Tuesday 17 December 2013
[Sir Roger Gale in the Chair]
Motion made, and Question proposed, That the sitting be now adjourned.—(Karen Bradley.)
It is a pleasure to serve under your chairmanship this morning, Sir Roger.
I am pleased to have secured this debate on the Tomlinson report prior to the Christmas recess, because it is important and touches on a lot of my work on interest rate swap mis-selling. The report’s scope is wider than just the interest rate swap mis-selling scandal, and it looks at how a certain part of the Royal Bank of Scotland, namely the global restructuring group, has been operating in relation to small businesses. It is important to place on the record that Lawrence Tomlinson’s findings reflect what I have seen both as a constituency MP and in my work on interest rate swap mis-selling.
Prior to the report’s publication, Lawrence Tomlinson spoke to the all-party parliamentary group on interest rate swap mis-selling, and it is fair to say that many Members in that meeting were shocked by what they heard about banks’ behaviour. What should concern us more than the fact that Members were shocked by Mr Tomlinson’s comments is that many of them were not surprised. When some of the report’s findings were highlighted, it was concerning to see that such activity was recognised by Members from their constituency casework. If MPs are not surprised by allegations of behaviour that verges on the criminal, there is cause for significant concern about banks’ behaviour.
Since the publication of the report and its findings, there has been a certain degree of blow-back. Elements of the press have suggested that Mr Tomlinson might have a personal agenda or vendetta against RBS. I therefore want to place on the record that I have never banked or had any banking facilities with RBS, and have no vendetta whatever against it. My concern lies with the numerous constituents who have been treated in a manner that I find unacceptable. It is important to highlight what the report found and how it resonates with those of us who have dealt with businesses that have been badly treated by their banks.
The report was met with a significant degree of sympathy when originally published, but concerns have been highlighted since then. I want to examine three key issues of concern today; other Members may have different issues to discuss. First, I want to concentrate on the report’s findings in relation to whether the bank deliberately attempted to engineer situations in which businesses defaulted or breached their banking covenants. One of the report’s key claims is that businesses often found themselves in difficulties due to the bank’s deliberate efforts to ensure that that happened, including through revaluations. Once banking covenants were breached, businesses were placed in the so-called supporting hands of the global restructuring group.
The second question that deserves consideration is about the nature of the support that businesses receive once subjected to the support structure of the GRG. Is it really trying to get businesses back on track, or—as in many cases that I have seen, and in many cases highlighted by Lawrence Tomlinson—are businesses subject to unfair and penal rates of interest and charges, and often asked to pay for reports and valuations that are almost never in the businesses’ interests?
The third question is about the impartiality of the whole insolvency process. The report asks significant questions about whether the process and all the professionals involved actually operate in an independent manner. I have seen a number of cases of valuations changing dramatically because valuers have been instructed to undertake a second valuation by the bank. That raises significant concerns about the independence of those valuations. Consultants, solicitors and accountants have been asked to undertake work, paid for by the business, on the instruction of the banks. Time and again, that work has been less than helpful to the survival of the business.
When I conclude my remarks, I will touch on the selection of Clifford Chance to conduct an internal review of RBS. I have no doubt that Clifford Chance is a reputable firm of solicitors, but I have concerns about whether it will pass the smell test of being impartial enough to undertake such a review, given its links to RBS.
Have RBS and the global restructuring group been guilty of engineering a default or a breach of covenant? There are examples. A constituent of mine had a quarry with landfill rights that was valued at £9.5 million. The bank decided to enforce a revaluation of the asset, which came back at £2.5 million. As one can imagine, the impact of a £7 million reduction in value was an immediate breach of the banking covenant. After long and hard-fought efforts by the company, there was a final agreed valuation of £4.5 million. The company agreed to that simply because it was desperate and wanted to try to keep trading. How can a £7 million reduction in value occur when the company undertaking the revaluation was the same one that made the original valuation only a few months previously? That question needs to be answered. Also, why did the company have to pay £14,000 for a valuation that it successfully disputed?
I was contacted by a business yesterday with a large portfolio of flats, one of which was valued by the GRG at £100,000. A sale price of £145,000 was achieved yesterday, but the bank is still unwilling to make any compromise on the valuation of the entire portfolio. When one flat is sold for £45,000 in excess of the bank’s valuation, one must question why the whole portfolio is not re-examined from a banking perspective. The business is paying penal rates of interests on the basis that it breached its loan-to-value covenant, yet the one sale that has been achieved shows that the asset’s value was much higher than the value that the bank placed on it.
Another example, of a hotel in north Yorkshire, landed on my desk because the business has also been affected by interest rate swaps. The hotel was independently valued by Matthews & Goodman at £3.4 million, but the bank was clearly unhappy with that valuation, which gave the business a healthy loan-to-value position, so it instructed the business to get a second valuation within two months. The business was charged £3,500 for the privilege, and the second valuation came back at £1.65 million. The result was that the business was in breach of its banking covenants. It is unsurprising that the business feels hard done by: an independent valuation suggested a value of £3.4 million, but less than three months later, another valuation, done on the instructions of the bank but paid for by the business, was less than half that.
I thank my hon. Friend for allowing me to intervene. There is a similar example from my constituency. Does he agree that it is often the time scale in which the bank demands a response that kills a business completely? A business in my constituency was given 24 hours to resolve a position that was not a difficulty. The business was bankrupted and its principal has gone to work in the far east, where they have created many jobs and much good business. That has been taken away from mid-Wales.
That is a fair point about timing. Another of my constituents was told that his bank charges would be increased to a weekly fee of £4,000. The letter informing him of that arrived on 21 December, just before his business closed for Christmas, which I am sure was enjoyable because of that letter. There was nothing to be done until the new year, because the business was closed. There is an issue there. To go back to the hotel I was talking about, as a result of the lower valuation, the business can show on paper that its bank charges over the following six months were £250,000 higher than they had been in the previous six months.
I applaud the hon. Gentleman’s work in this area, and it is a joy to work with him. I want to mention a similar case involving a constituent who had a long-term arrangement with a bank. His business, which owns housing, has been told by the bank that it wants to finish his loan on 31 March, so he is required to sell the housing on 1 April. How can that be fair?
That is an issue on which the bank would have to respond, because my view is that clearly it is not fair.
I have a fourth and final example of businesses finding themselves in difficulty due to decisions taken by the bank. A company that contacted me recently had net profit of £272,000 on turnover of £3.5 million in 2008, net profit of £281,000 on turnover of £4.4 million in 2009, and net profit of £268,000 on turnover of £3.9 million in 2010. Those are all healthy figures. The company employed about 40 members of staff. In late 2010, however, an agreed overdraft facility with the bank was withdrawn, because a loan agreement under the EFG—enterprise finance guarantee—system was declined. The company was therefore put into GRG support, and the group proceeded to disallow a payment of £14,000 in corporation tax, on which basis the company found itself in difficulties and ended up going into administration. The final set of management accounts for the nine months before the company went into administration showed a net profit of £190,000. The company would argue that its difficulties were caused by the bank refusing the corporation tax payment, even though the final accounts showed a profit.
Such businesses feel extremely hard done by as a result of the way that the GRG and RBS have behaved towards them. My evidence could be described as anecdotal—I am more than happy to accept that—but it is important to emphasise that the cases highlighted in the Tomlinson report are the tip of the iceberg; they are not representative of an issue created by Lawrence Tomlinson himself. I have seen these issues in my constituency, and other Members have seen them in theirs.
Once businesses are in the GRG, the concern is that its attitude and behaviour is less than helpful. RBS argues that the whole purpose of the group is to put businesses back into health, but it is difficult to see how a business allegedly subject to cash-flow problems is helped by having an additional £250,000 in fees in a six-month period. Time and again, I have seen the fees charged by the bank go up when businesses go into the GRG, and they apparently bear no relation to the amount of work done in support of the business.
So-called independent reviews are forced on businesses by the bank, whether through a valuation, accountancy work or solicitors. Professional fees are charged to the business, but the instructions come from the bank and, often, the reports go to the bank first. We have to be concerned about that. Furthermore, the businesses often have no say whatever in who the reviewers will be. There is a question about the conflict of interest faced by those professionals: if they are being paid by a business, but instructed by the bank, surely they are conflicted in their work.
The other thing that I have seen time and again is payments by suppliers not being prioritised. There is almost never a case in which a payment to suppliers would be allowed if that took the business beyond the terms of its overdraft or facilities, and yet I have never seen a case in which charges due to the GRG have not been taken because they will take the business over its overdraft limit. That is a fair point to make, because if a business can go over its agreed limit in order to pay the bank charges, why on earth will the bank not allow a payment to a supplier if that supplier is crucial to the continuation of the business in question?
I have already mentioned a constituent of mine struck with a £4,000 weekly fee for the continuation of his banking facilities. To return to him, after three months of negotiation, the GRG agreed that it would accept £2,000 per week. There was no explanation as to why the fee was initially £4,000, or why £2,000 was now acceptable. I get the impression that the reason why it was £4,000 to start was that the bank thought that it could get away with it; the fee was subsequently £2,000, because the business put up a fight—its accountants and solicitors argued the case, as did the MP.
Absolutely. When a business is taken into the GRG in order to help with cash flow, it is difficult to envisage why there is therefore justification in imposing a £4,000 or even £2,000 per week charge for support. There is no indication of what that support entails, but it certainly does not support the cash flow—let us put it that way.
The company I mentioned was also expected to produce new accounts. It had monthly management accounts produced by its accountants, but that was not good enough for the bank, which had to have KPMG to do the work. Again, it was not good enough for the bank for the company to use its solicitors to value assets that were subsequently sold; it had to use solicitors chosen by the bank. That is oppressive behaviour by the GRG towards businesses that it is allegedly meant to be supporting.
It is important to bear in mind that when we highlight such cases, the concern is that we have examples from throughout the country, which makes the case that there is an issue here that needs to be looked at. I am pleased that the regulatory authorities are taking a look at the Tomlinson report, but I hope that they also take on board the comments made today by me and other Members on our experiences of businesses not included in the Tomlinson report. This is happening throughout the country and it needs to be highlighted.
I also want to highlight an interview with Derek Sach, the founder of the GRG, by Debtwire in October 2012, which is rather chilling to someone who is of the view that the bank ought to be there to support small businesses. He describes the steady flow of “new distressed businesses” into the GRG as an opportunity. That is a key point. If the head of the GRG considers that distressed businesses coming into his organisation are “opportunities”, his view is that the group is there not to support businesses, but to gain commercial advantage on the back of those businesses. Furthermore, if any Members present represent a shipping business, they should be concerned, because Mr Sach also emphasised that he sees significant “opportunities” in that sector, because shipping is going through a difficult period—in other words, the GRG vultures are hovering, waiting for a further supply of distressed businesses of which to take advantage.
Throughout the process, I have also seen numerous examples of instructions by the GRG not to prioritise the Crown on VAT, corporation tax or pay-as-you-earn payments. That is concerning from any high street bank, but to see such an instruction to businesses coming from a bank that was supported and saved by the taxpayer should cause serious concern to Government. I hope that the Minister will respond to that specific point.
I have a final point to make before my brief comment on Clifford Chance. The whole insolvency process is a concern. When an insolvency practitioner or administrators go into a business, the poor old creditors will often receive little in return, because the fees will take the vast majority of what is available. Hon. Members need not take my word for that, because in a recent article, James Nicholls of Nicholls & Co, an insolvency lawyer based in Birmingham, highlighted the fact that the insolvency business is complicit in what is, in my view, an abuse of small businesses. He made the point that
“we in the insolvency industry have been complicit, collaborative and have completely failed in what our true roles should be. Almost everyone in our industry has effectively been ‘bought off’ by the Banks—accountants, IPs”—
that is, insolvency practitioners—“lawyers, surveyors—everyone.” That is not my comment but a comment from somebody involved in the insolvency industry. His argument is that the industry has turned a blind eye to the behaviour of the GRG and other turnaround companies: it has been bought off by the fees and affected by the culture that has existed in the past decade.
If we are serious about supporting small businesses and supporting the growth of our economy through their development, we have to ask ourselves whether that sort of attitude towards them—seeing them as opportunities to make money rather than as businesses to be supported—is the right way forward.
Everything my hon. Friend is saying is familiar to me. I have been supporting a decent-sized manufacturing business in my constituency. The bank concerned is not RBS but another major bank; I want the Minister to be aware of that fact, and I might speak with him afterwards. When a business needs support and is feeling a bit vulnerable, perhaps because it has just lost a contract or is restructuring, instead of getting support from its bank it gets a hike in interest rates and has extra costs imposed on it—for example, an extra £10,000 a month in accountancy costs—and there is no pathway for returning to regular lending.
The circumstances my hon. Friend has described are ones I am seeing with a business in my constituency; instead of getting the support it needs, the bank’s behaviour is creating worry and concern. I am supporting that business as best as I can. This debate is a timely one.
I appreciate my hon. Friend’s intervention, as it highlights the fact that this is not only an issue for those businesses highlighted in the Tomlinson report but something that we are seeing in our own constituencies.
James Nicholls concludes the article I mentioned by saying that the insolvency industry—by that he means accountants, solicitors, insolvency practitioners and so forth—needs
“to stop defending practices that on close and moral scrutiny just do not stand up to the ‘smell test’.”
I say, “Hear, hear,” to that.
I will conclude my comments by discussing Clifford Chance. I have no doubt, as I said in my opening remarks, that it is a reputable firm of solicitors, and make no comment about its behaviour, which I am sure is of the highest standard. However, by choosing Clifford Chance to undertake an internal review of the allegations made against the GRG, RBS is doing itself a disservice and is not creating any confidence in that review process.
Let us think of the relationship between Clifford Chance and RBS over the past couple of years. Clifford Chance worked on the sale of £80 billion of toxic UK commercial real estate by RBS, which was called Project Isobel internally; it acted on behalf of RBS on the sale of RBS Aviation Capital; it was instructed by RBS to deal with the recent IT outage suffered by RBS and NatWest; and it advised RBS on the LIBOR scandal.
I have no doubt that Clifford Chance feels that it could act impartially on the review, but businesses up and down the country genuinely feel that they have been treated badly by the GRG and RBS and they need to feel confident that the bank is taking their concerns seriously. I would argue that the impression given of a conflict of interests between Clifford Chance and RBS is enough of a reason for RBS to think again and appoint another firm to undertake the review. I welcome the fact that RBS is willing to undertake an internal review, and it has argued that it is creating an independent internal review; but that independence must be beyond reproach. Given the commercial relationship that I have highlighted between Clifford Chance and RBS, it is difficult to make the case that the review will be truly independent and will be able to gain the confidence of the business community. I ask the Minister to convey my concerns on that matter to RBS.
Thank you, Sir Roger, for allowing me to speak for so long on this issue, as I am aware that other Members wish to contribute. My concerns are simple. I believe that the issues highlighted in the Tomlinson report are worthy of consideration, and that it is good that the regulatory authorities are investigating on the basis of the report. But it is also important that Members of this House from all parts of the country highlight their experiences with the global restructuring group. RBS is not, in my view, the only bank to have behaved badly, but RBS and the GRG are the focus of the current report.
I am grateful to the hon. Gentleman for giving way just as he is concluding his remarks, which have been very thoughtful. He is right to say that the GRG might not be the only perpetrator of this kind of behaviour, but it is the focus of the report. Does he think that the evidence that he has heard from colleagues and has read in the report is enough to say not just that there might have been bad practice but that, as Tomlinson appears to allege, systematic fraud is being perpetrated by RBS—is that the case that he is making?
I would be extremely wary of using the word fraud. In my view, there has undoubtedly been systematic bad behaviour and I could speak at some length about West Register, which is part of RBS, and the way in which assets have been taken from businesses by the GRG and West Register—there is a conflict there. However, even with the privilege afforded by being in the House, I would be careful about using the word fraud.
Does the hon. Gentleman agree that we could summarise the matter in this way? Customers have trusted their banks over so many years and that trust has been built up through generations. People still think that they should trust their banks, but there is now a complete imbalance in that relationship, as a practice has grown up in which highly commercially minded organisations are managing personal money and business money. People are now not qualified to understand what they are being offered by their so-called friends, the business or relationship manager and their bank.
Undoubtedly. That imbalance is something I have highlighted time and again in relation to the issue of interest rate swaps. I do not think it is reasonable to assume that we are talking about two equal parties when one is a banking organisation that has the ability to pull someone’s livelihood away from them at the stroke of a pen.
To conclude, the attention focused today on the GRG and RBS reflects the fact that RBS was bailed out by the taxpayer to such a great extent. With that taxpayer support comes added scrutiny. We should not take our eye off the behaviour of other banks and there are issues within those banks, but the key point is that the bank that we are talking about today is supported by the taxpayer and so has an obligation to justify its behaviour, over and above what is expected of other banks.
It is a pleasure to serve under your chairmanship, Sir Roger. I am delighted that the hon. Member for Aberconwy (Guto Bebb) has secured this important debate on what is an absolute shocker of a report. He has led a campaign to expose the bullying tactics that were often used by banks on interest rate swaps. We have all been quite shocked to discover that interest rate swaps were just the tip of what is a very large iceberg.
The Tomlinson report gives us an insight into behaviour that, if it is not systematic fraud, certainly reflects a culture and set of practices in the banking sector that are shocking in the eyes of most right-minded people. Small and medium-sized businesses are already struggling in a difficult business climate; to find that the very institutions that are supposed to help them through that difficult time are using practices that make their situation even more difficult—and often force them into insolvency —is truly shocking.
On interest rate swaps, is my hon. Friend aware that tailored business loans sourced from the Clydesdale bank, for example, have been excluded from regulations and from the review? Businesses taking out those loans are just as badly affected as everyone else, so does she agree that such loans should be included in a review?
Absolutely, and I will conclude later by saying that that means we really have to look at the whole banking sector. The Banking Commission has done a good job of starting to expose some of these malpractices, but they are very worrying. The issue does not affect just RBS, and it needs to be looked at more widely.
What is really worrying is that RBS would, arguably, not exist if not for the fact that it was bailed out, and is 80% owned, by the taxpayer. However, some of the practices exposed by Tomlinson represent a double whammy for the taxpayer. I can cite examples of RBS using the GRG to take money out of bank accounts that businesses had set up expressly to pay Her Majesty’s Revenue and Customs. The bank was, therefore, not just taking taxpayers’ money so that it could continue to exist, but taking money from accounts specifically set up to pay HMRC.
I started to get involved in this issue as a result of constituents coming to see me about interest rate swaps. One particularly big example involves a man who owns care homes, which are disproportionately affected by interest rate swaps. He was a solvent customer running a successful business, but RBS bullied him into taking on loans that included interest rate swaps. He wanted to refuse, but RBS bounced his cheques until he took the loans on. He is now involved with the GRG, even though it was expressly set up for severely distressed customers. He is not in severe distress now, but he soon will be, because the money he has to use to pay back the interest rate swaps RBS forced him to take on should be going into investing in his care home business. In addition, when RBS first forced him to take on the loan, the exit fee was £10,000. Only a few months later, it was £150,000. Given the amounts involved, we really need to start taking a serious look at what RBS is doing.
The hon. Member for Aberconwy was reluctant to use the word “fraud”, and I understand why, because it is a serious accusation. However, what I would like to hear about from the Minister is the reverse: what makes him confident that systematic fraudulent activity is not happening in RBS? I am focusing on RBS because that is what the Tomlinson report focused on, but also because RBS is more than 80% state owned. What makes him confident that the bank is not forcing people into the arms of the GRG, with the result that perfectly solvent businesses are not solvent any more, and asset stripping them at the same time? What makes him confident the bank is not taking huge fees from companies that bank with them, asset stripping them and making sure they can no longer exist properly?
On that point, the bank sold the business of one of my constituents, which was bought by another of the bank’s customers, who then found themselves in exactly the same situation as their predecessor. The bank therefore profited from not only the distressed sale, but what happened afterwards. Worse still, the sale happened as a result of interest rate swap mis-selling, but there is another interest rate swap agreement with the new company, so something that happened in 2005 happened again in 2007. Very often, these things are happening to the people who provide large numbers of jobs in our constituencies—the businesses that will provide the jobs and the growth.
Indeed. Those responsible are laughing all the way to the bank—ha, ha! The engineering of loan defaults allows a company to be put into the GRG. What we find, and what we see in the Tomlinson report, is that the lending is refinanced—companies are forced to refinance—and the bank gets far higher margins on the new loans. The bank also prioritises taking disproportionately high penalty fees from companies.
All of that is chipping away at small and medium-sized companies, which just want to get on with their business; they do not want to have to worry about what these massive organisations are doing. The banking sector is supposed to help people. Before the crash, banks were over-generous in flinging money at people; after the crash, they have become highly reluctant to lend even to perfectly good businesses. Where they do make business loans to companies, they are behaving, if not fraudulently, then at least appallingly badly, as I think we can all agree.
The all-party group’s investigation into interest rate swap mis-selling revealed not just the banks’ bullying tactics, but many cases that highlighted the imbalance between the size of the banks and the size of small and medium-sized enterprises, which the hon. Member for Wells (Tessa Munt) mentioned. We recently had a meeting with the Minister about that very issue. Can we really say that individuals have access to justice, when RBS—I repeat that it is mainly state owned—can call on some of the best legal minds in the country to support it against tiny businesses? I would say that those businesses do not have access to justice, and I would like the Minister to look at that.
To return to interest rate swap loans, which is where all this started, another problem is the foot dragging by the banks, which are looking into this, and which would say they are dotting the i’s and crossing the t’s; by the Financial Conduct Authority, which is also making sure it gets everything absolutely right; and by the Treasury, which is not putting enough pressure on the banks and the FCA to make sure this issue is dealt with swiftly. As we have seen, exit fees can go from £10,000 to £150,000 in only a few months, and interest rate swap mis-selling is costing businesses vast amounts, so every day matters, because all this money is going to the bank, not the businesses.
We cannot be confident—the Tomlinson report highlights this—that systematic fraud is not going on, perhaps in the wider banking sector, but certainly in RBS. I would really like the Minister, when he responds, to say what he is doing to make sure we can be confident that systematic fraud is not going on at RBS and more widely in the banking sector. I will conclude there, because I would like to give him as much time as possible to respond.
I congratulate the hon. Member for Aberconwy (Guto Bebb). I must be honest: I had not intended to speak, but given that there are so few contributors, I want to say a little about my experiences and, more importantly, those of some of my constituents. I also congratulate the hon. Gentleman on the work he has done over a sustained period with the all-party group on interest rate swap mis-selling, which is what initially drove me towards the all-party group.
I want to tell Members about the sad experience of one of my constituents four or five years ago, although I suspect that one or two people in the room will be sick of hearing about it. The story initially confused me, and that is part of the problem: this is a complex issue, which makes it all the more difficult for a layperson to understand. As anyone who has had a constituent come to them to explain their difficulties will know, it takes considerable time to plough through what the constituent is saying, and to begin to understand the complexities of the banking system that has been operated for businesses for a considerable time. The lack of understanding that MPs will have initially, coupled with the fact that perhaps some sectors of the media do not understand the problem, means that light has not been shone on the issue in the way that it deserves to be. Stuck in the middle are businesses, which are going to the wall. As a result, people are losing their jobs. That is having an impact on family life across the length and breadth of the country.
A gentleman who was banking with Barclays bank got in touch with me about a family-run business that had been around for more than 20 years. It operated caravan parks in four parts of the UK: one was in my constituency, a couple were in the south Lake district, and one was in the Yorkshire dales. The company was encouraged, by almost a separate arm of Barclays bank, to look at investment in the business; the offer came in that guise. It was told, “We have set up a special arm of the bank to assist you; we can do some good business here and develop your business further.” The end result was the bank shifting products; it asked its client to sell one product back to it and to take out another. It ended up with three of the parks having to be sold so that the company could retain one, which continued to operate in Dumfries and Galloway for a period.
The businessman was reluctant for me to create any kind of a storm, because he could see that the first thing the bank would do was immediately move to close the business down. However, time passed and eventually administrators moved in. It all happened at and around the time of the LIBOR scandal and the involvement of The Daily Telegraph and Guardian Care Homes. That very much drew the issue into the spotlight, and as a result, I had a closer look at the case that my constituent had brought to me. I went to the administrators and said, “Quite clearly, this is a case of mis-selling. If this is mis-selling by the bank, and you are conducting business on behalf of this bank, you are doing nothing more than driving this business to the wall.” The administrators could not work quickly enough; basically, they drove the business into the ground.
That comes back to the point that the hon. Member for Aberconwy hinted at. The administrators were fine; their cheque was signed off. However, anyone else who was owed money was left waiting in the wings. The administrators and anyone dealing with the insolvency are absolutely guaranteed their money, despite the plight that many businesses are in. The shocking thing about the business that went down was that it did so owing £1.2 million, of which £900,000 was bank charges. That was punishing—crippling—and it destroyed that business. Goodness only knows how many other businesses the length and breadth of the country have experienced the same thing.
The Tomlinson report’s title is “Banks’ Lending Practices: Treatment of Businesses in distress”. Businesses in distress is one thing, but businesses being driven into distress is completely different. We heard this morning from the hon. Gentleman, and from my hon. Friend the Member for North East Derbyshire (Natascha Engel), about some experiences; I have three cases before me. One involves a gentleman whose small business—the family have a number of businesses—is some 200 yards along the street from my office in my constituency town of Dumfries. He discovered that the bank was dipping into other bank accounts—not only those that were relevant and related to his business, but those of family members. It had taken total control of all his finances. That poses a serious question mark about how banks are carrying out their business and what they are doing to people.
When my constituent contacted me, I said, “Come back to me in a couple of days”—because he was scheduled to meet the bank—“and let me know what action I need to take.” He came back saying, “It look as if they are prepared to move and assist.” The fact was that those were mere platitudes. The bank did not help him one iota, and that business, which is down the street from my constituency office, is closing down.
Another businessman who is, again, involved in caravan and camping sites has been mis-sold products. He does not have a kind word to say about the global restructuring group. His view is that the bank will quickly move to settle with him on the products that he was mis-sold. There has been an admission, but he also knows what is waiting in the wings. If he takes that early settlement, it will move in on other aspects of his business and close him down. That is no way to treat people who have probably been loyal customers of these banks for many years.
The most shocking case I have concerns a gentleman who is involved in property and is a private landlord. In the mid-1990s, his business had a value of about £300,000 to £400,000; gradually, over the years, he built that up into a business that provides jobs, of course, as well as a roof over the heads of individuals and families, and it was worth several million pounds. He then fell foul of the bank. He made me aware—he is an astute businessman—that he was always wary of the bank’s promises that what it was selling him was good for his business. The value of that business has fallen dramatically, and it may be worth somewhere in the region of £1.5 million to £2 million. However, stuck in the middle of all that are people living in homes that he is providing as a private landlord.
Does my hon. Friend agree that private landlords seem to be targeted by the banks? I had a constituent in that business who was taken to a hotel in Glasgow and treated to a big presentation about how the loans could help with the business. They were not told all the facts and then ended up getting into difficulty. Does he agree that this has been a conscious effort to dupe people?
I can only agree with my hon. Friend. I do not think there is any doubt that certain sectors have been targeted. I mentioned at the start of my contribution the caravan camping leisure sector, which Barclays had created a separate arm for, so there is no doubt there. Let us be honest: the types of businesses that can grow, even under difficult financial circumstances, appear to be targeted. There is an indication in the Tomlinson report that there have been elements, if I can put it this way, of predatory practice.
Again, I want to emphasise the point made by the hon. Member for Aberconwy: this is about businesses being told what is good for them. It is about businesses, once they get into financial difficulties, being told, “We need a report. We need someone to come in and do some work on how you’re running your business. We need valuations—and, by the way, you’ll pay for them at our behest.” The cost is not a few hundred pounds, or a couple of thousand pounds. These are significant sums of money. In any other world, we would call what the banks are doing an absolute rip-off. They actually gerrymander the valuation of businesses. That is simply not acceptable.
On the last couple of occasions on which I have attended meetings of the all-party interest rate swap mis-selling group, chaired by the hon. Member for Aberconwy, I have made this plea. The Royal Bank of Scotland—I should have declared at the beginning of my speech that I have banked with the Royal Bank of Scotland for more than 40 years; I try my best to keep on the right side of it—is 80% state controlled. We cannot release it back to where it was before the banking crisis. I have been pleading with the chair of the all-party group, and there is a Minister here this morning, so I plead with him: do not release the Royal Bank of Scotland and send it back whence it came, because we need some kind of control over this bank until some of the problems that it has caused are sorted out.
I know that the hon. Member for Aberconwy was anxious about the language that we should use in this place, despite the cover that we have, but I think that there is a culture of predatory business that is destroying businesses and, more importantly, destroying people’s lives. I apologise if I have missed a piece of work that the Select Committee on the Treasury has carried out, but I think that we need some of these people back in front of the Treasury Committee, explaining some of the charges that they are imposing on business. They are crippling business, not helping it. These big banks are organisations that we all looked at years ago, before the crash, and thought, “These are decent people that we can all do business with.” Frankly, they have been wolves in sheep’s clothing. They do this nation and the economy of this country no good whatever when they take businesses down.
It is a pleasure to serve under your chairmanship, Sir Roger, as we discuss a subject that is vitally important for small business owners across the country. As someone who was a small business owner before coming into this place, I like nothing more than the opportunity to reflect on what is happening with small businesses and, of course, the vital relationship between small businesses and their banks.
I congratulate the hon. Member for Aberconwy (Guto Bebb) on securing the debate. Everyone in the House will know how much of his parliamentary energy he has dedicated to the cause of small business redress, most notably through his campaigning on the interest rate swaps issue—an issue about which he and the Opposition share many concerns.
This debate and this report go to the heart of several big questions that Government and society need to address. What are banks for? Whom should they serve? What is the role for Government in that relationship? Where does the balance lie for banks in protecting their own interests and those of their customers when a conflict is seen to exist? A key question is not whether there has been any wrongdoing, but whether, as has been alleged in the Tomlinson report, there has been systematic fraud by Britain’s largest bank. We need to be clear that that is what Tomlinson is suggesting in his report. It is an incredibly powerful and potentially huge allegation from someone who sits at the heart of Government as an entrepreneur in residence at the Department for Business, Innovation and Skills.
The report also poses questions about how a responsible Government should balance the need to expose wrongdoing and scrutinise questionable practices, which has come across loud and clear in this debate, with the need for a measured and considered approach to evidence gathering, particularly when the allegations are as serious as those made in the Tomlinson report. The report is clear in its call for a change in the culture of British banking. Indeed, Tomlinson echoes concerns and remedies that the Opposition have already called for.
Mr Tomlinson is a much respected entrepreneur who has won admiration from across the business sector for his own business success as a British manufacturing success story, but he is involved in a long-running and bitter dispute with RBS. Given the way in which his report changed between the original draft that was sent to RBS and its subsequent publication, many people feel disquiet about the independence of the report and the strength of the evidence base that led to a report as hard-hitting and potentially damaging to UK plc as this one.
As my hon. Friend the Member for Streatham (Mr Umunna) has said and few will disagree, there were many things wrong with banking practices and many causes for concern about the way in which the relationship between businesses and the banks has been conducted in recent years and continues to be conducted today. That was why my hon. Friend publicly called for those guilty of LIBOR rigging to face jail, and why Labour has led the way in calling for decisive action on the mis-selling of interest rate swaps. We have been very much with the hon. Member for Aberconwy on that. We have been resolute in calling for speedier action to bring about closure and settlement for companies that were mis-sold products, and concerned at the way in which the Financial Conduct Authority has failed to ensure that the banks complied with timetables that they had promised to adhere to. At this stage, I would like to place on the record my admiration for the work done by Bully-Banks to highlight some of these issues and to ensure that the matter is kept under the glare of public scrutiny. Indeed, as we meet today, banks have paid out less than 3% of the amount that they have set aside for compensating the victims of that scandal.
Those concerns were also why Labour tabled an amendment to what was then the Financial Services Bill that would require Ministers to bring forward proposals to help firms to pursue collective redress against the mis-selling of swaps, which the Government combined on to vote down.
I think that many important points have been raised during the debate and that is certainly one of them.
We share the disappointment at the continued excesses in bank bonuses and the failure of the Government’s bank bonus levy to yield the returns that it promised. After all, we are having this debate just a day after publication of a survey showing that managing directors at banks in London are expecting a 44% rise in bonuses for 2013.
I turn now to some of the contributions made by hon. Members to the debate. Unsurprisingly, the hon. Member for Aberconwy made a series of significant contributions to the debate that he initiated. It was interesting that he reflected on the fact that Tomlinson had spoken to the all-party group on interest rate swaps. I was surprised to discover that during this process, Tomlinson never spoke to RBS and never gave it an opportunity to put the allegations that he was making in an alternative light.
The hon. Gentleman refused to take the bait that I generously offered him to say that the behaviour highlighted in the Tomlinson report would have verged on the illegal. I think that he understates the case. Tomlinson is fairly unequivocal. He is clearly alleging systematic fraud on the part of Britain’s largest bank—in effect, it is feathering its own nest by bringing down businesses that without the intervention of the bank would have survived and thrived.
It is fair to say that the allegations in the report are extremely serious. That is why, in my initial remarks, I welcomed the fact that the Government have referred the report to the relevant regulatory authorities—because I think that it is important that those allegations are looked at very carefully. However, the purpose of this debate was to highlight the significant effort in the media to portray Mr Tomlinson as a gentleman with a vendetta against RBS. The opportunity today was to highlight the fact that constituency MPs have seen behaviour by RBS and the GRG that is identical to that highlighted in the report.
There is no question about it: we have heard a lot of evidence of that sort. I agree, of course. I welcome the fact that the Government have referred the report on, but it is hard to see how they could have done anything else, on the basis of the strength of the report. The way in which the situation has been handled poses questions about judgment in terms of the seriousness of the allegations being made.
The matter will now be looked at by the Financial Conduct Authority. We are talking not about an external report to which the Government have to respond, but about a report written by someone at the heart of Government, which is apparently based on anecdotal evidence and which does not give RBS much of a right of reply. That is why I have questions.
The hon. Member for Aberconwy raised a legitimate question about the impact of the charges levied by banks on businesses that are already struggling with cash flow, and the powerlessness that businesses feel when they enter the restructuring process. In some cases, a business enters the process knowing that it is in trouble and feels as though the process is making the situation worse. I also recognise that Tomlinson highlights, as my hon. Friend the Member for Dumfries and Galloway (Mr Brown) has said, the fact that some businesses did not consider themselves to be in crisis until the moment they entered the process. The report raises many questions and we need to hear the Government’s response. It is important that we continue to put pressure on the banks, and indeed it is hard to see how that pressure will be alleviated.
My hon. Friend the Member for North East Derbyshire (Natascha Engel) highlighted suspect practices by RBS that were experienced by a business in her constituency. She repeated Tomlinson’s claim that systematic fraud was taking place. Interestingly, she asked the Minister to explain why he was certain that such practices were not occurring. Given that the report has come from the heart of Government, I imagine that he must be pretty clear that such fraud existed. I do not want to prejudge his comments, but I would be interested to hear what he has to say on that. My hon. Friend also made a significant point about the imbalance and unfairness of the relationship between banks and firms that are battling to stay afloat and do not have the resources to take on a major bank.
My hon. Friend the Member for Dumfries and Galloway raised an example from Barclays that it made it clear that such practices are not confined to RBS, although the Tomlinson report was entirely about RBS. My hon. Friend focused on businesses being driven into distress. He said that RBS was 80% state controlled. Although RBS is state owned, it has become clear under successive Governments that the bank is not state controlled; it is run in its own way. Perhaps we need to consider the fact that an organisation owned by Government is not always working in the best interest of British businesses and UK plc.
As I have said, we share many of Mr Tomlinson’s concerns and conclusions, and I now turn to the areas on which we agree. The Tomlinson report recognises the fundamental faults of the lack of competition in the British banking system, on which the Opposition wholeheartedly agree. Some 89% of small businesses are locked into the big five banks. The report also speaks of the need to change banking culture so that banks see small businesses as partners rather than merely cash cows, and so that the two can grow locally together. Such a model would not only be good for small businesses but lead to a stronger and more durable overall economy. That is why Labour proposes a new generation of local banks based on the Sparkassen model to add genuine competition on the high street. That would create a major new player that would not operate according to the same lending models as all the other banks, and would boost local decision making.
Although net lending has fallen every year during the crisis, our biggest European competitor, Germany, has seen an increase in lending over the same time. After the crash in 2008, a crisis occurred in bank lending, and far from being improved in the years since, it has continued to constrict. Tomlinson is right to say that we need greater competition. Alongside the new local entrants to the banking market, we are calling for greater bank account portability to ease the path into the market. Even a huge bank such as Santander found it exceptionally difficult and expensive to gain a foothold in the UK market.
We also agree that the culture of selling additional products and services alarmingly supersedes that of best serving customers’ needs, as was demonstrated by the interest rate swap scandal. Britain is currently facing a mutual crisis of confidence in small business lending, and in the relationship between banks and businesses more widely. A survey of members of the Federation of Small Businesses found that more than half of small businesses believe that banks do not care about small businesses, and, similarly, banks fear lending money to businesses. Such mutual distrust is one of the reasons why we have had the slowest recovery for 100 years. The Tomlinson report will, indisputably, further damage the confidence between banks and businesses. The Government have a grave responsibility to ensure that, when such damaging criticisms are made, every possible step has been taken to verify and scrutinise those criticisms before the Government endorse them.
In that context, we have significant reservations about a report that contains such serious allegations of systematic and widespread corporate fraud. There are concerns that, at best, the Tomlinson report will not be seen as being truly impartial. We have reservations about the Government’s endorsement of the report when its evidence base has not been subject to any public or, as far as we are aware, departmental scrutiny. The Secretary of State for Business, Innovation and Skills told the House during recent Business, Innovation and Skills questions that Tomlinson’s
“accusations are echoed in the report published by Sir Andrew Large, who was appointed by RBS.”—[Official Report, 5 December 2013; Vol. 571, c. 1080.]
However, the Tomlinson report states that businesses rarely survive the global restructuring group process, and that they never come out again. Tomlinson highlights the fact that
“a whistleblowing ex-RBS banker confirmed that they could not think of any occasion in which a business entered RBS’ Global Restructuring Group and came back into local management.”
The report by Sir Andrew Large showed that 50% of businesses traded out of the GRG, and that only about 10% became insolvent, so it is difficult to see how the Secretary of State could use the Large report as a justification for the publication of the Tomlinson report.
The Parliamentary Private Secretary to the Secretary of State for Business, Innovation and Skills appeared to be supportive of what the hon. Member for Aberconwy said, so I do not know whether his contribution has the Secretary of State’s implicit support. The hon. Members for Aberconwy and for Wells (Tessa Munt) certainly appeared to be working collaboratively. The allegations in the Tomlinson report are incredibly serious, and they clearly carry the stamp of Government.
If Labour had been in office when the issue came to prominence, we would not have been as quick as the Secretary of State has been to rush out this departmental report, about which there are many questions to answer. I am told that if Tomlinson had chosen to speak to RBS, he could have been referred to companies such as Samsonite, Fairline, Independent Slitters Ltd and many others, which would have told him that the GRG process was positive for them. He chose not to do so, and as a result the report represents serious concerns but does not reflect all points of view in a balanced way.
Had Labour been in office, we would have ensured that the FCA, which is the appropriate body to investigate such grave allegations, was immediately commissioned to conduct a full and proper inquiry before the trust between banks and businesses could be damaged by a sensational report such as the Tomlinson report. I do not suggest that bad practices do not exist or that we have not been pushing the banks to identify where they have failed their business customers, but we consider that the anecdotes in the report provide a pretty tenuous basis for such serious allegations to be made with the stamp of Government approval.
With that in mind, I ask the Minister to address the following questions. Was the Secretary of State aware of Mr Tomlinson’s ongoing dispute with RBS when he was commissioned to produce the report? If so, what assessment did the Secretary of State make of any potential conflict of interest before giving it the departmental stamp of approval? Why did the Secretary of State trumpet the report as independent when it was produced in his Department by someone with a close interest in both the party and the issues under discussion? Why were earlier references to malpractice at Lloyds removed from the final version of the report so that it focused purely on RBS, the bank with which Mr Tomlinson is in dispute, and why was RBS not shown the final report, nor given a chance to submit evidence to it?
The report is sadly lacking in detailed referencing and evidence. Given that the basis of the report seems to be that many of the businesses will have collapsed—presumably, that is on the public record—will the Department be publishing detailed citations for where the allegations have come from? Is the Minister personally satisfied that due diligence was carried out by his Department before it promoted the report? Does he agree that if the report’s claim that RBS was systematically involved in deliberately distressing businesses that would, without its intervention, have thrived, that would be a matter of corporate fraud on a huge scale, and such an allegation should be thoroughly investigated before being produced in a Government-backed report? Does he think that the appropriate level of scrutiny was given to the report prior to publication?
Finally, as we head towards a general election, I suspect we will hear from Ministers why they think the way in which the Secretary of State operated was not the way things would have been done under a Conservative Government. If we had a purely Conservative Government, would they have handled the report in the same way? If not, in what way would it have been different?
I will start by welcoming you to the Chair, Sir Roger, and congratulating my hon. Friend the Member for Aberconwy (Guto Bebb) on securing this important debate. I will try to address the concerns raised, and I thank all hon. Members for their contributions in this debate.
SMEs are a vital part of the UK economy; they contribute significantly to economic growth. Access to finance is important for funding investment, ensuring businesses reach their full potential, and for facilitating new business start-ups. As hon. Members who have contributed to today’s debate have made clear, it is essential that our banking system works in the interests of SMEs and treats them fairly.
I will turn specifically to the report. Lawrence Tomlinson is one of BIS’s two entrepreneurs in residence. His appointment was made by BIS officials, not by Ministers, following an open competition for which there were more than 200 applicants. Mr Tomlinson is independent of BIS, but, as an entrepreneur in residence, he has the scope to explore and raise matters that he regards as important to SMEs. His report was prepared in that context, so it was not commissioned by the Department or by Ministers. It was a personal report by Mr Tomlinson; it is not a Government report.
I will deal with the questions asked by the hon. Member for Chesterfield (Toby Perkins), which were all in the same vein. He referred to the report coming from the heart of Government, so it is worth restating that this is a personal report by Mr Tomlinson. It is not a Government report, so Mr Tomlinson was free to publish whatever he saw fit. No Ministers or officials were involved. What was eventually published by Mr Tomlinson was entirely his own choice. It was also his own choice whether to involve the banks that he refers to in the report and what resources he wanted to use.
The hon. Member for Aberconwy referred a few moments ago to the smell test. I do not know whether the Minister is attempting to distance himself from the report, but anyone applying the smell test would say that an entrepreneur in residence at the heart of BIS was the person selected by BIS officials to do a report that was promoted and welcomed by the Secretary of State for Business, Innovation and Skills. It does not feel independent.
I disagree with the hon. Gentleman. The value of the report is that it is entirely independent. It was done by Mr Tomlinson in a personal capacity. He was free to look at any of the issues that he saw as important to the SME sector. I will look at the important issues he has raised, but at this stage I want to make it clear that it was a personal report by Mr Tomlinson and not a Government report. Once that is taken into account, the answers to the questions that the hon. Gentleman asked become clear.
The allegations made in Mr Tomlinson’s report are deeply concerning, and they have raised questions as to whether banks—particularly RBS—are treating their customers appropriately. We expect all banks to act with integrity across all the business activities that they engage in. Separately, as we have heard, the new management of RBS also commissioned Sir Andrew Large to conduct an independent review to examine RBS’s support to SMEs and the decisions that they make on SME lending. Following that review, a report was published on 25 November, and RBS has committed to implement its recommendations in full.
The reports, which were not Government reports, contained some very serious allegations, as we have heard from various hon. Members, particularly from my hon. Friend the Member for Aberconwy. It is now the responsibility of the Financial Conduct Authority to undertake investigations into allegations surrounding RBS’s lending practices and treatment of small businesses.
The FCA has now considered both reports. It has notified RBS that an independent skilled person will be appointed in accordance with the FCA power under section 166 of the Financial Services and Markets Act 2000 to review the allegations made against RBS.
First, the FCA has yet to appoint the skilled person. I am not aware of a specific time limit, but it is fair to say that the FCA understands the urgency of the situation and the need to look into the allegations as quickly as possible. However, the hon. Lady will agree that it should take whatever time is necessary to get to the bottom of such serious allegations. The FCA will need to be satisfied that the skilled person appointed to review the allegations is sufficiently independent to carry out the work.
I am sorry to press this, but one of the very serious issues is the foot dragging, and the more time that is taken, even if it is under the guise of making sure that every i is dotted and every t is crossed, means more small and medium-sized businesses are unnecessarily going under, so the time pressure is really serious. I want to re-emphasise that the FCA must be put under pressure by the Treasury to ensure that the review is done as quickly as possible.
I agree with the gist of the hon. Lady’s comments, but I am not sure what she means by foot dragging. The report was published on 22 October. On 23 October, it was given to the FCA, and, within days, the FCA announced that it would investigate, so it would be wrong to accuse the FCA or anyone else of foot dragging, but she is right to suggest that we must stay on top of this and make sure it is handled in a timely way.[Official Report, 19 December 2013, Vol. 572, c. 7MC.]
The hon. Lady and other hon. Members mentioned the allegations of fraud in the report. They will understand it is not for Ministers to determine whether criminal activity by any institution or individual has or has not taken place. That is something that the courts and authorities must look into. If she or other hon. Members have been contacted by businesses with concerns, it is timely to remind her that micro-enterprises can go to the Financial Ombudsman Service with any such concerns. Businesses can also raise concerns directly with the FCA, which will investigate if it is appropriate, and of course any organisation is free to go to the police with any concerns about criminal activity. The police may involve other authorities such as the Serious Fraud Office.
In respect of some of the issues that hon. Members may be hearing about, as the Minister is aware, the arm of RBS operating in Northern Ireland is Ulster bank. Customers of that bank talked to Tomlinson, and other issues have arisen since the report. Will the skilled person appointed by the FCA look specifically at questions about the practices that seem to have been instilled into Ulster bank as well?
My understanding is that the FCA’s investigation through the skilled person will examine all allegations in the report and some similar allegations in Sir Andrew Large’s report.
I also mention, as my hon. Friend did, the Clifford Chance report commissioned by RBS and described by RBS as independent. I note my hon. Friend’s concerns about Clifford Chance; I listened carefully to what he said. Although it is for RBS to decide whom to appoint, I will ensure that his concerns are conveyed to RBS.
The hon. Member for Dumfries and Galloway (Mr Brown) discussed the future direction of RBS. He and others will be aware that on 1 November this year, the new management of RBS set out a new direction for the bank, which will lead RBS to boost the British economy rather than burden it. It will also enable RBS to focus on its core British business of supporting British families and companies. Ross McEwan, RBS’s new chief executive, has committed to improving RBS’s lending performance across the UK and announced the ambitious goal of becoming the No. 1 bank for small businesses and enterprises throughout the UK, as measured by a newly created independent survey to be run by the Federation of Small Businesses and the British Chambers of Commerce.
The Tomlinson report also recommended that state-owned banks be split into small banks focusing solely on retail and commercial lending as a means of improving competition in the banking sector. The Government are already committed to greater competition and diversity in the UK banking sector both locally and nationally, which is why we asked the Independent Commission on Banking to investigate competition issues in the UK banking sector as part of its work.
The ICB uncovered a number of issues, and we are taking forward its recommendations in the Banking Reform Bill and through other legislation. We are removing the competitive advantage that big banks get from the “too big to fail” system by introducing ring-fencing in the Bill. We have also secured a new seven-day switching service delivered by industry that will allow both consumers and SMEs to switch businesses accounts far more easily, and we have introduced a strong competition objective for the regulator, the FCA, to help it promote competition much more effectively.
The new regulators have already introduced big changes on the regulatory side to make it easier for new banks to enter the market, grow and compete with the large incumbent banks. We are also taking further action in the Banking Reform Bill by creating a new payments regulator to ensure that new and smaller banks have fair and transparent access to the payment system, and giving the Prudential Regulation Authority a secondary competition objective to strengthen its role in ensuring competitive banking markets. The Bill will also give the FCA further competition powers.
Hon. Members mentioned the future of Lloyds and RBS. At the national level, both RBS and Lloyds are in the process of divesting part of their UK banking businesses, creating new challenger banks. The Government have taken the first steps to return Lloyds to the private sector and are actively considering options for further share sales. The reintroduction of the TSB brand on the high street is great news for competition. That action is further evidence of the Government’s stated aim not to be a permanent investor in the UK banking sector.
The Government do not believe that there is a strong case for breaking up the core operations of any bank in which we have a stake. The cost of reorganisation would be attributable to the banks, and consequently to the taxpayer. The time required to execute such a reorganisation would also be lengthy, further delaying the Government’s ability to return the banks to private ownership.
Before I conclude, I turn to a couple of the other issues raised by hon. Members. My hon. Friend had concerns about insolvency, relating not just to the Tomlinson report but to the process more generally. His comments show how much he has researched the subject, so I take what he said seriously. He will know that the Department for Business, Innovation and Skills is the lead on insolvency issues, but I will ensure that my colleagues in BIS are aware of his concerns. Perhaps, if he finds it useful, I could arrange a meeting for him with the relevant Minister to discuss this important issue.
My hon. Friend will know, however, that insolvency procedures can be commenced only by a court order, and that the whole process is subject to supervision by courts. It is deliberately designed to ensure transparency, make the process legitimate and provide a forum for any disputes, as they often occur throughout such a fought process. I will take the issue forward for him and see whether more can be done to listen to his concerns.
I suspect that the extent to which the Minister has attempted to distance himself and the Government from the report speaks volumes. Does he believe that how BIS and the Business Secretary have handled the Tomlinson report and its impact on RBS’s performance is ultimately helpful to this Government’s future success, or does he think that it should have been handled differently?
I say again for the record—I hope that I have made it clear to the hon. Gentleman—that this is a personal report by the entrepreneur in residence at BIS. That has always been the Government’s position, and neither BIS Ministers, Treasury Ministers or any other Ministers have ever said anything different. Nevertheless, it is an important report. He will know that the entrepreneurs in residence initiative was started by this coalition Government in order to allow further analysis of what can be done to help the SME sector.
In that vein, we welcome the Tomlinson report, which is why we take its allegations seriously and why we are pleased that the FCA has acted quickly so far to consider them. This debate has shown how much parliamentary interest there is in the issue on behalf of our constituents, due to the number of small businesses in our constituencies that have come to us with similar concerns.
The hon. Member for Chesterfield (Toby Perkins) highlighted concerns about the fact that there was no advance consultation with RBS, but in his comments, Sir Andrew Large said that managers at RBS had very little understanding or scrutiny of the global restructuring group. In view of the fact that the report highlights concerns about the GRG, is it really a huge loss that consultation did not take place with a group of managers who did not know what was going on within the GRG, according to Sir Andrew Large?
My hon. Friend raises an important point. I hope that all that will be considered in the independent inquiries taking place.
I congratulate my hon. Friend once again on securing this important debate on issues about which he and many other Members feel strongly. Those issues will be seriously considered by the FCA, and further as required. It is important at this stage, though, to allow the FCA, as the conduct authority, to investigate the claims made in the Tomlinson report.
I am very grateful to have the opportunity to raise this subject in Parliament. It was first brought to my attention by a constituent; I will obviously keep her name confidential, but she is content for me to discuss her experiences, which are not unusual. Hypothyroidism is not a small or niche illness; it is estimated that up to 3.5 million people in the UK may have a thyroid problem. It disproportionately affects women compared with men, by a power of 10, and the effects of the disease can be really debilitating, with the many symptoms including tiredness, aches, weight change, coldness, memory loss and depression. Even more seriously, the disease can impact on the functioning of the heart. The problem is that many of these symptoms are not unique indicators, and therefore they may be hard to pinpoint or describe.
When someone is suspected of having an underactive thyroid, or hypothyroidism as it is known, their GP will usually do a blood test to check the levels of the thyroid-stimulating hormone, or TSH. This test is called the TSH or FT4 test. In the UK, an abnormal test result will only come back for someone who is above the “over” levels of the TSH bell curve for the population. That means that some people may have sub-clinical levels of hypothyroidism but they are not flagged up for treatment. Once again, there is a disparity between the number of men and women with sub-clinical levels of hypothyroidism; three times as many women as men suffer from those sub-clinical levels. The opposite can also be true. Doctors have to consider how to treat patients with abnormal results who otherwise show no clinical signs of hypothyroidism. Therefore, it is accepted that GPs might face many different problems when trying to treat a patient with hypothyroidism.
However, my constituents know exactly how difficult and frustrating it can be to live without effective treatment of their condition. I expect that all of us know someone who has suffered from hypothyroidism, and I think that we are all aware of the impact it can have on someone’s quality of life.
In her introduction, the right hon. Lady mentioned that about one in 50 women and about one in 1,000 men develop the disease in their lifetime. Does she agree that if someone has a family history of the disease, perhaps at a certain stage of life there should be a check carried out on them to see if they have it?
I thank the hon. Gentleman for his intervention, because that is an excellent suggestion; it is what I would describe as a no-brainer. If someone has a family history of the disease, surely that should be a very strong indication for the GP to be proactive in monitoring the possibility of it appearing in subsequent generations within the family. The Under-Secretary of State for Health, my hon. Friend the Member for Battersea (Jane Ellison), is responding to the debate and perhaps she could respond to that point.
The constituent who first brought this issue to my attention a couple of years ago is, in fact, director of the charity Thyroid UK, which has been contacted by 19,000 thyroid sufferers. There was recently a petition with more than 5,000 signatures from sufferers who wish to see this matter debated and this disease being better dealt with. Therefore, I want to take this opportunity to raise awareness of this serious disease, the methods of diagnosing it and the ways of treating it. I also want to question the broad range of GP responses to diagnosis. More training is required to ensure that GPs respond consistently and are ready to test a patient fully for thyroid problems, so that a quick and full diagnosis can be made. That should include checking someone who has a family history of the disease, which was the excellent point made earlier.
If hypothyroidism is left undiagnosed, it can affect heart health, as I said before. It can also be a risk in pregnancy for a younger woman. If they are undiagnosed, sufferers have to live with unabated symptoms. Wrongly diagnosed patients spend time and money on visiting different specialists, as they try to find an answer to the symptoms they know they have. That is obviously a waste of both the patient’s time and the doctor’s time, as well as a waste of precious resources within the NHS. Effective and quick diagnosis is needed. There are many stories of misdiagnosis, for example where depression or fibromyalgia is diagnosed, and therefore the patient is given the wrong prescription, which can include anti-depressants and other hormone-altering drugs.
There is also an argument that in the long term correct diagnosis and treatment will cost the NHS less. In addition, a healthy, active working patient will cost the state less in benefits. My constituent had to give up work during a period of five years, and she very much regrets that her symptoms necessitated her having to do that. The disease obviously has a huge impact on someone’s life and on their overall earning capacity within their working lifetime.
It is imperative that all GPs are trained in identifying this condition, and that they are reminded to consider that certain symptoms might indicate hypothyroidism even if someone’s TSH test comes back as normal. For example, could it be that the patient is still affected by sub-clinical hypothyroidism? Should the range for those considered “normal” be reduced to bring in these borderline and sub-clinical patients? In the UK, the test considers anything above 10 ml of TSH in serum in the blood as abnormal. However, given that 10 ml is an average figure, there will be individuals who may be hypothyroid with TSH levels below the 10 ml figure. So there may be an argument for reviewing the 10 ml level. At the very least, there should be assurances that the tests are standardised, with reproducible performance in different laboratories. I have discovered that in Germany the threshold is, in fact, 3 ml, but I have to say that it is measured in a slightly different way from the way that we measure it here. However, one question that I put to the Minister is this: why does there seem to be a more sensitive threshold in another well-developed country such as Germany, which might allow a doctor to be alerted sooner than might be the case here?
When a normal result is shown but symptoms are present, why is it not regular practice to carry out a T3 test, in case the problem is caused by a malfunction of the pituitary gland rather than a malfunction of the thyroid gland, or a lack of conversion from T4 to T3? A consistent and sympathetic approach to hypothyroid diagnosis by GPs and specialists is necessary, putting the needs, experience and concerns of patients first.
There is also an inconsistency in the prescription medicines that are offered. Guidelines from the National Institute for Health and Care Excellence clearly state that levothyroxine should be prescribed in the case of overt hypothyroidism, and that might be why the 10 ml level is required by the test. NICE also states that T3 should not be used in conjunction with levothyroxine.
First, it should be made clear that the test to see if the disease is present should not be set at a level solely for identifying the level needed for prescription and a curative drug. The threshold perhaps needs to be different to ensure that there is early and correct diagnosis. People need to know with certainty what illness they might have, in order to give them at least the ease of mind that they have the answers to their health questions.
Recently, the Medicines and Healthcare products Regulatory Agency called into question levothyroxine tablets made by a company called Teva. The agency recognised that levothyroxine is now far more controlled in its production and sale here in the UK. Levothyroxine is licensed in the UK, and I am not suggesting that those problems have not been dealt with; they have been. However, in the minds of patients, doubts were of course raised at the time.
Levothyroxine is not a drug as such, but is a naturally occurring thyroid hormone made to replace the missing hormone in someone who suffers from hypothyroidism. NHS Choices is clear that the drug does not usually have any side effects, unless too much of it is taken. Levothyroxine sodium can also be used.
A naturally desiccated thyroid treatment, or NDT, is a medication made from dried porcine thyroid glands. Before artificial thyroxine existed, this product tended to be used. I do not know at what date it ceased to be licensed, but presumably it was licensed in the 1960s, when it was the only product available. It is not now licensed in the UK, as the hormone levels in the naturally desiccated thyroid treatment can be inconsistent and both T4 and T3 hormones are present. However, my constituent is anxious that sufferers such as herself, who do not respond well to the artificial thyroxine product, should be able to be prescribed NDT treatment as an alternative.
The Royal College of Physicians advises against the use of the hormones T3 and T4 together, as that is inconsistent with normal physiology and high risks of long-term harm may outweigh the considered short-term benefits to the patient. However, NDT is prescribable by GPs, on their own direct responsibility, in respect of their patient’s health. Therefore they are rightly under no obligation to prescribe it. The Minister might like to reflect on the fact that, within the NHS, such variation can be a cause of concern among patients, some of whom do not have access to a GP who will prescribe it for them.
This inconsistent approach by doctors has caused distress among patients, some of whom have received the drug from GPs although others have not. Patients do, of course, compare notes. This inconsistency needs to be addressed. Combination and NDT drugs probably do not yet meet the clinical requirements to be licensed in the UK. However, it is surely time that a T3 replacement medicine or a combination medicine that meets the requirements is researched and produced. There is official recognition of some patients’ preference for such medicines, although it was understood, when studying patients who were unaware that they were taking a combination drug, that there is no clinical benefit. There is guidance to GPs on explaining the possible benefits and dangers in full to their patients.
There may be sufficient justification for a reappraisal of the treatment of hypothyroidism in the UK by such bodies as NICE and the Society for Endocrinology. Such a professional reappraisal would also benefit from the involvement of patients. The results of any reappraisal should be communicated clearly to patients, health care professionals and prescribers, and we parliamentarians, who take up individual cases.
I pay tribute to the work of the charity, Thyroid UK, which provides important support to the large number of sufferers, and families, affected by this disease.
It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate my right hon. Friend the Member for Meriden (Mrs Spelman) on securing a debate on this issue. This is, as she says, an opportunity to highlight something that we do not discuss often in Parliament. I hope that the debate will prove informative for those who wish to learn more about the condition, and will be useful to those who are affected in the way that she so ably described. I will mention the help and support that is available and will try to respond to the points that she made. If I am not able to respond to each point, I will write to her.
As my right hon. Friend said, hypothyroidism describes the general effects of a severely underactive thyroid gland, where not enough hormones are produced to keep the body functioning properly. The condition can be congenital, but most commonly occurs as a result of an autoimmune disease that attacks the thyroid gland and impairs its function. The condition is not uncommon, as she said. In the UK, the annual incidence of primary hypothyroidism is 3.5 cases per 1,000 women, and 0.6 per 1,000 men, so there is, as she said, a disparity between men and women.
The effects of hypothyroidism can be pronounced and debilitating, as my right hon. Friend said. Often, the condition goes untreated, because symptoms are frequently subtle and non-specific—she highlighted some—and may be wrongly attributed to other illnesses. Fatigue, weight gain, dry skin, lethargy, memory impairment and tiredness are all likely to be present. In elderly populations, symptoms such as memory disturbance, impaired mental state and depression may also be seen. However, the good news is that, for the vast majority of patients, once the right dose of hormone replacement treatment is given, they will return to a healthy state. Continuous medication is usually required to maintain that correct balance, and patients needing it are entitled to receive their prescriptions free of charge.
However, to get the right treatment and to restore the balance of health and well-being, a prompt diagnosis is, of course, crucial. My right hon. Friend focused on that. A range of guidance is available to improve awareness of the condition among both members of the public and health professionals. NHS Choices provides comprehensive advice on the causes, symptoms and treatment of the disease, and more detailed clinical guidance is available on the NHS clinical evidence website.
Best practice on the identification and management of hypothyroidism has been set out by the Royal College of Physicians in its guidance, “The Diagnosis and Management of Primary Hypothyroidism”, which was developed on behalf of key organisations, including the British Thyroid Association, the British Thyroid Foundation and the Society for Endocrinology. The guidance is endorsed by the Royal College of General Practitioners.
Clinical symptoms and signs alone are insufficient to make a diagnosis of hypothyroidism, so the RCP guidance makes it clear that the only validated method of testing thyroid function is blood testing, which must include measurement of the thyroid-stimulating hormone—TSH—and free thyroxine, or FT4, in serum. There is no evidence to support either the use of body fluids or the measurement of basal body temperature as a means of testing thyroid function. However, the guidance recognises that different methods of testing blood can give differing results, as my right hon. Friend mentioned. Highlighting in Parliament the RCP’s support for a helpful international initiative for greater harmonisation of reference ranges, and of the units used in expressing results of thyroid function tests, reinforces its thinking in that regard. My right hon. Friend is right to highlight that.
Once patients have been diagnosed with hypothyroidism, the vast majority can achieve successful management of their condition with a synthetic hormone replacement treatment. My right hon. Friend focused on the fact that some people do not get on with that treatment. The RCP guidance sets out that overwhelming evidence supports the use of thyroxine T4 hormone replacement—usually prescribed as levothyroxine tablets—alone in the treatment of hypothyroidism. The guidance does not recommend prescribing additional T3 hormone in any presently available form, including natural desiccated thyroid treatments, such as Armour Thyroid. This is because it has not been definitively proven to be of any benefit to patients and may be harmful. However, that does not prevent clinicians from considering other forms of thyroid hormone replacement, if appropriate.
For some patients, as my right hon. Friend highlighted, the wider availability of NDTs is a concern. It is worth making it clear that although this treatment remains unlicensed in this country, because the evidence base for its efficacy is unclear, GPs may prescribe it on a named-patient basis. I appreciate the push-back on inconsistency, but that is probably because it is unlicensed, so people have to find a GP willing to prescribe it on that basis.
To ensure that patients with the most severe and complex endocrine problems receive appropriate care and support, NHS England has published a service specification for complex endocrinology, setting out clearly what NHS England expects to be in place in order for providers to offer evidence-based, safe and effective care. That has been developed by clinicians and commissioners, with expert patient input. Certain patient groups have been calling for specialised training for endocrinologists and general practitioners in diagnosis and treatment. My right hon. Friend rightly focused many of her remarks on that.
Health Education England has responsibility for promoting high-quality education and training that is responsive to the changing needs of patients and local communities, and works with key stakeholders to influence training curriculums as appropriate. The curriculums of the Joint Royal Colleges of Physicians’ Training Board, which is responsible for the specialty of endocrinology, and the Royal College of General Practitioners, are both subject to regular review. As such, there are regular opportunities for stakeholders and interested parties, including parliamentarians, to express their views and influence the training of these clinicians. In light of the issues raised today by my right hon. Friend, I will write to the Royal College of General Practitioners, asking for its opinion on the guidance available to support its members in the diagnosis and treatment of hypothyroidism.
My hon. Friend the Minister is coming towards the end of her remarks. Perhaps when she writes to the Royal College of General Practitioners, she will mention the excellent point raised by the hon. Member for Strangford (Jim Shannon). Where there is a family history of hypothyroidism, we should be thinking a bit more about prevention. When a patient presents with an ill-defined collection of symptoms, such a family history might set off an alarm bell in a GP’s head and precipitate a test, so that the hypothyroidism does not go undetected for so long.
That is a good point. There is some information on the NHS website, but I will certainly include that point in my letter, and hopefully I will get a response from the royal college, which I will pass on. The hon. Member for Strangford (Jim Shannon) takes a fantastic interest in health issues and, as ever, is here in his place.
I hope that the Chamber is pleased to hear that the National Institute for Health Research is funding a £164,000 study on whether people aged 80 or older with hypothyroidism would benefit from lower doses of hormone treatment. Older people often have the condition in a mild form, and may not have symptoms with adverse outcomes, so the current treatment might not be beneficial.
I always make the point in these health debates that the NIHR welcomes high-quality funding applications for research on any aspect of human health. My right hon. Friend the Member for Meriden highlighted some areas that she feels would benefit from further research, and I can only say that the NIHR’s door is open to high-quality bids in any of those areas. That might be worth passing back to the charities and experts working in this field.
As I come to my conclusion, I reassure the Chamber more generally about the Government’s commitment to improving outcomes for the 15 million-plus people living in England with long-term conditions, including hypothyroidism. Through the NHS mandate, we have asked NHS England to make measurable progress towards making the NHS among the best in Europe at supporting people with ongoing health problems. We want such people to be able to live healthily and independently, with much better control over the care they receive. Of course, that feeds into many other priorities, such as ensuring that people do not present at accident and emergency because the management of a long-term condition has gone wrong. We want to ensure that such people can be healthy, well and looking after themselves without getting to that stage.
The various improvement areas mirrored in the NHS outcomes framework—this is relevant to the point on local doctors—are also in the clinical commissioning group outcomes indicator set, so CCGs are also held to account for, and are asked to provide information to the public on, the quality of the services and health outcomes that they achieve through commissioning for people with long-term conditions.
At a service level, the new NHS improvement body, NHS Improving Quality, has made the development of evidence-based tools for the management of long-term conditions the subject of a key improvement programme for 2013-14. The interventions under consideration include care plans, care co-ordination, the use of technology, self-care and the role of carers. That work will be evaluated, with best practice identified, to help us drive improvement across a range of long-term conditions. I am sure that some of the conclusions reached and evidence gathered by NHS Improving Quality will be relevant to hypothyroidism.
In conclusion, I thank my right hon. Friend once more for securing today’s debate. I hope this discussion has been helpful in providing some reassurance on our commitment to improving the quality of life for all those with long-term conditions such as hypothyroidism. I will, of course, write to her to follow up on this debate, which I hope will both help her to reassure her constituent and add to the wider debate.
[Hugh Bayley in the Chair]
It is a pleasure to be called to speak in this debate, Mr Bayley, which I have sought for some time. It all goes back to a meeting that I had with a number of people from Northern Ireland back in June. They outlined their concerns about the funding and resources for rare diseases, and about strategy.
In this debate, we have an opportunity to look back. Governments in Westminster and the regions, and particularly in Northern Ireland, which I represent, are responding to a UK strategy. The timing of this debate is more appropriate than it would have been had we had it in September, or July last year, because we now have the chance to discuss where we go with the strategy, and how we tie it in throughout the United Kingdom. I appreciate the attendance of Members to discuss rare diseases. It is a pleasure to have so many in the Chamber—to make a contribution, I hope.
Some of the stories that I have heard about rare diseases would break your heart, Mr Bayley. That is where I am coming from, because my cases are those of constituents who came to me with their problems and asked me to portray or reflect on them in the House of Commons and, we hope, find a way forward. It is abundantly clear to me and to everyone in the Chamber that we need to be proactive, making changes that will give the people affected in our nation a better quality of life.
Let me set the scene with a few facts. One in 17 people in the United Kingdom will be affected by a rare disease at some point in their life, which equates to 3.5 million people; 75% of rare diseases affect children; and 30% of patients with rare diseases will die before their fifth birthday. The Teenage Cancer Trust has given me some facts. There are more than 6,000 recognised rare conditions, 80% of which have a genetic cause.
In June 2009, the UK adopted the Council of the European Union’s “Recommendation on an action in the field of rare diseases”. It recommends that member states
“Establish and implement plans or strategies for rare diseases”,
which should be adopted
“as soon as possible, preferably by the end of 2013 at the latest”.
We will not make that deadline, but I hope that we will make the deadline of February 2014, when all the regions will come together under the captaincy of the NHS and the Minister in attendance, who will push things forward.
In November 2013, a UK strategy for rare diseases was issued by Ministers from the four UK Health Departments, including our Northern Ireland Minister, Edwin Poots. The recommendation contains 51 commitments, which all four countries of the UK are committed to delivering by 2020. The commitments are UK-wide and will be implemented in country-specific plans for England, Scotland, Wales and Northern Ireland. Time prevents me from going into all 51 commitments, but I have been contacted by many groups, and I wish to raise at least some of the issues that they highlighted for me.
Before the hon. Gentleman gets into a long list, does he agree that the changes in the structure of the NHS have made achieving a strategy more difficult, because it is often not clear where the responsibility for dealing with rare diseases lies between the commissioning groups and NHS England?
The hon. Gentleman has outlined an issue that is of concern to us, and I hope that the Minister will respond to it in this debate. With great respect to the Minister, he always tries hard to respond to the issues that we ask him about; I do not mean to put up too high a pedestal, but we have high expectations of his response.
The Teenage Cancer Trust contacted me, and its correspondence included some of the figures I gave earlier, which indicate how important the subject is. The trust told me that seven young people per day between the ages of 13 and 24 are diagnosed with cancer. The trust has 27 cancer units operating throughout the United Kingdom and Ireland. There are around 1,200 new cases of cancer among teenagers and young adults in the UK every year, which is a significant number for a rare disease, as defined by the specialised services. Cancer, however, remains the most common cause of non-accidental death in young people, and the five-year survival rates are lower among teenagers for some cancer types than among children. I repeat that, according to the trust, 30% of rare-disease patients will die before their fifth birthday. It is a cruel fact that some children will not enjoy life beyond the age of five.
The trust has proposed recommendations. It believes that it is critical that the service model continues to be secure in the NHS, as part of a standard cancer care; in other words, diagnosis and care must be delivered at an early stage. It welcomed the setting up of the teenage and young adult clinical reference group in NHS England, and called on NHS England to continue to work with the group to focus development on the services.
I refer to NHS England, even though I am an MP for Northern Ireland and health is a devolved matter, because there has to be a driver on rare diseases, and NHS England is the driver to take all the regions forward together. When I refer to NHS England, I am referring to something to which we can all contribute, including those in our part of Northern Ireland.
The Teenage Cancer Trust also referred to the fact that there are different cancer biologies, treatment protocols and responses to treatment. All the issues need to be brought together, which underlines what the hon. Member for Blackley and Broughton (Graham Stringer) said. There has to be better co-ordination. The trust also recommended more trials relating to teenagers and young adults with cancer, and challenging the arbitrary age criteria that are often set for trials. It also recommended ensuring a mechanism for action on new drugs, so that they can be tested by different groups. In other words, it wants early diagnosis, a focus on the issue and, by releasing financial and regulatory burdens safely, to encourage more research development for teenagers and young adults.
Another trust recommendation was for a system that alerted GPs when they had seen a patient three times with unresolved cancer symptoms. That would help them to identify and manage those cases. That is to say, with cancer, when someone has had three strikes, it is time for the case to be looked at intensely, so that we can ascertain exactly what is wrong. The trust has put forward those ideas, which are important to what we are trying to do.
There are more than 60 different types of muscular dystrophy and related neuromuscular conditions. Approximately 1,000 children and adults for every 1 million of the UK population are affected by muscle-wasting neuromuscular diseases. It is therefore estimated that some 70,000 people are affected by a neuromuscular condition in the UK. A constituent I met in June, Dr Amy Jayne McKnight, chair of the Muscular Dystrophy Campaign in Northern Ireland, is a director of the Northern Ireland Rare Disease Partnership; she sent me the following quotation through the Muscular Dystrophy Campaign, with which I have contact:
“There is an urgent need to establish multidisciplinary support for people with neuromuscular conditions in Northern Ireland. The lack of a register of affected individuals makes clinical care particularly challenging due to a lack of planned services. My father, who has spinal muscular atrophy, experienced very sporadic clinical support and was only offered respiratory care after he ended up in intensive care—putting his health at risk. Individuals in Northern Ireland deserve the same care and support as those living in England; international standards of care guidelines exist for several neuromuscular disorders including NICE accredited guidelines for Duchenne and the forthcoming NICE guidelines for uncommon neuromuscular disorders. We need to build on existing expertise in Belfast, alongside support from Centres of Excellence in the rest of the UK, to enable an effective network of specialist services to be developed in Northern Ireland.”
That is a lengthy comment, but it puts in perspective what the partnership is seeking, and what the House should be doing in the strategy that we develop.
I have raised this issue with the Minister who has responsibility for health in Northern Ireland, Edwin Poots, but if all four UK countries are to fulfil their part of the deal, the United Kingdom Government must soon provide additional, ring-fenced funding to each region. Only then will people receive the care that they need. It is all very well to have a strategy, but we must have resources and finance in place to make it happen. The four regions need to work together to make it happen; that is what we should be trying to do.
The hon. Gentleman has raised some profound points about networks and information. I am not so familiar with the situation in Northern Ireland, but clinical reference groups are vital. He has talked about Duchenne muscular dystrophy. In England, patients suffering from neuromuscular diseases are often directed to a clinical reference group for generic neurological diseases, which is obviously inappropriate. Is that his experience in Northern Ireland, and does he believe that we should do something about the situation in England?
I cannot speak about other places, but I do not believe that that has been the case in Northern Ireland—I am not aware of it. In my area, there are young people with Duchenne muscular dystrophy, and I met some young people with Duchenne at an event held every year in the Methodist centre across the way. I have been to the past couple of events, and there has been only one person from Northern Ireland there. With my background information, I would say that what the hon. Gentleman describes does not happen in Northern Ireland, but he says that it does in England, and that needs to be addressed. I hope that the Minister will take that point on board when responding.
The United Kingdom Primary Immunodeficiency Network, or UKPIN, is a professional organisation for all doctors, nurses and scientists working in this field, and it covers six rare diseases. UKPIN—I need to be careful how I say that, because UKIP has no role in this matter whatever—has stated that its aims are the registration and accreditation of specialist immunology centres for primary immunodeficiency, or PID; the development of a national patient registry, to which the Government have given a commitment in the rare diseases strategy; and the development and dissemination of guidelines and standards for best clinical practice. The UK PID registry has been supported by the Healthcare Quality Improvement Partnership, and has engaged the participation of 95% of UK centres since its establishment in 2008. To date, nearly 3,000 patients have been registered, making it the second largest patient registry in Europe, after the long-established French registry.
The figures for Northern Ireland suggest that PID is as common as cystic fibrosis. A first report on the matter is at the presses, and we will soon have the opportunity to read it. Perhaps the most pressing point that has been raised is that there is a need for meaningful national and international collaboration on both research and development of clinical practice to ensure maximum benefit for patients. Let us not disregard international collaboration: if something good is being done in France or Germany, it would be good to exchange expertise, so that we can all improve and move forward. Groups such as UKPIN can take the lead in some of these matters. The UK has already led in the development of novel treatments—for example, with gene therapy—and in implementing novel technologies such as next-generation sequencing. It is crucial that there is ongoing investment to maintain that research.
Rare Disease UK has welcomed the promise of greater co-ordination of care for people with rare diseases. As we hear all too often, patients and families have nobody to co-ordinate the multiple elements of care and treatment that their condition necessitates. How often have we heard that, when it comes to health care? It is not just about care for rare diseases. Members here today all regularly contribute to our discussions on health issues in the House, and all too often we hear of people who do not know where to go or who to speak to, and are not quite sure who they need to be in touch with to help them. That is a key issue; if we could address that, it would be helpful.
I am grateful to my hon. Friend for raising this important issue. He touched on support and services for families, particularly at the early stages of diagnosis of rare diseases. That is especially important when the case involves a child, as many do; we heard that earlier. Does he agree that that is one of the most critical matters that needs to be addressed in any UK strategy, and that it is particularly important in Northern Ireland? He and I have shared some experiences of the deficiencies in that regard.
I agree entirely with my right hon. Friend. We have experience of those deficiencies in the health service—we are not immune from them in Northern Ireland. In this House, I always try to extol the health service in Northern Ireland and the good things that we are doing, but there are times when we fall down, and times when we have to improve. My right hon. Friend is absolutely right that there are things that we would like to see done better, and we endeavour to make sure that happens. We have a devolved Administration and a Health Minister in Northern Ireland, so we have an opportunity to make that happen. We have seen lots of changes for the better in the health service in Northern Ireland.
Patients’ uncertainty about who to contact can mean that they do not receive the information and support that they need or that they have to tell their story over and over. I have often told the story of the gentleman I mentioned, and other people’s stories as well, but I still have not got the answers that are needed. My goodness, but it is frustrating for the people concerned, and it is also frustrating for me, as an elected representative. People can feel lost in the health care system.
It has been outlined to me that any strategy must include the development of a generic care pathway to facilitate the delivery of best practice to all rare disease patients, not just those who have a specific service specification; an appropriate care plan for all patients with a rare disease; clearly stated principles about the standards of care that patients with a rare disease can expect, including patients with no diagnosis; and the development of seamless pathways for transition, from childhood to adolescence and on to adulthood and older age. How does the Minister feel we can put such a strategy into place?
We must ensure that there is evidence-based diagnosis and treatment of rare diseases, as without accurate diagnosis, appropriate screening programmes and targeting of diagnostic tests, patients and families cannot access effective treatment or therapy, or manage their condition appropriately. All those things are important to the person who is living with such a disease every day of their life. A delay in diagnosis, or a misdiagnosis, could also involve multiple avoidable appointments with doctors and consultants, incorrect treatments and diagnostic tests, and significant distress. I hate to talk about money but it is an important factor in how the health service works, so we have to consider it. If we can do things more efficiently and effectively, let us do so, and deliver a better service, without some of the current bureaucracy and paperwork.
The UK rare diseases strategy represents the first time the four nations of the UK have come together to recognise and respond to the needs of rare disease patients systematically and structurally. It follows the founding principle of the NHS that treatment should be a response to need. The NHS is an organisation that we love and have great pride in—a pride that was mentioned in the House yesterday—and we want it to deliver across the whole spectrum for everyone. The rare disease strategy essentially gathers a set of 51 commitments that all four nations in the UK could agree to implement. When the Minister responds will he tell us how the 51 commitments will be achieved—will there be follow-up regulation and monitoring to make sure that they all take place?
Regrettably, few of the commitments require the four nations to work together on rare diseases. I find that a wee bit hard to understand. We should be exchanging expertise. If in Northern Ireland we are more expert on one aspect of treating rare diseases, let us do that part; if someone in Wales, Scotland or England is more expert on another aspect, let them do that part. Let us exchange our knowledge with each other to take the strategy forward. For high-quality care to be available to all patients with rare diseases across the UK, such collaboration needs to improve and increase.
I commend the hon. Gentleman on leading the debate. On the issue of co-operation and co-ordination across the UK, does he agree that the issue of rare diseases could be taken up for focus work by the British-Irish Council? As that body represents all eight Administrations within these islands, not just the devolved regions of the UK and Whitehall, its involvement could help to foster a sense that across these islands there is an open faculty of all those who are trying to specialise in improving the treatment and care of people with rare diseases.
I agree with the hon. Gentleman. The Teenage Cancer Trust already has 27 units working across the whole of the United Kingdom and Ireland. Bodies are already working across the borders, so to speak. As I said earlier, if someone in the Republic of Ireland or someone somewhere else in Europe has knowledge and expertise, let us galvanise our approach and work together.
It is in the area of rare diseases where the value of resource and service sharing can most easily be seen. The population size and distribution in each of our four nations vary tremendously, as do the health care needs, and there are significant efficiencies to be gained from sharing the burden between the four health services.
The Brittle Bone Society has highlighted that there needs to be a clear commitment to develop a fully functioning and properly staffed transitional service offering all the multidisciplinary services needed for all-round care at this life stage.
There should also be consideration for other departments, such as mature or older well women and well men clinics. Charitable patient organisations may be resource-poor, and it takes time, care, consideration, planning logistical preparation, communication, and an effort to inform and advise members to recruit them to take part in vital surveys, research trials and other invaluable projects.
Research into and development of new treatments and medicines for rare and very rare diseases, known as orphan and ultra-orphan medicines, is an important feature in medical research and the life sciences sector. A large number of products have been developed or are in development to treat rare and very rare diseases. Such research can provide valuable insight into the treatment of conditions that affect large numbers of people. Research and development must be enhanced to provide hope and an answer for those who are suffering from such diseases. The fact that the number of people who suffer from a disease is small must not detract from the fact that a child or adult in the UK is suffering, and we must do all that we can to alleviate that.
The Specialised Healthcare Alliance has sent me some helpful information. It refers to highly specialised services for the rarest conditions, some of which we may never have heard of—apart, perhaps, from a mention on TV, which will probably have been the first we have heard of it—but unfortunately they are occurring more often. There are some 500 patients in England and some 600 patients across the whole UK. Such illnesses and diseases are complex and need the highest level of expertise and knowledge to address. The alliance states:
“Many patients in Northern Ireland, Wales and Scotland depend upon the quality of English highly specialised services for their patients, given the very small number of centres that can sensibly provide these services.”
That goes back to a point that I made in the beginning: we are dependent on England being the driver for the issue, and on NHS England as the organisation that we follow in Northern Ireland, Scotland and Wales. The alliance also refers to “properly funded administrative support”. These are issues that it would like to see taken forward. It also says that the problem of capacity in the system has to be addressed to ensure that resources are there and that opportunities for specialised services are and can be delivered.
An example of the need to work together in the regions can be found in the fact that there is a regional variation in post-bone marrow transplant care. Patients who have received a transplant will face a range of severe and debilitating late effects, as well as life-threatening infection, due to the nature of their therapy. Those complex needs have to be managed by a transplant clinician in a late effects clinic, in which the co-morbidities can be considered with a full range of treatments by a specialist team. Without security of funding, a transplant centre cannot provide that service, so variation will creep in where follow-up care is commissioned by clinical commissioning groups.
Only small numbers of people receive transplants—1,440 in 2011. A nephew of mine has received a transplant, which transformed his life greatly. We are thankful to the donor for making that happen. It was not always plain sailing; sometimes there were backward steps. Has the organ been accepted by the body? Was there medication to ensure that that happened? At the end of the day, he is a bright young man today, and doing very well due to his kidney transplant. Many years ago, it would not have seemed possible, but we now have the opportunity to see a young man who has done extremely well through a transplant. There is a clear argument for NHS England to foot the bill to ensure the security of the service. Furthermore, it should ensure that the right type of care is available by drawing up national guidelines on what constitutes a late effects clinic to eliminate variation.
Time has beaten me, and I want to give others the opportunity to speak. I am not going to go into any further detail on the issue. Although the key commitments are welcome, there are fears of how they will work in reality. The Department must work with other Departments regionally to ensure that not only are those commitments realised, but that there is no longer a regional disparity in service provision. I commented on regional disparity yesterday in relation to the debate in the Chamber, and there is also a clear regional disparity on this topic. How can we achieve this funding and heart? The rare disease groups have shown that there is heart in abundance. Those organisations have spoken to hon. Members present and other hon. Members, who are unable to attend. However, we also need Government commitment to funding. Perhaps today we will get the assurance that that is forthcoming.
It is a pleasure to serve under your chairmanship, Mr Bayley. May I begin by congratulating the hon. Member for Strangford (Jim Shannon) on securing this debate? He mentioned that one in 17 of the population can expect to be affected by a rare disease. I want to speak briefly on two issues: trigeminal neuralgia and headache disorders.
Trigeminal neuralgia is a relatively rare condition, thought to affect less than 0.1% of the population, and that has included me. I secured an Adjournment debate on TN in 2010, seeking, among other things, to raise awareness of the condition.
It is important that the rarity of that or any condition does not exclude it from research, funding and the search for treatments or even a cure, as the hon. Gentleman referred to in his excellent opening remarks. One vital corollary of such research is in getting to grips with misdiagnosis, which is a particular problem when dealing with rare diseases. We need to break the chain of rarity leading to lack of research and knowledge leading to misdiagnosis. Such a chain can mean ongoing misery for the sufferer, when it might otherwise be possible to make breakthroughs that could bring hope and relief to the afflicted.
Of particular importance in the case of rare diseases is the existence of support groups and networks. They are important for all sufferers, as one often finds that the very rarity of a condition serves only to exacerbate the sense of isolation felt by the sufferer. If people do not know what they are talking about, and do not know anyone among their family or friends who suffers from a condition as rare as, for example, TN, it is crucial that one can link up with fellow sufferers, not only to overcome the sense of isolation, but, in practical terms, to share experiences, advice and the latest developments in that field of medicine, surgery and so on.
The Trigeminal Neuralgia Association UK brings together consultants, sufferers, doctors and researchers—indeed anyone with a connection to the disease. It also raises awareness among the public and medical professionals. I know that similar groups exist for other diseases, and all those groups are of immense importance and value to all of us.
I am the chair of the all-party group on headache disorders. We have initiated an inquiry into headache services in England. We have had a number of written submissions and one oral evidence session already, with another to follow in January. Evidence submitted to the inquiry so far indicates that there is significant misdiagnosis and subsequent mismanagement of primary headache disorders throughout England. Sufferers of rare headache disorders, such as cluster headaches, are further disadvantaged by the lack of medical awareness and access to specialists in the UK. The inquiry is looking into the current provision of care for headache sufferers in England and what opportunities exist in the new NHS system to improve care.
The all-party group has heard that misdiagnosis and incorrect treatment for headache disorders place a huge burden on the NHS, for example, inappropriate referrals to secondary care, costly medical procedures, and a high number of unnecessary A and E admissions. That can continue for years and comes at huge personal, financial and economic cost. The patient group OUCH reports high suicide levels among cluster headache sufferers.
Without funding for research into primary headache disorders, little will be done to improve the lives of sufferers or reduce the burden on the NHS and the UK economy. Increased education of health professionals—currently medical students receive only an average of four hours’ training on headaches—and clear treatment pathways are also required to tackle rare headache disorders.
Will the Minister meet officers of the all-party group once a report is published, which will certainly be before the summer recess, so that we can discuss its findings with him and his officials? Obviously we would like to extend that invitation to the shadow Minister. If the Minister is prepared to do that, that would be a welcome response to this excellent debate.
I am delighted to have the chance to speak in this debate, Mr Bayley, and I congratulate the hon. Member for Strangford (Jim Shannon) on securing it. I have been in the House for more than 20 years in total, and I cannot remember having a debate on rare diseases in that time. This is an important subject that we need to address in a constructive way, as the hon. Gentleman has done.
Looking at figures before coming into the Chamber, I saw that there were about 6,000 rare diseases, which is a shockingly high figure. I do not think that many people realise just how many different types of diseases there are. As a parent, one has only to watch a programme such as “Children in Need” to see how many diseases are out there, to see illnesses that we have never even heard of, but that are having such a devastating effect on families and lives, and to see how much work still needs to be done in the area. If the debate helps to take that forward, that is all to the good.
I want to focus on two aspects: first, the families and voluntary groups that work in this space and secondly, some of the academic research that is being done into rare diseases. So much of the work in this area is done by families who have been affected by a child or a family member who has been unwell. The work that they then do to raise funds, either to support other families or to carry out research, is an incredibly important part of the equation.
I want to refer to two examples. The first, Charlie’s Challenge, was named after Charlie Boutwood, a constituent of mine, who was 20 months old when he was found to have a brain tumour. He survived thanks to incredible medical attention, but his parents set up the Charlie’s Challenge charity to put money into brain tumour research, particularly relating to children. Although brain tumours are the biggest single killer of all the cancers of children and young people under 40, less than 1% of the research into cancers is into brain tumours and particularly the effect on young people. The work of Charlie’s Challenge is to see how it can provide additional support and research funding into such an important area. The second is Tildy’s Trust, which was named after Matilda Curran, a young teenager—the daughter of a very close friend—who was found to have leukaemia and who died of it two years after it was discovered. Her parents set up Tildy’s Trust in order to provide support, research and funding for families who are going through similar circumstances.
Those are just two examples of a large number of such organisations, which are driven by incredible commitment and passion by families who have been affected, and to whom we should pay tribute, because of the immense contribution that they make. Sometimes I feel that more could be done by Government to help to join up the work of those many different organisations to try to provide a greater central force to take forward that work and to help to co-ordinate the valuable work that they do.
The hon. Gentleman is making an important and quite sensitive point, because a number of these trusts are set up on the back of and because of people’s individual experiences and losses. It is difficult sometimes to get them to talk to each other, because they are so very personal to people.
I think that is absolutely true and there is a role that the Department can perhaps play in bringing people together, when they have similar goals, and if they can combine their force and strength, the overall gain may be bigger than the sum of the parts. Perhaps that is something to which the Minister could respond when he replies to the debate.
My second point relates to the university work that is being done in this area. When I left the Government in September last year, one thing that gave me the most joy was to be invited by the university of Edinburgh to become a visiting professor. I have been incredibly impressed by the work that is being done in this area—not in the part in which I am involved, which is the business school—particularly by the medical faculty. Work is being done to look comprehensively at the patient experience and at how to bring together all the issues that affect patients who often are being affected by rare diseases and how they can combine the necessary research into that as well.
The issue is not only about the role of world-class research, which I think Edinburgh has in abundance, but about how that is tied in with the role of benefactors, because the work of the university of Edinburgh has been made possible by a small number of extraordinarily important contributions. The Euan MacDonald centre for motor neurone disease research is funded by an immense donation by the family of Euan MacDonald, but that in turn led to an even bigger donation by J. K. Rowling for the Anne Rowling regenerative neurology clinic. It is through the work of the university—of examining how it can bring together its extraordinary genius in looking at the challenges that have been presented by these rare diseases—and tying that in to extraordinarily generous benefactors that offers us a really great way to address some of the issues. The work being done in Edinburgh is of course being done in many other universities in this country as well, but if we can help, through the Government, to try and co-ordinate that better, we will see real progress.
I remember hearing former President Jimmy Carter talking about what it meant to him, in his lifetime, to have played a leading role in the eradication of a single disease—river blindness. What an extraordinary, unbelievable ambition, and it is a magnificent thing to have been achieved, just as Bill Gates is achieving similar things in different sectors. The more that we can co-ordinate that work, expertise and genius in our universities with the good will of so many people outside it, the more, as a succession of Governments, we will be able to say that what we have done has led to the eradication of some of these diseases.
The hon. Gentleman is making very serious points about the excellent research that happens in the university of Edinburgh and in many of our other medical schools up and down the country, but he has not referred to a problem, which is that an excellent drug, or one that is likely to be excellent, can be developed, but because of the nature of rare diseases—that very few people suffer from them—it is very difficult to get it through the trials process, because that is designed to see whether the drug works on large numbers of people, quite sensibly. Does he agree with me that NICE should have different rules for drugs related to rare diseases?
I agree with the hon. Gentleman. A constituent has written to me just this week about meningitis and a drug that has gone through the trials process. It has been approved, essentially, but is only being made available to people who can pay for it at the moment. It seems to me that when treatments could be made available, expediting the process of approval and then ensuring that they are generally available as soon as possible, to as many people as possible, should be an objective of its own. I absolutely agree with what he said in that respect.
As I said in my introduction, the Teenage Cancer Trust indicated that that was one of its recommendations and it would like to see that happening. Perhaps the Minister can respond to that recommendation from the Teenage Cancer Trust. When it comes to the trial, effectiveness and availability of the drugs, we have to look outside the box. That is what we are trying to do, and I think that the hon. Gentleman is also saying that.
That is exactly what I am saying. The other thing that we owe tremendous credit to the Teenager Cancer Trust for is highlighting the way in which teenagers are dealt with in hospitals. The issue is that sometimes they are put in children’s wards, which is clearly not suitable for somebody who is in their late teens, and at other times, they are put in wards with people who were in their 80s and 90s, who are dying or are ill with other conditions. Someone who is a teenager is at a particularly vulnerable time of transition in their life, and it is incredibly important that their needs are dealt with in a specialist way and that they are surrounded by as many people of their own age group as possible. I think that is an important part of the treatment and recovery process.
I encourage the Government to continue what they are doing to try and address the issues. The strategy that is being put in place is of great importance, but more could be done to achieve a bigger overall gain from so many different fragmented, but immensely worthwhile contributions.
It is a pleasure to follow the hon. Member for Wealden (Charles Hendry), who gave a thoughtful and extremely constructive speech, which I hope that the Minister will respond to, on an area that so far, nobody else has covered. I thank the hon. Gentleman. I also congratulate the hon. Member for Strangford (Jim Shannon) on securing this important debate, and I pick up on the point made by the hon. Member for Wealden that we have had a dearth of interest in rare diseases on the Floor of the House. However, we have some extremely active all-party groups, which I shall come back to later.
Rare diseases are perhaps not quite so rare. There are an extraordinary number of them, and many more are being discovered, with five new diseases being described in medical journals each and every week. The number of people affected can vary from a handful to a few thousand, which often means there are issues about how they are supported and how care is given. Of course, these diseases are often hard to diagnose and complicated to treat, but one in 17 people will potentially be affected by a rare disease of one sort or another.
Despite the vast number of rare diseases, I would like to focus primarily on one that will be familiar to a number of Members present: muscular dystrophy. It and related neuromuscular conditions affect about 70,000 people in the UK. Each affects different muscles, and their severity and the way in which they affect individuals vary greatly. Most are progressive, causing muscles gradually to weaken over time. These conditions can be inherited or can occur out of the blue, even when there is no family history.
The Muscular Dystrophy Campaign has welcomed the strategy. I was pleased the campaign was highlighted in one of the strategy’s examples of good practice, which noted that people with a muscle-wasting condition and their families can
“be seen in one place at one time by the local paediatrician, the regional neurologist, therapists from both local and regional services and a representative of the Muscular Dystrophy Campaign.”
That sounds wonderful, and Plymouth and the south-west are, in many ways, exemplars when it comes to treating and supporting people with muscular dystrophy. Unfortunately, the same is not true everywhere; there really is a postcode lottery, and we have heard examples today. It is difficult, certainly in a region as large as the south-west, for people with serious mobility issues to travel excessively long distances, so we have not quite achieved that level of provision.
Let me cite the case of a constituent, Sharon Kitcher. Her son James is 22, and I have known them for many years. He suffers from Duchenne muscular dystrophy. The family have been real champions for James and his care over many years, and they have certainly beaten a path to my door on many occasions. They are very tenacious, and rightly so. However, it has been difficult for them to ensure he gets the treatment he needs, even though they are strong and vocal in supporting him. It has been difficult to get the wheelchairs he has needed as he has grown, because such things take time. It has also been difficult to get the support the family as a whole needs so that the household can operate properly.
Since transitioning to adult services, James has really struggled to access specialist neuromuscular physiotherapy, which is an extremely important part of managing Duchenne. Currently, there is no cure for the disease. James’s mum told me:
“Access to specialist care is extremely important for my son. There has been a huge difference in the level of support he receives since he has entered adult services and accessing specialist neuromuscular physiotherapy has been a particular challenge”.
That, of course, is happening in a region that is leading the way, so I really have concerns about other parts of the UK.
Will the Minister therefore explain what steps his Department is taking to harmonise the levels of support patients with rare diseases receive when transferring from child to adult services? How does the recently published strategy seek to address the issues my constituent is experiencing? Does the Minister accept that the confusion in the commissioning process in the current health market is not helping families and practitioners to find the right course for some patients? The pathway has not been seamless, and I agree with the hon. Member for Strangford that our aim must be a seamless pathway for young people as they move into adulthood. This is a difficult period at the best of times. A member of my family was in a similar position; she made the transition as a young woman with Down’s syndrome, and the problems were exactly the same, so we do not seem to have made much progress.
My hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) spoke passionately about his and OUCH’s experience, and I hope the Minister heard that. He also spoke about the importance of all-party groups, and most of us here belong to one or other of those linked to rare diseases. Our meetings are extremely well attended, and sufferers and their families—this is particularly true of the all-party group on muscular dystrophy—regularly come to Westminster. We hold regular inquiries into different areas of concern for sufferers, and the Minister has responded to issues that have been raised, as have other Ministers in the past. Those responses have been well thought through and considered.
I recently attended a briefing on alpha-1 antitrypsin deficiency. Alpha-1 is not rare, with one in 3,000 to 5,000 people affected, so I was concerned to hear about the frequency of misdiagnosis. Indeed, the introduction to the strategy states:
“Around 4 in every 10 patients say they found it difficult to get a correct diagnosis”—
for rare diseases. When the Minister winds up, perhaps he could outline how the strategy seeks to address that in the case of muscular dystrophy and across the board.
The Muscular Dystrophy Campaign is launching a landmark new project in July, and it is funded by the Department of Health, which is good. The aim is to secure neuromuscular service developments in the newly reformed NHS, and we shall see how that works, because, as I say, the jury is out on how the reforms have been put together. However, the principle behind what the campaign is trying to do is the right one. The project is bringing together specialist commissioners, clinical commissioning groups, clinicians and people living with muscle-wasting conditions so that they can work together to improve the patient experience. However, the project is about muscular dystrophy, and I come back to the point I made to the hon. Member for Wealden: myriad organisations, individuals and trusts out there are all trying to achieve the same ends, and we really have to find a mechanism to bring them together. I hope the work the Muscular Dystrophy Campaign is doing will help to show the Government how they can do that.
In closing, I want to touch on the question raised about the trials process for drugs and treatments. I met a mesothelioma sufferer—a very brave young woman who had picked the disease up through contact with her father’s clothes. She had to travel to Germany for treatment. She lived many years longer than she was told she would, and that was, without any doubt, because of the treatment. She had a good quality of life, but we had to battle hard to get any support for the cost of the treatment. NICE was particularly difficult, even though this tried-and-tested technique was being used in Germany. The problem was that there were not enough people in the pool here to justify NICE giving the treatment the all-clear so that this young woman could use it, and we really need to look at that. When medicines and treatments are available in America or Europe, where there are high standards of testing, there should be more flexibility than currently exists.
I commend the hon. Member for Strangford (Jim Shannon) on introducing the debate, which is taking place just a few months after the all-party group on muscular dystrophy concluded its inquiry; I took part in some of the evidence sessions. The group expressed the concern, which has been voiced in the debate, that some of the changes that are afoot could imperil some of the good, concentrated work that has been done on rare diseases. There is a fear that the confused migration of various functions and tasks means that some of the specialist focus over the past few years has been lost.
The Government have argued that there will be new approaches, and they have said that the UK strategy would help to take care of some issues, creating a new focus on rare diseases. However, they also said that the £50 million specialised services commissioning innovation fund would be used to support work on rare diseases. Only a month after the all-party group reported with its concerns, that fund was essentially withdrawn because of other funding pressures. The statements and assurances that we get do not add up. The fears and apprehensions of many of the rare disease campaign groups and others, including Members and all-party groups, are reinforced by the apparent confusion.
The Government need to do more to give the rare disease strategy credibility and traction. In an intervention on the hon. Member for Strangford, I talked about what was needed, in addition to work at the UK level, to get better co-ordination between NHS England and the various devolved health services. Besides each responsible health service area doing its bit, there is a need for real collaboration that transcends those areas. Indeed, I see that happening beyond the UK; I see it spanning the whole of the British-Irish Council, which includes the Republic of Ireland, the Isle of Man and the Channel Islands. There are people with rare conditions in isolated parts of these islands, and the idea of combining our efforts on rare diseases and trying to achieve an economy of effort that would not be possible within one jurisdiction or health authority is important. The British-Irish Council is ready made to bring added emphasis and commitment to such areas.
It is important to do more than just pledge greater co-ordination and prioritisation for rare diseases; another issue to be dealt with is resources. As individual health authorities find it harder to guarantee a competent concentration of commitment to rare diseases, we must find critical mass at a higher level that transcends the health authorities and the devolved health service areas. That is why the UK strategy is an important concept. The 51 commitments are strong and sound, but there are questions about whether they will, in practice, add up to a full strategy, if they are left to the interpretation of each area individually. At times, there seems to be confusion about when NHS England is driving for the UK as a whole, and when it is in the lead simply as a matter of quantum—because it is the biggest. I am not sure whether there is a full strategy and co-ordination plan, and we need to continue working on that.
Some hon. Members have mentioned excellent work done in various locations, some of which depends on the skilled and dedicated leadership of clinicians, who may move to other posts. We should not take it for granted that the excellence achieved in some places will be sustained and maintained. That is a challenge, not least in the area of rare diseases. People progress professionally and move on, and sometimes the services that they leave are not sustained and maintained with the same quality. That is why—to return to the idea of co-ordination and co-operation across the UK, and more widely across the British-Irish Council—I argue for a central, open faculty. Then the clinicians who provide treatment for, or do research on, rare diseases may not feel that they are working on in isolation, feeling nearly as lonely as some sufferers; instead, they may feel part of a working, open faculty, in which they can connect with other professionals and patients.
I commend the Government and devolved Administrations on formulating the strategy so far, but funding is a fundamental question. We need significant challenge funds to be available, so that specialists who respond to particular patients, identifying needs better and coming up with innovative treatments, are not left trying to busk around within their local health service, trying to get a bit of funding here or there. The fact that the £50 million innovations commissioning fund was an early casualty in the reorganised NHS does not give great encouragement. More needs to be done.
The Minister with responsibility for care is responding to the debate, and as the hon. Member for Plymouth, Moor View (Alison Seabeck) said, few of the rare diseases we have been considering have outright cures or treatments; for many with such diseases, the approach is supportive therapies and coping support. My remarks have concentrated perhaps more on clinical leadership, but care and support are also hugely important. I know that the Minister will be conscious of that. Aspects of what I mean include setting good models and examples of practice and experience; helping individuals—particularly the young people who are sufferers of so many of the rare diseases—and their families; and thinking about improving care networks and the meshing of services, so that people who provide services, whether in education or family support, understand better what rare diseases may entail, and their possible life-cycle variation during the life of a child. People who provide social and education services cannot readily make themselves experts in the conditions in question, and often they confuse conditions whose names sound the same, although they are very different in character, and give rise to different demands and behavioural consequences. Wider support is needed.
Finally, the Government need to take account of the context of welfare reform and changes to several benefits, and the fact that every so often, people must reapply and prove their case for benefits again. That is particularly hard when people have rare diseases. Those people and their families should not have to spell out their condition again, in all the medical jargon, and explain it. They should not be made to jump through those hoops. We should find a better way in the social security system of showing understanding about rare diseases.
The time it takes to process an application is frustrating for the person concerned—and it frustrates me and other hon. Members, too. In special cases such as those involving rare diseases, I have had to go to someone at the top of the tree in Northern Ireland, to expedite the process. Does the hon. Gentleman think that people with rare diseases should be put in a fast queue, to be processed more quickly?
I think they should be put in a “not to be neglected” queue, rather than a “too difficult for us to sort out now” queue. The problem at the moment is that if an applicant’s condition is deemed very rare or complex, instead of their case being given added attention and urgency, it is allowed to silt up. That can happen with medical treatment and the opportunity for further diagnosis, which often requires travel outside the jurisdiction, and with the social security issues that I have mentioned, and on which I want to finish.
The Welfare Reform Act 2012 contained provisions that seemed to assume that many people with lifelong conditions would suddenly improve and not want to let on about being cured. It is a bit much when families who have their hands full supporting someone with a rare condition—particularly a child or young person—as well as supporting other family members, must constantly jump through hoops for a system that is supposed to support them and understand their needs.
Will the hon. Gentleman accept that there are also issues about the way in which general health funding is distributed? In Plymouth, we have a very high prevalence of rare diseases, perhaps linked to the heavy industry that we have had, yet we get half the funding per person that is seen in Windsor and Maidenhead, for example. Will he accept that that also needs to be revisited?
I absolutely accept that point. It also came through in the earlier inquiry work on some of the concerns voiced by the all-party muscular dystrophy group. That goes back to the point that I made about funding.
The real test of whether a strategy is coherent and effective is what happens when it comes to funding. We can have many good statements of intent. There are 51 commitments, which are very strong and sound. It all sounds great, but does it translate into money being available for support and treatment or, as happens with approving new drugs, does the finance test get in the way of support and treatment reaching people? The cost-effectiveness criteria used either by the National Institute for Health and Care Excellence or by the Joint Committee on Vaccination and Immunisation raise questions. Particularly in relation to rare diseases, if the test is almost that a possible new treatment has to throw two sixes to start, in circumstances in which people do not even have any dice, it is a serious problem. Although the rare disease strategy is a good start, it is only that—a good start. It will need more work and more resources, and will need to be informed by further research.
Thank you, Mr Bayley; it is a great pleasure to speak under your chairmanship again. It is a huge privilege to follow the hon. Member for Foyle (Mark Durkan), who made an incredibly telling contribution to the debate as usual. He is one of the few hon. Members—I hope that he does not mind my saying this—that it is worth staying in a debate to listen to, and he always has been. There were also tremendous contributions from my hon. Friends the Members for Poplar and Limehouse (Jim Fitzpatrick), for Plymouth, Moor View (Alison Seabeck) and for Blackley and Broughton (Graham Stringer) and an incredibly insightful and welcome contribution from the hon. Member for Wealden (Charles Hendry), who reminded us yet again of what a genuine loss he is to the Treasury Bench.
I thank the hon. Member for Strangford (Jim Shannon), who spoke in a health debate in this Chamber only a fortnight ago. I commented then that his record in contributing to health debates in this Chamber is, in my experience, unrivalled—at least, he is always here when I am here. For those past contributions, for his speech today and for securing this very important debate, I cannot commend him enough.
Figures provided by Rare Disease UK show that one in 17 people will be affected by a rare disease at some point in their life. That equates to about 3.5 million people. As we have heard, three quarters of those affected by rare diseases are children and, tragically, almost one third of those children will die before their fifth birthday. As a father of four children, I can add no words to underline the stark brutality of that statistic. My heart goes out to all the families who have faced such a shocking loss.
The term “rare diseases” refers to more than 6,000 different conditions that can affect the young or old and have an impact on physical or mental health. These can be life-threatening, debilitating diseases, but the term can also refer to manageable conditions.
The very definition of rare diseases, and how these are manifested in the statistics that I have given and that we have heard from other hon. Members, illustrate the fundamental issues that arise when we try to establish a coherent, comprehensive and useful long-term strategy through which to deal with the problems that they present. Some rare diseases will be very similar and advancements in medical sciences and research in one area can greatly benefit another, but some classes of diseases can be extremely different from others and the treatments for those can be wildly different, not sharing any empirical research base. As we have heard, economies of scale are often hard, if not impossible, to find.
That huge difference in dealing with each disease highlights a problem in trying to gear the system with the tools and resources necessary to make advances. With limited resources, any improvement in one area of research can sometimes be at the expense of another. These are difficult calculations and choices. Research and development must be rewarded. Certainty and predictability of funding for this work are essential. Some research—potentially a good deal—will yield no tangible or quick benefit at all. Supply chains, researchers and research and development environments must be identified, supported, grown and nurtured. The loudest voices will not always be the most deserving.
These are invidious choices. Can the Minister explain the Government’s priorities in this regard? How will Government ensure that the right balance is struck between all these competing pressures, and can the Minister tell us what criteria are used by Government to decide how and which areas of research are prioritised?
In 2009, before the last general election, the Labour Government set in motion a UK strategy following the adoption of a recommendation from the European Union in which member states were required to commit to better research and more resources for tackling rare disease. I think that all hon. Members on both sides of the Chamber agree that that was an important step.
It is now just a few weeks since the current Government published the UK plan for rare diseases. We welcome that plan, but I am struck by some of the apparent contradictions between what the Government say they want to do and what they are actually doing. The Minister knows full well that I respect him significantly. We will be spending a lot of time together in Committee on the Care Bill next year, and I hope that we can perhaps establish a precedent and resolve those contradictions today.
In October this year, the specialised services commissioning innovation fund was scrapped. That fund was set up, amid great fanfare, just two months earlier, with the promise that it would save lives and help patients. The fund was intended to provide finances and resources needed to expedite the synthesis of hundreds of potential new treatments for rare diseases. The Prime Minister said that it was
“becoming ever more essential to get your products tested and adopted in the NHS much more quickly”
before warning that
“the newest innovations are often the lowest hanging fruit”
when savings need to be made.
As we have heard, the commissioning innovation fund represented a £50 million investment. The BBC reported that the fund was scrapped due to “financial pressures”. John Murray, the director of the Specialised Healthcare Alliance, called the decision
“bad news for people with rare and complex conditions”.
Will the Minister tell us what those financial pressures are? I could hazard a guess, but I think that we deserve to know.
Of course, this will not be the last time that the Prime Minister says one thing and does another, but can the Minister tell us how this decision affected the interests that I mentioned earlier? Has the Department assessed how this cancellation affected the research and development supply chain, its planning, its recruitment and its work streams? If such an assessment has not been undertaken, will he commit today to doing that? More importantly, has the Department undertaken any analysis of how this chaotic mess has affected the state of the art? Have any potential treatments failed to appear as a result of the funding cut? Have any treatment delivery work programmes been interrupted as a result? It is impossible to believe that the decision has had no effect. More importantly than anything else—I know that the Minister will want to answer this question—have the funding cut and its effects had any negative effect on patients living with rare diseases?
Just one month before the cut was announced, the all-party muscular dystrophy group warned that resources earmarked for rare disease medication had been absorbed by the overall NHS budget. Will the Minister explain how the removal of significant resources that were specifically earmarked for the research and development of new treatments for rare diseases fits with the Government’s stated aims?
Let me move on to the strategy. No one would disagree that there is a need for a co-ordinated effort from all the countries in the UK when tackling the issues before us. I would be grateful if the Minister could explain, when he responds, how the new fragmented system of commissioning of services in England will be able easily to co-ordinate the commissioning of research and the commissioning of what are often expensive treatments for rare diseases and, as we have heard, orphan and ultra-orphan conditions with the NHS in Scotland, Wales and Northern Ireland. Where is the guiding mind with which to achieve economies of scale and critical mass in research, which we know is necessary for these conditions?
It is clear that NHS England has a leading role to play in ensuring that the new strategy is implemented and implemented well. The benefits of a national body taking a lead on that are plentiful, but how does that fit with the idea of creating local areas of expertise, such as the centre at Newcastle university and the centres elsewhere in the country, to steer innovation? Is the driving force behind innovation and new treatments coming from NHS England or from experts on the ground, and how will that work in practice? Of course we need to allow innovators to flourish, but we also need to co-ordinate. Where does the responsibility for that co-ordination rest?
That brings me to my final point. As in any debate on matters relating to health issues, we must always focus on the patient. If patients are not seeing improvements in their care, or they do not experience any easing of the symptoms associated with their disease, the Government —any Government—will have failed. Innovations are meaningless if the patients who rely on them see no benefits. Without the resources to back them up, strategies are little more than meaningless words. For any of us to claim success, patient access to treatments must improve. Many groups, as we have heard, are calling for a form of adaptive licensing to be implemented with regard to treatments for rare diseases. Have the Minister or any of his officials had any contact with, made representations to or received representations from the Medicines and Healthcare products Regulatory Agency with regard to adaptive drug licensing for treatments of rare diseases?
Access to treatments raises several issues from the perspectives of the patient and the manufacturer. First, bringing drugs to market is difficult and expensive. Encouraging drug companies to manufacture drugs and treatments that will benefit a relatively small number of patients is an important and challenging task. In the case of motor neurone disease, for example, no new drugs for the treatment of the disease have been approved since riluzole more than 20 years ago.
We must always ensure that drugs brought to the market are safe and effective. That means that even if the new UK strategy is effective in encouraging greater innovation in the field for developing treatments for rare diseases, those treatments will not be available to help patients for several years. That is not a problem that has arisen solely under the current Government—nothing could be further from the truth—but it is a difficult, sensitive issue. To that end, what are the Government doing to ensure that new treatments are available to improve the quality of life for patients with rare diseases as soon as possible?
From the patient’s perspective, the issue is often cost. Prescriptions for those with rare diseases can amount to a significant financial burden. The previous Government put in place a framework that would have resulted in those with long-term conditions becoming exempt from prescription charges. Can the Minister explain why the coalition Government chose to scrap that? Enabling greater access to treatment is essential, and I hope that the Minister can explain why that has not been given more prominence in the strategy.
As I have said, rare diseases affect millions of people. The impact on sufferers and their families is immense, so the cost of getting the strategy wrong is high. More importantly, no matter how difficult it is and whatever our political allegiances, we are morally obliged to get this right. When the Minister gets to his feet, I hope he can give those people some confidence and help to resolve the contradictions I have outlined. Finally, if the Government can produce a coherent, integrated and effective approach to resolve the problems that they seem to have caused, and to progress those issues in a meaningful and timely manner, they will have my support and that of my colleagues.
It is a pleasure to serve under your chairmanship, Mr Bayley. I thank the shadow Minister, the hon. Member for Copeland (Mr Reed) for his generous offer of support, and I am sure that we will be able to deliver his preconditions for that support. I congratulate the hon. Member for Strangford (Jim Shannon) on securing the debate. He is, as the shadow Minister has said, one of the most assiduous attendees at health debates and a consistent contributor on a whole range of different issues. We all welcome his contributions. He always makes the case for better co-ordination and collaboration between the different nations of the United Kingdom, and I completely share that aspiration. There is great value in a bit of diversity in the development of our health systems, because we can often learn things from the innovation and experimentation taking place in other parts of the United Kingdom. In opposition, I visited Northern Ireland because I was fascinated by the way in which Northern Ireland commissions and provides health and social care together. I wanted to learn more about the experiences in Northern Ireland, good and bad. Such diversity is to be valued and we should not have a one-size-fits-all approach, but I agree with the hon. Gentleman about the importance of collaboration. The Government’s strategy is an example of where that can be really strong and effective.
On the Minister’s point about collaboration, is he aware that a drug to deal with atypical haemolytic uraemic syndrome has been approved in England but the same approval has not been given in the devolved institutions, particularly in Northern Ireland?
I was not aware of that, but I am interested to hear it, and the hon. Lady makes her case powerfully. Before I respond fully to the points made by the hon. Member for Strangford, I want to deal with some of the other issues that have arisen during the debate. Several hon. Members, including the shadow Minister, asked whether the new architecture of the NHS had damaged the co-ordination of work on rare diseases. In many respects, I can reassure hon. Members. There is a danger that if one was coming into this place from afar and hearing the debate, one might think that we were moving from an idealised, perfect scenario into something more troubling. We all know, however, that that is absolutely not the case. The treatment of rare diseases historically has been far from optimal, and the greater involvement of clinicians in the commissioning of care can have real benefits for patients. Until 31 March 2013, far from being a simple matter, specialised commissioning was fragmented across a range of NHS organisations including regional specialised commissioning groups, a national specialised commissioning team and local primary care trusts, which remained ultimately responsible for the specialised health care of their populations. From 1 April 2013, under the terms of the Health and Social Care Act 2012, NHS England became the sole direct commissioner of specialised services, which provides a greater simplicity in the commissioning of services.
I will continue, because I am conscious of the time. The hon. Member for Poplar and Limehouse (Jim Fitzpatrick) made a valuable contribution. I learned something about trigeminal neuralgia, from which I think I understood him to say that he suffers. He asked whether it would be possible to meet once the report that he referred to is complete, and I would be happy to agree to that, diary permitting. I am sure it will be possible to do so at some point. He made some important points about misdiagnosis, and about the importance of support groups and networks. The internet now provides incredible assistance to people with rare diseases, because they can link up not only with those in their neighbourhood but with people and clinicians globally who can guide them in the treatment of their condition. He also spoke about unnecessary referrals to hospitals and the mental health implications of some rare diseases, and I completely agree with him.
My hon. Friend the Member for Wealden (Charles Hendry) made powerful points about the extraordinary work of so many families, and he mentioned in particular the work of Charlie’s Challenge and Tildy’s Trust. Such families do the most remarkable work, and they are often hellbent on producing a really valuable legacy from their experiences. His point about the Department helping to co-ordinate the work of so many such groups was well made. He also referred to the fantastic work that is going on in Edinburgh university, and I applaud all those involved.
The hon. Member for Plymouth, Moor View (Alison Seabeck) made the point that there is extraordinary variability of service around the country. That is something that the strategy can absolutely address, and I believe we will get powerful results. She referred to her constituent, young James, who suffers from Duchenne muscular dystrophy, and she talked about the importance of transition to adulthood. I focus a lot on mental health, and that transition is often a complete disaster. We need to do far more to improve it.
The hon. Member for Foyle (Mark Durkan) made some important points about collaboration. He referred to the British-Irish Council, and although I have no idea whether his suggestion is possible, I am happy to look into it. He talked about the funding challenge. We are in very tough financial circumstances and often—the contributions of many hon. Members this afternoon have emphasised this—the question is how the money is used, because it is frequently not used effectively. A misdiagnosis usually results in an inappropriate referral to hospital, and a patient goes down completely the wrong track. An enormous amount of money is wasted, and the patient receives very poor care. It is essential to improve the way in which the system works to extract better value. We recently announced integration pioneers in 14 areas of the country. None has had extra money, but they demonstrate that, by co-ordinating their efforts more effectively, they are producing much better results for patients. The shadow Minister was absolutely right that the one thing we should all focus on is the patient—the individual citizen—and their experience of the system.
It is fitting that this debate should happen so soon after the launch of the UK strategy for rare diseases. This strategy is an overarching UK-wide framework, setting out a shared UK strategic vision for improving the lives of all those with rare diseases. It is owned by each country in the UK and commits them to more than 50 actions—I think it was identified as 51—that will deliver better outcomes for those with a rare disease. It means that for the first time we are in a position to make a tangible, co-ordinated difference to those suffering with a rare disease. That is something we can all be really positive about.
As we have heard, one in 17 people will experience a rare disease at some point in their life, with the majority of diagnoses made in childhood. That amounts to some 3 million people in the UK. A disease itself may be rare, but having a rare disease is, alas, not unusual, because there are so many of them—a point made by the hon. Member for Plymouth, Moor View. They are a major cause of illness and make considerable demands on the resources of the NHS and other care services. The strategy for rare diseases is based around the more effective and efficient use of services—a point I made earlier—with better links to research and innovation. As the NHS constitution states, no-one should be left behind because of their condition, be it rare, very rare or yet to be diagnosed. To achieve this, England, Scotland, Wales and Northern Ireland have agreed to deliver the 51 commitments that focus on five areas.
The first is empowering patients—perhaps the most significant of all—making sure that they are listened to, informed and consulted every step of the way. No one knows the condition better than the person suffering from it; too often, they are ignored in a rather paternalistic system. We will continue to work closely with patient groups and others to improve services for rare disease sufferers. We will improve access to knowledge and support networks at UK, European and international level, and we will help patients to participate in rare disease registries. We will look at how those might be developed in England to better capture the patient experience.
Secondly, we want to develop more effective methods for identifying and preventing rare diseases. Carrier testing, preconception and antenatal care, along with newborn screening, all play a part. Rare diseases are often genetic in nature, and so can affect more than one member of the family. This makes it important that testing of other family members, where appropriate, becomes more routine.
The third area is better diagnosis, which has been raised during the debate, and earlier intervention. Too many people still wait far too long to get an informed, correct diagnosis. There are several things we need to address. We need to ensure there is better awareness of rare diseases. That is important across all aspects of health care. Not everyone can be an expert, but ensuring that the possibility of a rare disease is considered when a diagnosis is proving difficult can help. We need to ensure that all doctors are alert to the possibility of a rare disease when they see patients, even if they are not able to diagnose specific diseases. This means including better training on rare diseases in university courses and in professional development at work.
The training and education of clinicians is critically important. Health professionals do not need detailed knowledge of every rare condition, but all medical specialties and multi-professional care teams should have a general awareness of rare diseases so that they can make rapid referrals to specialists in the appropriate field. Making genetic testing more mainstream, harnessing the potential of genomic technologies and focusing on what our DNA can tell us will also help us to reduce the time to diagnosis.
Perhaps the most important commitment is to develop clearly defined care pathways between primary and secondary care and regional and specialist centres. Health care professionals, especially GPs who are likely to be the first point of contact, need to know how to access the pathways for those at risk of rare disease.
Fourthly, we want to see better co-ordination of care. Building on the fantastic NHS genetic services that already exist—this country is well recognised internationally for that—we want to see the development of centres of excellence in rare diseases, providing one-stop-shop services to patients through co-ordinated consultation and treatment schedules. The centres should also be knowledge and skills hubs—concentrating the skills together—that support local delivery of services and facilitate clinical trials and other research projects.
The last area of the strategy, but by no means the least, is recognising the absolute importance of research, which several hon. Members have touched on today. The Government are committed to supporting research into rare diseases. Such research holds the key to improved personalised and targeted approaches to health care. These have the potential to improve the effectiveness and safety of treatments, the speed of diagnosis and patients’ quality of life.
In the UK, we are lucky to have some of the best academic and clinical research in the world. It was no coincidence that Earl Howe launched the strategy at Great Ormond Street hospital last month. The hospital itself hosts a National Institute for Health Research biomedical research centre that continues to lead on experimental medicine, including the discovery of diagnostics and new treatments for childhood diseases. The shadow Minister—if I can briefly divert him from his iPad; I am sure he is catching up on important stuff—made the point about how we ensure that we make the right decisions on research priorities. Ultimately, it comes down to the quality of the proposition that is put forward, but I will write to him and other hon. Members on the issues raised that I have not touched on.
We also want to see more collaboration between patients, health care professionals and researchers, and for that to become normal custom and practice. At that same event, Earl Howe also announced that the National Institute for Health Research is establishing a rare diseases translational research collaboration to translate research into actual practice. As part of the NIHR rare diseases translational research collaboration, researchers will share their considerable resources and world-leading expertise to increase research collaboration and improve treatment and care.
Some £20 million over four years is being invested by the NIHR to fund the NHS research infrastructure focused on deep phenotyping—the gathering of information on the physical characteristics of people with rare diseases. The TRC will build on our British heritage as a world leader in genomics. It will provide national co-ordination to bring those with significant relevant NIHR-funded infrastructure in the NHS together. That will speed up the development of new diagnostics and treatments. That is also why rare diseases is one of the three priority areas for the Government’s initiative to sequence 100,000 whole genomes over the next three to five years. We want to see innovative research and cutting-edge technology translated into real patient benefit.
The strategy for rare diseases will increase access and lead to a more patient-centred, co-ordinated approach to care and treatment, clearly focused on the needs of patients and families. Each country in the UK will develop its own implementation plans over the next few months. We will ask a reconstituted UK rare diseases stakeholder forum to maintain an overview of the implementation of the strategy. The original forum was established earlier this year and comprises policy officials from the four UK countries, service users, industry, regulators and service providers. The forum played an invaluable role in the development of the UK strategy and will now have an ongoing role in monitoring the strategy’s implementation and reporting back on progress.
In England, our key delivery partner is NHS England. The recommendations of the UK strategy for rare diseases that relate to NHS England’s responsibilities for specialised commissioning will form part of the scope of NHS England’s five-year strategy for specialised services—an £11.8 billion plan to co-ordinate specialist services.
I want to thank all hon. Members for their contributions to a very useful debate. On all the other points that I have not been able to deal with, I will write to hon. Members.
Sixth-Form Colleges (VAT)
My constituency is home to two excellent sixth-form colleges, St John Rigby college and Winstanley college. Like so many of the 94 sixth-form colleges in the country, they do an excellent job, not only for their students but for the wider community. It is deeply unfair that they must pay VAT while school and academy sixth forms do not. In other types of free 16 to 19 education provision, funding is diverted to the front line. Why not for students in sixth forms?
Following recent changes to the funding formula, the anomaly has become unjustifiable. That view is shared by at least 74 other Members of Parliament, including the Chairman of the Select Committee on Education and my hon. Friend the Member for Barrow and Furness (John Woodcock), who wanted to highlight the case of Barrow-in-Furness sixth-form college but unfortunately cannot be here due to illness.
This unfair situation is exacerbated by the cuts made to sixth-form colleges in recent years. In 2010, enrichment funding was reduced from 114 to just 30 hours a year. Subsequently, the new 16 to 19 funding formula cut their budgets further—the average was 6%, which masks much more serious cuts for some. Last week, out of the blue, sixth-form colleges were told that 18-year-olds would no longer attract the same level of funding. Ministers argued that it was because those students have already received two years of funding, which completely misses the point that they are often the young people who most need and benefit from the additional help that we can provide.
The hon. Lady is making a strong case. On behalf of the three sixth-form colleges in my constituency, I absolutely agree. Will she comment on the fact that the sixth-form colleges in Brighton disagree with the Government’s position that VAT costs are taken into account in the up-front funding allocation made to colleges? If she agrees, will she join me in saying to the Minister that surely that means schools and academies are effectively being double-funded, because they are getting that as well as the VAT rebate?
Absolutely. Issues of a level playing field are at the heart of this debate and I hope that the Minister will respond to that in his closing remarks.
Taken together, in the worst cases, the funding cuts have left some sixth-form colleges reeling from a staggering 30% overall budget cut. We should consider the issue against that backdrop.
Civil servants originally estimated that creating a level playing field for sixth-form colleges in relation to VAT would cost £20 million. They have since revised that upwards on several occasions, arriving most recently at a figure of £150 million, which includes other institutions. I say to the Minister that it seems completely the wrong approach, given that the Government have accepted in principle that treating sixth-form colleges differently is wrong, to refuse to right that wrong for them because they do not want to do so for others.
The problems for sixth-form colleges are exacerbated by the fact that, unlike school sixth forms, they cannot cross-subsidise their 16 to 19 work with funding from pre-16 provision, which is more generous. Principals and teachers across the sector are taking agonising decisions about dropping courses, cutting staff or reducing activities. A survey last year found nearly half of colleges had had to drop courses, eight out of 10 had had to cut staff and an astonishing 71% had removed or reduced enrichment activities such as sport, music, drama and dance. That is a loss for all young people, but it is devastating for young people who have never had such opportunities open to them.
I congratulate the hon. Lady on securing this debate, but will she acknowledge that sixth-form colleges are often able to offer courses that school sixth forms cannot, because they have the ability to draw in expertise? Ultimately, we need a level playing field, so that all those offering sixth-form education are playing by the same rules.
Absolutely. The issue of the level playing field has come up time and time again. The hon. Gentleman is absolutely right about courses and the staff that sixth-form colleges can use. I am concerned that that loss of staff has also meant a loss of expertise. If the sector is hit by anything else, we will struggle to get it back.
This issue has certainly been raised with me by St Brendan’s sixth-form college in my constituency. Another issue is the fact that the VAT situation does not allow adults to use the building for more than a short amount of time. Otherwise, that incurs VAT as well. The academy schools in my constituency lobbied me about that in the past, but thankfully we managed to overturn the situation for them. In terms of community engagement, does she agree that not being able to use the buildings in the evenings is a wasted opportunity?
Absolutely. I am grateful to my hon. Friend for raising that point. There is also a wider point: sixth-form colleges benefit not only their students but the wider community. I know from my constituency that they are institutions rooted in the wider community, and they play a much more beneficial role across our town than it would appear from looking only at their core activities.
It is galling for my sixth-form colleges that while they are struggling with the impacts of the cumulative funding cuts, the Government are creating new free schools and academy sixth forms, with which they are required to compete but which are VAT exempt. Many people contacted me before the debate to point out, rightly, that a market does not function if competition is not fair. Many new free school sixth forms are struggling to fill their places, yet those places are funded too. Ministers are paying for places in new institutions to lie empty while successful and established sixth-form colleges are struggling to afford the students that they have.
I congratulate my hon. Friend on securing this debate and putting the case so strongly. She puts her finger on it: new institutions are being funded for phantom students who are not there, while existing institutions are not only not being funded for this year’s students but taking a 17.5% cut in funding for next year’s students, based on an existing 20% difference in funding. VAT is yet another anomaly. Does she not agree?
Absolutely. I pay tribute to the work done by my hon. Friend and many of the other Members present. The fact that there are so many Members here for such a short debate should tell the Minister that there is huge strength of feeling throughout the House on this issue.
All of this would make more sense if the sector were failing, but taken as a whole, sixth-form colleges are not only lean and efficient institutions, according to the National Audit Office; they are also among the best existing provision for 16 to 19-year-olds. Some 80% of them are rated as good or better, and they consistently rate higher than other types of provision in terms of added value. I know that St John Rigby college in my constituency does tremendous work with young people from deprived backgrounds and outdoes almost every other type of provision in getting those young people to university.
I congratulate the hon. Lady on securing this important debate. Does she agree that 16 to 19 provision in further education colleges—outside a school setting—can sometimes provide the impetus that 16-year-olds who might not have done well at school need to enable them to achieve their GCSEs and then go on to A-levels?
The hon. Lady is absolutely right. I am grateful to her for raising that issue. The culture in sixth-form colleges is enormously beneficial to such young people, and the staff are obviously passionate and determined to ensure that those young people reach their potential.
In conclusion, Ministers have accepted that this situation is unfair, so will the Minister who is here in Westminster Hall today take steps to create a level playing field for sixth-form colleges?
My hon. Friend may be interested to know that my very first debate in Parliament, 16 years ago, was about sixth-form colleges and took place in this room, but that is beside the point. At that time, I described sixth-form colleges as the geese that lay golden eggs; I think she has made that point today. Of course, one other thing that sixth-form colleges do is to bring together young people from different schools and different communities. They are often situated in areas of diversity and they are a tremendous force for social cohesion. Does she accept that point?
My hon. Friend is absolutely right, and his expertise on sixth-form colleges is well known; not only does he sit on the governing body of a local sixth-form college but he is chair of the all-party group on sixth-form colleges, which has done so much good work on this issue. I have to say to him that when he was first raising issues about sixth-form colleges in this place, I was actually at a sixth-form college in the constituency of the hon. Member for Bury North (Mr Nuttall). That shows that nothing changes.
As I was saying, Ministers have accepted that this situation is unfair, so will the Minister take steps to create a level playing field for sixth-form colleges? Will he make this important sector a promise that there are no more of these cuts to come? And will he join me in paying tribute to the extraordinary contribution that sixth-form colleges, such as my local one, make to young people and communities across the country?
Thank you very much, Mr Bayley, for calling me to speak. It is a great pleasure to serve under your chairmanship, and to confirm that both the Minister and the hon. Member for Wigan (Lisa Nandy), who secured the debate, had agreed to my speaking in it. I am sorry if I should also have informed you, Mr Bayley, but I think my bureaucratic resources ran out after contacting the Minister and the hon. Member.
Given the short time available, I will try to keep my comments brief. In October, I wrote a letter to the Secretary of State for Education. It is a shame, notwithstanding the great respect that I have for my hon. Friend the Exchequer Secretary to the Treasury, who is a deeply distinguished member of the Government, that we do not have a Minister from the Department for Education here to answer questions about what is essentially an education matter. That letter was co-signed by 73 MPs from across the House, and it made the point that the unfair treatment of sixth-form colleges as far as VAT goes made no sense and was, in fact, untenable. The good news is that the Government agreed, fundamentally, that they could not defend that treatment. The bad news is that they do not plan to do anything about it. That is a shame, because Government policy is to create a level playing field for 16 to 19 provision, and they are right to do so. If anyone wants to play party politics, I will point out that the Opposition were wrong to leave the position uneven when they were in power. However, the Government have set out their aim, but now they are not fulfilling it. They have moved in that direction, but there is a real opportunity to take action on this issue. In the overall scheme of things, it would not be that expensive to do so; for sixth-form colleges, it is estimated that it would cost no more than £30 million.
There are reasons why sixth-form colleges could be treated differently from further education colleges, if one wanted a stepped programme. To say, “This is wrong, but we can only afford to rectify some of it, so we will rectify none of it” is illogical. It would be better to do the right thing by sixth-form colleges, not least because, as has been said, they are the most successful 16 to 19 providers that we have. If the Government’s education policy is about anything, it is about raising standards across the board and, of course, closing the gap between rich and poor. Well, guess which the most successful institutions are in the 16 to 19 sector at doing both those things? You’ve got it—sixth-form colleges.
I have no sixth-form colleges in my constituency; I am not banging a constituency drum here. The sixth forms in my local schools will probably be cross with me for speaking up for sixth-form colleges so often. However, the whole point of the Education Committee is that we look at the evidence and try to work out what is the best thing to do. Well, guess what? Sixth-form colleges are peculiarly successful in addressing the Government’s two key aims on education, so it makes no sense to penalise them in the way that is happening now.
The VAT penalty that sixth-form colleges face is worth an average of £250,000 per college, and as has been said, the problem is worsened because, unlike other institutions, they cannot cross-subsidise. If that money were to be provided to sixth-form colleges, it would help them to save courses that are being lost, including less popular courses such as further maths. Ministers are quite right to identify the need to encourage science, technology, engineering and maths subjects. Sixth-form colleges can play a positive part in doing that, if they are provided with the wherewithal to do so.
I am grateful to the Chairman of the Education Committee for giving way; he is making a very strong speech. He talked about investment in STEM subjects. Worcester sixth-form college has received money from the Government to invest in a new science centre. However, does he agree that that money would go further if we were able to take action on VAT for colleges?
I absolutely agree with my hon. Friend, and I think there are feelings across the House on this subject. I said that I would keep my remarks brief, so perhaps I will bring them to a close. The big point is that sixth-form colleges have for years consistently been the most successful providers at delivering the Government’s key educational aims for 16 to 19-year-olds, but time and again, they appear to be on the front line of cuts in funding. That cannot make sense, in terms of having a rational, coherent approach to this issue.
I congratulate my hon. Friend on the great work that he is doing. He said that he has no sixth-form colleges in his constituency; I have no schools that provide sixth-form education in my constituency. However, there are three colleges there that provide sixth-form education: Huddersfield New college, Greenhead college, and Kirklees college. I also congratulate the hon. Member for Wigan (Lisa Nandy) on securing this debate, and I will continue to support this campaign.
I am grateful to my hon. Friend for saying so.
There is another aspect that it is worth pointing out briefly. At the moment, because of the freedoms for schools that I think are broadly supported across the House—there is certainly support for them on the Government Benches—there is a danger that we are sleepwalking into the creation of more small sixth forms, which we know, from sustained evidence gathered over time, perform poorly. At the same time, we are undermining institutions that have a long track record of success in raising standards for all, and in closing the gap between rich and poor. We cannot allow that to happen, so we need the Government to wake up and recognise the jewels that they have in the form of sixth-form colleges.
Far from seeing sixth-form colleges cut back, sliced and reduced in capacity and capability, I would have thought that, having found a delivery system that works better than others, we should desperately look at expanding and supporting it in a way that is fair to other providers. I do not want in any way to be prejudiced against sixth forms, but I would like a level playing field, because we have the exact opposite: we are seemingly strengthening those with the weakest record, and weakening those with the strongest record.
I agree. If a system is most successful and cost-effective, establishes high standards, particularly for the poorest, and closes the wealth gap, I would think people would be delighted to see it expand. I will give way to my hon. Friend the Member for Eastleigh (Mike Thornton), and then I will draw to a close.
I thank the hon. Gentleman for giving way; I very much appreciate it. With the reduction in spending caused by VAT and the need to provide for those over 18, does he agree that it is very strange to cut money for colleges that aim specifically to get people good A-level results and other results at that level, when they are trying to educate people, including those who perhaps missed out earlier, but who are now able to catch up on their education between the ages of 18 and 19?
My hon. Friend is right. Perhaps that is the danger of making political promises that are nice and neat. His party might want to look carefully at the way that the protection of schools has left very few areas where we can cut in order to deliver reductions in spending. It could be that a series of measures that were positively meant have eventually led to this cut.
Those who are 18 at the start of an academic year and who are still at a sixth-form college are likely to be those clinging on to education, having struggled in post-16 education, and they may be at risk of becoming NEET—that is, not in education, employment or training. Again, it does not make sense for a Government who are rightly using the pupil premium and other measures to try to close the gap to finish up looking to make reductions at the end of the period—at the time when pupils need help to get over the line, and to get themselves on the first rung of the employment ladder—rather than looking to put in place additional support. The sixth-form college sector is not looking for special treatment; it is simply looking to be treated fairly, compared with other providers.
Thank you, Mr Bayley, for calling me to speak. It is a great pleasure to serve under your chairmanship. I congratulate the hon. Member for Wigan (Lisa Nandy) on securing this debate, and on making her case so strongly. Indeed, it is noteworthy that this is a well-attended debate, as she has mentioned.
In the light of the remarks made by my hon. Friend the Member for Beverley and Holderness (Mr Stuart), I should mention that I am here as a Treasury Minister, as the debate relates to the VAT system. In respect of House of Commons workings, this is a Treasury matter, and this week the Treasury, rather than the Department for Education, was up for debates, although the hon. Member for Wigan has been most ingenious in getting a debate on sixth forms in a week in which Department for Education Westminster Hall debates were not occurring.
The hon. Lady has highlighted how sixth-form colleges interact with the VAT system. Let me say a little bit about that. VAT can be a rather complex matter. It might help if I provided some background, before turning to the specific issue of sixth-form colleges. One basic feature of VAT is that businesses are able to reclaim the VAT that they pay on their inputs. However, this does not apply to purchases, acquisitions or imports made in relation to non-business activities, such as the provision of free education. This means that bodies such as schools can end up with VAT costs on the goods and services that they buy in.
Clearly, it is always an option to meet these costs by increasing the funding made available to schools, for example. However, there is a risk of the burden of that funding falling on local taxation, as the state education system in England and Wales has historically been delivered by local authorities. To deal with that, in 1973 the Government introduced a scheme, now under section 33 of the Value Added Tax Act 1994, allowing local authorities to recover the VAT incurred on goods and services purchased relating to non-business activities. Local authority maintained schools are able to recover VAT under the umbrella of the local authority.
Since then, there have been extensions to that scheme, in particular to cover the position of academy schools. The Finance Act 2011 introduced a new VAT refund scheme, under section 33B of the 1994 Act, to ensure that funding for academy schools’ non-business VAT costs was consistent with that for local authority maintained schools. The specific purpose of the scheme is to ensure continuity in the funding of institutions that are leaving local authority control to become academies, so that they are not put at a financial disadvantage.
I hope that this slight historical excursion has made it clear that there is clear logic to the VAT treatment of local authority schools and academy schools making the move out of local authority control. That logic is rooted in the nature of the service being provided and the relationship to public sector local authorities.
Let me turn to the campaign by sixth-form colleges, of which hon. Members in the Chamber are well aware. The campaign has gained the support of 74 Members representing constituencies that contain, or are serviced by, sixth-form colleges, and the likes of my hon. Friend the Member for Beverley and Holderness. They wrote to the Secretary of State for Education, expressing their concerns.
Hon. Members have welcomed the introduction of the new 16 to 19 funding formula, which will mean that all 16 to 19 education providers are funded in the same way, and which is reducing the historical disparity between school sixth forms and colleges. However, the 74 hon. Members feel that the way that sixth-form colleges interact with the VAT system leaves them at a disadvantage, compared with local authority or academy schools. In particular, as we heard today, they have asked for their differential VAT treatment to be recognised in the way that they are funded.
My memory goes back to when sixth-form colleges were grouped—by mistake, I think—with further education colleges and put into the FE sector. That is why the VAT mistake was made. Had sixth-form colleges been kept in the schools sector, this would not have occurred. Does the Minister agree?
I think that is probably a fair description, historically. Schools have been treated one way, in part, because of the relationship with local authorities and funding at local authority level, whereas other elements of the public sector do not get funding for VAT in the way that local authorities do. Sixth-form colleges and further education colleges are examples of that.
The Minister and I have exchanged words on this matter many times. The historical record is quite interesting. When colleges were incorporated, they had the same VAT rights as schools, because they came from the same part of the womb, as it were, but that was changed at the point of incorporation. Given the way that the landscape of education has changed, it is odd that new provisions, such as university technical colleges or 16 to 19 free schools, are entitled to the VAT, whereas sixth-form colleges are not. That anomaly was created on this Government’s watch. It would be better if it were not so.
It should be acknowledged—and it was, in earlier interventions—that notwithstanding the points that the hon. Gentleman makes, this is a long-standing issue.
Let me turn to the Government’s position. The academies VAT refund scheme is set up for a specific policy purpose, which is to remove a financial disincentive for maintained schools to convert to academies. As the purpose is specific, the Treasury has no plans to extend the scheme to colleges. Many other providers of public services are expected to cover their VAT costs from their funding allocations. This funding model is applied to bodies delivering—
Sitting suspended for a Division in the House.
I am grateful for the opportunity to complete my remarks. The academies VAT refund scheme is very specific. The Treasury has no plans to extend that scheme to colleges, and many other providers of public services are expected to cover their VAT costs from their funding allocations. That funding model is applied to many bodies delivering public services, and to some spending by Departments and non-departmental public bodies.
The Department for Education, however, has considered whether adjustments could be made to funding for 16 to 19 education to recognise the differential VAT treatment of different types of providers. In particular, the Department for Education has considered whether it could additionally fund sixth-form colleges by an amount equivalent to their typical VAT costs. The Department for Education has concluded that that is not affordable in the current fiscal climate. The £20 million estimate applies only to sixth-form colleges; extending extra funding to further education colleges, which have a similar case to sixth-form colleges, would cost some £150 million.
I echo the Chair of the Select Committee on Education, the hon. Member for Beverley and Holderness (Mr Stuart), by saying that the amounts are small in the scheme of things. They are piffling amounts compared with the volume of the Government’s public spending. One penny on the standard rate produces £4 billion, and we are talking about £30 million for sixth-form colleges. It is a tiny amount of money.
I am not entirely surprised by the hon. Gentleman’s comments. I have no doubt that he would not hesitate to put up income tax by 1p. In the context of the current fiscal situation, we have to be very careful with public expenditure. The Department for Education will, of course, keep the sector’s funding under review.
Although I recognise that colleges have concerns, the reform of 16 to 19 education is one of the Government’s priorities. The Government remain committed to moving towards fairer funding of 16 to 19 education by levelling the rate of funding for schools and colleges by 2015.
I am sorry that I missed the earlier remarks about 18-year-olds and the £700 cut in funding, which will mostly affect people in poorer postcodes. Does my hon. Friend the Minister accept that if the schools budget was increased by 0.8% rather than 1%, there would have been no need for a 17.5% cut in 18-plus funding to Worthing college and other sixth-form colleges?
Department for Education Ministers have decided to make savings in the academic year 2014-15 by reducing the participation requirements for 18-year-olds in full-time education. It is worth pointing out that most 18-year-olds will have already benefited from two years of post-16 education. We are of course in a situation where difficult choices must be made about public finances; my hon. Friend the Member for Worthing West (Sir Peter Bottomley) is well aware of that.
The Department for Education is introducing a series of reforms in partnership with the sector to help drive up standards and improve the quality of provision by implementing Alison Wolf’s proposals for 16 to 19 education, by introducing new traineeships for school leavers, and by reforming the apprenticeships programme to route funding directly to employers.
To conclude, while the Government recognise the concerns raised by sixth-form colleges, this position is not unique to such colleges. The Government have no plans to make any change in this area in the near future, given the fiscal climate.
Order. The Minister having sat down, I am bringing this debate to an end.
I want to put on record—an unadvisable thing to do to any statement from the Chair—that more than 20 Members were present for a half-hour debate, which is extremely unusual and indicates the importance that many hon. Members attach to the subject. I apologise to the Minister and the hon. Member for Wigan (Lisa Nandy) for the manner in which the debate was interrupted by a Division in the House.
Housing and Related Jobs (Greater London)
I thank Mr Speaker for choosing this subject for debate today. I welcome the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Keighley (Kris Hopkins) to the first debate that I have had with him on such issues and to his new responsibilities.
For the 30-plus years that I have had the privilege of being a Member of Parliament in Bermondsey and Southwark, housing has been at the top of the political agenda for my constituents. It is what they come and see me most about—they need more and better housing. We need more affordable housing of higher quality to meet the demands in a community such as ours. It is not that the local authority has not played a fundamentally important part; we have the largest local authority housing stock in London and one of the largest in the country. There is also significant housing association housing, and we have one of the highest proportions of shared ownership in the country. We have also seen considerable growth in owner-occupation over the years. It was only 2% when I was first elected and is now well into double figures.
As the Minister and everybody in London knows perfectly well, however, the legacy that this Government inherited has meant that we have seen relatively less housing being provided to meet the need in London. I am happy to give credit where it is due. More local authority housing was built under the Governments of Mrs Thatcher and John Major than thereafter, but we then had a period when, although money was spent by Government on bringing homes up to a decent standard, we did not build new local authority housing. We therefore have an accumulative deficit in housing need.
The other self-evident factor is that London has the greatest gap in the country between average family income and the average cost of a home. Both rental costs and purchase costs are far greater relative to income in London than anywhere else. We have a real crisis that the Government, to their credit, have sought to address. I am here to urge the Government to do more and to come up with specific proposals. In particular, I am here to place on the record in Parliament some of the recommendations of a report, which the Minister has now seen, commissioned and worked on by my colleagues in the Greater London assembly, who put forward proposals for how we can increase not only the number of properties built, but also the number of jobs created as a result. There is no better way to increase jobs and apprenticeships than through the construction industry. My constituency, like all others, will benefit from that upturn in jobs, and there are many who would want to work in the construction industry.
At our party conference in September 2012, my colleagues made housing a priority and specifically asked for various things. People can look up the full motion that was passed, but we wanted the Government, the Mayor of London and local government to
“stimulate a major programme of house building, increasing the rate of construction until we reach at least 300,000 houses a year”—
across the country—
“using untapped sources of finance and giving more freedom to social landlords, local authorities and local communities”,
and radical steps to be taken
“to improve land supply, through releasing public land with ‘build now, pay later’ deals.”
I persistently return to this issue.
I initiated an Adjournment debate in the summer on foreign purchases of properties in London. We have seen growth in the number of people purchasing from abroad and in the number of properties built and offered for sale abroad before they are offered for sale at home. That has caused particular anger and frustration. It has driven up prices, because if properties are opened up to the global market—Malaysia, Singapore and other places—and advertised to people who see London as a good place to invest in housing, the general price goes up because sellers can get higher prices for sales abroad. If local people cannot even get access to bid for properties until after they have been sold—on-plan or off-plan—to someone far away, that is a double frustration. That has been a real cause of grief and frustration to my constituents, in particular around the Elephant and Castle, where a huge development is ongoing, and elsewhere.
I am pleased that the message has got through and that local developers are now making commitments to offer property for sale locally. I am still frustrated that my local council, which Labour still runs, does not insist that the planning conditions that are meant to be applied, specifically that all developments should contain 35% affordable housing, are adhered to. That condition is regularly opposed or not fulfilled when planning permission is granted. I was particularly pleased, however, that the Chancellor responded specifically to the issue in the autumn statement as a result of, I hope, my debate, but also the propositions of others, and announced that, in the following financial year, any non-UK purchaser of residential property who sells a property will pay capital gains tax on that sale, as everybody else does. That has corrected a real injustice where residents in the UK felt that they were being penalised when those who came in from outside were not.
In October, against this background, my colleagues at the London assembly, Stephen Knight and Caroline Pidgeon, produced a report entitled “Affordable Homes & Jobs for London: A Seven Point Plan”. I thank them for their work and the Secretary of State for Business, Innovation and Skills for launching the report in Southwark. I will not repeat the history of difficulties, but I want to highlight one or two things before I concentrate on the proposals for how we get out of the difficulties and increase the Government’s current plans. We have a
“historically low cost of public borrowing”,
which is a plus, a
“high economic multiplier for investment in construction”,
which a plus, and a
“high level of spare capacity in the construction sector”,
which is again a plus. At the moment, we are placing
“13,000 homeless households into temporary accommodation”
in London every year, for which the best estimate of cost
“is £408 million every year”.
The best estimate for the cost to the taxpayer of poor housing is
“£17.5 billion a year in crime prevention, health costs and the loss of children’s future productivity”.
There are still lots of people in emergency temporary accommodation and in overcrowded homes, huge numbers on waiting lists and, as I indicated before, a multiple of 12.5 times the median income for London property prices. Furthermore, private rent levels have risen by more than 11% since June 2012.
The Mayor has his policy, and a draft housing strategy is out for consultation, so I encourage people in London to respond—the deadline is in February. I hope that people who read and hear our debate will look at the consultation and respond. Slightly, if not very frustratingly, when the report was compiled only 737 homes had been started by the Mayor in London this year, and only 5,225 homes had been built on GLA land, although the commitment was to build nearly 40,000. He therefore has a long way to go.
The Government have introduced policies that have certainly initiated significant new development of affordable housing. I hope that we are on target to deliver by the end of the Parliament much more affordable housing England-wide than in the previous Parliament—although the definition was changed—but we are still falling badly behind comparable countries. The report gives a table of the increase in housing completions since 2010 in the UK, Belgium, Finland, France, Switzerland, Poland, the Netherlands, Denmark, Sweden, Germany and Norway: all the others have achieved many more housing completions than we have. We have to be more ambitious. I remember, though I was not politically alert at the time, one of the great legacies of Harold Macmillan was building “homes fit for heroes”. We had a huge housing building programme after the war, as we did after the recession in the ’30s. I am clear that we need that sort of action now.
There are proposals for the Greater London authority to increase investment in and use much more GLA land for affordable homes, but I will speak about matters that the Minister and his colleagues in the Department for Communities and Local Government can deal with specifically. One thing is already on their agenda, which I welcome. This very week, the Minister sent me and colleagues a letter announcing the allocation for the new homes bonus; my local authority has received £10,845,251, according to the letter—I do not doubt the figure. This is a good initiative of the Government, and we welcome it. I am conscious that the GLA has experienced some top-slicing, which is controversial; none the less, the new homes bonus is allowing us to build many more homes and I am positive about it.
I want to propose, however, that the Government could usefully look again, and more boldly, at the housing revenue account and the way in which local authorities can deal with it. I ask the Government not only to take the welcome steps in the autumn statement—allowing shared spend of money up to the housing revenue cap—but to scrap the housing revenue account borrowing cap, allowing London boroughs to invest in affordable housing under prudential borrowing rules.
I want, too, the Government to increase their investment in affordable homes, shifting the balance of spending from housing benefit to bricks and mortar. We are in a nonsense position in this respect at the moment: for the four financial years of the current affordable housing programme, £4.5 billion is being invested by the Government to support the creation of affordable homes; over the same period, however, the Government are also spending an estimated £95 billion on housing benefit. In London, in 2011-12, £5.9 billion was spent on housing benefit alone; about half of that, or £2.6 billion, would provide 111,000 extra affordable homes.
I appreciate that we have to have the homes first, before we can move people from privately rented accommodation, where the rents are high, into much cheaper accommodation, which is their own. Of course there is a cycle, but it cannot be beyond the wit of Government to think of ways in which to forward finance that, so that we can build more quickly, move many more people into affordable housing and reduce the housing benefit bill, which I am sure that colleagues in the Department for Work and Pensions would wish. Only 11% of the annual housing benefit spend in London for four years would seem to be enough to fund 111,000 extra affordable homes.
On the benefit for jobs in London, the reality is not only that all the house building would produce extra jobs in the construction sector, which has the capacity—housing associations, too, have capacity, because I have spoken to them and they have confirmed it—but that there is opportunity for full-time employment and for apprentices. Eighteen per cent. of all small and medium-sized enterprises in London are in the construction sector. In the first quarter of 2013, however, the balance of construction employment in SMEs fell faster in London than anywhere else in the UK. Less than 20 years ago, more than two thirds of homes were built by companies employing fewer than 500 people; by 2012, only 27 companies were responsible for 70% of the housing starts in London. SMEs in construction have been squeezed, therefore, and some have left the market altogether.
The last benefit of such a programme is the apprenticeships. The Government have done a huge amount on apprenticeships, which I welcome, as the Minister would expect, but he knows about the capacity to recruit and retain other people as apprentices, who would then go on to the construction industry as a whole. In Southwark, we are bidding to have a university technical college in Bermondsey to specialise in construction skills, as well as in health service-related skills, because we believe that the market is there.
I will end with one encouragement to the Minister. I understand that the Treasury rules always make such issues difficult, because the Treasury counts local authority borrowing as public sector borrowing. I have, however, talked to the housing associations in London, which have been extremely helpful—there are 16 big ones and more than 300 smaller ones—and they are beginning to find ways of expanding the amount of social building. By and large, they are not simply building conventional, rented affordable homes; they are building homes that they sell at market rates and that they rent at market rates, allowing them to use private finance in their associations and so to cross-subsidise the affordable rented accommodation—so much so that associations such as London & Quadrant are now beginning to be able to relet and let their new affordable housing not only at the Government’s affordable rent—up to 80% of market rent, or even 60%—but even at target or social rents, which really meets the need.
As my last Christmas proposal to the Minister, I ask him to take back to Government the request that they should look at liberating local councils to do the same sort of thing, so that they can access not only the Treasury and public money, but the private sector, and lead in the regeneration of London’s housing. If we could get house building going in London, the land accumulation is waiting and ready. If we could add more incentives to the tax system so that people do not sit on land, but develop it, there would be huge benefit socially, to family life, relationships and mental and physical health, and economically. I hope that the Minister can be encouraged, but also encouraging, and go back to his Department to say, “We must do more, and we will find ways of doing so.”
It is a privilege to serve under your chairmanship, Mr Bayley. I thank my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) for his generous comments, which are much appreciated.
I came into the Chamber towards the end of the previous debate, and saw many Members enthusiastically contributing to a half-hour discussion on VAT and sixth-form colleges. My right hon. Friend and I see housing as an important issue, so it is somewhat sad that only he and I are here now to contemplate the matter. I am sure we will not agree on all the issues that he raised, but I acknowledge the spirit in which he has approached the debate.
I also want to acknowledge the comments my right hon. Friend made about Margaret Thatcher and John Major, which are appreciated, as well as his recognition of the interventions that the Chancellor has already made to address concerns about foreign investors. I intend there to be a strong relationship between housing associations and the Department, so if my right hon. Friend has ideas for specific interventions in that sector that he would like to see developed further I encourage him to write to me with them.
I appreciate the opportunity the debate gives me to consider the document that my right hon. Friend mentioned, “Affordable Jobs & Homes for London: A Seven Point Plan”, and I am pleased to respond to the debate on behalf of the Government. In doing so, I must stress that the Government are fully committed to seeing the supply of all types of housing increase, not just affordable housing. Through a balanced package of measures targeting both supply and demand, we want everyone to be able to access the home that best meets their needs.
London is experiencing rapid growth. Although that is good for its economy, it puts massive pressure on its housing. However, we are responding to that pressure. Over the Mayor’s two terms, more than 100,000 low-cost homes to rent or buy will be built, providing quality homes for around 250,000 Londoners. That represents the highest number of low-cost homes delivered in the GLA’s history. Around 67,000 have already been delivered.
My right hon. Friend suggested that the Mayor should borrow against the GLA’s annual revenue stream to increase investment in affordable housing in the capital.
Sitting suspended for a Division in the House.
Increased borrowing would only be a short-term approach and would not be sustainable year on year. The GLA already receives substantial capital grants to invest in affordable homes. The Government have provided £1.1 billion to the GLA from 2012-13 to 2014-15 to deliver affordable housing in London.
However, the Mayor recognises that more needs to be done. In his draft housing strategy, the Mayor has set out ambitious plans to double output, including an annual target to deliver at least 42,000 market sale, private rented and affordable homes, which is more than at any point since the 1930s; new funding of £1.25 billion to support the delivery of 45,000 low-cost homes from 2015 to 2018; and £160 million for a London housing bank to speed up building on large sites.
My right hon. Friend mentioned the use of GLA land. In 2012, the GLA inherited 625 hectares of land from the Homes and Communities Agency, and it is vital that a significant part of that is used for new house building. The GLA is already utilising land and property assets to drive economic growth and housing supply of all tenures. Much of that land has already been developed. Around 130 hectares have been released so far, with a gross development value of £3.6 billion. For instance, in recent months, contracts have been exchanged in the Silvertown quays and Royal Albert dock area, with a capacity for 1,500 homes and 29,000 jobs.
The GLA is also driving regeneration schemes through grant funding and infrastructure investment at Greenwich peninsula, Barking riverside, Kidbrooke in Greenwich and Woodberry Down in Hackney. Those four developments will provide in excess of 30,000 homes of all tenures. The GLA is using, and will continue to use, its public land holdings to deliver new homes in London.
My right hon. Friend suggests that the Government should scrap the housing revenue account borrowing cap, enabling London boroughs to invest further in affordable housing through prudential borrowing rules. I must stress that the Government’s first priority is to reduce the national deficit. Allowing councils unlimited borrowing would increase that. With the introduction of self-financing in April 2012, London boroughs collectively had about £1.4 billion extra headroom to invest in housing if they chose to do so. We recognise that some councils may need additional borrowing, which is why we announced in the autumn statement an additional £300 million of borrowing capability, which individual authorities may use on housing if they so choose. We expect that to support around 10,000 affordable homes over 2015-16 and 2016-17. The provision will be allocated through a competitive bid process.
I reiterate that the Government are committed to building more affordable housing. More than 170,000 new affordable homes have been delivered in England over the past three and a half years. In comparison, between 1997 and 2010, under the previous Administration, the number of affordable rented homes fell by 420,000, as my right hon. Friend pointed out. Our affordable homes programme is making almost £20 billion of public and private investment available to deliver 170,000 new affordable homes between 2011 and 2015. Some 98,700 affordable homes have been delivered through the affordable homes programme since it started in 2011, which is more than half way towards delivering the 170,000 new affordable homes we expect by 2015.
Up to an additional 30,000 homes will be delivered by March 2017, supported by a share of the £10 billion housing guarantees scheme and grants of £450 million. Around £23 billion of additional public and private funding will deliver another 165,000 new homes over three years from 2015. That will be the fastest annual rate of building of affordable homes for nearly 20 years.
We are also committed to boosting the supply of all tenures of housing and are investing in expanding the wider supply of housing. Housing supply is now at its highest since the end of the unsustainable housing boom in 2008, with 400,000 new homes built over the last three years.
I agree with my right hon. Friend that it is vital that Londoners—and everyone else around the country—are equipped to respond to the housing demand and to take advantage of the new jobs created by an increase in house building. That is why the Government have a range of measures and schemes in place to ensure that that happens.
My right hon. Friend talked about small and medium-sized enterprises. We have a shared desire to increase the number of homes built. Part of that will be to get all builders—not just the big six but small and medium-sized enterprises—developing new homes. The Government are playing their part in improving demand through schemes such as Help to Buy equity loans. Some 87% of builders out of the 939 registered with the scheme are small builders building 40 units or fewer. We are working with the Department for Business, Innovation and Skills to ensure that small builders are aware of the business bank, which includes schemes to provide lower levels of development finance guarantees.
We have introduced a range of measures to support apprenticeships. The Government introduced the apprenticeship grant for employers in February 2012, which pays £1,500 per apprentice to support employers of up to 1,000 employees taking on a new young apprentice aged 16 to 24. The Government fully fund the training costs for 16 to 18-year-olds to provide an incentive to employers to take on a younger person. For apprentices aged 19 and over, the Government will pay 50% of the assessed cost of the framework.
In conclusion, I acknowledge the scale of the challenge in London, which we and the Mayor are dedicated to tackling. Our housing strategy adds to a balanced package of support for both supply and demand.
Question put and agreed to.