Tuesday 3 December 2013
[Mr Jim Hood in the Chair]
Royal Navy Ships
Motion made, and Question proposed, That the sitting be now adjourned.—(Mark Lancaster.)
It is a pleasure to work under your chairmanship, Mr Hood. I am delighted to have secured a debate on future ships for the Royal Navy. That may seem an odd subject, considering that the Queen Elizabeth-class carriers will not be operational until 2020 and that the Type 26 global combat ship, for which advance plans are in place, is not expected to enter service until June 2022.
The development times for such vessels are long, and although the plans to replace the Invincible-class carriers with the QE-class carriers were made in 1997—16 years ago—and the green light to replace the Type 23s with the global combat ship was given 15 years ago, the first sheet of metal has yet to be cut. If we combine that lengthy development period with, first, Britain’s ever-evolving place and role in the world; secondly, the changing threats and challenges that we face away from traditional deep-blue-water engagements; and, finally, the seismic changes in war-fighting technology, it makes perfect sense to ask what role the Royal Navy should play in the future and how it should be equipped to perform that role.
Let me take each of those points in turn. The previous strategic defence and security review made it clear that, as a maritime nation, we will retain significant global interests, with our prosperity, stability and security largely dependent on access to the sea and the maintenance of uninterrupted free trade. Having served in the armed forces, I would be the first to support a large permanent military capability, but history shows that that is a luxury that the nation cannot always afford. For hundreds of years, the size of our armed forces has concertinaed, and this decade will be no different. With defence spending falling from about 4% of GDP in the cold war to 2% today, it is right that we consider what the default size of our armed forces should be to allow us to meet our national and international security obligations and to respond, with or without our allies, to sizeable short-term commitments.
Although we cannot predict the future, we can say with some certainty that our forces will be deployed. Thanks to modern, 24-hour news coverage, which allows the nation to take a more proactive and vocal interest in the type of interventionist engagements that we participate in—as reflected in the recent vote on punitive intervention in Syria—and to the fact that there is no appetite for repeating the intervention challenges of Iraq and Afghanistan, we are likely to be more selective about the engagements that our forces are committed to. Future operations are likely to be multinational, light-footprint, manageable and easy to extract—essentially, low-risk entanglements—especially when mass is not immediately available or politically desirable. That bodes well for the greater utility of the ship—if it is built with the flexibility to modularise for the task.
Let me turn now to the changing threats and challenges that we may face. I draw Members’ attention to the latest book by respected author, strategist and counter-insurgency expert David Kilcullen, in which he speaks of
“the dangers of marginalised slums and complex security threats of the world’s coastal cities, where almost 75% of the world’s population will be living by midcentury.”
“a future of feral cities, urban systems under stress, and increasing overlaps between crime and war, internal and external threats, and the real and virtual worlds.”
Of course, not everyone will agree with his rather grim predictions, but it cannot be denied that an increasingly interdependent world will be characterised by intense globalisation and competition, favouring many people, but alienating others.
With 80% of the world’s population living within 100 miles of the sea and most human maritime activity, such as shipping, fishing and hydrocarbon exploration, taking place 100 miles out to sea, most of the world’s economic activity will be conducted in a narrow strip of land and sea—the so-called littoral. It is there that we will find the poorly governed or the ungoverned space that leads to future conflicts—whether prompted by natural or man-made disasters—and that provides the breeding grounds for trouble. That, in turn, will threaten Britain’s interests. That is where future tensions and conflict will occur, as the world shifts towards a multipolar construct. Britain must adapt to that new landscape if it is to continue to play an active and engaged role in shaping global change. That means developing more flexible, mobile and defendable military capabilities, and the Royal Navy has a key role to play in that.
Given the platforms that are about to come online, it could be argued that almost all the kinetic operations that we have carried out recently could have been achieved from the relative safety of the sea. By way of illustration, I should point out that 35% of US air operations over Afghanistan were conducted from carriers based in the Indian ocean, while 40% of all allied sorties in the Libya campaign came from a single carrier—the Charles de Gaulle—before it had to retire for maintenance.
That is a powerful argument, if ever there was one, for commissioning both QE- class carriers, not just one. I will not comment too much on those carriers, because I made my views clear in my Royal United Services Institute report, but they will be game changing for British military capability. Two carriers would allow us to develop not only carrier strike, but a permanent expeditionary capability, unlike the use of Apaches on Ocean, which was a temporary move.
That leads me to the advances in war-fighting technology. The current revolution in technology is changing the conduct of warfare—arguably, to a far greater extent than the arrival of the longbow at Agincourt, the Gatling gun in the US civil war or the tank at the battle of Cambrai. Such so-called force multipliers give the user greater war-fighting effect at an ever greater distance from the target. Each new development moves the conduct of war into a new chapter.
The same applies in the maritime environment. The development and application of new technology—in essence, tactics—over hundreds of years, and, possibly, a local rule that allowed the spoils of war to be shared by the crew, allowed the Royal Navy to dominate the high seas for a long time, charged by Parliament with protecting and growing British trade routes and interests. We have seen the development of full-rigged ships; cannons, which replaced the need to board enemy ships; and the dreadnoughts, which had fewer but larger guns. In the last century, we saw the introduction of submarines, aircraft carriers and torpedoes. With the technology coming online today, tomorrow’s battles—wherever they are—will be fought not just by those in the theatre of war, but, arguably, by a similar number of operators hundreds of miles from the battlefield, as unmanned warfare becomes the norm.
The advanced systems coming online will transform the ability of all three services to collect intelligence; to deter, or efficiently and clinically to defeat, the enemy at range; and to blur the lines of responsibility between the services. Operationally, we are only beginning to appreciate that, as reflected in the Libya campaign, where HMS Ocean, with a combat range of 8,000 miles, carried Apache helicopters, with a combat range of 300 miles and armed with Hellfire missiles, which have a range of 8 km. A stand-alone system was temporarily placed on a platform, crossing service boundaries no less, to assist with an objective. The question I therefore pose today is: could there be more of that ability to modularise systems to meet the variety of tasks that we now require of our fleet? That means challenging the Royal Navy’s desire for all its ships to be permanently capable of high-end warfare tasks.
The Type 45 destroyer, for example, is a formidable ship, arguably the top of its class in defending the skies at sea and attacking other ships. It is, however, so high-spec that it cannot hit things on land, as traditionally that has been the domain of the RAF and, latterly, the sub-surface fleet. It is built for high-end and deep-blue warfare, yet it spends 50% of its time conducting SDSR taskings, such as counter-piracy and counter-drugs operations, and humanitarian operations, such as those that we have recently seen in the Philippines.
I have no doubt that we need high-end capability, but that kinetic capability must be able to harness the full spectrum of complex weapons technology and take on future technologies by being more modular and systems-based. I therefore very much welcome the fact that the lines between the frigate and the destroyer are being blurred in the design of the Type 26 global combat ship. I understand that it should be able to fire Tomahawk missiles from the Sylver vertical launch system A70 pods and that there is space on board for two Wildcat helicopters and a number of rigid inflatables, as well as 40 Royal Marine commandos. One does not need to be an able sea dog to recognise how much more versatile the design will be. It will certainly be more proficient in expeditionary warfare in the littoral environment.
With the detailed ship design yet to be agreed, will the Minister consider increasing the size of the mission bay and deck to offer greater space beyond that for the planned two helicopters? I stress the point: whether manned or unmanned, the airborne capability extends the versatility of a vessel, from the high-end to the soft power influence, giving the ship vastly increased expeditionary capability. We are now seeing unmanned aerial systems, or drones, to use common language: the ScanEagle, the Fire Scout and Boeing’s Hummingbird. They will be the norm in the skies; they will be a permanent part of war.
I will not go into the details about selected precision effects at range, but I would encourage increased synergies in the complex weapons systems employed by all three services. Is there any reason why Storm Shadow cannot be fired from a ship or, indeed, Brimstone from a Wildcat? Another example is the Mistral MBDA surface-to-air launch system, which can be fired from helicopters or ships and is also man-portable. That is a bit of kit that is versatile across all three services—a great example of one system being shared across the board.
I ask the Minister to recognise the convergence of interest in the battle space and the challenges of the continued siloed approach to procurement. I will cite one British example. The Fire Shadow, procured by the British Army, is a surface-launched precision loitering missile with a range of around 100 km. It is transported by trailer behind the back of a 4-tonne lorry. There is no reason why such a cheap but accurate bit of kit could not be modularised and placed, when required, on board a ship. Heaven forbid, it could even be run by the Royal Artillery, although perhaps that is a step too far. I believe that that is the mindset that should dominate future joint effect—modular systems covering all four phases of war that can be brought together.
As the design for the Type 26 is consolidated, I offer two options: option 1, do we need all 13 of them to be of such high specifications, or could, say, five of the eight have a more simplified design, where tailored assets are assigned depending on the task at hand? On option 2, if we commissioned just eight Type 26s, we could use the additional funds to procure 10 cheaper, larger modular ships with the deck and mission space for a minimum of four rotor systems to effectively conduct counter-piracy and counter-narcotics operations and defend home waters and to excel at upstream engagement, stabilisation and humanitarian tasks.
Does my hon. Friend recognise that it is important that we also have ships that will protect our aircraft carriers? After all, the key thing that Nelson always talked about was the need for frigates to support the rest of the flagships and other such things.
My hon. Friend makes a valid point. I commend him for his work in supporting what goes on in Devonport. He is absolutely right that ships can and often do work individually, but they might be required to be part of a larger flotilla or part of a taskforce, which might include defending an aircraft carrier. Clearly, with a limited number of platforms, that would be harder to do, so an increased number of ships would make the job easier.
The types of role that the Type 26s could be engaged in—upstream engagement, stabilisation and humanitarian tasks—are the very things the SDSR is saying that we should be doing more of, to promote Britain’s interests. I believe that such a design might even allow the provision for an Army company strength to be based on board. Essentially, the ship could be a small moving location—a sea-based platform for operations to be conducted on land. In essence, it could act as a safe lily pad from which land and sea-based assets could be safely deployed without the need for any boots to be permanently on the ground. Such a ship would then free the high-end ships for NATO, middle east, south Atlantic and nuclear deterrent duties. Indeed, as my hon. Friend has just said, they would be free to form part of a flotilla to protect our aircraft carriers.
The Minister will be aware that the surface fleet is coping—but only just—with meeting its maritime obligations with 19 destroyers and frigates, when 23 ships is the defence strategic direction mandated standard. We are therefore taking an operational risk, and that is managed, but option 2 would mitigate that risk. I urge the Minister to gain some inspiration by looking at the United States littoral combat ship, or the USS Freedom, a catamaran-style ship. The US is exploring exactly the same more modular-based approach. The MOD wrote a joint concept report colourfully entitled “Future ‘Black Swan’ Class Sloop-of-War”, published in May last year, which talks exactly about the concept of a far cheaper ship, with the money invested instead in the systems that go on it.
As we slowly approach the next SDSR, will the Minister look at one further system that I believe would be game changing in the maritime environment? The V-22 Osprey is a US multi-mission military tiltrotor aircraft. It is an example of the large utility helicopters of the future. It already operates on the US Wasp-class carrier and can fly higher, faster and further, and it can of course land on the deck of any frigate or destroyer. It would be able refuel our F-35s. Such a system would have an enormous impact in the maritime environment. I believe that leasing six from the United States, similar to what we did with the C-17s, would make logical sense.
In conclusion, it has been said time and again that, no matter how advanced, ships can only be in one place at a time. We have impressive naval ships, but they remain very specific in their remit and too siloed in harnessing systems from all services—and, of course, there are only 19 of them. Our ships are conducting a number of international duties that they were not built to achieve. Looking ahead, Britain must excel at influencing activities in the littoral environment. I believe that that aim is best served by simpler and cheaper platforms, where the sophistication and investment is focused on the modular systems on board, rather than on the ship. I hope that I speak for both sides of the House in paying tribute to all those who serve in the Royal Navy and the Royal Marines. I offer my thoughts today in the spirit of ensuring that the House considers how we can best equip the Royal Navy in future in the lead-up to the next SDSR.
Several hon. Members rose—
I pay tribute to the hon. and gallant Member for Bournemouth East (Mr Ellwood), who has a long track record and experience in defence matters. I congratulate him on securing the debate and on outlining many thoughtful points, in particular relating to the littoral dimension, global strategic challenges, and interoperability and joint effect.
When considering future and current vessels, one must consider future and current maritime roles and taskings as an important starting point. I think that Members from across the House agree that naval forces are there to protect and patrol, to secure freedom of movement, to enforce the boundaries of territorial waters, to control exclusive economic zones, and to secure the environment—a significant consideration—renewables and critical infrastructure. That is particularly important when one bears in mind what is likely to happen in the decades ahead with offshore wind, tidal and wave power and the development of super-grid systems, which are likely to connect Iceland, the Faroe islands, Scotland, Norway and the rest of Europe. Other dimensions include subsea infrastructure and, of course, the trafficking of drugs and people. I had a quick look at the Royal Navy’s website before the debate and noted the five key current areas of maritime security, which were counter-piracy, counter-narcotics, counter-terrorism, keeping sea lanes open and “around the UK”.
I join the hon. Member for Bournemouth East not only in praising UK personnel and those of other countries for their life-saving roles far from home—including, most recently, in reacting to the humanitarian catastrophe in the Philippines—but in acknowledging the importance of anti-piracy operations, and the maintenance of free-trade routes through measures such as Operation Ocean Shield, which is ably commanded from a Norwegian vessel, the Fridtjof Nansen.
It is the fifth and surely most important task in the Royal Navy’s list that I want to address in the context of future and current conventional naval vessels, capabilities and tasking: maritime domain awareness, or MDA, to use the Navy’s terminology, which we should understand. It is the effective understanding of anything associated with the maritime domain that could impact on security, safety, the economy or the environment. I want to examine the issue in terms of recent developments close to home.
There is no better place to start than with an incident that happened two years ago and has close connection to my part of the world. The 65,000-tonne Admiral Kuznetsov anchored on the edge of UK waters off my constituency. Other Russian ships that also sought shelter in the Moray firth included the anti-submarine warfare ship Admiral Chabanenko, and the escort ship Yaroslav Mudryy. The vessels did not warn domestic authorities that they were going to come so close to the coast, and are believed to have blamed bad weather for making that approach. It was the first time the Kuznetsov, or a vessel of its size, had deployed near UK waters, and it was the closest in 20 years that a Russian naval task group had deployed to Scotland or anywhere else in the UK.
In previous years, Nimrod maritime patrol aircraft would have been loitering and would have been aware of the presence of a Russian deployment of that size. Of course, by 2011, the UK had no such aircraft; it is the only northern European military without them. Nevertheless, the Russians were there without any UK escort. At that stage, the Ministry of Defence was relying on Scottish fishing vessels to report developments, including fly-tipping by the visitors. When the MOD became aware of the Russians’ presence, a 30-year-old Type 42 frigate, the HMS York, was scrambled from Portsmouth, around 1,000 miles away. That distance, at 20 to 24 knots, takes more than 24 hours to travel. The responsibility that the HMS York was fulfilling was that of fleet ready escort, which means being the deployable and capable vessel in UK waters ready to perform emergency response tasks. The Kuznetsov case raises serious questions relating to current and future naval vessels, and I would be grateful if the Minister could address them. I know that he is well advised today, so I am sure that he will have time to respond to my points.
Is the availability of a fleet ready escort a mandated task of the Royal Navy? Will the Minister confirm that, owing to the unavailability of vessels, the fleet ready escort provision has been repeatedly gapped? Will he confirm that Ministers need to be informed by the Royal Navy every time such a gap exists? Will he confirm how many times over the last five years and for how long the fleet ready escort has been gapped? Will he confirm that offshore patrol and mine countermeasures vessels have been assigned for fleet ready escort duty during gapped periods? When considering future ships, it is important to understand the current state of play and what one might want to ensure does not happen in future.
Staying with recent experience, in May 2007, Tornado F3 jets from RAF Leuchars in Fife were sent to intercept two Russian aircraft spotted observing a Royal Navy exercise off northern Scotland. The jets were scrambled after the foreign planes were detected by radar in the skies over the western isles. They were identified as Russian Bear Foxtrot planes, commonly seen by RAF pilots during the cold war. In this case, they were intercepted and their return was escorted.
Although there have been recent developments, I do not want to explore in any detail in this forum the interest shown by some countries in subsea infrastructure, but I am sure that both the Government and Opposition Front-Bench representatives will understand its importance and the importance of its integrity. The examples that I have given underline that, with regard to the maritime domain awareness of future and current vessels, there are important tasks close to the UK that must be properly managed as a priority.
I want to raise the question of tasking in our immediate wider maritime region and, in particular, the contribution towards joint allied responsibilities and training. NATO has, as part of its immediate reaction force, standing NATO maritime group 1, which primarily operates in the eastern Atlantic. Similarly, standing NATO mine countermeasures group 1 operates in northern waters. They are relevant for future and current naval vessel provision, as they are standing operational commitments for allied nations, which provide destroyers, frigates and mine countermeasure vessels. It is notable that the UK has not provided vessels to either of the groups for several years.
Similarly, on joint training, there is a real issue of properly committing current and, hopefully, future vessels. Last month saw the largest NATO training exercise in northern Europe in nearly a decade. Some 6,000 troops from 20 allied and partner nations took part in Steadfast Jazz, which involved land, air, and sea elements. Of the 6,000 participants in the exercise, the UK contributed precisely 52 personnel aboard a single mine hunter. It followed a large-scale exercise with maritime dimensions in Norway, where the UK provided just one aircraft, which is more than has ever been provided to the NATO air policing commitments in Iceland.
When it comes to our immediate maritime backyard, the UK is sadly posted missing too often and is not taking its responsibilities seriously. The absence of any mention of the high north and Arctic in the most recent strategic defence and security review eloquently underlines my point.
This is all especially relevant to Scotland when it comes to current and future conventional vessels. Scotland is a maritime nation with a sea area five times larger than its land area. Our coastline is over 11,000 km long, and is longer than that of the People’s Republic of China and that of India. It constitutes 61% of the entire UK coastline, and there are more than 800 islands. Remarkably, however, there is not a single major, ocean-going, UK conventional vessel based in Scotland to perform the key tasks that I have outlined; no frigates or offshore patrol vessels are based in Scotland. That can and will change after a yes vote in next year’s independence referendum in Scotland. Last week, the Scottish Government published their White Paper, “Scotland’s Future”, which included plans for naval forces. I commend the White Paper to Members of all parties, although I understand that the print run has already been fully exhausted.
This issue is close to my heart, and I would be happy to debate at great length the Scottish public’s overwhelming opposition to nuclear weapons being based in Scotland—something ignored, sadly, by the hon. Gentleman’s party and by the official Opposition in Westminster—but I am looking closely at the clock. In the White Paper, however, which I commend to him, the plans for Faslane are for a vibrant conventional naval base, and I am sure that most people would welcome that. I am delighted at the strong commitment in the White Paper to maritime capabilities, including frigates, OPVs, patrol boats, auxiliary ships and, crucially, newly procured maritime patrol aircraft.
UK assets and liabilities are key, and they must be a consideration for the Ministry of Defence, now and after a yes vote. Future vessels are very relevant. The referendum will have a significant bearing on issues relating to current and future vessels, but as yet we have had no indication from the Government as to their preferences on defence assets. According to the most recent UK asset register, published in 2007, MOD assets totalled more than £92 billion in value; on a population share basis, Scotland would be entitled to £7.7 billion in defence estate, equipment and vessels, or a financial offset. With regard to future vessels, that is important, because the UK Government have to date given no indication of the effect of a yes vote on their planning assumptions or procurement plans.
The MOD has projected the need for £160 billion of spending on defence equipment and support over the next 10 years; £13 billion of that spending is predicated on continuing guaranteed Scottish taxpayer support. With independence, Whitehall will need to work with the Scottish Government on joint procurement even to come close to those commitments. It is in the interests of both Governments to work together. The Scottish Government’s White Paper included the following commitment:
“This Scottish Government will take forward the procurement of four new frigates, to be built on the Clyde, preferably through joint procurement with the rest of the UK.”
That presents a good chance for massive procurement gain, with the potential to extend the production run of the Type 26 frigate. Unless the Government were to signal a further reduction in demand for frigate numbers, we could see more ships built rather than fewer, which is good news for the Clyde, good news for taxpayers across these islands, and good news for defence with appropriate conventional capabilities.
In conclusion, current and future naval vessels have essential tasks at home and further afield. I have stressed the importance of providing for necessary maritime territorial and regional defence, which is the core business of defence responsibility. Sadly, the UK Government have taken their eye off the ball, so I look forward to a sovereign Scotland taking those responsibilities seriously, and having the vessels and capabilities to do so.
It is a pleasure to serve under your chairmanship, Mr Hood. I congratulate my hon. and gallant Friend the Member for Bournemouth East (Mr Ellwood) on securing this important debate and on his compelling and persuasive opening speech about the importance of our future fleet and its capabilities. I apologise in advance that I cannot stay for the duration of the debate, which saddens me. I desperately wanted to take part, but I have a previous engagement that I have to skip off to before the end, so I will be checking Hansard avidly for the Minister’s answers to my questions.
My hon. Friend the Member for Bournemouth East made some compelling arguments about the technical specifications of warships but I am not in a position to do that. I want to talk about the human impact of decisions about future naval ships—their construction and where they are based—and the effect on local communities. I should declare an interest: members of my family work and have worked for generations in the business of building, maintaining and taking care of Royal Navy ships. After all, I was born in Portsmouth and represent Gosport, and people would be hard pressed to find a single person in that region who is not affected in some way by the Royal Navy or the care, maintenance and construction of its ships. That is why the community was devastated by the recent news that shipbuilding in Portsmouth is to cease.
In Portsmouth, we do not have a sentimental view of shipbuilding. We understand that it is something that has always fluctuated. My grandfather worked in the dockyard for 45 years, including on the building of HMS Andromeda, which in the late 1960s—around 1967—was the last Royal Navy ship to be built entirely in Portsmouth dockyard. There was a huge gap in shipbuilding at the dockyard after that, so we understand that naval shipbuilding fluctuates. Furthermore, we always understood that the Queen Elizabeth class, which has been partly constructed in Portsmouth, would come to an end eventually. It is a once-in-a-generation shipbuilding project, which created many jobs, but they were never going to last for ever, because of the scale of the ship—only one 20th of it filled an enormous BAE hangar in Portsmouth dockyard.
We used to feel a little better about the lack of shipbuilding jobs when other jobs could be taken on the maintenance and care of the fleet—the ship support services. In recent years, however, that work has deteriorated as well. I remember as a little girl, we had the Queen’s jubilee fleet review of 1977—the Spithead review—which was a glorious spectacle. The ships went as far as the eye could see; we had a magnificent fleet. There was a fleet review in 2005, to commemorate the battle of Trafalgar, and I also went to that. We managed to collect a bunch of different naval ships from various international navies. Her Majesty did inspect them, but she was probably still home in time to watch “EastEnders”, because there was nothing like the level of ships that we used to have.
That is important. I suppose the problem started with the construction of the Type 45, as my hon. Friend the Member for Bournemouth East pointed out. By anyone’s standards, it is a super-impressive piece of kit. Naval folklore, which is particularly prevalent in my part of the world, has the ships taking part in an international military exercise in the Atlantic, but being asked to leave by other navies, because the Type 45 ships were so technically brilliant that they were beating everyone else before they could start. Apparently, they have the radar shadow of a small fishing boat—they are whizzy pieces of kit. The trouble with the Type 45 ships, however, is the cost—they were £1 billion a pop, which is very pricey—and we got six of them and not 12. I am not normally keen on quoting Joseph Stalin, but he said that quantity has a quality of its own.
As other Members have pointed out, our Navy is different from other wings of the armed forces: even when we are not involved in any combat operations, the Navy is almost fully deployed protecting our trade routes, on anti-piracy missions, deploying mine counter-measures, on fishery protection, in the Falklands, taking part in drugs operations in the Caribbean and on disaster and humanitarian relief, as we have seen recently. We therefore need a quantity of ships. No matter how incredibly advanced our warships are, one has not yet been invented with the ability to be in more than one place at the same time; that is the issue.
My first question to the Minister is, will he guarantee that for the future global combat ship we will learn the lessons of the Type 45, and have a ship that is flexible and adaptable but affordable and exportable, so that we have something that other countries want to buy? They do not want the £1-billion-a-pop Type 45s because they cannot afford them.
Another important matter is the basing of the future fleet. It is no secret that people in Portsmouth were devastated by the news that the Type 23s will now be maintained and repaired in Plymouth. Where shipbuilding jobs are disappearing, the hope is that those jobs would be back-filled by ship support work and fleet maintenance. But there is a massive strategic gap: when work finishes for the last Type 23 that will be repaired in Portsmouth, the HMS Westminster, there will be a gap of around a year before the first Type 45, HMS Daring, comes back for its first refit. We had hoped that some of the shipbuilding jobs would go into ship support, but we are not even 100% sure that all the ship support jobs will be in Portsmouth because of that year-long strategic gap. Will the Minister tell us what he is doing to mitigate that? The area cannot support any further job losses.
I welcome the news that the QE class will be based in Portsmouth harbour and that the Government are going to spend £100 million on improving the dockyard. That news is welcome, but Portsmouth is holding its breath to see what happens to the second QE-class carrier. We would like to know what the future holds for that ship, because it would be fantastic if it could be used in some way rather than mothballed.
We must not underestimate the importance of this issue to the local economy. Gosport, my constituency, is on the other side of Portsmouth harbour to Portsmouth itself. Around 35% of the people who work in the Portsmouth naval base and dockyard come from my constituency: it is an area whose fortunes have been completely wrapped up in those of the Navy and that has supported the Royal Navy for hundreds and hundreds of years. Its economic fortunes have dived in line with Navy cuts. We now have a victualling yard that no longer supplies victuals to the Royal Navy, an oil fuel depot that currently does not deliver oil, a submarine escape tank with no submariners in it and a royal naval hospital—the last in the UK, which was shut down by the previous Government—with no patients. Twenty-one per cent of Gosport’s surface area is still in the hands of the Defence Infrastructure Organisation, so the land is not even being released to commercial companies that could do something with it. That is incredibly painful, because commercial companies would like to come in and do something to restore the fortunes of our great town, and are being prevented from doing so not because the DIO is saying no, but because the DIO is simply not engaging in the conversation. Will the Minister help out with that situation?
Gosport has less than half a job per working adult, and we do not have a culture of entrepreneurship, because generation after generation has been employed by the Royal Navy. The Minister will say that the Ministry of Defence is not an employment agency or in the business of creating work, but I read a small statistic recently: Cardiff university did a poll on the national competitiveness of UK towns, and Gosport is second from bottom of the English towns in that poll, having dropped a staggering 94 places in the past three years. That is how much the fortunes of our town are tied to the fortunes of the military and the Navy.
It is of course important that decisions about future naval ships are made on the basis of affordability and practicality, but we also have to bear in mind the huge debt of gratitude we owe to communities that have served the Royal Navy for hundreds of years. Those communities have built up around serving the defence industry and we must ensure that we consider them in our plans.
It is a pleasure to serve under your chairmanship, Mr Hood. I congratulate my hon. and gallant Friend the Member for Bournemouth East (Mr Ellwood) on securing the debate. As he knows, he and I have been talking about the future of the Royal Navy for the past three years, since I was elected. I am very aware of how important the Royal Navy and the Royal Marines are in my own constituency of Plymouth, Sutton and Devonport. I will be arguing a strong case for the Royal Navy during my contribution.
I should say, however, that the Government have had a difficult time. They have found themselves with enormously problematic public finances and have therefore had to make significant cuts in the delivery of public services. I am sorry that they should find themselves in that position. We should most certainly control the public expenditure envelope, but my view is that politics is about delivering priorities as well, and I believe that our chief priority should be the defence of our country.
This is an opportune time to have this debate, as the Government will not only consider the next round of the strategic defence and security review in a couple of years’ time but decide the amount of money that will be spent. As others have said, when the “Options for Change” review took place in the 1990s, about 4% or 5% of the country’s GDP was being spent on defence; that is now down to around 2%. It is important that, over the next few years, we look at the amount of money that we are investing in defence. I hope that this debate will send out that message. If the Minister would be willing to work with me, I am very willing to work with him on trying to argue our case to the Government and to the Treasury.
Representing Plymouth, Sutton and Devonport as I do, I pay tribute to the Government for deciding that they will continue to make sure that Plymouth has the licence for refuelling and refitting nuclear submarines. I recognise that the hon. Member for Moray (Angus Robertson) would prefer not to end up with nuclear submarines in Scotland. Bluntly, we are quite willing to end up with them in Plymouth if we possibly can. We would welcome it. We recognise that it is the stake in the ground, as far as Devonport is concerned. There has to be work going into Devonport. About 38% of people working in the city depend on the public sector. Another incredibly important point is that we have a low skills base. The one thing that Devonport and Plymouth have going for them is their global reputation for marine science and engineering research. The Royal Navy is a significant player in that sector, along with Plymouth university, and I hope that we can continue to build on that.
The Navy is so important because we are an island—a maritime nation that depends upon using sea routes to bring our food and imports into the country. The Ministry of Defence should have two priorities: it should make sure that we have not only a strong Royal Navy but a strong RAF as well. We must protect our sea routes and air routes so that we can get bits of kit and imports into the country. Could we imagine Christmas without oranges or the kinds of fruits that we depend upon being able to import? Looking at the events of the first and second world wars, we can see how close we came to finding ourselves starved to death by our aggressors.
Aircraft carriers are important: they provide a launch pad for aircraft to cover and dominate the air when we are landing troops—I hope, our Royal Marines—on beaches. We should not forget that. However, this matter is not simply about having aircraft carriers. Nelson, who is the great hero of the Royal Navy and, I would argue, Britain, said that we must ensure that we have plenty of ships, including frigates and other vessels that can protect our other activities on the sea. They are utterly vital, and investment in them is important.
Plymouth has the licence for refitting and refurbishing our nuclear submarines, and it is key that we retain our nuclear deterrent. I have been very supportive of ensuring that we have four submarines, so that we have a continuous sea deterrent. I would like confirmation that the Conservative party will remain committed to that and that it will not be subject to any discussions with other political parties after the general election if we unfortunately find ourselves in a coalition again. We must have a strong Navy, which will mean a strong Devonport and a strong Plymouth. I am very keen to ensure that.
The issue is not just the seaborne deterrent, but how we can use our Royal Navy to deliver soft power. We all know that, if we end up putting a ship into port, everybody is interested in knowing what is happening and what the ship is going to do. They also thoroughly enjoy the idea of occasionally having a drink on board. I assure the Chamber that we have done much work in that regard. I understand that people in Sierra Leone are still talking about a Royal Navy frigate or aircraft carrier being just over the horizon and about how, if they do not behave themselves, the Royal Navy will be turning up immediately on their beaches. Therefore, soft power is very important.
We must ensure that, in the next SDSR and in the next spending round, the Navy is recognised and has the Government’s full and utter support.
My hon. Friend the Member for Bournemouth East (Mr Ellwood) has long been an articulate commentator on Army issues; more recently he has taken up the cudgels on behalf of the Royal Navy. If I were in charge of the Royal Air Force, I would look to my laurels, because I am sure that it is next on his agenda. To give the Minister maximum time to consider my questions, I will ask them at the beginning of my contribution rather than at the end, so he will be at liberty to ignore anything I say afterwards.
First, when the main gate contracts are signed some time next year after the Scottish referendum, will a minimum of 13 frigates be ordered? Secondly, does the Minister accept that the unit cost of new frigates will be much cheaper if all 13 are ordered at the outset? Thirdly, eight of the 13 frigates will specialise in anti-submarine warfare. Was that figure derived from doctrinal consideration, and if so, what is it? My concern is that if we are to have seven frigates available for that purpose, we would need 10, not eight. I think doctrine requires at least seven to be available. Fourthly, how many of the new frigates would be necessary to escort a taskforce, whether that is an amphibious or carrier taskforce? Finally, what consideration will be given to adoption of the plug-and-play method of warship development that my hon. Friend the Member for Bournemouth East referred to, and the importance of getting hulls in the water first and then building up capacity over the lifetime of the vessel?
In the time available, I hope to speak about strategy, numbers and design concept. You have drawn the short straw, Mr Hood, in chairing this debate, because when I made my maiden speech on defence in the Queen’s Speech debate in 1997, you spoke after me, and were kind enough to predict that the House would be hearing a lot more from me on defence in the years to come. You were absolutely right, and I have been banging on about it ever since, although I had not expected to be making the same sort of repetitious points and representations to a Conservative-led Government as I did to the Labour Government during the more than six years in which I was my party’s spokesman on the Royal Navy, but there you are. Politics is a strange profession.
The distinction that I achieved cannot be overemphasised: I advanced from probationer ordinary seaman to full ordinary seaman. I was very proud to be one, because even in those days—it was from 1979 to 1982, or thereabouts—I was too old to be an officer cadet. I feel the bus pass jingling in my pocket.
Yesterday, I took the day off and had the great pleasure of travelling to Southampton university at the invitation of Commander Chris Ling, commanding officer of Thunderer Squadron, which is the defence technical undergraduate scheme at the university, and Lieutenant Amie Jackson. She—I emphasise “she”—is the commanding officer of the warship HMS Blazer, which is attached to the university’s Royal Navy unit. It was wonderful to celebrate with them the opening of their new joint headquarters at the National Oceanography Centre. Looking at the fine young people who are coming through the system and having a first-class maritime education there, I could not help wondering how many opportunities they would have, and how many naval vessels would be available for them to serve in, in the years ahead, when they go on, as so many of them do, to professional careers in the Royal Navy.
I said that I would talk a bit about strategy. I have always acknowledged on a cross-party basis that the concepts of Labour’s 1998 strategic defence review were very sound. They recognised that we were no longer facing as our primary concern the cold war threat on the continent, and that if our forces were engaged, it would be in more far-flung theatres. As we were no longer an empire and no longer had a string of bases all over the world, it would be necessary to have a portable, movable sea base that we could use to take our joint forces to the theatre in which they were engaged. That seemed sound then, and it is sound today. That concept required two sorts of taskforce: one to allow air power to be projected from the sea, hence the aircraft carriers; and the other to enable military power to be landed from the sea, hence the amphibious taskforce. Broadly speaking, we have the central elements of those taskforces.
We know that the aircraft carriers are moving steadily forward, whatever financial peaks and troughs they have had in their chequered history, and that they will come to fruition. I would like to predict that the Government will bring both carriers into service, because it would be sheer madness to build one of the largest ships that the Royal Navy has ever seen and not deploy it.
The Albion, the Bulwark, and our Bay-class ships of the Royal Fleet Auxiliary Service form the core of the amphibious taskforce, and again, it would be interesting to know—although I do not expect an answer today—what plans there are to think about the next generation of assault ships to follow the Albion and the Bulwark. However, the point about the two taskforces, and the relevance to today’s debate, is that they will have to be protected against air threats, surface threats and submarine threats. As I said before, if we need a certain number of frigates—let us say as many as four to protect a taskforce, if it were in a serious regional conflict—given the roles that the frigates will have to perform in other areas, including ongoing and standing tasks, I find myself querying how the idea that we will generate a minimum of seven available anti-submarine warfare frigates from only eight out of the 13 will work.
I shall say a brief word about numbers. I start from the standpoint that we are simply not spending enough on defence. I know all the economic arguments about that, but the fact is that as a proportion of gross domestic product, defence spending has declined too far down our list of priorities. Spending was between 4% and 5% during the cold war years. When Labour came into office in 1997, it went from 2.9% to 2.6%, then to 2.8%. Then, in successive years, it was 2.7%, 2.7% again, 2.5%, 2.5% again, and so on. That looked fairly consistent, but the problem was that during that period, we were engaged in fighting two large regional conflicts, and the Treasury was not prepared to stump up the extra money to fund those conflicts in full. As a result, we found the core military budget being eaten away by the financing of current conflicts, and since then, under the present Government, the situation has not improved. I believe that we are down to something like 2.1% of GDP at present, and I feel that that is the root of the problem.
At the time of the strategic defence review that set out those concepts, the Labour Government proposed reducing the combined number of frigates and destroyers from 35 to 32. The admirals gritted their teeth and accepted that, but it quickly emerged that 32 had actually gone down to 31, and the then Secretary of State, Geoff Hoon, formulated what I later dubbed the “Hoon excuse”, which was, “It doesn’t really matter that we have lost an extra frigate, because they are more powerful than they used to be, so 31 ships can do what 32 used to do.” That, I am afraid, was the start of a very slippery slope.
The next bite taken out of the total by the Labour Government took the number down from 31 to 25. I remember standing up in the House of Commons at the beginning of 2007 waxing eloquent about persistent rumours that the Government intended to mothball, if not permanently dispose of, another half a dozen frigates to take the total down to 19. In the end, that gradually slipped away, but a couple of Type 23 frigates were paid off, and effectively the total went down to 23 from 25. It took the Conservative-led coalition coming in before we went down to 19 in the 2010 SDSR, yet the concept set out in 1998 remained basically sound: we needed to be able to fulfil certain standing tasks, to protect a mobile base, and to escort an amphibious taskforce or an aircraft carrier taskforce. I do not see what doctrinal developments since then justify such a radical reduction in the numbers.
That leads to me to my final point, about the design concept, which my hon. and gallant Friend the Member for Bournemouth East mentioned. It is about whether it might be worth looking at the other five more general-purpose hulls that are proposed to bring the total number of frigates up to 13, and whether it might be worth considering doing something simpler to get more hulls in the water from which we can regenerate the surface fleet. Back in February 2005, in putting forward that concept, I was unwise enough to say that, really, the replacement general-purpose frigates ought to be “as cheap as chips”, which is not the sort of phrase that a proud Navy wants to hear. However, the point is based on an important development that I referred to in my opening questions—the idea of plug and play.
When the Type 45s were designed and put into service, they had a very large gymnasium. Why? Because they were designed in such a way that at a future stage in their life cycle, when we could afford it, we would be able to plug into that large space a module of land attack cruise missiles, which would hugely increase the ships’ power, even though we felt that we could not afford to do so at the beginning. It is perfectly possible to design ships that are relatively simple, but that have that capacity; I am extremely glad to see the hon. Member for Moray (Angus Robertson) nodding in agreement. We are very capable of upgrading those ships in their lifetime, and adding to their capacity. Perhaps it is too late now—I do not know—but we could at least try to keep the number of hulls a bit larger and lessen the complexity a bit; we would then have the basis for upgrading the quality of the vessels during their lifetime.
It is very much one of the examples that I have in mind. Those vessels are extremely economical, but they are out there in good numbers, and as was said by my hon. Friend the Member for Gosport (Caroline Dinenage), who had to leave, they are exportable.
I think that the Chamber has heard more than enough from me on these matters. I very much look forward to hearing the wind-ups and, in particular, answers to some of the questions I posed. If I cannot have them all just now, perhaps I can have some of them in writing.
I commend the hon. and gallant Member for Bournemouth East (Mr Ellwood) for securing the debate and for highlighting a series of pertinent issues and the questions that follow from them. I wholly support his tribute not only to those who serve in the Royal Navy, but to the communities that support them. His article for the Royal United Service Institute, “Leveraging UK Carrier Capability”, has rightly received a lot of attention. It raises some issues and points that I will come back to later.
The hon. Gentleman described the changing world in which we live and set out the argument for a strong Navy to support activity in the littoral environment. That argument was reinforced by the hon. Member for Plymouth, Sutton and Devonport (Oliver Colvile). The hon. Member for New Forest East (Dr Lewis), with his usual passion for defence issues, put a series of questions to the Minister—I hope that he will be able to answer them—but also, with his great background knowledge, set out the historical challenges faced by successive Governments.
Last week, I was privileged to be at the celebration in Devonport of the centenary of HMS Warspite. Built in and launched from Plymouth, she was the most decorated ship in the Royal Navy. There were people present who had served on her. “From Jutland Hero to Cold War Warrior” was the description given by Iain Ballantyne of Warships magazine. She was one in a long line of ships, cruisers, destroyers, frigates and aircraft carriers built in British shipyards.
Sadly, in the last few weeks, we have had the announcement that shipbuilding in Portsmouth will cease, but around the UK, at smaller shipyards such as Appledore, and on the Clyde, we have centres of excellence where there are skills that we need to protect if we are to be able to continue to build ships, with sovereign capability. We should acknowledge the expertise of all those involved, from the designers to fitters and systems engineers. They are global leaders.
Shipbuilding has historically been an industry that has times of feast and times of famine. As the Government are often the only customer for some of these vessels—that issue was raised in relation to exportability, and I will mention that—there needs to be a more clearly defined defence industrial strategy in this sector as we go forward. Therein lie some of the problems. We are demanding ships that have greater longevity and need less servicing—in the same way as we do for our cars—but we also want value for money. That does leave gaps in the maintenance drumbeat. That was highlighted by the hon. Member for Gosport (Caroline Dinenage) and will pose some problems for this Government and future Governments.
We are also looking for vessels to be designed that are slightly more generic, as the hon. Member for New Forest East pointed out, and more exportable. In a sense, it is quite difficult for us to compete in some of these markets when countries such as South Korea are very well able to do some of that. The most recent contract awarded by the Government, which was for the MARS—the military afloat reach and sustainability—project, went to South Korea; it did not go to a British shipyard.
Where do we go next? We have the Type 42 or Sheffield-class destroyers, which are now at the end of their heroic service. The Type 42 is being replaced by a stunning vessel, the Type 45. It has been designed to avoid some of the issues with its predecessors. As has been pointed out, it is top-end, gold-plated, all-singing, all-dancing and much admired by other nations, but they are unlikely to want to buy it and we are unlikely to want to sell it, I suspect, to be honest. We are also looking beyond the Type 23s to the global combat ship, the Type 26, so there are quite exciting times ahead in terms of ship design.
We are looking at a new configuration of our Navy based on fewer ships. I heard what the hon. Member for Bournemouth East said about the design and numbers of Type 26s. I will come back to that later in my speech, if I may.
Does the hon. Lady recognise that the number of ships is also important in relation to the career structures of the Royal Navy? There need to be the command postings to ensure that there is that experience. My concern is that that is perhaps being capped. We do need that experience to continue at the top echelons of the Royal Navy.
The hon. Gentleman raises a different point, which almost requires a different debate, but it is perfectly valid. It is about how people progress and how we keep that expertise and the interest of people coming in at the lower ranks—how do they go through the system? However, I will say to him that last week I was with the First Sea Lord in Plymouth when he gave a very robust defence of the Navy’s future configuration, with the QE class sitting at its centre. He was very careful, as we would expect, not to specify the number of carriers with which his successors will be working. Given that we are approaching a further SDSR, I feel that he was correct not to make assumptions. We need to understand what our defence and foreign policies need to deliver and what we want them to deliver, and clearly we also need to ensure within that that our shores are fully and properly protected.
However, the First Sea Lord was genuinely excited about the capability that the new carriers—I use the plural with some care, for reasons that I have alluded to—will bring. There is no doubt that their ability to deploy the full spectrum of diplomatic, political and military options, to stand off and deliver hard and soft power, will be a major addition to the fleet and our ability to defend our realm should we need to do so.
The global combat ship adds a further part to the picture. It will be very interesting to watch the design as it develops. It needs to be able to fulfil many roles—it needs to be flexible, to facilitate a full range of operations, to allow deployment of uninhabited or unmanned surface and subsea vessels, towed sonar arrays and inflatables, as well as to have the capacity to take something as large potentially as a Chinook and to be used with unmanned aerial vehicles doing airborne surveillance; it will give them additional range. The new ships will not just be single task-specific but must be designed with flexible capability, and that is what I understand is happening with the Type 26s.
The hon. Member for Bournemouth East was also right to highlight the benefits of modularisation. I am sure that the Minister heard his comments about additional helicopter bays in the new design. The hon. Member for Bournemouth East also suggested a downgrade in design for a proportion of the new Type 26s and was challenged by my constituency neighbour, the hon. Member for Plymouth, Sutton and Devonport, about the ability of a limited number of full-strength Type 26s, with full capability, to protect carriers if the numbers were reduced. That was a perfectly sensible question, and it will be interesting to see what the Minister says in response.
The hon. Gentleman is prescient beyond belief, because my next paragraph says that there of course needs to be a discussion about where the Type 26s are base-ported. Sadly, the hon. Member for Gosport has been called away and is not in her place. That decision needs to be taken on strategic grounds. We need to consider how we protect our skills base and we need to ensure that we do not have all our eggs in one basket. I listened with interest to the hon. Lady, who made a plea for base-porting—all base-porting in effect—to be in Portsmouth. As I have said, that, in my view, is a sentimental, not a strategic, view. We need to protect skills across all our bases. Clearly, I have a strong view about Plymouth and ensuring that we have a drumbeat that works for our work force as well.
Of course, the new vessel will be designed with stealth and unobservability in mind and will need to be acoustically quiet. It will be interesting to see whether she resembles in any way the futuristically designed Sea Shadow or USS Zumwalt. The latter has an outline that is not too dissimilar from the very early iron-clad battleships, so this is quite an exciting time in ship design. I am sure that those involved are extremely stimulated by the challenge that the Type 26 offers.
Equally, the launch of the new QE class will be a milestone in naval history. That programme has been through the wringer in terms of procurement, under the last Government and certainly under this one. We do need to know, as the hon. Member for Bournemouth East pointed out, whether there is an intention to mothball the second boat and perhaps keep HMS Ocean going for longer. What is Ocean’s future? Plymouthians will certainly have a view about that and would welcome an answer.
On procurement, we do need to do much better. I put my hands up, in terms of some of the problems that we had under the last Government, on this. We need to be clearer through the SDSR about our future needs—the type of wars we need and want to fight, as well as how those demands play into our industrial strategy and industrial base. That said, we also have to have a vehicle that can deliver our new ships on time and on budget. Two weeks ago, we saw the collapse of one of the two remaining consortiums bidding for the GoCo model for future procurement, which was bad news for the Government. It is difficult to see how the Government can continue to pursue that option when their own report stated that the competition would still be possible with two bidders, but that a further withdrawal should initiate a formal reconsideration of whether a GoCo was viable.
The Minister needs to make his mind up, and fast, ideally before the Defence Reform Bill is considered in the other place. What is it to be? Will it be new ships and weapons systems procured through a GoCo, or will it be a DE&S-plus model that oversees the delivery of the Type 26 and the successor programme?
I am grateful to have been given fractionally less than 10 minutes to wind up the debate. As a result, I will unfortunately not be able to address all the points that hon. Members have raised, because to do so would consume my entire time. I will endeavour to write to hon. Members whose questions I do not address in my response.
I congratulate my hon. Friend the Member for Bournemouth East (Mr Ellwood) on securing the debate. As has been mentioned, he has become an expert not only in land matters but increasingly in maritime affairs. Other hon. Members have already referred to his paper for RUSI, which is a masterclass on how to pursue Ministers for answers to parliamentary questions and turn them into an authoritative document. I am pleased to have been able to contribute in some way to that process.
A number of colleagues have referred to the second aircraft carrier, and I would like to start by pointing out that our surface fleet is in the process of regeneration and renewal. As the hon. Member for Plymouth, Moor View (Alison Seabeck) indicated, this is an exciting time for the Royal Navy, as we transition from a legacy fleet into a new high-tech, latest-capability fleet. Aircraft carriers will be the next vessels to form part of that fleet. It is not appropriate to indicate at this point what will happen to the second carrier, so I am unable to give an answer to that question. As my right hon. Friend the Secretary of State for Defence has indicated in the House, however, a decision is expected to be made as part of the strategic defence and security review in 2015.
It is important to emphasise that we see the carrier strike capability as offering a step change in power projection, giving the UK the ability to project decisive political intent and military will at reach. The carrier has been designed as a multi-role platform in addition to carrier strike. In its littoral manoeuvre role, it will be able to land Royal Marines or special forces, evacuate non-combatants and deliver humanitarian aid, disaster relief or international defence diplomacy and engagement. The programme is on track to deliver an operational capability for carrier strike in 2020.
On the next platform upgrade—the Type 26 global combat ship—I have to be a little cautious in what I say, because the main gate investment decision will not be taken until the end of next year. I have been pressed by colleagues to advance investment decisions before the design is fully mature, but the Government have been clear that that was one of the reasons why we believe the previous Government got into some difficulty in major platform procurements. I was grateful to hear the hon. Member for Plymouth, Moor View acknowledge for, I believe, the first time in the Chamber that the previous Administration encountered some problems with procurement. I do not intend to place us in a similar situation by pre-announcing decisions before the designs are mature. We are making good progress with the design. Some 70% of the equipment systems have been selected or are being selected by the design authority, BAE Systems, and we have increasing confidence in the maturity of the design. It is being designed with modularity in mind, and I hope to cover that point before I conclude.
I would like to tackle head-on the claim that we heard yet again today about the impact on shipyards in Scotland of a yes vote in the Scottish referendum. Last week, the Scottish Government claimed in their White Paper that they would support the procurement of defence equipment and services in an independent Scotland, as we heard again today, claiming that to do so would protect the future of Scotland’s shipyards. However, the White Paper completely failed to acknowledge that, as part of the UK, companies in Scotland already benefit greatly from the billions of pounds of work that is placed with them to equip and support the UK armed forces. Thousands of people are employed in the defence sector in Scotland. The defence industry offers some of the best high-tech engineering jobs and opportunities in Scotland, and it contributes substantially to local economies across Scotland.
Orders for complex warships such as destroyers and the Queen Elizabeth-class aircraft carriers, on which some 4,000 people are currently employed in Scottish yards, were won only on the basis that the UK can choose to place or hold competition for such contracts domestically for national security reasons under an exemption from EU law. The UK has not placed an order for a complex warship outside its own borders in modern times. If Scotland were not part of the UK, it would not benefit from that national security exemption. The question of how defence jobs in Scotland would be sustained in an independent Scottish state remains wholly unanswered. The thousands of skilled defence jobs in Scotland are safer and more secure if the country remains part of the UK.
I will try to address the questions raised by my hon. Friend the Member for Bournemouth East, who made a thoughtful speech. He asked about modularity of systems and whether we can construct vessels that are capable of plug and play. A number of weapon systems and command systems that we seek to introduce in our vessels will be portable. Perhaps the most obvious recent example is the Sea Ceptor air defence missile, which we have recently contracted to introduce to the Type 23, with a view to transitioning it to the Type 26. As he mentioned, the system has many features in common with a version that is capable of being launched on land. That is the approach that we are taking to a number of defence assets. We are rationalising our helicopter fleets to allow greater interoperability between services. The Wildcat, which will be capable of being carried on our frigates and destroyers, will also be used by the Army Air Corps. Modularity and interoperability are features of the systems that we seek to introduce.
The flexibility of the Type 26 is provided by the mission bay, which is a much larger hangar space than that of the Type 23. It can carry a payload of 10 20-foot containers, a medical centre or a command and control centre. It can contain four landing craft for rapid response by Royal Marines. The vessel has been designed to have a smaller crew than that of the Type 23, but it can accommodate some 100 Royal Marines or other personnel for protracted engagements, or a much larger number of individuals for a short time, when the vessel performs an evacuation role. It will be the most flexible vessel of its kind and the most modern frigate design available in the world, so we believe that it will have some export potential—a point made by several hon. Members.
In the less than half a minute remaining to me, I will unfortunately not be able to address many of the questions that have been asked, but I would like to deal with numbers and commissioning. My hon. Friend the Member for New Forest East (Dr Lewis) gave me due notice of his questions. We intend to place an order towards the end of next year, once the design is mature, which we expect to be for eight vessels initially—
Mayfields New Town
It is a great pleasure to serve under your chairmanship, Mr Hood. With your permission and the agreement of the Minister, I propose allocating a few minutes of my time to my right hon. Friend the Member for Arundel and South Downs (Nick Herbert). I called for the debate to raise an issue of the greatest concern to our constituents—namely, the proposal by Mayfield Market Towns Ltd to build up to 10,000 houses on open countryside between Henfield and Sayers Common in West Sussex. That new town would stretch across the border of Horsham and Mid Sussex district councils and our constituencies and is thus of profound concern to us both. The proposal is totally and wholly inappropriate and is causing the greatest possible local concern and anxiety.
I want to say at the outset that my right hon. Friend and I acknowledge of course the need for new houses. We accept that they are required to meet the demands of a growing population and to meet the worthy aspirations of our young people to live in their own houses. It is our strong view that schemes such as the Mayfields project are not helping to achieve that aim, but are seriously hindering it, and in the process, gravely undermining support for the Government’s flagship commitment to localism.
Why is Mayfields such a thoroughly bad scheme? Its proponents call the putative new settlement a “market town”. That is arrant nonsense, since there would be minimal local employment. It would, as the excellent Sussex branch of the Campaign to Protect Rural England observed, be a commuter town, since almost all its residents would in fact travel to other areas for work. The glossy brochure produced by Mayfield Market Towns absurdly suggests that its new residents would, “work where they live”, or walk, cycle or take the bus to their employment, “leaving the car at home”. Even the most zealous supporter of the scheme—there are not many—would be hard pressed to describe it as sustainable. Apart from the destruction of beautiful countryside and good, valuable, productive agricultural land, the development is not on a railway line, nor is it close to a major road, and there are already serious flood issues in the area. With 25,000 people living in the new town, there would clearly be huge pressure on already inadequate local infrastructure.
Those are just some of the reasons why Mid Sussex and Horsham district councils previously rejected the idea of a new town in the area in a report in 2010. That report concluded:
“Drawing on the lessons from earlier development of new towns, it is clear that a development of 10,000 homes will not create a self-sufficient community.”
My right hon. Friend the Secretary of State for Communities and Local Government has said that he will not impose new towns on unwilling councils. I agree with him; that is entirely the right approach. It is strongly supported by my right hon. Friend the Member for Arundel and South Downs and me, and it is wholly consistent with the Localism Act 2011 and the national planning policy framework. It is my firm hope and expectation therefore that the Minister will agree that no proposal that has been rejected by the local council and is opposed by the overwhelming majority of local residents should be permitted to overturn local plans under any circumstances.
I want to make it clear beyond any doubt that our district councils are planning responsibly for new housing. Mid Sussex district council—the authority that covers my constituency and two wards in that of my right hon. Friend—has produced an excellent and formidably argued draft plan. That plan explicitly rejects large-scale developments, such as Mayfields. It sets a clearly thought-out and substantiated housing target of 10,600 homes between 2011 and 2031. It states that, outside the strategic sites identified—the Mayfields site is not among them—
“the homes to be provided elsewhere in the District will come forward through Neighbourhood Plans.”
Furthermore, it calls for development which,
“reflects the distinctive towns and villages, retains their separate identity and character and prevents coalescence.”
And so say all of us, with a resounding cheer.
Mid Sussex is anything but a nimby council trying to avoid housing growth. Indeed, the Mid Sussex plan aims to deliver more housing than the objectively assessed need, making it unique in West Sussex. The objectively assessed need is for 411 homes per annum, and the plan aims to deliver 530 homes. During the first five years of the plan, 3,000 new homes will be built in Burgess Hill alone. They are ready-to-go projects. The consortium of developers is waiting only for the sites to be allocated before submitting a planning application.
I warmly commend the tremendous efforts of Mid Sussex to get these fiendishly difficult matters right. Its plan is wisely proactive about planning for growth, with a 3% year-on-year increase in economic activity envisaged throughout the plan period. It includes significant new employment space, including a new science park, which is part of the Brighton city deal bid. Let us remember that is all in an area between the South Downs national park and the High Weald area of outstanding natural beauty, which gravely limits the council’s room for manoeuvre. All that good and laudable work is in danger of being wrecked by the grotesque and wholly unwanted Mayfields proposal.
The developer has attempted to threaten the district council into compliance with the scheme. When that failed, it has continued to place obstacles in the way of the plan’s passage. That is all thoroughly unhelpful and disruptive, because the longer the plan is delayed, the longer Mid Sussex will remain susceptible to speculative development and planning by appeal, serving the interests of developers only and not our local communities. The proposed new town is undermining localism, certainly delaying necessary new housing and causing the greatest possible anxiety and concern among local people. An admirable and energetic group—Locals Against Mayfield Building Sprawl—is rallying support locally and putting the case against the deeply unsuitable plan in formidable and accurate detail.
I want to tell my hon. Friend the Minister that neither I nor my right hon. Friend the Member for Arundel and South Downs will accept the new town, and we will be deeply and abidingly unhappy if the Government’s planning reforms, which we loyally supported and which were meant to promote the principle of sustainable development and localism, allow such an appalling development to happen. We cannot allow the localism that we promised, which local people supported, to be overturned at the behest of developers. There will be lasting damage, not just to the countryside, but to the Government. Our constituents expect us to honour our party’s words and commitments; we intend to see that we do.
It is a pleasure, Mr Hood, to join the debate secured by my right hon. Friend the Member for Mid Sussex (Nicholas Soames). As he explained, we have a mutual interest in the proposed new town, which crosses our two constituencies. I endorse every word that he said and share his deep concern about the proposal. I shall amplify a number of the points that he made.
First, there is considerable local concern about the proposal. I have attended packed meetings in village halls in my constituency. People have been unable to get into meetings, because there is so much concern about the proposed new town. I have never known anything like it. That concern is having a practical effect on people’s economic well-being, because a planning blight is already being cast over the local area. Numerous constituents have written to me to express their concern about, for instance, their ability to sell their houses at the normal market rate due to the belief that a new town is threatened.
Secondly, I underline what my right hon. Friend said about the importance of sustainability, which is, after all, written into the Government’s new planning policy. The principle was sustainable development, not development at any price. The new planning policy framework clearly set out three dimensions to that sustainability: environmental, social and economic.
It is therefore highly significant that a report commissioned earlier by Horsham, Crawley and Mid Sussex councils, as my right hon. Friend said, ruled out a new town in the area precisely on the grounds that it would not be sustainable, for all the reasons set out. It seems to me that the report is significant for an additional reason: it shows that the local authorities considered a development in the area. They are not ruling out the notion of new housing out of hand, but they consider that it is not appropriate or sustainable. Whose view will carry the day when we promise localism in such matters? I will return to that issue.
The third issue is the behaviour of the developer in promoting the scheme. Mayfield Market Towns has not just set out a proposal for a new town; it has gone much further. For instance, it has distributed 8,000 leaflets in the constituency of my right hon. Friend the Member for Horsham (Mr Maude), north of Horsham, telling people that they need not have development in that area because they can have a new town outside their area instead. The developers are setting out to undermine the normal local planning process and interfere with the sensitive consultations that local authorities are holding with our electorate. That is entirely reprehensible behaviour; it is deeply unhelpful to the development of new plans; and it should be roundly condemned.
My hon. Friend the Minister knows that my right hon. Friend the Member for Mid Sussex and I expressed concern previously, in a letter to the Secretary of State for Communities and Local Government on 24 June, about the position of one of the directors of Mayfield Market Towns, Lord Taylor of Goss Moor. Lord Taylor—though I emphasise that he has properly declared the interest—is one of the Government’s advisers on planning and has been drawing up the very guidance on the national policy planning framework on which local authorities are being asked to rely, as they consider their local plans. How can one of the directors of a developer that is actively seeking to subvert localism and produce a new town in a local area also advise the Government on how localism will work? That is clearly a conflict of interest. It is deeply resented by local people, and it is damaging to the perception of the Government’s independence in such matters. We do not believe that it can stand.
Fourthly, I turn to the core principle of localism that underlies the Government’s planning reforms and on the basis of which many of us supported those reforms. It is interesting to note, for instance, that in the Telegraph, which today reported the prize that Lord Wolfson is offering for the most interesting idea for new towns, his new adviser recently confirmed that Lord Wolfson
“is committed to the idea that if the locals don’t want it, it should not happen. So it is not top down.”
As my right hon. Friend said, that is the Government’s stated position through the Secretary of State for Communities and Local Government, who has made it clear that proposals for new towns must have local consent. Mayfields does not have local consent either from the community or from the district councils concerned, which have explicitly ruled it out.
The Prime Minister said last January:
“I care deeply about our countryside and environment. Our vision is one where we give communities much more say, much more control. The fear people have in villages is the great big housing estate being plonked down from above. Our reforms will make it easier for communities to say, ‘We are not going to have a big plonking housing estate landing next to the village, but we would like 10, 20, 30 extra houses and we would like them built in this way, to be built for local people’.”
I strongly support what the Prime Minister said more than a year ago about how local people feel when a plonking development, to use his words, is proposed in their area, and I supported the promise that they should not have to have it and would be given greater control. The local communities in both my constituency and that of my right hon. Friend the Member for Mid Sussex are planning responsibly for new housing at both the district and the neighbourhood level, but the new town and the way that localism is being subverted are undermining their responsible plans, causing people to lose faith in the very localism that we promised.
I remind the Minister that the 2010 Conservative manifesto said:
“We will put neighbourhoods in charge of planning the way their communities develop… To give communities greater control over planning, we will abolish the power of planning inspectors to rewrite local plans”.
Yesterday, the planning inspector delayed Mid Sussex council’s plan—that will damage the local environment and delay much-needed new housing in the area under the plan—because the council apparently failed in its duty to co-operate, according to an over-elaborate interpretation of that duty not stated in the original national policy planning framework. That will only hinder the process of localism that we promised.
I reinforce the words of my right hon. Friend the Member for Mid Sussex. This is not just a question of two local Members of Parliament being concerned about a proposed development; we have been at pains to point out that we support local plans that envisage a great deal of additional housing. This is much more. For us, it is a test of faith in the Government’s flagship policy of localism, which we loyally supported. The Minister knows that Conservative Members feel increasing concern about how the policy is being interpreted, whether through the behaviour of the Planning Inspectorate and the instructions that it appears to have been given or through the drive to raise housing numbers against the spirit of the local control that we promised.
This developer cannot be allowed to abuse the reforms of localism that were passed by the House and promised in our manifesto and the coalition agreement and in which local people put their trust when we made those pledges. We cannot stand before them and defend a policy unless that policy is true to what we said: that local people will have control, that responsible local authorities should be free to take their own decisions and that we would not allow a top-down planning process that has done so much damage to support for development in the past.
I am pleased to serve under your chairmanship, Mr Hood. I welcome the fact that my right hon. Friend the Member for Mid Sussex (Nicholas Soames) has secured this debate on the important issue of housing development. The backdrop to this debate is the proposed Mayfields new town development, which I know is of great importance to him and my right hon. Friend the Member for Arundel and South Downs (Nick Herbert).
My right hon. Friend the Member for Mid Sussex will be aware that policy responsibility for planning lies with the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Grantham and Stamford (Nick Boles), who unfortunately could not be with us today. I am absolutely delighted to respond on the Government’s behalf on this issue. I wish to make it clear that my ministerial role means that I am not able to comment on the specific issues about the Mayfields new town proposal. However, I recognise that my right hon. Friends the Members for Mid Sussex, and for Arundel and South Downs are very much local champions, giving a local voice to those people who are very concerned about the proposal. I am absolutely sure that they will insist that the correct process is undertaken regarding the receipt of any application, and that they will ensure that a local plan is developed and is appropriate. I am also absolutely sure that they will be robust in any challenge they make to Government if they feel that Government action is inappropriate.
However, I want to reassure my right hon. Friends that power lies with local government, through local plans, and that it is up to local communities to shape the response to their housing needs—the two points that they have both made. To provide that reassurance, I want to start by reiterating some of the key aspects of national planning policy. A core principle in the national planning policy framework is that planning should
“proactively drive and support sustainable economic development to deliver the homes, business and industrial units, infrastructure and thriving local places that the country needs.”
The framework also sets out that local planning authorities should prepare a strategic housing market assessment of their full housing needs, working with neighbouring authorities where housing market areas cross administrative boundaries. The SHMA should identify the scale and mix of housing, and the range of tenures, that the local population is likely to need over the plan period. Authorities should use their local plan process to set out how they will meet that need, and they should identify a five-year supply of specific deliverable sites to provide for that need, with a buffer to ensure choice and competition. Where they have not done so, a presumption in favour of sustainable development will apply, as my right hon. Friend the Member for Mid Sussex said. The NPPF is clear that authorities should plan to meet their needs.
Despite the concerns raised today, as both my right hon. Friends have said and as I have heard myself, there is widespread support across the country for more housing to meet the needs of local communities. However, my right hon. Friends will recognise, as I do, that when a development is potentially to be located on a greenfield site or in the green belt there is often an outcry from communities. That is understandable, and I do not want to see any more green fields being used than is necessary. Indeed, the NPPF maintains strong protections for the green belt, areas of outstanding natural beauty and other environmental designations. It also allows councils to introduce a new local green space designation to provide additional planning protection for green areas that are demonstrably special to a local community and that hold a particular local significance. Also, the framework continues to encourage the reuse of brownfield sites.
Most importantly, however, the changes that we have made to the planning system put local plans at the heart of the system. Unlike the previous Government’s approach of having top-down regional strategies, which imposed housing numbers and forced green-belt reviews on communities, local authorities should now be assessing their own need and working with their communities to decide how and where to put the homes to meet that need.
Not every community can meet its needs. That is why local authorities should work together constructively, actively and on an ongoing basis to maximise the effectiveness of their local plans, in line with the duty to co-operate that was introduced by the Localism Act 2011. Good plans are now being made across the country. When this Government came to power, only 33% of local authorities had published a plan; now, more than 76% of them have published one.
I am following very carefully what my hon. Friend the Minister is saying. However, does he agree that it is extremely important that plans entered into and work done in good faith by district councils are not altered in any way as a result of the Government moving the goalposts during the process?
I recognise that concern, but I do not see any change in those goalposts; they are not moving. I know that the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Grantham and Stamford, who is not here today, is absolutely committed to supporting local communities in the development of their local plan to shape their community.
Neighbourhood plans are at the centre of this new system. Whereas regional strategies and central targets built nothing but resentment, setting people against development that was imposed on them, communities have firmly grasped the opportunity to engage with neighbourhood plans. I know that that is true in Mid Sussex, which is a hotbed of neighbourhood plan activity; local people there are taking control of shaping their community.
I will touch on large-scale housing development. The Government have recognised that there is a need for new homes, and sometimes that need can be met through planning for larger-scale developments, such as new settlements or extensions to existing villages or towns, following the principles of the garden cities. The previous Government also liked the idea of large-scale development, but there is a contrast between their approach and ours. Their top-down eco-towns programme was an expensive failure, plagued, I have to say, by community opposition to bureaucrats in Whitehall who drew lines on maps. That top-down approach is very different from our approach.
Our focus is on supporting the development of long-term new communities that local authorities and local communities want, helping to ensure that key infrastructure and community facilities are built alongside new homes, and not later, as an afterthought. We are doing that by supporting local authorities and development partners to bring forward a pipeline of ambitious new communities through brokerage, capacity and capital investment. So far, we have invested some £80 million for 69,000 new homes, including those in a scheme in Cranbrook in Devon, where our investment is supporting the development of a new sustainable community of 6,000 new homes. We hope that a further 14 sites across the country will eventually deliver some 38,000 homes. Importantly, local communities are driving this process, which is not about the Government adopting a top-down approach, but about local communities making choices about where these large-scale developments should be.
To conclude, the planning system is changing for the better. It asks communities to meet their need for housing—I recognise that both my right hon. Friends have expressed their commitment to new housing and have spoken of their areas’ need for it—while maintaining strong protections for the environment. It asks communities to do so through local and neighbourhood plans, which allow them to decide where development should take place. Where authorities have failed to plan, the presumption in favour of sustainable development will apply. While we continue to support the principle of large-scale developments as a way of meeting the overwhelming housing need that we face, Government funding and expert advice is clearly predicated on local community support. As I have said, I am sure that the enthusiasm, engagement and leadership of my right hon. Friends will help to shape community opinion in the areas that they represent. I thank them for their questions.
Local Authority Funding
[Mr Gary Streeter in the Chair]
Mr Streeter, it is a great pleasure to serve under your chairmanship for the first time, particularly in this most important debate, which I was delighted to secure.
Local government finance holdbacks may not, on the face of it, be the most exciting subject to be debated in the House, but the issue is central to the daily experience of so many of our constituents. Indeed, for my constituents in Newcastle upon Tyne Central, this is probably the most important debate that I have secured. It goes to the heart of the delivery of public services—services that are delivered mainly, and increasingly, by local councils—and ultimately affects how many potholes are filled, how many homes are built and how well our buses are run.
I have come here not to ask the Minister for more money, although if he has found some that would be great, but to examine how we might best use what we have and how we can ensure that fairness, which is so ingrained in British values and culture, is at the centre. I hope that he will engage with the debate constructively and that he will not use the autumn statement and the upcoming settlement announcement to hide from what I am sure he knows are the serious concerns of councils throughout the country, of all political persuasions.
We can agree, at the outset, that we all want a system of local government financing that is fair, transparent and allows councils to plan ahead, as far as possible. Although I will speak mainly about the impact on Newcastle, the issues we face there are the same as those faced by many councils across England, particularly, but by no means exclusively, in urban areas.
Shortly after the election, the Prime Minister said,
“This government will not cut this deficit in a way that hurts those we most need to help, that divides the country, or that undermines the spirit and ethos of our public services”.
I was so pleased to secure this debate, because that is exactly what the current local government finance proposals will do. We in this country pride ourselves on a sense of fair play. Fairness is, these days, the political centre ground and everyone wishes to position themselves on it. This Government are finding that if a policy, such as letting energy companies hike up energy prices in the midst of a cost of living scandal, is seen as unfair, you lose—except, perhaps, if that policy is wrapped up in enough accounting doublespeak and councils are blamed for not implementing what the Association of North East Councils has called “impossible cuts”. It seems that, if that is done, one can get away with it. ANEC says that, since 2011, councils have seen a one third reduction in funding—a staggering amount—and estimates that by 2017 funding will have been cut by 50% in real terms.
I emphasise that this debate is about not the overall spending level—I know that the Minister does not decide that—but how we distribute what we have. Analysis of the Government’s proposals for the next local government finance settlement by the special interest group of municipal authorities, which is a group of urban councils within the Local Government Association, found that municipal authorities
“started off from a position of disadvantage; have borne a disproportionate burden of cuts under the Spending Review; and carry the greatest risk of the highest cuts in the future.”
The insidious nature of this Government’s top-slicing and holdbacks in particular will have an impact on services for people struggling through the cost of living crisis in Newcastle and similar towns and cities.
Councils must be in a viable financial position if they are to fulfil the statutory burden that Whitehall places on them. On top of that, we expect them to be—indeed, we insist that they should be—active partners in driving forward economic growth, yet the north-east has endured the biggest cuts, with higher reductions in spending power than the national average. In the spending review, we were told to expect 10% cuts in core funding, yet the north-east is now looking at a real-terms cut of 25% when social care costs are included. That is putting public services under severe strain.
At the beginning of the year, the Department for Communities and Local Government estimated that next year Newcastle would see a cut per dwelling of £126, compared with an average cut in England of £75 and a cut in Wokingham, for example, of £19. It later emerged that those figures for Newcastle were significantly understated. At a time when demand for services in the north-east is increasing, why does the Minister think that targeting areas with higher levels of deprivation to make savings is the fairest way to implement these cuts? Will that not hurt
“those we most need to help”,
to use the Prime Minister’s words? I urge the Minister to respond to that question in particular and I am sure that he will.
Has the Minister considered allocating cuts to councils by an equal percentage, based on spending power? Would that not be fairer? If not, why not? By what process did he decide that his current proposals are fairer and will not disproportionately hit the most deprived? I ask him to publish any evidence that is to the contrary of the Audit Commission’s report, among others, which sets out how deprived areas will suffer more than wealthier ones and to which Sir Merrick Cockrell, the Conservative leader of Kensington and Chelsea council and chairman of the LGA, responded:
“The report highlights a significant variation in the impact of the cuts at a local level, with a number of places taking a disproportionately heavy hit. It provides yet more evidence that the existing system of funding is too exposed to the vagaries of national politics and incapable of delivering the long term certainty that local areas need to deliver consistently excellent services.”
My hon. Friend is making a powerful speech. Does she agree that, in addition to the cut in revenue support grant for Newcastle upon Tyne Central, there has been a disproportionate cut in the revenue support grant for Oldham, a metropolitan area with two Members of Parliament? In fact, in 2014-16, that will have decreased by £36.8 million, which will, unfortunately, not be recouped by the new homes bonus, for example, which has raised just £700,000. I support her argument. Does not that cut put dreadful pressure on the council, which provides services such as social care, and does it not impact on constituents?
I had the pleasure of visiting Oldham not long ago, and my hon. Friend is absolutely right to highlight the disproportionate cuts that Oldham is suffering under this funding approach. I will speak about the new homes bonus shortly. The Government claim to be giving money to councils such as Oldham and Newcastle, but they are in fact taking away far more than they are giving.
The Audit Commission estimates that one third of councils, many of which are in the most deprived areas, are at risk of financial failure in the medium term under current proposals. An equal percentage cut based on spending power would bring significant benefits to many of those deprived areas across the country, not only in Newcastle and London but in the north-west and the shire counties and districts.
Children’s social care is an area of particular concern as we see growing need and reduced funding. In Newcastle and the north-east, there are real and growing concerns about the pressures on children’s services. Indeed, I recently looked at a website containing anonymous reports from social workers working in children’s services, and it was a frightening insight into the pressures that they face.
The number of looked-after children is growing at 11% nationally, with higher pressures in the north-east. Councils have seen a 4% cash increase in costs, but DCLG and the Department for Education have cut children’s social care funding by 30%. Children’s social care assessment was cut by 30% between 2010 and 2013-14, which is about four times the assumed cut, while the number of looked-after children has increased by 31% in the north-east since 2009. Budgeted spending on children’s social care rose by 4% nationally, but by just 1% in the north-east.
When ANEC raised concerns, the response by Ministers at the Department for Education was that councils would have to find the cuts “somewhere else.” It is difficult to see how a further 25% cut in core funding in the north-east can in any way be justified. How can it be taken out of children’s services over the next two years? Will the Minister explain why spending on children’s social care has been cut so much when the levels of need are increasing?
Ministers like to come up with complex formulas for giving money to councils that tend to benefit wealthier authorities, but when it comes to cutting money, Ministers are increasingly turning to crude holdbacks and top-slicing from the central revenue budget. It is possible that not everyone here is familiar with holdbacks. Indeed, I confess that, prior to entering Parliament, I did not follow the intricacies of local government financing with as much attention as I possibly should have. I dread to think how much excitement I have missed as a result.
A holdback is when Ministers or civil servants decide that money allocated to councils will literally be held back by Whitehall for a specific purpose or on a certain condition, which, again, disproportionally affects the most deprived councils. Money is being cut from the central pot, the revenue support grant, which automatically means that councils with the highest need lose out the most. If the Minister decides that he wants to hold back £500 million, for example, it comes from the central budget, which means that all councils lose a slice. The councils that would have received a bigger slice, because they have greater need, lose out more. A holdback of £500 million would mean that Newcastle loses £4 million, whereas Wokingham loses only £400,000. That is a £32 cut per household in Newcastle and a £6 cut per household in Wokingham. Authorities such as Hackney and Birmingham are even worse off, at £50 and £37 per household respectively. All authorities would then get some money back, but if the funding is skewed to favour wealthy authorities, as it so often is under this Government, the effect is a budget transfer from poor to rich, which is Robin Hood, disguised as a Whitehall accountant, in reverse. That is not a pleasant sight.
Parliament has decided that the money should be used to fund councils for services that they have a legal duty to provide. SIGOMA, ANEC, the Audit Commission and the Joseph Rowntree Foundation have all highlighted the problem, so will the Minister explain whether he agrees with their analysis? With what does he disagree? Why are the Government increasingly using holdbacks to fund projects?
This week, we have been reading in the papers that on Thursday the Chancellor plans to cap business rate rises. With small business Saturday this weekend, it would surely have been more appropriate and beneficial to local economies if he had stolen another Labour policy by cutting and then freezing business rates. The Chancellor should not feel shy.
When councils were told that business rate takings were to be localised, thereby shifting the risk on to the councils, I do not think they expected that any potential reward would be offset by equal cuts to their revenue funding. The business rate safety net is yet another example of how unfair holdbacks can be for poorer areas. Will the Minister tell us whether the business rate safety net is flawed? Was it designed on purpose so that councils such as Newcastle end up funding shortfalls in business rate takings in Westminster by a staggering amount?
The safety net—again, this a technical description of a complex area—provides funding for any council for which business rate receipts fall more than 7.5% below its baseline funding level. The safety net is funded by a levy on councils for which the increase in revenue from business rates outstrips the increase in its funding level and holdbacks.
A holdback of £25 million was originally created to fund the difference between levy funds and safety net payments so that all authorities would fund the safety net. The history is quite complex, but what is crucial is that, because the estimated levy amount has proved inadequate, the top-slice holdback has been increased to £120 million next year. That is a staggering increase, and SIGOMA says that, because of the system’s design, Westminster city council will claim more than two thirds of the national £79 million safety net pot next year. That is two thirds for one of the richest councils in the country. Again, funding is disproportionately going from poorer areas to richer areas.
I congratulate my hon. Friend on securing this important debate. I am sorry that I cannot stay until the end.
Anticipating what might come on Thursday, and assuming the Chancellor is minded to go some way towards assisting small businesses by freezing business rate increases next year, does my hon. Friend agree that it is essential that the Chancellor makes it transparent that any costs should be borne by the Exchequer, not by local authorities? Given the sleight of hand that she has just described, we want that spelled out in crystal clear terms to assure us that it is being done.
My hon. Friend makes an excellent point, as always, and he is absolutely right. I have lost count of the number of occasions that I have heard Ministers announce funding for my local authority—I will give the example of the new homes bonus in a minute—that is actually a cut in funding more generally. If the autumn statement on Thursday is used to announce any further support for business rates or for local authorities, I am sure that the Chancellor will set out transparently exactly where the funding will come from. If he does not, I am sure that parliamentary questions will follow.
I could consider the approach to be an error, mistake or one-off, but several holdbacks have had a similar effect, and the new homes bonus is one of the most important. Money is top-sliced from the revenue budget—everyone’s budget—but then finds it way predominantly to the wealthier parts of the country. I always thought that a bonus was something extra on top of a payment.
Exactly. I thought that that was inherent in the term. Ministers in this Government, however, fund their bonuses not only from existing money, but from existing money that some might argue is not theirs.
The new homes bonus increases cumulatively for six years and is estimated to peak at some £2 billion. The increases are funded by deducting the increase from the revenue support grant, so it favours authorities in wealthier parts of the country, owing to their higher house prices and relatively low reduction in needs-based funding. Although Newcastle loses £5.3 million through top-slicing to fund the new homes bonus, it is given back only £2.2 million. The Minister gets to put out a press release saying that he is generously rewarding the council with £2.2 million, but nobody notices the reality that Newcastle has actually lost out by £3 million. Wiltshire, for example, will have seen a net gain of over £4 million. At the same time, my surgeries and mailbox are testament to the fact that the lack of affordable housing is a critical issue for my constituents.
The new homes bonus is unfair and does not work, which has been confirmed by the National Audit Office and the Public Accounts Committee. Does the Minister intend to press ahead with it? Newcastle city council and the Association of North East Councils have called for it to be frozen at 2013-14 levels. What is the Minister’s view? It would allow him to return some of the planned holdbacks to core funding and to relieve some of the pressures that Newcastle and other councils are facing.
My hon. Friend is making a good point about the new homes bonus, which is one of the original and probably largest holdbacks, and she is right to draw attention to the Public Accounts Committee report. As she says, the key is in the title—new homes bonus. It is not a bonus, and the Public Accounts Committee decided that there was no evidence that it had led to the building of any new homes.
My hon. Friend makes an excellent point. I was in the Chamber when it was revealed that the new homes bonus’s purpose was not to build new homes, which reveals a subtlety of language that I confess is beyond me. It is clearly of concern, and I am sure that the Minister will explain not only what the bonus is achieving, but how we can ensure that it is more fairly distributed, so that Newcastle and other authorities are not disadvantaged.
Will the Minister also explain why the figure in the settlement paper for 2015-16 is £210 million higher than that quoted in the new homes bonus consultation, which was based on an estimate from the National Audit Office? Would he consider using the National Audit Office figure? The Local Government Association estimates that £210 million would cover the cost of filling 4 million potholes or 30% of the country’s street-cleaning bill for a year. It would be good to know what has happened to and what is being done with that money.
Finally, I want to discuss the stability and transparency implications of the Government’s use of holdbacks. It is essential that councils get consistent figures when planning budgets. Newcastle city council has identified several other holdbacks, amounting to over £550 million next year and a massive £1.5 billion the year after, that would be better either returned to core funding or funded through other means. The holdbacks include capitalisation, the collaboration and efficiency fund, the fire transformation fund, the independent living fund, the troubled families fund and the money for the new social care burdens. I would welcome the opportunity to discuss them in more detail with the Minister if he feels that he does not have the time to speak to each today.
I congratulate my hon. Friend on securing the debate and on her speech. We are really getting to the nub of the issue. Although we have been discussing cuts to council funding, it is ultimately about the cuts to services and the impact on our constituents’ lives. The independent living fund and the social care issues, with a particular focus on children, are affected, but so are adult carers. People’s lives are being detrimentally affected, but it does not seem a priority for the Government.
My hon. Friend is absolutely right. I pay tribute to her for the passion that she brings to the subject.
As I said at the beginning, the subject appears dry, but my post box and surgeries reveal the daily impact of cuts to the funding of services and the progressive and cumulative impact on the lives of often vulnerable people, who find not only an impact on housing and social care, but that their streets are not as clean, that their environment is more depressing and that schools do not have the same resources. That impact is partly a consequence of holdbacks. These dry financial mechanisms are holding back the services that my constituents and so many others need. We need to focus on that. It is important that the Minister identifies and explains why this is happening and what he can do to stop the impacts that we are talking about.
I have one overarching point for the Minister. The mechanism is regressive and effectively moves money to better-off areas, but it is also opaque and severely limits councils’ ability to plan in advance. Will he work to ensure that future rounds of local government finance settlements are conducted more transparently? Ministers have found ways to give varying protection to some more visible services, but that increases the pressure on other funds. When the Minister chooses to protect London transport funding by 6%, money for children’s social care and libraries is squeezed in Newcastle.
I want to bring the Minister back to the Prime Minister’s quote about tackling the deficit:
“This Government will not cut this deficit in a way that hurts those we most need to help, that divides the country, or that undermines the spirit and ethos of our public services”.
Does the Minister think that the Government’s approach to local government finance has been fair and in the interests of councils’ ability to plan for the long term?
I urge the Minister to listen to councils throughout the country, to find an alternative way to reduce the additional cuts by reducing council holdbacks and top-slices. That will help all councils to prevent further unnecessary service cuts and job losses. It will also help them to stabilise their finances, at a time when one third of them face serious financial failure in the medium term.
Two weeks ago, I visited St Paul’s Church of England primary school in my constituency and was given an excellent tour by the head, Mrs Judith Sword. I also held a question-and-answer session with the year 6 pupils. One of them asked me why the council did not spend its money better, so that the libraries could stay open. I explained that the council was losing a third of its budget, or more than £100 million—at that figure, there was big “Oh!” of shock in the room—but that it had consulted more than 50,000 residents to decide the fairest way to implement the cuts. I did not add, because I did not want to over-complicate my answer, that there was not really any such thing as the council’s money any more, because so much of it was being held back by the Government and redirected to other purposes, so that the council could not plan. I hope that the Minister understands how unfair that is to the children and adults of Newcastle and, indeed, to all the children and adults in our constituencies throughout the country.
It is again a pleasure to make a contribution to a debate under your chairmanship, Mr Streeter.
I congratulate my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) on her choice of topic. In the overall context of the Department’s budget, the sum of money involved is relatively small, and the subject that we are discussing may seem rather technical, but as she has pointed out, the devil is in the detail. Furthermore, at the heart of what we ought to be considering is fairness. I have had the honour and privilege of representing the great city of Newcastle upon Tyne for 30 years in this place, and I have to say to the Minister that what the Government are doing to inner-city local authorities such as Newcastle—although we are not unique—is simply not fair.
At the heart of the argument is the fact that the statutory burdens on the authorities—in particular, people have to be cared for, whether the elderly, those in social care or in need of even more intensive care, or children taken into care—are driven by factors over which the local authority has no control. The separation of the need from the money, which is what in essence the Government are doing, is a wicked thing. What ought to be the case is that a child who needs to be cared for in Newcastle should be cared for with exactly the same energy, enthusiasm and compassion as a child anywhere else in the United Kingdom. The money should follow the need. That is not the Government’s direction of travel. What they are doing is fundamentally wrong—their broader journey is wrong, and what we are discussing today is a small signpost on the wrong way.
The Government’s new mechanism for funding local authorities, the business rate retention scheme, makes provision for a safety net, which is used to top up the funds of those authorities that have encountered a reduction of more than 7.5% in business rate income. It is funded, rather illogically, by a levy on those authorities that see an increase in their business rate income beyond a set threshold. Personally, I do not agree with any of that—a minority view, I know—and I will explain why later. For now, I will focus on the seemingly technical subject of today’s debate.
The Department for Communities and Local Government put aside £25 million to fund the safety net for the current 2013-14 financial year, but the Government have now revealed that this is not enough and that they are seeking to increase it by an additional £95 million, making a total of £120 million, which is a substantially larger sum. The Government propose, in effect, to top-slice or hold back that money from the 2014-15 local government finance allocation, even though councils have begun to draw up their budgets for 2014-15, with some already out to consultation.
If we consider the practicalities of consulting on a budget that is being squeezed year on year and the context that the needs that that budget has to meet are not heading in the same direction, we realise how unjust what the Government are doing is. Councils are not only faced with revised settlements, but have the prospect of additional cuts so that the Department can meet what it believes to be its internal budgetary needs. However, as my hon. Friend pointed out, it is not entirely clear that those needs are as the Department states them to be.
The impact of taking money from the revenue support grant is that the Government are reducing the proportion of money subject to funding formulas that account for need and deprivation. By reducing the revenue support grant to top up the business rate redistribution mechanism, in effect, the total amount of local authority funding that has been subjected to adjustments for deprivation, need and other factors is being lowered. That is fundamentally unfair. The need is there, and the money should follow the need. Consequently, deprivation factors are weakened within the totality of the local government finance settlement. With many local authorities facing increased costs and demand for statutory services, factors linked to deprivation—the parts of the finance settlement that take such elements into account—are reduced, increasing the pressures on councils. Perhaps it is an unfortunate coincidence, but the councils most affected tend to be the poorer ones, representing communities that are poorer—inner-city local authorities, which are predominantly Labour controlled. The effect of the redistribution is towards more affluent parts of the country that are not Labour controlled—they are controlled by parties in the governing coalition.
When the previous Conservative Government nationalised what was then the local business rate, I thought that they made a reasonably sound case for doing so: from each according to his abilities, to each according to his needs, as I am sure I remember Mrs Thatcher and Sir John Major saying when making this point, although memory plays tricks as we grow older. The assumption is of course that the rateable values for business, which are the foundation of the business rate, are regularly revalued. No more money is raised by revaluation, but the distribution of the burden is fairer throughout the whole of what is a United Kingdom. It would be wrong to defer a revaluation for political reasons, because doing so disadvantages the relatively less wealthy parts of England—it is more accurate to say England in this context, rather than the United Kingdom.
The Government have also altered the duty on the Department to make a revenue support grant to a power to make a revenue support grant. The purpose is to march off in exactly the same direction that is of concern to me and my hon. Friend the Member for Newcastle upon Tyne Central. That will weaken the link between the need, which local authorities have a statutory duty to meet, and the resources, which are necessary to meet the need. She talked about the new homes bonus, and the Chairman of the Select Committee, my hon. Friend the Member for Sheffield South East (Mr Betts), intervened to make a point along the same lines. All of that is heading in the same direction, and it is very much the wrong direction.
The city of Newcastle upon Tyne is on the receiving end of all this, and if I have done nothing else in my short contribution, I hope I have rammed home to the Minister how strongly we in the city feel about this issue, how unfair it is that he should proceed in this way and how impossible the situation will be for the local authority that represents people in the constituencies that my hon. Friend the Member for Newcastle upon Tyne Central and I represent, as well as other inner-city local authorities throughout England, if the Government continue in the same direction.
The Minister must do something—a range of options are open to him—to make sure that the support payments available to local authorities meet the needs to which those authorities have a statutory duty to respond. To do anything else is unfair because local authorities have no other way of getting the money to meet those needs.
It is a pleasure to serve under your chairmanship, Mr Streeter, for what I think is the first time—certainly in my role as Opposition spokesman on local government matters, including local government funding, which I shall talk about today.
My hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) opened the debate by saying how important it was for her constituents. I congratulate her on securing it, and I thank her for doing so, because my constituents are also concerned about local services. Earlier today, I met 25 members of the University of the Third Age, from Thrapston, a small town in my constituency, and the topic of conversation was the impact of various funding cuts on their lives. They talked about having to pay £6 a week for the Lifeline service in sheltered accommodation, which was previously paid for out of the Supporting People funds. They also talked about the impact on their communities of further cuts to bus services. My county council has reduced the subsidy for local authority bus services by more than any other county council. My constituents said, “What is the point of a bus to a nearby town if I can’t get back from it?”
My constituents also spoke about the isolation that they experience as elderly people. They talked of their concerns about their grandchildren’s school transport costs. They highlighted the impact of cuts to police community support officer funding in their small market town, which have happened partly because local authorities can no longer fund partnerships. My constituents are also concerned—my hon. Friend mentioned this—about potholes and cuts to funding for other things that they see every day, such as street lights. This is therefore an incredibly important debate.
My hon. Friend said the Government’s changes to local government funding fundamentally impact the spirit and ethos of how public services are funded, and I wholeheartedly agree. She spoke passionately about the unfairness of the cuts, as did other hon. Members, including my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown). He said that, in his 30 years in this place, he has not seen anything handed down to communities that is as unfair as these local authority cuts, which are particularly impacting on his city. They are also impacting on Oldham, the local authority of my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams).
My hon. Friend the Member for Newcastle upon Tyne Central drew on comments from the Conservative leader of the Local Government Association, so it is not just Opposition politicians who are raising concerns. Sir Merrick Cockell said that the cuts were having a disproportionate impact on some areas of the community. Recently in the House, the hon. Member for Cambridge (Dr Huppert) said that his local authority and many other local authorities around the country were being “cut to the bone”, but the Government have failed to recognise the very real impact that the cuts are having.
I was struck by the summative description of the cuts that my hon. Friend the Member for Newcastle upon Tyne Central gave: she said that they were Robin Hood in reverse. My right hon. Friend the Member for Newcastle upon Tyne East simply suggested that their impact was wicked. It is not just that funding is being cut. As we all recognise, this is a time of rising pressures. In particular, Members have talked about the costs of dealing with looked-after children. My hon. Friend the Member for Newcastle upon Tyne Central highlighted the 11% growth in the number of looked-after children across the country, and the rate is higher in her area, as we might expect because of the nature of her community. Clearly, it compounds the problem when such a significant cut is meted out to her local authority.
My hon. Friend the Member for Oldham East and Saddleworth spoke passionately, as she always does, about social care. She talked about how the cut in the independent living fund is impacting people in her community. Not only are local authorities meeting only severe needs, but they are being forced to reassess elderly and vulnerable constituents who were previously considered to have severe needs, and are beginning to withdraw the services that those people had come to rely on, leaving them incredibly worried. In some cases, that has perverse consequences. Local authority social care cuts are causing hospitals to use acute hospital budgets to fund social care beds. Surely the Government cannot see that as a good use of public money.
My hon. Friend is making a passionate speech himself. These measures are having an impact on not only local authority services, but the NHS. As we know, we have an accident and emergency crisis across the country, and that is partly because of the impact on social care.
My hon. Friend is absolutely right. She has considerable expertise in these matters, and I have heard her speak frequently about them in the main Chamber. In my area, the A and E crisis, which means that many people have to wait more than four hours, is happening because the hospital is running “hot”. I do not know whether you have heard that term in relation to your local hospital, Mr Streeter, but it means that the beds are full, and that is partly because there are no social care beds. The services that should help people to return home are not being put in place properly or quickly enough to do that. These things are very much linked, and I hope the Minister will acknowledge that in a way that other Conservative Members have failed to do in some of our debates on health care, and on the impact of local authority funding cuts on a much broader range of public services.
We have quoted Sir Merrick Cockell, the LGA’s Conservative leader, who has called the cuts “unsustainable” because of their scale and pace and the rising demand we have highlighted. The Conservative leader of Kent county council has also said that his county cannot cope with further reductions, and that it is “running on empty”.
Ministers know that local government is the most efficient part of the public sector—the Prime Minister has said so—but they have decided to reward councils for that efficiency by cutting more from them than from any other part of the public sector. Indeed, the Secretary of State for Communities and Local Government approached the Star Chamber to bid for that substantial cut to local authority funding.
The Institute for Fiscal Studies is clear that the total cuts to local government spending will outpace those in the public sector as a whole, and the situation will get worse, not better. The LGA’s excellent report, “Future funding outlook for councils”, incorporates the 10% cut in this year’s spending review, which comes on top of the 33% cut that councils face over this Parliament, and that includes the issue of holdbacks, which I will come to in more detail.
The Minister will no doubt tell us that there has been a 2.6% cut—I hear those figures all the time, and I heard them again on “Look East” just the other day. At the same time, the leader of Norfolk county council was talking about what, by anybody’s measure, was a cut of a third to the council’s budget. Councils simply do not recognise this 2.6% figure; it does not stand up to scrutiny.
The black hole will get bigger: by 2020 there will be a £15-billion black hole in the finances, but the Secretary of State talks about council cuts as though they are modest. I do not think that it surprises any of us when Conservative council leaders raise complaints with the Prime Minister about the language being used, and the reality gap between how Ministers at the Department for Communities and Local Government talk about the level of the cuts, and council leaders’ experience of trying to deliver public services around the country. I have spoken to the leader of Northamptonshire county council. He is a Conservative politician, but we have a constructive dialogue about how we are grappling with huge changes. For example, he is currently scratching his head about how we will sustain Sure Start and children’s centre provision across the county, and how we will continue to provide libraries across a large county.
Leaders of any party know the reality out there, but the Government will not listen to the warnings. They will not listen to the National Audit Office, which has said that cuts are having a direct impact on front-line services. The myth created in the early days of the coalition—that everything could be achieved through efficiencies—simply does not match up to reality. The NAO says that 12% of councils are at risk of being unable to balance their books. That will have disastrous consequences.
The Minister told me in a written answer last week that a response to the Public Accounts Committee report on the financial sustainability of local authorities had been published in September. I cannot find that response, and would be grateful if he could draw my attention to it more directly. It seems that the Government simply do not know how they will respond when councils fall over. The permanent secretary to the Department for Communities and Local Government, when questioned by the Public Accounts Committee, said that councils have a duty to balance their books. Ministers are relying on a statutory duty in the face of reality.
Of course, we know that councils will do their very best, because they will want to ensure that they comply with the law. They will be well advised by their monitoring officers and finance officer. Councillors will want to balance the books. They will know that that will be audited by the new independent local auditor, so they will have to do it—and we know how they will do it: by turning off the street lights; by further cutting social care; by ending the use of the local swimming pool; by closing the libraries; and by stopping maintaining the streets. If they have to, against the Secretary of State’s best wishes, they will do it by stopping some bin collections, which will affect our recycling rates. They will do it by cutting services around the country.
Some councils will find more quickly than others that they need to balance the books. They will not be councils in the north of England only, although many councils there will find themselves in particular difficulty. It is one of the poorest regions in the country, and my right hon. Friend the Member for Newcastle upon Tyne East and my hon. Friend the Member for Newcastle upon Tyne Central are to be congratulated on highlighting the impact on their region, as the Association of North East Councils has also done very powerfully.
Councils all around the country will be affected. We are told that Tory-led West Somerset will be one of the first councils that will have to close its doors and will simply not be able to balance the books. As I understand it, there is an idea that such councils will be taken over by their neighbours. I think that that is the Government’s way forward: the neighbours will step in. However, although I am a co-operator, I must say that when faced with a neighbouring authority that is about to fall over, it would not be prudent of any hon. Member to encourage their own local authority to take on the burden of financial responsibility. The crisis has been created by central Government, and they must face up to it and tell us what their response might be.
I thank my hon. Friend for the excellent speech he is making; he is highlighting several points that I did not cover. Is he aware that when the Secretary of State acceded to his post, he is said to have banned the use of the word “regionalism” because he did not believe in regions? He wanted instead to focus on localism and localities. Is it not therefore ironic that, by cutting funding so much and taking control of more of it centrally, he might cause local authorities to be taken over by other local authorities, thus attacking the communities he is supposed to be supporting?
My hon. Friend is right that the sense of regional awareness in places around the country is derived from all sorts of things. Sometimes it is economic or cultural connectedness going back over time, or derives from the links between industry across an area. However, in some areas of the country, over time, some of that sense of regional awareness has come from regions feeling that the further away from London they are, the less the Government are concerned about the people there, and the more unfairly they have been treated. I am a strong supporter of the Better Together campaign. I hope that Scotland and England remain together, as do many of my Scottish constituents. However, it was not a huge surprise to me to see only the other day a newspaper article saying, “If Scotland goes, can you take the north with you?” People in the north feel that the Government simply do not understand the impact of the cuts.
Communities are told to become more independent; the rationale that the Government present to us is that they are over-reliant on central Government funding. Communities are seeking to become more independent by promoting their economies. What do the Government think is happening to the economic development function of local authorities around the country? What do the Government think has happened in the absence of the strong role that One North East previously played in promoting economic development in the north-east? That strong economic development role, that drive that local authorities can provide, is no longer there as it once was. I pay tribute to people such as the leader of Newcastle city council, Nick Forbes, for trying to ensure that his city has a bright and economically prosperous future, but the Government are making that task harder, and I hope they recognise that.
The impact of the cuts falls on both statutory and non-statutory services. Too often it is assumed that statutory services will be safe, as it is by the permanent secretary to the Department, who says that because it is written in law that councils have to balance the books, it will happen. Too often it is also assumed—by campaigning organisations and commentators on local authority finance—that statutory services will continue to be provided and will be safe because they are a legal requirement. However, the truth is that councils are already having to look at the eligibility criteria. For example, the duty placed on local authorities in the 1960s to provide for an efficient library service will have to be interpreted in new ways by local authorities in future. Frankly, it will have to be interpreted in ways that do not meet local communities’ real aspirations for those services.
We know that statutory services will not be safe, and we also know that the burden will fall particularly on the more discretionary services. However, the discretionary services, such as cultural services, are no less important. Over the river from my right hon. Friend the Member for Newcastle upon Tyne East, and my hon. Friend the Member for Newcastle upon Tyne Central, in Gateshead, there are iconic cultural attractions, as indeed there are in Newcastle upon Tyne. As a student at Durham university, I enjoyed the cultural offer in Newcastle many times. These things are vital to local economies and to the health and vibrancy of the community. They are part of what a prosperous community in the 21st century should be all about. Local authorities have a vital role in enabling such things and ensuring that they are present in a community, but we know that around the country they will be the first to go.
We must be honest about what would have happened were a Labour Government now in power, as we come out of a period of global recession. Resources were rightly used to help keep young people in work—for example, through the future jobs fund—to keep our vital industries going, and to keep people in their homes to avoid the scandal of home repossessions that we saw in Conservative recessions in previous decades. The Government rightly tried to maintain jobs and the economy. A Labour Government would have come into a period, in this Parliament, in which we would need to look at how to balance the books. Our proposals differ very much from the Government’s. The Government’s proposals have gone far too far and go about things in the wrong way. Front-loading has had a particular impact, resulting in, for example, the perverse problems we have described in our health services.
Above all, however, we know that the effect of the Government’s proposals over three years was to grind the economy to a halt. We are told that there has been a huge increase in private sector employment. Many of those private sector jobs are transfers from the public sector, because of the cuts in recent years. Where they are genuine private sector jobs—indeed, where they are public sector transfers—we often find that people are on zero-hours contracts, employed through agencies in insecure jobs on low wages. The Government have removed any enforcement of the protections afforded to those people. They have less money in their pockets and are less able to contribute to the local community, thereby compounding the problems that local authorities face in their community leadership role around the country. That has been the impact of the Government’s proposals. We simply would not have done things in the same way, and we would not have done things in such a fundamentally unfair way.
It is not just organisations such the Association of North East Councils or SIGOMA, the special interest group of municipal authorities—SIGOMA provided us with a helpful background briefing, for which I am grateful—making this point. The Audit Commission, which provides independent commentary, has highlighted the unfairness, stating that
“councils in the most deprived areas have seen substantially greater reductions in government funding as a share of revenue expenditure than councils in less deprived areas.”
In 2014-15, the 10 most deprived local authorities in England will lose six times more than the 10 least deprived local authorities, as compared to 2010-11. The councils that will suffer the biggest cuts in spending power per head—that is the Government’s own manipulated measure, which is designed to mask the real impact—are Liverpool, Hackney, Newham, Manchester, Knowsley, Blackpool, Tower Hamlets, Middlesbrough, Birmingham and Kingston upon Hull. Those are some of the most deprived communities around the country. I would add Newcastle to that list, as another deprived community; there are particular needs in Oldham as well. Those communities should be properly recognised in a fair funding formula.
My hon. Friend the Member for Newcastle upon Tyne Central points out that her region—although, as she said, the Government do not like that term—has endured the biggest cuts. There are communities with high levels of deprivation and particular needs in London, and some of the most deprived wards in the country are in the heart of Corby in the midlands, but when we look at the map of the impact of these measures across the country, it is clear that money is going from north to south, and from poorer to more affluent areas. The Prime Minister’s local authority, West Oxfordshire, is one of the least deprived in the country, ranking 316th out of 325 in the indices of multiple deprivation. It is getting an increase in spending power of 3.1%; that is extraordinary. We know that this is not an accident, but a deliberate strategy by the Government to shift funding. The problem is compounded by holdbacks, which my hon. Friend the Member for Newcastle upon Tyne Central rightly raised as having a further significant unfair impact on particular local authorities. That is partly, as we know, because of the impact of the new homes bonus.
The cut to local government in the 2015-16 spending settlement appears to be around 5% greater than the amount stated in the spending round of 2013. The Local Government Association’s analysis is that there will be a 15% real reduction for most local authorities, as opposed to the 10% claimed by the Government; the analysis by SIGOMA and others is that the real impact will be higher. Will the Minister at least accept the analysis of the cross-party Local Government Association, which has no particular political axe to grind?
The Government’s announcement on funding with regard to holdbacks has caused particular issues because of the scale and pace of the increase in the number of holdbacks announced for 2015-16. The original figure for the new homes bonus was £800 million of holdback; I understand that remains the same. The holdback for the safety net around business rates was originally proposed to be £25 million, but the revised proposal is that it will now be £120 million. I understand that there are additional holdbacks on capitalisation as well. The net effect of the changes is to add £180 million to the holdbacks.
The Select Committee on Communities and Local Government looked at the issue recently, and said that holdbacks were making it impossible for councils to set budgets. As local authorities are having to make incredibly tough decisions, consultation is even more important, but giving short notice of the huge cuts in funding makes it really difficult for local authorities to hold genuine consultations with communities.
The increase in the amount retained for the safety net for business rates from £25 million to £120 million has caused particular concern. At a recent hearing of the Select Committee, the hon. Member for South Derbyshire (Heather Wheeler) described the safety net increase as “a huge jump”, and said that arguments that all the money would ultimately be returned to local government did not make sense, asking:
“How can councils budget when decisions like this are being made?”
Remember, that comes from a Conservative member of the Committee.
I understand that Sir Bob Kerslake, the permanent secretary at the Department, said that the holdbacks represented “relatively small amounts” of the £25 billion total funding for local government. He uses that global figure deliberately to massage the appearance of this issue and make it seem less significant. Some district councils—I know that they are exotic things to some hon. Members, but I have two in my area—will face cuts of £300,000 to £400,000 because of these changes. That is not a modest amount; it is a huge amount from their overall budget.
Similarly, the Select Committee asked why councils were given only three months’ notice of the additional 20% cut. I will quote the hon. Member for South Derbyshire again: she said that it “just does not fly”. Is the Minister going to tell us today that it does fly, or will he agree that the situation is unfair and has compounded the problem that local authorities face?
Does the Minister accept that councils must plan and set their budgets for 2015-16 on the basis of a cut in funding of 15%? The Government say that councils can set their budgets based on taking a risk—although all the risk seems to me to be shifted on to local authorities, given the way the holdbacks are handed out—that the holdback may be 10%. Does the Minister seriously think that that would be a prudent way for a local authority to manage its budget? We know from the work of the National Audit Office that even before the cuts really bite, as they will this year and for the next two years, three in 10 councils have had to take in-year unexpected action to try to balance their books. They have had to reduce service levels, for example, and have had recruitment freezes and emergency renegotiation of contracts with their providers. The NAO’s review was nearly a year ago, so I estimate that the figure will now be higher than three in 10. Given those challenges, does the Minister really think it is prudent to ask local authorities to budget on that basis?
I believe that there is hope. If there is a change of Government in 2015, there will be an opportunity to make a reality of community budgets and Total Place, and to end the silo approach to local authority funding—for example, in relation to care services. We can genuinely integrate services to make the public pound go further. We will back local authorities in taking on new roles—in back-to-work schemes, for example—that could be both financially beneficial to the local authority, if the incentives are right, and beneficial to our communities. There are opportunities for much better dialogue. We need to review the new homes bonus, which is a mechanism to shift resources around the country in an unfair way. I hope that today the Minister will accept the scale of the crisis that his Government have created, and will give us assurances that they will listen to us on holdbacks and accept the real need to review the funding formula across the country, so that when the provisional settlement is announced in just a few weeks’ time, it is fairer.
It is a pleasure to serve under your chairmanship this afternoon, Mr Streeter. I congratulate the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) on securing a debate on a matter that is clearly important for her. It gives us the chance to air some important issues about local government more generally.
Before I turn directly to the subject of the debate, I want to put it in context. The shadow Minister commented on the size of local government, its funding and the changes in funding. He made a comment about going too far and too fast, which we have not heard for some time from the Opposition. That comment seems incredible in the light of the current economic situation, as the Government’s economic policy is clearly working for the benefit of the country.
We also have to remember exactly how we got to where we are. The previous Government left us with an unprecedented deficit, something this Government are having to deal with. Local government accounts for 25% of public expenditure, and so has a big part to play in those efforts. Unfortunately, that is a part of the legacy that we took on from the previous Government. Even today, we are still all wondering about the £52 million—and growing—cuts that Labour has stated that it would make to local government; despite what the shadow Minister said, Labour has not yet outlined where those cuts would come from, and the figure has continued to go up in some of its recent pledges. We have to put the situation in some context.
I do not accept the Minister’s analysis, but for the purposes of debate, I will give him the benefit of the doubt. If what he says is right, why is the burden of expenditure reduction not being shared fairly across England? If special measures to protect anyone should be taken, why are they not being taken to protect the very poorest and most vulnerable—the people whom local authorities have a statutory duty to look after? Why is the burden not being shared fairly?
I will come to the issue outlined by the right hon. Gentleman, but I remind him that the independent report, which is in the Library, outlined that this year’s settlement was fair to areas in the north and south, rural and urban. It is important to remember the legacy that we inherited. My area—Great Yarmouth—is in the east and, thanks to the previous Government’s policy decisions, was left with a £3 million black hole, which this Government have had to fix. When we talk about spending power, we must remember that a Labour Government left my local authority with what would have been a 20% cut in spending power in one year— something this Government have had to deal with.
The hon. Member for Corby (Andy Sawford) mentioned councils such as West Somerset. He might like to do a bit more research and homework on what is going on in West Somerset and look at the work it is doing with its neighbours, on which I congratulate it. More and more small district authorities are moving to ensure that money on the front line is not spent on bureaucracy and red-tape administration. Many small district authorities particularly have budgets of under £20 million and should be looking to share management and chief executives to ensure that their taxpayers’ hard-earned money is spent on the services that we all want and not on bureaucracy and red tape. It is logical for authorities to do that. Instead of using childish language such as “takeover”, Labour Members should realise that this is about working in partnership and with efficiency for the benefit of local people.
It is important to understand that there has been a landmark change for local government this year. After years of doffing their caps to Whitehall, all councils now have the ability to control their own destiny. In the midst of the clamour of deficit denial and doom-mongering from some people, that message is in danger of not being heard. The size of the deficit and the debt must be dealt with, and local government is one of the biggest players in the public sector.
I want to make it clear to hon. Members that the current settlement and the one that we will soon propose for 2014-15 are fair to all—the north and the south—as the Library outlined. The hon. Member for Newcastle upon Tyne Central referred to what will happen next year, and I hope that she appreciates that we are only a couple of weeks from next year’s assessment, so she will not have to wait long for the details.
I urge the Minister to focus on the key point of this debate, which is that money is being held back from local authorities and redistributed. He said that local authorities can take their destiny into their own hands and drive forward, but that necessitates imposing no such holdbacks in future. Will he confirm that?
The hon. Lady’s point highlights where we are. The current structure for local government is that councils will benefit and see their income rise as a reward for the good work that they do for their communities. I will touch on that directly.
Manchester, Liverpool and Newcastle all have higher spending power per dwelling than the national average. When talking about what local areas have, it is important to put that in the context of the starting point. The average reduction in spending power is only 1.3% this year and we are protecting individual council tax payers by offering a council tax freeze. We are protecting councils through the rates retention scheme’s safety net, which generates a minimum level for their baseline funding, which Newcastle will benefit from, although it was unable to do so previously.
The settlement is fair because even for councils like mine, which now benefits from the efficiency support grant, we have provided protection for those who were hit worst by the policy decisions of the previous Government, and that brings me to the important point of how the system now works in a council’s favour. Following the Localism Act 2011 and financial reforms to the settlement, 70% of an authority’s income is raised locally and, most importantly, the growth incentive ensures that local government will keep up to 50% of all the growth that it generates. Councils have more power than ever before, but they must understand the implications. They must act in their residents’ best interests and work hard on their behalf. Redesigning council tax benefit to cut fraud, which costs around £2 billion, promoting local enterprise and getting people back into work, or redesigning services to make them more efficient and sustainable, especially as there are still savings to be had across the sector, all make a difference.
Some cutting-edge councils understand that and lead by example in developing good practice for the rest of the country to follow. Getting the ball rolling can be the hardest part of radically overhauling local services. The Government established the transformation challenge award to help councils, particularly small ones, to demonstrate innovation, to protect services and to reduce costs to the taxpayer. Just a few months ago, I was pleased to announce 18 successful schemes, including projects to accelerate the integration of local health and care services, which hon. Members have outlined this afternoon, and to create shared finance and human resources for emergency services.
The £3.8 billion that is coming across from the health service to be part of the local government family to provide adult social care is an indication of the work that follows on from the community budget pilots. That transformation touches on the point that the hon. Member for Corby made and is an important way to bring the public sector together and to drive out duplication and provide better services. We know from the community budget pilots that up to £20 billion of savings can be found across the public sector if we can get the work done correctly throughout the country. More importantly, they have shown better services for residents and more effective service delivery.
The whole point of the change in the structure of local government finance is that council finance is partly in councils’ control. That is why 40 authorities have had an increase in their income this year alone. Today, a Labour authority has predicted a £500,000 increase in its income over the next couple of years, thanks to the business rate retention scheme. Hon. Members should focus on their councils’ decisions on what services they provide locally. Some £3.8 billion is going to local councils to ensure that they can deal with adult social care in a joined-up way, without creating further bureaucracy.
Local government has shown great skill in moving forward. The Audit Commission and a recent survey noted that residents believe that services have improved. Our community and neighbourhood budgets show that we are finding ways to rewire the system to provide better services at much lower cost.
Turning to the future, I recognise that councils are facing pressures. That is why the spending review set out a package of measures to support them in 2015-16, including the £3.8 billion pool of funding for integrated health and social care, which will help to ensure that services in the care and support system can be protected and will enable authorities to invest in prevention and early intervention.
We will make available a new fund of £330 million to accelerate the transformation of local services with a £200 million extension of the troubled families programme to support another 400,000 families, £100 million to build on the transformation challenge award to improve public service delivery and a further £30 million to drive change in the fire and rescue service. All that together shows that there is a huge opportunity for councils to save money and to achieve better outcomes by working collaboratively and innovatively for their communities.
The Minister avoided answering the question asked by my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) about the impact of the funding changes on different councils in the north and south by re-emphasising the power that local authorities and councils have to direct their own funding. Will he specifically say whether he supports the principle of holding back funding, as has been described in several contributions this afternoon? He has listed some increases in some different funds. Are they coming from top-sliced funding or from new money, as we would understand it?
I tell the hon. Lady again that what a local council does with its funding is a matter that she must put to her local authority. Councils must make the decisions about how they spend the money that they have. There is no point continuing to look at silo pots of money. The point of spending power is that it shows exactly what a local council has in total to spend on its local community. In Newcastle, the amount is one of the highest in the country. It is also why it is important that we offer support to people individually as well. We are pleased to be able to offer further support for council tax freezes in 2014-15 and 2015-16. We have been clear that if an authority wants to raise its council tax, it should do so with the assent of the public in a referendum locally. It needs to be able to explain to residents what it wants that money for and to convince residents of its case.
It is worth adding that in many cases, councils have more in reserves than they are losing through cutbacks. Liverpool, Manchester and Leeds all have reserves that are twice that of their spending power reductions. Indeed, this year, Newcastle has had substantial reserves. It is also important to note that local authorities will be spending about £4 billion extra this year across the country—well over the £100 billion of last year. It is also worth noting that local authorities have managed to increase reserves to a record level, going up by almost £3 billion to £19 billion. With that and the £2 billion in fraud and error, and with a further £2 billion in uncollected council tax, there is still a long way for local authorities to go before they can claim that they have done everything to drive out waste and bureaucracy.
We are in a new world for local government. The funding settlement used to be the endgame; now, it is just the starting point, with councils no longer tied to the settlement figures. They can get to earn their keep and retain £11 billion of business rates. That could deliver an extra £10 billion to our wider economy. It is worth noting that areas such as Manchester, Liverpool and Newcastle all saw business rates rise above the national average of 4.8% in recent years. However, thanks to the old begging bowl system, they missed out on the opportunity of making the most of that money—but no longer. From now on, it will be what councils make and not what they take that counts. If they bring in more businesses, more jobs and more homes, they will be rewarded. If they build those new homes through the new homes bonus, they will see a share of that money, which is worth £650 million this year and is growing. If they increase their business rates, they will retain some of the benefit of that increase.
Therefore, the message to councils is clear: if they are ambitious, become self-reliant and work hard on behalf of their local people, they will succeed and see the benefits. We want authorities to go further and faster, so that residents feel those benefits. We want to help and reward those who do the right thing and are innovative. Our funding approaches, as has been outlined independently, are fair for north and south, urban and rural, and rich and poor. I gently say to hon. Members who have outlined what they see as the funding draw from urban areas that even Labour Front Benchers have been arguing on the Floor of the House to move money away from urban areas into rural areas.
I inform the Minister that I also put a petition from local residents in the Speaker’s petition bag, as did many hon. Members of all parties in representing their constituents. However, the Labour Front-Bench team’s position was clearly set out, as the Minister is very well aware, only a few weeks ago in the debate relating to SPARSE—the Sparsity Partnership for Authorities delivering Rural Services. We were clear that we see the current formula as fundamentally unfair.
I gently say to the hon. Gentleman that the hon. Member for City of Durham was in the Chamber on the night giving in her petition, in which the case that was being made was not about having more money, but about ensuring a different distribution between rural and urban areas, but I shall let him take that up with her, rather than me. She was the one who was making the case to move the money to rural away from urban, so I suspect that the Labour party has some work to do with its own Members.
We now ensure that the system rewards innovation and imagination, as we saw this year with the transformation fund. We have given councils more power than they have had before, and we are developing a new ethos for local government, where they are generating more income through the work that they do locally, rather than holding out a begging bowl to central Government. If councils are willing to look to the future, they have a once-in-a-generation chance to step out from Whitehall’s shadow and to use the income from local growth to support, develop and improve the services that they give their residents.
We now move on to our next debate. Our participants are here, so anyone wanting a second go on the previous debate will not get it. It is an important debate on managing Government contracts—I shall speak slowly so that the Minister has a chance to get to his position. It is a delight to call Meg Hillier.
As ever, it is a pleasure to serve under your chairmanship, Mr Streeter. Before I start, I need to declare an interest: my husband is a non-executive director of a social enterprise that runs some Government contracts. However, the focus of my concern is small and medium-sized enterprises, and I am delighted to have secured this debate on their behalf.
My interest in the issue stems from my work as a member of the Public Accounts Committee and from my many conversations with businesses in my constituency and elsewhere. The Minister will be aware of the Committee’s work and particularly our hearings on 20 and 25 November. I do not intend to cover the same ground in this debate, as he will have the pleasure of reading the Committee’s report shortly.
I want to focus mostly on how Government contracts work for small and medium-sized businesses. As our hearings demonstrated, there are a few large companies that have a grip on the delivery of public sector contracts. Whether they run prisons, maintenance, security or hospital services, relatively few prime contractors are in the market for business that both recent Governments have embraced, worth billions of pounds a year. Government talk the talk about supporting small businesses, but unless they are willing to lead from the front, the promises, frankly, ring hollow.
As the MP for Shoreditch—often called “tech city”—I do not need to be convinced that small and medium-sized enterprises are the engine room of UK plc’s future growth. It is not only me who is saying that; the Chancellor of the Exchequer declared that tech city
“will be the technology centre of Europe”.
There is no shortage of private investors either who are prepared to bet their money on these businesses.
However, those innovative businesses face different hurdles when it comes to Government contracts. The hurdles set by civil servants, most of whom, as I am sure the Minister will acknowledge, have never run a business, big or small—that is not intended as a criticism; it is just a fact—are so cumbersome that most small businesses cannot comply with them. The automatic setting in Government is to be as risk averse as possible, and that sets in train in contracting a vicious and uncompetitive circle that is well-nigh impossible for new businesses to break into. Of course, I share a desire, as I am sure the Government do, to make sure that the taxpayer is not taking on undue risk, but balance is needed.
Some of the innovative tech businesses in Shoreditch, such as the recent arrival, Affinitext, which is offering transformational software for smart document reading, can offer solutions that will save the taxpayer money. Many work in ways that the Government could learn from, but businesses that do not meet the Government’s pre-determined model of contracting are shut out.
There are spin-off benefits, too, for the wider economy that the Government should be aware of. Research shows that every £1 of business with an SME generates 63p to the local economy, whereas with large businesses—those employing more than 250 people—only 40p is generated in the local economy. Both are worth aiming for, but for a Government who say they support business, the question is whether they only support big business.
We need to see a step change in how Government work with smaller businesses. Specifically, we need shorter procurement processes—again, that is the risk aversion coming in to play—and a serious step change in how contracts are drawn up. When a contract includes 150 key performance indicators, as we heard at the PAC the other week, it suggests a serious lack of critical focus. There also needs to be a sensible approach to how Government Departments and businesses can meet outside formal contract negotiations and learn what each has to offer. I think the Minister would have some very exciting meetings in Shoreditch if he were able to visit.
I will highlight one example. Tribesports, which is a Shoreditch-based business—based in the Cremer business centre, just off Kingsland road—provides a social platform for sports enthusiasts. Priya Shah, who is responsible for business development, told me that trying to get through to health providers to suggest alternatives to paper leaflets as a way of spreading health messages, in a world of smart phones, was challenging. She said that it was
“impossible to get through to the right contact at the NHS. This”—
she was referring to providing health advice—
“requires a modern approach, with everyone spending more and more time on computers and phones, not reading leaflets.”
She is only one example.
Overall, contract management has become unnecessarily complicated. The advent of G-Cloud is a help—I was pleased to welcome an official from G-Cloud to Shoreditch not that long ago—although local businesses in Shoreditch tell me that it is still cumbersome. For many—this is about the language sometimes spoken between Government and businesses—the very word “Government” in front of a contract suggests a minefield that is hard to navigate compared with other sectors, and indeed, other countries with which they do business. That is the challenge. Sometimes, it is just a different language that is being spoken, but the Cabinet Office and the Minister are now supposed to be capturing and sharing knowledge and best practice within projects, across projects in a Department and across Departments.
The Minister has a difficult task. Whitehall is strewn with the failed legacies of Cabinet Office Ministers who have promised various versions of joined-up government or Prime Minister enforcer roles—call them what you will—but who have not been there long enough to see off the interests of the large Whitehall spending Departments. I am pleased that the Minister for the Cabinet Office and Paymaster General has been in post for a long time. That is an improvement. However, we know that, in Whitehall and Cabinet, the bigger the budget of the Department, the more clout the Department has. Initiatives such as the commissioning academy and the Major Projects Authority are welcome, but improving contract management and procurement skills just is not enough. Too often we hear of hurdles set by risk-averse civil servants. What about better use of technological solutions to monitor compliance?
Just one example of how the Government could learn from the private sector—another one—is suggested by Affinitext, which I have mentioned. Graham Thomson, managing director of Affinitext, says:
“Electronic, tablet friendly versions of contracts should incorporate an agreed rights and obligations matrix, so as to ensure that each party performs their obligations in accordance with the contract, using ‘Just-in-Time’ task reminders.”
That is pretty simple stuff in their world, but Whitehall does not yet seem ready to embrace it.
The Public Accounts Committee got a thumbs-up from the big private sector companies when we called for more transparency, which is another issue for some of these smaller companies. In Shoreditch, that is the way business is done. It seems that in many respects Whitehall and Ministers are nervous about losing control of “the message” by encouraging that. I speak as a former Minister with some knowledge of the pressure on Ministers. However, as Graham Thomson says,
“‘Commercial sensitivity’ issues, if raised in that regard, are definitely more Civil Servant driven than private sector driven. In any event, they are manageable.”
All the businesses that we have spoken to on the PAC and that I have spoken to in Shoreditch are far less concerned about commercial sensitivity than Government are.
I have some specific questions for the Minister. The first is about the length of procurement processes. Why are Government procurement processes so long compared with those of other countries? One supplier—I would happily talk to the Minister privately about this individual, although I do not think that it is appropriate to name them in this debate—tells me that in the US, Canada, Sweden and New Zealand, procurement of the same product has typically taken seven to 12 weeks compared with two and a half years for a Ministry of Justice contract that is still not concluded. Many other people have highlighted long, drawn-out or delayed contracts as a major risk.
What is being done to improve how contracts are drawn up? Many small businesses, including Fixflo, which has an online platform for housing maintenance, and another company, which won a Government health contract, have highlighted the complexity of contracts and the frequent changes by commissioners as off-putting.
Why are Government still demanding that intellectual property be handed over to Government? Does the Cabinet Office have any guidance for Departments about that? Has it seriously addressed the issue? It can be a deal-breaker for emerging tech businesses, whose capital is often their IP.
What are the Government doing to break down Government contracts into smaller contracts? I know that there are some attempts to do that, but as one company said,
“Instead of tending towards single suppliers of IT services, an integrated solution which incorporates smaller companies would help to support the IT sector and innovation. Encouragement should be achieved through a credit in the tender scoring process.”
I hope that the Minister will consider that suggestion.
It is a pleasure to serve under your chairmanship, Mr Streeter. I congratulate my hon. Friend on securing this important debate. She touches on a number of issues. The one that I will ask her to comment on is not contract management, but contract monitoring. Does she believe that frequent contract monitoring is necessary to prove, first and foremost, best value for the Government?
My hon. Friend raises an important point. Contract monitoring is often more of a box-ticking exercise. When there are 150 key performance indicators, it is difficult to know whether someone is watching the overall performance of the contract, and sometimes the contracts are drawn up in such a complicated way that it is very difficult to shift meaningfully. In the building world, for example, there are attempts by housing associations and contractors to partner, so that they work together to acknowledge where there might need to be a change for more improvement. I hope that the Minister would acknowledge that there needs to be great improvement. The Major Projects Authority is doing some good work in that area, but it deals with the major projects. Many Government contracts are much smaller than that, which is one of the big challenges. Building a warship is one thing; letting a small IT contract is another.
Crucially, all of this—what my hon. Friend talked about and what I have talked about—cannot just be left to Departments. We know that procurement managers come in various forms. Some are not very expert. I remember as a Minister saying to one official who had led two projects that came in ahead of time and under budget and that delivered very successfully, “What’s your next one?” The reply was, “Well, I have to move in order to get my next promotion.” I know that there have been some attempts to put project managers in place in Departments, but I would be interested to hear whether the Minister has an update on that.
Procurement managers can often prefer the simplicity of a single supplier, as it can be more complicated to manage several contracts. The Cabinet Office recently—yesterday, I think—advertised its event management contract, welcoming multiple small bidders. I hope that that will be better than other Government bids and that the Cabinet Office will live up to its promise. I am quoting from the Minister’s own website, which says:
“We are committed to ensuring that small organisations and businesses can compete fairly with bigger companies for our contracts.”
I see him nodding. I hope that businesses in Shoreditch take that seriously and that he delivers.
When contracts are broken up, smaller IT companies are often required to partner with bigger players to meet the risk threshold. That can be a big issue for a supplier’s IP and it adds complexity. For businesses in Shoreditch and particularly the tech businesses, it is a deal-breaker.
I want to raise one specific issue in relation to local government procurement; I am not sure how this applies to national Government. Now that councils often join forces to procure for longer contracts—perhaps across more than one local authority area—those now count as large contracts, and it is often the case that small businesses do not meet the requirement that the value of the contract be not more than 25% of their annual income. That is an example of a hidden barrier that could be avoided if the threshold were for the annual value of the contract, rather than the whole contract over the longer period. I am not sure whether the Cabinet Office is aware of that. I hope that the Minister is. Does it apply to central Government too, and can the Cabinet Office do anything to tackle it?
It is fair to say that there has been some progress by both recent Governments in paying contractors much faster, but late payment can be a big issue for smaller companies if they are a subcontractor down the line. Has the Minister any plans to make it mandatory for large contractors to pay their subcontractors within 30 days of receipt of payment from Government? If the Government are paying on time, there should be no excuse for that payment not being sent down the line to the smaller contractors on time as well. I hope that the Minister can answer that point.
During the Olympics, there were some very interesting issues going on with contracts from the public sector. There were scams whereby bidders included local businesses in a bid and then stood them down once they had won. I do not know whether the Government are aware of that and what they are planning to do to ensure that it does not happen in future. It had a big impact on local supply chains and, crucially, on small and medium-sized businesses’ confidence. There is such cynicism out there. If the Minister were able to come to Shoreditch, he would hear this. There is a desire to take these contracts on. People realise the prize that they bring, but there is cynicism about whether they will ever have the chance to compete on a level playing field.
That happened during the Olympics. We picked up on it too late, because clearly there was a very tight deadline for delivery of the Olympics, but I believe that contracts need to be better audited after they are awarded. We must ensure that promises of local employment and contracting with certain subcontractors and promises on pay rates, training provision and so on are delivered on. Only a post-audit will deliver that.
I have touched on financial hurdles, but there are others that I have heard about repeatedly from solvent and successful businesses. When smaller businesses join forces to bid for a contract—often in a creative partnership and sometimes delivering very good solutions or potentially doing so—they require three years of audited accounts, which they cannot provide because they have never worked together before. Even when they are able to get around that by providing projected accounts, they need to spend up to £6,000 on accountancy fees to do that. It is right that due diligence takes place, but could that hurdle be introduced later in the bidding, when a consortium knows that it is in the running? The up-front costs can easily put off SMEs, whereas big companies can afford them much more easily.
One company, which had won a health contract, told me:
“Financial guarantees were required which were impossible for SMEs to reach. For one application we were required to put up a bond of £10m which removed small companies immediately from competition, as for a company with a £3m market cap nobody will be willing to put up the risk for such a bond. This means that small companies are effectively denied the chance of competing in the bid, and stops them…making the jump from small to medium sized companies.”
I thank my hon. Friend for giving way once more and for making very powerful points on the procurement aspect. Has she, like me, experienced the reluctance of small and medium-sized businesses in relation to eProcurement—their fear of using that tool to submit tenders online?
Earlier, I mentioned G-Cloud. That is an important innovation, but there needs to be greater confidence building and greater awareness.
I am not sure whether the Minister has come across this, but there were times when I was a Minister when I would ask whether anyone had spoken to someone and I would gather that there had been a big consultation, but later on, when I met some of the people who had been at that, whether from the business sector or elsewhere—I dealt with procurement in the Home Office for three years—I discovered that being in a meeting was all that happened. Someone sat in a meeting; they did not actually engage. I think there needs to be really good, positive engagement with businesses, which are keen and willing and have a lot to offer.
I extend an invitation to the Minister or his senior officials to come to meet Shoreditch businesses and hear from them directly about the barriers that they face. If he does so, he will also learn about a number of innovative, user-friendly and cost-effective ways for the Government to deliver smarter services. I hope that he will take that opportunity and spend a thrilling morning meeting some of the best brains in the country.
We know that civil servants’ careers are not enhanced by taking risks, so the safe, risk-averse approach is well embedded in Whitehall. The Cabinet Office is charged with changing that landscape and opening up Government to the small business sector. It is certainly talking the talk, but whether the large-spending Departments will deliver is another matter. I look forward very much to the Minister’s response. Shoreditch is listening, and I will be holding him to his words and his Government’s promise of more business for the small business.
It is a great pleasure to serve under your chairmanship, Mr Streeter—I think for the first time—and to respond to an important debate. I congratulate the hon. Member for Hackney South and Shoreditch (Meg Hillier) on securing the debate, and on presenting it in such a clear and compelling way, rooted in her experience as a former Minister responsible for procurement in the Home Office and a member of the Public Accounts Committee. I am reassured by her telling me that my reading of the upcoming report will be a pleasure. That will be a first, and I await it with bated breath.
The issue that the hon. Lady has raised is enormously important, and I want to persuade her that the Government, and the Cabinet Office in particular, are absolutely committed to trying to open up more space for small and medium-sized enterprises to come in and offer the value and the innovation that she has talked about. I do not want to appear at all complacent, because although we think we have made some good progress, we know that we are nowhere near where we want to be, considering the scale of the opportunity.
The matter is extremely important, not least given the state of the public finances and the situation that we inherited. It is important to recognise where we started. As I think the hon. Lady recognised, what we might call the outsourced public service market was entirely dominated by large private sector organisations, and small companies had little room to come in and improve the situation. I recognise a lot of her analysis about how off-putting and complex the whole concept of bidding for Government contracts is for those running a small business, which I have done myself. It is hard enough work as it is without having to wander through a swamp of bureaucracy and difficulties.
We inherited that situation, which was compounded by the fact that Government did not know how much they spent with major suppliers. I am glad that the hon. Lady referred to the fact that the Minister for the Cabinet Office and Paymaster General has been in post since the start of the process, because that has made a great deal of difference. We are trying to drive a culture change across the system, and he has been extraordinarily persistent in trying to achieve that. The results of the work of the Efficiency and Reform Group, which we created, have been dramatic. We saved the taxpayer £10 billion last year alone compared with 2010, of which £3.8 billion came from commercial areas and £800 million from better engaging with strategic suppliers. There was no rocket science involved; the Government simply woke up to the fact that we sit on top of a powerful buying machine, which makes it possible to secure much better terms. We can leverage our scale to get better value and resolve performance disputes more quickly.
We are trying to embrace a culture change. There was a culture of buying big and buying badly in a very risk-averse way, and we are trying to improve that—to touch on a point alluded to by the hon. Member for Hackney South and Shoreditch—not least by instilling much greater commercial capability and confidence in the system. A saving of £10 billion in one year is an important improvement, which is equivalent to about £600 per UK household. That is real money, which has real-world impact. Within that, we have been working hard to improve the procurement processes that the hon. Lady quite rightly criticised. We need to make it easier and cheaper for firms, particularly smaller ones, to bid for work.
In the context of my main responsibilities as Minister for Civil Society, I might add that we are particularly keen that charities and social enterprises feel they have more space and a level playing field on which to compete. The hon. Lady mentioned the length of procurement times, and we have cut the length of the average procurement by 40%, which makes the UK faster, we think, than any of our European neighbours. I am always delighted to hear about specific cases where the procurement process has been too long and too clunky, but we have taken a big step in the right direction.
Part of the process is improving our commercial capability and confidence at the heart of the civil service, so 1,800 officials have already been trained in procurement and 150 leaders have been through the Major Projects Leadership Academy in Oxford. We need to go much further, as I have said, and get smarter at managing performance. For the first time, the Government have allowed past performance to be taken into account when bids for new work are evaluated. It is astonishing that that has not happened before. Suppliers can now be rated high risk when there are material performance concerns, and we have introduced a new approach for managing gross misconduct. Our long-term goal remains the creation of a vibrant, competitive marketplace. Where bad practice is uncovered, we will crack down on it robustly. We intend to continue to build on the progress of the past three years, focusing on commercial capability and promoting transparency.
I turn to the meat of the hon. Lady’s contribution on behalf of businesses in her constituency. We are absolutely determined to wrestle with some of the challenges, problems and barriers to which she alluded, to make it easier for small businesses to come in, compete and give those spending taxpayers’ money more choice and more access to the innovation that we desperately need. She talked about procurement time, and, as I have said, we have reduced the average turnaround time from advert to contract award by more than 40% to 100 working days. That is better than France and better than Germany. Within that, small procurements can be much quicker, and we are keen to continue to improve. Some progress has, therefore, been made in that area.
The hon. Lady talked about contract complexity, which I definitely recognise as a problem; the contract with some 150 key performance indicators that she mentioned is simply extraordinary. Our next step to try to simplify the system and introduce more consistency is to release a model contract for services, which sets out best-practice contracting approaches and includes a streamlined performance management regime.
The hon. Lady asked about intellectual property, which is of particular interest to technology companies in her constituency, and whether the Government still demanded that intellectual property be handed over to them. Our approach is to make that decision on a case-by-case basis. In the new model service contract, ownership of previously existing intellectual property rights will stay with the author. If the Government pay for new IPR to be created, however, in some circumstances it will be appropriate to retain ownership.
I take that point on board, and I give the hon. Lady an undertaking to feed it into the system as we look at the model contract and the best-practice contracting approaches. She spoke passionately about the need to open up more opportunities for SMEs, and I assure her that we are committed to doing so. She challenged me to get beyond mere words, and those are not just words; we can now talk about numbers. Since 2010, overall spend from Government with SMEs has increased by £1.5 billion, which is serious money. We are not concerned simply about the relentless pursuit of value for money for the taxpayer. Given the recent economic circumstances and the search for growth, it is in the interests of the taxpayer and the country that we support growth where it can be generated. As we all know, SMEs are the engine of growth in the economy, so the agenda is extremely important. As she knows, the Government set out an aspiration that 25% of Government spending should go to SMEs. Although the data are not perfect—I would not claim they were—we think about 19% of Government spending is directly and indirectly with SMEs. That is progress.
The hon. Lady talked about IT in particular. I know she has a specific constituency interest there. We are keen to break down Government contracts in IT into smaller sizes, which is essential if we are to capture the value that the SME community can bring. The massive differences in prices between the old suppliers producing old technology the old way and what can be done now through new technology are absolutely extraordinary. We are determined to break such contracts open. New presumptions are set against information and communications technology contracts worth more than £100 million and we have published an ICT strategy that explicitly supports smaller, more disaggregated approaches. We have also launched CloudStore. Some 58% of the first £54.5 million spent on CloudStore went to SMEs, which benefited from 66% of sales by number. Interestingly, the Foreign Office is a good example of success; rather than have a single ICT provider, it has split a single contract into three. G-Cloud has around 1,000 SMEs on it, which have won 66% of contract awards by number. We have also just announced the digital services framework, where SMEs constitute 84% of suppliers. I hope I can assure her that, in that space, there are not just words, but genuine achievements to point to in creating the frameworks and space for SMEs to come in and supply us with innovation and the potential to add huge amounts of value to the Government ICT spend.
The hon. Lady mentioned bad practice and sham practices in local government. The reach of central Government and the Cabinet Office in limiting local government has limits. We have, however, consulted on Lord Young’s recommendations on how we can extend some of what we have learnt in central Government and make it available for local authorities, so they can improve their procurement practice and, in particular, make it easier for SMEs to participate. We shall relentlessly bear down on the need for pre-qualification questionnaires below a certain threshold of contract. Contracts Finder has been enormously popular. It contains all opportunities worth more than £10,000. More that 19,000 contracts have been published online and 31% of contract awards have gone to SMEs. For the first time, we have published a contracts pipeline, with £169 billion-worth of contract opportunities.
We have set up a mystery shopper scheme to address bad practice and the need to blow a whistle on bad processes or notify us when things are not being done in the right way. The scheme allows suppliers to report poor procurement practice across the public sector. So far, more than 550 cases have been received, of which more than 100 have been successfully resolved in local government.
Payment terms are enormously important, because cash flow is everything when running a small business. The hon. Lady rightly asked about payment terms and whether the Cabinet Office plans to make it mandatory for large contractors to pay their subcontractors within 30 days of receipt for payment. Yes, is the answer. The Government pay all undisputed invoices within five days. We have mandated prime contractors to pay subcontractors within 30 days, through the inclusion of a contract condition in the contracts we write. The new model contract I mentioned will reinforce that, because it is enormously important. We recently consulted on Lord Young’s recommendation that those contract conditions be adopted across the whole of the public sector. There is a tremendous amount of ambition.
The hon. Lady talked about the need for post-contract audits and the need to improve the way we monitor performance. I and the Government acknowledge that. We want to do more post-contract audit, to focus on how the contract is performing, supported by much greater focus on building commercial capability and contract management in Whitehall. Too much of the capability, resource, process and thinking has been directed at the procurement process, and not at the broader commissioning process and the need to monitor and work with the supply chain after the contract is awarded, to ensure that what we bought is being delivered in the right ways.
The hon. Lady mentioned some barriers that her constituents and others face. She said that, where businesses join forces to bid for a contract, they are required to have three years of audited accounts, which they cannot provide. We are keen to remove as many barriers as possible, so that situation is suboptimal. That is why the Cabinet Office advises procurers not to request three years of audited accounts. We would be keen to review specific cases where such behaviour has occurred. The mystery shopper service is an opportunity for people, and small businesses in particular, to tell us the reality on the ground.
With that broad sweep, I hope that I have convinced the hon. Lady that our commitment to improve goes beyond words. She knows from her time in government and from the evidence she received on the Committee that such work is difficult. It is gritty. We are changing culture. We have to bring in new expertise and capability. We have to challenge the system that was frankly not very efficient at managing and spending public money. For reasons she will recognise, we are determined to secure much better value for the taxpayer, and that includes making it easier for SMEs in her constituency and others to come in and help us with the innovation, value for money and fresh approaches we desperately need.
We are ready to move on to our next debate. The protagonist has entered the Chamber. There is a lot of interest in this extremely serious health matter. As the Minister takes his place, I am delighted to welcome the hon. Member for North Devon.
It is good, Mr Streeter, to have the opportunity to debate this topic this afternoon. I have been aware of the issue for a long time. Roaccutane raises a lot of understandable passion among those who are directly affected. It is a form of the drug isotretinoin, used to treat severe acne and manufactured by Swiss pharmaceutical giant Roche. It was licensed for use in the UK 30 years ago, in 1983. Since then, in the UK alone, it has been implicated in reports of 878 psychiatric disorders, including 44 suspected suicides.
Next month, in January, it will be 10 years since my constituents’ son, Jon Medland, tragically took his own life while studying for a medical degree in Manchester. Having heard of its “miraculous” effects, Jon began taking Roaccutane to clear a relatively mild case of acne. Just three and a half weeks later, he died, having transformed from a successful, outgoing, happy young man to a withdrawn and depressed individual. Jon had never suffered from depression. Everything in his case points to an adverse reaction to the medicine. As the coroner said:
“For a drug to affect a person of a very solid life foundation...deserves further investigation”.
Despite a number of similar cases and mounting scientific evidence, we seem to have lost sight of the precautionary principle when it comes to Roaccutane. It is impossible for my constituents—Jon’s parents, Pamela and Jonathan, who are here today—and the other families affected, to achieve genuine closure while young lives are still at risk and reports continue to come in.
The purpose of today’s debate is to call for a thorough re-examination of the evidence and an investigation into the use of Roaccutane, for stricter guidelines to medical professionals on prescribing the drug and for the Department of Health and the Medicines and Healthcare products Regulatory Agency to show greater will in warning of the risks.
I congratulate my hon. Friend the Member for North Devon (Sir Nick Harvey) on securing this debate on a subject that has affected one of my constituents, Mr Derek Jones. Forgive me if I am jumping the gun by raising this issue. My constituent, Mr Jesse Jones, committed suicide, and someone who wrote to Mr Derek Jones after reading an article in The Mail on Sunday related another case. In both cases, the deceased were referred for psychiatric treatment after stopping the drug, but because suicide occurred after they stopped taking the drug, no warning was given to the right officials.
My hon. Friend makes an important point. The point when people are at the greatest risk can be as long as six months after taking the drug. In the case of John Medland, the impact was swift and profound, but in other cases, it has occurred some time later.
Is it possible, therefore, that there is a link? If the drug is a toxic chemotherapy agent, it may well have a permanent effect on the brain. Consequently, after the person stops taking the drug, it can affect their personality. Could that be the reason?
My hon. Friend tempts me beyond my limited medical expertise, but the logic of what he is describing sounds convincing. The other point to be made about the delay in some cases is that the numbers on the incidence of suicide and psychotic disorder that I quoted a few minutes ago are highly likely to be gross underestimates. For example, just this morning, I had a telephone call from someone in Cornwall who had heard a morning bulletin on his local BBC radio station referring to this debate. He said that for the first time, the penny dropped with him. He had attempted suicide and been forced out of the Royal Navy, but he had never before put the two things together. With the benefit of many years’ hindsight, he realised that it happened just months after he had used Roaccutane to deal with acne. I therefore think that it is fair to say that we are looking at numbers far greater than we first thought.
I congratulate my hon. Friend on this important debate. Given that he has said that the number of people affected may have been grossly underestimated, does he agree that what is desperately needed is robust scientific investigation and analysis of the numbers and possible causes, especially as many of the studies are not very up to date?
I entirely agree that a great deal more research is needed. My point in raising the matter with Government through my hon. Friend the Minister is that I cannot see who other than a public authority could initiate or, indeed, fund such research. It is certainly not in the manufacturer’s interest; Roche clings to the notion that millions of people have been treated with the drug without side effects or mishap. That may be perfectly true, but it does not alter the fact that, for those who have suffered a serious side effect, the impact has been devastating. I ask again: where is the precautionary principle?
What is Roche’s answer to the fact that the drug is more or less banned in the United States—one must sign a separate declaration—and that it is banned in other countries? If the drug is totally safe, why do other countries not consider it so?
What has happened in the United States is interesting. As we know, the United States has a much more litigious culture than we do in the UK, and the manufacturer there has paid out to a patient on quite a large scale. That patient suffered different side effects, but the manufacturer nevertheless had to pay out. That, combined with the fact that generic versions of the drug are now available on the US market, has caused the manufacturer to withdraw altogether from the US market.
While we are discussing the attitude of Roche, it is worth noting that the information in the drug’s packaging includes explicit warnings about the possible psychological side effects, including incidences of suicide. If Roche acknowledges that to the extent of being willing to put it on the information, it seems to be recognising that for all the millions who may have used it successfully, a cohort of the population has nevertheless suffered as a result of using the drug.
The logical continuum of that is the ultimate withdrawal of the drug altogether. Rationally, I do not think that we can ask the Government to move straight to that in one go, much as I would like them to. Were they to attempt to go down that path, in no time at all they would find themselves locked in some sort of litigation with Roche, which would certainly not stand by and watch a major market like the UK ban its product. The court would expect the Government to demonstrate overwhelming scientific evidence, which I do not believe is available as yet. That is why, as a first step, I am calling for such scientific research to take place.
On my hon. Friend’s point about calling for the drug to be withdrawn, does he agree with the dermatologist in my constituency who sent me an e-mail today saying that it would be a sad day for many thousands of acne sufferers if the drug were withdrawn completely? We desperately need this debate and the future to hinge on accurate scientific information.
I am not entirely sure that I agree. Other treatments for acne are available. I readily acknowledge that they may not be as effective, but they include antibiotics and a variety of other treatments. Unless and until we have some way to predict which people are most likely to suffer catastrophic side effects, I would prefer on the precautionary principle that no one at all took the drug. If we could predict with some certainty—whether by means of genetics or whatever—who might be predisposed to such side effects, then and only then might it be safe to argue that anyone without such a predisposition could safely use the drug, but we are nowhere near that yet. I suffered from acne and was prescribed antibiotics for 11 years or so to deal with it. It is a miserable business—no one would make any bones about that—but there are other treatments, and the catastrophic consequences for some people of using the drug suggest that we would be better off without it.
On that point, Robyn Cole, who is not my constituent, wrote a moving letter to Mr Jones saying that the best cure that she had for acne was sunshine, and if only she had been told that initially. On the dysfunctions caused by the drugs, Mr Jones wrote in an e-mail to me:
“Sexual dysfunction is not included in the patient information notes; Roche said that they were not aware of this side effect. But as one sufferer told me, if they put ‘sexual dysfunction’ in the leaflet, no one would take it.”
His son was severely affected, and Robyn Cole also tells me that she is still physically affected some years on, having given up the drug.
My hon. Friend makes an interesting point, and I am sure that he is absolutely right in his belief that if it were mentioned in the warning notes, the use of the drug would undoubtedly be greatly reduced, as we would want in the interim.
Let us look at the available scientific and anecdotal evidence that establishes a link between the drug and the effects that I have described. Roaccutane is a vitamin A-related compound that has long been known to cause psychiatric side effects. Reports of users experiencing depression have continually surfaced, so much so that in the USA the Food and Drug Administration forced Roche to produce safety warnings about Roaccutane as long ago as 1998. The following year, an Irish study found that users of the drug were 900 times more likely to suffer from depressive symptoms than patients being treated for acne with antibiotics.
Although many studies since that time have provided limited evidence, they have often been too small to be viewed as conclusive. However, I want to mention two that stand out. First, in 2005, Dr Doug Bremner from Atlanta university published a study using brain imaging before and after four months of treatment with Roaccutane. The images clearly showed an impact on brain function, associating the drug with a decrease in function of the frontal lobe—a part of the brain that regulates emotion. Secondly, Dr Sarah Bailey from Bath university undertook studies on young adult mice and rats. When the animals were put through a “forced swim” test, where they were placed in water, those on Roaccutane spent longer being immobile, without attempting to escape, than those on antibiotics—a change in behaviour consistent with depression-related behaviour in the animals. Of course, humans and mice are very different and therefore much more research is necessary. However, at the very least Dr Bailey’s findings should be seen as a caution to doctors prescribing the drug.
These studies simply are not enough. It is evident that not everyone who takes Roaccutane develops depression, but there is clearly a vulnerable population of patients who do. Investigations just have not gone far enough to find out why that group is vulnerable, but such research is vital. Surely, before we lose more young lives to the psychological impact of the drug, there is a clear case for further study on a larger scale.
Roche consistently says that it does not know the mechanism by which the drug actually works. Therefore, one might conclude that it is none the wiser about, or perhaps is not interested in, how these side effects work. However, one cannot ignore the fact that isotretinoin—I cannot pronounce it properly—is the only drug not designed to affect mental state that features in the USA’s top 10 list of drugs associated with depression. In response to the idea of a link between Roaccutane and depression, many people have suggested that the victims were already depressed because of their acne. While acne may indeed reduce self-esteem—many acne sufferers will know what I mean by that—it is an exaggeration to generally describe people who suffer from acne as being in the grip of depression.
That description just sounds ridiculous. Surely, if this drug is effective at curing acne, if someone took it and their acne was cured, they would not be depressed by having acne because their acne would have gone. There is no way acne could be described as being the cause of the depression.
My hon. Friend undoubtedly raises a logical loop, but there is the question of time scales, because even a very brief usage of the drug could have—as other hon. Members have suggested—quite a lasting impact. I simply do not accept that the horribly sudden onset of mood swings, paranoia and episodes of psychosis can be remotely compared with any feelings of lowered self-esteem that might be experienced by people because they suffer from acne.
Jon Medland, my constituent, had no history of depression. Similarly, the heartbreaking suicide note of James Sillcock, who died last year, told how he had “loved” his life, but it also said that Roaccutane had “changed his world completely”. Worryingly, a European Medicines Agency report in 2003 confirmed that discontinuing the drug may not be enough to alleviate adverse reactions. That was certainly true in a number of suicide cases, where young people realised they were “not themselves” and stopped the course of treatment, only to find themselves falling deeper and deeper into depression afterwards, which comes back to the point I was making earlier.
At the very least, this issue highlights the need for a greater awareness at all levels of the patient’s interaction with doctors; direct approaches must be made to monitor the patient’s mental state. Ultimately, we may never know how many people have been affected. Roaccutane was linked to nine suicide cases between September 2010 and September 2011, but with suicide such a sensitive topic, we can imagine that some victims’ families have not come forward. Indeed, others may not have realised the full picture—that the container of insignificant-looking pills, kept in the bathroom, for a few spots could have led someone to take their life in a state of psychosis.
It is also worth mentioning again that Roche has pulled Roaccutane from the US market. The drug first came on to the market for chemotherapy and then was marketed to a wider audience when its acne-curing properties became apparent. A number of doctors have been keen to argue that it is being overprescribed as a first-line treatment; it is only supposed to be used after at least two other medicines have been tried. In 2009, Dr Tony Chu said:
“You know with Roaccutane you can get patients off your books in six months rather than go through the mill and try them on a variety of things until you hit on the thing that will actually work for them...it’s bad medicine.”
If doctors are doling out Roaccutane with little thought about the bigger picture, they are also ignoring the psychiatric risks.
Does my hon. Friend agree that Roaccutane can only be prescribed by a dermatologist, so the vast majority of patients would have gone through products prescribed by their GP before they ever get to a dermatologist and have the possibility of having Roaccutane prescribed?
Indeed, Mr Streeter.
What my hon. Friend says should be the case, but there seems to be some evidence from some medics that Roaccutaine is being used rather too quickly.
Young people full of potential and leading happy lives have been crippled by their use of this drug. On the face of it, perhaps the proportion of users of the drug who become victims does not appear to necessitate any action being taken, but if we look at the actual numbers involved and reflect that these cases are real, we must ask what has become of the precautionary principle.
In the absence of a consensus that a link exists, the burden of proof should fall upon the manufacturers and drug agencies to prove that there is no link, given the scale of the anecdotal evidence and the picture that is building up. We need a thorough, well-funded and sizeable study into the link between Roaccutane and the adverse effects that I have described. There is a clear need for stricter guidelines to medical professionals when prescribing the drug. The Department of Health should be clear about the risks and ensure that that advice permeates through every level of the NHS. Young lives are at stake and we can no longer afford inaction.
I congratulate my hon. Friend the Member for North Devon (Sir Nick Harvey) on securing this debate, and I say right at the start that I take the issue that he raises extremely seriously. I cannot begin to imagine what families have gone through after suffering such tragic losses, but if I was in their shoes, I would be campaigning and fighting, just as they are. I applaud the work that they have done in raising an issue that is obviously of intense concern to them.
Roaccutane is the brand name for the drug substance isotretinoin—my hon. Friend and I have both had some difficulty in pronouncing it. During my speech, I will refer to “Roaccutane”, although it is one brand name of that drug. I am grateful to my hon. Friend for providing this opportunity to update the House on issues relating to the prescribing of this medicine. I will aim to address the serious concerns that have been raised about the safety of Roaccutane, including the adverse psychiatric effects that my hon. Friend and other Members have expressed concern about.
Roaccutane is a derivative of vitamin A that is used for the treatment of severe and resistant acne; it is important to stress that. My hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) made the point that it is used only in those cases.
Acne is a common condition that affects around 80% of adolescents at one time or another; it affects adults more rarely. Although acne is not life-threatening, it can have a significant impact on the lives of sufferers. In its severe forms, acne can be both extremely debilitating and distressing, causing real disfigurement and permanent scarring. It can also have a genuine impact on someone’s mental health. Many forms of acne will respond well to treatment with topical preparations or systemic antibiotics. For severe and resistant acne, however, effective treatment options are more limited.
Roaccutane has been authorised in the UK since 1983. It is available worldwide and has been used by millions of people. Roche, which first licensed Roaccutane, has withdrawn its product for commercial reasons in a number of countries, including the USA. However, other brands of the same drug—so-called generic drugs—are still available in those countries. It is a highly effective oral treatment for severe and resistant acne. However, all effective medicines are associated with a risk of side effects in some people. I appreciate that the side effect, or potential side effect, that we are talking about is of the most serious nature possible.
Unfortunately, it is impossible to predict which individuals will suffer a side effect from a medicine, but a medicine will be issued a licence only if it is considered that the benefits of treatment in the licensed indications outweigh the risks of side effects. The risks and benefits of Roaccutane were carefully considered at the time of licensing and, because of the known safety profile of this drug, it is licensed for use only for severe forms of acne that are resistant to other treatment. Since licensing, the safety of Roaccutane has been closely monitored by the Medicines and Healthcare products Regulatory Agency, with expert advice from the Commission on Human Medicines.
Roaccutane is a medicine that is highly effective at doing what it is designed to do. It is associated with some serious side effects. Roaccutane is harmful to the unborn foetus and therefore must not be taken during pregnancy. When Roaccutane is taken, common side effects include dryness of the skin and the lining of the mouth, nose and eyes. The dryness of skin that is associated with Roaccutane can take the form of cheilitis, which is cracking or inflammation of the lips. This condition can become very severe, chronic and debilitating in some patients. There has also been significant concern about the possibility that Roaccutane may be associated with psychiatric adverse effects, such as depression and suicidal behaviour.
Roaccutane is licensed for use only for severe forms of acne that are resistant to other treatment. This narrow indication for use is not the only restriction on its use in the UK. As my hon. Friend the Member for Romsey and Southampton North said, it can only be given by, or under the supervision of, a consultant dermatologist. The intention behind restricting prescribing in this way is to ensure that the health professionals with the most experience, and who are best placed to give patients advice about the important safety issues related to the drug’s use, make the prescribing decisions.
To underpin the discussions between prescriber and patient, all licensed medicines have a summary of product characteristics, which contains important information for prescribers, and are accompanied by an information leaflet for patients.
I was going to make that point. It is important that proper advice is given to patients when a drug is prescribed. My hon. Friend raises a serious concern on behalf of his constituent. I accept his point. The patient information leaflet is an essential document if the patient is to be fully aware of the possible risks of treatment and make informed choices about their care. Of course, unless they are directed to it and advised to read it by the clinician, the chances are that they will never read it. That is an important point.
I am grateful to my hon. Friend for her intervention. I am sure that that is the usual practice. However, the concern expressed by my hon. Friend the Member for Beckenham (Bob Stewart) suggests that that may not uniformly be so, though it certainly ought to be.
Since 1998, there has been increasing awareness that Roaccutane may be associated with psychiatric adverse reactions, particularly depression and suicidal behaviour. The assessment of this issue has been complicated by the fact that young people with acne are already at an increased risk of depression, regardless of treatment. All psychiatric adverse reactions were assessed by the working group on isotretinoin in 2005. This working group of the Committee on Safety of Medicines consisted of independent experts, including psychiatrists and dermatologists, who considered the available data from published literature and case reports. All new information on psychiatric adverse reactions has remained under close and regular review since that time.
The product information for Roaccutane, and the other generic alternatives, states that particular care needs to be taken where patients have a history of depression, and that all patients should be monitored for signs of depression and referred for appropriate treatment if necessary. It also states that stopping taking Roaccutane may not lead—as hon. Members have mentioned—to improvement, and therefore further psychiatric or psychological evaluation may be necessary and appropriate.
As it is associated with rare, serious side effects, Roaccutane can only be prescribed by, or under the supervision of, a consultant dermatologist. The British Association of Dermatologists has published guidelines for its members on when to prescribe Roaccutane and how best to monitor patients for adverse effects during treatment. The guidelines recommend that patients be asked about any previous psychiatric illness, and the patient and their family should be made aware that the medicine may affect their mood. Patients should be asked about psychological symptoms at every clinic visit.
I appreciate that, in the case of the constituents of my hon. Friend the Member for North Devon, there appeared to be a rapid deterioration of mental health—certainly, a deterioration that immediately followed the start of taking Roaccutane. Female patients will be asked about such symptoms every four weeks because of the need to rule out pregnancy before a new prescription is issued. The Medicines and Healthcare products Regulatory Agency keeps this issue under close review. Any new information is carefully assessed to see whether there is a need to take action to alert health care professionals and patients.
This debate has provided an important opportunity to update the House on developments relating to the prescribing of Roaccutane, which was last debated about 10 years ago in this place. As with any effective medicine, difficult issues of risk and benefit must be grappled with. Few hon. Members will not have known someone who has suffered, physically or mentally, with the scars of acne—severe and acute acne can be a disabling condition—and few would doubt the serious nature of the potential side effects of this powerful medicine, and their tragic potential consequences. In the short time available, I hope that I have been able to update the House on the measures in place to ensure safe prescribing of Roaccutane.
I sense that my hon. Friend is reaching his peroration. He has offered us reassurance that the drug is used only under the auspices of specialist doctors and, apparently, only in severe cases, although my constituent’s was a mild case. Is he minded to take any further action at all, because as yet he has not suggested anything?
I am grateful for that intervention. I was going to suggest, at the end of my speech, that I am happy to talk to my hon. Friend and his constituent, if he wants that, because this concern cannot be dismissed in a half-hour debate. I am happy to look further at his concerns, because they could not be more serious. I recognise that other hon. Members are interested as well, and I am happy to meet others, if that would be of some use. I understand the seriousness of the issue that my hon. Friend raises.
Question put and agreed to.