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Commons Chamber

Volume 523: debated on Wednesday 9 February 2011

House of Commons

Wednesday 9 February 2011

The House met at half-past Eleven o’clock


[Mr Speaker in the Chair]

business before questions

New Writ


That the Speaker do issue his Warrant to the Clerk of the Crown, to make out a new Writ for the electing of a Member to serve in this present Parliament for the Borough Constituency of Barnsley Central in the room of Eric Evelyn Illsley, who since his election for the said Borough Constituency has been appointed to the Office of Steward or Bailiff of Her Majesty’s Three Chiltern Hundreds of Stoke, Desborough and Burnham in the County of Buckingham.—(Ms Rosie Winterton.)

Oral Answers to Questions

Northern Ireland

The Secretary of State was asked—

Value Added Tax

1. What assessment he has made of the effect on economic growth in Northern Ireland of the increase in the basic rate of value added tax. (38253)

Before answering, may I pay tribute to Ranger David Dalzell of the 1st Battalion the Royal Irish Regiment? He came from Bangor, but he was also stationed with his regiment in my constituency at Tern Hill. I am sure the whole House will join me in offering our condolences to his family and friends, and thanking this brave young man for his service to his country after he was killed in Helmand this week.

The reckless years of debt and spending made the VAT rise a necessary step for national economic recovery. Forecasts from the Office for Budget Responsibility show that the Government’s plans will deliver sustainable growth for each of the next five years, with employment rising by 1.1 million by 2015, and the deficit falling.

When will the Secretary of State set out his paper on rebalancing the Northern Ireland economy? That is particularly crucial at a time when the VAT rise is damaging local retailers.

The hon. Lady is correct. We need to bring the paper forward as a team effort, working with local Ministers. I will come to that in response to later questions. We had a very satisfactory meeting with the Exchequer Secretary earlier this week, and we hope to publish the paper as soon as possible.

I am grateful to the Chairman of the Select Committee on Northern Ireland Affairs for his question. That has to be finally decided, but I would estimate that we should have a public consultation period of two to three months.

I associate myself with the comments of the Secretary of State on Ranger Dalzell. Across the House we are all well aware of the bravery and courage that all those young men show. We sympathise with his family at this time.

On VAT, shoppers from the Republic of Ireland coming across to Northern Ireland contribute greatly to the economy of Northern Ireland. The VAT increase has impacted directly on Northern Ireland, leading to a 10% reduction in sales and a 28% reduction in exports. What will the Secretary of State do to address that?

I am grateful to the hon. Gentleman for his comments on Ranger Dalzell.

Cross-border taxation is an issue that we will consider as part of the paper. We are acutely aware of the ability of consumers to move their spending rapidly either way, depending on taxation.

Can the Secretary of State put into context the changes in taxation? Basic rate taxpayers in Northern Ireland have had their personal allowance increase, which has taken many of them out of the tax net.

We regard Northern Ireland as an integral part of the United Kingdom. Northern Ireland taxpayers pay their tax and receive public spending in return.

I join the Secretary of State in his tribute to Ranger Dalzell and his family.

The Secretary of State has made it clear that he wants to be Northern Ireland’s man in the Cabinet. As he knows, following the rise in VAT instituted by his Government, a litre of fuel in Northern Ireland is the most expensive in any part of the UK. Can he tell the House why it is more expensive in Belfast than in North Shropshire, and what a litre of fuel costs in Belfast this morning?

Prices vary from 120p to 133p for petrol or diesel, but the right hon. Gentleman should remember that it was his Government who increased the rate of duty on fuel. He was in the bunker with the great incompetent for Kirkcaldy and Cowdenbeath (Mr Brown), who got the country into this mess in the first place.

I am glad that the Secretary of State managed to find an answer in his folder. The First Minister and Deputy First Minister are asking him urgently for help in Northern Ireland now. He has been in the job for nearly a year, but so far there has been no real help on the economy, just a promised paper on the economy that is still stuck in the printing press. Meanwhile, VAT is up, fuel prices are up and private sector business activity is reporting the biggest fall in 26 months. Hundreds are losing their jobs at Belfast Metropolitan college, 4,000 more are due to lose their jobs in health and social services and tens of thousands more jobs will go in the public sector. In Dublin, demand evaporates. Now we learn that he is losing his battle with the Chancellor for a future grab on end-of-year funding from the Executive. We can all see that it is hurting. When are people in Northern Ireland going to see it is working?

I do not know how the right hon. Gentleman has the nerve. When he was sitting in the bunker in Downing street shoring up his former boss, who overruled the right hon. Member for Edinburgh South West (Mr Darling) when he wanted to raise VAT, the Belfast News Letter found out that I was in Northern Ireland more than he was. We were in the danger zone in May, but thanks to the measures that we have taken, everyone in the UK, including in Northern Ireland and Lancashire, are in a better place as we establish stability in the public finances. We cannot go on spending £120 million a day on debt interest.

Stop-and-search Powers

My right hon. Friend the Secretary of State updated the House this morning on plans to make amendments to powers of stop and search in Northern Ireland. These powers are essential in Northern Ireland for tackling the threat from terrorism. They have prevented attacks, saved lives and led to arrests and convictions. The Police Service of Northern Ireland uses all available legislation to deal with the terrorist threat. Oversight and accountability mechanisms are in place to ensure that powers are used properly.

I thank the Minister for that response and for the statement that has been placed in the Library. The use of section 44 powers has undoubtedly saved lives in Northern Ireland, along with powers under the Justice and Security (Northern Ireland) Act 2007. What assurances can he give the House that the PSNI will in no way be hampered in its efforts to disrupt and prevent terrorist activities?

That is an entirely legitimate question. The changes that we are making are to bring legislation in Northern Ireland into line with changes to section 44. The hon. Gentleman should be reassured, because, as he would imagine, we have been discussing these matters closely with the PSNI. It has a range of other powers at its disposal, but I agree that it would be a retrograde step to limit its powers at what is a difficult time in Northern Ireland. The proposed amendment will not do that.

Will the Minister kindly confirm the precise details of the Army’s powers of stop and search if deployed in Northern Ireland?

With your leave, Mr Speaker, I would like to take this opportunity to thank colleagues on both sides of the House for their generous tributes to my young constituent—only 20 years of age—David Dalzell, who fought alongside his fellow Rangers in 1st Battalion the Royal Irish Regiment with great courage, enthusiasm and pride, but sadly lost his life in a tragic accident in Afghanistan at the weekend. I thank all Members for their comments today.

I associate myself with the hon. Lady’s comments. I can confirm that there are no plans to change the powers of stop and search for the military in Northern Ireland.

How can the Minister justify not changing the Army’s powers of stop and search in Northern Ireland, which exceed those granted to the police under the 2007 Act? They are not subject to annual renewal by Parliament as emergency provisions, as they were throughout the years of the troubles, and are now permanent and not subject to any of the accountability checks that apply to police powers?

The hon. Gentleman will be aware of the rising terrorist threat in Northern Ireland, and he will recognise the part played by the military’s bomb disposal units and the need to go about their business, not least in his own city of Londonderry, where unfortunately we had an incident recently.

When the police in Northern Ireland have used stop-and-search powers, they have used them when there is a reasonable suspicion of terrorist activity. Will the Minister reassure the House that that will continue to be the case? Dissident republican activity is on the rise, and those powers are required principally and forcibly by the police to thwart that terrorist threat.

Look, we want to make those powers watertight; we do not wish to water them down. It is because the PSNI has used those powers proportionately that we are where we are with section 44, and the Home Secretary was clear in saying that. She went to Northern Ireland and specifically said that the PSNI had been behaving properly, but we do not want anything we do in Northern Ireland to be subject to a possible challenge. That is why we are taking that action, and why a code of practice will be worked out in conjunction with the PSNI—as I say, to make the powers that we have watertight, not to water them down.

Police Service of Northern Ireland

3. What arrangements he has made to ensure that the Police Service of Northern Ireland has the resources to meet threats from dissident activity. (38255)

Funding for the PSNI is primarily a matter for the Northern Ireland Executive. However, this Government are committed to ensuring that the Chief Constable has the necessary resources to counter the threat posed by terrorist groups. The Northern Ireland Justice Minister has made a strong case to the Treasury for access to additional resources, but discussions are continuing at the highest level, and I am confident that we will have a satisfactory outcome soon.

The Chief Constable of the PSNI has requested an extra £200 million to deal with the perceived dissident threat in Northern Ireland. Yesterday the Chancellor of the Exchequer said that he was “interrogating the request”. Surely we should have had a proper response by now.

The hon. Gentleman is quite right: the Chief Constable and the Justice Minister have made that request, and we are taking it extremely seriously. The bid is, of course, for money over four years, which is probably unprecedented for the reserve, and it is not an easy matter, given the national economic circumstances that we face. I remind the hon. Gentleman, however, of the Chancellor’s words yesterday. He said:

“We will treat the request with due diligence, but I am clear that security comes first. That will be my priority.” —[Official Report, 8 February 2011; Vol. 523, c. 148.]

The Secretary of State will no doubt be as delighted as I am by the proposed visit of the Queen down to Dublin, but he will have seen the news on republican websites that there is likely to be dissident activity. What assistance will be given to the PSNI during that difficult period?

My hon. Friend will know that no visit has formally been confirmed, although everyone in the House would welcome one. I should like to confirm that we have the closest possible collaboration with the Garda Siochana out in Dublin. A couple of weeks ago I met the new commissioner, Martin Callinan, and I am delighted to say that he is absolutely as robust and as determined to face down those terrorists as his predecessor, Fachtna Murphy.

Given the continuing perceived threat from dissident activity, the disruption to normal human and economic activity two weeks ago in Belfast, and the calculating callousness of leaving a booby-trap device on a child’s bicycle, will the Secretary of State now take action to ensure that intelligence is transferred from MI5 to the Police Service of Northern Ireland, which has all the accountability mechanisms in place?

I agree with the hon. Lady about the disgusting nature of those terrorists: booby-trapping a child’s bicycle is absolutely revolting. I know that her strong belief is that the regime should be changed, but at this moment it would be crazy to move the furniture around. Let me make it very clear that Lord Carlile, who conducted an independent review of the matter, said that MI5 and the Police Service of Northern Ireland are working very closely together, and that we could not do more work, or do it more energetically, to deal with what is a very difficult threat. I am afraid that we just have to disagree on this matter, but I do agree that we have to do everything that we can to bear down—

Although PSNI funding is rightly the responsibility of the devolved Administration, will my right hon. Friend reassure the House that, in the event that dissident activity becomes much stronger, resources may be made available from the UK Government?

I thank my hon. Friend for that question. We made it clear that a bid has been made by the Justice Minister, whom I met on Monday and talked to this morning on the phone. We are raising this at the highest level of government and we are determined to stand by Northern Ireland and do the right thing.

It would be churlish of me to let this occasion pass without congratulating the right hon. Gentleman, the Minister of State, on his elevation to the Privy Council, and I do so with pleasure.

It would be negligent of me—

Order. Let me say to the hon. Gentleman that there is real pressure on time, so let us get on with the question.

It would be negligent of me, Mr Speaker, not to remind the Secretary of State that the request for additional funding has been with the Treasury since last year—for months. The signal that we send to dissident terrorists is the most important thing here. Will the Secretary of State fight for Ulster, fight against the dissidents and fight with the Treasury to get this money, which the PSNI needs now?

I thank the hon. Gentleman for his congratulations to my right hon. Friend. He is not quite right about the request—[Interruption.] No, he is not right to say “months”. The Minister of Justice has negotiated within the Executive and got a significant increase from his fellow Ministers, which we welcome. Having resolved where he stood with the Executive, he then wrote to me with a request calling on the reserve. That letter came to me in January.


4. What recent assessment he has made of the level of threat to security in Northern Ireland posed by residual terrorist groups; and if he will make a statement. (38256)

9. What recent assessment he has made of the level of threat to security in Northern Ireland posed by residual terrorist groups; and if he will make a statement. (38262)

The threat level in Northern Ireland remains at severe. So far this year there have been 15 arrests and three persons charged with terrorist-related offences. This follows 210 arrests and 80 persons charged in 2010. The severity of the threat was highlighted by the recent Antrim road incident, for which there have been three arrests in the past 48 hours. This attack not only endangered lives but also caused major disruption to local communities and businesses.

I thank my right hon. Friend for that answer. Does he agree that cross-border co-operation between the north and the south is essential to address the level of threat posed by terrorist groups?

In a word, yes. My hon. Friend will have heard my right hon. Friend the Secretary of State say that he has now met the new chief of the Garda Siochana, Martin Callinan. We continue to work very closely with the Garda, which has had some very lucky finds and some finds as a result of its hard work and co-operation with the PSNI. We applaud the work—

The Minister has made it clear that he is in negotiation with the Treasury over the extra funds needed to tackle dissident groups. Can he say at this stage whether he agrees with the assessment of the Chief Constable that this money is required?

Clearly we do, because we have endorsed it. These things do not come out of the blue. We are working very closely with the PSNI. We continue to work with the Department of Justice and David Ford, and we continue to work with the Treasury. The hon. Gentleman needs to think about the sums of money that are involved in all these things. He would surely agree that it is only fit, right and proper that the Treasury looks at all applications for funding very closely so that we do not find ourselves in the same hole that we were in when we came into power in May last year.

The recent third annual report of the independent reviewer of the Justice and Security (Northern Ireland) Act 2007 states:

“So far as terrorism is concerned, the activities of the residual terrorist groups have been dangerous and disruptive.”

What steps is my right hon. Friend taking to help Northern Ireland to combat this threat?

The threat in Northern Ireland is extremely serious. The majority of people in Northern Ireland are against the residual terrorist groups, which have no support in the community and are disrupting businesses. In the case of the Antrim road incident, they put about 100 people out of their houses on one of the coldest nights of the year. We continue to work extremely closely with the PSNI. The PSNI works with the Garda in the Republic of Ireland to bear down on these terrorists. We are certain that we can do that and drive them out. They have no place in modern Northern Ireland—

Intelligence agencies tell us that a republican group in County Tyrone is planning to announce its appearance with a bombing wave in Northern Ireland. One hundred members of the Provisional IRA have seemingly pledged their allegiance to this new group. Can the Minister assure the House that any republican prisoner released under the Belfast agreement who becomes a member of this group will immediately be returned to prison?

I can reassure the hon. Gentleman that the Secretary of State and I keep under constant review the possibility of recalling those who have been released earlier. It is under constant review.

I thank the Minister and the Secretary of State for the work they have been doing with the Treasury to address the problems that are faced with dissident terrorist activity. Is the Minister concerned that the current to-ing and fro-ing is giving succour to those dissident terrorists when what the Treasury needs to do is to stand by commitments made?

No, I do not believe that. I do believe, as I said to the hon. Member for Caerphilly (Mr David), that the PSNI has made a good case to the Treasury. We have worked on that with the PSNI and the Department of Justice. It is now up to the various bodies involved to negotiate an outcome. I can only repeat what the Chancellor said yesterday in answer to the hon. Member for Ealing North (Stephen Pound):

“I am clear that security comes first.”—[Official Report, 8 February 2011; Vol. 523, c. 148.]

I have no reason to suppose that the Chancellor has changed his mind in the intervening 24 hours.

Will the Minister comment on the assessments that have been made of the intentions of dissident republicans here on the mainland with regard to the preparations for the Olympics? What might that activity mean in terms of future terrorist attacks here?

The right hon. Gentleman asks that question 15 years to the day since the Canary Wharf bombing, which heralded the end of the IRA ceasefire. It is therefore a timely question on a date that we all remember. Of course, there is a threat here from Northern Ireland-related terrorism. That is why, for the first time ever, the Home Secretary raised the threat level. I assure hon. Members that all services are working closely together to ensure that any attempt to disrupt the Olympics or any other occasion of national importance in the coming months or years—

Economic Development

5. What recent discussions he has had with Ministers in the Northern Ireland Executive on economic development in Northern Ireland. (38258)

The Minister of State and I met last week with the Exchequer Secretary and Northern Ireland’s First Minister, Deputy First Minister, Minister of Finance and Personnel, and Minister of Enterprise, Trade and Finance to discuss the Government paper on rebalancing the Northern Ireland economy and promoting investment and growth.

Given the coming corporation tax cut, the national insurance contributions holiday for small businesses and the avoidance of Labour’s national insurance tax increase next month, does the Secretary of State agree that this Government are restoring Northern Ireland’s reputation as a destination for inward investment, which was badly damaged by the previous Government?

I endorse my hon. Friend’s comments. We had an excellent meeting at Hillsborough only last week with a number of major businesses, at which we saw significant investment coming in from Denmark. I am pleased to say that our plans were endorsed by a coalition of significant business organisations last week.

Will the Secretary of State outline his assessment of the potential impact on the Northern Ireland economy of the reduction in corporation tax, and of its cost?

The coalition of businesses that I mentioned gave an estimate last week of 94,000 jobs, and the Northern Ireland Economic Reform Group published a report yesterday with an estimate of 90,000 jobs. On the costs, the hon. Gentleman should consider the case of Canada, where corporation tax has been reduced over recent years and revenue has increased. He will have to be patient and wait for the publication of our paper, which I hope will happen soon.

Does the Secretary of State agree that Northern Ireland urgently needs meaningful action on creating economic opportunity? Has there been any discussion about how we might create the authority for the Northern Ireland Executive to create bonds, thereby creating private funding to boost our construction industry and build the necessary schools and infrastructure that are missing?

Order. There is far too much noise in the Chamber. [Hon. Members: “Hear! Hear!”] Agreement is one thing; abiding by it is another. Ministers cannot even hear what is being asked. A bit of order please.

I am grateful to the hon. Gentleman for his question. We will have a consultation period once the paper is published. He made an interesting suggestion, which the Chancellor will have heard. I hope that he will put it through formally in the consultation process.

Economic Affairs

7. When the Government expect to publish their proposals for rebalancing the Northern Ireland economy. (38260)

The Exchequer Secretary, the Minister of State and I continue to work intensively with Northern Ireland Ministers on the Government’s consultation paper to set out measures aimed at rebalancing and growing the Northern Ireland economy. We hope to complete our work and publish the paper soon.

Does the Secretary of State accept that the Northern Ireland economy needs to stimulate the private sector? How do the Government propose to do that?

The hon. Gentleman is right. According to one report, Northern Ireland’s economy depends on public spending for 77.6% of its gross domestic product. That is wholly and totally unsustainable. I have been visiting Northern Ireland for three and a half years now and visiting businesses, and we are considering a whole range of measures for rebalancing the economy and helping to promote the private sector, which will be published in our report. There are excellent private businesses in Northern Ireland, just not enough.

The Secretary of State will be aware that to travel from Aldergrove airport in Northern Ireland on a transatlantic flight, a passenger has to spend an additional £150 in tax. If he travelled from the south of Ireland, 90 miles away, as of 1 March he would pay €3 in tax. What is the Secretary of State going to do about that to encourage people to travel on transatlantic flights from Northern Ireland?

The hon. Gentleman raises an important issue. I discussed it with Declan Kelly, the US envoy, 10 days ago, and it was also discussed at our meeting with local Ministers and the Exchequer Secretary earlier this week. My right hon. Friend the Minister of State is working on it with colleagues in the Treasury.

Prime Minister

The Prime Minister was asked—


I am sure the whole House will wish to join me in paying tribute to Ranger David Dalzell, from 1st Battalion the Royal Irish Regiment, who died on Friday, and Warrant Officer Class 2 Colin Beckett, from 3rd Battalion the Parachute Regiment, who died on Saturday. They were both highly respected soldiers who served with the utmost dedication and pride. They will be hugely missed by their colleagues and by all who knew them, and our deepest sympathy should be with their family and their friends.

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

I know that the whole House will want to join the Prime Minister in his expression of sympathy for the recent loss of life in Afghanistan. Training establishments in my constituency, such as the Sennybridge ranges and the infantry battle school, have built up very good relationships between the community and the military, which are ongoing and strengthening.

UK universities have a worldwide reputation for teaching and research. Many foreign students wish to attend those universities, and they are important not least because of the £5 billion that they contribute to the national economy. Many universities are very concerned that Government proposals—

Can the Prime Minister give an assurance to the universities that any proposals will not discourage the recruitment of genuine students?

The hon. Gentleman makes an extremely good point. Our universities in this country are world-class, and we want students from around the world to come to those universities to study, not just for the contribution that they bring financially but because of the links they will make between our country and their country in years to come.

I can tell the hon. Gentleman that we are not currently looking at limits on tier 4 immigration visas, but I make this point to anybody who is concerned about the issue: I profoundly believe that we can have excellent universities, open to foreign students, and control immigration at the same time. The reason I am so confident is that last year there were about 91,000 students who did not go to the trusted universities but went to other colleges—some 600 colleges. I am sure that the extent of the abuse is very great, and if we crack down on that abuse we can make sure that there are many students coming to our excellent universities.

I join the Prime Minister in paying tribute to Ranger David Dalzell, from 1st Battalion the Royal Irish Regiment, and Warrant Officer Class 2 Colin Beckett, from 3rd Battalion the Parachute Regiment. We should all remember both men for their heroism, their dedication and their sacrifice, and our deep condolences go to their family and friends.

Can the Prime Minister tell us, how is his big society going?

I actually believe that almost every single Member of this House of Commons backs what we are talking about. Let me just explain what it is. The idea of devolving power to local authorities, and beyond to communities, was in his manifesto, in my manifesto and indeed in the Liberal Democrat manifesto. I think we all support it. The idea of opening up public services to more local involvement and control, again, was in all our manifestos, and we support it. I believe that probably every single Member of the House spends time in their own constituency encouraging volunteering and philanthropic giving, and wants people to play a bigger part in a bigger society. I think the whole House is united on that.

We all support thriving communities, which is why there is such concern from charities up and down the country. Why does the Prime Minister not listen to people who know a lot about volunteering, such as Dame Elisabeth Hoodless, the chief executive of Community Service Volunteers, which is the largest volunteering charity in Britain, who says that his policies are “destroying the volunteer army”?

Obviously, I do not agree with what Dame Elisabeth Hoodless has said, but I want to work with all those involved in charities and voluntary bodies to encourage them to play a strong part. We are putting £470 million into charities and voluntary bodies across this spending review. We are also establishing a £100 million transition fund to help charities that are affected by cuts. I can today tell the right hon. Gentleman for the first time that because of our deal with the banks the big society bank—[Interruption.] Wait for it. The big society bank will be taking £200 million from Britain’s banks to put into the voluntary sector. Labour would have got nothing out of the banks, so I am sure that he will want to stand up and welcome that.

The Prime Minister does not mention that he is cutting billions of pounds from voluntary sector organisations up and down this country. Let us take an example of where parents volunteer and of a crucial part of local communities: Sure Start. Before the election, he promised to protect Sure Start, but in fact he decided to cut funding by 9%, and the Daycare Trust says that 250 Sure Starts are expected to close. Can he tell us how that is helping the big society?

First, let me just say this: Labour put money into the banks; we are taking money out of the banks and putting it into the big society.

The right hon. Gentleman asks specifically about Sure Start and the Daycare Trust. I must say that, not for the first time, he has not done his homework, because the chief executive of the Daycare Trust, Anand Shukla, said:

“The Government has allocated sufficient funding for the existing network of Sure Start Children’s Centres to be maintained”—[Interruption.]

Order. These exchanges are excessively rowdy—[Interruption.] Order. Again, I must ask Members on both sides to consider what the public think of this sort of behaviour. The Prime Minister—[Interruption.] Order. Questions will be heard, and the answers from the Prime Minister will be heard.

I look forward to the answer to this one. We have maintained the money for Sure Start and the money for children’s centres, and the head of the Daycare Trust backs our view rather than the right hon. Gentleman’s.

No, the Prime Minister has cut the funding and we will judge him on whether Sure Start centres close over the coming months.

The problem with the Prime Minister’s argument on local government, and with the nonsense peddled by the local government Secretary, is that they say they can make 28% cuts in local government funding and not affect any front-line services. What does the Conservative head of the Local Government Association say about that? She says that the local government Secretary is “detached from reality”.

Let us ask about libraries. Four libraries are threatened with closure in the Prime Minister’s own constituency, and hundreds are threatened up and down the country. Can he explain to people who are concerned about that how he expects people to volunteer at the local library if it is being shut down?

Let me just deal with the right hon. Gentleman’s question on Sure Start. I know he got that wrong—[Interruption.] We will come to libraries in a minute. On Sure Start, the budget is going from £2.212 million to £2.297 million. That budget is going up. That is what is happening.

The right hon. Gentleman gave a particular example, so let me put one to him—[Interruption.] We will come to libraries. Let me take the case of one council: Liverpool council. The cuts will mean that, by 2013, Liverpool council will go back to the level of grant it received in 2009, so what we are seeing is politically motivated moves by Labour councils. I remember the times when Labour leaders stood up to Labour councils that made those decisions.

On the issue of libraries, because we are taking council spending back generally to the level of the grants in 2007, I see no reason why they should not continue with a very well funded network of libraries. We all know a truth about libraries, which is that those which will succeed are those that wake up to the world of new technology, the internet and everything else, and investment goes in. That is what needs to happen. Should councils look at community solutions for other libraries? I believe that they should. Instead of sniping and jumping on every bandwagon, the right hon. Gentleman should get behind the big society.

Only this Prime Minister could blame the libraries for closing. He needs to understand why his big society idea is in such trouble. It is because libraries, Sure Start centres, citizens advice bureaux, community centres—including in Hammersmith and Fulham, his flagship council—which are at the heart of our society, are threatened with closure up and down the country. If it is going so well, why does his big society adviser, Paul Twivy, say that this idea

“is increasingly loathed by the public”?

We were all waiting for the right hon. Gentleman’s big idea, and we have now got it. Labour has published its fresh new ideas. The tree was chopped down, but there is nothing in the book. We all knew that we wanted a blank page, but no one thought that he would publish a whole book of them. What are his plans? What are his great ideas? He has not got a single idea for making this country a better place. Instead of sniping, why does he not join in and work out how we could build a bigger society in our country?

The Prime Minister should not get so angry: it will cloud his judgment. He is not the first Prime Minister I have said that to—[Hon. Members: “Oh.”] Did not the right hon. Member for Haltemprice and Howden (Mr Davis) get to the truth behind the Prime Minister’s motives? The right hon. Gentleman said:

“If you talk about the small state, people think you’re Attila the Hun. If you talk about the big society, people think you’re Mother Teresa.”

After what the Prime Minister is doing to charities up and down this country, no one will think he is Mother Teresa. Is not the truth being exposed day by day—he is cutting too far and too fast, and society is becoming smaller and weaker, not bigger and stronger?

The problem with everything that the right hon. Gentleman has said is that all the cuts that we are having to make are because of the complete mess that he made of the economy. That is the background for this whole debate. We now know what they think of the inheritance that they left us, because the shadow Chancellor has said:

“I don’t think we had a structural deficit at all in that period”.

The Institute for Fiscal Studies says:

“By the eve of the financial crisis…the UK”


“one of the largest structural budget deficits in the developed world.”

May I advise the right hon. Gentleman that the first stage of recovery is to recognise that you have a problem? The truth about the Opposition is that they doubled the debt, let the banks rip and bankrupted the country, and their only message is, “Let us do it all over again.”

Q2. My constituent, Rifleman Jack Otter, lost both his legs and an arm while serving in Afghanistan more than 15 months ago. I am sure that the Prime Minister and the whole House understand the debt that we owe Jack and others like him who have served our country. With the number of British soldiers losing limbs having increased by 40% from 2009 to 2010, does the Prime Minister agree that it is important that we find access to new resources to ensure that patients and staff at Headley Court can continue their excellent standard of work, which is sadly coming under greater pressure? (39062)

My hon. Friend makes an incredibly important point about what is happening in terms of the number of people returning as single, double and sometimes treble amputees, and about what we as a society must do to support them. I have visited Headley Court, and I know that many others have done so. It is an absolutely magnificent facility. A new ward opened in September last year and it now has a capacity of 111 trauma beds. Because of what Help for Heroes has done, there is a 25-metre swimming pool, a Battle of Britain gym with a sprung sports floor and a centre for mental and cognitive health. But we must go on ensuring that that magnificent facility is continually improved and that we do everything for our brave returning soldiers.

Just over a year ago the Prime Minister visited a maternity unit and found our midwives to be overworked. As a result, he promised that, with a Conservative Government, he would bring about 3,000 more midwives. A year on, could he tell us how he has gone about that?

The first thing that we have done is ignored the advice from Labour and increased the NHS budget. We would not be making progress on any of these health issues if we had followed the advice of the hon. Lady’s party and cut the NHS. We do need more midwives and more resources; we are making sure that those are going in.

Q3. Will the Prime Minister reflect on the decision taken in the House of Lords on Monday, which was supported by many senior Conservatives and Cross Benchers, to enable Parliament to have a review in the event of fewer than four in 10 people participating in the AV referendum? Will my right hon. Friend consider this compromise to be a reasonable one and to be consistent with the coalition agreement? Failing that, will he trust his own Back Benchers in a free vote to make their own judgments? (39063)

I have to say to my hon. Friend that we have not had thresholds in previous referendums, but I do not think that he should be so down on this. I am sure—[Interruption.]

Order. The Prime Minister’s answer must be heard. All this noise is—[Interruption.] Order. All this noise is damaging colleagues’ chance of getting in.

I am sure that my hon. Friend will work with me to get the turnout up, particularly for the no vote.

Last week a cross-party Welsh Affairs Committee report criticised the Government’s proposal to close Newport passport office, which will see the loss of 250 jobs, be devastating for the economy of Newport and does not appear to be saving any money. Will the Prime Minister agree to meet me and my hon. Friend the Member for Newport West (Paul Flynn), so that we can put the case to him personally?

I am looking at this decision. It is an important decision, and I know that there is great work being done in reflecting on what jobs can be saved in Newport and Liverpool, where the two competing offices are. I am very happy to arrange for the hon. Lady to meet my hon. Friend the Minister for Immigration, because he is the one who will have to make the decision, so that he can hear from her and the hon. Member for Newport West (Paul Flynn) directly.

Nuclear Deterrent

Q4. What assessment he has made of the effect of coalition politics on the future of the UK’s nuclear deterrent. (39064)

We have made it clear that we are committed to maintaining a nuclear deterrent based on Trident. That is why it was excluded from the strategic defence and security review, and why we commissioned a separate value-for-money study. The replacement of Trident is going ahead, and initial gate will be passed soon. As set out in the coalition agreement, the Liberal Democrats will continue to make the case for alternatives.

When the coalition was being formed, my right hon. Friend promised a meeting of all Conservative MPs that the Liberal Democrats would support the replacement of Trident. As we know, the key decision has been postponed until after the next election, and the Liberal Democrats, from their president downwards, have been boasting that this was their achievement. Will the Prime Minister give a pledge to this House and to the country that in the event of another hung Parliament, if the Liberal Democrats demand as the price for another coalition the scrapping of Trident, he will refuse to pay that price?

First of all, let me make this point. The replacement of Trident is going ahead. The investment is going in; the initial gate will soon be passed. The reason for the delay is that we had a value-for-money study because we desperately need to save some money in the Ministry of Defence, so that we can invest in front-line capability. That is the argument there. In terms of the future, all I can say to the hon. Gentleman is that I am in favour of a full replacement for Trident, a continuous at-sea deterrent and making sure that we keep our guard up. That is Conservative policy; it will remain Conservative policy as long as I am the leader of this party.

But with due respect, the Prime Minister chose to break his word on the education maintenance allowance and matters such as reorganising the NHS, so why will this pledge prove any different?

I have visited the hon. Gentleman’s constituency and I know how important this issue is for him. I profoundly believe that we should maintain our independent nuclear deterrent. I have looked at all the alternatives over the years, and I am completely convinced that we need a submarine-based alternative—a full replacement for Trident—in order to guarantee the ultimate insurance policy for this country. That is my view, the view of my party and the view of most of the people sitting opposite me. I believe that there is all-party support for the move.


Q5. Lord Carlile, the official reviewer of terrorism legislation, said last week that this country had become a “safe haven” for terrorists. Will my right hon. Friend give the House an assurance that this Government will do all that they possibly can to deport foreign nationals who are suspected of involvement in terrorism? (39065)

My hon. Friend is absolutely right to raise this point. I have been concerned for many years that we have not been able to deport people we suspect of plotting against us in the way that we should be able to. Lord Carlile has spoken and written about this extremely clearly. We have negotiated return agreements—so-called deportation with assurance agreements—with Algeria, Jordan, Ethiopia, Libya and Lebanon, but I want us to negotiate many, many more. In the end, we must do whatever is necessary to ensure that we can keep this country safe.

Q6. Northern Ireland is still being held back by some dissident republican groups. To deal with this, the Chief Constable has asked for up-front access to the reserve allocation over the next four years. Does the Prime Minister agree that, if the threat is not dealt with, it will quickly spread to the rest of the United Kingdom? Will he grant the Chief Constable’s request? (39066)

I have met the Chief Constable on several occasions since becoming Prime Minister. He came to the meeting of the National Security Council at which we discussed the security situation in Northern Ireland. We will do what is necessary to ensure that security, the police and everything else are properly funded. I think that it is right, now that these issues are devolved, that there is greater decision making and greater efforts to put money into the front line in Northern Ireland itself, but of course we always stand ready to help where necessary.

The Prime Minister might recall visiting the maternity department at Fairfield hospital in Bury when he was Leader of the Opposition. Last week, despite our pledge to keep it open and despite the very useful new criteria issued by the Department of Health, the NHS in the north-west decided to continue with the closure decision that was taken by Labour. Will my right hon. Friend discuss with the Secretary of State for Health the ways in which we can keep our pledge on this matter?

I am very happy to discuss that issue with my hon. Friend and with the Secretary of State for Health. As he knows, we have introduced far tougher steps before these decisions can be taken, to ensure that local needs, and the views of patients and local GPs, are respected. The whole point about the new system, which is GP-led, is that hospitals will thrive when local people use and value them.

Q7. In the past few weeks, the Government have rebranded antisocial behaviour orders as criminal behaviour orders, renamed control orders as terrorism prevention and investigation measures, and rechristened curfews as overnight residence requirements. Does the Prime Minister not realise that no amount of rebranding will disguise the fact that a Government preparing to cut police numbers by 10,000 will be seen as nothing other than weak on antisocial behaviour, reckless on terrorism and soft on crime? (39067)

I notice that the Labour party is going a long way to rebranding new Labour as old and irresponsible Labour, and I have to say that the project is going very well.

Does my right hon. Friend believe that the quality of the debate on the future of Britain’s debt burden is enhanced by the deficit denial on the Opposition Front Bench?

My hon. Friend makes an extremely good point. The Opposition were beginning to understand that they had left us with a debt burden, and beginning to own up to it, but now, with the new shadow Chancellor, they are in complete and utter deficit denial. They have not even taken the first step to being a responsible Opposition.

Q8. Around the country, driving test centres such as those at Arbroath and Forfar in my constituency are being closed without any consultation whatever with the local community or instructors. Surely that is the complete opposite of localism. Will the Prime Minister lean over and instruct his Transport Secretary to put a stop to such closures until there has been at the very least consultation with the local community and consideration of alternative ways to provide the service? (39068)

I understand the importance of these facilities in rural communities. As I understand it, the chief executive of the Driving Standards Agency has said that she will explore further how to continue to offer facilities in these locations. I will ask the Under-Secretary of State for Transport, my hon. Friend the Member for Hemel Hempstead (Mike Penning), to contact the hon. Gentleman to discuss this important issue with him.

Last week, there was a memorial service in Gloucester cathedral for Tom Walkinshaw, a constituent of the Prime Minister and a legend in my city for all he did to revive Gloucester rugby. Does the Prime Minister agree that Tom, and many others like him who have invested so much of their own money in our great sports, have done a lot to increase self-belief and pride in our cities?

My hon. Friend speaks very well of someone who lived in my constituency and invested not only in rugby, but in Formula 1, which has been an absolutely world-beating industry for our country. We should celebrate that, particularly in my region, where so many people are employed in this incredibly high-tech endeavour.

Q9. Does not the Prime Minister’s plan to sell off the forests show once again that he knows the price of everything but the value of nothing? (39069)

Let me say to the hon. Lady and to all hon. Members who I know are very interested in this subject that we are having a consultation; we are listening to people’s views. Let me make a couple of things clear. First, we will not do what happened under the last Government, which was the sale of forests with absolutely no guarantees of access. [Interruption.] Yes, that is exactly what they did. We also have a good opportunity to bust a few myths about this situation. The idea that all Forestry Commission forests are open to the public and do not charge is simply not true. Many forests, such as the New Forest, are not owned by the Forestry Commission and have much better access, no parking charges and very good records on habitat. While we are having this consultation, we should bust some of the myths that have been put around about this idea.

The latest US Department of Defence report to Congress states that the Taliban’s strength lies in the Afghan people’s perception that the Taliban will ultimately be victorious. Is it not now time for fresh thinking on Afghanistan, which must include getting the Americans to open talks with the Taliban, because as we proved in Northern Ireland it is possible to talk and fight at the same time?

I would say two things to my hon. Friend. First, of course there has to be a political process; almost every insurgency in history has ended through some combination of military might and a political process. I accept that, but where I disagree with my hon. Friend is that I think that this year the Taliban will see that there is no meaningful removal of US forces from Afghanistan. This will be another year in which the Taliban are going to be heavily defeated on the battlefield, which will make a political solution more rather than less likely.

Q10. Why is the Prime Minister cutting benefits and pensions for the armed forces? Does he intend to honour the agreement with our armed forces? (39070)

I do not accept what the hon. Gentleman says. Indeed, the armed forces are excluded from John Hutton’s report, which is looking at increasing people’s contributions. Let me remind the hon. Gentleman of what we have done for the armed forces. We said we would double the operational allowance for people serving in Afghanistan, and we have done that. We said that we would introduce a pupil premium, for the first time, for soldiers’ children who go to our schools, and we have done that. We have said that leave for the armed forces should start when they land back in the UK, not when they leave Afghanistan, and we are doing that. This Government are very pro our armed services and their families, and want to ensure that we give them a good deal.

The whole House will regret the regular reports of tragic knife-crime incidents in this country. Does the Prime Minister agree that anyone who takes to the streets carrying a knife does so with the capability to commit grievous bodily harm or murder? What sort of punishment does he feel that these people should receive?

My hon. Friend makes an extremely important point. We must ensure that people who carry knives know that the result of that is likely to be a prison sentence. We must get tougher on what happens in terms of knife crime. Under the last Government, knife crime after knife crime was met with a caution rather than with proper punishment in courts. Labour Members can talk about knife crime as much as they like, but they were as soft as anything on it.

Q11. The provisions of the Health and Social Care Bill were not costed before or after the election. Given the extension of commercial providers, is it the case that the NHS is not safe in the hands of the Government, but that the hands are in the safe of the NHS? (39071)

On the NHS, I can do no better than quote the shadow Secretary of State for Health. This is what he said about our plans:

“No-one in the House of Commons knows more about the NHS than Andrew Lansley… Andrew Lansley spent six years in Opposition as shadow health secretary. No-one has visited more of the NHS. No-one has talked to more people who work in the NHS than Andrew Lansley… these plans are consistent, coherent and comprehensive. I would expect nothing less from Andrew Lansley.”

That was said by Labour’s shadow Health Secretary. I could not have put it better myself.

Q12. Last week the Government committed more than £100 million of investment to the M6 Heysham Port road link, promising to bring much-needed new jobs and businesses to my part of Lancashire. Can the Prime Minister reassure me that, despite our economic difficulties, the Government will continue to invest in major capital schemes, particularly in northern areas such as mine, which were much neglected by the last Labour Government? (39072)

My hon. Friend makes a very good point. We have prioritised, in a difficult spending round, spending on capital infrastructure, including the scheme that he mentions. It is important, as we go for growth in our country, that we put capital expenditure into our roads and railways, and things that will help our economy to grow. That is exactly what we are doing in my hon. Friend’s constituency, and in many other constituencies across the country.

Q13. The Prime Minister insists that the financial crisis was caused by a lack of regulation, but even after the collapse of Northern Rock he complained that the last Government had subjected the banks to excessive bureaucracy and too much regulation. He promised to give them an easier ride, saying,“government needs to do less taxing and regulating”.Is that why donors in the City have given the Tory party so much money? (39073)

I remember a time when the hon. Gentleman used to write the last Prime Minister’s questions. Given what he has said, I think that the last Prime Minister is writing his questions. The fact is that Labour left us the most indebted households, the most bust banks, and a deficit—[Interruption.]

Order. The Prime Minister’s answer will be heard, and with some courtesy. That is what the public want to see. They are sick to death of this sort of behaviour.

Thank you, Mr Speaker. Let me just make one point. The person who was the City Minister when the City blew up is now your shadow Chancellor. Great pick.

Q14. Can the Prime Minister give an assurance that Parliament will have the final say on whether prisoners will have the right to vote? In view of the public’s disdain for the unelected bureaucrats in Strasbourg, will he defend our country from any further sanctions from Europe on the issue? (39074)

I think the hon. Lady knows that I have every sympathy with her view. I see no reason why prisoners should have the vote. This is not a situation that I want this country to be in. I am sure that you will all have a very lively debate on Thursday, when the House of Commons will make its views known.

Flood Defence Allocations

Before I call the hon. Member for Wakefield (Mary Creagh), let me appeal to right hon. and hon. Members who are leaving the Chamber to do so both quickly and quietly so that the question can proceed in a reasonable atmosphere. I ask Members what they would want if they were asking or answering the urgent question.

(Urgent Question): To ask the Secretary of State for Environment, Food and Rural Affairs if she will make a statement on the Government’s flood defence allocations for 2011-12.

The coalition Government are committed to protecting people and property from flooding and coastal erosion where it is sustainable and affordable to do so. Today, the Environment Agency is setting out detailed plans for proposed capital investment projects in the 2011-12 financial year. When completed, these schemes will provide better protection to over 112,000 homes in England. As already announced, a total of £521 million will be allocated by the Department for Environment, Food and Rural Affairs to the Environment Agency next year for flood and coastal erosion risk management in England. That will be roughly half revenue funding and half capital investment. The capital funds will take forward 109 schemes which are already under construction, and in addition to these, a further 39 new flood and coastal defence projects will go ahead. Of these, 21 projects will provide better protection to 13,000 households at risk. The remainder relates to repairs and safety enhancements to existing defences.

The list of new schemes includes a £5.7 million project to protect 182 households in Keswick from flooding of the river Derwent. In total, over the next four years DEFRA intends to spend at least £2.1 billion and increase protection for at least 145,000 homes.

Inevitably, it has been necessary to find savings in all areas of Government expenditure, but we have protected flood and coastal erosion risk management as much as possible. The reduction is 8% compared with the previous four-year period. We have protected front-line services such as forecasting, warnings and incident response, and the maintenance of existing defences.

As I have said previously, no schemes will have been cancelled. All defences already under construction—the 109 projects I have mentioned— will be completed. It is the nature of flood and coastal defence investment that there are always more projects than national budgets can afford at any one time. Funding has always needed to be prioritised. Nevertheless, I understand the concerns of people and hon. Members who are worried that a particular scheme is not on the indicative list for funding. I should stress, however, that this does not amount to the Government cancelling schemes or saying any particular scheme cannot go ahead in the future. The method of Government funding for schemes starting in 2012-13 and beyond is currently under review. That follows recommendations made by Sir Michael Pitt after the widespread flooding of 2007. Transparency and greater local involvement are at the heart of the new proposals.

Whatever the amount of funding available, we cannot expect the national taxpayer to completely fund all the costs of each and every scheme; that has been a long-accepted understanding on both sides of the House. Difficult decisions must be made, and we must ensure that public investment delivers the most in terms of outcomes and benefits per pound spent.

Under the new proposals for funding flood and coastal erosion risk management, local ambitions in terms of protection no longer need be constrained by what national budgets can afford. We want to use every £1 wisely and make sure that as many people as possible have the opportunity of benefiting from new or enhanced flood defences. With the funding allocations announced today, 112,000 properties will benefit from improved protection. Going forward, closer working with local communities and more opportunities for outside contributions will mean that more people will ultimately be protected.

I am grateful to the Minister for that reply, but I am surprised that the Secretary of State, to whom this question was put, did not deem the House worthy of an answer in person from her.

We know that the Environment Agency board met last Thursday to decide this year’s flood defence allocations, and that the press were invited to a briefing today at noon. We heard from journalists that DEFRA would issue a press release today at noon, but without this urgent question—which you kindly granted, Mr Speaker—Members would have read of the total nationwide flood allocations from the media this evening rather than debating them fully in Parliament today. Can the Minister tell the House why a written ministerial statement on the flood allocations was not even laid in the Library or on the Order Paper today?

Following the comprehensive spending review, Parliament has not had any chance to debate the flood budget for 2011-12, yet this is arguably the part of the DEFRA budget which most affects our constituents. The amount was revealed in a written answer on 20 January this year, which said that the capital funding for flood defences to protect our constituents’ homes has fallen from a baseline figure last year of £354 million to £259 million. Will the Minister confirm that this is a 27% cash cut to the budget, and a 32% real-terms cut when inflation is taken into account, and not the bizarre 8% cut that he insists on briefing in the media?

We know from the Environment Agency’s own figures that,

“On average, every pound invested in improved flood protection…reduces the long term cost of flooding and coastal erosion by £8.”

Has the Minister calculated that this £95 million cut to flood defence spending this year will actually cost the nation more than three quarters of a billion pounds—£760 million—in lost future value? We know that certain schemes have been cancelled, because MPs in those areas have been briefed. The Minister mentioned 39 new schemes going forward, but 59 flood defence projects are due to start over the next four years. How many of those will be completed in the next four years, and what steps is he taking to protect areas affected by these reductions in flood defence spending?

In the past, the Government allocated flood defence money for two or three years, as large construction projects take several years to plan and complete. We have heard from the Minister today about his plans for a flood levy. Again, this is the first time we have debated that on the Floor of the House, but the consultation is on the DEFRA website. Can he reassure the House that any proposals for future flood defence funding are not skewed away from areas of high need and towards areas where people have deeper pockets?

Can the Minister say what conversations he has had with the insurance industry about its consternation at these funding cuts? Labour’s statement of principles guaranteed universal flood insurance coverage for homes in affected areas. It runs out in 2013 and was based on the understanding, following the Pitt review, that Government should have

“above inflation settlements for future spending rounds.”

Is the Minister aware of the comments of Steve Foulsham, technical service manager of the British Insurance Brokers Association, who said in Insurance Professional Magazine in January 2011:

“When the Statement of Principles comes to an end, it will be devastating for consumers”?

Has the Minister had any contact with David Williams, managing director of claims at Axa Commercial Lines, who says,

“Now that spending has been reduced…all bets are off. The Government is in breach of its side of the bargain, so if insurers wanted to stop providing cover, they would probably be able to”?

What contact has the Minister had with the industry to ensure that homes do not become uninsurable, or insurance premiums simply unaffordable? Does he agree with me that if insurance is too expensive, the Government become the insurer of last resort for those who simply cannot afford it?

Finally, may I ask that the Minister place a copy of his statement in the Library of the House, so that hon. Members in all parts of the House can communicate first with their constituents, and not be trumped once again by the newspapers?

I am grateful for those questions and I am sure I can reassure the hon. Lady on a number of them. First, my right hon. Friend the Secretary of State has just returned from a meeting at Water UK. This is an urgent question, she came to the House a short time ago, and I have been available to prepare for it. Secondly, we have a debate this afternoon in Westminster Hall when we will have the opportunity to discuss these matters in detail, and I look forward to that. Thirdly, on the hon. Lady’s question about a written statement, there is nothing different in this method of announcing funding compared with previous years. Last year, there was no written statement. These are indicative budgets put forward by the Environment Agency. Where Ministers were, rightly, held and continue to be held to account was on the overall budget, which was announced in the autumn. There are plenty of opportunities for the hon. Lady—Opposition day debates and other circumstances —to raise this issue and hold Ministers to account. The Environment Agency is publishing its indicative list of schemes that are due to go ahead in the coming year, and that goes to regional flood defence committees for approval. So we are at that stage of the process, and that is no different from previous years, and no written statement was made last year—I checked before I came to the House.

On capital spending, really, the hon. Lady has got to change her tack, because she is not comparing apples with apples; these are two very different circumstances. Rightly, the former Chancellor in the previous Government announced a 50% cut in capital spending. If the hon. Lady were sitting on the Government side of the House, she might—rightly, as we have—favour flood spending and reduce the amount of saving accordingly, as we have done. But she cannot say that as if the spending last year and this year are the same, because they are not; the economic situations are completely different. She knows that and she really needs to change her tune.

The hon. Lady asked about communities with a high deprivation index, where there is a need to protect people on low incomes. I can assure her that the system will be skewed, as it is and always was, in favour of areas where a large number of people are on low incomes; that will remain through the payment-for-outcomes scheme.

On insurance, we are working closely with the Association of British Insurers. The statement of principles was always going to end in 2013, and it is always going to require important and careful negotiation to ensure that we get a scheme that protects people and their homes and so that they can get insurance. A good working party has come out of a flood summit that we held in September, which was attended by a number of hon. Members. The ABI is optimistic that it can find a scheme that will offer the kind of protection that households will need in the future, and I hope that that will be the case.

Order. There is considerable interest in this subject, but there are two important statements, and other demanding business, to follow. There is pressure on time, so short questions and short answers are essential.

The House will not be taken in by the crocodile tears of the hon. Member for Wakefield (Mary Creagh), whose Government changed the points system in 2005, depriving many towns such as Thirsk of protection from floods. Will the Minister give the House an assurance that any local levy he seeks to raise will not trigger the 2.5% increase that would lead to a local referendum? Will he work with the insurance industry to see whether local resilience measures for houses could be extended to business properties and whether a lower insurance premium could then be attracted?

We very much want to gear things towards a system where the benefits can be understood by people. That is why the payment-for-outcomes scheme offers so much potential; it offers clarity, for the first time, where the current system is opaque. It will allow communities such as my hon. Friend’s to see where they are in the pecking order, why they are constantly overtaken as our understanding of flood risk management gets better and where they are missing out. Thus, when people and businesses are benefiting, they may choose to contribute and get their scheme above the line. This approach offers her and her constituents a great opportunity.

Can the Minister please explain how the cuts that he is being forced to confirm to the House today are consistent with a very clear assurance given by the Prime Minister to this House during Prime Minister’s questions on 17 November? He said that flood defence spending would be “protected” and would be “roughly the same” as under Labour.

I hope that we will be able to prove at the end of this process that the spending is broadly the same: an 8% cut compared with the previous four years, but with 15% efficiency savings that we think we can get out of the Environment Agency and a greater understanding of how we can deliver. The right hon. Gentleman must agree that what really matters is the outcome: households protected from flooding. I am really confident that at the end of this process we will be able to produce outcomes that are no worse than those in the past and perhaps even better.

Will the Environment Agency continue to work with local organisations and local people on small-scale engineering improvements, which have helped to protect for the future areas such as Glendale and the Ingram valley in Northumberland, as well as considering issues such as those relating to Morpeth?

I can guarantee that to my right hon. Friend. I can also tell him that our understanding and the software now available to guide on things such as surface water flooding mean that a small and relatively low-cost building of defences can have an enormous effect in delivering precisely the amount of protection we want. I can assure him that the Environment Agency will continue to work with local people.

In the north-west London basin, 2,000 people have been subjected to repeated flooding in the Mogden catchment area. That was to be addressed through the sustainable urban drainage scheme and the investigations that were going on into that catchment area. Can the Minister assure me that that scheme will go ahead?

I do not want to mislead the House or the hon. Gentleman. If he will meet me, I will be happy to give him exact and firm details about that scheme.

Parts of my constituency were devastated by the floods in 2007. May I thank the Minister, on behalf of the people of Alcester, for allowing the project there to go ahead? May I also, on behalf of the people of Broom, come and see him about an innovative idea that we have had, with the Environment Agency, for mitigating flooding in Broom?

I am all for innovation. The carpet in my office is wearing thin from colleagues on both sides of the House coming to see me, but I will certainly meet my hon. Friend. I am keen to hear about new plans and I am happy to involve the Environment Agency, which perhaps has greater technical understanding than I do.

The Minister mentioned the Pitt review and that the Government have protected incident response. One of the review’s recommendations was to place a statutory duty on fire and rescue authorities. The Government supported that in opposition and the Select Committee on Environment, Food and Rural Affairs supports it now. Can he give us a time scale for the implementation of that statutory duty?

The hon. Gentleman is absolutely right to raise this issue, which is the one area of the Pitt review about which we have qualms. I am happy to discuss it because I know that he has a lot of contact with members of the fire service. I am not sure that placing a statutory duty on fire and rescue services will make any difference to the services I have seen. We are really going to be testing them through Exercise Watermark. Some of them tell me that they would like a duty, but quite a lot tell me that it would not make a blind bit of difference to how they operate and how they integrate with other emergency services. However, I have an open mind and I will listen to him.

I want to take this opportunity to thank the Minister for meeting my constituents and because the schemes for Felixstowe and Thorpeness are on the national list. That has yet to be confirmed by the regional flood and coastal committee, but I am sure that it will do so. Will he tell us a little more about how the funding will help people who help themselves and how it will protect those in vulnerable households and areas?

I have been impressed by innovative schemes in my hon. Friend’s constituency, which we are using as a basis from which to take forward a number of ideas. I can confirm that the central Felixstowe beach management works will proceed under the next year’s budget.

What assessment has the Minister made of the impact that the cuts will have on my constituents in Hull who were badly flooded in 2007 and who still find the insurance market partly closed?

The statement of principles relates only to properties built before 2009, so for a large number of households it already does not apply. That is a major concern. We have debated this issue in the House, and the hon. Lady’s constituents who were flooded in 2007, like mine, have a right to see the road ahead on this issue. Not only are their premiums rising but their excess charges are rising too. Some of my constituents, frankly, have no insurance because they have excess charges of £10,000. She is absolutely right to ask about this issue, which we will take forward in our negotiations with the ABI. The most important thing is that we are talking. There is a lot of agreement and I believe we can find a way forward and find solutions. The insurance industry is in a state of change and we will see more specialist providers coming through this process.

One of the lessons from the flooding in Cornwall before Christmas was that community flood plans and community flood wardens can make a real difference in protecting people and property. Can the Minister assure me that there is money within the settlement to continue the establishment of such groups in vulnerable areas?

We really value those measures and we are impressed with what has been happening in my hon. Friend’s constituency and elsewhere, so we will certainly encourage that. It is not just us doing that: there is also the work of Mary Dhonau and her organisation. They are trying to provide local flood forums with a toolkit they can pick up not only when a disaster happens, as with my hon. Friend’s constituents, but in areas that we know are at risk of flooding, which can be forewarned and better able to cope with flooding in future.

May I reiterate that Morpeth is in my constituency? I made that point last week, but I think I need to re-emphasise it. Having listened to the Minister’s statement, can he reassure me that the Morpeth flood alleviation scheme, in its entirety, will still take place?

The hon. Gentleman and I met yesterday and I explained to him the complexities of the scheme, which is not going ahead in the current proposals, but will, I am sure, in future. The scheme requires further work and consideration about areas where it can be provided and give better value for money. [Interruption.] Some hon. Members are chuntering, but if we allow a scheme that does not stack up as well as others to go ahead, other hon. Members will quite rightly come to the House and try to hold me to account by asking, “Why isn’t our scheme going ahead?” That has always been the case for Ministers standing here. It is important to understand that we have to give best value for money. The hon. Gentleman’s scheme is good and I hope that it will go ahead in time.

Given the constraints on the public finances, can my hon. Friend confirm that the criteria for judging the schemes before him include not only the risk but the costs of flooding? In Leeds, which is the second-biggest financial centre in the country, those costs would be £500 million. Do the criteria also include the economic benefits of putting in the flood alleviation scheme? In Leeds, the scheme is supported by all the Leeds MPs because it would attract more development to the city.

I am well aware of the concerns of the people of Leeds, which have been well articulated by the Members who represent that city. That scheme is hugely expensive and I do not doubt that it will bring benefits to the city. I am happy to meet Members on both sides of the House to discuss it. We want to work with the local authority and other agencies to find parts of the scheme with which we might proceed sooner than others. It will not go from conception to commissioning in one year because it is such a massive scheme, but we want to bring it forward as quickly as we can. We have to make sure that we have value for taxpayers’ money at the heart of what we are doing so that we can protect as many homes as possible across the country.

I am grateful for those words from the Minister, but is he aware that Leeds city centre came within centimetres of being flooded in 2000, according to Environment Agency information, and that it had numerous near misses in 2004, 2007 and 2008? Will the Minister agree to meet Leeds MPs to discuss this? Leeds is the largest city in the north and we cannot allow it to be knocked out by flooding or to be prioritised below households. It is the major economic centre of west Yorkshire.

I absolutely understand that. The hon. Gentleman can come to meet me if he wishes to hear more details about this. The scheme will cost £250,000 or thereabouts per household it protects. That is an enormous amount of money and I do not deny its importance, particularly to the people of Leeds, but we have to look at it from the perspective of the whole area. If it can unlock regeneration or benefits to that city there might be opportunities under the new payment-for-outcomes scheme.

You know, Mr Speaker, that I headed up flood risk management for the Environment Agency Wales between 2005 and 2010, so I appreciate the relationship between climate change and flood risk, which we have seen in New Orleans. What has happened in Queensland, Australia and in England is not a laughing matter. Will Ministers undertake to visit victims and communities who have been devastated by flooding that could have been avoided had the Minister not cut the revised budget for flood defences, which was made after the 2007 floods, and say sorry to them?

We have visited places that have been flooded since we came into government. The hon. Gentleman must understand that I have waded through houses reeking of sewage and have looked into the eyes of families whose houses have been flooded. He does not have to tell me about the misery that flooding causes those communities—2,500 households in my constituency were flooded in 2007. We understand how important this issue is and he knows that we cannot protect every house. There are 5.2 million houses at risk.

Will the Minister take this opportunity to correct the record and confirm that my right hon. Friend the Member for Leeds Central (Hilary Benn), when he was the Secretary of State for Environment, Food and Rural Affairs, ring-fenced flood defences so that in the last round of cuts there was no cut in the funding? That is why this year’s cut is a 27% cut.

A 50% cut and ring-fenced funding for the future could not have been defended. That is absolutely impossible. I honestly urge the hon. Gentleman to look at the realities of the situation. There is a 50% capital cut. Whichever party had been in government now would have had to take difficult decisions. We have protected the floods budget as best we can, and he should recognise that.

Has the Environment Agency’s flood defence scheme for Water End and Leeman road in York, which defends more than 300 low-income households, been cancelled? It was due to go ahead this year and was funded to go ahead this year. If it has not been cancelled, when will it go ahead?

The scheme has not been cancelled. It has been deferred. There are technical difficulties with it.

We will shortly debate the matter in Westminster Hall, when I will be happy to give the hon. Gentleman more details. I can assure him that the scheme has not been cancelled.


The near-collapse of the British banking system more than two years ago still generates today deep feelings of anger and cries for retribution. I understand that, for the link between risk and reward that underpins our free market was completely broken.

Bankers who had made the most catastrophic mistakes walked away with huge payouts and pensions. Those entrusted by us to regulate those bankers and run our economy washed their hands. Meanwhile the rest of the country is left paying every day for their failures. The new coalition Government must pick up the pieces. Let me set out how we will do that.

First, we will make sure that this never happens again. We are replacing entirely the tripartite system of regulation that was introduced by a previous Chancellor and his advisers in 1997, and which completely failed. Next week we will publish the detailed proposals to give the Bank of England responsibility for prudential regulation, and to create a new consumer protection and markets authority that will protect the interests of bank customers. We will then undertake pre-legislative scrutiny, as requested by the House, before introducing the Bill. I hope it will command support from both sides.

Later this year we will receive the interim and final reports of the Independent Banking Commission that this Government established, and which I asked Sir John Vickers to chair. Sir John and his fellow commissioners are asking the difficult questions that need to be asked about how we protect the British taxpayer from future bank failures so that never again is a bank too big to fail. We look forward to receiving their recommendations. I should make it very clear that nothing that I will say today about the settlement that we have reached with Britain’s banks, including references to a level playing field, in any way prejudges the outcome of the commission. That includes both the commission’s recommendations and the Government’s response.

The second task facing the Government is to make sure that we get the maximum sustainable tax revenues from the financial sector. Her Majesty’s Revenue and Customs confirms that the one-off bank payroll tax introduced in the dying months of the previous Government raised £2.3 billion net, but as my predecessor—the Chancellor who introduced the tax—has pointed out, it could not be repeated without massive tax avoidance. I agree with him and we will not repeat the bank payroll tax.

Instead, we have implemented a new and permanent bank levy, and that is why yesterday I announced an increase in that levy so that it raises £2.5 billion this year. This will bring the total raised by the new bank levy to £10 billion over the Parliament, and it means that in each and every year of this Government we will raise more in bank taxes than the previous Government raised in any single year. We have also required all the major banks operating in the UK to comply in spirit and by the letter with the code of practice on taxation. The code was announced with a fanfare by the previous Government, but I discovered that when they left office only two banks had signed up to it. Today all the major banks have signed.

The third task facing the new Government was to reach a new settlement with the banks so that they could contribute to Britain’s economic recovery. Some prominent people in the House were predicting just 24 hours ago that my tax announcement meant that our discussions with the banks on lending were falling apart. The House will be pleased to know that that prediction was completely wrong. This morning the heads of the major British banks—Barclays, RBS, Lloyds and HSBC—reached a new settlement with the Government. I want to thank John Varley, the former chief executive of Barclays, for the huge amount of time and personal commitment that he has given to this project.

The essentials of the new settlement are exactly as I set out last month, and I am today publishing an exchange of letters between John Varley and myself. The banks will lend more money, especially to small business; pay more taxes; pay less bonuses; be more transparent about the bonuses that they do pay; and make a greater contribution to our regional economy and society. In return the Government commit to the success of a strong, resilient, stable and globally competitive financial services sector in which UK banks can compete with the best banks in the world on a level playing field, and in which London is a world centre for finance. That is good for jobs and growth in our country.

Let me go through each part in detail, starting with pay and bonuses. Most of us find the levels of pay in financial services to be completely out of kilter with what the rest of society would regard as fair or reasonable. We are determined to bring responsibility and constraint, and make sure that pay is properly taxed. Four years ago, at the height of the banking boom, the City paid £11.5 billion in banking bonuses, most of which was in cash, most of which could not be recovered when the banks collapsed, and too much of which went untaxed. The new remuneration code introduced last month and the tax avoidance measures that we are taking will change that.

Today I can tell the House that the four major British banks have also agreed that total bonuses for their UK-based staff will be lower than last year and lower than they would have been without today’s settlement. The independent non-executive director who chairs each bank’s remuneration committee will have to confirm personally in writing to the Financial Services Authority that their pay deal conforms with today’s commitments. For the first time, the banks have agreed to seek explicit approval from their board’s remuneration committee for the pay of the 10 highest paid employees in each of their main business units. That did not happen in banks such as the Royal Bank of Scotland before the crisis, where the board was ignorant of what was going on.

We have also insisted that the banks be far more transparent about who and how they pay. From this year onwards, the four major banks have committed to disclose the pay details not just of their executive board members, but of the top five highest paid executives not on the board. This will mean that the salary details of at least seven executives at each bank will be published this year. That compares with five individuals in the United States of America and Hong Kong, and only board executives in Germany and Japan. By disclosing individual pay levels the settlement goes further than the Walker report recommended, on which we are seeking international agreement.

We will consult on whether to make it a mandatory requirement from 2012 on all large UK banks to publish the pay of the board plus the eight highest paid senior executive officers. That would mean that Britain had the toughest and most transparent pay regime of any major financial centre in the world.

Let me provide an update on the situation at the Royal Bank of Scotland and Lloyds. The previous Government signed an agreement with RBS that explicitly said that it would in 2010

“enable pay arrangements in line with the market”.

Despite that constraint, which we inherited from the previous Government, United Kingdom Financial Investments Ltd, the arm’s length body which manages the Government’s stake in those two banks, has agreed the following: for all staff at RBS and Lloyds, the maximum up-front cash bonuses will be limited to a maximum of £2,000 this year; all executive directors, including the chief executives, have agreed to receive this year’s bonuses entirely in the form of shares; and directors will have to wait until 2013 to convert these shares into cash.

As the Prime Minister made clear last month, the bonuses at RBS and Lloyds will in total be smaller than they were last year under the previous Government and so, crucially, will the compensation ratios be. They will backmarkers in the industry, instead of the front runners that they once were.

Let me turn from pay to the additional support that the British banks have committed today to provide to the regional economy. At the end of last year the industry pledged £1.5 billion to a new business growth fund, which will invest in the kinds of expanding small businesses that hold the key to Britain’s more balanced economic future. Today they commit to make an additional £1.2 billion contribution to society. The four major banks commit to an additional £l billion for the fund and an additional £200 million to capitalise the big society bank. The business growth fund contribution will be front-loaded over the next couple of years, so that more help can be given to businesses sooner. This money will be in addition to the lending commitments and additional to any funding already allocated from dormant bank accounts.

Finally, at the heart of today’s settlement is a commitment from the four major banks, as well as Santander, to make much more money available for lending to small and medium-sized business. Last year these banks lent £66 billion to such businesses. Today the banks commit to lend £76 billion this year. That is £10 billion more gross new lending to small and medium-sized businesses, a massive 15% increase, materially higher than they had been planning to lend this year and materially higher than anyone who has followed these discussions would have expected. It comes alongside a very welcome commitment from the banks greatly to improve their customer service to small businesses, with a free mentoring service, published lending principles, transparent appeals and improved access to trade finance. Overall, gross new lending to all businesses, large and small, will increase from £179 billion to £190 billion, and the banks will make a commitment to lend even more if demand materialises.

Absent this deal, the banks were actually expecting lending to fall this year. To ensure that progress against these lending commitments can be monitored, the Bank of England has agreed to collect the relevant data and publish them quarterly. To help to ensure that today’s agreement is honoured, for the first time the pay of the chief executives of each bank, as well as of the relevant business area leaders, will be linked to their performance against these SME lending targets. Of course, if the banks fail even then to live up to their promises, the Government reserve the right to return to the issue and take further measures, but I sincerely hope that will not be necessary.

The anger at the terrible mistakes of the banking industry and the failure of those who regulated it will long remain, and rightly so, but let us as a country confront this hard truth: anger and retribution will not bring one percentage point of economic growth or create one single new job. The anger will remain, and I understand that, and we must never make the same mistakes again, but Britain needs to move from retribution to recovery. Today we get the banks to commit, with more lending—£10 billion more for small businesses— for our regional economies and society, £10 billion more in bank taxes, lower bonuses and the most transparent pay regime in the world. In return, let us build a banking industry that creates jobs for hundreds of thousands of our citizens and that competes in the world. Above all, let us ensure that the economic catastrophe that befell this country can never be repeated. That is how this new Government will clean up the mistakes of the previous Government. I commend this statement to the House.

Given that this statement was not on the Order Paper, I thank the Chancellor for the eight minutes’ advance notice he gave me of it. Yesterday, he confirmed in his “Today” programme mini-Budget that he is cutting taxes for the banks this year, compared to last year. [Interruption.] Today we find out what the Chancellor has got in return from the banks, after weeks and months of negotiations with the UK banking industry, culminating in the complete shambles of the past 24 hours, and the result is: precious little. From a Chancellor who talked so tough in opposition and who even yesterday continued to promise much, this is a pitiful outcome and an embarrassing climbdown. [Interruption.]

Order. Earlier I made it clear that heckling and abuse of the Prime Minister when he was answering questions should not take place and that his answers would be heard. I say to hon. Members who are now heckling the shadow Chancellor, stop it. It is a disgrace. The public loathe it. Do not imagine for one moment that while screaming abuse you have the slightest prospect of being invited to ask a question. Behave and get the message.

Thank you, Mr Speaker. They tend to heckle when they are worried.

A “damp squib” is defined in the dictionary as something potentially explosive but that fails to perform because it has got wet. That is this Chancellor all over. This negotiation has turned from Project Merlin into “The Wizard of Oz”: the curtain has been pulled back and there is nothing there. Of the leading players on the Government Front Bench, who is the one without courage, who is the one without a brain and who is the one without a heart?

Let us review what the Chancellor has achieved. On lending, he claims to have secured an agreement with the banks to lend £190 billion this year, but financial experts are clear that the deal he has announced is vague, toothless and unenforceable and not a proper substitute for proper competition. How will he be able to measure in detail whether the deal is delivered? Can he tell us the detail of how it will be enforced? Is there a sanction if the lending does not materialise? Was not a senior banker right when he told the Daily Mail on Monday that this lending agreement is “meaningless”? Is not the Financial Times right to say today:

“With much noisy showmanship, the Conservative-Liberal Democrat coalition is puffing demands that are little more than cosmetic”?

Is not that the truth?

On pay transparency, again we have a damp squib. The Chancellor claims that we will now have the most open regime in the world, but what does it actually add up to? The answer is transparency for pay and remuneration of only the seven most senior bank executives, whose anonymity is still fully protected. The Government are demanding that local authorities publish the salaries of anyone in local government earning more than £58,200, but he is allowing a taxpayer-owned bank and publically quoted companies in the financial sector to continue to pay staff millions of pounds in pay and bonuses with no transparency at all.

Why is the Chancellor not activating the legislation that we put on the statute book that would require the publication of the remuneration of any individual paid more than £1 million? It is there on the statute book and ready to go, so why not just sign the order and get on with it? Why has he failed so abjectly to make any progress in international negotiations with European and global Governments on transparency? There has been no progress because there is no sign that he has even tried.

On bonuses, I am afraid that the country will conclude that the Chancellor has thrown in the towel in the face of extensive lobbying by people with whom he and his Conservative colleagues have just become too close and too cosy. Does he remember what the Prime Minister said just two years ago—when Leader of the Opposition—when attacking the previous Government? He said:

“Because of this dithering we could see bonuses paid out for a second year to executives in taxpayer owned banks, which is unacceptable.”

After months of dithering from this Chancellor, what will we see over the next fortnight? We will see exactly that: bonuses running into millions of pounds, in cash and shares, paid to executives in taxpayer-owned banks. What he should be doing today is announcing proper reform of corporate governance and taking up our proposal to repeat last year’s £3.5 billion bank bonus tax, in addition to his levy, and use the money to support jobs and growth to kick-start his stalled recovery.

I have told the Chancellor that I will support him on long-term banking reform, enforceable lending agreements and proper statutory action on transparency and pay. Our economy badly needs a reformed, transformed, vibrant and globally competitive financial services industry for the future. He is right that hundreds of thousands of jobs depend upon it. However, this is not an agreement to secure the long-term future of our economy, but a short-term and shabby political deal. There have been talks that dragged on for weeks, a mini-Budget on the “Today” programme, crisis conference calls with the banks yesterday afternoon, a hasty compromise cooked up overnight and a Chancellor finally coming to the House with little to offer in return for his tax cuts for the banks.

I have to say that this is a Chancellor who, as the former CBI head has said, puts politics before economics. He talked tough in opposition, but in government he looks increasingly out of his depth and out of touch. We have rising VAT, rising fuel prices, rising unemployment and deep spending cuts hitting living standards of families, and yet his first priority is a tax cut for the banks. Millions of families up and down the country will now be asking, whose side is this Government on?

Well, that has to be one of the feeblest replies to a statement that I have heard. The only person who seems to be out of his depth at the moment, rather surprisingly, is the shadow Chancellor. There was one thing missing from that rant: an apology. He was the City Minister. I will move on to all the things that we need to do to regulate the City, but I will first remind him that he stood at this Dispatch Box for two years as City Minister and could have done any of the things that were either in my statement or in his reply, but he did not. The truth is that he is man with a past, and we will not let him forget it—even if he does. I took the opportunity to look at his website on which he lists all his achievements in politics, but he does not mention the fact that he was City Minister. He does not mention the fact that he invented the system of City regulation that failed so spectacularly. He might have forgotten what he did not do in government; we will not.

Let me deal specifically with some of the right hon. Gentleman’s questions. He asks how the lending targets will be monitored. I told him in the statement that the Bank of England is going to monitor them. [Interruption.] “How are they going to be enforced?”, Opposition Members cry. The chief executive’s pay will be linked to the targets, and I made it very clear in the statement that, of course, if the deal is not met we will return to the issue.

The right hon. Gentleman talks about transparency. In 13 years, the previous Government never implemented transparency in the City of London. Some £11.5 billion of bonuses were paid in the year in which he was the City Minister, but we are introducing the most transparent regime of any major financial centre in the world.

The right hon. Gentleman continues deliberately—because I know he must know the numbers—to get the sums wrong on the bank payroll tax and bank levy. Her Majesty’s Revenue and Customs confirmed that there is a £2.3 billion net receipt from the bank payroll tax, and that is spelled out in the March 2010 Budget book, which the Labour Government published. We are raising £2.5 billion every year from a bank levy that he opposes— right?—unless he has changed his mind on that. [Interruption.] He now supports it. Well, that is good news.

Perhaps, then, the right hon. Gentleman will listen to the right hon. Member for Edinburgh South West (Mr Darling). The right hon. Member for Morley and Outwood (Ed Balls) quoted quite a lot from the newspapers in his reply. Well, this is from The Daily Telegraph: “Bankers’ bonus tax failed, admits Alistair Darling,” who said:

“I think it will be a one-off thing because, frankly, the very people you are after here are very good at getting out of these things and...will find all sorts of imaginative ways of avoiding it in the future.”

That is from the then Chancellor who actually introduced the tax on which the right hon. Gentleman now pins his entire economic prospects.

Let me end by saying this: the right hon. Gentleman calls for things that he simply did not do in government. On pay and bonuses, he says control them in the nationalised banks; he did not do that last year when he was in the Cabinet, and he did not do it at all when he was in the Treasury. He calls for transparency; he did not introduce it when he was in the Cabinet or in the Treasury. He talks about reforming the banking system; he is the person who designed the banking regulatory system that failed, but he does not admit it. He talks about the bank levy; he wrote 11 Budgets and never put one in. And on lending, he tried as a member of the Government to secure lending agreements throughout the banks, and he completely failed. The truth is this: he is a man running away from his past, with no plan for the future.

Anybody looking reasonably at the settlement will have to agree that it is a welcome step in the right direction. In normal times, Governments should not intervene to force banks to lend or to reveal commercial details of pay, and I very much hope the Chancellor will confirm that it is a one-off, with one exception. Does he not agree that, without further transparency on bonuses, we will never know whether banks are fuelling risks and mistakes for which one day, as a result of the way they misallocate risk, we may have to pay? Will he also support the Treasury Committee’s initiative, outlined in a letter to the Financial Services Authority, and supported by Sir David Walker, to secure that much higher level of transparency?

I thank the Chair of the Treasury Committee for the welcome that he gives to the package. Of course, in any normal times one would not want to have to negotiate lending agreements with the banks or, indeed, be in a situation where half our banking sector was in part in the public’s hands, but that is the situation that we inherited as a Government and why I felt that the agreement with the banks was necessary, as well as the additional tax that we are levying on them.

My hon. Friend specifically raises the issue of transparency and his proposals that I know he has put to the FSA. As I said in my statement, we have a voluntary agreement this year on disclosure, which already goes beyond those of other financial centres in the world, but, having consulted, we will legislate in the coming year, and his proposals will deserve close attention.

Will the Chancellor confirm that, as a result of his Herculean efforts in this struggle with the banks, the names of the traders who are still going to be awarded the greatest bonuses will not be made public?

The disclosure will be of those senior executives not on the board, but in the Walker proposals there was not even a proposal to identify individual salaries. So it is the senior executives who will be identified.

I welcome what the Chancellor says about the levy, the extra lending, the transparency on bonuses and, in particular, the restraint shown by the two banks that are effectively under state control. On the banks that are not under our control, however, does he agree that, at a time when families throughout the country face difficulties, some banks seem to have lost their moral compass and really ought not to award themselves extravagant bonuses on a level that families could only dream of?

I agree with my hon. Friend that the banks should show restraint and an appreciation of the society in which they operate, the challenges that we face with the economy and, indeed, the squeeze on families’ incomes, in part due to the high prices of things such as oil and food. I make this observation: the bonuses this year will be lower than those in the last year of the Labour Government; and, as a result of this agreement, they will also be lower than they would have been, a point that will be confirmed by the independent non-executive director of the individual bank.

Why should anybody believe that the Chancellor of the Exchequer has got the guts to take on the banks, when today it is revealed that he and his friends in the Tory party—those on millionaires’ row—have picked up £44 million from those bankers in the City? Why should we believe all this rubbish?

I thought that the hon. Gentleman might ask a question like that, so I did a bit of research and discovered that one of the biggest donors to the shadow Chancellor’s party leadership campaign was a Michael Sanzone, who started off at ABN Amro, moved to RBS and ended up at Lehman Brothers before supporting his campaign. They are probably the four most catastrophic decisions of recent years.

That gentleman was probably expecting a knighthood and a peerage, like so many of them had in the past. Have we not moved on from excessive bonuses to an emphasis on lending more money to small and medium-sized enterprises? Are we not seeing £10 billion for SMEs and £2.5 billion in total for the new growth fund?

My hon. Friend is absolutely right. For me, in these discussions the absolute key has been the additional commitment to lend to small and medium-sized businesses. Over the past couple of years, all Members have had people in our constituencies come to us with very difficult stories about the failure of banks to lend to such businesses, and we now have a commitment to increase the lending available by 15%, which is a substantial increase. Alongside that—I did not have time to go into all the detail, but it is being published this afternoon—there will be a new code of practice for the banks to treat their customers much more fairly: for example, they should engage with small businesses a full year before an overdraft comes up for renewal. For me, dealing with that crucial area of the economy—getting credit to small and medium-sized businesses—has been one of the most important parts of the new settlement.

We now have the big society shrinking before our eyes, and voluntary organisations seeing their budgets cut left, right and centre. At the same time, we still have bankers’ bonuses well beyond most people’s dreams, and on top of that we learn today that the City and organisations in it, as my hon. Friend the Member for Bolsover (Mr Skinner) pointed out, have been stuffing money into the Tory party’s coffers. Is this a series of coincidences, or should the public be more suspicious?

I just pointed out that a Lehman Brothers executive was one of the biggest donors to the shadow Chancellor’s campaign, and I think the hon. Member for Bolsover (Mr Skinner) shouted at that point, “Well, I didn’t vote for him.” [Interruption.] He repeats it; in fact, he probably did not vote for the Labour party leader, because as far as I can tell virtually no Labour MP did. That brings me to this point: the key thing about the Labour party and its fundraising is that it gets money from the trade unions and changes policy as a result.

On behalf of the small businesses and voluntary sector in my constituency, may I thank the Chancellor for his announcements about the business growth fund and the big society bank? Is not the reason why the shadow Chancellor’s statement was so empty that the Opposition realise that they did nothing so constructive during their 13 years in government?

My hon. Friend makes the very good point that we need to see more support for small and medium-sized businesses in our constituencies and in our economy. The regional business fund that I talked about, to which the banks have today made a commitment of an additional £1 billion, is very important because it addresses one of the weaknesses in the British economy—the absence of support, particularly equity support, for small, expanding businesses. I think that this will make a significant contribution to that.

I thank the Chancellor for his statement and for the early advance sight of it. I agree with what he said about the public’s response to the high levels of pay, which are not fair and reasonable and are not seen to be so. I welcome the very low cash bonuses for RBS and Lloyds staff and the decision for executive bonuses to be paid in shares only. May I suggest that that should rolled out to every bank every year as a matter of course? On the new bank lending, will he confirm that it will really be new, that it will go to the businesses that need it most, and that we will not be locked into excessive fees and charges?

I thank the hon. Gentleman for the support he has given to important parts of this package. I understand how important the banking industry is to Scotland, where many thousands of people are employed in it, and the impact that the failure of RBS and HBOS had in Scotland. On his specific point about bonuses, the new code of practice that came in last month forces all banks to pay a much greater proportion of their bonuses in shares and in deferred packages. Of course, none of this existed when Labour was regulating the City. As I have said, I would urge the banks to show restraint and reflect the fact that they are operating in a society with economic challenges brought about by the deepest recession and the biggest banking crisis of our lifetimes.

Let me tell the hon. Member for Bolsover (Mr Skinner) that my constituents and I can only dream of living in the £1.6 million house that his party leader lives in.

I welcome the Chancellor’s statement on lending to small businesses and curbing banking bonuses. However, with Lloyds TSB closing its last remaining branch in Meltham and Barclays closing its branch in Milnsbridge, when he next meets the banking bosses will he please stress the importance of community banking and the fact that not all constituents have access to internet banking?

When I next talk to the banking chiefs, I will certainly communicate to them, or my office will do so, the specific issues that my hon. Friend raises about the two banks in his constituency. One of the challenges we have at the moment is that RBS and Lloyds are trying to de-lever because of the enormous mess they got into under the previous Government. More generally, he makes a very good point about the importance of community banking. The four banks that have reached this settlement today are committed to extending that and thereby, to a degree, rolling back what happened in recent years. There are also those who want to enter the banking sector. Of course, they have to comply with the FSA requirements, but I know that some of them are offering a return to the kind of community banking that he talked about.

The Chancellor compares the funding given to the Labour party by trade unionists with the 50% of donations to his party from the City, but I remind him that it was the bankers who caused this crisis, not millions of hard-working trade unionists.

An FSA report found that RBS had 1.1 million customer complaints, more than 50% of which were not dealt with appropriately, resulting in a £2.8 million fine. Does the Chancellor think it is right to reward failure with lavish bonuses, whether in cash or in shares?

It was the last Labour Government who were responsible for the economic mess that we got ourselves into, and the sooner Labour Members face up to that, the better. One example of that was the arrangements put in place regarding RBS, to which the hon. Gentleman referred. That is the contract that we inherited from Labour; this is what the then Ministers who now sit on the shadow Front Bench signed up to: they explicitly told RBS that from 2010 it should pay in line with the market rate. We have now got it to be at the back of the market, not the front.

Like other Members, I welcome the move on lending to small businesses. The Federation of Small Businesses, the chambers of commerce and independent businesses have been arguing for some time that good businesses that are viable but have cash-flow problems have been struggling as a result of the policy of the banks under the previous Government. Given that this new move will allow those businesses to survive, and indeed grow, to the benefit of the economy, does the Chancellor agree that it is somewhat surprising, if not disappointing, that the shadow Chancellor and Labour Members have not welcomed it?

It is surprising. I noticed that in the shadow Chancellor’s rather extraordinary response there was no mention of lending. Indeed, I am not even sure what the Labour party’s plan is to get the banks to lend more and whether Labour Members welcome this move or not. I know for a fact that the previous Labour Government tried to negotiate a cross-bank agreement on gross lending, and failed. One would have thought, therefore, that they would welcome this, but they have not done so. My hon. Friend makes the good point that the key is to get lending to small businesses going, which is where the market failure has been over the past couple of years. That is absolutely crucial to our economic recovery.

Now that the Chancellor is into transparency on salaries, can he, as the largest shareholder in RBS, the bailed-out bank, tell the House whether it is true, as the Financial Times has suggested, that 100 bankers are earning more than £1 million? If not, how many are?

The transparency arrangements are the ones that I have set out, and the arrangements for managing RBS are the ones put in place by the Government of whom he was a Whip.

Many hard-working families and people in my constituency will welcome today’s announcements. Does the Chancellor agree that the banks have a moral responsibility to invest in areas such as the west midlands and the black country, where we need the private sector jobs growth that is vital for the future?

I absolutely agree with my hon. Friend. There is a preponderance of small and medium-sized manufacturing businesses in the west midlands and the black country, as I know from my various visits there. These are precisely the sort of firms that we need to help and assist, and this agreement means that more lending will be available to them. As I say, there is also a commitment to a regional business support fund that will provide equity investment to help those small and medium-sized firms to become bigger firms, which is what the British economy needs so that we do not, as we did in the past 10 years, depend on one sector, in one corner of the country, for our economic growth.

Is the Chancellor confident enough to predict that as a consequence of this package there will be more small businesses on the high streets of Retford, Worksop and Harworth at the end of this year?

I am confident about saying that the situation for small and medium-sized businesses in the hon. Gentleman’s constituency and elsewhere will improve. The situation is not going to be transformed overnight—[Interruption.] The hon. Member for Vale of Clwyd (Chris Ruane) and others seem to have complete amnesia about the fact that Labour presided over the biggest banking crisis and the deepest recession since the 1930s. Labour Members got elected on the slogan crafted by the shadow Chancellor, “No more boom and bust”, and then gave us the biggest boom and the biggest bust, and we are recovering the economy from the mess that they left.

Order. There is clearly a great deal of interest. May I gently remind the House that Members who came into the Chamber after the statement began should not expect to be called? The position on this is very clear and long established, and it must be adhered to.

Thank you, Mr Speaker.

“If the City is doing well, the country is doing well. When it prospers, we all prosper”.

They are not my words but those of the shadow Chancellor. Did my right hon. Friend take any advice from him?