked. We must do the same again in the 21st century.
Let me speak briefly about the particular issues that relate to Dudley and then about those that relate to the wider sub-region. I grew up in Dudley. I love it to bits and am really proud to represent it. Anyone who lived in Dudley in the ’70s and ’80s will know that our town centre has seen better days. We have been hit hard by three things: the growth of out-of-town shopping, the decline of traditional manufacturing on which the area’s prosperity was based, and the loss of our university campus—it was originally a teacher training college.
Under the leadership of Bill Kirk, the council is at last introducing long-awaited redevelopment plans, but they need to be put into action urgently. Will the Minister tell me whether those plans will receive the same level of support in the future as was planned in the past? It is crucial that they do so that we can get new investment in the town centre, develop vacant sites and provide new car parking and new shopping. It is crucial that the world-renowned tourism attractions at Castle Hill, such as Dudley zoo and the world-class black country museum, receive the funding that they are bidding for from the regional growth fund so that we can attract new visitors and boost the town’s economy.
I invite the Minister to visit Dudley. He will not regret it, because it is the greatest town in the country. He will see our fantastic facilities and our great plans for the town centre, which I hope he will support.
Dudley is the largest place in the country to have no university campus. The university was originally Dudley teacher training college. I grew up on the street that had the teaching training college at one end and the halls of residence at the other. As a child, I would see students with books under their arms walking up and down the road, and that must have persuaded me that staying on at school and going to college and university were the normal things to do. It is tragic that we no longer have that example in our area, because we need to get more young people staying on at college and going to university. Is the Minister prepared to treat Dudley as a special case?
I thank all hon. and right hon. Members for such a good debate. I am very heartened by the non-partisan attitude that has prevailed. It is obvious that we all have our own constituencies at heart here. I am also a trustee of the Sikh temple on Upper Villiers street in the constituency of the right hon. Member for Wolverhampton South East (Mr McFadden). It used to be the site of the original Sunbeam motor factories. Although cars are no longer produced there, love and happiness can still be found there on a Sunday—because of the more spiritual dimension that the temple has brought to Wolverhampton.
Let me return to the point about education and how we can tap into our young people’s ambition and aspiration. Much of the heritage that has been fondly mentioned here today came from a buccaneering spirit: people often felt that they could beat the world. I am sure that that attitude still exists, but it is latent and needs to be inspired. Coming from a modest background and going to a state school, I am aware of the issue. It is about being exposed to an environment that makes us think we can do whatever we want to do. We need to spread that message and ensure that it reaches down not just to teenagers but to primary and secondary schools.
[Annette Brooke in the Chair]
The hon. Gentleman is absolutely correct. We have many great strengths in our region: hard work, ingenuity, adaptability and innovation. Those are the attributes on which we launched the industrial revolution and built Britain’s economy. As my right hon. Friend said, although we have some world-beating companies, we do not have enough. The truth is—this is the central point that I want the Minister to consider—that our region has been hit harder than anywhere else in Britain during this recession. The recovery is more fragile. We will take longer to emerge from the recession and to attract new industries and new jobs unless we take action now. Such structural problems are not the result of mistakes made over the past few years. In 1971, the combined economies of the midlands and the north were greater in size that those of London and the south-east. By 1976, the economy of the west midlands had fallen behind and we have not matched the national average of output and productivity on a per capita basis for more than 30 years. We have been falling further and further behind.
Our region is the only place in the country where private sector investment has declined over the past 20 years. That is as a result of major structural challenges in relation to transport, trade, innovation, reputation and skills. The central issue is that of skills. It absolutely underpins the challenges that we face and how we need to address them. As my right hon. Friend said, we have made major improvements in this area over the past 10 years or so. For example, in 2005 employer investment in training and retraining in the west midlands was the lowest in England. By 2007, it was the fourth highest. In 2005, we had the highest proportion of vacancies owing to skill shortages, but by 2007 we had completely turned that around so that we had the lowest. We had the best performing apprenticeship programme in the country and the best Train to Gain service.
We need to boost the number of graduates working in the regional economy. We have 70,000 fewer graduates working in the west midlands than in other parts of the country. Much of that is about the structural make-up of our economy. Our region has a larger proportion of small and medium-sized enterprises than elsewhere. A struggling owner/manager of a small business who is trying to keep their head above water is not likely to be thinking about how to build links with universities, employ graduates and invest in new technologies and all the rest of it, as the major companies are able to do, so we need to address that point in particular.
Despite our region attracting some of the world-beating aerospace and engineering companies that my hon. Friend the Member for Wolverhampton North East (Emma Reynolds) and my right hon. Friend have both listed, the central issue of skills is the reason why we have not been able to attract the new industries in ways that other regions have. For example, Britain is a world leader in the manufacture of pharmaceuticals, but all the jobs in that sector went to the south-east because we did not have the skills that the pharmaceutical companies were looking for. Similarly, during the computer revolution in Britain we did not manage to attract the number of jobs that the Thames valley did because we were unable to persuade the computer companies investing in Britain that we had the skills they were looking for.
During the next few years, there will be major opportunities in the low-carbon sector, in advanced manufacturing, in health care and biomedical sciences, and in digital media, which will provide hundreds of thousands of well-paid, highly skilled jobs, and it is absolutely crucial that we have a new industrial revolution to bring those jobs to the black country. That is why the whole of our sub-region should decide collectively that we will set for our communities the ambition of achieving the biggest rise in educational standards anywhere in the country. If we do that and get colleges and universities working together to equip people with the skills they will need for the advanced manufacturing revolution and the new low-carbon industries that will emerge, as well as getting the councils working together on these issues, I am absolutely convinced that we can build a stronger economy for the future.
There are just a few final points that I want to raise with the Minister. First, I have to tell him that, for an area such as the black country, increases in tuition fees present very serious challenges to the aim of getting more young people to stay on at college and go to university. Also, the abolition of the education maintenance allowance is a disaster for the communities that the Members here today represent. I visited students at Dudley college and I found that four out of five students at the college receive EMA. Many of them are very worried about whether they will be able to stay on at college if they lose it. They are not using it for going out or for luxuries. Those who are studying construction or public services have to buy uniforms and equipment with it. They and other students use it for their transport, to buy their lunch and for their books. It is the funding that is enabling them to stay on at college, and I plead with the Minister to make an area such as ours a real priority for the support that will be available for students so that they are able to continue their studies.
Will the Minister reflect on the points that I have made about the structural challenges that the black country faces and consider how he can make an area such as ours a priority when it comes to allocating funds from the regional growth fund? If we do not restructure and breathe new life into the economy in an area such as the black country, there is no way we will be able to get the economy of the country as a whole moving forward in a way that I am sure the Government want.
It is a pleasure to appear before you again, Mrs Brooke, and it has been a pleasure to listen to the debate.
I commend the hon. Member for Wolverhampton South West (Paul Uppal) for initiating this debate on behalf of his constituency and, of course, the wider region. I hope that I get all the geographical directions and references correct in my contribution. I also commend all the right hon. and hon. Members who have spoken eloquently on behalf of their constituents today. It is extremely valuable to have the opportunity in Adjournment debates to focus on particular areas. Although that is very valuable for me, it is even more valuable for the Minister, because he can focus on that particular area of the country and the particular issues relating to it not only in the contribution that he will make to today’s debate but in his preparation for it.
The contribution that debates such as this make cannot be undervalued, especially when we have had such excellent speeches today from all parts of the House. As the hon. Member for Wolverhampton South West said, it has been a non-partisan debate because all of us want Wolverhampton and the black country to succeed. Although we have different road maps to achieve that aim I am sure that all of us can make positive contributions towards achieving it.
One issue is that we are, of course, in difficult economic times. We have just come through the worst recession since 1929 and a huge banking crisis. There are difficult times at present with very difficult growth figures. In that context, finding the right policies to allow Wolverhampton and the black country to develop and prosper is extremely difficult, and there are different routes that can be taken.
Concerns have been expressed about the possible conflicts that exist in legislation such as the Localism Bill. In an area such as Wolverhampton, it seems to me—although I of course defer to the local knowledge of the area of all right hon. and hon. Members who have spoken today—that getting the balance right between the interests of business and the interests of residents will be extremely difficult. We all have planning issues that arise in our area that are difficult for us to make calls on, because there are different and conflicting ideas about them.
One of the themes that has emerged in the debate is that, as far as Wolverhampton and the black country are concerned, the focus must be on business and growth. My right hon. Friend the Member for Wolverhampton South East (Mr McFadden) referred to the fact that his constituency is in the bottom 15 in the country as far as unemployment is concerned. That is a major threat to the prosperity and the attractiveness of the area, as it would be for any area of the country.
Of course, Wolverhampton has been well established for many years as a hugely important manufacturing city and as a city that has a huge amount to offer. As we have already heard, what needs to happen is that the attractions that made Wolverhampton successful in the past—entrepreneurial drive and individuals with ideas who were able to use those ideas to create manufacturing, jobs and prosperity—need to be developed once more. Those attractions have been developed before and they need to be developed again.
At the heart of that process is the skilled work force that we have just heard my hon. Friend the Member for Dudley North (Ian Austin) talk about. He referred to the fact that, at present, there are young people who are training and trying to get on in their lives, and they are being given support through the education maintenance allowance, but that support is being withdrawn. That is pulling a ladder away from those young people and it is a very damaging policy.
I know that the Government are introducing alternatives to the EMA. However, earlier this morning I was speaking to a group of young people from my constituency of Wrexham about the EMA. For the west midlands, that Government policy will lead to a competitive disadvantage, and that also applies to tuition fees. Therefore, that educational limb of development policy is putting Wolverhampton at a disadvantage.
What is very striking about the globalised world in which we live is that it is intensely competitive. Globalisation will not go backwards. It will continue and become more intense. Consequently, if we are to compete we must devise in our own country the right policies to deal with it. That means that we need to take advantage of the skills and the established industries that we have.
In the Wolverhampton area, aerospace is a hugely important industry. We are one of the leading aerospace manufacturers on the planet. In fact, we are the number two aerospace manufacturer, behind only the United States. To ensure that we continue in that position and continue to offer work of the highest quality, an area such as Wolverhampton needs to compete. It needs to compete internationally, so it needs to have the support of Government with provisions such as the grants for business that were referred to by my right hon. Friend. The reality is that, if that Government support is not provided within the UK, it will be provided in France, Germany, Spain, China and other parts of the world. It is simply not the case that businesses and industries such as aerospace will not move. If we do not compete on a level playing field—to use that dreadful phrase—with those countries, in terms of the type of support that the Government offer, we will lose out.
Does my hon. Friend agree that the other important point about that state help is that it is not just the Government going around signing cheques for business, as it has sometimes been characterised, but their playing a, usually, small role in levering in significantly more private sector investment? One of the striking characteristics of the Department for Business, Innovation and Skills figures on the grants for business investment scheme is that for every £1 spent by the Government £10 more was levered in from the private sector. This is not, therefore, just about propping up failing industries or holding back the future, it is about the Government playing a small role to get the private sector to play a far bigger one.
My right hon. Friend is of course absolutely right, and the examples are many, the most obvious recent one being Nissan in the north-east. Its Leaf vehicle manufacturing is supported by this Government, who decided that it was a sensible investment. With one exception, the Government have looked at the investments made by the previous Government and have supported them. They do lever in private finance, and that inward investment has to come.
We have heard that Wolverhampton has a strong Indian connection. As someone from outside of the region, I beg to suggest that that connection be used strongly by the community—I am sure it is—in relation to its competitiveness within the UK. The type of connection that culturally can exist between a city with Wolverhampton’s background and the Indian community locally can create huge export opportunities, and I venture to suggest that the university of Wolverhampton will develop Indian contacts. Does the Minister believe that the student visa restrictions being considered by the Government are in the best long-term interests of UK industry? The granting of those visas brings so much inward investment and income to our universities, and I am receiving many representations about the visa restrictions, from universities both in my constituency and beyond.
On that very point, I have had a representation from the vice-chancellor of the university of Wolverhampton, who is very concerned about the restriction on the number of student visas, especially when universities are seeing their teaching grant cut back significantly. The university of Wolverhampton grant is being cut by more than 80%, which is greater than the average, and the vice-chancellor is concerned that restricting student visa numbers will deprive the university of a significant income stream.
I thank my hon. Friend for her contribution. There is a significant diminution of the income stream at present, but the connections in the long term are also massively important. She and I visited China in the latter part of last year, and I was stunned to hear that 70% of Chinese graduates who go to university abroad take up employment abroad and do not return to China. What struck me about that was that huge cultural and business connections can be established with those students in the countries to which they have moved—it might be the United States; it might be the UK. For an export-driven economy, which I know the Minister wants to achieve, we need to have that type of connection, and that way of working with the hugely developing countries of the developing world will enable it to happen.
I would like to raise a point about local business structures and local government structures with the Minister, because I am confused about the position of the Government office for the west midlands. We all heard last year that it would be abolished as part of the restructuring of governmental agencies, and that to support localism the functions would be transferred to local government level and to centralised level—to the Department for Business, Innovation and Skills. I have read reports, including in the Financial Times, in the past week that the Secretary of State for Business, Innovation and Skills is talking about creating regional structures within certain UK geographical areas. Could the Minister indicate whether the Government office for the west midlands, among other Government offices, will have a role as far as BIS is concerned? It is important that in an area such as the west midlands there is a contribution, of some sort, at a regional level. The sense of that is far more important than the political face that might be lost by reversing the decision. Provided that the structure was right, such a body could support the type of redevelopment and regeneration that we all want to see in Wolverhampton and the black country, across the west midlands and, of course, across the rest of the UK.
I congratulate the hon. Member for Wolverhampton South West on his contribution today. He has initiated and engendered a very worthwhile debate, which I am sure will continue.
This is the first time that I have served under your chairmanship, Mrs Brooke, and I am happy to be guided by you in ensuring that we maintain order.
I congratulate my hon. Friend the Member for Wolverhampton South West (Paul Uppal) on securing the debate. I had better get my geography right. I notice that north-west Wolverhampton is struggling here, but I am sure that the Wolverhampton Members have it all covered. This has been a really good debate, with an excellent and insightful contribution at the beginning by my hon. Friend who, like other right hon. and hon. Members, correctly pointed to the need for local collaboration, whether between Members—evidence of which we have seen today—or between different civic and business partners, looking at how the future of not just the Wolverhampton economy, but those economies that surround Wolverhampton, can flourish.
My private office will be appalled by yet another diary request, but the temptations of Dudley zoo are strong, so I shall have to see when a visit might be feasible. I am grateful to the hon. Member for Dudley North (Ian Austin) for his invitation, and I shall certainly be happy to receive a more formal one in due course.
Right hon. and hon. Members are absolutely right to start by looking back at the history of the area. I will not get into the local concerns about whether the spark was in Walsall, Dudley or Wolverhampton, because I do not think that my job is worth that. What is important is that—
No, I will not get into even that debate. What is important is that Wolverhampton and its surrounding areas—the black country—are a genuinely industrial heartland, and that context makes regeneration doubly difficult, as technology and industrial capabilities have moved on. I think that the point that the hon. Member for Dudley North made was that in more recent years, as technologies and capabilities have changed, it is difficult to regenerate an area that has a long history in contaminated land, or whatever. The renewal task, therefore, can be challenging, and highlights the importance of clear national economic policies and good local leadership. I shall come on to a number of the wide-ranging issues that have been raised today.
The Government and I feel that we need fiscal stability and clear policies to best promote future growth and jobs, which does mean supporting infrastructure, ensuring that we invest in things such as manufacturing, and setting free enterprise and that can-do spirit, to which my hon. Friend referred. That is why we have set out our £200 billion 10-year national infrastructure plan, with £14 billion going into rail and £10 billion into roads, and why we want to press ahead with High Speed 2 so that London and the midlands are conjoined more effectively and dynamically. It is why we are supporting small businesses by reducing the corporation tax rate from 21p to 20p, reversing the previously planned increase in the employers’ national insurance contributions, and increasing the limit for the 10% entrepreneurial relief rate on capital gains from £2 million to £5 million. It is important to send out a signal that taking the step of building a business will be rewarded by gains created, wealth generated and, of course, additional jobs.
That is why we seek to support sectors of the economy that have been largely ignored in recent years by what I call the commentariat. Advanced manufacturing is a strong example. Although we might have different road maps for getting there, I think that all Members share a belief that the role, importance and current capabilities of manufacturing in this country have too often been ignored, particularly by the media.
That is why we are cutting the main rate of corporation tax from 28p to 24p by 2014. To address an issue raised by various Members about skills and training, it is also why we are seeking to boost apprenticeships funding by up to £250 million by the end of this spending review, which will create up to 75,000 more places a year. To return to how apprenticeships are progressed, we are seeking to ensure that we consider higher qualification levels and strengthen the element of learning alongside experienced hands. Although the classroom has a role, my instinct is that, especially in engineering, the crucial gain for apprentices is working alongside someone whose skills they are trying to learn. That practical change will be important.
I am heartened to hear that. One thing that I hear increasingly in feedback from businesses and constituents is that sometimes apprentices come along who need to develop soft skills such as communication and social skills. The academic boxes might all be ticked and everything on the CV might look fine and dandy, but they need that final level of nuance in developing business contacts and sealing the deal. Sometimes the softer, fuzzier peripheral skills need developing as well.
I agree entirely. It is not just about the core elements in the curriculum; it is also about how individuals learn what I call employability skills. [Interruption.] Did I gather that the right hon. Member for Wolverhampton South East (Mr McFadden) wanted to intervene?
Okay. I will canter on until the right hon. Gentleman wants to intervene further. Another important issue about skills that is relevant to the black country is the new generation of university technology colleges where students will be able to start training at age 14.
I thank the Minister for giving way. I wanted to intervene before he moved on from apprenticeships, but I did not want to cut short his answer to the hon. Member for Wolverhampton South West (Paul Uppal).
When I was in the Minister’s shoes and had some responsibility for these issues, we put more funds into what we called higher-level or technician-level apprenticeships, precisely in order to address the skills gaps that have been referred to. Will he acknowledge that a significant proportion of the funds that the Government are putting into apprenticeships is coming from the Train to Gain scheme? Therefore—this is a factual question; I do not want to enter into a debate about the whys and wherefores of Train to Gain—will he acknowledge that, given the cost of one apprenticeship, for which we trained three or four people under the Train to Gain scheme, if we fast-forward two years or so, the Government will actually be funding fewer learners at work than they are today?
The difficulty is that we are not comparing apples with apples. What is gained under Train to Gain is different from what is secured by apprenticeships. That is why we have sought to increase the number of apprenticeships over that period. I do not think that one can say that it is just about head count; it is also about quality, not least because engineering employers say to me that they need the right people with the right range of skills.
We could have a debate about the benefits, but my question concerns the number of people at work being helped by Government support. The Minister must know the answer. Will he acknowledge that in two years, there will be fewer learners at work funded by Government as a result of the decision to switch Government money from the Train to Gain budget, as he outlined?
The point that I am trying to make is that we are talking to businesses and asking them what they need. I am not the Minister with responsibility for skills, so before he tells me that I have said something incorrect, I will check with him and write back to hon. Members here. I am wary of making a statement that might prove incorrect. However, the right hon. Gentleman has made a sensible point. I will double-check before giving an incorrect answer.
University technology colleges are important because students will be able to start at age 14. One of the first UTCs will open at Bloxwich in the black country this September. It is an important element.
I am excited by the idea of university technology colleges. I have written to the leader of Dudley council asking whether she is prepared to consider having one. I do not see why Walsall should have one and not Dudley. Perhaps when the Minister comes to Dudley he can meet the council leader and extol the policy’s virtues to her.
I do not want to get into a debate about the rights and wrongs of abolishing the education maintenance allowance, but if student numbers in a place such as Dudley, where education skills must be our No. 1 priority, decline as a result of its abolition—although I know that the Minister hopes that they will not—will the Government think again and restore the funding that enables students to undertake studies? I am not trying to catch him out. It is a serious question.
I realise that. Our view is that by putting a strong emphasis on vocational education rather than on higher education alone, as has been the habit in recent years, we will help those numbers to grow. When the previous Government went from no tuition fees to £3,000, I suspect that we all thought that the number of participants would drop, but it rose. We must be careful when speculating, but I take the point.
A number of other issues were raised. I am aware that I have only four minutes left, so I will canter through them briefly. On the Moog deal, I say to the hon. Member for Wolverhampton North East (Emma Reynolds) and other Members that I was aware of it at the start and am pleased that regional, local and national officials were able to sort it out, because it was a concern early on. I agree with her on that point. On the broader issue of aerospace, we are strengthening our national focus on it, as we have tremendous national assets. However, we also recognise that local enterprise partnerships are best placed to lead. I know that several of them with a strong aerospace dimension are considering how they want to collaborate to work with us nationally. Getting the fusion right is important.
On the role of the local enterprise partnership, I was pleased that Wolverhampton became part of the black country LEP. Along with Dudley, Sandwell and Walsall and under the new chairmanship and board, it has drawn together strong civic and business leaders. The right hon. Gentleman was right to say that the board now looks outward, and it hopes to play on its Indian connections globally.
My hon. Friend mentioned business rates. We want to help, which is why we are simplifying how small business tax relief operates, so that it is automated and need not be bid for. We are considering greater discretion for local councils to ensure that they can use the business rate system in a way that helps locally.
Other questions were asked about assets. We have received a full register of assets from the regional development agencies. We are mindful of the balance that we need to strike between local economic regeneration and public value for money, and we will set out shortly exactly how the process will operate. The hon. Lady and others made several pitches. That is understandable, but as there are 450 applications, I will remain mute on the subject, for the obvious reason that we want to ensure that the process is open and fair.
We are investing an additional £50 million in the Manufacturing Advisory Service over the next three years. We want the service to be consistent. It has always been highly regarded, but it is of course an outreach service. I say to the hon. Lady that no decisions have yet been taken about where the headquarters might be. My concern is to ensure that the small and medium-sized businesses get a good, consistent service and, importantly, an outreach service that comes to them.
I was asked how foreign direct investment will work. Our view is that UK Trade and Investment abroad should be the voice and face of the UK when we seek inward investment, but that there should be a strong national network within England that handles inquiries. That should and will include the west midlands and the area represented by the hon. Lady.
A number of other questions relating to planning were asked, and I am sorry that I did not come to them. However, the long-term—
National Defence Medal
It is a pleasure to serve under your chairmanship, Mrs Brooke.
In essence, this debate is simple. The time has come to honour all the servicemen and women who serve our nation with a medal called the national defence medal. It would be given to the thousands upon thousands of former soldiers, sailors and air force personnel who have served their nation but have nothing to show for it. I am glad to say that some of them are present to listen to this debate. They place all their hope and confidence in the Minister that, by 1 o’clock, their wish will be granted.
The relationship of the British people to their armed forces has been transformed in recent years. Television and modern warfare have brought home the service and sacrifice that veterans have always understood, but that the public perhaps has not. Long gone are the days when Kipling could mock a nation that did not honour its soldiers when he wrote:
“For it’s Tommy this, an’ Tommy that, an’ ‘Chuck him out, the brute!’
But it’s ‘Saviour of ’is country’ when the guns begin to shoot”.
That scorn is over. In each year since 1945—save, I think, one—British armed forces personnel have been in action. Remembrance day in Rotherham and nationally is as crowded as ever, but we still have no recognition for that service. Of course, gallantry and leadership are recognised, and I urge a visit to the Imperial War museum across the river Thames to see Lord Ashcroft’s Victoria Cross gallery.
There is no recognition, however, for the many soldiers who served, and saw comrades die or wounded, or who provided the long tail of logistics and support that is as vital to military endeavour and success as the teeth of those doing the shooting at the front. A national defence medal would put that right.
In a spirit of non-partisanship, when the right hon. Gentleman’s party was in government, they introduced the veterans badge, which is a form of recognition that can be worn all year round. Perhaps he ought to address that point.
My very next point was that a veterans badge—welcome as it is—is the most that can be aspired to. Only 10% of those eligible for the badge have taken it up. A medal that arrives at one’s home and that can be shown to one’s children, grandchildren and others is qualitatively different, and I believe that the House and the nation want something better.
To achieve that, we have to take on and defeat the enemy, by which I do not mean the actual foe out in the field, or even the traditional enemy of all our soldiers, the Treasury, but the most dangerous enemy that serving men and women can face—the gentlemen of the Ministry of Defence who always know best. I remember the wonderful song, “One staff officer jumped right over another staff officer’s back”, from “Oh! What a Lovely War”, and I fear that our major generals are making Ministers jump over each other’s backs as they find excuse after excuse not to award a national defence medal to those who have served our nation.
This is not about the present Administration. More than two years ago, nearly 200 MPs signed a Commons motion calling for the establishment of a national defence medal. It was initiated by our former colleague, the right hon. and gallant Colonel Michael Mates, and supported by all Members of the House. Frankly, I wish that members of my party had dealt with the issue when in power, rather than leaving it to my colleague, the Minister, who is an occasional skiing companion of mine in the parliamentary ski race and in whom I have every confidence. The motion, however, is opposed by a committee of anonymous major generals in Whitehall who do not want to award such a medal. They are of the view that the award of a medal in recognition purely of service would somehow devalue the medal system.
We already award medals for long service and good conduct in the regular and reserve forces. In addition, medals in recognition of service have been awarded at particular times during our monarch’s reign, such as the coronation and the silver and golden jubilees. Medals are therefore awarded to people just for the coincidence of having been in uniform when the Queen was crowned or when she had served a certain number of years on the throne.
Does the right hon. Gentleman accept that although his is an extremely noble endeavour, there have been conflicts and incidents for which incredibly brave members of our armed forces have not received a medal? I am thinking in particular about the campaign to get a medal for the Arctic convoy veterans of the second world war. Those guys put up with unbelievable hardship, but they did not qualify for a medal because it was thought that they would qualify for the Atlantic star. However, they needed to have served for six months for that, and no one could manage that in the extreme conditions of keeping the supply chains open to Russia. It belittles their contribution to the war effort to say that—
I agree with the hon. Member for Gosport (Caroline Dinenage); I feel strongly about the issue. My uncle, Neil MacShane, died when his ship was sunk while on Arctic convoy duties. I have also campaigned for Bomber Command veterans to be given a medal, but that too has been refused. I could not agree more with the hon. Lady. We are talking about one or two people who are now probably in their late 80s, or even in their 90s, and I do not think it would do any harm at all. My family would certainly appreciate the award of an Arctic medal, even though it would be extremely posthumous.
The Peninsular general service medal was awarded from 1832 onwards. It was retrospectively awarded not for peacetime service, but for operational service. Therefore, following the logic of the right hon. Gentleman’s sensible arguments, I could reclaim retrospectively for my great-great-grandfather, who served in the Irish militia during the Napoleonic wars but who saw not a stroke of action. We cannot have the proposed medal if we do not honour our fathers and forefathers who actually saw campaign service but received no recognition at all. As I understand it, this is simply a medal for service, rather than campaign service.
The medal is indeed for service. The Arctic convoy and Bomber Command medals are a separate case, but if people who served in those campaigns who are still alive were given a medal that they could wear on Remembrance day and pass on to their grandchildren and so on, it would at least be some recognition.
There are medals for given conflicts and campaigns, and I welcome the decision to award the Afghanistan service medal to medical personnel who fly in for a short time. However, thousands of veterans who are still with us are denied the chance to wear a medal. In the Cyprus campaign, for example, 371 men were killed—more than in Afghanistan—over a short period in the mid-1950s, yet they needed to serve for 120 days to qualify for a medal, which is more than three months longer than the time required for the Afghanistan medal.
We should also give recognition to the more than 2 million young men between the ages of 18 and 21 who were taken away from their homes by the Act of Parliament that introduced national service. They were obliged to serve in the armed forces, and without them this country and its interests around the world at the time would not have been protected. Many are now dead, and the remainder are in their 70s and 80s. How would it devalue the medal system to award them a national defence medal?
The cold war involved a formidable threat from the Soviet and Warsaw pact forces. Many service personnel died not while fighting, but while on duty in north-west Europe, and many more were discharged through injury. One of the most critical moments was the Berlin airlift. The RAF worked tirelessly to keep West Berlin alive and to stop Stalin’s effort to take control of the city. Thirty-nine of our service personnel died in that operation. Would giving them a medal devalue the medal system? Of course not.
One of the most scandalous examples of ill treatment of our service personnel occurred in the 1950s in relation to nuclear weapon testing in Australia. Some 28,000 members of UK armed forces were used as guinea pigs in the nuclear tests conducted in Australia and the Pacific ocean area. None of those veterans had protective clothing, and they were subjected to high levels of radiation. Fewer than 3,000 of those veterans are still alive today, and it is estimated that 30% of those deceased died early in their 50s from different cancers. Many people in our communities across the country would fail to see how recognition of the award of a national defence medal to those cold war veterans would devalue the medal system.
Let us consider Northern Ireland, where IRA extremists posed a specific threat to British service personnel and their families not just in the Province, but outside Northern Ireland and, indeed, the United Kingdom. During that time, there was no normal way of life for those service personnel and certainly no safe haven. For example, nine soldiers were blown up in their barracks in Duisburg in far away Germany, and 10 Royal Marine bandsmen were killed and 20 more injured when the military school of music was blown up in Deal. A coach crowded with soldiers and their families was blown up on the M62 while they were returning to their barracks after a weekend away; there were 11 dead, including a corporal, his wife, and their two children aged 5 and 2. A staff sergeant was blown up in his car in Colchester; a colonel was shot in Bielefeld, Germany; and an RAF corporal and his four-month-old baby were shot and killed at a petrol station in Wildenrath. The list goes on.
Recognition of such service by creating a national defence medal cannot be deemed to devalue our medal system. I strongly urge the Minister to overrule his major generals and to recommend to Her Majesty that she award a UK national defence medal. On the recommendation of the Australian and New Zealand Governments, Her Majesty has already agreed to award a defence medal to their respective armed forces and veterans. If the Anzac forces and Governments can agree that with the approval of Buckingham palace, I really do not know why Britain has to trail behind.
I have been in correspondence with the Secretary of State for Defence on the matter and, in a reply sent to me last month, he got several facts wrong. For example, he wrote:
“The position remains that medals are not awarded solely as a record of service.”
However, those of us who support the idea of a national defence medal have never made that argument. We believe that there should be a single medal for service. There is the precedent of medals for specific periods of service, including the long-service good conduct medal, which is awarded for 15 years regular service; the volunteer reserve service medal, awarded after 10 years in the Territorial Army; the jubilee medals, which mark service at a particular point in time; and the Rhodesia medal, which is awarded for just 14 days service between designated dates and is not a campaign medal.
In his letter to me, the Secretary of State made reference to the veterans badge and the Elizabeth cross. I welcome the veterans badge, but we want recognition from Her Majesty and the right to wear her medal because one has served her in the armed forces. Fewer than 10% of those eligible have taken up the offer of a veterans badge. Service personnel want a medal that they can wear with pride on Remembrance day and on other appropriate occasions. The Elizabeth cross is a marvellous new decoration, but it is not an award to servicemen and women, although, of course, it is a welcome gift to their families. For armed forces personnel past or present, there remains no award for those injured or killed during service, or those present when a terrorist or other attack takes place that is aimed at military personnel.
May I politely suggest that the Ministry of Defence is out of step with public opinion, with the 184 MPs who have signed the early-day motion and with what is happening in the Commonwealth? While our Whitehall warriors ponder and pontificate, the New Zealanders, with Her Majesty’s approval, are getting ready to award their first medals in February this year.
As I said, I know from previous campaigns to get an award for Bomber Command veterans how hard the MOD combats those who want to reward our armed services personnel with a medal. My uncle was drowned when his ship was sunk on Arctic convoy duties. Those who survived have been denied a medal. Now they are in their 80s and 90s, can we not be generous and let them hand on to their grandchildren and great-grandchildren a medal that recalls the service of those sailors? I just do not understand why the Major General Blimps of the MOD are so mean and unwilling to honour service with a medal. We failed in our campaign to get a Bomber Command medal or an Arctic convoy medal, but I hope that this new Government can read the mood of the nation better, particularly as far more former serving officers are now MPs and Ministers. I urge the Minister to take command of the issue himself and tell the MOD to get on with bringing in a national defence medal.
It is a pleasure to serve under you for the first time in Westminster Hall, Mrs Brooke. I am sure that there will be many more such occasions. I congratulate the right hon. Member for Rotherham (Mr MacShane) on securing this short debate on a proposal for a national defence medal. He speaks with some history on this long-running campaign, and I acknowledge that he has an interest in the recognition of former service personnel; indeed, I have with me the letter he sent to the Secretary of State in January. I am sorry to hear that today the right hon. Gentleman regards me as representing the enemy but, nevertheless, that appears to be my position.
First, I pay tribute to the courage and dedication of both current service personnel and those who have served in the past—those from the second world war who are still alive and those have served since then whether as part of national service or whatever. My right hon. Friend the Prime Minister uses words such as “awesome” to describe our armed forces, but no words can describe the outstanding, courageous work they are doing today and, indeed, have done in the past. There can be no doubt that they have earned the nation’s recognition of their service to our country and the nation’s gratitude.
As a former serviceman, I know the hardships of service life and the pride of earning a medal. I got two after 15 years; I had to rejoin the Army to get the second one, but I do not know of anyone who joined the services in order to gain a medal. Heroic personnel who perform gallant acts do not perform such actions in hope of a medal; they do so out of instinct and because they feel it is the right thing to do. I question the value of a medal that is essentially given to anyone who has served in the armed forces. Medals should be earned not expected, and I would certainly be surprised if they were demanded.
There is a belief that the rules governing the award of medals have been applied inconsistently, so the coalition Government pledged to address that in their agreement. We have honoured that pledge and have undertaken to review the rules governing the awarding of medals. The review is considering the numerous campaigns by veterans to reconsider past cases and the justification for a national defence medal is again being re-considered as part of that. The review will report to me and work is now under way. Senior military officers—Major General Blimps, the right hon. Gentleman might call them—are contributing to the review and the chiefs of staff have been consulted. Campaign representations have also been considered.
The review aims to report its conclusions in the near future and will address the following four issues: the principles underpinning the award of medals, operational medals currently awarded to the armed forces, the award of foreign medals and proposals, such as this one, for medals for past service. At present, the position remains that medals are not awarded solely for service. The only exceptions are coronation and jubilee medals, and even then strict qualifying criteria have to be satisfied before a medal is issued. As I am sure the right hon. Gentleman will appreciate, that position cannot change until the review has concluded.
As the right hon. Gentleman knows, there are already many forms of recognition that acknowledge many aspects of service in the British armed forces. I shall set out clearly what they are. First, service personnel are already recognised for their extra effort, for courageous, distinguished and gallant acts, and for the risk and rigour they face on operations, by the award of state decorations, meritorious medals, campaign medals and commendations. The integrity of the operational honours system is a matter of the utmost importance to the Ministry of Defence and, indeed, to all service personnel to whom I speak. Medals are generally introduced for particular operations when there is the presence of particular risk and rigour. However, many service personnel have served and continue to serve on commitments that are demanding in their own way but are not recognised by a medal.
There is no evidence that today’s personnel have any particular desire for a universal defence medal. New medals are instituted primarily for serving personnel, not for veterans. Medals awarded to members of the British armed forces have a relative scarcity about them, which is not shared by many other nations; for example, the former Soviet Union, North Korea and, indeed, some of our allies. Such an approach leaves people in no doubt that medals have been truly earned. That ethos has stood us in good stead in the past and we should be cautious about changing it.
Secondly, as the right hon. Gentleman will be aware, long service and good conduct are also recognised. Thirdly, official recognition from the Government for service in the armed forces is awarded in the form of Her Majesty’s armed forces veterans badge, to which my hon. Friend the Member for New Forest East (Dr Lewis) has already alluded. Although the national defence medal supporters claim that the badge is insufficient recognition for having served, almost 1 million veterans have claimed a badge and one is now issued to all personnel as they leave the armed forces.
I have taken the time to look at the national defence medal veterans recognition report, submitted to the Ministry of Defence in June 2009 under the previous Administration. I was interested to see that the campaigners for the medal agree with, and quote, the words of Winston Churchill:
“The object of giving medals, stars and ribbons is to give pride and pleasure to those who have deserved them. At the same time a distinction is something which everybody does not possess. If all have it, it is of less value. There must, therefore, be heartburnings and disappointments on the borderline. A medal glitters, but it also casts a shadow. The task of drawing up regulations for such awards is one which does not admit of a perfect solution. It is not possible to satisfy everybody without running the risk of satisfying nobody. All that is possible is to give the greatest satisfaction to the greatest number and to hurt the feelings of the fewest.”
That was written in 1944 when Winston Churchill was busy with the second world war, and it is extraordinarily prescient. Is it not true, therefore, that just to give a medal for service would challenge that comment?
Some argue that by serving in the armed forces and by performing the daily duties of service life, service personnel should automatically receive a medal irrespective of the duties they undertook. I am sure the right hon. Gentleman agrees that duties undertaken in areas of heightened risk and rigour are not comparable to those undertaken by service personnel based in Chelsea, for example, or in Germany or Colchester. Should they qualify for the same level of recognition? A similar argument could be applied to many other professions. Doctors, nurses, police and firefighters, to name but a few, perform selfless acts on a daily basis, but they are not automatically awarded a medal in recognition of their efforts.
There needs to be a compelling argument as to why service in the armed forces should be so completely different. Some argue that being on call to deploy on operations should entitle personnel to a medal, but joining the armed forces does not guarantee operational service, even though it is highly likely in today’s climate. Many have stood ready to go to war, but thankfully were never called on to do so.
Some argue that those who undertook national service should receive special recognition, such as a national defence medal, on the grounds that conscription was mandatory and disrupted lives. Many feel that the sacrifices that were made have largely gone unrecognised by the nation. However, although there is no medal specifically for those who performed a period of national service, those conscripted for military service could qualify for the same medals as their regular colleagues, and many did. Furthermore, since national service was terminated in 1960, it has been the personal choice of an individual to join the armed forces. It would be divisive, and I have to say curious, to offer national servicemen a medal simply for being conscripted, when those who volunteered for service would be excluded from receiving the same award.
Some argue that we should adopt the principles of other countries such as Australia and New Zealand, but they withdrew from the imperial honours system many years ago. It is for them and their Governments to decide which medals they wish to institute.
The right hon. Gentleman and the national defence medal campaigners claim that there is a significant amount of support for the institution of such a medal. Although I am sure that many people are concerned about the matter—indeed, some of them are here today—in reality the representation made to my Department is very low. Of the estimated 4 million former service personnel who would qualify for the medal, less than 200 have contacted the Ministry of Defence either directly or through their Member of Parliament. Frankly, those communications are likely to be the result of the national defence medal campaign targeting former service personnel to lobby as many MPs as possible on their behalf. It is notable that an e-mail was sent out yesterday. It said that “you might suggest”—
that the recipient—
“use the short letter below for your MP to send directly to the Defence Minister...If you haven’t already could you please send me your postcode so I can ensure that every MP in the country has at least one active supporter in their constituency.”
I am sure that there are many active supporters in every constituency, but that would make a grand total of 650 people campaigning on behalf of the proposal, and I do not think that would be a great many.
I shall briefly touch on the issue of cost. The right hon. Gentleman may be interested to know that it is estimated that approximately 4 million people could apply, either for themselves or on behalf of a deceased relation, for a national defence medal, should the review conclude that one should be instituted. The estimated cost of a national defence medal could extend to as much as £300 million, or even more, because one would have to research each case where somebody claimed to qualify for a medal. Otherwise one would just be giving out medals to anybody who claimed that they were in the forces. The right hon. Gentleman grimaces, but not far from my constituency in Burbage there was a man who used to go to Remembrance day ceremonies wearing a Special Air Service beret, a full array of medals and a blazer. People thought that he was very smart until they started looking at the medals; indeed, I understand that he is currently being prosecuted. The medals he wore included medals for the Korean war, the Falklands war and, I think, the Afghan war. It is quite difficult to fit in all those wars in one period of service.
I am sure that the right hon. Gentleman would agree that the medal would cost a huge amount of taxpayers money, especially in the current financial climate. To justify such expense would be hard, particularly when the grounds for doing so appear to be somewhat thin. I must state that we would be unlikely to decline a proposal for a new medal on the grounds of cost alone, but such an expense must be warranted.
Campaigners for the medal have suggested that it could be paid for by individuals. Medals are awarded free of charge to individuals who meet or exceed the published qualifying criteria laid down for each one, from a grateful nation, expressed by the Queen. If a charge was placed on such a medal it would devalue the status of the award, and the UK honours and awards system more generally. I understand that one can buy commercially produced medals to commemorate having served under national service. However, I think that is not what people wish to have.
I have listened to the right hon. Gentleman and I assure him that we firmly believe that it is important to review the rules governing the award of medals, and that we are considering carefully the case for a national defence medal. In conclusion, I must say that those who are serving at present, or who have served in the past 50, 60, 70 or 80 years, have done their duty. The Government and I pay the highest tribute to them, but I am not sure that most of them would want that tribute recognised by the receipt of a material object such as a medal simply for having been there. The right hon. Gentleman said that the time has come. Well, it is noteworthy that this campaign started relatively recently, when personnel are earning many campaign medals—many more than I did when I was serving—but little demand for this was heard in the 1960s, 1970s, 1980s or even in the 1990s. Today, the right hon. Gentleman has urged me not to disappoint. I fear that I will disappoint him, but we will await the results of the review.
Care for the Elderly (Kent)
Thank you, Mrs Brooke. I am deeply obliged to you for giving me an extra two minutes for this debate. I am delighted and proud to have secured a debate on this important issue, which matters to all residents in Kent. I shall focus on my constituents and those of my hon. Friend the Member for Dartford (Gareth Johnson).
This matter is extremely dear to the hearts of my constituents. Securing a safe, loving home is of the utmost importance for any family member hoping to make the final years of their relation, normally their parents, nice and happy. It is not always easy, and once people find a good home, they want their family member to settle there for a long time, and not have the disruption of moving from one home to another.
That was the experience I had with my father, who was in residential care for some 10 years. For the last 10 years of his life, he suffered from Alzheimer’s. He barely recognised me and could not communicate very effectively. I had to look after him and ensure that his needs were met. That experience coincided with the period between 1997 and 2002, when regulations were changed and care homes were closing all around Kent. I had to move him from home to home, trying to ensure that he had the love, care, support and, in particular, stability that older people need in residential care.
Hon. Members will recall that we lost some 2,000 care homes during that period. My father’s experience, which was by no means unique, left me with a passion for ensuring that we look after older people who should have dignity in their final years, and the stability and care that they deserve.
I thank my hon. Friend for allowing me to comment. I am clearly not from Kent, but I have a huge interest in the issue that he raises. Does he agree that providing a service for the elderly, particularly those who suffer from neurological illness, is one of the greatest challenges for the current Government over the next few years, and that over the past two decades the British Parliament simply has not met that challenge?
I strongly agree. The population is ageing, and we know that the need for care of the elderly will increase, not lessen, over time. With the triumph of longevity comes the downside that people may well require more care—respite and day care but also residential care—for longer, and that will have a cost. There will be an expense to society, but society can rise to the challenge by ensuring that services are of the standard that we would expect. My hon. Friend’s comment is particularly relevant, given the announcement that Sampson Court, the much loved care home in my town of Deal, is to be closed by Kent county council.
Sampson Court provides a range of services—palliative care, day care and respite care—and specialises in dementia and separate elderly mentally infirm care. It is extremely important to the community and loved not only by residents but by their families, all of whom have been passionate in their support for keeping that important community facility open. Despite that, Sampson Court is no longer classed as meeting care standards—hon. Members will recall that the previous Government introduced the decent homes standard—and because it does not have en-suite bathrooms and the building is costly to maintain and in need of renovation, Kent county council says that it is too expensive to make those changes and that it cannot continue to run the home.
That decision was a challenge to the community, which started a consultation. The community has worked hard and, led by Councillor Julie Rook in Deal, has made a passionate case for not closing the home—a petition with 5,000 signatures was delivered to the council—and for finding an alternative way forward. A transfer of going concern has been raised as a possibility.
The parents of my constituent, Mr Hawker, receive care at Sampson Court. He wrote to me:
“Sampson Court is in no way beyond the end of its life at 25 years old…it’s well maintained, clean and hygienic, and en-suite facilities would be actually hazardous to those who cannot even use a toilet without assistance such as my father who has dementia and is incontinent.”
Kent county council has cited European Union procurement rules as a reason for not doing a transfer of going concern. It says that it is extraordinarily costly to do such a transfer under those rules, and that, because of the complexity, the only realistic possibility is simply to close the home and sell the site, despite the potential interest of other care home operators who might like to take it on.
My constituent Gareth Fowler, whose mother has been at Sampson Court for four years, asked the council representative at a public meeting during the consultation process where the 15 EMI residents would go. The council had no answer other than “the local area”. Mr Fowler rang every EMI care home in the local area, but none had any space. If a decision is taken to close a home, there must be an alternative. There is great concern among my constituents that there is no alternative place for them to go to.
My constituents point to the Kent county council consultation, which states:
“People rightly expect more choice in their care”.
There is no doubt that its decision has left less choice, not more. I would ask the Minister to review whether Kent county council has an effective alternative plan for elderly people. Mr Fowler’s experience suggests that it does not. Sampson Court is a much-loved community resource that is fully workable. That begs the question, why can it not be retained, if not by Kent county council then by another body, to ensure that we have proper care for the elderly in Kent?
As well as criticising Kent county council, I want to be positive about it. I understand the challenge to its budget, the challenge in meeting the decent homes standard, and the challenge of the EU public procurement regime, which is expensive and, frankly, gold-plated—it ought to be minimised. Can anything be done about public procurement in this kind of case?
The other case I have been making to Kent county council is that it could transfer the home, not as a going concern in the market but to a community interest company. That is where my interest particularly lies. Allowing a community outside the regime of Government, the procurement rules and all the regulations to take it on would enable the expertise of local care home operators to be captured so that a home could continue to operate on that site in the future. I am asking for Government support and guidance on how Sampson Court might be transferred to a CIC in partnership with local care home operators.
Hon. Members will no doubt know that a CIC could provide the benefit and excellence of a care home in a local community. It would have flexibility and access to a range of financing options, and would be a solution to the decision that Kent county council has made. It would mean that local people can come together and work to secure a community takeover that would bring the community together, provide better value for money and ensure more freedom to offer extended services. We could turn a community resource that is fast disappearing into one that is expanding.
We should not lose community resources such as Sampson Court, but this debate is not just about Sampson Court or care for the elderly in Kent. I bring the matter to the Minister’s attention because I suspect that this is a wider issue across counties and the country as a whole, and that there are many similar cases involving aged buildings, the decent homes standard and EU public procurement rules. Many communities are in the same boat, so the national picture needs to be examined to ensure that there is effective transition—and enough care for the elderly across the whole of Kent.
Local GP, John Sharvill, wrote to me. He said that, without a doubt, Sampson Court
“is an excellent institution providing fantastic care...there is no other home in this area which provides the level of care that they do in the spacious, airy, surroundings they provide”.
Using the community right to challenge and the community right to buy under the Localism Bill, soon to become an Act, may provide a way forward. There is a right for voluntary and community groups, social enterprises, parish councils and local authority employees to challenge a local authority on delivery of a service by expressing an interest in running a service for which they are responsible. The local authority must consider and respond to such a challenge, which may trigger a procurement exercise for the service, in line with relevant procedure, in which the challenging organisation could bid, alongside others. Such rights are part of the Government’s aim to create a big society. The Minister of State, Department for Communities and Local Government, my right hon. Friend the Member for Tunbridge Wells (Greg Clark), is sitting next to me. He has an interest in the Localism Bill, which is currently before the House.
When listed assets—either the freehold or a long leasehold—come up for disposal, communities will be given the chance to develop a bid and raise the capital to buy the asset when it comes on the open market. However, there are issues with that, which I would like to flag up. First, the local authority does not have to seek out possible community owners, and there is no compulsion for it to do so. That means that communities may struggle if they are up against the local authority, especially as there is no independent monitor to judge a community bid against a local authority’s plans. Secondly, if a local authority wishes to proceed with a sell-off, there is no provision for a temporary stop, a break for consideration, or a certain designated time that would allow community groups time to put together and advance a bid.
John Porter of the “Bowles Lodge Stays!” campaign, run elsewhere in Kent, also flagged up those kind of problems. He pointed out the difficulties he had over the care of his mother, Vera Woylor, who is an 89-year-old resident of the care home and does not want to move. On her behalf, he has made a strong case to Kent county council, which does not think that the right process has been followed. The ideal would be to enable continuity of care. Such issues need to be addressed, and community interest companies should be encouraged.
Ministers may consider the matter to be simply a local issue, but given the terms of the Localism Bill it is a wider national issue of how we can encourage takeovers by community interest companies and what we can do to simplify EU public procurement regulations to ensure that homes, such as Sampson Court and others across Kent, give continuity of care and love under new ownership if they cannot remain under that of Kent county council.
I congratulate my hon. Friend the Member for Dover (Charlie Elphicke) on securing this debate on an issue that is clearly important not only for Dover and Dartford but for the whole of Kent.
I hope that I will be forgiven for speaking about the Manorbrooke and The Limes care homes, which are the two affected in my constituency, because the principles that affect them are similar to those that affect homes around the entire county. I have visited both care homes and have met the staff and residents. They are two types of care home and offer two distinct services to the residents of Dartford.
First, The Limes is a care and day centre that offers an almost unique service in Kent. Many of my constituents have benefited over a considerable number of years from the service it provides because it allows patients who would otherwise need to remain in hospital to be discharged into its care, thereby relieving pressure on the local hospital in Dartford, Darent Valley hospital. It had to deal recently with extra pressure after the A&E department at nearby Queen Mary’s hospital closed its doors, and I fear that the closure of The Limes can only add to the pressure on it. Patients who might otherwise have been discharged to The Limes will either have to remain at Darent Valley hospital or find alternative care home provision. Clearly, that provision will be harder to find if care homes are closed around the county.
The “Save The Limes” campaign group has been passionate in standing up for the care home, and none more so than Laura Whitehead and Karen Baldwin, who I am pleased are engaged enough with the campaign to make the trip to Westminster for the debate my hon. Friend secured. They have made it clear that it would be a huge mistake to close The Limes. It has been claimed that it is very expensive to run, and the line that Kent county council has used time and time again is that it costs an inordinate amount of money, but in my experience the staff have not been given the opportunity to reduce the costs of care provision at the home. They certainly have not shown any reluctance or unwillingness to modernise or introduce efficiency savings. They simply have not had the chance to show that they can make savings.
The situation for Manorbrooke is similar. It is a residential care home earmarked for closure by Kent county council. The plan is for it to be demolished and a more modern facility built on the same site in the manner described by my hon. Friend. It would mean the residents having to leave their home at Manorbrooke, move elsewhere and then move back to Manorbrooke a couple of years later once the building work is complete. That would mean three different homes in two years. Surely, our elderly deserve better. Yes, the homes will be larger, with gymnasiums and even internet cafés, but we are talking about people’s homes, and that goes to the heart of the debate. No one in this Chamber or Palace would want their home taken from them, and yet that is precisely what is happening in care homes across Kent. The residents in Manorbrooke and The Limes are happy where they are—they are very happy—and they want to stay there.
Yvette Knight, who is in Strangers Gallery, has worked extremely hard to keep the care home open, and has approached the issue with a dignified and commendable attitude; as has the local county councillor, Penny Cole, who has worked tirelessly on this issue. Those who support The Limes and Manorbrooke are enormously frustrated by the whole closure programme. Surely, land could be purchased to build a new care home before the closure of the existing home takes place. One home in Kent could have been closed for that to happen, and the money used to purchase land as part of a rolling programme. That would have prevented anyone from losing their home and having to go elsewhere while other homes were built. I hope that even at this late stage, the homes can be saved and an alternative solution found by the county council, if necessary with support from central Government. I understand what the county council is trying to achieve, but I feel that the planned process of closure is wrong—very wrong. A rethink is needed.
It is a pleasure to serve under your chairmanship, Mrs Brooke. I congratulate the hon. Member for Dover (Charlie Elphicke) on securing the debate. He, like the hon. Member for Dartford (Gareth Johnson), has used it to ensure that those responsible for making the decisions are properly held to account and the issues are fully aired and in the public domain. The summing up given by the hon. Member for Dartford underlines the important contribution that a debate in Parliament can make to illuminating an issue and ensuring that local decision makers account to their public for their decisions.
The hon. Member for Dover raised an issue that is causing a great deal of concern to his constituents, the hon. Member for Dartford and many other Kent residents. He talked specifically about Sampson Court and identified the commitment that he and his constituents feel towards that facility. It is a much loved, long-standing part of the community. Both hon. Gentlemen talked about the passion displayed by those campaigning on these issues.
The county council has already taken decisions on this and other home closures of the sort about which the hon. Member for Dartford spoke. Parliament has given the responsibility for taking final decisions on care home closures to councils not to Ministers. I know from my constituency work just how upsetting care home closures can be. Clearly, in the event of any care home closure—I will not prejudge where a subsequent challenge to the decisions in Kent would get to—our first thoughts have to be about the welfare of those who live in the homes and use the services, as has been clearly described by the hon. Member for Dover who talked about his father and about the representations received from constituents. I realise that for residents and families associated with the care homes, this is an unsettling time. Moving home when a person is elderly or frail can be hugely distressing and potentially damaging to their health. If badly handled, it can actually foreshorten life—I make no bones about that.
I have asked Kent county council for reassurance about its plans to reduce the disruption and harm to residents who will be transferred as a result of the decisions that it has made. As I understand, the council is currently assessing the needs and preferences of all residents and services, and it is doing everything in its power to accommodate people’s wishes. For example, it is ensuring that people are not moved to a place that is different from the place their friends from the home are moved to. If people want to stay together, they will have the opportunity to do so.
The council also told me that the families or advocates of those affected are being kept informed during the process. That is crucial, although some of what I have heard during the debate suggests that there are different opinions about that statement, and from some of the body language, I see that others share that feeling. The council hopes to support residents to move at a pace with which they are comfortable, and evidence from past closures demonstrates that that is crucial for minimising the effects of such a move. The sense that there is an arbitrary timetable can have a significant impact on the health and well-being of an individual.
I am told that all residents and service users will be found places in centres and homes of an equivalent or higher standard. I do note, however, the representation made by the hon. Member for Dover about the experiences of his constituents and the lack of assurance that they have received so far in their efforts to discover an appropriate home for their loved ones. The council has said that, within reason, service users will not lose out financially, and that an independent arbiter will deal with any disputes over costs associated with the move.
The hon. Gentleman was right to say that we must put this into a national context, and across the country all councils are having to grasp the nettle and take painful decisions to reshape social care around the changing needs of their population. We need a broad strategic shift towards preventing and postponing dependency, and promoting greater independence. That includes ensuring that the services available are the right services for a particular point in a person’s journey with a degenerative neurological condition, such as dementia, for example, which he mentioned. Earlier diagnosis is key to sensible planning and it is important to ensure that we deliver the right care at each stage of the journey taken by an individual and their family carers. That means that over time, councils need to spend less on care services where there is overcapacity, and free-up resources to invest in more personalised support.
This Government have no ideological opposition to residential care, although there is a sense that that was the case in the past under previous Administrations. There will always be a need for good-quality residential and nursing care in our communities, and anyone who has had a long-term engagement with the sector—as I have, and I am sure other hon. Members have—will know how much it has changed over the past 20 years. The level of need and dependency of residents has risen significantly, and the length of stay has shortened.
Currently there are approximately 50,000 vacancies in care and nursing homes across the country. According to the recent “Care of Elderly People UK Market Survey” by the independent health care analysts, Laing and Buisson, the level of spare capacity in the care home sector is currently 10% nationally. That carries a significant opportunity cost and locks a public resource that could be released and spent more effectively on early intervention and more personalised forms of care.
We should be clear that these closures are not—or should not be—a question of budget pressures forcing the council’s hands. The money for social care is there. The Government made a clear choice on decisions about funding critical services, and despite inheriting the largest peacetime deficit in our history and the largest structural deficit in Europe, and despite paying £120 million a day in interest repayments on the national debt, we have chosen to protect the care and dignity of older people. In the spending review, we made it clear that an extra £2 billion a year for adult social care would be available by the end of the spending review period. Furthermore, £1 billion of that would be added to the local government formula grant, which comes on top of the existing £1.3 billion social care grant. That means that total grant funding from the Department for social care will reach £2.4 billion by 2014-15. For those keeping up with the numbers, the other £1 billion will be transferred from the NHS and spent on social care measures that also support health.
That settlement is frontloaded, so that extra resources are put into the system at the beginning of the spending period. It means that considerable amounts of extra investment are available now. Kent county council has already received £1.4 million in November to improve re-ablement services, and £4.1 million in January as part of a national investment of £162 million to cope with winter pressures facing social care services. From April, it will get an additional injection of £16.2 million, which is its share of the £648 million that we are allocating via primary care trusts to support social care. That is on top of the extra funding for social care that we are putting into the local government finance settlement—a share of the £530 million extra available nationally next year, rising to the £1 billion I have just mentioned.
My understanding from briefings I have received is that Kent county council’s approach is not a sudden, hasty, knee-jerk response to tighter financial circumstances. The proposals are part of a long-term plan in Kent to improve care and meet the changing needs of the local population. The council published its “Later Life” plan in 2009, and it has been working over the last two years to restructure and transform services to put more emphasis on prevention and practical support.
Services need to be tailored to people’s circumstances and population need, and I emphasise that residential care is part of that mix and must be carefully thought through when services are designed. We need services that deliver value for money in a climate where we expect higher demand as the population ages, and we want good quality services—whether provided in the public or independent sector—that are well equipped to give people the choice, comfort, compassion and independence they deserve.
The council argues that the facilities at Sampson Court no longer meet the standards we should expect. The hon. Gentleman has rehearsed that argument and stated his concerns. The council also argues that the building would require extensive refurbishment to bring it up to scratch, and that the money could be better used in other ways. The council’s view—painful though it clearly is—is that closure is the right way forward. I understand that many people will disagree with that, and believe that alternatives have not been adequately considered—the hon. Gentleman referred to the petition collected by Councillor Julie Rook. The Government are keen to give communities the opportunity to run community facilities. That is what the Localism Bill currently making its way through the House attempts to put in place. That Bill also seeks to reduce the barriers that enable a variety of organisations, including community groups, to provide services.
The council’s view is that it has been through an extensive consultation process and considered the alternative options. The 11 care home changes have been debated in the council’s chambers, and the proposals have been the subject of the council’s overview and scrutiny committee. I know that there are great concerns among those who have led the campaign against the closures, and I am told that lawyers have been instructed to look at pursuing the matter through a judicial review. In that way, the process that the council has gone through can be tested, and if it is flawed, the decisions will be reopened and further options considered. However, that is not a matter for me as a Minister; it is about deciding whether the process has been properly followed, and a matter for judicial review. Parliament has not given Ministers that power, and the Government have made it clear that in the past, far too much rested on the desks of Ministers in Whitehall and other officials.
During conversations with Kent council over the past few days, the director of adult social services said that the council would be pleased to continue discussions with the hon. Gentleman and his colleagues, to see whether further points of concern can be addressed. In conclusion, I hope that we have covered some of the issues raised, but in the end, this matter must be resolved locally.
Housing Benefit (Scotland)
I am sure that hon. Members on both sides of the Chamber would agree that the provision of decent homes is the mark of a civilised society. Parliament has a role in ensuring that that consensus is reflected in policy. That is why I asked for the debate. I am concerned about the consequences of the Government’s choices on housing benefit and on local housing allowances for my constituents and for the whole of Scotland.
According to the Department’s impact assessment, 55,000 households in Scotland will be worse off this year as a result of the Government’s choices on housing benefit. I have been speaking to community groups, local government, housing associations and charities in my constituency. They are deeply concerned about the impact of the Government’s choices on some of the most vulnerable members of our community. As a result of just some of the changes, £2.2 million will be taken out of the pockets of people claiming housing benefits in north Lanarkshire alone every year, and 75% of social tenants claiming housing benefit will lose out in north Lanarkshire.
Some Ministers have expressed concerns about the impact of the cuts. The Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), has said that they mean that
“some people who are on the breadline will be put below the breadline.”
Therefore, I know that this Minister will treat these genuine concerns with the respect that they deserve.
I hope that the Minister will also accept that choices that the Government have made interact in a way that will make life harder for some people. I want to draw his attention to the problems posed by the interactions between some of the changes. For instance, consider a family in which working-age social tenants claiming housing benefit are living with grown-up children. There are many such families in all our constituencies. The Government have announced their intention substantially to increase non-dependant reductions in housing benefit for both social and private tenants.
My hon. Friend is speaking remarkably well in an excellently chosen debate. Is he aware that, in addition to the vulnerable people whom he has mentioned, many of the organisations of and for people with disabilities are particularly worried about the impact on them? Many of them might be affected out of proportion to their numbers, and they really are the least able to bear it.
My right hon. Friend raises a very good point. He is well known in the House for his expertise in that area. He is right to raise the issue of the impact on disabled individuals and families in particular.
One issue that I want to press with the Minister is the Government’s intention to extend the reduced shared-room rate of housing benefit to all single people under the age of 35. That will make it harder for young people on low incomes to move out of their family home, as the rate is frequently too low to cover the costs of accommodation. Outside major cities, there are very few licences for houses in multiple occupation in Scotland. Even in the major cities, those HMOs are likely to be fully occupied already. Also, some young people, particularly those with mental or physical health problems, would find it very difficult to live in shared accommodation, in many cases with strangers.
Even if young people do move out of the family home, another problem looms. If their parents are, like many people in my constituency, working-age social tenants, they will fall foul of the limit on payments for working-age tenants who are deemed to be “under-occupying”.
I congratulate my hon. Friend on securing this very important debate. One key issue in my constituency is that there is a major drive—quite rightly, in many instances—to restrict the number of HMO licences due to the concentration in small areas. Would my hon. Friend like to comment on what impact that might have on this policy?
My hon. Friend raises a very good point. There clearly is, broadly speaking, a real pressure on HMOs. That is one area in which policies, as I am sure the Minister will agree, can have interactions and unintended consequences that lead to deleterious outcomes for vulnerable individuals.
I was saying that there are parents who are working-age social tenants who will fall foul of the limit on payments for working-age tenants who are deemed to be under-occupying. However, we know that no social landlord deliberately puts people into properties that are too large for them. The Government believe that a negative financial incentive will lead social landlords to manage their properties more efficiently. My concern is that that outcome is not guaranteed. It seems likely that that choice could harm existing tenants whose circumstances have changed: the bereaved, the divorced or those whose children have left home.
A similar negative financial incentive is being introduced for the long-term unemployed to move home to seek work. The Government will penalise the unemployed by cutting their housing benefit entitlement by 10% once they have been unemployed for a year. That cut will apply even to those who are actively seeking work. It could affect almost 300 jobseeker’s allowance claimants in my constituency alone, and I am sure that it will affect many more in some of my hon. Friends’ constituencies.
The problem—again, I am sure that the Minister will agree—is that it is not easy at the moment to find work anywhere in the country, and Scotland has a particular problem. It is a harsh reality that at the end of last year there were four people chasing every job vacancy in Scotland, and there are few signs, so far at least, of that ratio improving.
My local YMCA, which I have spoken with recently, deals every week with cases of young people who are out of work and out of a home. Those are the most vulnerable young people.
On the issue of young people leaving home and perhaps not having a home, I appreciate that my hon. Friend is not from the same city as I am, but is he aware of a report by Glasgow city council, which has assessed the impact of the housing benefit reforms and calculated that there could be a loss of £8.5 million to homelessness services? That would have an impact not only on homeless people themselves, but on the regeneration of the city of Glasgow, which we have done much work to improve. Does my hon. Friend agree that whatever the Government do to tackle housing benefit, that should not exacerbate the problem of homelessness, which we have made great strides to deal with?
I thank my hon. Friend for her intervention. She raises a very good point about Glasgow in particular, although I should say that I do consider myself a Glaswegian. Cumbernauld is not very far away. However, although I may consider myself a Glaswegian, Glaswegians may have a different view.
Every week, my local YMCA deals with young people who are out of a home and out of a job. Those are the most vulnerable young people. Many are unable even to provide the right documentation to make an initial claim for housing benefit within the narrow window open to them. Those are often young people with psychological and dependency problems, coming from difficult family backgrounds. Things that we find easy are sometimes difficult for people in a vulnerable situation.
The YMCA and other local charities tell me that the cut to housing benefits for JSA claimants will leave the young unemployed at greater risk of falling into rent arrears if they do find a place to live. I know that Ministers say that they want to encourage the unemployed to move to different areas to find work, but the Government underestimate perhaps the social, cultural and psychological challenges that are sometimes involved in that process.
Has my hon. Friend considered that the issue is not just that young people find it difficult to move? Very often, the areas where jobs are available are the areas where there is the biggest pressure on housing, so even if young people move and find a job, they might not be able to find somewhere to live.
My hon. Friend makes a good point. I was just going to suggest that Ministers will also be aware that there is a relationship between the number of jobs available and the cost of accommodation in an area. That is an extra problem facing those dealing with this aspect of policy.
Cuts to local housing allowances will make the private rented sector less affordable in more prosperous areas where work might be found. As I observed, the extension of the shared-room rate will make it harder for young people to find affordable accommodation once they leave home. Existing claimants in Glasgow will lose £7 a week on average as a result of that single change. That £7 could render a tenancy unaffordable for somebody moving in search of work. Research conducted by the Joseph Rowntree Foundation shows that there is already a shortage of private rented accommodation that meets the shared-room rate criteria.
Meanwhile, restricting payments to the 30th percentile of market rents, rather than the median, as was previously the case, will put many properties in major cities further out of reach. In north Lanarkshire, that single change will reduce the support available for a single room by £5 a week and that available for a one-bedroom flat by £7 a week. Switching uprating to the consumer prices index will, over time, compound the problem.
I congratulate my hon. Friend on securing the debate. Many people, especially in charity organisations and in the city of Glasgow, are deeply concerned about changing the uprating to CPI. Between 1997 and 2007, CPI increased by 20%, but rents increased by 70%. If we carry on in that way, housing benefit will cover only 10% of available properties by 2020. That will have a massive and devastating impact on Glasgow and other cities across the country.
I thank my hon. Friend for that important intervention. It is worth adding that CPI does not include housing costs as it stands.
The Government argue that reducing LHA will lead landlords to put rents down, but market pressure on rents in Scotland is moving them sharply upwards—it is supply and demand—and that is particularly true in the private rented sector. House building is falling. First-time buyers who are unable to secure mortgages are moving into the private rented sector. That is increasing the pressure on rents, and it would be an unusual landlord indeed who reduced his rents out of kindness.
Thanks to the Scottish National party Government slashing the budget for social housing in Scotland, waiting lists are rapidly increasing. In that context, social housing does not offer a credible alternative to the private rented sector. The vacancy rate for social homes in my constituency is less than 1%.
I am concerned that people in Scotland could face a triple whammy over the next few years. Conditions in the housing market are pushing rents upwards. At the same time, cuts to benefits are putting affordable homes out of reach. Meanwhile, the Scottish Government’s cuts to social housing mean that the sector cannot provide a viable alternative.
I therefore ask the Minister for a number of assurances. What is he doing to ensure that the housing benefits system encourages and supports people into work? What is he doing to ensure that the most vulnerable, particularly people with mental and physical health problems, including disabilities, are given the financial support that they need to remain in suitable accommodation? How will his Department support housing associations through the proposed changes and the ultimate switch to universal credit? What is his response to calls from Crisis and other organisations for tenants to be given the right to choose to have housing benefit and local housing allowances paid directly to their landlord? What is he doing to encourage his colleague the Secretary of State for Scotland to meet the head of the Convention of Scottish Local Authorities? I am sure that the Minister will address those concerns, having watched him as he has seriously addressed other concerns raised by Opposition Members.
It is a pleasure to serve under your chairmanship for what I think is the first time, Mrs Brooke. I congratulate the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) on securing the debate; I was trained before we started in how to pronounce his constituency’s name by the right hon. Member for Coatbridge, Chryston and Bellshill (Mr Clarke).
This is an important subject, and I know that the hon. Gentleman takes a close interest in it, not least because I seem constantly to be answering his written parliamentary questions on it. He has pursued the issue in an entirely thoughtful and measured manner, which is always helpful in such debates.
The hon. Gentleman raised a broad set of issues relating to the impact of the changes on his constituency and on Scotland. He also raised some more general points. He brought together changes that will come in during April, some that will be phased in with a nine-month lag for existing recipients, some for which the primary legislation has not yet been passed and some that will happen in 2013. He therefore raises quite a raft of things, and properly so, but it is worth saying that these things will not suddenly happen in April. There is, therefore, time for tenants, landlords and local authorities—but particularly tenants and landlords—to change their choices and behaviour. That is part of the point of the reforms.
The figures that the hon. Gentleman quoted at the start—the £2.2 million going out of his constituency as a result of housing benefit reductions—assume that nothing changes, but part of the point of the exercise is that things will be different in the new regime. As I am sure he knows, the context for these things is the sky-rocketing bill we face, although it is not necessarily his role to say where the £1 billion that will be added to that bill each year will come from. However, without the measures that we are taking, a large amount of extra money will go into the system without necessarily benefiting tenants.
Let me cite a slightly surprising source of evidence for that view. On 10 September, COSLA submitted to the Department its response to the consultation on the first version of the housing benefit amendments. I would not for a second suggest that it was supportive—quite the contrary; it is not—but its analysis was rather interesting. COSLA said:
“We had previously flagged up concerns, during the formal consultation prior to the roll-out of Local Housing Allowance nationally from April 2008, that this new scheme was”—
here we go—
“likely to result in a huge increase in expenditure on Housing Benefit for private sector tenants for little return”,
and that is what has happened. LHA has essentially driven up rents; it has not meant more poor people in nice houses. The response goes on:
“We raised concerns that very many landlords would increase their rents up to the LHA level and that allowing claimants to keep any excess above their contractual rent was unlikely to benefit them… because of that upward drift of rents.”
Let me say for the benefit of hon. Members that although I should very much welcome their contributions, this debate was initiated by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, and I will give way to him at any point. It is only fair to him to respond to his points.
The Scottish perspective from COSLA is that the convention expected LHA to drive up rents, and that is what seems to have happened. The question now is what will happen when we try to stop that escalation, which is where the CPI point comes in. In that respect, I should say that the CPI excludes only owner-occupiers’ housing costs, not all housing costs. That, however, is where we are trying to put a cap on the process. As far as I am aware, the national cap does not affect Scotland at all.
The question is what landlords will do in response. The hon. Gentleman’s hypothesis was that there is plenty of demand out there, so they will do nothing. However, a landlord with a potential tenant who is on LHA has a choice between not going with that tenant or telling the local authority, “What would clinch it for me would be direct payment.” We have said that we will extend the scope of direct payment, which the hon. Gentleman asked about at the end of his speech, so that a local authority will be able to agree with a landlord and a tenant to make payments direct to the landlord in return for securing a tenancy that would not otherwise have happened and for getting rents down.
Plenty of landlords rent to people on housing benefit; it is not that landlords will not do so, although I accept that some will not. A large number of landlords will rent to people on housing benefit, who are the people we are talking about. It is not that these things do not happen. A landlord looking at a potential housing benefit or LHA tenant, or thinking about renewing a tenancy, can have uncertainty about whether the tenant will pay or they can have direct payments. Direct payments are like a triple A bond; they are like guaranteed money. That is worth something to the landlord. For an investor, certainty is worth something. If a landlord just shaves a bit off the rent in return for the direct payment, which is the deal we shall try to strike, the shortfalls that the hon. Gentleman mentioned, which look a bit scary when they are multiplied, will be reduced.
The debate is about the impact on Scotland, and the hon. Gentleman will know that the average shortfall in the United Kingdom is £12, while the average figure for Scotland, if I remember correctly, is £10. It does not take much, therefore: let us take the example of a rent of £200. A landlord who reduces that by 2.5%, which is £5, or by 5%, which is £10, has suddenly wiped out the shortfall. Clearly we must ensure that that happens. We cannot just sit back and hope that landlords will cut their rent. I fully accept that. That is why we have made the change. That is important.
The regulations have been improved by the consultation and by the changes that we have made, specifically with respect to transition. We said that from April new tenancies will go straight on to the new rules, because the whole philosophy of the reforms is that the choices made by people on housing benefit—who, I fully accept, may be in work—should mirror the choice that someone would make if they had no subsidy but were just doing a low-paid job. That is the parallel. We are not trying to take a penal approach or to be harsh towards people who happen to be on LHA; we are simply trying to level the playing field. The idea is that they will make the choices in a constrained way, just as people in a low-paid job would have to do. That would, again, mean that they focused on a reduced section of the market; but properties would still be affordable. To take the broad rental market area that serves the hon. Gentleman’s constituency, which I assume is the North Lanarkshire BRMA, we estimate that after the reforms 37% of properties will be affordable. Clearly we are telling people on a relatively low income or benefit, “You have a more constrained choice than you did”; but 37% is still, by definition, more than a third of the market.
The hon. Gentleman asked questions on some more detailed points, including the single room rent. We will publish an impact assessment on that change. He also raised the important issue of people with mental health problems and what would happen if, through a reduction in subsidy, someone were to be coerced inappropriately into shared accommodation. There are already exemptions for vulnerable groups. For example, certain disabled people are not affected by the single room rent regulations; but, clearly, we will always consider the issue of vulnerable people and the impact of changes on them.
I think, technically, that right hon. and hon. Members who intervene are meant to tell me formally that they want to do so; I do not mind at all, but they have made their comments and I think it is fair that I respond to the hon. Gentleman.
There are several Scottish angles to the debate and I want to deal with some of them rather than make more general points. There is an issue about whether people who are covered by LHA are being driven into pockets—very localised areas. One aspect of the Scottish situation is that the 30th percentile tends to be closer to the 50th percentile than perhaps it is in other parts of Great Britain. The cash difference tends to be smaller, as I said earlier, so the impact is not as great as it might be in other areas where the rent distribution is more dispersed. I fully accept the point that the impact of the measures will be different in different places, but the 30th percentile has a smaller impact in Scotland because of the compressed rent distribution.
The hon. Gentleman quite properly raised the issue of unemployment. I would not for a moment suggest that it is ever easy or straightforward to find a job; but, again, headline unemployment is slightly lower in Scotland than for Great Britain as a whole. The majority of Scottish local authorities have lower unemployment rates than the Great Britain average. That is not to belittle the matter, but it is not a purely Scottish dimension. The issue is clearly one to be dealt with nationally.
As to the hon. Gentleman’s constituency and the support that we are giving, an important feature of the new scheme is discretionary housing payments. We recognise that we cannot anticipate every hard case, so we give local authorities discretion. We give them funds so that if there is someone who just does not fit the rules terribly well or who is acutely affected by the changes—the hon. Gentleman gave examples of situations that might be difficult—local authorities have discretionary funding. In 2011-12, Scotland as a whole will be getting an increase of 15% over 2010-11. That is an increase of £360,000 in discretionary housing payments. The hon. Gentleman’s local authority will be getting a 34% increase; more than double the Scottish average increase will be going to North Lanarkshire to provide additional assistance. The figure will go from £77,000 in support this year to £103,000. It is worth saying that the 2011 DHP increase is much smaller than the increases will be in succeeding years; the Great Britain-wide figure will go from £20 million this year to £30 million, and then £60 million a year. Most of the increase in DHP will be in later years, but we have already added 34% to it in the coming year for the broad rental market area of the hon. Gentleman’s constituency. Although, inevitably, that money will have to do a lot of work, it is specifically designed for the sort of hard cases he spoke about.
I have been listening closely to the Minister, because I wanted him to develop his argument before I intervened. Is he comfortable with a policy which, as he perfectly fairly described it, tries to put people who get housing benefit and may be working, on a level playing field with people who are, as he described it, low paid, but who do not get housing benefit, in the context of an economy in which there is not much evidence that people can move into better paid jobs? The structure of the economy in a place such as North Lanarkshire does not include many professional—middle-class, if you like—positions for people to move up to, if the Minister’s broader argument is about social mobility. From our point of view there is a danger that instead of focusing on trying to increase opportunities for a broad range of people from near the bottom to the middle of the income distribution, the focus is on people who are already struggling. I think the Minister would agree that we must do something about what happens further up the scale, to open up opportunities for the people who are affected.
I entirely agree with that point. We want to encourage people not simply to move into any job at the bottom of the scale; we also want to encourage career progression and additional hours and training—the things that make people employable and enable them to earn more. That is the philosophy behind the universal credit. One of the problems is that there is an issue about the incentive to take any job; once a person has a job the current system can withdraw 95% in the pound, in extreme cases. That cannot be right and it traps people. Even if jobs are available and there are opportunities to do more work or gain more skills, there is no point, because the money is simply clawed away. With a lower taper rate for most people the universal credit will give people more opportunity to do just the sort of things that the hon. Gentleman describes.
We know that the hon. Gentleman is a thoughtful Minister. A larger question looms over the issue, and that is whether, in the economy as it stands—not just in this recession but structurally over the past 30 years—there are opportunities for people to move up the ladder in large enough numbers. Does the Minister agree that such macro-structural political economy issues are related? Unless we have that possibility, what is happening may be seen as an attack on people who are already not exactly living luxurious lives.
I certainly agree that we are not talking about people leading luxurious lives. There are, as the hon. Gentleman says, bigger structural issues affecting the economy. In the past few years under a series of Governments the economy has created millions of new jobs, but some of them are part-time, and they vary in nature. One of the things that the Government are trying to do, whether through apprenticeships or a range of other initiatives, is to upskill the work force. In a global economy we shall not be able to compete with very low wages in the far east, for example.
In the final couple of moments available to me I stress that we are keen to engage with the Scottish perspective, as the hon. Gentleman suggested. COSLA is represented on the Department for Work and Pensions local authority associations steering group, which meets each month, and along with the local authority associations it was formally consulted on the draft regulations for 2011 that I mentioned earlier. Officials from the Scottish Government have attended events and meetings to discuss the impact of LHA reforms, and Members of the Scottish Government have been invited to attend a conference that we are holding in Glasgow on 3 March 2011. We have invited all Scottish benefit managers from local authorities to attend, and we are inviting officials from the Scottish Government to be involved in the LHA reform national implementation group and the evaluation of the reforms.
I was quoting from COSLA’s assertion, but we are happy to give the hon. Gentleman what evidence we have, although trying to prove cause and effect is a challenge.
I congratulate the hon. Gentleman on raising this important debate, and I am grateful to colleagues who contributed.
Question put and agreed to.