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Commons Chamber

Volume 546: debated on Wednesday 20 June 2012

House of Commons

Wednesday 20 June 2012

The House met at half-past Eleven o’clock


[Mr Speaker in the Chair]

Oral Answers to Questions


The Secretary of State was asked—

Scottish Independence

As my right hon. Friend the Prime Minister has made clear, we believe that Scotland is stronger in the United Kingdom and that the United Kingdom is stronger with Scotland in it. Leading up to the referendum, the Government will produce detailed evidence and analysis to assess the benefits that Scotland gains from being part of the United Kingdom and the contribution that Scotland makes to our United Kingdom.

I thank the Secretary of State. Does he agree that the defence of Scotland, England, Wales and Northern Ireland will be greatly enhanced if we do not have a separate Scotland? Defence matters greatly to the whole of this country.

My hon. Friend makes an important point. Over the next 18 months, civil servants will prepare detailed analysis and evidence that will show the basis of the arguments that we need to be involved in as Scotland confronts this great debate. Fundamentally, protecting our citizens is one of the most important parts of our role in government. We will also want to consider our position in the world and the economic benefits that we get from being part of the United Kingdom.

The Secretary of State and his Tory and Labour allies in the anti-independence coalition all say that they believe the constitutional status quo is not sustainable. With only days to go until the formal launch of the no campaign, will he outline to the House what joint proposals they have for further devolution? What powers will be devolved, and when?

I hope that the hon. Gentleman has not got himself into trouble by mentioning the “independence” word, but he is a brave guy, so perhaps he thought it was a risk worth taking.

It is a bit rich for the hon. Gentleman to come here and ask questions of us, with our having just delivered the biggest transfer of financial powers from London to Scotland since the Act of Union. Every time we ask him what “independence” means, his proposals unravel.

Last time I looked this was Scottish questions—questions to the Secretary of State and the UK Government. I ask him for a second time: given that he and his allies say that the constitutional status quo is not sustainable, what specific joint proposals do they have for the further devolution of powers? He did not answer the question the first time I asked it. Will he please answer it now?

I thought that the hon. Gentleman’s party had belatedly and even grudgingly welcomed the fact that the Scotland Act 2012 has now set in place the biggest transfer of financial powers north of the border, including borrowing powers, the Scottish rate of income tax and the transfer of stamp duty land tax. The debate to which he refers, which we all need to get on with, is the one about independence. That is why the UK Government are absolutely committed to ensuring that we get the necessary evidence and analysis, working with experts, academics and outside bodies to ensure that we are equipped for that great debate across the country.

Does my right hon. Friend consider that Scotland being part of the United Kingdom is an important benefit in any international trade disputes? I particularly have in mind the efforts of the United States some years ago to restrict the import of the finest quality cashmere goods from his own constituency, in a dispute about bananas. Was the fact that Scotland was part of the United Kingdom an important factor in ensuring a proper resolution of that issue?

My right hon. and learned Friend is absolutely right. It was critical to us in the borders, and to the producers of luxury goods the length and breadth of Scotland, that we were part of the United Kingdom. We had great clout within the European Union and could negotiate within the World Trade Organisation to get the right outcome. Our position in the world, the protection of our citizens and the future of our economy are the three key strands that we will examine to ensure that we are well informed in this great debate.

We heard it here first: the launch of the “Separatists for Devolution” campaign. Scottish National party Members do not like the word “separation” or the word “independence”, and they want to leave Britain in order to make us more British. What a ludicrous set of proposals.

None, but it is a matter for the Scottish National party and Scottish Government to set out their proposals. They have singularly failed to do so.

The Secretary of State may be aware that I received answers to parliamentary questions yesterday that indicate that although the Scottish Government argue that a separate Scotland will continue to use sterling, the Bank of England and UK financial regulatory institutions, they have not yet undertaken any work behind the scenes to explore those options—no correspondence has been sent, no questions have been asked and no discussions have taken place. Does he agree that the First Minister should spend less time in Hollywood and more time in Holyrood—[Interruption.] It was a good try. Given that the Scottish Government have made those statements on the economy and a separate Scotland, what steps has the Secretary of State taken to clear up the confusion and ambiguity of such claims?

I agree with the hon. Lady that it is quite striking that the SNP and Scottish Government are curiously short on the detail as they set out their lifelong ambition to create an independent Scotland, and that they are not curious to ask more questions. I start from a simple point: Scotland is stronger within the UK and the UK is stronger for having Scotland as part of it. The economy is a key part of that argument.

I thank the Secretary of State for that argument. In such debates on Scotland, we have assertion, not argument, and fantasy rather than facts—the Scottish Government’s arguments cannot pass the most basic test of credible evidence. Will the Secretary of State and the whole UK Government therefore work with others to ensure that we have credible evidence and arguments that pass the test of objective and independent scrutiny to ensure that Scottish people get the arguments they deserve?

I absolutely agree with the hon. Lady that it is important that this great debate is well informed by detailed evidence and strong analysis. That is why the Government are getting civil servants to work through the key issues and to engage with academics, think-tanks and other respected experts outside the Government to ensure we have all the evidence to inform the debate. As we do that over the next 18 months, I am confident we will show beyond doubt that Scotland’s place is much stronger as part of the UK.

Modern Apprenticeship Scheme

2. What discussions he has had on the effect of the Scottish Government’s modern apprenticeship scheme on employment in Scotland. (111818)

I am in regular contact with the Scottish Government on a range of issues. Later this week, the British-Irish Council is due to discuss the effectiveness of programmes and policies to support youth employment in Members’ respective Administrations.

In the Scottish Parliament last week, the Labour spokesperson on youth unemployment, Kezia Dugdale MSP, uncovered figures showing that of the 25,000 modern apprenticeships that the Scottish Government claim to have set up, more than 10,000 involved people who were already in work. Does the Minister agree that the Scottish Government should spend public money on creating additional jobs, and not just on rebadging jobs?

I share the hon. Lady’s concerns about how the Scottish Government seek to present facts. The facts of their responsibilities on employment matters are clear, and they have had £22 million of additional money in relation to youth contract consequentials. I should like them to focus on how they spend that money rather than on their obsession with the constitution.

Order. I entirely understand, but I would like greater brevity from now on, to be exemplified by the hon. Member for Epping Forest (Mrs Laing).

Is the Minister aware that almost every economic analysis shows beyond doubt that employment prospects in Scotland would be significantly reduced if Scotland were separate from the UK?

I absolutely agree with my hon. Friend, who I am sure will welcome with me the fact that employment in Scotland increased by 18,000 in the last period.

I am sure that, like me, the Minister has witnessed the Labour party’s ridiculous and scurrilous campaign against what is undoubtedly one of the most successful modern apprenticeship schemes in Scotland. Seemingly, Labour Members’ complaint is against rules that they introduced themselves. Should the Minister not instead congratulate the Scottish Government on almost doubling the number of modern apprenticeships in the past year and on the extra £72 million of investment?

I noticed that the hon. Gentleman did not mention the word “independence”, so he is obviously on message. On unemployment in Scotland, including youth unemployment, the UK and Scottish Governments should work together.

Employment Opportunities

The Government are committed to creating the right environment for sustained economic growth to provide the basis for the creation of secure jobs.

It should come as no surprise to the Secretary of State that unemployment in Scotland is at crisis level. The unemployment figures are unacceptable; in particular, the youth unemployment figures are disgraceful. If it were not for my council in Inverclyde—

May I press on the Secretary of State and the Government the need to make reducing the unemployment figures in Scotland their absolute priority? Will he join—

I agree that we must do everything possible to reduce unemployment, particularly youth unemployment, which, as the hon. Gentleman will recall, began to rise during the growth periods under the previous Labour Government. Through our measures, including the Work programme, the youth contract and our joint work with the Scottish Government, we have been bearing down on the problem, but I am happy to meet him to discuss the matter further, if he wishes.

Is the Secretary of State aware that the Scottish chambers of commerce have today called for an expansion of infrastructure investment to help Scottish businesses? What will he do to ensure that this happens?

The hon. Lady needs to recognise the serious steps we are taking to get the economy back on a secure path to growth, after what we inherited from her Government two years ago. We must also bear in mind the crisis in other parts of Europe. By cutting corporation tax, keeping interest rates as low as possible and introducing specific measures for Scotland, including the enterprise areas in Irvine, Nigg and Dundee, we are taking action to help the Scottish economy.

Does the Secretary of State agree that by cutting corporation tax, reducing regulation and, at the same time, having the largest Work programme the country has ever seen, we are succeeding in Scotland, with 14,000 fewer unemployed people this month—the third month in a row?

I certainly welcome the reduction in unemployment, but we need to recognise that things will continue to be challenging for people the length and breadth of Scotland and the rest of the UK. My hon. Friend is right, though, that our measures to get the economy back on the right track are fundamentally right and are the way to create secure jobs.

Does the Secretary of State agree that Statoil’s decision to invest in the North sea and a further 300 jobs for Aberdeen is recognition that the Treasury’s positive new approach to encourage investment is bearing fruit?

My hon. Friend is right. There have been significant announcements in the energy sector from Statoil, BP, Gamesa and others on the future of Scotland’s energy needs, not only in oil and gas but elsewhere. They recognise that that is an important part of what the Government are committed to and that Scotland is better for being part of the UK when it comes to delivery.

I am glad that the Secretary of State welcomed the 14,000 fall in unemployment—that is good news—and I am sure he will also want to welcome today’s news on foreign direct investment into Scotland creating jobs, but of course he is right that we must create the right environment for businesses to employ people. That means downward pressure on costs, particularly fuel prices, which are recognised as one of the most significant cost pressures that businesses face. Will he therefore ask his Treasury colleagues to cancel the fuel duty rise planned for August?

I point out to the hon. Gentleman that thanks to the Government’s actions in introducing the fuel duty stabiliser and abandoning the escalator we inherited from the Labour party, we are doing a lot to help motorists, and will continue to do so.

I remind the House that the clue is in the heading—“Questions to the Secretary of State for Scotland”.

Listening to the Secretary of State reminds us how totally isolated he is in Scotland in believing that the answer to this crisis of weak economic demand is harsher austerity over the next four years. Does he not accept that nearly twice as many people as on black Wednesday are being forced to work part time because there are not enough full-time jobs in our economy? Some 320,000 people in Scotland are struggling below the poverty line despite being in work, and real wages have fallen every month that this Government have been in office. Is that not the real explanation of why we face a double-dip recession, made in Downing street?

It may suit the hon. Gentleman’s case, but he cannot be allowed to forget the legacy of his Government and the mess that we inherited two years ago, nor can the Opposition be allowed to be blinkered about the challenges around Europe and the world. We are ensuring that we create the right financial and economic conditions to get Scotland and the UK economy back on the right foot.

Scottish Agricultural Industry

4. What recent discussions representatives of his Department have had with representatives of the Scottish agricultural industry. (111820)

I meet regularly with representatives of the Scottish agricultural industry, including the National Farmers Union of Scotland and individual producers. I look forward to further direct engagement tomorrow, when I attend the royal highland show.

Does the Minister agree that those in the Scottish agricultural sector are better off with Scotland remaining part of the UK?

I absolutely agree with my hon. Friend. An independent Scotland would shrink our home market of 60 million consumers to a mere 5 million overnight. Farmers would be reliant on exporting their produce. Some 64% of Scottish beef was sold to the rest of the UK, as the first point of delivery, in 2011.

Perhaps the Minister could try answering a question about something that is actually the responsibility of the UK Government. Is he aware of the huge concern in the Scottish agricultural and horticultural sectors about the future of the seasonal agricultural workers scheme, which is due to expire next year? Has he made representations to the Home Office for the continuation of the scheme?

I note the hon. Gentleman’s concerns and I would be happy to meet him to discuss them further.

Youth Unemployment

I meet with Scottish Ministers regularly to discuss a range of issues. On 15 March, Scottish Ministers joined me in Dundee for a joint-Government summit to discuss youth unemployment in Scotland, and we agreed to continue to work together on this important issue.

With the information that there was falsification going on in the apprenticeship schemes—with people already in work being counted as new apprentices—and with the offshore oil industry saying that it needs 44% of those with non-graduate technical skills to fill the spaces that are coming up in the industry, is it not time that the Secretary of State showed some leadership and called an all-party, all-Parliament forum in Scotland about unemployment and stopped the behaviour of the Scottish National party, which has been running a single-party state, with its Ministers wandering round having one-party meetings?

I appreciate the length of time that the hon. Gentleman has spent working on this issue over his political career. I also believe that it is important that the parties can work together, because the origins of youth unemployment lie elsewhere, rather than just under this Government’s tenure. I am happy to work with him and others to ensure that we get all the best ideas focused on tackling youth unemployment.

I welcome the Secretary of State’s recent visit to my constituency’s largest employer, Aviva in Bishopbriggs, which has 1,100 staff, and his support for my “Get East Dunbartonshire Working” initiative, which has helped to create 43 new employment and training opportunities in the local area since the end of April. What more can the Government do to ensure that businesses are aware of the support that is available, particularly through the £1 billion youth contract, to employ young people in particular?

I thank my hon. Friend for the opportunity to pay a visit with her to the Aviva offices in her constituency, and I pay tribute to Aviva for the work it is doing with young people and others. It is very important that we do all that we can to support young people. That is why the youth contract is now in place, boosting work experience, increasing the number of wage incentives that are available and ensuring that the Scottish Government have support for more apprenticeships.

The Secretary of State recently visited my constituency. I wonder whether he could give us a progress report on how he has got on with the schools-industry liaison committees.

I regret to inform the hon. Gentleman that I have not made as much progress as he would wish me to. I hope, however, that he will recognise the important support that we have given to Irvine, in the form of the enterprise allowances—the 100% capital allowances that are now available—and I will be happy to catch up with him on the school-industry partnership and the Scottish Government’s role in it any time soon.

Does my right hon. Friend agree that the plans to reform employment law will particularly encourage small businesses to take on more young people?

As my hon. Friend will know, the employment law review will carry on through this Parliament, and I look forward to seeing the proposals that will come forward in due course.

Energy Prices

The Government are committed to ensuring that consumers get the best deal for their energy usage, and have put in place measures to help to reduce household energy bills. In May, I held a summit in Rutherglen, bringing together the big six energy suppliers, Scottish consumer groups and the regulator, Ofgem, to examine ways of addressing this issue.

Over the past eight years, average energy prices have increased by 140% per household, while the increase in average income for households has been a mere 20%. What are the Government doing to respond to people’s worries—especially those of low-income families, elderly people and people with disabilities—and to deal with this onslaught on vulnerable people?

The Government are continuing the cold weather and winter fuel payments, and bringing forward the green deal. We are also working with voluntary organisations across Scotland to help them to support the most vulnerable people, so that they can access all the fuel-related benefits that are available to them.

Many islanders are telling me that the 5p fuel duty discount is not being passed on to the motorist. Will the Minister ask Her Majesty’s Revenue and Customs and the Office of Fair Trading to investigate this matter? They must ensure that this discount is passed on to the motorist in its entirety.

I am concerned to hear what the hon. Gentleman is saying, and I would be happy to meet him and other concerned island MPs to discuss the matter.

Devolved Government (Funding)

8. What steps he is taking to reform central Government funding for the devolved Government in Scotland. (111824)

As the coalition agreement sets out, we are committed to a review of public funding arrangements once we have dealt with the unprecedented deficit that we inherited from the previous Government.

Someone would need an intelligence as profound as that of Spinoza to understand central Government funding of Scotland, but it must be clear to even the most basic English person that not only do we have no say over education and health in Scotland while they run ours, but we pay over the odds for theirs. Should not the Scottish National party be careful what it wishes for when it calls for independence?

My hon. Friend, more than most, understands the complexities of public spending in this country. I say to him, however, that our priority has to be to reduce the deficit, after which we can look at these issues again. I would also gently point out to him that within England there are quite large variations, and that the figure per head for spending in London is higher than in Scotland.

10. Given that the Scottish Government have had no discussions with either the Chancellor or the Bank of England about having a place on the Bank’s Monetary Policy Committee—which would be a committee of a foreign country—does the Secretary of State agree that this is another fanciful assertion that cons the Scottish people? (111826)

The hon. Gentleman is entirely right to highlight the fact that the Scottish Government are yet again making such assertions rather than producing detailed analysis and evidence, which is what this Government are determined to provide in this great debate. The Scottish Government seem willing and able to swap a good partnership for some kind of new dependency, and that is not right.

Scottish Fishing Industry

9. What assessment he has made of the implications for the Scottish fishing industry of the recent EU Fisheries Council. (111825)

The UK Government have worked hard to influence the content of the “General Approach” at the Fisheries Council. It would deliver positive benefits for Scotland’s fisheries and those who depend on them, and I welcome its commitment to manage fish stocks sustainably, to move towards more regionalised fisheries management and to ensure that discards are eliminated.

I also welcome the progress that was made in Luxembourg last week, but does the Minister think that this would be an appropriate juncture in the process at which to introduce more transparency into fisheries management in the form of the UK Government making public the individuals and companies that hold fish quota here?

I agree with the hon. Lady that it is important for the UK Government and the Scottish Government to work well together, and the recent Fisheries Council is a good example of them doing that for the benefit of Scotland’s fishermen.

The hon. Member for Banff and Buchan (Dr Whiteford) is absolutely right: we need a register of active fishermen—[Interruption.]

Order. The House must come to order. The House should be listening to the Chair of the Select Committee on Environment, Food and Rural Affairs—listening with respect.

—and fisheries. [Laughter.] The hon. Lady is absolutely right that, without a register, we do not know who are active fishermen in Scotland and who are slipper skippers.

Ministers both here in the UK Government and in the Scottish Government will have heard the comments of my hon. Friend, who is a respected contributor on such matters.

Dr David Livingstone

I have met representatives of the Scotland-Malawi partnership to discuss the best way for the UK Government to mark this bicentenary. The Scotland Office will hold a commemorative event at Dover house. My officials will work with other interested parties to ensure that this anniversary is celebrated across the UK.

I thank the Minister for his reply. Will he join me in supporting my invitation to the President of Malawi, Joyce Banda, to visit the UK during the bicentenary and as part of that visit to come to Blantyre, Lanarkshire, in my constituency?

I commend the hon. Gentleman for the role he has played in promoting the David Livingstone bicentenary, which has great resonance in his constituency. Yes, the Scotland Office will work with him and others to encourage the President of Malawi to come to Scotland.

Prime Minister

The Prime Minister was asked—


I have been asked to reply. My right hon. Friend the Prime Minister is attending the G20 summit in Mexico.

I am sure the whole House will wish to join me in paying tribute to those servicemen who have lost their lives in Afghanistan since the last Prime Minister’s Question Time, Lance Corporal James Ashworth of 1st Battalion Grenadier Guards and Corporal Alex Guy of 1st Battalion the Royal Anglian Regiment. Our sincere condolences are with their families and their loved ones. Last week, I visited our armed forces in Helmand where I was once again reminded of their exceptional work on behalf of this country. That work and these sacrifices must never be forgotten.

I join the Foreign Secretary in expressing our deepest sympathy to the families of our fallen heroes and pray God will comfort them.

The Belfast International air link into Heathrow is an invaluable asset to the economy of Northern Ireland. There are deep concerns, however, that this link is at risk, because the landing slots are allocated to carriers rather than to regional airports. Will the Government urgently publish an aviation strategy that ensures our international airport maintains its link with Heathrow?

The Department for Transport will consult in the summer on our future aviation policy and ask for evidence on options about maintaining the UK’s status as an international hub for aviation. The hon. Gentleman is quite right that the London to Belfast link is important to the economy. There are currently more than 18,000 flights a year between the two Belfast airports and the five main London airports. I hope that he agrees that our steps to devolve power to set air passenger duty rates for direct long-haul flights departing from Northern Ireland will also boost investment and tourism.

As my right hon. Friend will know from my recent letter to the Prime Minister, the situation at the Coryton oil refinery on the Thames is becoming increasingly difficult. In an attempt to support manufacturing, secure well-paid jobs and secure our UK fuel supplies, will he use the offices of the Prime Minister to secure an urgent summit, bringing together the heads of the Department for Business, Innovation and Skills, the Department of Energy and Climate Change and the Treasury to explore every single avenue possible to keep this refinery open?

I know that this has been very disappointing news and that my hon. Friend has been very active on this matter. The work force and the local community have worked tirelessly to help the administrators to secure the long-term future of the refinery. We are keeping in close contact with the administrators, who are still looking at further options, and working with Thurrock council’s taskforce as well. The Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Wealden (Charles Hendry), has met representatives of the work force and local community. I will, of course, draw my hon. Friend’s remarks to the attention of the Prime Minister as well.

May I join the Foreign Secretary in paying tribute to Lance Corporal James Ashworth of 1st Battalion Grenadier Guards and Corporal Alex Guy of 1st Battalion the Royal Anglian Regiment? They died serving our country with the utmost bravery, and we join the Foreign Secretary in sending our deepest condolences to their families and friends.

We know that there is still a long way to go before the people of Burma get the democracy to which they are entitled, but the fact that progress has been made is due to the extraordinary commitment and courage of one woman who has endured more than two decades of house arrest. Will the Foreign Secretary join me in expressing our utmost admiration for Aung San Suu Kyi?

I absolutely will, and I think it highly appropriate to raise this matter during Prime Minister’s Question Time. I believe that I was the first European Foreign Minister to visit Aung San Suu Kyi and to visit Burma at the beginning of the year, and I found her, not only in reputation but in substance, an inspirational figure.

As the right hon. and learned Lady says, there is still a long way to go, not only in bringing democracy to Burma but in ending ethnic conflicts, one of which is still going on in Kachin state. We look to the Government of Burma to continue to travel on this road and to release remaining political prisoners, and I think that across all parties we look forward to giving Daw Aung San Suu Kyi a tremendous welcome tomorrow.

I thank the Foreign Secretary for his answer. He was right to visit Burma when he did. We support the suspension of sanctions on Burma, but will he reassure us that the position of the British Government will remain that sanctions will be re-imposed unless there is sustained progress towards democracy and the rule of law?

That is very much our position, and I have said so in terms to the Foreign Minister of Burma. Indeed, we have argued in the European Union that sanctions and other restrictive measures should not be lifted unconditionally, but should be suspended so that they can be re-imposed if necessary and if progress comes to a stop. They have been suspended for 12 months, and we will of course continue to review progress throughout that period.

Having met the President of Burma on my visit, I believe that he is absolutely sincere in his intentions, but there will of course be elements in the Government of Burma who are not so enthusiastic about these changes and who will be alarmed by the success of Aung San Suu Kyi and her party in recent by-elections. We will keep up the pressure, as well as the welcome, for these changes.

I thank the Foreign Secretary for that answer, and for his commitment to keeping up the pressure for progress. Let me now turn to domestic issues, and specifically to the national health service.

This week a survey showed that 90% of primary care trusts are restricting access to treatment because of the financial pressure that they are under. That will hit older people particularly. How can the Foreign Secretary justify an elderly person with cataracts in both eyes being told that they can have surgery in only one of them?

It is totally unacceptable if trusts are rationing on the basis of financial considerations. The NHS medical director has written to trusts telling them that the criteria for decisions must be only clinical and not financial. If evidence is found that they are ignoring that, the Secretary of State can intervene. The Department of Health will look into any cases in which trusts are using financial conditions for the purpose of decisions. Allegations have been made about this issue before, including under the last Government. The Department of Health is very clear about what it will do, and that should be welcomed throughout the House.

But there is evidence and the Foreign Secretary is still not acting. This is not just about cataract operations: 125 different treatments are being rationed on grounds of cost, including hip and knee replacements. What does the Foreign Secretary say to an elderly patient who needs a hip replacement—“Wait in pain” or “Try to pay and go private”? What does he say?

I say three things. First, I say what I said a moment ago when answering the right hon. and learned Lady’s question about rationing. Secondly, I say that arbitrarily restricting access to operations was not just happening under the last Government, but allowed under the last Government. In 2007, patients in Suffolk had to wait for a minimum of 14 weeks for routine surgery, and York NHS Trust was told by its primary care trust not to operate on non-urgent cases until they had waited for a minimum of 20 weeks.

Thirdly, I say to any of those individuals that their GP—their doctor—should be at work tomorrow, and not on strike. We on this side of the House encourage those doctors to go to work, and I hope that the right hon. and learned Lady and all those on her side of the House will say clearly today that those doctors should be at work tomorrow.

We do not want patients to suffer, so we do not want the GPs to be going on strike, but we are proud of what we did in the NHS—more doctors, more nurses and cutting the waiting lists. It is always the same: Labour builds up the NHS and the Tories drag it down.

Today, the Foreign Secretary is saying that he is 100% behind the Government’s health plans, but it is a different story in his own constituency. Last month, he took to the streets, marching in protest against the NHS cuts. Let us remind ourselves of what the Prime Minister said about midwives. Just before the general election, the Prime Minister wrote for The Sun newspaper—because, professionally of course, they were all in it together—and said that

“we will increase the number of midwives by 3,000.”

Can the Foreign Secretary confirm that they have broken their promise on midwives?

That was a long question, although I congratulate the right hon. and learned Lady on not having the shadow Chancellor here today, which does help everyone to hear and concentrate. [Interruption.] The Chancellor is at the G20; the shadow Chancellor is presumably doing another opinion poll on what people think of him—and by the way, we could have told him that for nothing. [Laughter.] More value under the Conservatives.

On the questions that the right hon. and learned Lady asked, I am glad that she says that GPs should be at work tomorrow. She should tell that to her own spokesman, the hon. Member for Hackney North and Stoke Newington (Ms Abbott), who said that she had “a lot of sympathy” with the British Medical Association and that there would be a lot of public support for the action it is taking. So there is a clear division across the Floor of the House.

It is perilous for the right hon. and learned Lady to go into the affairs of another constituency, because what is happening in my constituency is nothing to do with funding or health reforms. But I will tell her all about that separately, if she would like. She says that Labour Members are proud, but we are proud of what has happened in the NHS. Average waiting times for both in-patients and out-patients are lower than at the last general election; the best performance ever has now been attained for patients waiting after 18 weeks to be treated; the total number of qualified clinical staff is higher than at the election; there are 3,900 more doctors since the election; and hospital infections are at their lowest level since surveillance of them began.

And he never answered the question about midwives, because before the election the then Leader of the Opposition was all “Yes we Cam,” but as soon as he became Prime Minister it is “No we can’t.” Services rationed, patients suffering and public satisfaction at a new low—that is the Tories on the NHS. The Prime Minister once told us that he could sum up his priorities in three letters—NHS. Isn’t it more like “LOL”?

It obviously took a long time to think of that one. I have set out the achievements of the Government on the NHS. Even the King’s Fund, in its latest report, which has sometimes been quoted by the Opposition, says:

“There is no evidence of a…decline in service quality or performance”.

It also says:

“infection rates have not noticeably deteriorated—remaining relatively stable in…most measures…or, in the case of MRSA and C difficile, reducing.”

These are important achievements in the health service, and they are a contrast with the Opposition health spokesman saying in June 2010:

“It is irresponsible to increase NHS spending in real terms”.

They are also a contrast with the number of managers doubling under the Labour party; a contrast with Labour’s last year in power, when the number of NHS managers rose six times as fast as the number of nurses: and a huge contrast with the situation in Wales, where Labour is cutting NHS spending.

Given the appalling behaviour of Liberal Democrat Cabinet Members in not supporting the Secretary of State for Culture, Olympics, Media and Sport, would my preferred Deputy Prime Minister arrange a divorce from the yellow peril so that we can govern with Conservative policies as a minority Government?

I am sure that they will, Mr Speaker. My hon. Friend’s bringing up of the subject of divorce might be deeply troubling to Mrs Bone, so we should all seek to reassure her immediately that he is talking only about a political divorce. As someone who helped to negotiate the coalition and who values enormously co-operation with the Liberal Democrats, I will not be advocating a divorce in the Government.

Q2. Will the Foreign Secretary confirm that, apart from Italy, the UK is the only country in the G20 in a double-dip recession? (112661)

The fact of the matter is that the IMF now forecasts that in the coming year the British economy—[Interruption.] Opposition Members might not want to know what has been said by the IMF, but the shadow Chancellor—who is not here to make his hand gestures—has always said that we should take notice of the IMF. It says that in the coming year the British economy will grow faster than the German or French economy and that next year growth in the British economy will be similar to that of the United States and twice that of the eurozone. That would not be happening had we not brought the excessive deficits and debts of the previous Government under control.

In the light of the historic signing of a deal in China for record investment in Wirral Waters, the granting of the turnaround cruise terminal in Liverpool and the support for the automotive industries that has led to 1,000 more jobs at Jaguar and the saving of Vauxhall at Ellesmere Port, would the Foreign Secretary say that this Government have done more in two years to expand private enterprise on Merseyside than Labour did in its entire tenure?

Well, yes, I would say exactly that and I point out that the success my hon. Friend describes is part of a process that in the last two years has seen British exports to Brazil going up 37%, British exports to China going up 61% and British exports to India going up 73%. That is happening because the British Government are out there championing British business, which the Labour party neglected to do.

Q3. Will the Secretary of State inform the House why, under the proposals for regional pay, he wants his nurses in Richmond, Yorkshire to be paid substantially less than nurses doing exactly the same job in Richmond, Surrey? (112662)

The pay review bodies are now examining that issue, as the hon. Gentleman will know, and they will report next month, making their recommendations, which we can then all debate. The case for local pay was once made by a Chancellor of the Exchequer, who said that

“it makes sense to recognise that a more considered approach to local and regional conditions in pay offers the best modern route to full employment in our country.”—[Official Report, 9 June 2003; Vol. 406, c. 412.]

That Chancellor of the Exchequer was the hon. Gentleman’s near neighbour, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown).

Order. I am sure that Conservative Back Benchers wish to hear from one of their coalition colleagues. I call Tessa Munt.

Q4. The Department of Health accepts that radiotherapy is the cheapest and most effective way of treating cancer. Despite that, the Department will spend more than £1.5 billion on cancer drugs this year and less than a third of that on radiotherapy. In the south-west, seven of our hospitals rely on charity to fund basic radiotherapy services. The cancer drugs fund is underspent— (112663)

So, will the right hon. Gentleman speak to the Prime Minister about authorising the investment of that unused money into radiotherapy so that hospitals in my region can cure cancer patients?

My hon. Friend is right to point out the importance of radiotherapy. It is also important to stress that decisions on treatments should be made by clinicians on the basis of whatever is most appropriate for their patients. We are investing an additional sum of more than £150 million over the next four years to expand radiotherapy capacity. I know that she will welcome that, as well as the fact that more than 12,500 extra patients have benefited from the £650 million cancer drugs fund that this Government introduced.

Q5. The regional growth fund is the Government’s flagship scheme for boosting jobs and growth in the regions. A recent National Audit Office report criticised it for spending too much on projects creating too few jobs, with the cost sometimes being £200,000 per job. What are the Government doing about it? (112664)

The hon. Gentleman’s region will benefit from the regional growth fund, including through £235 million from the fund. It is, of course, important that the money is spent effectively, and my ministerial colleagues will do their utmost to ensure that that happens, but it is also important to remember that his region benefits from many other things that the Government are doing, including infrastructure projects to support growth in the west midlands, and enterprise zones for Birmingham city centre and for the black country. These measures are much more likely to get regional growth going than the excessive tax and spending of the Labour party.

Q6. My constituent Ian Tapp has now lost 300 cattle to bovine TB, and that scourge has been exacerbated by the fact that the previous Government did precisely nothing about the problem. Although I recognise the sterling work that this Government have done, will my right hon. Friend reassure my livestock farmers that, when it comes to disease control regulations, there will be proportionality and nothing that is likely to detract from their livelihood? (112665)

My hon. Friend raises an important point. Bovine TB is a devastating disease and one of the most serious challenges facing the British cattle farming industry. Last year, around 26,000 cattle were compulsorily slaughtered in England alone. The Department for Environment, Food and Rural Affairs will make an announcement tomorrow about how it intends to proceed on this subject. Cattle measures continue to be the foundation of our TB control programme, but it is clear that those alone are not sufficient in some areas, so I invite him to stand by for a further announcement tomorrow.

The Foreign Secretary will be aware that His Holiness the 14th Dalai Lama of Tibet is in London today and that he will visit Parliament this afternoon. On such an auspicious day, will the right hon. Gentleman use this opportunity to restate the Government’s commitment to the human rights of Tibetans within China?

In this country and the House, we believe in the universality of human rights. I often make that point to Chinese leaders, including in the annual strategic dialogue that I conduct with China. We also have a formal human rights dialogue with China and we do not shy away from raising any of these cases. Of course, like the previous Government, we see Tibet as part of the People’s Republic of China, but we also look for meaningful dialogue between representatives of the Dalai Lama and the Chinese authorities, and we will continue to support that.

Q7. The Government have made clear their commitment to root out tax avoidance by public officials and civil servants. Will the deputy—the Foreign Secretary—make it clear that the Government will be equally robust in rooting out tax avoidance by the corporate sector that does jobs for the Government, or that is employed by the Government? (112666)

Absolutely, and I will not mention that slip to the Deputy Prime Minister—it is entirely between ourselves and these four walls.

In the Budget, the Chancellor set out clearly his absolute determination to deal with tax avoidance and to do so in the future without warning. If the Chancellor was here, I know that he would say that that applies to the corporate sector, too.

Benefit Cap

The Government believe that it is not reasonable or fair that households should receive a greater income from benefits than the average weekly wage for working households. In some cases it can be more than double the average household income. Our changes will mean that no family on benefits will earn more than a working family’s average salary, £26,000 a year for couple and single-parent households. This strikes the right balance between supporting families and providing incentives to work.

Rent levels in inner London and near Canary Wharf in my constituency are disproportionately high. Jobcentre Plus has written to 900 families in my constituency, who between them have 4,000 children, telling them that their benefits will be cut on 1 April by £200 a month on average. This will cause them either to rack up rent arrears or to have to move. Mayor Boris Johnson—

Mayor Boris Johnson says he will not preside over the removal of the poor from inner London. Boris gets it: why don’t the Government?

I know that the hon. Gentleman has long-running concerns about this and has frequently expressed them. It is important to stress that for all but the most expensive parts of London, at least 30% of all private rental properties will be affordable. In London, under the system that we inherited, 150 families were receiving housing benefit of more than £50,000 a year, and that is not acceptable to the taxpayers of this country in general. Our reforms are fair. Housing benefit will still be paid to meet rents of almost £21,000 a year. There is also a £190 million fund for discretionary payments to help local authorities with the changes, including assistance to renegotiate lower rents with landlords, but the principle remains, and I say it again, that it is not fair that people on housing benefit can afford to live in streets and homes that people out working hard are unable to live in.


Q9. Wales is the only nation in the UK without a single yard of electrified rail track, thanks in part to the Labour party. As a former Secretary of State for Wales, could the Foreign Secretary persuade the Government that extending the track as far as Swansea, not just Cardiff, would be great for jobs, great for Wales, and somewhat cheaper than the current refurbishment of Tottenham Court Road station? (112668)

I know that my right hon. Friend the Welsh Secretary is working hard on this. We are committed to electrifying more than 300 miles of railway routes, which compares with just 9 miles electrified under the previous Government—an interesting contrast in infrastructure investment. The Department for Transport is currently considering a business case for electrification between Cardiff and Swansea prepared in Wales, and I understand that the decision will be made by the summer. Of course, it will depend on whether it is affordable and on the assessment of competing priorities as well.

There is more work to do, but for the third month unemployment has reduced in Scotland, and for the second year in a row Scotland is the best performing location for foreign direct investment in the UK. Will the Foreign Secretary take the opportunity to congratulate the Scottish Government and Scottish Development International, which is the lead agency that secures foreign direct investment?

The hon. Gentleman is right to draw attention to the employment figures, which we must never be complacent about. There is always so much more work to do, but the right hon. and learned Member for Camberwell and Peckham (Ms Harman) did not ask about the figures, which show a quarterly fall in unemployment of 51,000, the rate of unemployment coming down in the quarter and, importantly, youth unemployment coming down by 29,000 in the past quarter, although long-term unemployment is still rising and remains a challenge. Scotland, as part of the United Kingdom, is an attractive place to invest. I congratulate many Scottish people and businesses on their work. They would have much harder work to do if Scotland were not part of the United Kingdom.

Q10. While welcoming overseas students who come to this country to get a world-class education and then return home to benefit their countries, will my right hon. Friend look extremely sceptically on vice-chancellors who believe they cannot compete unless students are given an additional incentive to stay on in this country, legally or illegally, especially as last year 120,000 students sought and were granted the right to extend their stay here? (112669)

Yes, as my right hon. Friend knows, the Government have introduced radical reforms to stamp out abuse and restore order to a student visa system that was out of control, making the immigration system easier for students, universities and the UK Border Agency. We are closing bogus colleges and regulating the remainder, restricting the right to work here and bring dependants and making sure that all but the very best go home at the end of their studies. On that basis, of course talented students from around the world are welcome here in the United Kingdom.

As MP for Rotherham, may I welcome the fact that the right hon. Gentleman has realised his ambition, thwarted in 2001, and is now briefly in charge of the clattering train? As two Asian Nobel peace prize winners will visit the House of Commons this week, will he take the opportunity to invite a third, Liu Xiaobo, currently rotting in the Chinese gulag, who was awarded the Nobel peace prize last December, and will he mention his name, Liu Xiaobo, from the Dispatch Box, rather than referring to it in the human rights dialogue, and invite him to London next year?

It is good that nice words about Rotherham are being exchanged at Prime Minister’s Question Time, so I welcome the right hon. Gentleman’s question. We do raise individual cases with the Chinese, often publicly, but I will assess which ones to raise and when to do so. The human rights dialogue we have with China is very important, and it is important that in China there is an understanding of our deep concerns about many of these cases. He can rest assured that I will be raising them.

The right hon. Member for Rotherham (Mr MacShane) has got his answer on Liu Xiaobo and will doubtless be content.

Q11. In the cause of deficit reduction, the Government are reducing police funding by 20% in real terms over four years. Can my right hon. Friend therefore assure me that, also in the cause of deficit reduction, he will insist on a reduction in our contribution to the European Union budget of more than 20%? (112670)

Highly desirable though that would be, my hon. Friend is aware that that contribution is not determined by a single decision of Government; it is the balance between two large figures determined in other ways. However, he can rest assured that we will be far better at negotiating on this than were Opposition Members. When the shadow Foreign Secretary was Minister for Europe, the Labour party gave away £7 billion of the British rebate, for nothing in return—an abject failure of negotiation and leadership that we will not repeat.

Q12. Does the Foreign Secretary agree with the hon. Member for Hexham (Guy Opperman), who was quoted in Newcastle’s The Journal as saying:“I see no economic argument for introducing regional pay”? (112671)

I think that there is a variety of views on regional and local pay in all political parties—I pointed out earlier the views expressed by the former leader of the Labour party on local and regional pay. It is also worth pointing out that the previous Government introduced local pay into Her Majesty’s Courts and Tribunals Service in 2007.

Does my right hon. Friend agree how wonderful the announcement was about the investment in Derby for Rolls-Royce, which will mean future engineering jobs? Bombardier is looking for 44 new jobs and unemployment in South Derbyshire has gone down by 150 in the past two months.

That is indeed good news, as my hon. Friend says. It is good news for investment in this country and for Derby and the surrounding area, and it is good news for the long-term security of this country that we are prepared to invest confidently in submarine technologies for the long term.

Q13. How does the snoopers’ charter that the Government plan to introduce shortly differ from the 2009 proposals, which both governing parties opposed when they sat on the Opposition Benches? (112672)

It differs enormously, because the previous Government’s proposal was to hold all data in a central database. Our proposal would require providers to hold on to their data. The hon. Gentleman uses the catchphrase “a snoopers’ charter”, but it is designed to be a criminals’ nightmare. If we do not update our ability to detect terrorism and criminality in this country, that will have a very serious effect, so I encourage the hon. Gentleman to look at this in detail. It is very important for maintaining law and order in the UK.

Q14. Is my right hon. Friend aware that the highlight of the Olympic torch relay will take place on 6 July, when it arrives in Southend to be met by a choir of 2,000 on the longest pier in the world, with its new, iconic building? Does he agree that the Olympic games are an opportunity for our country to come together and celebrate this Government putting the “Great” back into Britain? (112673)

The arrival of the torch in Southend is one of the highlights, the other being the fact that today it is passing through Richmond, Yorkshire—and I would have dearly loved to be there to see it. But that is one of the highlights, and my hon. Friend is quite right: the Olympics are an enormous opportunity for this country. We are looking, through the Olympic games, to secure more than £1 billion of inward investment, to attract an additional 4 million visitors, including to Southend, and to use the games to inspire more young people to take up sport. It is a great moment for Britain.

Q15. We all know that the Prime Minister likes to “chillax” down the pub, but when it comes to Anglo-French relations should he not adopt a more sober approach? (112674)

The Prime Minister always has excellent relations, in my experience, with any President of France, including with the new President of France. We should welcome and applaud the fact that the city in which we are sitting is the seventh largest for French people in the world, and they are of course welcome here in the United Kingdom whatever their Government are doing at home.

I understand why the right hon. Gentleman would have liked to have been in Richmond, but he has paid the price of fame, which is why he has had to be here instead, and we are extremely grateful to him.

We now come to a statement from the Secretary of State for Business, Innovation and Skills, Mr Secretary Cable. [Interruption.] Order. I know that Members are toddling out of the Chamber—quickly and quietly so that we can hear from Mr Secretary Cable.

Directors’ Pay

I welcome this opportunity to set out the Government’s proposals for directors’ pay. This follows extensive consultation with business and the investment community.

Since I first addressed the House on the issue, the Government have initiated a broad, national debate about shareholder activism, and this encouraged shareholders to become more engaged as owners of their companies during the so-called “shareholder spring”. We have also seen many companies engage constructively in the face of that opposition, and this is an important step in encouraging improved pay discipline.

There is, as I said then, compelling evidence of a disconnect between pay and performance in large UK-listed companies, and it is right that the Government act to address that market failure. Today I can therefore announce a far-reaching package of reforms that will strengthen the hand of shareholders to challenge excessive pay while not imposing unnecessary regulatory burdens.

We will give shareholders new powers to hold companies to account on the structure and the level of pay, and make it easier to understand what directors are earning and how that links to company strategy and performance. Shareholders will have a binding vote on a company’s pay policy, including their approach to exit payments, and, rather than being a one-off vote, for the first time there will be a real, lasting and binding control on pay.

A company will be able to make payments only within the limits that have been approved by a majority of shareholders, and this binding vote will happen annually unless companies choose to leave their pay policy unchanged, in which case the vote will happen a minimum of every three years. This will encourage companies to set out and stick to a clear, long-term pay strategy, and it will put a brake on the annual upward pay ratchet.

The policy should explain clearly how pay supports the strategic objectives of the company and include better information on how directors’ pay relates to that of the wider work force. There will be increased transparency on employee pay, including information that will show the difference between rises in directors’ pay and that of the employees. Indeed, employee views on pay are important. That is why I am proposing that companies report on whether they have taken steps to seek the views of their work force. As part of their policy, companies will have to spell out their approach to exit payments. When a director leaves, the company must publish a statement explaining to shareholders exactly what payments the director has received, and companies will not be able to pay more than shareholders agree.

Alongside the binding vote on pay, there will, as now, be an annual advisory vote on how the policy has been implemented, including all remuneration paid in the previous year. If a company fails the advisory vote, that will automatically trigger a binding vote on policy the following year. Both the binding and the advisory vote should be as strong as possible to keep up pressure on companies. I therefore welcome the CBI’s call for the Financial Reporting Council’s corporate governance code to be updated to codify current best practice whereby companies make a statement when a significant minority of shareholders vote against a pay resolution. This will publicly hold directors to account. Pay reports will be clearer and more transparent for investors. Companies will have to report a single figure for the total pay that directors received for the year, details of whether they met performance measures, and a comparison between company performance and chief executives’ pay.

The Government will shortly bring forward amendments to the Enterprise and Regulatory Reform Bill to introduce these reforms. In tandem, as good policy-making requires, we will publish for comment revised, simplified regulations setting out what companies must report on directors’ pay.

Lasting reform is dependent on business and investors maintaining this activism and developing and adopting good practice. The best companies and investors are already leading the way and acting as early adopters of these reforms. We welcome the close engagement of institutional shareholders and their willingness to use their voting powers. We want this to be sustained and we shall continue to monitor disclosure levels. Evidence suggests that more institutional investors are disclosing their voting records and that up to three quarters of these investors are now disclosing their votes. We will consider further action if the number of investors volunteering to disclose their voting records does not continue to increase.

In summary, this is a strong package of reform. It builds on the UK’s status as a global leader in corporate governance, it commands wide support from investors and business, and it addresses public concerns about directors’ pay. These proposals restore a stronger, clearer link between pay and performance; reduce rewards for failure; promote better engagement between companies and shareholders; and, overall, empower shareholders to hold companies to account through binding votes. We look forward to discussing the proposals further with the Business, Innovation and Skills Committee on 28 June and in the Public Bill Committee that will consider the Enterprise and Regulatory Reform Bill.

I thank the Secretary of State for advance sight of his statement.

In the past decade, the value of FTSE 350 companies increased by 80% while the average total earnings of executives in those companies increased by 108%. So the evidence is clear: many of these rewards, as the Secretary of State said, are not linked to success or performance. This problem has grown over the past few decades under Governments of all persuasions. In fact, one has to go back to 1979 to find things more in proportion, with executive pay growing by 0.8% on average in the three decades since that year. It is imperative that we all do what we can to address this problem.

In government, rightly, we did not rush to legislation. It was right to see whether legislation could be avoided. When it became clear that that was not the case, in 2002 we made it mandatory for quoted companies to publish a separate directors’ remuneration report, and we gave shareholders the right to vote on remuneration through advisory votes. As the Secretary of State said, shareholders, to their credit, have been exercising those rights with some verve this year. That is very welcome, because change and reform must be led by them.

The Secretary of State outlined a number of proposals to assist shareholders in that endeavour. I welcome the binding vote on exit payments, the measures to simplify pay reports and the measures to increase transparency, but I have a number of concerns and questions in relation to the other things that he mentioned.

First, on the annual binding vote on future remuneration policy, it is deeply disappointing that having marched us all up the hill, the Secretary of State appears to be marching us back down again by performing a U-turn on his original proposal. Having proposed an annual vote, he now seeks one every three years, unless there is a change to the policy during those three years. Will that not incentivise boards to draft policy as broadly as possible to avoid anything other than a triennial vote? Exactly how does he define a change to remuneration policy? Who will be the arbiter in each company as to whether a change has occurred—the board or the shareholders? I know that bureaucracy has been raised as an objection to an annual vote, but given that there are many other annual votes, I am not sure whether that holds water.

Secondly, the Government should have been bolder on the majority that is required for a pay policy to be approved and gone for a 75% threshold, as opposed to a simple majority. Dominic Rossi, the chief investment officer of Fidelity Worldwide Investment, has said that such a threshold would

“ensure that companies consult widely with shareholders prior to a vote.”

He went on to say that it would give

“companies a clear mandate and the need for a clear majority also encourages all shareholders to express their views”.

Why does the Secretary of State not take heed of that advice?

Thirdly, the Secretary of State says that employees’ views on pay are important. If that is the case, why does he persist in standing in the way of the requirement for employee representatives to sit on board remuneration committees?

Fourthly, we fully support the introduction of an annual advisory vote on how remuneration policy has been implemented over the previous year. The Secretary of State said that the loss of such a vote would “automatically trigger a binding vote on policy the following year.” Will he clarify to which vote in the following year he was referring—the backward-looking vote that would usually have been advisory or the forward-looking vote on policy?

Finally, I too welcome the CBI’s call for the Financial Reporting Council’s corporate governance code to be updated. Will the Secretary of State consider requiring the FRC to produce an annual report on the operation of the UK stewardship code to keep shareholder activism and good pay and remuneration practices high on the national agenda in the years to come? It would be a great shame if it fell off the agenda.

I thank the hon. Gentleman for his positive comments. It was useful that he started with a bit of history. It is worth recalling that in the 13 years of Labour Government, seven Secretaries of State occupied my job—eight if we include Lord Mandelson twice. In the seven years that followed the introduction of advisory votes, none of my predecessors thought it necessary to introduce a binding vote on pay, despite there being, as the hon. Gentleman acknowledged, a continuing trend for top pay to diverge from the performance of companies, let alone from the pay of employees.

The hon. Gentleman continues to raise the issue of workers on boards. I think that having workers on boards is an excellent idea. The question is whether it should be mandatory. If it was such a good idea, why did none of my predecessors do anything about it? Most of them were nominated by trade unions and one was a distinguished general secretary of a trade union. None of them took any action to implement the measure that the hon. Gentleman is demanding. I welcome employee participation and will expect a report back from companies on whether they have consulted their employees on pay.

There will be an annual vote if pay policy changes. The hon. Gentleman seems to find a problem with the idea that if nothing changes, a policy can last for a three-year period. I would have thought that he would see the obvious attraction of a system that encourages companies to think long term. As I understand it, he has just copied my example in setting up a report on long-termism. We want companies to think long term. Should they choose to use the three-year process and leave their policies unchanged, it would put a stop to the ratcheting of annual pay awards. That process would be a considerable improvement should companies choose to use it, but for the most part, as I have indicated, the vote will take place annually.

I personally believe that it would be desirable to have a 75% vote threshold in the advisory votes, and the FRC will pursue the requirement of a statement to the market. As the hon. Gentleman will know, the FRC is an independent body, and I do not mandate it, but I believe that having a higher threshold would be desirable in that case.

The hon. Gentleman specifically asked what the FRC was doing to strengthen overall corporate governance. It is pursuing investigations on a variety of issues such as how companies should formally respond when a significant minority oppose a pay vote, requiring all companies to adopt clawback mechanisms and the extent to which executives should serve on remuneration committees in other companies. Those are big issues, and subject to the FRC’s recommendations we will have considerable improvements in the corporate governance system.

These are radical changes, and I would have thought it would enhance the hon. Gentleman’s reputation if he was gracious enough to acknowledge that a major set of reforms has been undertaken.

Banks have taken excessive risks, for which we have all paid. The Treasury Committee is now investigating that and has heard extensive evidence that senior bank executives have been rewarded excessively for taking those risks. What in these proposals specifically addresses the problem of systemic risk in our major financial institutions?

As the hon. Gentleman knows in his important role as Chairman of the Treasury Committee, a separate set of regulations introduced by the Financial Services Authority deals with the link between the types of pay package that are introduced and systemic risk. Excessive bonusing has undoubtedly had an effect in the past, and as a result of the experience of the financial crash, those regulations have been tightened. Banks, as public limited companies, will be governed by the new regulations, and I imagine that after their experiences shareholders in our leading banks will want to ensure that forward-looking pay policies take proper account of the systemic risk of their institutions.

I broadly welcome the Minister’s statement and I welcome his agreement to appear before the Select Committee on Business, Innovation and Skills on 28 June to be further questioned on it. May I probe him on his comments about the disclosure levels of institutional investors? Currently, only 15% of asset management companies reveal their voting behaviour at shareholder annual general meetings. In the light of his statement, will he consider introducing legislation to ensure that that becomes 100%?

I have already indicated in my statement that we are examining disclosure levels. There is an encouraging trend towards disclosure, and as the hon. Gentleman knows, the big weight of votes comes through the big pension and insurance companies. I have said that we will consider further measures if the current ones do not lead to the right trajectory, and his point is a useful one.

I very much welcome these proposals. The three-year binding pay policy will help to constrain the constant upward spiral in directors’ pay increases that we have seen in recent years. It has been suggested that the three-year pay policy agreement may turn out to be deflationary as growth improves in the economy and, hopefully, in companies. Does my right hon. Friend agree, and would he welcome that?

My hon. Friend is right, and that was one point that institutional investors made when we consulted them. They saw that the option of having a three-year unchanged policy would be helpful in deflating top pay. She is right that the problem that we are dealing with is an upward spiral in which pay is often unrelated to performance and top executives are trying to get into the top quartile, where by definition they cannot all be.

Is the Secretary of State not singing a different song from the one that he used to utter from the seat where I am now? He used to talk about the balance between people on both sides in business—the trade unions and the bosses. Is the truth not that he has come here with a set of proposals that might have been okay some time ago, but that he has been tied hand and foot by the Tories in the coalition and even got rattled by being asked a few decent questions by the pleasant shadow Business Secretary? What a transformation.

I know that the shadow Secretary of State is indeed very pleasant. I will concede that point. I did not think his questions were terribly good, but he is certainly very pleasant.

As for my performance when I used to sit in the seat where the hon. Member for Bolsover (Mr Skinner) is now, I did indeed warmly welcome Patricia Hewitt’s changes seven years before the end of the Labour Government. They were a big step forward, and they were helpful even though taken as a whole they were quite a weak package. What is happening today builds substantially on those proposals.

The Secretary of State’s proposals are unnecessary and will just be an additional burden on industry. Should he not concentrate instead on his day job? Gallay Ltd, in my constituency, has been waiting since February for an export licence and will lose an order to the Americans. Should we not have more action and fewer stunts?

If there is a genuine problem with export licensing, I will be happy to address it, but only a very small proportion of exports are covered by the licensing regime. As the hon. Gentleman will know, they cover defence and national security, and it is important that we are careful in how—

I welcome much of what the Secretary of State said, but the proof of the pudding will be in the eating. What difference will the changes make to the so-called directors—I call them the vermin—of the private equity world who took over Boots the Chemist five years ago and have now sold it off to the Americans? Will he announce how much money they have screwed out of this deal?

This change deals with public listed companies, not with private equity. There is a whole set of separate issues to consider about the regulation of private equity companies and about tax policy, but this change is about public listed companies.

I welcome my right hon. Friend’s taking a reasonable approach on directors’ pay following consultation with business and investors. Does he believe that more power for shareholders and greater transparency will encourage more people to participate in companies’ meetings, get involved and buy company shares? That is surely what we all want—more shareholders and more involvement.

That is absolutely right, and I congratulate shareholders who have become actively engaged in issues of pay policy for the first time in many years. I think one reason why they have been active is that they knew legislation to cement their position was coming.

The Secretary of State was quite right to castigate previous Governments for their complacency on top pay, which is now not simply a practical issue but a moral one. However, if he is honest I think he knows that his statement was timid. Is it not time that we had a high pay commission to consider how we begin to dismantle the obscenely high pay of the top-paid at a time when the poor are getting poorer?

I have seen the work of the existing High Pay Commission, which I think is a voluntary body and which has made some good suggestions, many of which we have taken on board. If the community of investors, think-tanks and others were to come together to examine top pay, I would look with great interest at what it suggested.

I welcome the Government’s announcements on executive pay, especially after a decade of runaway executive pay. Does my right hon. Friend agree that it is imperative that board members understand that what they do has to be in the interests of not only employees, stakeholders and shareholders but above all else the long-term sustainability and well-being of the business, operating by ethical means?

The hon. Lady is absolutely right—that is what the corporate stewardship code is all about. That initiative goes hand in hand with the others we are taking to ensure that companies operate on a long-term basis. British business has been undermined for far too long by short-term decision making, and we are trying to move it in the opposite direction.

I broadly welcome the Government’s proposals, but on a practical matter, if a company were to default or not implement the legislation, what penalties could the Government impose on them?

There is already a set of rules under the stewardship code. If companies fail to observe the binding vote, they will be making unauthorised payments. Very considerable liabilities can accrue to directors of companies that do that.

I welcome the statement, and the Secretary of State is right to tackle rewards for failure. Surely the worst example is that of Enterprise Inns, which suffered a 96.6% decline in share values over five years. Over three years when share values declined by 80%, Ted Tuppen, the chief executive, thought it fit to reward himself with £850,000 in performance-related bonuses. Does my right hon. Friend agree that shareholders are only part of the answer? Thousands of businesses are being damaged by the pubco model, so will he pledge to uphold the will of Parliament and announce a review in the autumn? As everyone in the industry knows, the imbalance in that sector has not been changed by the so-called self-regulatory solution.

The Minister who formerly had responsibility for pubs, who is now Secretary of State for Energy and Climate Change, had extensive debates with my hon. Friend on Enterprise Inns and the damage that the pubco model has done. The figures my hon. Friend produces are striking. I cannot understand why shareholders are not more active if there has been such a divergence between pay and performance. Perhaps he, with his formidable campaigning skills, will help them to be so.

I thank the Secretary of State for his statement and early sight of it. He says: “Pay reports will be clearer and more transparent for investors.” Investors in large listed companies have the capacity to do such work, but has he no concerns about the potential unintended consequence that business investors will see that burden as a de facto requirement of any business in which they seek to invest? Is he not concerned that there might be too much work involved for smaller businesses that are seeking investment to grow?

That is a perfectly correct statement of the balance we are trying to strike. We want investors and shareholders to be actively involved. In order to be so, they need to know what is going on and to have other information. I fully acknowledge that indirectly that has some regulatory impact. We have tried to strike the correct balance, and I believe we have done so.

The Secretary of State is right to identify the deep public distaste not just for rewards for failure but for general rewards for those who are not in any meaningful way risk-takers or entrepreneurs. How will he judge whether the policy has been a success over the next three years? When we are sitting here in June 2015, on what basis will he see today as a success?

The hon. Gentleman is right to stress that we are talking not just about reward for failure but about the general escalation of the pay of top executives unrelated to company performance. It is not likely that we could produce a simple metric of how the policy will work through, but if annual or tri-annual reviews of policy are successfully implemented across companies, with well informed shareholders exercising their votes, I think that in a few years’ time we will see a good deal of restraint and more strategic thinking in the setting of pay policies. That is what we are trying to achieve.

Three years is an awful long time to pack in share options, mega-bonuses, huge share handouts, long-term incentive pay schemes and so on. Why not have an annual binding shareholder vote to stop top executive remuneration ballooning wildly out of control within a three-year grace period?

Even if that perverse behaviour were to occur, there would still be the existing annual backward-looking advisory vote. If shareholders are dissatisfied, the company, subject to the Financial Reporting Council’s work, will be required to issue a statement, which will require a binding vote the following year. Checks and balances are built into the system to ensure that the abuses the right hon. Gentleman describes simply do not happen.

Does my right hon. Friend agree that there is a vital role for remuneration committees, and particularly their non-executive members, in re-linking rewards with positive performance in companies throughout the country?

Yes, there is an important role for remuneration committees and the consultants who advise them. One thing I did not mention was the effort being made to ensure that fees for remuneration consultants are properly declared, so that there is more transparency in that aspect of the process.

I welcome the statement, not least because I proposed an amendment to the Finance Bill to the effect that we should introduce a binding vote. I appreciate that the Government were consulting during that period. However, the shareholder vote is a binary vote—a straightforward yes or no. Does the Secretary of State envisage a process in which shareholders can amend the pay policy, for example to introduce a ratio between the highest and lowest paid within companies?

It will be possible for shareholders’ representatives to work out the ratio because of the information that will become available. We suggested that it would not be sensible to make that metric compulsory, because it can be misleading. I have previously described to the House the anomalies that can arise. A company with a large number of low-paid employees would have a big ratio, but a company that has outsourced such employees, which might be less socially responsible, will none the less have a better ratio, for entirely artificial reasons. We do not attach overriding importance to that measure, but the hon. Gentleman is right that it should not simply be a question of saying yes or no. Shareholders must engage with the company should there be a failure to pass a binding vote to produce a more satisfactory outcome. That is a process, not simply an event.

I would be grateful if the Secretary of State could elaborate on the concept of long-termism that he has mentioned in a few of his replies. I ran a business for 20 years before I came to the House, and the best decisions I made were long-term ones. Only when we take a long-term view will we tackle mediocre performance head on.

The hon. Gentleman is absolutely right. The big issue is essentially a cultural question—the evolution of business in the UK over a long period is central. That is why I set up the review under Professor Kay, which was supported by Sir John Rose and others. That will report in July. Some of its proposals—on, for instance, an end to quarterly reporting—will emerge in detail shortly.

While millions of people are trying to make ends meet—far more than under the previous Government—why should we believe that the massive annual sums, amounting to millions of pounds, given to the heads of the banks and other organisations are likely to change? We are in an unfair society, and there is no indication that that will change in any way as a result of what the Secretary of State has told us.

The proposal is not designed to solve all the problems of income and wealth distribution in society; it is designed to ensure that public listed companies operate responsibly, and that they are properly policed by their shareholders. The wider questions the hon. Gentleman raises involve tax and other policies, which I am sure we will debate on many other occasions.

I welcome the Secretary of State’s statement, but are we giving shareholders enough power quickly enough to stop companies providing a lot of executive pay for very poor performance?

The measures in the Bill on the binding vote are strong ones. Whether they are implemented quickly enough depends partly on how quickly the House proceeds with the legislation. I would expect to see it coming into effect soon.

In welcoming the Secretary of State’s statement, may I caution against weather presenters claiming credit for the spring? On the three-year binding pay policies reported by institutional investors, will he ensure that they will not have elasticity and undue headroom built in? He recognises that there will be changes in the Enterprise and Regulatory Reform Bill, but on institutional investors does he envisage the possible need for changes in the Financial Services Bill?

We are not proposing changes in the Financial Services Bill. Whether there is elasticity in the policy will depend on the shareholders: they own the companies and make the judgments, and they will ensure that the powers we are giving them are enforced in their companies.

On credit for the shareholder spring, I think the prospect of legislation has probably helped, although I would not claim credit for it. By passing these measures, however, we will ensure the spring is not a one-off event but is sustained; that is the purpose of what we are doing.

I very much welcome the Secretary of State’s measured proposals to give shareholders, who after all own the businesses in which they have shares, greater control over top pay. Further to the question from my hon. Friend the Member for Bexleyheath and Crayford (Mr Evennett), does the Secretary of State agree that the best way to increase shareholder activism is to increase the number of shareholders, especially non-institutional ones? What measures are the Government taking to increase the number of private, non-institutional shareholders?

The hon. Gentleman is right to stress the point that shareholders own the companies. That is self-evident but often overlooked, and they have often been treated as outsiders. Clearly, widening shareholding would be desirable, and we are considering a variety of ways of doing that, not least through encouraging employees to have shares in their own company. The Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for North Norfolk (Norman Lamb), and I will consider how to effect that in one of the companies for which we still have direct responsibility—the Royal Mail.

There is growing evidence that a major contributor to the ratchet effect on directors’ remuneration is the role of remuneration committees. People are concerned about the very narrow base from which remuneration committees are drawn, and there have been recommendations to widen their membership. The Secretary of State has already indicated his support for having an employee on remuneration committees. If he does not make that mandatory, will he make mandatory a wider base from which to draw the membership of remuneration committees?

I take the hon. Gentleman’s broader point that diversity among directors is critical to changing the culture of companies. At the moment, we are focusing on women on boards of companies, on which significant progress has already been made. That is part of the wider picture of having more diversity, and more employees, among directors.

A large proportion of the population has a direct or indirect stake in the stock market. Does the Secretary of State believe that there is a link between the relatively poor performance of the stock market over the past 10 years and the increasing share of corporate wealth taken out by directors and senior managers?

It is precisely the divergence between those two things that we are endeavouring to correct. My hon. Friend’s point is certainly true of the banking system, where very large salaries and bonuses have come at the expense of dividends. These reforms should help to correct that.

Today’s measures are welcome, but it should not just be a question of trying to stop the upward spiral of excessive directors’ pay; something needs to be done about the current excesses. When this measure comes into effect, will the Secretary of State urge companies to consider existing levels of directors’ pay? If that does not deal with the existing excesses, will he consider returning with other measures to drive them down?

There is an important distinction between existing pay arrangements, which are governed by contract, and future pay policies, which will be the subject of binding votes, after which those contracts can be set on a fresh principle. There is a restraint on existing pay through the advisory vote, and, as I have set out, I envisage the disciplines around the advisory vote being strengthened by the statement, subject to the operation of the Financial Reporting Council.

When an employee and union representative at ITV in Leeds, I was dismayed to see the then boss of ITV, Charles Allen, receive millions in pay, perks and bonuses, while making a series of catastrophic business decisions that brought the company to its knees and saw the share price plummet. I am also dismayed to see that he is now sacking workers at Labour party headquarters. Does my right hon. Friend agree that work forces’ views on executive pay should be considered?

They should be considered. If my predecessors had been as active as this Government have been in bringing forward this legislation, the Labour party would probably not be facing these redundancies.

I congratulate my right hon. Friend on securing this socialist measure through the coalition Government. Will he assure me that this will not drive UK-listed companies out of the UK? What will it do to encourage more companies to get listed in the UK?

I am frequently accused of socialist tendencies by colleagues behind me, but the promotion of shareholders is a rather strange definition of socialism. There is not a shred of evidence to suggest that this will promote the outward movement of companies. Indeed, all the leading business associations and investor groups have welcomed what we are doing.

In many quoted companies, highly paid employees actually earn more than directors. Will the Secretary of State consider extending at least the transparency aspect of this legislation to employees, as well as directors?

I have identified that problem. It is particularly a problem in banks, where the so-called code staff, including traders, are sometimes paid more than their directors. That will be covered by the regulation on financial services, which is being strengthened in that respect. There are probably very few public listed companies outside the banking sector where the phenomenon the hon. Gentleman describes is real.

Will the Secretary of State talk a little more about the transparency proposals for paid consultants? Is it worth considering adding to that the fee structures and mechanics for executive search consultants in relation to board positions?

I will happily give the hon. Gentleman more information on the detailed work done on the rules governing transparency in that sector. His point about executive search agencies is a new one—I had not encountered it before—and we will certainly consider it, but the principle of greater transparency is absolutely right.

Will my right hon. Friend assure the House that the Government, as a major investor in some of the country’s largest banks, will be a proactive investor and ensure that rewards reflect results in those banks?

As my hon. Friend knows, the banks are governed by an arm’s length arrangement, through United Kingdom Financial Investments Ltd, but he will have seen that the pay and bonuses of senior executives, particularly at RBS, in the last season reflected the Government’s concerns about excessive pay in general.

Will my right hon. Friend confirm that high-performing individuals in successful companies that perform within the proper corporate governance have nothing to fear from these proposals, but that those companies that do not follow best practice clearly do? Are the Government proposing guidance on what would be best practice?