Skip to main content

Commons Chamber

Volume 527: debated on Tuesday 10 May 2011

House of Commons

Tuesday 10 May 2011

The House met at half-past Two o’clock


[Mr Speaker in the Chair]

business before questions

Death of a Member

I regret to have to report to the House the death of David Cairns, the Member for Inverclyde. David was a most assiduous Member serving as Parliamentary Under-Secretary of State and Minister of State in the last Parliament, and was much respected by the House. David trained and served as a priest before beginning his political career. I am sure that Members in all parts of the House will join me in mourning the loss of a colleague, and extending our sympathy to the hon. Member’s partner Dermot, his father John, his brother Billy and his many friends and family.

Oral Answers to Questions


The Chancellor of the Exchequer was asked—

Monetary Policy Framework

I begin by expressing my own personal sadness and shock at the death of David Cairns, whom I knew pretty well. I went with him on a trip to the United States some years ago and spent some time with him, and I know that he was principled, gentle—in the best sense of the word—and genuinely liked and respected in all parts of the House. His sudden and premature death is a tragedy, and my sympathies—and, I suspect, those of everyone here—go to his partner Dermot and his family.

The Government have set up a new macro-economic framework to restore economic stability. The building blocks of that framework are an independent Monetary Policy Committee that will continue to target inflation, a new Financial Policy Committee to operate macro-prudential tools, so that we can assess overall levels of debt in the economy—something not done in recent years—and, crucially, a credible, coherent and independently monitored fiscal policy that allows interest rates to stay lower for longer while remaining consistent with the inflation target. It is now widely accepted that this framework is far more effective than the one that went before it.

May I associate myself with your tribute, Mr Speaker? David Cairns was a highly valued colleague, and I am sure that all our thoughts and prayers are with his partner Dermot and his family.

I am grateful to the Chancellor of the Exchequer for his answer, and I was wondering whether, in his more reflective moments, he would agree that Portugal, Greece and Ireland face a major problem, in that they cannot run an independent monetary policy attuned to their particular needs. That being the case, will he stop making rather childish comparisons between the UK and the eurozone countries?

The hon. Lady is right that those countries do not have a flexible exchange rate. That is because they are in the euro, which I campaigned to keep Britain out of. I do not know how she has campaigned in recent years, but the last time I checked I think it was still official Labour party policy to join the euro in principle. Perhaps the shadow Chancellor will clear that up when he gets to his feet. The comparison I make is a good one: a year ago almost to the day, people were looking at the British budget deficit, which was larger than those of Portugal and Ireland, and asking whether Britain could pay its way in the world. Our credit rating had been put on negative watch. Now, however, thanks to the policies of this coalition Government, Britain has economic stability again.

I also wish to pay tribute to the memory of David Cairns. May I ask the Chancellor how the co-ordination is organised to achieve a synthesis between our tight fiscal policy and our lax monetary policy?

Obviously, monetary policy is independent—the MPC sets it in the way we all know—so there is no co-ordination in that sense. I do not have a direct influence on monetary policy, but it is clear that by setting a credible fiscal policy, we give the MPC maximum room for manoeuvre and the freedom to keep interest rates lower for longer. The Governor of the Bank of England made that clear when he gave his Mansion House speech last year, and it is an observation also made by many independent observers of the British economy. Interest rates would be higher if we had a less credible fiscal policy.

I would like to thank you, Mr Speaker, and the Chancellor for your tributes to David Cairns, our colleague, and to add our tributes from the Opposition side of the House. David was one of those very rare people who caused a change in the law in order for him to be able to take his seat in this place, and when he arrived his presence was not a disappointment to anyone. He was a great colleague and friend, and our hearts go out to his family and friends. We would like to add our deepest condolences at the shocking news of his untimely and very early death today.

Before the last election, both parties now in government pledged no rise in VAT, but with inflation running at double the Bank of England target, people are facing the biggest and longest squeeze in their living standards for 80 years. How does the Chancellor think that increasing VAT by 2.5% has helped them to cope with this issue?

Order. Whatever may be said about the question, I am sure that the Chancellor will focus on the monetary policy framework. That is what he can be relied upon to do.

Actually, monetary policy is the thing that I am not directly in charge of, but the point I would make is that the VAT rise is part of a credible fiscal policy. The person who was Chancellor of the Exchequer before me has made it pretty clear in interviews since the election that he, too, was considering a VAT rise, and he would probably have gone ahead with one if Labour had been re-elected.

The shadow Chancellor shakes his head. I know that in government he tried to do everything to stop a credible fiscal policy being developed, and he is now doing everything in opposition to stop Labour developing a credible economic policy. Long may he continue to do so.

The Chancellor will shortly publish draft legislation on financial regulation making the Bank of England the most powerful central bank of its type in the world. The word “Governor” simply does not do justice to the empire over which Mervyn King will shortly preside. What specific proposals does the Chancellor have to ensure full democratic accountability of the reformed Bank to both Parliament and the country?

I thank my hon. Friend for advance notice of his important question. Both the Governor of the Bank of England and the Government take the accountability of the Bank very seriously. Clearly the Bank will receive considerable new powers for its prudential regulation of our financial system and in its macro-prudential tools. We are looking at specific ideas for enhancing the Bank’s accountability, including to this House, but it would be appropriate first for me to appear before my hon. Friend’s Committee—I know that he has contacted my office seeking a date—and to await the Treasury Committee’s findings, so that we can listen to what it has to say before coming up with our confirmed proposals.

Bank Lending (Small Businesses)

2. What recent assessment he has made of trends in levels of bank lending to small businesses. (54722)

Repayment of debt by small businesses is running ahead of lending to the same sector. As a consequence, net lending fell in the first quarter of this year. However, the availability of credit to business in the same period increased.

I would like to draw attention to the situation affecting my constituent George Archer, a business man who has had a £5,000 overdraft that was unused for three years, with the exception of four days when he requested a £20,000 extension. The bank—which is one of the big four—offered him £25,000 on rates that he initially refused, before beating it down to acceptable rates. On paper, that bank has increased its lending to a small or medium-sized business by £20,000, but I wonder what the Minister can do to halt this duplicity and ensure that loans are real, active, needed and utilised.

I cannot comment on the particular circumstances that my hon. Friend has raised, although I am happy to look at them more carefully. I am sure that she would welcome, as does the whole House, the commitment of banks to increase their capacity to lend to businesses of all sizes.

I wonder whether the Minister still thinks that Project Merlin was such a great deal with the big banks. Lending to small businesses continues to fall, while the charges for those loans are rising. The banks’ promise to support the big society bank looks less generous, as we learn that money will be lent only on commercial terms, and now we hear that Santander is pulling out of the business growth fund, which was a key plank of the deal. Is this a failure of Project Merlin or a failure of the Government?

It is rather churlish of the hon. Gentleman to be critical of Project Merlin. When his party was in office it was able to secure lending commitments from only two banks. We have achieved a comprehensive package with all banks, including Santander, to increase the amount of money that they will lend to businesses, including small businesses. The business growth fund, which he also raised, is an opportunity for businesses to seek equity finance in a way that is currently not available and that meets the equity gap, which the previous Government did little to resolve.

Business Costs

As well as dealing with the deficit, this Government are helping business. To support a private sector recovery, we have cut corporation tax by 2% this year, with 3% to come. We have cut small companies’ tax and extended the small business rate holiday for another year. We have stopped Labour’s jobs tax, expanded enterprise and research tax breaks, announced new enterprise zones and, crucially for millions of businesses and families, we have abolished the fuel duty escalator and cut the duty.

As Merseyside seeks to expand its private sector, it is looking towards its knowledge economy so that it can build on its substantial science base. Predictions show that, by 2022, it could have growth of 15%, which would mean 58,000 jobs. What are the Government doing to incentivise such growth to ensure that those predictions for Wirral and Merseyside become a reality?

First, we have increased science funding in the north-west. Although it is not in my hon. Friend’s constituency, there has been additional money for Daresbury, which was announced in the Budget. Also, Mersey Waters in her constituency is going to be an enterprise zone. We have also announced the redevelopment of the Royal Liverpool hospital at a cost of £450 million. So, whether it is medical research, science at Daresbury, the Atlantic Gateway project or the enterprise zones, we are doing all sorts of things to help the Mersey region.

I endorse the sentiments expressed by my hon. Friend the Member for Wallasey (Ms Eagle) and others about the tragic death of our colleague and friend, David Cairns.

I also congratulate the Chancellor on his successful masterminding of the “No to AV” campaign. We all saw how much he enjoyed it over the past week or so, but now that that political campaign is out of the way, perhaps he could drag himself back to his day job for a moment. The flagship measure of his strategy for growth in last year’s Budget was a £1 billion national insurance holiday for new businesses outside London and the south-east. He said that that would benefit 400,000 companies and create 800,000 jobs. Let me ask him a very specific question. Will the Chancellor tell the House how many companies have so far benefited from that scheme, and how many jobs have been created?

I thank the right hon. Gentleman for congratulating the “No to AV” campaign, which many of his colleagues supported, even if he did not. I cannot help but notice that he had a big role to play in Labour’s election campaign, during which he said that

“the Scottish elections are a big test”

for Labour. Well, he was certainly right about that.

Let me say something about that national insurance tax break that was announced in the previous Budget. The take-up has been in the low thousands, and that is something that I acknowledged to the Treasury Select Committee. We are seeking to improve the design of the scheme, to ensure that new businesses are more aware of its benefits. As a result of work being done by Her Majesty’s Revenue and Customs, we expect take-up to increase.

Despite all the bluster, there was not a specific answer to the question in there. We were told by the Business Secretary in February that the Chancellor would announce the details of how he would develop the scheme in the Budget, yet those details still have not arrived. Actually, I have the figures from the Chancellor’s own Department. How many companies have benefited from the scheme? Not 400,000 but just 3,000. How many jobs have been created? Not 800,000 but just 6,000. If that is the flagship measure of his growth strategy, it is no wonder that the economy is flat-lining, that consumer confidence is down and that unemployment is forecast to rise—[Interruption.] Well, if that is not the reason, perhaps the Chancellor will tell us why the economy has been flat-lining in the past six months. Is not the reality that the country is discovering what the Liberal Democrats discovered on Thursday of last week: that this coalition is hurting, but it is not working?

The shadow Chancellor is not just out of his depth; he is drowning. The truth is that he has had absolutely no impact in the several months that he has been doing the job. He had one policy, a VAT cut on fuel that the European Union ruled illegal. He had one idea, which was to follow America, but now the Obama Administration have announced a deficit reduction plan as fast and as deep as the UK’s. He had one prediction, which was that there would be a double-dip recession, and that has not happened. We know that he is a man with a past, but we are beginning to discover that he has absolutely no ideas for the future. If we want any proof of that, this is what the CBI said this week when asked what the outcome would be if Britain followed Labour plans:

“The economy would be weaker because of the impact of a loss of confidence”.

Economic Growth (VAT)

4. What assessment he has made of the effects of the increase in the standard rate of VAT on levels of economic growth in the first quarter of 2011. (54724)

At this stage, it is not possible to make a full assessment of the effect of the increase in the standard rate of VAT on levels of economic growth in the first quarter of 2011. The Office for Budget Responsibility forecast released on 23 March projected growth of 1.7% over the course of 2011. That forecast takes full account of the Government’s fiscal policy measures.

The Bank of England expects inflation rates to accelerate over the next few months. The markets, however, seem to have taken the view that interest rates will not increase as speedily as was anticipated just a few weeks ago. How does the Exchequer Secretary reconcile the Chancellor’s notion that the economy has grown with the judgment of the markets?

The economy is growing: that is clear from the Office for National Statistics numbers and from the projections of every respected economic forecaster. Despite the predictions coming from the Opposition last year, there has been no double dip.

May I return to the topic of VAT on fuel? I have just come from a business session in my constituency of Devizes, where I know that despite the decrease, high fuel prices continue to be a real drag on growth for small businesses across the economy. I have a letter from the EU commissioner saying that the recent motion we debated—that a derogation should be made specifically for motoring fuel—is almost certainly illegal and definitely unworkable under EU legislation. May I ask Ministers what proposals we can suggest to help motorists in the real world now that the Labour party’s suggestion has been revealed as yet another—

It is striking that the first line of Labour’s blank sheet of paper on the economy is a proposal that we now know does not work, is illegal, would not help and would leave tax on fuel just as high as it was—whereas we are cutting fuel duty.

Charitable Giving

The Government think that charitable giving needs a great deal more support than it has been getting, so we announced a major package of new tax breaks in the Budget, ranging from the biggest to the smallest donations. This includes the commitment that anyone giving more than 10% of their estate to charity will have their inheritance tax bill cut by 10%. For the first time ever, the first £5,000 of a donation or donations to a charity will automatically attract gift aid. That is automatic tax relief on the collection plate and the collecting tin on the high street. Overall, 100,000 charities could benefit to the tune of £600 million a year. These are the most generous tax changes for a generation.

Over the year, some £58 million in loose change is put in collection plates from just Church of England collections, so the small donation gift aid scheme will be very welcome, as it will enable tax to be recovered on that amount. Welcome, too, will be the reduction in inheritance tax for those who give more than 10% of their estate to charity. After all, we can take nothing with us, and it is probably better to leave as much as possible to charity when we go.

I thank my hon. Friend for his support. One challenge is to make sure that everyone hears about these schemes over the next couple of years. Because the Budget focused on big issues like fuel duty and the corporation tax cut, the same amount of attention was not given on Budget day to the charitable giving measures. Over the period before they come into effect, I want to make sure that all the charities are aware of the benefits. Every charity will be able to benefit, but small charities will be disproportionately better off.

Many local charities would disagree with the Chancellor’s statement. Will he explain why he chose in the Budget to focus on tax breaks for the wealthiest owners when many small local charities who will not benefit from such donations are being hit by the triple whammy of a rise in VAT, the end to the gift aid transitional rate and cuts to local government grant funding? What help is he giving to those charities that he expects to form the backbone of his big society?

I am not sure who the hon. Lady has been listening to, but this is what the British Red Cross said: “Allowing charities to—”[Interruption.] I am sorry; it seems that we should disregard the views of the British Red Cross. Let me, however, repeat what it said for the benefit of my right hon. and hon. Friends.

“Allowing charities to claim back on up to £5,000 of small donations per year will have a big impact for small charities”.

The Charities Aid Foundation said:

“The Chancellor has today delivered for charities and those who want to support them.”

Instead of carping from the sidelines, why does the hon. Lady not get behind this good scheme and ensure that all charities in all our constituencies make use of it?

Tax and Benefit Changes

6. What assessment he has made of the effects on families and children of the tax and benefit changes introduced in April 2011. (54726)

I echo your tribute to David Cairns, Mr Speaker. I knew him as a very effective Scotland Office Minister, and as a champion of Scottish broadcasting. It is a tragic loss, and he will be very sorely missed by Members in all parts of the House.

Direct tax and benefit changes introduced in April are progressive. On average, households in the bottom 80% of income distribution gain. As a result of the direct tax changes introduced in April, 21 million individuals earning up to about £35,000 per annum will benefit in real terms this year.

Let me take a moment to associate myself with the Chief Secretary’s comments on the sad death of David Cairns. David provided me with a lot of support and a lot of laughter during my time here as a parliamentary researcher and, over the last year, as a Member of Parliament.

Families with two or more children will lose up to £1,560 per year as a result of the cuts in the child care element of working tax credit. Does the Chief Secretary accept that that will deter many parents who would otherwise have returned to work from doing so?

The vast majority of people on low and middle incomes will benefit from the income tax cuts that will result from the raising of the income tax threshold by £1,000. For families with children, we have increased the child element of child tax credit by £180 above indexation. I agree with the shadow Chancellor, who admitted on the BBC shortly after the Budget that

“only the majority of families”

would benefit from those moves.

Does the Chief Secretary share my desire to see a welfare system in which hard-working families are better off than those who choose not to work? Does he agree that, as soon as we can afford it, we should enable as many as possible of those hard-working families to benefit from the lifting of the tax threshold?

I agree wholeheartedly. That is why we have set ourselves the agenda of both reforming the welfare system and lifting the income tax threshold to £10,000, which will significantly benefit millions of people on low and middle incomes.

Value added tax up, losses of about £1,500 for middle-income families, child benefit frozen, child tax credit cut, working families tax credit frozen: can the Chief Secretary tell me why, when such decisions are made, it remains the Government’s priority to cut the 50p tax rate for the highest earners in the community?

I am not sure that the right hon. Gentleman opposed any of the items on that list in votes in the House.

As I said earlier, we have cut income tax by increasing the income tax threshold. We have also introduced a triple lock on pensions, increased cold weather payments, and increased the child element of child tax credit. Of course we must look at the way in which the income tax system works, but our priority has been to cut income tax for people on low and middle incomes by increasing the tax threshold. That is the tax priority of this Government.

Business Regulation

7. What steps he is taking to ensure that the Financial Services Authority exempts from new domestic regulation businesses employing fewer than 10 people and new businesses for the next three years. (54727)

Where the Government are granting new powers to the Financial Services Authority through primary and secondary legislation, we will seek to apply the moratorium. The FSA is, however, an independent regulator with powers to make rules under the Financial Services and Markets Act 2000. The Government’s policy on exempting micro-businesses and start-ups from new regulation will therefore not apply automatically to rules made by the FSA.

In his testimony to the Treasury Committee, the chief executive of the FSA said that up to 10,000 jobs—in many cases, those of small independent financial advisers—could be lost as a result of the retail distribution review. Will the Financial Secretary meet the chief executive of the FSA as a matter of urgency to discuss ways in which the impact could be mitigated?

I know that my hon. Friend has campaigned tenaciously for IFAs. I remind her that although the FSA is an independent regulator—this addresses her question directly—it has an obligation to assess the impact of its rules on businesses, including small businesses, and to make its rules proportionate. I should add that it is not planning any initiatives by means of its powers under the Financial Services and Markets Act apart from those that are already under way.

I thank the Minister for his response. Clearly, if the economy is to be regenerated and rebuilt, it will be small and medium-sized businesses that will achieve that, and one of the things they tell me as their elected representative is that they need rates relief and assistance. What assistance is the Minister considering giving to such businesses?

As the hon. Gentleman will be aware, this Government have taken many actions to provide support to small companies. For example, we have cut the small profits rate of corporation tax—which the previous Government sought to increase. We have done a lot to encourage the growth of small businesses, and we will continue to look at what further measures we might take to encourage their future prosperity.

Public Sector Borrowing Requirement

The public sector finances first release published by the Office for National Statistics estimates that the first provisional out-turn for public sector net borrowing in 2010-11 is £141.1 billion, or 9.6% of GDP. That is £15 billion lower than in 2009-10.

Manufacturing has been undergoing a renaissance under this Government, and clearly has a role to play in helping the economy grow and in reducing the deficit. Does the Minister agree that manufacturing also has a significant role to play in helping to reduce the other deficit: the balance of payments deficit?

I completely agree with my hon. Friend; he is absolutely right that manufacturing has a vital role to play. In fact, the total trade deficits narrowed in each of the past three months, and that recovery in exports has been driven largely by strong growth in the export of manufactured goods, which accounted for almost 50% of the UK’s total exports. That is not just good news for those businesses; it is good news for jobs, too. It shows that under this Government Britain is not just open for business in the UK; it is open for business abroad, too.

When the Government’s cuts really start to kick-in, unemployment will rise by hundreds of thousands, if not up to 1 million. That will result in lower tax revenues and higher benefit payments, and the deficit will get worse and public borrowing will increase. Is not the Government’s policy nonsense?

The hon. Gentleman is giving a critique of his own party’s policy in many respects, because its proposed cuts are nearly as large as ours this year. The difference is that we have set up the Office for Budget Responsibility, and there is clear evidence that we will start to see employment growing year on year and unemployment falling year on year, so by the end of this Parliament we should see a net creation of almost 1 million jobs. Surely, the hon. Gentleman must welcome that? His party leaves unemployment higher when it leaves office.

First-time Buyers

Until and including 24 March 2012, first-time buyers can apply for relief from stamp duty land tax on properties of up to £250,000. The Government are currently reviewing this relief, and will announce the outcome of the review in the autumn. The Government are also investing £250 million in 2011 to assist more than 10,000 first-time buyers to purchase a new-build home of their own through the FirstBuy Direct scheme. That scheme is being co-funded by developers.

I thank the Minister for his response. First-time buyers are the lifeblood of the residential property market, and while I congratulate the Chancellor and his team on the deposit scheme announced in the Budget to assist first-time buyers to purchase new-build property, will the Treasury team consider apportioning part of that funding to assist first-time buyers who want to purchase second-hand property, in order to give the property market the vital shot in the arm that it needs?

My hon. Friend makes an important point, but it is crucial that we target help where it will deliver the greatest economic benefit. By targeting assistance on first-time buyers purchasing new-build property, the FirstBuy scheme helps to unlock stalled developments and stimulate additional house building, with a further 10,000 homes being built for open market sale, supporting 42,000 jobs directly and a further 24,000 jobs indirectly for a year. If we were to pursue the route my hon. Friend suggests, we would potentially lose the benefit of the financing that comes from home builders.

Is the Minister concerned that the proposed savings cap in the universal credit will make it more difficult for first-time buyers to save for the much higher levels of deposit that lenders increasingly require?

Everyone in the House will understand the challenges that face many first-time buyers in trying to save up for a deposit. That is why we announced this scheme at the time of the Budget, which has been widely welcomed. We should also recognise that a number of lenders are now reducing the loan-to-value ratio, to enable more first-time buyers to get on to the housing ladder with a smaller deposit.

Regional Investment

Returning the UK economy to sustainable economic growth that is more balanced across the regions of this country and across sectors is a key priority. In the recent Budget, this Government took steps to encourage investment and exports as a route to a more balanced economy. In addition, we have introduced 21 new enterprise zones in England and we have allocated £450 million of investment in the first round of the regional growth fund, including to an excellent proposal from the Western Daily Press and the university of Plymouth to support small firms across the south-west.

I thank my right hon. Friend for that reply. Private sector growth is really important in my constituency, but only six of 464 bids to the regional growth fund were from Cornwall. What can the Government do to encourage more bids from Cornwall in the second round?

I would urge my hon. Friend and other colleagues from Cornwall to encourage businesses and the local authorities to support bids from private sector businesses. The regional growth fund is there to support private sector-led bids that create growth and jobs and that support economic development across England, and I would urge her to work with chambers of commerce and local enterprise partnerships.

In view of the indifferent growth in the regions, does the Minister regret the Government’s decision to abolish regional development agencies and to give to their authorities no money, no staff and no authority?

No, I do not; I think that that was the right decision. The balance of policies that we are putting forward—on enterprise zones, local enterprise partnerships and the regional growth fund—is designed to ensure that ideas that come from the regions have a much greater chance of success. Our decision was the right one, and the hon. Gentleman will have noted that inequality among the regions actually grew during Labour’s 13 years in office.

Economic Growth

As my hon. Friend knows, we inherited an economic mess, we have restored economic stability and we are promoting economic growth by cutting business taxes, encouraging investment, expanding exports, improving and investing in skills, and creating jobs. The whole House will be pleased to know that 400,000 private sector jobs have been created since the Government came into office.

I warmly welcome the excellent record of this Government, led by my right hon. Friend the Prime Minister, and the admirable work done by the Chancellor. Does he agree that, in addition to all this work to encourage growth, the deregulation of the economy continues to be extremely important and that it is not proceeding at as fast a pace as it should? Will he do everything he can to encourage his colleagues in the Government to get on with the deregulatory programme?

I certainly am doing that. We announced in the Budget the deregulation of £350 million-worth of business regulation, and we also imposed a moratorium for the coming years on regulation on small businesses. On the first anniversary of this Government, it is worth reflecting that 400,000 extra jobs have been created in the private sector, 89,000 fewer people are on the unemployment count, manufacturing output is up by 5%, business investment is up by 11%, exports are up by 12%, our credit rating has come off negative watch, our market interest rates are down and, as I say, economy stability has been restored.

Would the Chancellor like to associate himself with the views of the Secretary of State for Business, Innovation and Skills on the cumulative effect of carbon reduction measures on the competitiveness of energy-intensive industries? There is real concern in the ceramics sector in my constituency that the Government are in danger of exporting jobs and importing carbon, which is in nobody’s interest?

The hon. Gentleman raises a very specific issue—the cumulative impact of the environmental policies of both the previous Government and this one on some very energy-intensive industries such as the one that he represents in Stoke—which is worth consideration. We are examining it, and it is a challenge for the whole House to ensure that we get the right balance between absolutely meeting our carbon reduction requirements, to which we have all signed up as Members of this Parliament, and ensuring that we can do so in a way that enables Britain to continue to have a competitive energy-intensive industry.

Barnett Formula

As the coalition programme for Government states, the Government

“recognise the concerns expressed…on the system of devolution funding.”

The Government’s priority, however, must be to reduce the enormous budget deficit and therefore any change to the system of funding for the devolved Administrations must await the stabilisation of the public finances.

I thank the Chief Secretary for that reply. He will be aware, however, that the Holtham commission, the House of Lords Select Committee and the noble Lord Barnett are all of the view that the Barnett formula is in need of urgent review and should be replaced by a mechanism based on need. I understand that the priority must be to tackle the deficit, but can we not at least start the process in the course of this Parliament of putting in place a fairer allocation mechanism based on need?

No, I am afraid I cannot make that commitment. As I said earlier, our priority is to reduce the deficit. We have the Scotland Bill to take forward here, and in relation to Wales we have a process that is following on from the referendum and we have the Holtham commission to look at specific issues. I think that is the right set of priorities for the moment.

As the Chief Secretary knows, his Government have announced a Calman-like process for Wales following the successful referendum in March for further powers. Will he confirm that reform of the Barnett formula will be a precondition of any wider financial reforms to the way the Welsh Government are funded?

I cannot confirm that, no. We have said that we will consider the issues to do with tax powers raised in the second Holtham report as well as other issues that were brought forward at that stage. We made a commitment to the previous Welsh Assembly Government to engage in a conversation about those things. If the new Welsh Assembly Government want to take that forward, we will be open to that, too.

Alcohol Duty

I met a number of stakeholders ahead of this year’s Budget, including the all-party group on beer and the British Beer and Pub Association. We carried out a review of alcohol taxation last summer and members of the licensed trade contributed heavily to that.

I thank the Minister for her answer. Given the importance of the licensed trade to the economy and our culture, particularly in regions such as the west country, where tourism is high, is it not now time to seek to reduce alcohol duty on served drinks and to increase it on cheap booze sold by supermarkets?

My hon. Friend is absolutely right to raise that issue. In fact, it is part of the rationale behind tackling problem drinking. One way we have sought to do that is by introducing the limits on the below-cost selling of alcohol in supermarkets. That will be done by a formula of assessing duty plus VAT as the below-cost level. My hon. Friend is also right to point out that we need to do what we can to support pubs, which are the lifeblood of many local communities. They will also benefit from the various packages of measures we have brought forward to support small businesses, including reduced corporation tax, increased national insurance thresholds and, of course, the plan for growth.

Budget Deficits

14. What recent discussions he has had with his international counterparts on strategies to reduce budget deficits. (54735)

At the G20 summit in Seoul in November, advanced countries committed to formulate and implement credible growth-friendly, medium-term fiscal consolidation plans. The Chancellor has been involved in discussions with our international and European counterparts since the Seoul summit, including in the International Monetary and Financial Committee and the International Monetary Fund spring meetings. As was the case with the previous Administration, it is not the Government’s practice to provide details of all such discussions.

I thank the Minister for his reply. The OECD’s recent report says that the UK is striking

“the right balance between addressing fiscal sustainability…on the one hand, and preserving short-term growth on the other.”

In his contact with international colleagues, has my hon. Friend found other support for this view or, indeed, any support for the opposing view?

It is quite striking that on one side of the argument, saying that we must be serious about getting the deficit down, there is the OECD, the IMF, the European Commission, the CBI, the Governor of the Bank of England and the US Government, whereas on the other side we have the Labour party. We do not find the Labour party’s case terribly persuasive. On the evidence of last week, nor do the British people.

Does not what happened in Greece show that measures that hamper growth make tackling the deficit all the harder? Is that not why, six months after the geniuses opposite took stewardship of an economy that was beginning to recover strongly, growth had ground to a halt? Is it now why, far from tackling the deficit, which is what all this is supposed to be about, the small print of the Budget shows that the Government will have to borrow £46 billion more?

I know that the hon. Gentleman is close to the former Prime Minister, but it really is disappointing that he is such a deficit denier. He even seems to suggest that the Greeks should not be doing anything about their deficit. If we do not have a credible plan, then the economy is at risk. We do have a credible plan.

First, Mr Speaker, may I associate myself and my Liberal Democrat colleagues with your remarks about David Cairns at the start of Question Time?

On the deficit, the Government’s plans will reduce the fiscal deficit from last year’s figure of 9.6% to 7.9% this year, but that will still be roughly double the eurozone average and higher than the figures for Germany, France, Italy and Spain. Does the Minister agree that if we did not take this action to reduce the deficit, it would undermine international confidence in this country and our ability to borrow the funds that we still need to fund our programmes?

My hon. Friend is absolutely right. Even now, our deficit is higher than Portugal’s and it is perfectly clear that we on the Government side are united and determined to bring that deficit down.

Topical Questions

The core purpose of the Treasury is to ensure the stability of the economy, to promote growth and employment, to reform banking and to clear up the mess in the public finances that we inherited so that Britain starts to live within her means.

The Chancellor will know that fraud and error have plagued the tax system since it was introduced. What measures is he taking to bear down on this and what financial impacts does he expect those measures to have?

I can today report to the House that in the past year Her Majesty’s Revenue and Customs has saved an additional £1 billion by tackling fraud and error in the tax credit system. For many years, the flaws in the shambolic administration of tax credits went completely ignored by the Labour party, causing misery for hundreds of thousands of families and costing the taxpayer billions of pounds, but we are now sorting out this mess.

T3. Has the Chancellor had an opportunity to note the findings of last week’s report from the National Institute of Economic and Social Research, which show the contraction in public and private demand since emerging from the recession to be higher in this country than in any comparable major economy? Does that not show that the Government are cutting too far and too fast? (54748)

First, the report recommends higher taxes and higher interest rates—perhaps that has become part of the Labour party’s official policy. I think it is worth looking at what the CBI has said this week. I have already quoted what it said when I was asked what the outcome would have been had Britain followed Labour’s plans—it said there would have been weaker economic growth—but its director general has also said:

“We are rock solid behind the chancellor’s plans to eliminate the structural deficit within a parliament”,

which are an

“essential part of putting the economy back on a stable footing”.

That is the voice of British business’s view of the deficit. [Interruption.] The shadow Chancellor says that is not true. A couple of months ago he was quoting the CBI across the Dispatch Box at me, but now that the CBI says that Labour’s economic policies would lead to weaker economic growth, he is in denial about that too.

T2. What financial stress test will the Treasury impose before allowing the Department of Health to authorise general practitioner or clinical consortia? (54747)

I am grateful to my hon. Friend for his question, which raises a very important issue. It is a key part of the Treasury’s engagement with this to make sure that the process for authorising GP consortia ensures that those organisations are fully financially capable, as well as clinically capable, of meeting their objectives before they are authorised on whatever timescale.

T7. Does the Chancellor recall his statement to the House in October, when he said:“I completely understand the public’s anger that the banks…should now be contemplating paying high bonuses”?—[Official Report, 20 October 2010; Vol. 516, c. 955.]It is all very well being angry about that, but why do the banks continue to pay high bonuses to their high-ranking directors and why does he not do something about it? Why does he not repeat Labour’s bank bonus tax and reinvest the money in jobs, housing and many other things that the people of this country want? (54752)

Bank bonuses were higher when the hon. Gentleman was a Minister. There is complete amnesia among the Opposition about their having presided over the collapse of the British banking system and over bonuses that were billions of pounds higher in total than those being paid today, and they have no ideas about how to reform the banking system. The Chancellor who introduced the bank bonus tax to which the hon. Gentleman refers said that it would not work again. We have introduced a permanent bank levy which, I think, the Labour party continues to oppose.

T4. The economy of Hastings received a tremendous boost today when the Heritage Lottery Fund announced that it would support our bid for £8.7 million for the pier renewal but, sadly, seaside towns in general and we in Hastings suffer from bad transport links, high public sector employment and low wages. Will the Chancellor consider what can be done to support seaside towns under this Government? (54749)

I join my hon. Friend in celebrating the good news about the successful bid for the renovation of the pier. She is right to point out that there are specific issues associated with seaside towns across the country which are well known to the Members who represent them and well known also to the Government. We intend to come forward with proposals later this year to help those seaside towns.

T8. Household debt has been revised upwards by £300 billion, and my constituency, Gateshead, has one of the highest rates of personal insolvency in the country. What is the point of cutting the national debt, only to transfer the burden on to the personal finances of ordinary families? It is blindingly obvious that we are not all in this together—some of us are in this up to our necks. (54753)

I am afraid the hon. Gentleman misses two important facts. First, the most recent figures—within the past week—for personal insolvencies showed a welcome fall. Secondly, household debt reached a record level under the previous Government. As I said in response to the first question today, we are introducing a Financial Policy Committee to assess overall levels of private debt, including business debt, in the economy so that we do not allow dangerous unsustainable levels to grow. That will now be a judgment for the Financial Policy Committee and it will have the tools to do something about it.

T5. Can my right hon. Friend update the House on what discussions he has had about the likelihood of a further bail-out of the Greek economy and whether he has made any assessment of the UK’s likely contribution? (54750)

The answer is that we have not had discussions about a second Greek bail-out and we have not been asked to make a contribution. The question for Greece is whether it lives up to the commitments that it has entered into. There is currently an International Monetary Fund, European Commission and European Central Bank team in Athens assessing Greece’s progress against the plan that it committed to, and we should await the results of that assessment.

A year ago the Office for Budget Responsibility was projecting growth in the UK economy of 2.6% this year. Now the forecast is down to 1.7%. What has gone wrong?

As I am sure the right hon. Gentleman knows, there are very significant global headwinds of the high oil—[Interruption.] I know that Labour Members live in a complete vacuum but, according to the most recent growth figures for this first quarter, the British economy posted a higher quarterly growth rate than the United States of America. Of course we have the high oil price and the ongoing problem in the eurozone, but what is required above all is a credible deficit reduction plan that keeps Britain out of the financial danger zone.

T6. Given that Plymouth is a low-skills, low- wage economy with 38% of the work force dependent on the public sector, can my right hon. Friend give me the timetable for the creation of enterprise zones? What role could green deal manufacturing play within that? (54751)

I know that my hon. Friend is a trenchant supporter of his constituency and a promoter of green industry there. He has raised the issue with me on a number of occasions. I know that Plymouth has put forward a bid for the second round of enterprise zones. An announcement will be made later this summer, in July, and I am afraid he will just have to wait until then, but as I say, he has certainly brought to my attention the potential for the green economy in the city that he represents.

May I offer my condolences to the friends, family and colleagues of David Cairns? He was a man who always argued his corner with intelligence and humour, and carried the rare gift of being liked and respected across the Scottish political divide. We will all miss him.

I am sure the House is pleased that both Santander and RBS have access to European Investment Bank funds to issue discounted loans into the economy—£150 million in the case of Santander, and a third tranche of £300 million in the case of RBS. Can the Chancellor confirm that this is new, additional money, or will it be rolled into the gross lending figures already agreed?

Let me write to the hon. Gentleman on the specific issue of the Santander loan and the application to the European funds. I take this opportunity to congratulate the Scottish National party on its victory in the Scottish parliamentary elections and say that we respect their outcome. As he knows, my right hon. Friend the Prime Minister contacted the Scottish First Minister to congratulate him personally. I hope that we can work together in the next few months and years to deliver what we both want to see, which is jobs and prosperity in Scotland.

T9. US Treasury Secretary, Timothy Geithner, recently praised the Government’s fiscal reduction plans, saying that the Chancellor had locked the coalition Government into a set of reforms that were “very good”. What lessons has he drawn from this powerful endorsement? (54754)

Of course it is welcome to have the support of the US Treasury Secretary. It is interesting that we have been urged for some months by Labour to follow the US example. The Obama Administration, in the speech the President gave at George Washington university, set out a deficit reduction plan—it is not yet legislated for in Congress—that goes faster and deeper than the one we are promoting here in the UK. I suspect that we will not now hear the argument that we have heard for the past few months from the Labour party.

May I associate myself with the remarks about our much-missed colleague David Cairns that you, Mr Speaker, and others have made?

Recent commentators have suggested that it is possible that the Government will not meet their target to balance the cyclically adjusted current budget by 2015-16, by the end of this Parliament. If it becomes clear that Tory cuts are not working to reduce the deficit, at what stage will the Chancellor change course?

I have just been told by my hon. Friend the Member for Chelsea and Fulham (Greg Hands) something about the hon. Lady that I did not know: she is the Parliamentary Private Secretary to the previous leader of the Labour party. It is presumably not a job with onerous responsibilities, but it sounds as though he may have written that question for her. The Office for Budget Responsibility is the independent body that assesses our ability to hit the fiscal mandate. The reason we set it up was because under the stewardship of the person to whom she is PPS all credibility for Treasury figures was lost.

It is incredibly important to try to increase the number of women who set up their own businesses. The Government have undertaken a number of specific initiatives, driven from No. 10 Downing street, and I will ensure that my hon. Friend is closely involved in them.

Yesterday, in a welcome move, the British banking industry abandoned its legal fight with the Financial Services Authority over the mis-selling of payment protection insurance. Does the Chancellor agree that this scandal, as a result of which millions of people in this country were fleeced by the banking sector on a large scale, was an absolute disgrace and that the banks involved should settle the claims that arise, immediately and without further delay?

The hon. Gentleman is right to highlight the mis-selling of PPI. This happened under the regulatory regime that his colleagues set up when they were in government. One aspect of the reforms that we are introducing by setting up the financial conduct authority is to give the regulator more powers to intervene earlier to prevent that sort of scandal happening again.

Given the Chancellor’s concern for the use of taxpayers’ money, will he really allow members of GP consortia boards to be paid as much as £30,000 a year for just one day’s work a week?

As I said in response to my hon. Friend the Member for Southport (John Pugh), one of the things we need to do as part of the listening exercise is hear the concerns about how consortia will work and ensure that the financial regime that is in place is sustainable and puts the maximum amount of resource to the front line.

The Chancellor did not answer the question from my hon. Friend the Member for Gedling (Vernon Coaker), so I would like to give the right hon. Gentleman another chance. Will he repeat the bank bonus tax that was so successful last year and use that money to build the extra affordable homes, to rent and to buy, which are desperately needed by people in this country and by the construction industry, and which would be good for the economy?

As I was explaining to the hon. Member for Gedling (Vernon Coaker), the bank bonus tax was introduced by the previous Chancellor of the Exchequer, and it was his judgment that it would not work for another year because the banks would find a way of avoiding it. That is why we introduced a permanent bank levy not just for one year, but for each and every year. In any one year it raises more than the bank bonus tax net, so that is what we have done. It is pretty striking: Labour Members had 13 years in government to introduce a permanent bank tax; they did not do so, and they cannot carp from the sidelines now.

The gold was sold, I think on the advice of the current shadow Chancellor, at $3.5 billion—a princely sum, except that it would now be worth $19 billion.

Off-quota University Places

(Urgent Question): To ask the Secretary of State for Business, Innovation and Skills if he will make a statement on the proposals for students to buy off-quota university places.

Fair access to university is crucial for achieving equality of opportunity, and there is a clear issue of principle here. Access to a university must be based on ability to learn, not on ability to pay. There is absolutely no question of wealthy students being able to buy their way into university.

As the coalition prepares its White Paper on higher education, we are considering possible ways to allow universities to recruit extra students in addition to their student number allocation. Any such arrangement would have to comply with the principle that access to university must be based on ability to learn, not on ability to pay. That is why, in the Secretary of State’s speech to the Higher Education Funding Council on 6 April, he said:

“Another measure for the longer term could be to remove student number controls which inhibit universities’ ability to recruit students who represent no burden to the public purse. For example, I don't believe that universities should be prevented from expanding courses where employers cover students’ costs”.

We are considering two options: first, making it easier for employers to sponsor students at university; and secondly, making it easier for charities to sponsor students at university. Any such scheme would need to comply with the following conditions: the principles of fair access must apply; there would need to be genuine additional places; there would be no reduction in entrance standards; and, of course, rich individuals should not be able to buy their way into university.

Everything this coalition does is guided by our belief in the need to improve social mobility after it stagnated under the Labour party. We will set out our proposals in the White Paper, which will be published shortly.

In The Guardian and on the “Today” programme, the Minister set out plans to allow students who have access to private funds to buy their way into universities that they cannot get into on merit. Why was the House not told of those plans when we voted on tuition fees? How many hon. Members would have trebled fees if they had known that he planned to allow students to buy entrance to selective universities? Or has the Minister just made up this plan? He has cut 20,000 student places, lost control of fees, £9,000 is the norm not the exception and access agreements have no teeth. There is a black hole in his budget and threats to cut more student places or teaching budgets.

Given that mess, why is it that every time the right hon. Gentleman puts a sticking-plaster on the wounds that he has caused he makes things worse? Yesterday he launched the communications plan for the new fees system. Can he not imagine the dismay that he has caused for thousands of hard-working A-level students today? They now know that hard work, ability and ambition will not be enough.

Students from low-income homes want fairness, not favours. Does the Minister not understand that a few places will not soften the brutal message that, for this Tory Government, access to wealth and privilege will always trump ability and ambition? Poor families have no chance of buying their way in, but is this not also a cruel betrayal of middle England—those hard-working, middle-class, middle-income families who want to do the best for their children and face agonising pressure to take on huge private debts to remortgage their homes to make sure that their children get what the kids of the wealthy take as a right?

Does the Minister accept that although there is nothing wrong with employers getting universities to provide bespoke courses for their employees and nothing wrong with employers paying fees once the university has decided whom to admit, his plans will corrupt university admissions with a two-tier system—one for the best qualified and another for those with access to fatter cheque books? And who will pay? The Minister’s response was remarkable, because it is clear from his interviews today that he wants to allow wealthy families to buy places: he did not deny that in several interviews. Now incompetent Government Ministers are arguing about it in public. Where are these charities that want to pay £70,000 per student? Who are the employers who want to pay for the second best, not the best?

I am glad that the Minister has been forced here today. We will study his plans to see whether he really has climbed down, because if so, it is the most humiliating and fastest U-turn in the history of this discredited Government. This House needs what we needed last December—a proper White Paper to tell us how this whole mess is going to be sorted out.

The shadow Secretary of State clearly has not been listening to what I have been saying. He has invented a policy and then denounced it. He has no excuse for that, because in every public statement I have made, I have made it absolutely clear that we are looking at employers and charities. Those are the actual words that I used in The Guardian this morning when I referred to the current rules which, for example, limit the ability of charities or social enterprises to sponsor students.

Let me make the position clear regarding the two proposals that we are considering. First, Members in all parts of the House have endlessly urged us to do more to get employers involved in sponsoring students at university. Only 6,000 students out of well over 1 million in total are currently sponsored by employers outside quota controls. That is why, yes, we are looking at ways in which extra places outside quota controls can be made available for students sponsored by companies, but they must meet the conditions that I clearly set out in my earlier response.

Secondly, we are pursuing another objective that I thought was shared by Members on both sides of the House—encouraging greater endowments for our universities. Many people who are considering charitable support for our universities like to know that real individuals will benefit. At the moment, if they identify and provide for any places for poor students, they come up against a universities quota limiting total numbers. That deters charitable giving. So, again, we are investigating whether charities and social enterprises can support people at universities outside quota controls.

Whatever we do will comply with the fundamental principle that rich individuals should not be able to buy their way into university. Labour Members left the public finances in a mess. They left universities with a £1 billion deficit and in a straitjacket, they restricted places, they fined institutions, and they blocked ambitions. We are determined to reform Labour’s broken system.

Will the Minister again reassure the House that there will not be an uneven playing field for those from lower-income families? Will he ensure that we have fair and equitable access to our universities while ensuring that Labour Members do not stand in the way of employers and charities being able to make the maximum number of places available to everyone, regardless of background?

I can absolutely give my hon. Friend the assurance that he seeks. The challenge to Labour Members is to join us in explaining to young people in schools and colleges across the country that none of them will have to pay up front to go to university. Under our proposals, the threshold for repayment is increased from the £15,000 we inherited from Labour to £21,000 now.

Consultation on our proposals will take place after we publish the White Paper. In a speech that I gave to Universities UK and in the speech that I quoted by my right hon. Friend the Secretary of State to HEFCE, we made it clear publicly that this is the option we are looking at.

I have the great privilege to represent three great universities: the university of Cambridge, Anglia Ruskin university and the Open university. Will the Minister assure me that nothing he does in this or any other policy will force any of those universities to lower their standards for financial gain?

Yes. I have made it clear and am happy to confirm it again for the hon. Gentleman that there should be no reduction in entrance standards for our universities.

Was it wise of the Minister to give the impression on Radio 4 and in The Guardian that our universities are like easyJet in that people can buy their way to the front of the queue? He knows that our lecture halls, universities and university accommodation are only so big. Surely, if extra places are put on, places will be denied to those who want universal access.

We inherited from the previous Government, of whom the right hon. Gentleman was the Minister for universities, a system of student number controls so tight that he was fining universities for taking on extra students. There were students who wanted to go to university and universities who wanted to educate them, but he fined the universities for wanting to recruit them. We are trying to break free from the constraints that he placed on opportunity, while making it absolutely clear that people cannot buy a place at university.

I note my right hon. Friend’s comments on off-quota university places, and am reassured by his statement on the issue of standards and entry. However, is it not the case that across the HE sector, discussions about this topic are already taking place?

It is the case. I have read with interest the reaction to the speculation today. I was struck by a comment released today by the chief executive of GuildHE:

“Providing off-quota places can be socially progressive.”

He went on to say:

“This could give students of all backgrounds a wider set of choices, including whether or not to take out a long term loan.”

That gentleman is, of course, the former special adviser to the shadow Secretary of State.

Chaos on health policy; Ministers rowing in public about whether to abandon our carbon reductions; and now this, all in the space of 24 hours: is this not the most serially incompetent Government in living memory? When will the Prime Minister get a grip?

I do not know what the right hon. Gentleman is getting quite so aerated about. The Government are committed to improving social mobility and to easing the controls under which universities function. We will put forward proposals in the White Paper to achieve precisely those objectives.

We welcome any measure to aid social mobility and increase fair access. I welcome my right hon. Friend’s ideas to increase the number of places by getting charities and businesses to sponsor degrees. Will he confirm that rich students will never be able to buy their way into university under this Government?

I am happy to give the hon. Lady the assurance that she seeks. That is not the proposal that we will put forward in the White Paper.

Does the Secretary of State accept that it was he who started this hare running? The minds of those of us who want to be fair to him have not been put at rest by what the Minister has said today. We do not want a twin-track or two-tier system. May I add that, as the Minister knows, many of the leading public schools in this country are charities?

The Secretary of State and I have publicly referred to this idea. I referred to it in a public speech to Universities UK and he referred to it in a speech to HEFCE. We both said that we were looking at ideas for off-quota places. We make no secret of the fact that we are investigating those ideas. I have also made it clear in every public remark that we are looking at employers and charities as the people who would sponsor such places.

May I welcome my right hon. Friend’s desire to create more university places? More sponsorship of students by businesses and charities would be very welcome to both students and universities, but does he agree that taking the Government cap off student numbers is the only real way to create a fully functioning market?

I share my hon. Friend’s dislike of the system that we have inherited. I deeply dislike a system in which universities are fined for taking on students who meet their entry requirements, but of course there are public expenditure constraints, because each student comes with a cost. That is why I am being perfectly explicit about the fact that we are considering ways in which it would be possible for students to be accepted into university outside the quota, under the conditions that I have clearly set before the House this afternoon. I hope that moves us some way towards his admirable objective.

I agree that that is very important, and that the principles of fair access must apply. When we produce our White Paper and our proposals are consulted on, that question will of course need to be properly addressed.

Will the Minister confirm that the policy of off-quota places can expand the opportunities of some people from all sorts of backgrounds to go to university, including those who would not normally have the opportunity to go, provided that they have the support of a business or charity?

My hon. Friend is absolutely right. We are trying to spread opportunity to go to university, even at a time when money is tight. That is what we are committed to achieving, and it is a great pity that the Labour party has completely failed to suggest anything that would deliver on our belief in improving social mobility.

Given his absence from the House today, can the Minister assure the House that this policy has the full support of his boss, the Secretary of State, and will continue to have it in the future?

I am setting out the approach of the coalition Government, and of course we will set out in the White Paper our proposals to deliver on the coalition’s commitment to improving social mobility.

Is the Minister aware of a scheme run by KPMG, which pays the fees for students who go on to work for it? Is he attracted to that model?

The KPMG scheme is an excellent example of exactly what we are trying to encourage. The trouble is that at the moment, so far as such estimates can be made, we believe that only approximately 6,000 students out of well over 1 million are benefiting from extra places sponsored by companies such as KPMG. That is far too low, and we are considering ways in which we can encourage more such schemes, because we believe they are a way to spread and improve opportunity in this country.

Affluence is influence, and this is a triumph of affluence over ability. The Government have to recognise that it is social networking that leads to people accessing this type of support to go to university, so it will not be directed at the poorest people from our constituencies. It will be an opportunity for those who do not meet the criteria for entering university to get in by the back door because they have access to private finance.

I am afraid the hon. Gentleman is more interested in fighting class war than in considering practical proposals to improve access to university. Not only are the particular conditions that I have set out to the House today intended to ensure that his concerns do not come to pass, but in general, I believe that the expansion of higher education places is of itself a good thing for social mobility and opportunity in this country.

Is it not the case that quotas and rationing have served low-income students very badly? In Britain, only 19% of low-income people go to university, which can be compared with more open systems such as those in Australia, which has 30%, and America, which has 50%. Does that not show the poor record of the previous Government?

My hon. Friend is absolutely right. There is a problem. We are restricting access to university, and social mobility in our country is far too low. This Government are looking at how we can tackle that problem, but all we get from the Labour party is completely wilful misrepresentation of what we are doing, and no practical proposals whatever.

As my hon. Friend the Member for Huddersfield (Mr Sheerman) has pointed out, public schools are charities. Will the Minister unambiguously rule out that his proposals would allow any public school to buy places at any university?

It is absolutely not our intention that such purchasing of places at university should happen. That is why the criteria that I have set out are absolutely clear on fair access. People should not be able to buy places at university. We are not proposing what the hon. Gentleman claims.

Employers, among others, benefit from well-educated students. Is it not right that if we can find a way for them to share in that burden, we should use it, rather than jumping in and getting over-excited at the mere mention of them?

My hon. Friend is absolutely right. Indeed, the previous Government, towards the end of their time in office, produced a report, “Higher Ambitions”, which on page 47 specifically calls for employers to be more engaged. It says that

“businesses have a crucial role in the funding and design of programmes, in the sponsorship of students”.

We are trying to ensure that more employers have the opportunity that was talked about by the previous Government, but which, not for the first time, they failed to deliver.

The Minister has categorically refused not to rule out private schools buying places for their students. Is this yet another idea dreamt up on the playing fields of Eton?

Access to Russell group universities from the lowest income groups has abysmally flatlined over the past 20 years. Ideas such as allowing companies and charities to create social mobility and greater access should be debated. They should not become the subject of scaremongering and misrepresentation. It is a shame that the Opposition have done that with a cynical letter to The Guardian in support of its scaremongering headline.

Not for the first time, my hon. Friend is a voice of sanity in this debate, and I completely agree with his point. Government Members are engaged in improving social mobility and people’s opportunities to go to university, while making absolutely clear the principle that nobody should be able to buy a place at university using their personal wealth. That is the principle we are applying, and I am grateful to my hon. Friend for his support.

When I read this story in The Guardian, my first inclination was to check the date, but it clearly could not be 1 April, because we have had May’s elections, when Labour took Keele university from the Liberal Democrats because of broken promises on tuition fees. I then thought that the story must be a clever wheeze by plotting Conservative Ministers, who are thinking, “What can we do to make Vince Cable, the Secretary of State, finally jump ship?”

The Minister has clearly not told colleagues and the House in his responses how he would discriminate between different charities: which would qualify, and which would not?

I am afraid that I have made absolutely clear the principles that will guide our policy. It is not our intention that schools should be able to buy places at university.

I congratulate my right hon. Friend the Minister on the help and support that he has given to mature, part-time students—students who did not do well at school first time around, but who in their 20s and 30s decide to be socially mobile and to get qualifications and further education.

My hon. Friend is right. That is one reason why one proposal before the House is to extend loans for fees for the first time to part-time students, many of whom are mature students, which will enable them to take the opportunity of going to university. Our central objective is to give that opportunity to as many people as possible who have the ability and commitment to gain from it. That admirable objective is what drives the coalition.

Will the Minister assure the House that there is no truth in the rumour that this policy was announced today to add the final humiliation to the Lib Dems and precipitate a general election?

This policy has been referred to in speeches by me and the Secretary of State. [Hon. Members: “When?”] In speeches we gave to Universities UK and the Higher Education Funding Council. The policy will also be set out in the White Paper, after which I look forward to debating it further in the House.

Given the constraints on public spending, allowing businesses and charities to provide additional places at no cost to the public purse is, in principle, a good idea, but can my right hon. Friend tell the House exactly how the Government will ensure that no university in this country will have different entry criteria for quota and off-quota places?

My hon. Friend is right to raise that important principle. I hope that I made it clear earlier that there should be no question of sacrificing university entry standards. We are not considering that.

The Minister will want to confirm to the House that university education in Scotland is fully devolved—thank goodness—but will he also confirm that should this extraordinary plan ever see the light of day, it will apply to English universities only, and that there will be no requirement to roll it out in Scotland?

The hon. Gentleman says, “thank goodness”, but hon. Members on both sides of the House are still looking forward to hearing the Scottish National party’s long-term plans for the financing of universities in Scotland. We have set out our proposals to ensure that universities in England are well financed and able to offer to our students a high-quality education. I hope that that opportunity is also available to students at Scottish universities.

If the Minister intends to allow charities to sponsor university places, can he explain to the House what amendments he will introduce to change charity law so that public schools are not counted as charities for that purpose?

After the White Paper, we will—with the consent of the House, I hope—introduce legislation that will provide the framework within which all the assurances I have given today can be met.

How can it be socially progressive to devote time and energy to facilitating access for students from better-off backgrounds at the same time as the Government have axed Aimhigher, which means that projects in my constituency to reach out to poorer students will run out of funding by October this year?

It is socially progressive to consider how to provide more opportunities for people to go to university and whether they can be sponsored by their employer or whether that can happen as part of a charity wishing to endow a university. That is socially progressive, which is why these proposals will help to tackle one of the biggest challenges facing Britain today—our very low levels of social mobility.

Twenty-six per cent. of young people in Rochdale get the opportunity to go to university, compared with the national average of 31%. That gap narrowed under the previous Government. Instead of coming up with fanciful policies that will help his wealthy mates’ kids get into university, will the Minister start helping youngsters in places such as Rochdale?

It is important to help young people in places such as Rochdale through educational reform and raising school standards. However, in the many debates on higher education that I have attended in the House over the years, hon. Members on both sides have called for greater employer involvement in course sponsorship, and for greater endowments and charitable giving to universities, yet as soon as we introduce practical ideas to achieve these objectives, Opposition Members suddenly no longer support principles that I thought were widely endorsed on both sides of the House.

The key point is that people have to get into university first and then get the sponsorship from outside, otherwise the hon. Member for Vale of Glamorgan (Alun Cairns) will be right: this will be a charter for extending access to universities, because more thick rich people will be going to university.

That is why we have made it clear that there should be no reduction in entrance standards, and that in no circumstances should rich individuals be able to buy their way into university. I have made that clear to the House all afternoon, and it has been made clear in every statement on this matter from me and the Secretary of State.

I say, Mr Speaker, there might be many on the Tory Benches who think it an absolutely spiffing idea to allow mummy and daddy to purchase privilege through this toff quota. Should this principle be extended, perhaps to allow mummy and daddy to purchase a parliamentary seat, the odd ambassadorship or even, dare I say it, a top judge’s job?

If that constitutes the Labour party’s response to our proposals, we can understand why our party is serious about improving conditions in our country and Labour is not.

What consultation did the Secretary of State have with UCAS before launching the policy, and what was its response? Will he clarify what the range of fees will be for students who try to jump the queue?

As I have said, the idea was mentioned in public speeches to Universities UK and the Higher Education Funding Council for England. The proposals will be further set out in the White Paper, after which there will be further consultation.

Wealthy families often set up charitable trusts for themselves. How will the Minister prevent family-run charitable trusts from circumventing his rules and buying places, given that they are governed by exactly the same charity legislation as the other charities to which he has referred?

It is very important that endowments for universities absolutely meet the criteria of fair access, and that there should be genuinely additional places and no reduction in entry standards. It is the university that will decide who is admitted, and it is essential that we do not compromise on that principle.

I listened carefully to the Minister’s reassurances to the Chairman of the Education Committee. I also listened to his accusations of class war against the Opposition, but I wonder whether there has been any cross-departmental collaboration to ensure that social mobility will come about under his policy. Has he consulted the Secretary of State for Education about his policy, which has seen 500,000 youngsters receiving education maintenance allowance at the higher level to get into further education reduced to 12,000 receiving bursaries under the new scheme?

The Secretary of State for Education, just like me, is trying to deliver improved education opportunities after inheriting a total mess in the public finances from Labour, so we have to take tough decisions. We are trying to save money, but at the same time we are delivering reform of schools, improved access to universities, a better way of funding them in future and the freedom for them to escape from student number controls, albeit under carefully controlled conditions and with clear principles. That is the way to improve education standards in our country, even when money is tight.

Will the Minister tease out for us the conversations he has had with his adviser on fair access, the right hon. Member for Bermondsey and Old Southwark (Simon Hughes)? Has not this whole problem arisen because of the ideological experiment that the Minister is conducting with our universities? What is wrong with the state and the private sector working together, rather than this neo-liberal vision that he has for our universities, undermining their integrity and world-class reputation?

We absolutely do want the public and private sectors to work together. That is why we do not like the regime that we inherited from the previous Government, which had what are called “closed places”—that is, specially restricted places that are the only off-quota places that employers can sponsor. I very much value the advice of the right hon. Member for Bermondsey and Old Southwark (Simon Hughes)—who, if I might say so, made a powerful intervention in a previous debate in this House on higher education, only last week or the week before, about how our student finance reforms will work, which was exactly the right way forward for student finance in this country. [Interruption.]

Admission to university is determined by the university. It is the university that has the admission standards, which cannot be compromised, the university that does needs-blind admissions, which cannot be compromised, and the university that is bound by the clear conditions I have set out. Of course there is no suggestion that anyone other than the university looking at who can best benefit from a course should be deciding on admission to university. After our White Paper, when we have a further opportunity to debate our proposals, I very much hope that it will be possible to carry forward these exchanges, to show that we on the Government Benches remain committed to expanding our universities and improving social mobility in our country.

Passenger Name Records

With permission, Mr Speaker, I would like to make a statement on the draft EU directive on passenger name records—PNRs—and the Government’s decision to opt into it. My appearance today fulfils a commitment that I made to the European Scrutiny Committee.

Global travel brings with it countless benefits—economic, cultural and social—and there is no doubt that our more interconnected world is a better world, but greater freedom of movement also provides opportunities for those who wish to do us harm. We know that terrorists have long had an interest in aviation-related attacks. We know, too, that serious criminals, people traffickers and drug smugglers have exploited easy international forms of travel to carry out their crimes. They often plan and execute their crimes in meticulous detail, using intricate ruses to escape detection and capture. In response, Governments around the world are increasingly exercising greater vigilance to keep their citizens safe. Passenger name records—passenger data collected by air carriers as part of the operation of their business—are a vital and proven tool in the fight against terrorism and other serious crimes.

Passenger name records help our law enforcement agencies to prevent, detect, investigate and prosecute terrorists and other serious criminals. Their power lies in the fact that, by using an automated system and interrogating it intelligently, we are able to sift data quickly and in such a way that they reveal patterns and make links that would otherwise not be readily apparent. For example, the case of David Headley, the terrorist facilitator convicted in the US of involvement in the Mumbai attacks, shows the benefits of PNRs. All that was available to US investigators initially was the first name, “David”, a vague travel window of “the next few weeks” and the partial travel itinerary of a flight from the United States to Germany. The US used these PNR data in association with other known flight information to identify the suspect before he could travel. Headley was later arrested and pleaded guilty to terrorism-related crimes.

PNR data therefore have a proven capability to protect our citizens from harm. Along with advance passenger information—API—PNRs are a crucial element of the UK’s own e-Borders system. Since 2005, e-Borders has led to more than 1,500 people being refused entry and to more than 8,700 arrests, including 57 for murder, 175 for rape or sexual assault, 25 for kidnapping, 441 for fraud, 397 for drugs offences and 920 for violence. That is why we committed to supporting e-Borders in our coalition agreement.

Critical to our decision of opting into the directive was the aim of securing an ability to mandate the collection of PNR data on flights between two EU member states, for the full usefulness of the system to be realised. I am pleased to say that the coalition Government made significant progress on this, ahead of the opt-in deadline, and that the European Council has given a clear political signal that it favours collection of data on intra-EU flights, following a UK amendment to that effect. The Home Secretary pressed the argument for it at the April Justice and Home Affairs Council meeting, which has been reported to the House via letters to the Chairs of both scrutiny Committees. At the Council, 15 member states supported the UK’s position to include intra-EU data collection. So, although we have reservations about some aspects of the directive that will need to be resolved in due course, we can enter into negotiations from a position of strength, knowing that we have the support of a majority of other member states on this key issue for the UK. Indeed, the official outcome of proceedings of the 11 April JHA Council states that

“the preparatory work on the draft PNR Directive will continue...on the basis of the indication by the Council that the Directive should allow individual Member States the option to mandate the collection of PNR data with regard to targeted intra-EU flights”.

The draft directive as it stands is not perfect, but it is right that we work with our European partners to get a directive that best serves Britain’s interests. Initial parliamentary scrutiny of the directive has already taken place, but it will continue as the negotiations progress. Debates have been held in both Houses. The Lords strongly recommended that we opt into the directive and the Commons supported the Government’s negotiating position. We already have domestic legislation to underpin the collection of PNR data, but the directive will provide an unequivocal legal framework at EU level for the collection and sharing of such data. I know, however, that some hon. Members have concerns about the PNR directive, which I want to address directly today.

Let me address the two basic issues of why using PNRs is both necessary and proportionate. I set out earlier how PNR data have been used to target suspected terrorists. The application of this data also has wider benefits in tackling serious organised crime. For example, in 2009, working with our Italian colleagues, we used PNR data to identify Chinese passengers attempting to travel to London from Italy in a human trafficking operation. This led to the conviction in the Italian courts of several traffickers in January 2010. Modern criminality requires modern methods to seek out and shut down criminal activity. We cannot just focus on solving crimes after they have happened; instead, we must use the tools available to prevent them from happening in the first place.

Our commitment to a proportionate approach is made clear by our proposal to collect data only on routes of high risk, whether these are between a third country and a member state or between member states. Our starting position is thus about reducing the amount of data collected rather than imposing blanket coverage on all routes from outside the EU as the directive currently proposes. A further benefit of our approach is that it should help make costs manageable, in terms of both data transmission by carriers, and management and maintenance of the system by the member state. We will want to see stringent data protection requirements, overseen by independent information commissioners, so that people’s rights over their personal data are protected. We will also work to ensure that the directive allows data to be retained only for as long as is necessary and proportionate to the task in hand.

Thirdly, some hon. Members will have concerns about sovereignty. Let me be clear: this directive is not about handing over responsibility to a European institution. Rather, it is about member states collecting and processing PNR data on travel under an agreed legal framework to help protect citizens from harm. The draft proposals are based on each member state collecting and analysing the data, and we will vigorously stand by that way of operating. Indeed, the current directive would not allow for the creation of an EU-wide database. We must recognise that criminals are no respecters of national boundaries—they will exploit any perceived gaps or weaknesses within the EU—so it is our collective responsibility to ensure that we close loopholes, wherever and whenever we can.

Finally, carriers will not be required to collect any more data than they already collect as part of an ordinary business transaction. Transmission costs will be borne by the carrier, and have been estimated by the Commission at less than 8p per passenger per flight—a small price to pay for increased safety and security.

Opting in to this directive is good for our safety, good for our security and good for our citizens. It is necessary and right. Opting in to this directive will make Britain a safer place. I commend this statement to the House.

I thank the Minister for advance sight of his statement. The current UK regime that allows for the collection of PNR data and their use for both immigration control and combating terrorism was brought in by the previous Labour Government through their creation and roll-out of the e-Borders programme. We therefore recognise the vital importance of the role played by PNR data to achieve both those policy objectives.

Given that PNRs are a proven tool for the prevention and detection of serious crime and terrorism, we believe that it is sensible to have a Europe-wide regime to ensure similarity of methodology and approach to PNR rather than have member states going their own way and making individual agreements. We are thus supportive of the UK decision to opt in to the directive.

We note the different approach taken by the Conservatives, now that they sit on the Government Front Bench, to EU co-operation on home affairs and justice matters. That was not something they championed in opposition, but, as we have seen with their change of heart on the extension of the European arrest warrant and their position on PNR data today, that is what happens when rhetoric confronts reality. It is a shame that the Minister took such a long time to sign the directive on human trafficking, where the reality is so shocking.

As the Minister has already told us, the biggest change between the first draft directive and the new draft directive is the inclusion of intra-EU flights within its scope. That is a positive step. As the Minister and I discussed in European Committee B, the inclusion of intra-EU flights is necessary to prevent a security gap from emerging. Will the Minister tell us whether negotiations are continuing with the member states that have not yet expressed support for the proposal—in particular, Germany—and give us his assessment of the effectiveness of the directive without universal support for the inclusion of intra-EU flights?

I note from the new draft directive that the new article 1(a) leaves open the ability of member states to decide which intra-EU routes they wish to include in their PNR data collection coverage, and I note from the Minister’s statement that, in the UK at least, that will focus data collection on routes that are considered to be high risk. However, there is a danger that that will displace the problem rather than deal with it. If potential criminals and terrorists know that certain routes are being targeted, they are likely to move to other routes. Is the Minister confident that we have the necessary flexibility and resources to pre-empt that, and to ensure that we keep pace with what is a constantly changing and developing security picture?

One of the questions I raised with the Minister when this matter was last debated in the House was whether all terrorism offences under the Terrorism Acts 2000 and 2006 would be within the scope of the directive allowing PNR data to be collected and shared. The Minister has written to me. I note that he does not yet know whether all those offences will be covered, and that

“complex legal analysis”

will be required

“during the negotiations to determine the overlap between definitions in the Directive and those in our domestic legislation”.

The UK regime for counter-terrorism reflects the UK’s national experience, and is therefore more extensive in some ways than the regimes of other European Union states. Legislative parity, given the extensive provisions of the Terrorism Acts, will therefore be vital. May I impress on the Minister the importance of keeping that point under review, and will he assure the House that it will be a priority as negotiations continue?

One of the important features of the UK’s internal arrangements is that through the e-Borders programme we can use API and PNR data together, and can use both types of data set for crime fighting and immigration control purposes. I know that the Minister agrees that the full benefits of e-Borders are realised when API and PNR data are collected and used together.

I have asked the Minister before whether he thinks that the current directive is sufficiently clear to enable the UK to continue to use PNR data for immigration control purposes, but I note that the potentially relevant paragraphs of the draft directive remain unchanged. Will the Minister assure the House that signing up to the draft directive will not diminish or weaken the UK’s e-Borders programme in any way, and that he will continue to press for clarity in the directive in order to leave no doubt that member states can collect and use PNR data not just in respect of terrorism and serious crime, but for immigration control? There should be no unintended consequences that would prevent the UK from maintaining effective control of its border.

The draft directive currently states that PNR data will be collected and retained for a period of 30 days, after which it will be anonymised and held for a further five years. The UK Government have been pressing for the data to be held for much longer than that. First, will the Minister tell the House where the negotiations stand in relation to that important part of the proposal? Secondly, will he explain how this conforms with the coalition Government’s emphasis on the removal of data held for the purposes of fighting serious crime? That is what they are doing by weakening the DNA database under the Protection of Freedoms Bill, but they do not seem to be particularly concerned about it in the context of the directive. Does the Minister believe that the Government are adopting a consistent approach, or will they continue to be—as they are at present—all over the place?

Using appropriate information in the fight against serious crime and terrorism is, of course, entirely necessary. We welcome this European initiative, which may make the Government think again about the fight against other serious crime.

I am grateful for the hon. Lady’s support for the Government’s decision, although I am slightly puzzled by her suggestion that there has been some enormous change since my party was in opposition, given that from 2005 onwards the Opposition spokesman on this subject was me. There has been no change at all, either in the person of the spokesman or in the attitude I have taken to PNR and the collection of data. What we are doing is putting into practice what we said in opposition.

The hon. Lady asked a number of specific questions. Negotiations are continuing now that we have decided to opt into the directive. She asked whether the directive will be useful if it ends up not containing the intra-EU provisions that we regard as so important. First, I should emphasise that we have already ensured that a majority of member states are now in favour, so we are extremely hopeful of getting this in place. Secondly, it will be useful, but not as useful as it will be if the intra-EU travel provisions are allowed.

The hon. Lady asked about targeting and whether we can keep pace. It is an important point that some routes are much more high risk than others, so concentrating our resources on them is likely to make us more effective than just having a blanket collection. We and other countries will need to flex to meet the circumstances. The hon. Lady is right that criminals and terrorists will change their patterns of activity. One of the advantages of collecting PNR is that it enables us to see patterns emerging and changing, and to meet that by being fleeter of foot in changing the routes we cover.

The hon. Lady mentioned our exchange in Committee on terrorism offences. She read out part of my letter to her, but neglected to continue. The answer to her question is in the next couple of lines:

“As the negotiations progress…we will need to keep this point under review and, if necessary, seek any changes during the passage of the Directive.”

That is, of course, what we are going to do.

I am happy to be able to assure the hon. Lady that this will not diminish our e-Borders programme. I should point out to her that the most effective immigration part of the e-Borders programme is the API collection, not the PNR collection. I am sorry to be talking in jargon to the House. The API data are essentially the basic information that comes off the passport of any traveller. The collection of that is what will enable us, under e-Borders, to count people out as well as in, and that is what is crucial for immigration.

The hon. Lady talked about the period of time for which data will be held. That will be at the core of the negotiations, and it is extremely important. Under the current British e-Borders system, we hold the data for, essentially, 10 years, and we think that is too long. The Commission is proposing 30 days, and for it then to be anonymised for a few years. The Canadians have a different system again, under which it is held for three and a half years. This issue will be at the heart of the negotiations.

As for the hon. Lady’s idea that there is any inconsistency between our approach on this and our approach on domestic data collection, that is absolutely dead wrong. As I emphasised in my statement, we believe in the necessary and proportionate use of data to combat crime and terrorism, while preserving the civil liberties of the British people. That is what we apply in our domestic field, and that is what we will apply in the international field as well.

I am extremely grateful to you, Mr Speaker; thank you very much for that.

As the Minister knows, the European Scrutiny Committee is somewhat concerned, to say the least, about the blizzard of opt-ins and the fact that the negotiations on a number of very important matters are still going on. There is therefore some concern about the possibility of our opting in on the hoof, and we will keep these negotiations under close scrutiny, in particular the negotiation on the length of time for the retention of data, but also that on the definition of a serious crime and the question of proportionality in using these data for offences such as racism, xenophobia and sabotage. There is also the whole issue of sensitive personal data in itself. I know the Minister is apprised of these issues, but will he understand that we are extremely concerned and that as there are these important continuing negotiations it is not good enough simply to say, “We will accept it in principle and then discuss it all afterwards”?

First, may I add my good wishes to my hon. Friend on reaching his 39th birthday? I assure him that the Government are keenly aware not only of the key issues he has raised but that he and his Committee will be scrutinising what the Government do. Indeed, as the negotiations are likely to go on for at least a year, if not longer, there will undoubtedly be opportunities for the Committee to return to its perfectly proper scrutiny arrangements during that time.

May I also support the Government’s decision to opt in to this directive? The Minister has dealt adequately with the two issues raised by the Home Affairs Committee when it considered the matter—privacy and cost—but will he confirm that the information being collected will not be shared outside the EU? It had been suggested that it might be given to other countries, such as the United States. Secondly, will he also assure us that now that the contracts have been issued under the e-Borders programme, which of course suffered an unfortunate delay under the previous Government, it will be fully operational by 2014, when he may still be the Immigration Minister?

The right hon. Gentleman always paints a happy prospect of life ahead. I am grateful for his support and on the data protection issues I can say that the British information will be dealt with by the British Government, so we will not see the random international sharing of information that he suggests—I agree that that would be bad for data protection issues. On the e-Borders system, we are indeed proceeding with letting the new contracts. We already have more than 90% of routes outside the EU covered by e-Borders and we hope that within the next 12 months that coverage will be more or less complete, so that will proceed quickly. Clearly the biggest single gap in the e-Borders coverage is within the EU, which is what this directive is very precisely going to help us with.

The Minister rightly says that the directive will make Britain safer, but will he say a little more about the safeguards? Specifically, will he confirm that the data will not be used for profiling and that the UK’s data protection standards will apply?

I am very happy to give my hon. Friend that specific assurance that the data will not be used for profiling. Indeed, the amount of sensitive personal data that will be put on the system is one of the liveliest matters for negotiation. I entirely share his instincts, which I know to be that although data need to be collected and stored for the protection of our citizens, that must done proportionately. In many ways, the ideal situation is that we collect and store the exact minimum of data that we need to enhance the security of the people and do not drift into the situation that the previous Government fell into. They believed that they made us safer by collecting and storing more and more data and keeping them for longer. That did not make any British citizen safer but it did amount to an assault on our civil liberties.