Tuesday 11 February 2014
[Mr Philip Hollobone in the Chair]
Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Swayne.)
I am pleased not only to have secured the debate but to serve under your chairmanship, Mr Hollobone. I am pleased that the Minister is here to listen and to respond. I thank my co-signatories to the debate, my friends the hon. Members for Brighton, Pavilion (Caroline Lucas), and for Strangford (Jim Shannon). I am pleased to see an excellent turnout from MPs across the UK and across the House, which reflects the importance of the debate. I offer an apology from my hon. Friend the Member for Foyle (Mark Durkan), who is on a Public Bill Committee on consumer rights this morning. During the past couple of years, he has submitted an early-day motion on the subject, and tabled an amendment to a Finance Bill on the issue.
A reduction in VAT is important for tourism, which is a vital industry across these islands; it provides 10% of GDP and supports more than 2 million jobs in the UK. In Ireland, the industry employs some 180,000 people and generates an estimated €5 billion a year. There is potential for significant growth in the sector, especially in Northern Ireland, and that growth would boost associated industries and the wider economy.
Those who come to the UK as tourists spend money in our hotels, pubs, restaurants and shops. They bring economic life to areas that have struggled in the recent economic climate. However, the tourism industry was hit particularly hard by the higher rate of VAT introduced by the Government, and no alleviation has been offered. It is common practice across the EU for member states to introduce sector-specific cuts for the tourism industry, which some offer for accommodation rates, some for tourist and cultural attractions and some for restaurant charges. The UK is one of only four states that ignore all those options. As a result, the industry in Britain and Northern Ireland confronts one of the worst policy regimes possible.
I congratulate the hon. Lady on securing the debate. Small hospitality businesses in my constituency are afraid to go above the threshold for VAT registration for fear of having to pay a rate of 20% on their income. Does she agree that reducing the VAT rate would encourage such small businesses to expand?
I thank the hon. Gentleman for his helpful intervention, and I completely agree with him. In our nearest neighbour, the Republic of Ireland, VAT on tourism products is now 9%. Even in the difficult economic climate that the Republic has experienced—it has just come out of the bail-out situation—the VAT rate reduction has underpinned businesses in the tourism sector and encouraged new ones to emerge.
I, too, commend the hon. Lady and her colleagues on securing this important debate. To be parochial for a moment, in Northern Ireland the problem is our land frontier with the Irish Republic where, as she has just mentioned, there is a lower rate of VAT. Is that not a particular issue for the Province, given people’s propensity simply to go south to enjoy better VAT rates?
I thank the right hon. Gentleman for his very helpful intervention. I absolutely agree with him. My constituency borders County Louth in the Republic of Ireland. Many people come to the island of Ireland via Dublin airport, where there will be a zero rate of air passenger duty from April this year. The lower VAT rate on tourism products encourages many of them to use their purchasing power on accommodation and restaurants in the Republic of Ireland, rather than travelling north, where they would have an opportunity to invest in our local economy.
As a labour-intensive industry, the tourism sector is a leading employer. In particular, it offers younger people entry-level jobs at the start of their careers, and more than 44% of people employed in the sector are less than 30 years old. We face a youth unemployment crisis, with more than one in four young people out of work, and the Government’s lack of support for the tourism sector is clearly impairing job creation. A cut in the rate of VAT would create demand, which would spur job creation and go some way towards reducing youth unemployment. In Ireland, the VAT cut for tourism has produced an extra 10,000 jobs in just over a year. A prominent report on the subject published by Deloitte produced evidence that a similar tourist VAT cut in the UK would create some 80,000 jobs.
I congratulate the hon. Lady on securing this extremely important debate. I represent an area of the south-west that is affected by flooding. Does she empathise, and does she agree that if the Chancellor considered a cut in VAT, it would be a hugely welcome boost to the thousands of small tourist businesses on which the economy of the south-west depends, and that it would help those who are shivering in the midst of the flooding?
I thank the hon. and learned Gentleman for his helpful intervention. My colleagues from Northern Ireland and I offer our sympathy, support and empathy to the people of the south-west. My aunt used to work in the hospitality industry in Plymouth many years ago, so I know it quite well. I suggest to the Minister that a cut in VAT would help those who are struggling economically, financially and emotionally at this difficult time.
I congratulate the hon. Lady on securing the debate and on the forceful way in which she is putting her case. Does she agree that attractive tourist destinations such as Northern Ireland and Merseyside are being hampered competitively by the arrangements elsewhere in Europe that she has described?
The right hon. Gentleman is absolutely correct. Other countries in the EU, including Belgium, the Netherlands and Germany, have much more competitive rates. In France, for example, there is a banking agreement between the Government and the industry. Such measures help to attract visitors and ensure that the money they spend is invested in the local economy.
I congratulate the hon. Lady on securing this incredibly important debate. She mentioned the possibility that a VAT rate reduction for the tourism industry would lead to increased job creation. Would she recognise that many people in the tourism industry—particularly in places such as my constituency, the Lake district, and the Yorkshire dales—are desperate not only to create more jobs but to ensure that jobs are better paid and that a living wage can be paid to people working in the tourism industry? Does she acknowledge that a cut to a fairer level of VAT would help to make tourism a more high-wage industry?
I thank the hon. Gentleman for his intervention and I agree with him. Many jobs in the tourism sector are quite low paid, but if there was a level playing field in taxation rates, that would afford the opportunity for employers to pay better rates. It would also ensure that people have confidence and trust, and would allow them to do a better job in promoting their local areas.
I would like to make a little progress. Will the Minister robustly consider the case for a reduction in VAT on hotel accommodation and visitor attractions from 20% to 5%? Would he also consider broadening that out in future to the wider hospitality sector, including to food served in pubs and restaurants? That would encourage many more foreign visitors and provide an incentive for staycations in the domestic market. It would boost coastal resorts, rural retreats and cities and towns that have been hit hard by the economic downturn since 2008.
The industry is significantly constrained by its lack of price competitiveness. The Chancellor is not long back from Davos. While there, he may have learned that the World Economic Forum places the UK in 138th place for price competitiveness for tourism, out of 140 countries. The UK sits at the bottom of the international league table, with businesses facing the challenge of the highest rates in the world for VAT, air passenger duty and visa charges. The purpose of today’s debate is not to rehearse the arguments on issues such as air passenger duty, but that placing shows that the Government’s lack of action on VAT forms part of a broader lethargy when it comes to supporting the tourism industry.
The Government say that visitor numbers remain strong, but I would suggest that that is in spite of the current pricing policy, rather than because of it. The UK’s balance of payments for tourist products has declined steeply in the past 15 years, making it clear that tourism growth has not been what it could have been in recent years, and that we are not maximising the industry’s enormous potential to deliver revenue and jobs. I would argue that the blame for that lies with the policy regime, which is holding back the industry’s potential. Any argument from the Government based on the cost of a VAT cut being prohibitive is highly dubious.
There is strong evidence from the Treasury’s own economic modelling, as used by Professor Adam Blake in a study for the British Hospitality Association, that a VAT cut for the sector would benefit the whole economy. Yes, there might be a loss of some £640 million in the first year, but that would be comfortably offset by years 2 and 3 of the programme. Figures show that a 15% cut in tourism VAT would quickly become revenue-neutral and would result in a radically increased tax take of £2.6 billion over 10 years, delivering a £4 billion boost to the gross domestic product. I repeat: those figures do not come from the industry or lobbying consultants. They are derived from the Treasury’s own internal economic models.
The hon. Lady will be aware that alongside this debate and campaign there is great concern, as expressed in the main Chamber just a few days ago, about the plight of struggling pubs, many of which are closing each and every week. There are a number of issues behind that. Beer taxation, which the Government started to address, is certainly one of them, but VAT is hampering that industry as well, particularly when pubs survive through the food that they provide. Does the hon. Lady agree that one way to help pubs, which are a vital part of the tourism industry, would be to consider how they are affected by VAT?
I thank the hon. Gentleman, who is the Chair of the Northern Ireland Affairs Committee, for his intervention. I agree with him on that point, but I see restaurants and pubs that serve food as being further down the line, so to speak. Nevertheless, I do not disagree with his point, because we must invest in local economies and jobs throughout the UK.
The hon. Lady will appreciate that my constituency attracts a huge amount of tourism, being right in the centre of London. I therefore have some sympathy with a lot of what she says—a number of operators have lobbied me on the matter. However, she recognised and referred to the idea that the Treasury would potentially lose money in the short term. She mentioned some specifics on which she would want immediate action—tourist attractions and accommodation—but does she not recognise that if we include other things, such as pub food, we are looking at a very uncertain tax break? It could cost considerably more money at a difficult time for the public finances. Is it not therefore important that she focuses specifically on measures that will have the maximum benefit for the UK’s tourism industry, without negative effects on the public purse?
I thank the hon. Gentleman for his intervention. Although I understand that at this stage the focus must be on accommodation and visitor attractions, it would be wrong not to pursue the Treasury and the Minister to try to ensure that we get a better deal for our tourism industry and the wider population we represent.
It might be helpful if I gave a little information from the British Hospitality Association and the Cut Tourism VAT campaign. The Government have asserted that they cannot afford to take a loss on VAT income. It is worth pointing out, however, that the direct loss of VAT incurred by a reduction for visitor accommodation and attractions would be £1.2 billion. Half of that loss would be made good within the first year via savings from social security benefits—more people would be employed—and increased tax yields, principally from employment-related taxes. The year 1 deficit would therefore be £645 million.
I thank the hon. Lady for giving way, and for securing this debate. Professor Blake said that he felt that a VAT cut would be
“one of the most efficient, if not the most efficient, means of generating GDP gains at low cost to the exchequer”
that he had seen, under the Treasury’s own model. Furthermore, a week or so ago I had a comprehensive meeting with VisitBritain and was reminded that such a reduction would create 80,000 new jobs. That would make a significant difference and neutralise the cost to the Treasury, exactly as the hon. Lady says.
I thank the hon. Gentleman for his helpful intervention. It is worth pointing out that Professor Blake used the Treasury’s model for the research that resulted in his recommendation that the focus of a VAT cut be on accommodation and visitor attractions.
I would like to make a little more progress. I would like the Minister to clarify whether the Treasury accepts the figures resulting from its modelling, and whether it contests that this measure would be revenue-neutral and bring a long-term benefit, in terms of tourism numbers, tax revenue and job creation. If the Minister has figures that dispute that, I think everybody would be grateful to see them.
I would like to set the issue in the EU context. Even if the Government concede that the cost would not be excessive, they frequently argue that if such a cut was granted to the tourism sector, every other industry would be queuing up to get a similar cut. That is simply not the case. The EU has already established that the tourism industry is one of very few labour-intensive services that would be eligible for a reduced rate of VAT. Strikingly, the vast majority of other EU member states, which appreciate the importance of the industry, have exercised that right, but not the UK. As was pointed out in a report by Deloitte in 2011, the UK is the only country in the EU that does not apply a reduced rate of VAT to some part of its tourism sector.
The UK is one of only four of the EU’s 27 member states that do not take advantage of the reduced VAT rate on visitor accommodation, one of only 14 that apply the full VAT rate to admissions to amusement parks, and one of only nine that apply the full rate to admissions to cultural attractions. Thirteen countries, including Ireland, also have a reduced VAT rate for restaurant meals. That is not a record of which the UK can be proud. We hear much from the Government about how they are constrained and restrained by Brussels; here is a perfect example of where the Government have the right to be flexible, but they have so far refused to exercise that right.
Other countries are a rich seam of information on the benefits of a cut. It is no coincidence that after such measures are implemented, countries tend to stick with them. If we compare Ireland and the UK, we see a tale of two Governments. The introduction of a 9% VAT rate for tourism-related business and services made 2013 the most successful year since the financial crisis for Irish tourism, with visitor numbers up 10% and more than 9,000 jobs created.
The Minister will know of my passion for caravans, because there are so many in my constituency. I thank him for the work that he did last year to ensure that the proposed VAT rate on caravan sales was dropped from 20% to 5%, which has saved the industry in my area and other parts of the UK. I ask him to consider a tourism-related VAT cut in exactly the same vein. Holidaymakers’ loyalty to the UK, holiday businesses’ investment in the UK, and the passion for people felt by tourism staff, of whom I was one for a decade, deserve to be rewarded with a sensible approach to this issue.
Yes, that is what many of us are saying. We are making a special plea to the Treasury for a sensible approach that ensures growth in our local economies.
In conclusion, to take the case of Ireland, north and south, the island is marketed as one area, but it has two different taxation regimes and two different rates of tax on tourism products, including both visitor attractions and accommodation. We believe that that needs to be synchronised in some measure. I hope that the Minister sees that there is a strong case for a VAT reduction for accommodation and attractions. It could subsequently be widened to include food served in pubs and restaurants, which forms an integral part of our wider tourism sector. That would send a strong message of support to the tourism industry and, importantly, enable it to compete on a more even basis with other European nations, which have almost unanimously introduced such measures. I know that the local tourism industry in Northern Ireland—particularly in my constituency, where wonderful work is already being done—would welcome it with open arms.
There are many MPs here from England, Scotland and Wales, and I know, having talked to some of them, that they would also welcome such measures to pump-prime and grow the local economy, and enable the tourism industry to invest in growth and jobs. This Government talk a great deal about creating growth in the private sector, delivering jobs and supporting local businesses. Here is a ready-made policy that could be implemented quickly and would deliver instant results. I hope that we have a full and frank debate about the issue, leading up to the Minister’s response and, hopefully, to some better news in the Budget report on 19 March.
Order. I have some good news and some bad news. The bad news is that I am afraid you are going to have to tear up your 15-minute speeches. The good news is that I shall do my level best to ensure that everyone gets to speak, but it will only be for a limited period. With the permission of the Chairman of Ways and Means, I will impose a three-and-a-half-minute time limit, which will work only if there are no interventions. If there are no interventions and everyone sticks to the time limit, that should leave 10 minutes each for Front-Bench speeches.
I congratulate the hon. Member for South Down (Ms Ritchie) on her excellent speech. I do not intend to repeat it, but I will start by saying that the south-west is open for business. Times are difficult for us at the moment. I send my condolences to all those in Somerset affected by the terrible flooding. In my own coastal constituency, many families and business have been severely affected.
What we need at the moment is help. We offer a fantastic range of opportunities for people who want to come to visit—if God made constituencies, he would have designed Totnes—and I hope that people will visit, but those businesses are struggling. I have heard from numerous business owners in my constituency about the effect of competition across Europe. As people decide where they will stay this summer, they are considering things such as food prices in restaurants and the cost of accommodation. Right now, our businesses are crying out for support from the Treasury. Can we consider seriously the impact that a 5% VAT rate would have, particularly if applied to hotel rooms and visitor attractions? It is not just competition across national boundaries that makes a difference; it is competition within the tourism sector.
Perhaps the Minister will clarify the effect in his response. Riverboat and tourist rail companies currently are not hit by the higher rate of VAT because they count as transport, but neighbouring attractions are. I am also told that there is concern across the industry about the position of charities. We need a level playing field. I am not suggesting for a minute that we should apply a higher rate to other businesses; only that we should make the playing field level across the sector. That would be widely appreciated.
I would like to mention the impact on employment. Yesterday, I met a large group of young people from my constituency, where youth unemployment is, sadly, an ongoing issue. The tourism sector is particularly important in providing opportunities for young people in my constituency. We have a very low-wage economy. Numerous businesses have written to me to say that they would like to pay a living wage but are unable to do so at the moment. Will the Minister consider what impact higher wages across this important sector would have on allowing young people to stay in places such as south Devon? Will he consider the evidence? I have been contacted this week by one very successful business saying that, normally, it would employ far more people, but it has had to cut its staff from the 35 people that it usually employs on the payroll at this time of year to 27. Will he confirm in his response that he has considered the impact that a VAT cut could have on that?
Most importantly, I reiterate that the south-west is open for business. I encourage anyone listening to this debate to come see what we have to offer, but I would also like the Government to do their bit by allowing businesses to offer lower prices, so that people will make the right decisions as the summer comes on.
It is a pleasure to follow the hon. Member for Totnes (Dr Wollaston). I, too, congratulate the hon. Member for South Down (Ms Ritchie) on an excellent introductory speech. I know that we are time-limited, so I will concentrate on some items local to my area and on general issues. As both speakers have said, VAT is a consumer tax that impairs employment opportunities, so it is in many respects a tax on jobs. The Government claim, quite rightly, that they want to eradicate the deficit, but they have chosen the wrong tax to increase, because it has a negative effect on jobs and the economy. In the United States, where there has been fiscal stimulus, the economy has grown much more quickly since the recession than in this country.
VAT has an impact on jobs directly and on the tourism sector in particular, and not only the journals of the hospitality industry are saying that: The Daily Telegraph, which is not a left-leaning paper by any stretch of the imagination, has said that VAT
“is forcing many businesses into a tight corner.”
VAT is hurting small businesses, and as a consequence, it is affecting the number of jobs that could be created.
The tax take is being unfairly concentrated on small and medium-sized businesses. We are seeing a 19% increase in VAT on small businesses at the same time as large corporations are experiencing a decrease in the tax taken from them by the Treasury. We need to even out that situation.
The suggestion made in this debate—including by the hon. Member for South Down, who secured it—to reduce VAT on tourism is a sensible one. Tourism is one of the fastest growing global industries, and we live in a global time, as the hon. Member for Totnes suggested. My area has a link with the Republic of Ireland, which is only two hours away, and many tourists who come to north-west Wales “do Europe” and they can compare the prices in Britain with those in other countries in the European Union. That is true in my area, to the south and west of us—Pembrokeshire is also close to the Republic of Ireland—and in the south-east of England, which is close to France and the rest of the continent.
I represent Ynys Môn, the Isle of Anglesey, and the area is very proud of its tradition of drawing many people from across the world. We need to help tourism businesses. In the short time that I have left to speak, I will highlight the experience of one business, whose owners have written to me. At the moment, their business is just below the VAT threshold. They want to invest in the local economy and local people, but they cannot do so because they are inhibited by the fact that they would face a 20% hike in VAT if they choose to go above the threshold.
VAT is a tax on jobs and it can be reduced. People right across the United Kingdom want a fair and level playing field for our tourism and hospitality industries. Reducing VAT is a simple measure that could achieve that level playing field.
I finish by saying to colleagues who represent areas that are being flooded that the UK is a great destination and that it is open for business. The heart of the British Isles is Ynys Môn, the Isle of Anglesey, but the rest of Britain would also benefit from a policy of reducing VAT.
It is a pleasure to serve under your chairmanship, Mr Hollobone, and I, too, congratulate the hon. Member for South Down (Ms Ritchie) on securing this debate. She spoke as a Member for Northern Ireland, but she also took a UK perspective, and I will add a Welsh dimension to the debate. I suppose that the benefit of having a limit of three and a half minutes to speak is that we will not have huge opportunities to advertise the merits of our own constituencies, although both the hon. Members for Totnes (Dr Wollaston) and for Ynys Môn (Albert Owen) did a good job in advertising theirs. I look forward to going to Totnes to meet the members of the South Brent women’s institute in a week or so.
Ceredigion speaks for itself: there are huge opportunities for growth in our tourism sector. I reiterate the comments that have been made about flooding. Many Members will have seen on their TV screens the great Victorian promenade on our seafront in Aberystwyth being battered by the storms. That has caused significant damage, but the message from me, as from others, is that businesses in my area are open for business. I concur with what the hon. and learned Member for Torridge and West Devon (Mr Cox) said about the message that a reduction in VAT would send out to those businesses that have suffered recently.
In Wales, of course, the responsibility for tourism is shared—there is a partnership between our National Assembly Government and this place—but the taxation regime across the UK directly impedes the development of the tourism sector. Two years ago, the British Hospitality Association commissioned Oxford Economics to produce a report that specifically examined the impact of VAT on the tourist sector in Wales. The report was appropriately named, “Hospitality: driving local economies” and showed how hospitality underpins communities. It highlighted the importance of tourism and hospitality to jobs in Wales.
In Wales, more than 112,000 people are employed directly, and another 56,000 people are employed indirectly, in tourism and hospitality. In my constituency, 3,000 people are employed in the sector, which is about 8% of total employment in my constituency. If we take the big players out of our economy—our universities, our NHS and our local government—tourism is at the top of the list of employers.
As I say, 8% of people in Ceredigion are employed in the sector, and as we heard from the hon. Member for South Down, potentially another 80,000 jobs could be created in tourism. Therefore, 10,000 jobs could be created in Wales, which would mean 2,000 new jobs in my constituency. In turn, that would create opportunities for young people and keep people in our communities, rather than seeing them move away. The key phrase is giving the right support to the tourism sector, and I am very much of the opinion that the sector would be boosted if the 5% VAT rate was introduced.
My hon. Friend the Member for Wells (Tessa Munt) talked about the importance of caravans in her constituency, and they are important in my constituency, too. I will quote the Prime Minister, who has said:
“There are always good cases for cutting VAT on individual items. The leisure industry and the hotel industry make a very good argument”.
Of course, he is right on that and the Government were right to take the action that they took on the VAT rate for static caravans. I and many other Members who are here in Westminster Hall today presented petitions on that issue, making the point about the need to reduce VAT to stimulate our local economies, and of course that is what we are all calling on the Government to undertake to do today. We do so in the expectation that that move would be costly in the short term but that, further down the road, it would be cost-neutral, as well as being of huge benefit to the national economy and particularly to our local economies.
I congratulate the hon. Member for South Down (Ms Ritchie) on securing this debate and on her compelling opening speech.
I am hugely cheered by the number of people who have come out for this debate, which demonstrates the strength of feeling across the House about the importance of this measure. However, there is the sad downside that I cannot talk about quite as many of the wonders of Brighton and Hove as I had hoped to. Nevertheless, I will highlight the testimonies that I have received from the Brighton and Hove chamber of commerce and from Brighton and Hove Tourism Alliance, both of which have told me—in no uncertain terms—what a big difference this measure would make to the local economy in the city.
There are not many win-wins in politics, but this measure is one of them. In fact, it is not even a win-win. It is a win-win-win, in the sense that it is good for jobs and for the economy, because over time it is likely to raise revenue for the Exchequer, and it addresses the competitive disadvantage that the UK suffers by comparison with other parts of the European Union. In a few years’ time, we will look back to today and think, “Why on earth didn’t we move this whole debate sooner?” because it is such an obvious issue to act on. It is like the famous £20 note on the street that people walk past because they cannot quite believe that it is there and such a benefit. This measure would be a benefit; there is a chance now to grasp this opportunity; and I hope that the Treasury is listening to this debate.
Many hon. Members have referred to jobs in tourism. I will just underline one aspect of tourism: 44% of those employed in the sector are under 30, compared with a national average of 24% for all sectors. Therefore, it is anticipated that a cut in VAT for tourism would particularly encourage the creation of employment opportunities for young people. That is incredibly important.
Significantly, the tourism industry has expressed a willingness to consider entering into a collaborative agreement along the lines of the French contrat d’avenir, which would include taking on long-term unemployed people as well as increased involvement in training and product improvement. Again, there is a real opportunity to create more apprenticeships and to get more young people into jobs, so that they can move forward.
Many hon. Members have talked about fiscal neutrality, and there is strong evidence to support the case that this measure would be fiscally neutral. The key evidence for the case to reduce VAT on attractions and accommodation comes, as other Members have said, from Professor Adam Blake, the Treasury adviser, who has used the Treasury’s own economic model. As we have heard, he concludes that a reduction in VAT for accommodation and attractions would be
“one of the most efficient, if not the most efficient, means of generating GDP gains at low cost to the Exchequer”.
The standard Treasury reply to correspondence on this issue states that a cut in VAT would cost the Exchequer an estimated £1.2 billion a year. However, we have heard that Professor Blake found that, based on reasonable and plausible assumptions, the modelling exercise seems to support a general case that a reduction in VAT on tourism services
“would be fairly close to fiscal neutrality.”
He reports that the modelling shows substantially higher GDP gains than others have predicted, peaking at about £4 billion a year.
We also heard earlier about the research that was undertaken by Deloitte and Tourism Respect, which included case studies of tourism VAT changes in other countries and detailed analysis of the price sensitivity of UK tourism. The research found that cutting VAT on tourism would deliver £2.6 billion in extra revenue to the Treasury over a decade and create 80,000 jobs over two to three years. There would be a one-year shortfall in fiscal income, which is projected to be £645 million net or £1.2 billion gross. However, there is a key question that I would like to hear the Minister answer today: if it were possible to find a way of bridging that gap—
I thank the hon. Member for Brighton, Pavilion (Caroline Lucas). I am pleased to serve under your chairmanship, Mr Hollobone, and I congratulate the hon. Member for South Down (Ms Ritchie) on securing this debate.
Three and a half minutes is not enough time for me to extol all the virtues of my High Peak constituency. Suffice it to say that many hon. Members have heard of High Peak and of Buxton, Glossop and all our fantastic attractions, such as the caves of Castleton. Tourism is a huge source of income for the High Peak. I would support a cut in VAT, which would boost the local economy by bringing more tourists into High Peak and across the country. The hon. Member for Westmorland and Lonsdale (Tim Farron), from the Lake district, who is no longer in his place, may argue with me about this, but the Peak district, which covers a lot of my constituency, is the best national park in the country; it is the second most visited in the world, after Mount Fuji. Let us make it the most visited.
A cut in VAT would boost the economy and create jobs for local people, including young people. Many young people work in tourism. One of my first jobs was working as a waiter in a restaurant, often serving tourists. A VAT cut would help in that regard.
Tourism is a competitive market. It is not just about getting people from this country; it is about bringing international visitors into the country. It is part of my job to get them up from London—up the M1 and the M6, and the west coast main line—into High Peak, to see what we have to offer. In an international marketplace, a cut in VAT would help. VAT charged on visitor accommodation in France and Spain, our two biggest competitors in Europe in terms of tourists, is charged at 10%, but it is 20% here. Studies say that, if we cut VAT, operators would pass that on to the customer. We need to try to compete on a level playing field with France and Spain, not on the one that we are encountering at the moment. We must get visitors in from abroad. We must encourage staycations as well, keeping British people here holidaying. We had a good summer last year; let us hope we have another good one this year.
I appreciate that we live in difficult times and that the Treasury is not overdone with cash at the moment, and I hear the talk about fiscal neutrality. However, I regard today almost as a start of a conversation. In an ideal world, we would like to see this cut included in the Budget, but money is tight. Let us start a conversation and look at this idea. I have seen various studies about its benefit to tourism and to the country. We should give this matter serious consideration.
I am sure that the Minister and his colleagues in the Treasury are badgered repeatedly by colleagues who want money for this, that and the other, but as a Member of Parliament representing a seat in a place that exists on huge tourism income, it is incumbent on me to say to the Treasury, “Give this priority among other requests for cash and for money.” If we cut VAT on tourist attractions and hotel accommodation, we will get the benefit.
High Peak is a rural area and we have rural disadvantage. People talk about rural deprivation: we have poor broadband and things like that. A VAT cut will give the economy a boost to offset the difficulties that we face. I am glad that the Minister is here and I am sure that he is listening. On behalf of everybody in High Peak, I ask him to look carefully at this proposal. If we cannot do it in this Budget, let us look at it sooner rather than later.
I am pleased to contribute to this important debate under your chairmanship, Mr Hollobone. I congratulate the hon. Member for South Down (Ms Ritchie) on securing it.
I have pursued this issue over the years. In fact, I first asked a question about it in 2004. To my last question on the subject, in October, the Exchequer Secretary, who will respond to this debate, replied:
“I have written to the Chairman of the Campaign for Reduced Tourism VAT explaining that while there is no prospect of a VAT cut for tourism, the Government is committed to a wide range of measures to support tourism.”—[Official Report, 8 October 2013; Vol. 568, c. 161W.]
That does not give me a great deal of confidence that he will change his mind today, but, never being one to give up, I will give it a try.
In 24 of the current 28 European Union states, including Germany, France and Spain, there is a lower rate of VAT for tourist accommodation. In fact, the UK has the second highest rate of VAT on hotel accommodation, exceeded only by Denmark and Lithuania. The rate in Luxembourg is 3%, and in Portugal, which is, of course, a major tourist destination, it is only 6%. At a time when tourist businesses are fighting hard to retain their business against cheaper destinations, these lower rates give many continental destinations a considerable advantage over businesses within the UK. This is an important issue for Scotland, where tourism contributes 4.9% to our GDP. Indeed, almost 10% of my constituents work in tourism or tourism-related businesses.
Even the UK Government have not been averse to cutting VAT on selected tourism-related operations. In the 2012 Budget, they cut the VAT chargeable on small cable-suspended transport systems—ski lifts, to you and me, Mr Hollobone—which was a welcome change, especially for ski-lift businesses. I am sure that it is entirely coincidental that most of those businesses are in the constituency of the Chief Secretary to the Treasury. However, that illustrates what can be done and that the UK Government have done it in other areas.
The Irish 9% rate specifically applies to facilities used by those taking part in sporting activities and extends to green fees charged for golf and subscriptions charged by non-member-owned golf clubs. Again, that puts them at an advantage in a competitive market against the wonderful golf clubs in Scotland and other parts of the UK. In addition to the 9% rate, Ireland has for some time had a 13.5% rate on other services, including short-term car hire and tour guide services.
When the present UK Government published their tourism strategy in 2011, they stated that they aimed to generate 4 million extra visitors up to 2015 and that,
“The increase in overseas visitors would bring an extra £2 billion worth of visitor spend and help to create 50,000 new jobs across the country over that period, securing tourism’s place as one of Britain’s”
I struggle to see how the GREAT campaign and simplifying visa applications for Chinese visitors, as mentioned in documents, could do that. A VAT cut would go a long way to helping hard-pressed tourism operators.
Hon. Members have talked about Professor Blake’s research and the amount of jobs and income that would be created. I will not go over that again, but whatever research says, a cut of VAT to tourism-related businesses would lead to increased employment and give a significant boost to the rural economy in all parts of the UK.
We need to give our tourism industries a boost and a chance to fight back, rather than asking them to fight with one hand tied behind their backs because we refuse to match the change in VAT in the EU.
I congratulate the hon. Member for South Down (Ms Ritchie) on securing the debate.
I am fortunate to represent the beautiful constituency of Argyll and Bute. The scenery is beautiful, but the economy is fragile. “You can’t eat the scenery”, as the old saying goes, but we can sell the scenery to visitors, and that is where tourism plays such a vital role. Tourism provides jobs in remote areas where alternative employment would be difficult to find. It is a labour-intensive industry, so much of the spend goes straight into jobs. This is a very competitive international industry. With many people struggling to make ends meet, price is an important factor in their choice of holiday, and Britain’s tourism businesses have to cope with a VAT rate double, or even more than double, the rate in Spain, Germany, France, Italy and the Republic of Ireland.
The UK is now one of only four EU states with no reduced VAT rate for tourism. In a price-sensitive international market, the high rate of VAT compared with our competitors must be damaging our tourism industry. Reducing tourism VAT would lower prices, attract more visitors to the UK and encourage businesses to invest in Britain’s tourist attractions.
Of course, cutting any tax means reduced revenue in the short term, but surely the key is whether the cut will stimulate the economy to such an extent that the public purse benefits more in the long run from the extra economic activity than is lost in the short term by the tax cut. Stimulating the tourism sector will lead to more people working—so fewer benefit payments and more income tax and national insurance coming into the Treasury.
Many detailed independent studies and analyses have all found that reducing VAT on tourism to a rate of 5% would stimulate both domestic and overseas demand, leading to expansion of the tourism sector, the creation of many jobs and a fiscal return to the Treasury that would reverse the long-term trend of Britain’s worsening tourism balance of payments.
We do not just have to rely on theoretical modelling. The Isle of Man cut VAT on tourism to 5% 20 years ago and that was such a success that the Manx Government have never even considered reversing it. Visitor numbers to the Isle of Man show that, in the nine years before the cut, there was a sharp decline in tourism, but after the VAT cut, visitor numbers recovered strongly and have stayed high since then.
Britain has a vibrant tourism industry. We have a wonderful product to sell, but common sense says that we cannot compete if our VAT rate is double that of our competitors. The experience of the Isle of Man and the independent modelling both indicate that cutting VAT on tourism will bring in more tax revenue than will be lost. Theory and practice are in agreement.
I hope that the Government accept the findings of the independent reports and cut VAT on tourism. I know that the Minister cannot pre-empt the Budget by making an announcement today, but I expect him to say in his winding-up speech that the Treasury is taking the campaign seriously and will study carefully the findings of the independent reports and respond to them.
I congratulate the hon. Members for South Down (Ms Ritchie), and for Brighton, Pavilion (Caroline Lucas), on having joined me in securing this debate.
Members will not be surprised to hear that I am unashamedly vocal about the beauties of my constituency, and I truly believe that I represent the most breathtaking constituency in the whole United Kingdom. I have previously spoken of the potential for tourism in Northern Ireland that has yet to be explored, and if that potential were to be exposed to the rest of the world, the entire United Kingdom would benefit. The first part of my three-and-a-half minute contribution is on the question of how we go about that task.
The Northern Ireland issue is highlighted and exposed by the fact that we border the Republic of Ireland. The industry in Northern Ireland is linked to tourism in the Republic of Ireland, so the discrepancy in VAT rates is noticeable. VAT in the Republic of Ireland has been reduced for hotel accommodation since 1986. In 2011, the VAT reduction was extended to cover out-of-home meals. Take those two things together and Northern Ireland—and, indeed, the United Kingdom—is 11% behind the Republic of Ireland’s VAT rate. That puts the United Kingdom, and especially Northern Ireland, on an uneven keel.
The Northern Ireland Hotels Federation gives figures that justify a VAT reduction. The federation indicates that 14,900 jobs would be created by reducing VAT. Gross value added would increase by £155 million, and wages would increase by £64 million to £225 million by 2020. Those figures indicate a clear win-win-win, because as the hon. Member for Brighton, Pavilion, said, a VAT reduction would mean more jobs, more money in people’s pockets, and a reduction in benefits paid to the unemployed. That can clearly be done. The Republic of Ireland produced 6,500 new jobs and saved 31,000 jobs, which indicates the seriousness of our position. We are one of only four countries in Europe that are not availing themselves of a reduced VAT rate. The VAT rate on hotels is 7% in Germany and 10% in France, and that encourages UK and EU residents to holiday in those countries. It is time that we did something about that. Perhaps the Minister will indicate what he hopes to do.
The industry is anxious to find the best way to use a VAT cut for the benefit of the Treasury and the UK as a whole, for example by ensuring that at least half the cut is passed on in lower prices, with the rest used for increased staff wages, training, employment and increased investment; that would be similar to what the French Government did with their restaurant industry.
Time is against me, but others will join me in proving beyond reasonable doubt that a short-term investment in the tourism industry will yield long-term dividends, as has been proved in Europe and can be shown here, if the chance is taken. Some might ask, “How can we do that?” I would simply tell them to book a flight to Belfast and take the 20-minute journey to my constituency. They will see within seconds why I believe that, with a little bit of help and support, tourism can and will thrive. There is an opportunity for us all to take our place on the world tourism stage and to allow others to enjoy what we have: great lodgings, fantastic scenery, wonderful shopping, world-class golf, hotels, salons, historical journeys and, most importantly, our unique Northern Irish hospitality, which draws people and makes them feel part of the family. It is not for nothing that we are called the happiest people in the United Kingdom. A holiday in Northern Ireland will refresh and renew. The Minister has a chance to enhance that potential, and I hope that he will take it.
About two years ago, I spoke to a Treasury Minister about this issue. He was a much more junior Treasury Minister than the one here today, but none the less he was a Treasury Minister. He simply said that the Treasury would dismiss any suggestion of a reduction in VAT because anything that contributes, even in the short term, to an increase in the deficit is a threat to interest rates. The Treasury therefore dismissed such a reduction out of hand, but times have changed. We have heard much about the Deloitte survey and about Professor Blake’s use of the Treasury’s model. We have a much enhanced and increased coalition of stakeholders and interests, which have put compelling evidence before all of us and, I think, before the Treasury. In the past few weeks we have seen a huge climatic impact on coastal communities such as mine, and on inland communities, and that has altered the outlook somewhat for tourism businesses in those areas.
I will quickly refer to a fairly formal letter that the Prime Minister wrote to the late John Cook, one of the three founding fathers of Bourne Leisure, the big holiday company, in October 2010. The little bit in the Prime Minister’s own handwriting at the bottom is interesting:
“The figures for other EU countries are—as you say—striking. But the fiscal challenge right now is so bad that it will be tough to persuade HMT, as you say, to accept short term loss for medium term gain. It is the early years where the need for deficit reduction is so great.”
Things have changed since October 2010, and I am not sure that the Treasury is able to argue with the force that it did then that such measures should be resisted. The Prime Minister, I thought, left the door open in his letter to Bourne Leisure and John Cook: a VAT reduction is not beyond the Treasury’s grip when economic conditions improve.
Not for the first time, it is the Treasury versus everyone else, including people in the tourism industry represented here, and many businesses dotted around various constituencies, represented here or not. It cannot be completely true that the Treasury is always right and the experts in the industry are always wrong. The circumstances have changed. They changed recently because of the weather, but they have changed over a longer period because of improved economic conditions, and because of the evidence put before us by experts in the field. I hope that the Treasury will take those changing circumstances into account. For the benefit of those in the tourism industry, whose representatives are here to make the case, the Treasury should not dismiss these matters out of hand, as it did quite reasonably three or four years ago.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I commend the hon. Member for South Down (Ms Ritchie) on her powerful presentation. Many of the points I wish to make have already been raised, so I will concentrate on constructive reinforcement, rather than on unnecessary duplication. I hope hon. Members are able to distinguish between the two.
Commendably, the Prime Minister has been quoted as saying:
“There are always good cases for cutting VAT on individual items. The leisure industry and the hotel industry make a very good argument.”
I would go further: there is a compelling case. Indeed, it is extremely ironic that the Prime Minister, who wants to negotiate flexibility within the EU and to reduce bureaucratic orthodoxy, has failed to capitalise on one of the key areas on which there is considerable flexibility—the VAT charges on tourism, particularly on the hotel and leisure industries. Indeed, it is shocking that we are at such a disadvantage compared with other European countries, as was highlighted by a number of speakers, when the Government have the power to reduce VAT. It is all the more disturbing that a party that espouses the virtues of innovation, enterprise, grasping opportunity and promoting sustainable growth in business has so far failed to reduce VAT. UK tourism is almost at the bottom of the league table of international competitiveness —we are 138th out of 140—yet it is our economy’s sixth largest export earner.
The Chancellor pleads repeatedly for removing barriers to growth and for promoting investment. The conservative estimates of an independent and reputable academic highlight the potential to boost GDP by £4 billion a year, to create 80,000-plus jobs and to improve professionalism in the industry. Professor Blake confirms that such an initiative would be fiscally neutral, so what on earth is holding the Chancellor back? The tourism industry feels that it has to operate with one hand tied behind its back, with declining opportunities for sustainable growth.
It is economic madness not to reverse the long-term trend of decline in the UK’s tourism balance of payments. We are clearly not operating on a level playing field. My home county of Fife is the Mecca of world golf, yet tourist numbers are declining. In my neck of the woods in Glenrothes, the Balbirnie House hotel, a small country house hotel that achieves the highest standards of excellence and employs more than 100 people, is fleeced for more than £800,000 in tax and rates. That is more than £8,000 per employee, and it is only through innovative marketing, outstanding quality of service and tenacity in the face of adversity that the hotel has been able to consolidate its business.
We are clearly not on a level playing field, so a marked reduction in VAT on UK tourism is a no-brainer, to use a colloquial expression. I urge the Chancellor to heed the powerful arguments presented in this debate and reduce VAT on tourism. That would attract foreign investment and domestic tourists, create employment, encourage much-needed investment, promote sustainable growth and improve further standards in the industry. He must know that makes sense.
I congratulate the hon. Member for South Down (Ms Ritchie) on securing this debate. I repeat the message that the far south-west is open for business, particularly the spectacular English riviera. People might bag a bargain if they book their summer holiday there now, and I am sure that the hon. Member for Totnes (Dr Wollaston) and I will be there to welcome them, if we are free.
This is the fourth debate in which I have raised this issue, so it is not new. We have seen that Ireland, France and many other countries have successfully used VAT reductions as a stimulus for tourism, which has been disproportionately affected by the recession, both overseas and here. There is no doubt but that such a reduction would help areas, especially coastal towns, that have particularly weak local economies. It is therefore puzzling that the Government have so strongly ruled out looking at how to help the tourism industry. On the one hand, there is rhetoric from the Prime Minister and senior members of the Government saying that the UK should be the most competitive economy in the world, and woe betide any suggestion that we increase tax rates, lest that scare off investment; but on the other hand, there is a twisted adherence to a particular idea of credibility that insists that we do not want to minimise the burden on businesses and consumers.
I specifically mention credibility because it has been the bulwark of the Government’s argument against VAT cuts. That argument misses a vital point, because credibility is not particularly quantifiable and is decidedly context-specific. One could argue that the inconsistencies in the Government’s fiscal approach undermine economic confidence and credibility more than the state of the figures produced by the Treasury. If the Government chose to, they could incorporate VAT cuts into a narrative of growth, prosperity, stability and a competitive economy. Those cuts can and should be a credible and legitimate approach. We have long heard the message that we have structural economic problems that require long-term solutions. It is not as if a VAT reduction would be a fiscal disaster. What we lost in VAT revenues would be regained within a few years by greater income tax revenue from the estimated 200,000 jobs that the reduction would create, and significant savings on out-of-work and low-wage benefits.
I have several tourism businesses in my Torbay constituency, and the tourist trade represents the biggest contributor to the private sector locally. We have some of the toughest economic conditions in the UK, with the associated social ills of poor health and housing, high rates of teenage pregnancy and drug dependency, low educational achievement and aspiration, and so on. Driving local economic investment is the only way out. Thankfully, the Government have realised one part of that and are investing locally in business infrastructure, such as the Kingskerswell bypass, but we need to do more.
The main thing local businesses point out to me is that the UK is one of only four EU members not to exercise its discretion somewhere within tourism and leisure spending. We already have high costs compared with much of Europe, and that unnecessarily harms businesses when they try to attract visitors. South-west England has a great deal to offer, but when it is cheaper to visit just about any other country in Europe, how can we even start being the most competitive in the global race?
I thank the hon. Member for South Down (Ms Ritchie) for her speech on the impact of VAT on tourism. I take issue with what she and my hon. Friend the Member for Strangford (Jim Shannon) said, because I look across the Belfast lough to their constituencies, which are shrouded in mist and doused in rain, from the stunning coastline and glens of Antrim, which are bathed in sunshine.
I understand the Minister’s dilemma. He is being battered in all directions by people pleading special cases. As he contemplates this issue, he should think of one thing: what principles have the Government and the Chancellor laid down on the tax regime? The first is that tax changes should be judged by their impact on growth and efficiency. As the Minister contemplates that, I draw three facts to his attention. First, 19 Governments across Europe have reduced VAT on tourism, and some of them have done that not when fiscal times were good, but when they were difficult. France in 2009, Germany in 2010 and the Irish Republic in 2011 all did that when facing the same problems as the Minister. They made a judgment that, because of the tax elasticity in demand for tourism, there were benefits, and that has proved to be the case. Some 28,200 new jobs have been created in France, with 15,000 businesses saved. Tourism in the Irish Republic is up 16%.
Secondly, I do not want to go into the issue of the model, which has been referred to time and again, but that model shows that a reduction in VAT on accommodation and tourist attractions would be four times more efficient at generating GDP increases than the 2p reduction in corporation tax that the Government have announced. Extending that VAT reduction to food would be three times more efficient at generating GDP than the corporation tax reduction.
Thirdly, to be parochial, the estimates for the Northern Ireland economy show that a VAT reduction could result in 10,000 new jobs in the tourism industry, a 50% increase in tourism revenue and a 40% increase in the number of hotel industry jobs. All those jobs would be available to young people and would help deal with youth unemployment. The reduction would also help increase investment in hotels. One hotel owner told me that they take £500,000 a year, and a 15% reduction in VAT would give them £75,000 to invest in facilities and to train and take on new staff. I hope that the Government will listen to those arguments.
I draw Members’ attention to my declaration in the Register of Members’ Financial Interests. I am also the chair of the all-party group on the UK events industry. I commend our report on the international competitiveness of the UK events industry to the Minister and to Members. That report is relevant to today’s debate, because I want to draw a distinction between business tourism and leisure tourism. Business sector tourism is defined as conferences, meetings, exhibitions, trade shows, corporate hospitality, music industry festivals and sports events, and that sector is worth £36 billion per annum to the UK economy. The industry forecasts that that will rise to £48 billion by 2020. It is worth noting that business visitors to the UK spend £131 a day on average, which is 72% more than leisure visitors. Visitors from overseas spend nearly 200% more on business trips, so the issue applies as much to the business sector as to the leisure sector.
The Minister will be interested to note that there are more than 25,000 businesses in the sector, including organisers, venues, suppliers and direct marketing organisations, representing roughly half a million full-time jobs. The international inbound event industry not only advertises Britain as a place fit to do business with in the permanent long term, but drives additional leisure tourism traffic. The many varied items that bring people to choose the UK, and London in particular, as a destination of choice are all discussed in our report, but I highlight the impact of the delegate fee for visitors. That is critical when choosing whether to come to this country for events, and our VAT position puts us at a competitive disadvantage. The league tables show that the UK is one of the top 10 countries for international meetings, but we are dwarfed by countries where VAT is outside the scope of being reclaimed. That reclaiming adds to the cost of visitors coming to this country. The USA, Japan and Singapore all dwarf us, as do other European countries that have lower VAT rates.
Whether the industry thrives or survives is not just down to VAT, but VAT influences decisions on where to hold events. I urge the Minister to understand that the impact both on the business events industry delegate price, which will influence choice, and on the subsequent leisure prices represent significant leverage in the pursuit of the industry’s goal of £48 billion in attendee expenditure by 2020. I commend the report to the Minister; in it, he will see the argument set out in great detail.
I congratulate the hon. Members for South Down (Ms Ritchie), for Brighton, Pavilion (Caroline Lucas) and for Strangford (Jim Shannon) on securing the debate. It has been well attended, as proven by the time limit on speeches. We have had some brilliant contributions, some of which were rather fast-paced as people struggled with the time constraints. The debate has served as an important reminder of the importance of tourism to UK plc, and we heard some compelling arguments in favour of supporting the tourism sector and for reducing VAT to improve the sector’s international competitiveness.
The hon. Member for South Down opened the debate with a powerful speech. Her comparison of the UK and the Republic of Ireland was particularly forceful, and she spoke impressively on the potential impact on youth unemployment, given the relative youth of those employed by the tourism sector—a point that was also expressed by the hon. Member for Brighton, Pavilion. A connected point was made about low pay in the tourism sector, so the work force being relatively young is not the only issue. I am sure that all hon. Members will agree that tackling low pay in the sector is important not only for individuals who want to be paid more, but for the growth of the economy overall.
The hon. Member for Totnes (Dr Wollaston) made me smile when she said that, if God were designing the best constituency, he would create Totnes. I would of course argue strongly in favour of Birmingham, Ladywood. I was a little worried after her speech that every contribution would turn into a PR pitch for individual constituencies. One or two Members did indulge in that, so we will have to agree to disagree about the relative merits of the places that we represent.
The hon. Lady also expressed solidarity and support for those struggling with the floods, and I join her in expressing that sentiment. People are suffering desperately, and we must work together to get them the help that they need and to tackle the long-term issues that have led to the problems.
The hon. Member for Ceredigion (Mr Williams) said that his constituency is open for business, but the country should also be viewed as such. We are a favoured destination for tourists and rank as the seventh most-visited country in the world. We hold a unique position in terms of culture, heritage and language that makes us a destination of choice. Regardless of our position on VAT and expense, we are still well visited, and we should continue to reinforce that at every opportunity.
I will require photographic proof from the hon. Member for East Antrim (Sammy Wilson) that there is sunshine in his constituency given the horrible weather that we are experiencing at the moment.
I am interested in the all-party parliamentary group for the UK events industry’s report, which was mentioned by the hon. Member for Enfield North (Nick de Bois), who is the group’s chair, and the distinction between leisure and business visitors. I will discuss the matter later in my speech.
I will disappoint hon. Members today by not making a spending commitment to reduce VAT for the tourism sector. I apologise for that, but I would get into a lot of trouble if I did. I acknowledge the passionate views of Members present and the strong arguments of the Cut Tourism VAT campaign, but the Opposition’s stance is that an incoming Labour Government in 2015 will inherit a difficult financial situation. Deficit reduction alone does not make for a successful economic policy, but it is a necessary and important part of it.
I thank the hon. Lady for giving way, but does she not accept what several hon. Members have said: precisely at a time of economic difficulty, we should be investing to get people into jobs and thus paying taxes to the Revenue? The idea that VAT should not be cut because we are in a time of economic difficulty indicates a misreading of the situation.
I am grateful for the hon. Lady’s intervention, and I will in a moment explain why I cannot quite go as far as she would perhaps like.
Although we are determined to build a fairer society and to deliver the long-term changes that our economy needs, including rebalancing, of which the tourism sector could and should play an important part, we must ensure that the sums add up. We will therefore not be able to reverse all the cuts and tax rises that this Government have pushed through to date, but we have had well-documented disagreements with the Government over VAT.
Although we are too far away from the general election to make detailed commitments across all the areas that may appear in our manifesto, we know now that we will face difficult choices. The Government’s day-to-day spending plans for 2015-16 will be our starting point, and we will not borrow any more for such spending. Any changes to the current spending plans for that year must and will be fully funded. That is not only a statement of our current economic policy, but an invitation to those involved in the VAT campaign perhaps to present some proposals that might work under the tests that we have set for policies come 2015, and I can confirm that my hon. Friends the Members for Barnsley Central (Dan Jarvis) and for Eltham (Clive Efford) are already working closely with the tourism sector.
Although I cannot commit to the VAT cut that the campaign calls for, I can commit to engaging in the conversation and working with the shadow Business, Innovation and Skills team, the shadow Culture, Media and Sport team and the shadow Treasury team to examine what else we can do to support the industry and to ensure that it plays its full part in getting us towards sustained economic growth.
Tourism is one of the UK’s biggest employers. The sector provides 9% of total jobs and contributes £134 billion to the economy, with revenue increasing by £9 billion last year. As I said earlier, we are the seventh most-visited country in the world. It is important that we continue to engage in the conversation and with the campaign to ensure that we support this vital industry as much as possible.
One or two Members touched on this topic, but we have not discussed in detail immigration policy and whether we make ourselves as easy to visit as other countries. The visitor visa regime has well-documented concerns, for example. On this subject, I speak not only as a shadow Treasury Minister, but as a former shadow universities and science spokeswoman. Higher education is our seventh largest export industry, and there is tension between the economic benefits, which are similar to those of tourism, and effective immigration control.
Our regime for visa applications, fees and monitoring to avoid over-staying is not the simplest. There is particular tension with the countries that we deem to be at risk, from where we may expect people with visitor visas to visit with the intention of over-staying. Countries that have historically been placed in that group, such as India, can actually be those from which we benefit greatly. In tourism, for example, growing numbers of genuine visitors want to come to this country, spend their money and help to boost our economy, while having a great time. It is important to resolve that tension, so that those growth sectors do not suffer unnecessarily and so that we get the maximum benefit from our tourism policy.
We cannot agree now to the cut that has been called for by campaigners and hon. Members present for the debate; however, we are committed to working closely with the sector. We will take seriously other help for the sector that does not have cost implications, including immigration changes.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the hon. Member for South Down (Ms Ritchie) on securing the debate and putting her case so strongly and on the fact that the debate is so well attended. Her constituency is known as one of the most beautiful in the United Kingdom, but I appreciate the strong case made by several other hon. Members for their constituencies to be on that list. In the interest of time, I shall not attempt to comment on each of those areas, but I can reassure hon. Members that the Government appreciate the value and importance of the tourism sector. Ministers from the Treasury and the Department for Culture, Media and Sport have been working closely with the industry to increase inbound and domestic tourism.
VAT is governed by EU law, which strictly limits reliefs. However, as hon. Members have pointed out, VAT law allows member states to implement certain reduced rates of VAT, which are listed in annex III of the VAT directive, at the discretion of the member states. Two of the reliefs are
“accommodation provided in hotels and similar establishments, including the provision of holiday accommodation and the letting of places on camping or caravan sites;”
and restaurant and catering services, excluding alcoholic drinks. As several hon. Members have pointed out, when the list of optional reduced rates of VAT entered into force in 2006, the UK opted not to implement those two reliefs and has maintained that position since.
Several other member states have chosen to implement a reduced rate of VAT on tourism, but the Government have yet to find any evidence of a causal link between VAT rates and tourism activity. Comparisons with other countries tend not to take into account the significant VAT reliefs that the UK provides for cultural attractions and public transport, or the other tourist taxes that other member states choose to levy. In addition to the sector-specific reliefs, the UK’s VAT registration threshold is the highest in the EU. Therefore, many tourist attractions do not have to charge any VAT to their customers. It is interesting to note that France, which is often the country quoted as reducing the rate and reaping the rewards, put its VAT rate on restaurant services up from 7% to 10% in January. Also, many businesses in the tourism sector are small businesses and will benefit from the £2,000 cut in national insurance contributions—the employment allowance—that will come into effect in April.
As I mentioned, Treasury and DCMS Ministers have discussed the Cut Tourism VAT campaign, and I have met campaigners and engaged in correspondence with them about the report mentioned by the hon. Member for South Down, among other things. The campaign’s analysis assumes that the revenue shortfall associated with a VAT cut should be met by increasing Government borrowing, but the latest figures from the Office for National Statistics suggest that reducing VAT to 5% for all catering services provided by restaurants, pubs, cafes and canteens would cost the Exchequer between £9 billion and £10 billion a year. Cutting VAT to 5% for accommodation would cost the Exchequer an estimated £2 billion a year. I do not have to remind hon. Members that those costs would have to be met by increasing other taxes, which would be likely to affect growth and jobs adversely elsewhere in the economy, by reducing spending or by increases in borrowing. That would be contrary to the Government’s long-term economic plan and risk raising interest rates, undermining the recovery and adversely affecting families and small businesses.
Many hon. Members spoke in the debate about the jobs that could be created; the figure for Northern Ireland was almost 15,000. Those jobs would result in taxes being paid and people coming off benefits. What weight has the Minister given to that part of the equation, in the figures he has just outlined?
I reiterate that funding the cut by additional borrowing would be contrary to our long-term economic plan to get the deficit down and put our public finances in a credible position. It would entail a risk to the recovery. As all hon. Members know, the Government’s priority is to tackle the record budget deficit decisively but fairly and to restore confidence in the economy and support the economic recovery. The conclusion that we reached, therefore, which I announced in Parliament last year, is that a VAT cut would not produce sufficient economic growth to outweigh the revenue shortfall. I have not seen any new evidence since then that has led me to revisit that conclusion, so, at present, the Government have no plans to introduce a VAT cut for the sector.
The Minister will be aware of the report of Professor Adam Blake, who I understand is a Treasury adviser, and who used the Government’s computable general equilibrium model and maintained that it would be possible for a reduction in VAT on tourism to end up fiscally neutral. Has the Minister a comment to make on that, and did he talk to Professor Blake about the report and to Deloitte?
I think that I have touched on that, but I want to emphasise that the figures produced by the industry and Professor Blake represent independent research; the Treasury has engaged with the campaign and has concluded that VAT cuts would lead to a significant revenue shortfall. I could go into more detail about the modelling, but because of the time I will not. We do not accept the conclusions that the hon. Lady refers to.
A more targeted VAT cut, on a regional basis, is not possible under EU VAT law, because a single rate of VAT for a particular good or service must apply throughout a member state. A reduced rate for Northern Ireland is not possible, and it is also not possible to distinguish between tourists, locals and people on business who use a restaurant or hotel. However, I reassure hon. Members that we recognise the importance of the tourism industry and remain committed to a wide range of measures to support the sector.
Since 2011-12, we have put £37 million into the tourism pillar of the GREAT campaign, which in 2012-13 generated a return of more than 400,000 visits to the target cities; those visits brought in £200 million, which is a return of 8:1 on the investment. Between 2011 and 2015, we are spending £50 million on a tactical marketing campaign via VisitBritain, with a further £50 million match-funded by the private sector to market what the UK has to offer overseas. Between 2011-12 and 2014-15, we are spending £10 million on a campaign to encourage domestic tourism, which has already generated about £300 million in additional spending. There are also good results in Northern Ireland, where in the 12 months to September there was an 8% increase in the number of visits compared with the previous 12 months.
We are taking action to help the tourism industry, but a cut in VAT would be expensive and would create a revenue shortfall. That would put the Government’s economic credibility and long-term economic plan at risk.
Medical Records (Confidentiality)
It is a pleasure to hold this debate under your distinguished chairmanship, Mr Hollobone.
The debate deals with one of the most accepted and appreciated relationships, which is that between patients and their doctor, with the knowledge that whatever information is recorded by the GP is confidential and kept securely in the medical records held by the practice. Next month, that will change. Under controversial legislation passed in 2012, family doctors will be required to pass to a new national database created by NHS England all the medical records of the patients in that practice.
The personal GP record may be added to by any other social care organisation that deals with the patient and with hospital records that exist for an individual. This is being done, according to NHS England, to improve the delivery of health care to benefit researchers inside and outside the national health service. I have no reason to suggest that this move will not lead to improvements in health care, and, no doubt, the Minister will deal with that matter more fully.
I have sought the debate for two main reasons. My first concern is shared by many people, including some present in the Chamber: the security dangers of bringing all such personal data together in one huge national database. The second reason is my dismay and even anger at the deliberate manner in which the public have been deprived of consultation and information on what could be, and I think will be, a significant threat to their right of privacy in respect of their medical records.
On the first threat, to security, we are assured by NHS England that the information
“will be stored…in a secure environment with the highest standards of information governance and technical expertise to protect the data.”
If patients are reassured by that statement, the US Government must have lower standards. For example, Angela Merkel, the German Chancellor, learned about the USA hacking her personal phone from sources inside the US. A young lad from Glasgow was extradited to the USA in the past 19 months to face charges, because from his Govan bedroom he had breached military systems in the US. This weekend, closer to home, Barclays bank admitted that delicate, sensitive and important financial details of 35,000 of its customers had been stolen.
Does the hon. Gentleman believe, as I do, that the single most important point, which I hope that he will elaborate for us, is whether the identities of the people whose data are being stored are also being stored? If they are being stored, I am entirely with him; if they are not and only data without identity are being stored, there might be more to be said for the scheme. I am interested to know what he has to say.
Importantly, the fear is not only of professional hacking, but of amateur hacking, which can break into major databases. The problem about the medical database is that someone’s medical data are almost as strong as a fingerprint. If people were looking for me, for example, I have five broken noses on my medical record, which probably reduces the numbers that they are looking at from 60 million to about 100; they could also probably work out my age, if that is removed, from when I had my diphtheria jab and various other early jabs. It is still possible to reverse engineer from so-called anonymised data. In the States, that was done with an anonymised data system—the record of the Governor of Massachusetts was picked out by an academic, to demonstrate how weak such systems are.
I read with interest about the right hon. Gentleman’s unfortunate nose. He makes an important point.
My point is that there will eventually be a breach of security. It is inevitable, given the size of the database and the information stored in it. The human cost to the patient whose identity and medical history are made public is potentially disastrous. Careers could be ended, jobs lost, insurance refused and relationships destroyed if sensitive medical facts are made public or used by private firms, other people or, indeed, the media.
I congratulate the hon. Gentleman on bringing this matter to the House for consideration. He said rightly that there is a medical need to have some of the information, but many patients fear that their confidentiality could be taken over by money-making ventures from those involved in the process. Instead of an opt-out system, should there not be an opt-in system, whereby the GP and the patient get together and discuss confidentiality and an understanding of the system before anything happens?
The hon. Gentleman makes an important point, which I will cover when discussing the second issue that I identified. At the moment, I am dealing with security, but I will come on to the opt-out arrangements, which are far from satisfactory.
A further reason for concern is that the information will not be available for analysis and research in the national health service alone, but will be made available to non-NHS organisations. A Library note describes an interesting situation in which, without the consent of individuals, the information given can identify patients:
“In most cases, researchers can carry out their studies using information that does not identify you. Occasionally, however, medical researchers need to use information that does identify you. Only researchers who have obtained your permission or who have been granted special approval are allowed to access your identifiable data… The CAG approves requests where it is not possible to use information that does not identify you and it is not possible to ask you. There are a variety of reasons why it might not be possible to ask people; for example, where there are extremely large numbers of patients”—
so it is okay if researchers pinch a lot of patient information and identify the patients, but such patients would have no come-back, because that is reasonable in the eyes of the national health service.
Another interesting but concerning document includes a diagram helpfully provided by the Information Commissioner that describes three different levels of anonymity. First, in the public domain, there is no information—none. It is totally anonymous. Secondly, for approved organisations, whether NHS or outside organisations given permission, there is potentially identifiable data. Finally, organisations that have a legal basis, such as the police, have all the data—nothing is hidden. Interestingly enough, the police will not have to do what they have to do now, which is to get a court order to get the information; they will have an automatic right to it.
NHS England has explained that information given to private researchers will be anonymised before release, but that is undermined by its statement that the standard of anonymity it is using requires it to
“ensure that, as far as it is reasonably practicable to do so, information published does not identify individuals.”
That is hardly reassuring.
All those instances could be dismissed as speculation, but we should be aware that NHS England and the Government see the whole exercise as an opportunity for the UK to become a major player in medical research, with both the NHS and the private sector seeing strong economic growth and income from the use of the data. I forgot to mention that in the database will be included people’s national health service number, postcode, date of birth, gender and ethnicity. With all that information—particularly the postcode—it will be fairly easy to identify someone.
I turn now to the question of permission. This genuinely makes me very cross. The handover from GPs will take place in March—one month’s time—and after three months, depending on opt-out numbers, 100% of records will be on the national database. That should have happened already, but the Information Commissioner stopped the process late last year because the NHS had not consulted or, in the commissioner’s view, given enough information to the public. The commissioner ordered the NHS to postpone the process and take steps to give more information on both what was happening and the right to opt out. It has been given £2 million to do so, but it is far from clear that it is doing it willingly—it is doing it in bad grace.
I should mention the summary care record, another IT exercise that was carried out five or six years ago, more limited in its function but with the same organisational structure. A key element was that, unless a patient objected, their records would automatically go on the database. That tactic of forcing people to opt out rather than in was successful and with summary care records only 1% of patients in the pilot schemes opted out. There was a discussion about what system should be used for opting out for the new, greater system, a report was written, and surprise—officials chose the opt-out. With no real publicity, involvement or consultation, they have reckoned from the pilots that that might be the result nationwide. I thoroughly object to that.
NHS England published a leaflet, which might have come through Members’ doors, that supposedly meets the Information Commissioner’s request, but it is so bland, patronising and uninformative that it seems to have been written, miraculously, by a dead author—Enid Blyton. It is an insult to the general public. Opting out is not actually spelled out within the leaflet. NHS England is demanding that people go to their doctor’s surgery, discuss the matter with a doctor or practice manager and then give their decision on opting out. The House knows how busy doctors are and how busy their surgeries are. Is somebody going to take a day off work to go and see their doctor not because they are ill but because they want to discuss opting out? It is not sensible.
I suggest that NHS England is not serious about involving and empowering the general public. That is the second reason why real questions should be asked about this plan. The leaflet does not make the point that there are two opt-out options, one for giving the information out within the health service and one for giving it out outside the health service, or that people can obtain a form, fill that in and send it in to a practice.
I am taking up time and I know that a colleague wants to speak. I want the Minister to take his lead from the Information Commissioner and postpone the introduction of the scheme to allow further consultation and discussion about whether there should be an opt-in or an opt-out, about what information is being shared and about the security of that information. If the medical records of members of the public are going to be given out, they should have knowledge of that and should have had the opportunity to opt out.
I congratulate the hon. Member for Leeds East (Mr Mudie) on raising this issue for a debate that I think merits a bigger attendance. I hope that the subject will be debated subsequently on the Floor of the House.
This is an important issue. We have seen in recent months and years in the House that data sit at the heart of so much of the transparency revolution that is taking place in health care, not least in the Francis report, which was indeed in part driven by a revolution in transparency, with outcomes data revealing differences in outcomes across the UK. That has highlighted that, within our precious and beloved NHS, there is huge variability in standards and outputs. The genie is out of the bottle, in terms of the public interest in the power of those data to drive both transparency on outcomes and patient empowerment—a theme that the hon. Gentleman rightly touched on.
I declare an interest in that I come to this matter after a 15-year career in biomedical science and research, in the last seven years of which I helped to create partnerships in the national health service between NHS clinician scientists, research charities, industry and university scientists to try to accelerate the process by which modern medicines are discovered and developed. My experience is that, over the past 10 years, this country has quietly come to lead in the appliance and use of anonymised cohort datasets and, indeed, specific patient datasets in particular disease areas to drive and accelerate the development of modern medicines, with extraordinary benefits for patients in the NHS.
The truth is that the traditional model of medicines development, on which we and the NHS have relied for nearly 50 years, in which the pharmaceutical industry goes away and spends hundreds of millions—or increasingly, billions—of pounds and comes back to us with a perfect drug that suits everybody, is a model that it cannot afford, and we cannot either. The more we learn about genetics and genomics, and patients and disease, the more we know that your disease, Mr Hollobone, will be different from mine: our susceptibility to it will be different, as will be our response to drugs. The revolution in research data offers an extraordinary opportunity for the NHS to be the place in the world where we develop and design 21st century medicines targeted at the patients who need them and generate extraordinary opportunities for our NHS patients and clinicians.
I want to mention an example that brings this matter to life. The last project that I worked on was here in London, at King’s college, with Professor Simon Lovestone, the head of research at King’s academic health science centre and professor of psychiatry. The project was funded by the National Institute for Health Research, an NHS body, and looked at the catchment population for the South London and Maudsley NHS mental health trust—250,000 patients suffering from a range of mental health ailments. As Members will be aware, in mental health, there is no magic bullet drug; there is a huge cocktail of some very difficult drugs, with hugely traumatic experiences for patients, who often have to change dosage. It is an unsatisfactory area of modern health care, in which we are really failing a large number of patients. The system that was put in place, funded by the NIHR, created an anonymised dataset of the 250,000 patients, which allows researchers to look across that cohort at relationships between medicines and outcomes, disease and MRI scans, and really shines a light on which drugs are working for which patients. That gives extraordinary opportunities to us here in London and in Britain to lead in the field of developing treatments for a whole range of mental health ailments, from Alzheimer’s to a range of other indicators.
The truth is that these data are utterly key to the quiet revolution in 21st century health care and medicine that we are beginning to see for three reasons. The first is research, as we have discussed. The second is accountability, as we saw in the Francis report most traumatically, but across the board. My constituents want to understand and to see that their patient journey from care is properly tracked. I have power of attorney for my mother, and last summer I wanted to be able to log on quickly to see what she had been prescribed and what her diagnosis was when she was unable to do that for herself. The younger generation particularly want and are beginning to expect to be able to use data to drive accountability.
The third and most important reason is empowerment, which the hon. Member for Leeds East touched on. We are moving from an age when health care and medicine was something that was done to us by the Government to something that we want modern 21st century citizens to take more responsibility for. Several concerns have been touched on, some of which are valid and important to discuss.
My right hon. Friend makes an excellent point, as ever, and I was just coming to it.
The hon. Member for Leeds East raised several important points that I want to touch on. We should be clear that the data will be anonymised, and it might be worth looking at a framework to ensure that only anonymised data are released. No one is even beginning to think or talk about insurance or anything to do with insurance companies. That has not been mentioned, and it is important to say that here. That is not what the issue is about. We should all remember that it is illegal for pharma companies to contact any patient even if they have got hold of data.
On opting in and opting out, the evidence suggests that patients want their data to be used in research. The opt-in rate to the biobank project is 98%, and when patients are told that the data are not being used for research, they want to know what on earth is being done with them.
An additional point worth making concerns doctor-patient confidentiality. There are layers of data, and my right hon. Friend’s broken nose would sit quite high. More discreet information such as notes by a GP may not be appropriate for release, and we should acknowledge that we are talking about layers of data.
I will wrap up by saying that there is a huge danger in the Government’s laudable initiative to link their datasets together to drive the revolution: a clear statement of patient rights is needed. Patient data are involved, and patients should have a framework and the architecture to access them for themselves. We should encourage them to take responsibility for their outcomes, their health and their data. If we did that, I think that we would find much more public support for this important initiative, which I welcome.
It is a pleasure, Mr Hollobone, to serve under your chairmanship. I congratulate the hon. Member for Leeds East (Mr Mudie) on securing this debate and all hon. Members on their contributions.
I pay particular tribute to my hon. Friend the Member for Mid Norfolk (George Freeman) for his excellent speech, in which he highlighted the importance of sharing data to improve patient care. He talked about empowering patients to take greater control over their health care. That is important and the key to it is ensuring that patients have the right data to do so. He also talked about improving research, ensuring that we can properly combat disease and linking data properly to understand exactly how to find cures for rare diseases. Importantly, he referred to the fact that we need properly to understand how good health services are, and to recognise where there is good practice. That is particularly important following the Francis inquiry and report, which outlined the importance of delivering high-quality care and transparent and properly used data to deliver that. He made those points very well.
My hon. Friend the Member for Mid Norfolk (George Freeman) also referred to a major project involving people at the Maudsley hospital who had suffered serious mental illness. I want to hear from the Minister that there is no way under the sun that people who have suffered mental illness, for example, would find their data getting into the wrong hands. Without that guarantee, the project seems to be very dangerous.
In the time available, it is difficult to speak about detailed points. I apologise to my hon. Friend for that and I will write to him addressing some of the points that he raises. However, I can assure him that robust safeguards are already in place to protect patients with mental illness, and those safeguards will remain robust, if not more so under the systems that we will put in place.
It is important to recognise that the big challenge facing the health and care system is the fact that in the past we have had too much silo working, which has been to the detriment of patient care. The health system has often operated in a fragmented and siloed way. The operation of the health and care systems is not integrated and joined up. Key to driving improvements in patient care is ensuring that we join up the information that informs what good care looks like. Integration involves ensuring that a process exists to join up health and care information to improve care for patients.
We want to look after people with diabetes, dementia and long-term illnesses and to give them dignity of care in their own homes. It is important to do that and to have the right information and evidence to do so. We are well into that journey. The £3.8 billion integration fund will help with the provision of services, and the health and social care information centre will help us to get the right evidence base to drive properly joined-up, integrated care.
Will the Minister confirm that the situation at the moment—that is, under the previous Care.Data initiative—is more or less that GPs have patients’ records, many of which are not electronic but in paper format with treasury tags, but there is no formal link across to hospital records? Hospitals can say whether a patient has been admitted, but most of them do not have an integrated system to know what treatment a patient received in different parts of the hospital. Normally, someone pushes a wagon along the corridor with the treasury-tagged information. Also, there is no integration at the moment with the care system. The data of many of my constituents who go in and out of hospital for acute care and community care are chaotic. That makes transparency difficult, and it was one of the things at the heart of the Francis report and some of the Winterbourne View issues. We must remember that we would all gain from this public health benefit.
My hon. Friend makes an excellent point, and he is right to highlight the fact that we are talking about an evolutionary process. The health and social care information centre is not a sudden revolution. It will allow better use of information to join up care in exactly the way that he describes. It is no good having a £3.8 billion integration fund for better provision of services unless we have the right information and can join up intelligence to understand what good care looks like.
The two professionals in the Chamber are having an interesting conversation, but the public want to know whether the Minister is content, first, that the use of personal data will not lead to the identification of individuals and, secondly, with the present system of consultation on opting-out.
We already have robust procedures in place, and they will exist under the new system to protect patient confidentiality. I would describe them in more detail if I had more time, but it is worth highlighting some of the history. It is not revolutionary to store information; it is evolutionary. Hospital episode statistics started being collected in the following care settings in, I believe, the following years: in-patient data in 1989, out-patient data in 2003, A and E data in 2007-08, and primary care data from 2014.
We already have systems for collecting and analysing information, and patient safeguards exist in those systems. We will now see a system that better joins up and builds that evidence base to drive better care for patients, which is exactly the point that my hon. Friend the Member for Mid Norfolk made. We need to expand the evidence base, and it is absolutely right that we ensure patient confidentiality when doing so. I believe that we have the right safeguards in place to do that.
A number of points have been raised in the debate, and I will write to hon. Members with further clarification. I hope that that will be helpful.
[Jim Sheridan in the Chair]
As always, it is a great pleasure to serve under your chairmanship, Mr Sheridan. I had anticipated that this debate would be more heavily subscribed, but I am sure that what we lack in quantity, we will make up for in quality. I know that some members of the Environmental Audit Committee who would have been anxious to take part are away on a Select Committee visit.
The main focus of my remarks is the report by the Energy Bill Revolution, which finds that the core of the problem of fuel poverty lies with the poor heat efficiency of our housing stock. For many years, it has been more important to put a roof over people’s heads than to provide a warm home that is well insulated. That comes from a time when energy prices were cheap and carbon emissions were not considered to be a problem. Even if we build 200,000 new homes a year of good thermal efficiency for the next 15 years, 90% of the houses we live in by 2030 will have been built before 2014, and most of them will have poor thermal characteristics.
I congratulate the Energy Bill Revolution for assembling such a powerful group of charities, companies, disability groups, environmental groups, trade unions and trade associations to tackle this important issue. I also wish to congratulate it on highlighting the matter during cold homes week.
The causes of fuel poverty are a complicated nexus of poorly insulated homes, rising fuel prices, low incomes and limited accessibility to the cheapest fuel and best tariffs. The Energy Bill Revolution rightly focuses on retrofitting substandard properties. We have a large legacy of poorly insulated properties in this country. Such is the backlog of that essential work that, if 600,000 houses were treated every year, it would take until 2027 to deal with 90% of the homes.
My hon. Friend is completely right. The regulation and specification for energy efficiency in new houses today is to be welcomed. Some of us believe that a higher degree of that could have been aspired to.
The Energy Bill Revolution is calling for the revenues from two carbon taxes—the EU emissions trading scheme and the carbon price floor—to be invested in a massive energy efficiency programme that would eliminate the scourge of fuel poverty once and for all. Compared with much of Europe, the UK has a bigger fuel poverty problem because of our poor quality housing.
Does my hon. Friend agree that that is a particular problem in the area he represents and in my neighbouring constituency? It is about the age of the housing stock coupled with the problem, as a rural area, of the absence of any gas provision. It is a case of lacking alternatives, as well as older housing stock.
My hon. Friend is correct, and I shall come on to that later. Most houses in rural areas tend to have solid walls, and insulating them is much more difficult and much more expensive than dealing with properties with cavity walls.
Improving the poor quality has to be the focus of solving the problem. Investing in better housing should be the next Government’s top infrastructure priority and funds need to be found. The last Liberal Democrat conference passed policies to recycle carbon taxes for that purpose. Investing in better housing is also good for jobs and the economy, as well as having major health benefits.
I congratulate the hon. Gentleman on securing the debate, which is happening at a most appropriate time, given the problems that we face, which are about not only energy costs, but people staying in badly insulated housing. Is it not the case that public housing, as it was, was always better than the private sector for insulation? The U-values in public housing were much greater than they were in the private sector.
I thank the hon. Gentleman for that point, but I am not in a position to answer his question. I suspect that different local authorities might have had different standards in building houses. Whether they were better or worse than the private sector, I guess, depended on the developer.
I congratulate the hon. Gentleman on securing the debate. We have had lots of debates about fuel poverty, and Government spending on fuel poverty is down 25% on 2010. Having said that, should we not learn a lesson from the past and look at the possibilities of improvement grants, which were often used—certainly in the late ’60s and ’70s—to deal with this sort of problem and for when people lacked amenities, such as toilets?
The hon. Gentleman is being generous in allowing interventions. Pensioners are among those most at risk of falling into fuel poverty. Does he agree that the Government’s warm home discount scheme has been helpful—in fact, invaluable—in providing financial support for more than 1 million pensioners to help them make their homes warmer and safer?
I agree that the warm home discount scheme is very important, as are winter fuel payments and cold weather payments. A combination of those enables old-age pensioners, particularly in poor housing, to have a fairly decent standard of living and a decent quality of life.
I, too, congratulate the hon. Gentleman on securing this important debate. He is right to point to the necessity of insulating homes better and of concentrating on that. Will he join me in welcoming the Northern Ireland Executive’s approach? We have the highest levels of fuel poverty of anywhere in the UK—42% of all households are in fuel poverty, which is a shocking statistic—but the Housing Executive has now embarked on a campaign to get all social housing double-glazed, so that there is no single-glazing or substandard windows in any of these houses in Northern Ireland.
I thank the right hon. Gentleman for those comments. They are of interest to me; I think the devolved nations in the UK very often show the way to best practice in such matters and that other nations can learn from them. Getting double-glazing into social housing and local authority housing is a way forward.
The three factors that make it more likely that a household will be fuel poor are low income, high energy prices and energy inefficiency of the home, although people would not know that from much of the noisy debate in recent months, and from party promises of fuel price freezes and rolling back charges on bills. By far the most important of those in the UK context is the state of homes. UK incomes are not especially low. EUROSTAT figures for real adjusted gross disposable income of households per capita in 2011 put the UK right in the middle of the table, coming seventh out of the 13 countries for which data are available. We are within €1,000 of Finland and the Netherlands, which have marginally less income, and Sweden and Belgium, which have marginally more.
I, too, congratulate the hon. Gentleman on securing this very important debate. According to Barnardo’s, the impact of fuel poverty is being felt by families and older people, but, in addition, 90% of the respondents to its survey said that families were cutting back financially on other services and other things to meet their fuel costs. Therefore, although I support the hon. Gentleman’s debate, I appeal to him to recognise and highlight the fact that families are facing a squeeze. In areas with high levels of child poverty, such as in my constituency, the fuel poverty dimension is a huge issue in the cost of living crisis. I therefore hope that he will join us in campaigning on that and ensure that this debate falls into the context of wider poverty issues.
I thank the hon. Lady for making that point. I do not underestimate the effect that fuel poverty has on families. It is particularly troublesome that children are drawn into this problem. There will be ways in which we can deal with the immediate issues. The purpose of this debate, as I see it, is to find a much more long-term approach to the problem that will get rid of fuel poverty for ever, rather than mitigating it as it appears.
On that point, does my hon. Friend agree with me that the progress in, for example, Northumberland, where we have 13 oil-buying clubs, providing more than 1 million litres of oil and a 10% to 20% discount for off-grid customers, and the role of the Church and credit unions in assisting those who need finance for off-grid supplies are the sort of long-term solutions that we need to reduce prices and generally address the problem?
I thank my hon. Friend for bringing that to my attention. I will move on to rural issues later, but certainly fuel-buying clubs have a big future in rural areas and make a real difference. One of the ways forward that I will be suggesting later is extending the gas main to ensure that other people have the opportunity that most people in towns take for granted.
I am grateful once again to the hon. Gentleman for giving way, but it must be put on the record that we can have long-term solutions to the problem, but we have immediate problems—problems right now. If one in five people are turning off the heating in their house, it is the case that either they heat the house or they feed the house. It is far more important to have that as the basis of a debate today on fuel poverty.
I agree with the hon. Gentleman that that is a debate to be had, but successive Governments have been putting off taking the tough decisions that need quite a large amount of expenditure and that would make a real difference to the problem. Yes, we have to deal with the situation of pensioners and families as they experience it today, but we also must look to the future.
I congratulate my hon. Friend on securing the debate. Does he agree that we should not forget a significant minority, which is those who live in park homes? They struggle because they have to pay for a share of the electricity and it is very difficult to be included in schemes because of the construction of the properties. These really are people on low incomes.
My hon. Friend has a great record of campaigning on behalf of park home owners. Indeed, in Wales, through the Welsh Government, legislation has been brought through to support park home owners. One issue is how the people who live in park homes are charged for energy and water and what the owner of the park takes as a percentage of the charge made to the residents. My hon. Friend has done an enormous amount of work on that.
In terms of prices in the UK, I accept that lower prices are always welcome, but we must recognise that the Department of Energy and Climate Change quarterly energy prices update shows that in 2011 the cost of a unit of domestic electricity in the UK, including taxes, was the third lowest in the EU15 countries. Similarly, the cost of a unit of gas was the second lowest in the EU15. Buying a unit of energy in the UK is cheap by international standards. What makes the bills expensive—the bills are the key issue—is that we have to buy so many units because our houses just do not keep the heat in.
Only when we look at housing quality do the reasons for our fuel poverty problems become clear. EUROSTAT conducts an annual survey about “Statistics on Income and Living Conditions”. That includes a question on whether households live in a dwelling with a leaking roof, damp walls, floors or foundations, or rot in the window frames or floor. Such substandard homes may be hard to keep warm, as well as presenting a health risk to the occupants. On that, the UK ranks 11th out of 15, with almost 16% of households in leaky homes. Finland is at the top of the table with just 5.7%. However, a second indicator shows that even UK homes without leaks or damp lose more heat than those of most of our neighbours. The amount of heat that a wall allows to escape is measured by using what is known as a U-value. Data from the Buildings Performance Institute Europe data hub show that homes in the UK are further from the optimal U-value than those in almost every other country for which figures are available. We come seventh out of eight countries.
There is a real warning in these figures for politicians of all parties. Talking big on price cuts may be popular, but they will not solve the problem of fuel poverty. A politician without a serious plan to improve housing is very unlikely to be serious about tackling fuel poverty.
My hon. Friend has not mentioned thus far the green deal, which, as part of the coalition’s policy, is one of the finest things, and one of the things of which I am most proud, in terms of improving housing stock on a very cost-efficient basis that addresses both energy efficiency and environmental concerns.
I thank my hon. Friend for picking me up on that. The green deal is indeed a very important part of the coalition’s policy. Figures show that more and more people are making use of green deal assessments. Indeed, some of the companies providing those assessments are not charging for them, but see that as an opportunity to suggest ways forward that will improve the environment of the house. As I understand it, though, some of the green deal finance is not taken up. Some of the green deal recommendations are put into practice without taking up the green deal finance.
I congratulate the hon. Gentleman on securing the debate. On the green deal, he is correct to say that the number of assessments is going up, but the Government’s targets have not quite been met. However, when the assessments have been done, the practical steps that are taken are to replace boilers, for example. Surely it would be more cost-effective to have a scrappage scheme and a boiler efficiency scheme, which would help people on grid and off grid.
I understand that the hon. Gentleman has a real passion for this issue. We share that, as we represent rural areas. I am not quite sure how a scrappage scheme would fit into the green deal, but I am sure that he will enlighten me on that after the debate. I will come on to some of my concerns about the ECO—energy company obligation—scheme later.
On the rural situation—this is a caveat on the comments that I have just made—certain parts of the UK face significantly higher energy prices. Rural areas in particular are far less likely to be on the mains gas grid. The Department for Environment, Food and Rural Affairs has found that although 10% of the houses in urban areas do not have a gas connection, that figure rises to 36% in rural areas. In villages, the figure rises to more than 50%, and for hamlets and isolated dwellings it is more than 60%. Those figures are for England in 2009, but they illustrate the point well, although I am sure that for some of the devolved nations they could be much higher.
Age UK says that household energy bills in rural areas are, on average, 27% higher than in urban areas. Without mains gas, people in such homes rely on more expensive forms of fuel such as heating oil, liquid petroleum gas, solid fuel or even electric heating. The extension of the gas grid would bring benefits to many such homes. The Government must also ensure that homes that rely on more expensive heating fuels are better insulated if people are to be able to afford energy bills in the future.
The hon. Gentleman has raised a significant point about off-grid households, and he is right to say that the problem is far worse in some areas of the country than in others. In Northern Ireland, 70% of households are dependent on home heating oil, which is a massive extra cost burden, and the warm home discount does not apply in the Province. Does he agree that the matter should be looked at as a priority? The problems faced by off-grid households are critical for rural areas and peripheral parts of the UK.
I absolutely agree with the right hon. Gentleman. One of the first things I did when I was elected to the House was to continue the work of my predecessor, who wanted to bring real competition into the supply of liquid petroleum gas. We managed to get the Competition Commission to conduct an inquiry into the procedures that limited people’s ability to change providers, and the commission introduced proposals to allow people to change their supplier without having to change their bulk tank. That has made people much more likely to choose their own supplier.
I congratulate my hon. Friend on the success of his campaign. I am sure that he was as disappointed as me by the Office of Fair Trading investigation into the heating oil market, which concluded that it was working fine, when it is quite clear that in rural constituencies such as mine people are subject to monopolies because they do not have a choice of suppliers. Does he agree that the OFT should look at the situation again?
I absolutely agree with my hon. Friend, and I would join him if he made such a proposal. At the height of concern about the lack of competition in heating oil, we looked at a price comparison site that was available to my constituents, which appeared to show four potential suppliers of oil. When we looked into it, however, those suppliers were all the same company pretending to provide competition and offering marginal differences in oil price. That was undoubtedly illegal, and I believe that the company concerned has been prosecuted.
I sometimes think that the suggestion that poor families should shop around for cheaper fuel is a cop-out. We should, as I said in a debate in this place about three years ago, carry out a proper investigation into the companies involved, because they are frankly rigging the market. Some years ago when I was in Cornwall, I saw five fuel tankers lined up for about three weeks to force the price up. Does the hon. Gentleman agree that it is time we had a proper inquiry into the industry to break those companies up?
I completely agree with the hon. Gentleman, because transparency is essential. I have already told hon. Members about the experience that I had in my constituency, and I have even suggested that in the energy supply industry, we need a different type of company to come in and promote real competition. I have suggested that Welsh Water, a not-for-profit company that pays no dividends to shareholders and is responsible only to its customers, might provide good competition in the system. People should be able to choose to take services such as water, electricity or gas from such a company.
Ending fuel poverty is undoubtedly a massive task. At its launch, the Energy Bill Revolution estimated that we need to improve slightly more than 9 million homes, and it assessed the average cost of improving each home to be £6,500. Many homes can be improved for far less than that, but the most difficult to treat can be very expensive indeed. Improvements have already been made to many cavity-wall homes, but improving the insulation of those with solid walls, which are the ones that really need it, can be expensive.
The Energy Bill Revolution has pointed out that the Treasury is already receiving the proceeds from the auction of carbon permits under the EU emissions trading scheme, which along with money from the carbon price floor, may raise an average of £4 billion over the next five years. That money ultimately comes from those who pay energy bills, and the Energy Bill Revolution suggests that it should be invested in energy efficiency measures to help cut those bills. I am proud that as part of the zero-carbon Britain policy that we passed at our most recent party conference, the Liberal Democrat party decided, in common with other EU Governments, to allocate revenue from the EU ETS and the carbon price floor to an energy efficiency programme designed to assist households suffering from fuel poverty. I hope that the Minister will take that large ask seriously and consider the use of carbon taxes to achieve it. I also ask him to consider how to support hard-to-treat homes, because improvements to easy-to-treat homes, cavity walls and loft insulation will all soon be done.
I turn to a favourite theme of mine, which is extending the gas main. The fuel poverty problems of at least three villages in my constituency would be greatly reduced by the installation of mains gas. Abercraf, a former mining community of some 1,000 people, used to rely on the free coal that was available to many of its inhabitants who were coal miners, their widows or their relations. Sadly, such free fuel is no longer available to many of the residents, and they have no mains gas. In Llangynidr, another village, the mains gas supply runs on the other side of the River Usk, and the installation of a crossing for the mains pipeline is thought to be too expensive. The third village, Howey, needs only a short extension from Llandrindod Wells. At the moment, however, they all remain excluded from mains gas. I know that the expense of installing such facilities is great and that individuals will be asked to contribute to that cost, but some of them will find it difficult to do so because they are pensioners. With funds shortly beginning to flow from income streams such as shale gas, can the Minister give some good news to those communities? Those are big asks for a big solution, but they would bring great benefits to our constituents.
My hon. Friend the Member for Southport (John Pugh), who cannot be present in the debate, has concerns about the operation of the ECO scheme with regard to the replacement of boilers. Manufacturers tell him that because the scheme is about carbon reduction rather than fuel poverty, it is being directed at people with large homes and old boilers rather than at the fuel poor. Many of the big six have already met their targets, and no more funding is available for free boilers for people in need. Many boiler companies have done the work only to be told that there is no funding. Suppliers are switching to inferior boilers manufactured abroad, which puts consumers at risk. Will the Minister address that today or contact my hon. Friend to answer his questions?
We have covered quite a lot of ground, and there have been some helpful interventions from other hon. Members. I look forward to the rest of the debate.
It is a pleasure to serve under your chairmanship again, Mr Sheridan, and to follow the hon. Member for Brecon and Radnorshire (Roger Williams). He has been a sincere campaigner on behalf of the fuel poor for many years, particularly since we both came into the House in 2001. I very much agreed with the tone of his speech and the outcomes that he asked for. I make no apology for concentrating in my speech on some of the issues that he raised because they are very important.
One statistic, which comes from the Department of Energy and Climate Change, is that, on average, fuel poverty in rural areas is twice that of urban areas. The fuel-poor are concentrated in many of the rural areas of the United Kingdom. I am glad that the Minister is present, because he has given evidence to the Energy and Climate Change Committee on a number of occasions, and I know that he is sincere in his wish for an all-UK solution to fuel poverty, whether for those in a large urban town or city or those in a small rural area.
I would like to give some context on why we must do more for rural areas. I have been campaigning for some time about off-grid gas and for the extension of the gas mains. I am pleased that the Energy Bill Revolution campaign has come up with funding mechanisms for that from the EU emissions trading scheme and the carbon floor tax. That is important, but I would like to add a third stream to that funding equation. Shale gas has great potential for this country’s future revenues. If the exploration goes ahead and the volume of recoverable gas is sufficient, the profits should be used to extend the gas mains into rural areas of the UK.
As regulator, Ofgem insists that its policy is to extend the gas mains, but currently the incentives are just not there for the energy distribution companies. I support the Government’s stance on shale gas, and it is quite right that, if we have a bonanza, there must be local community benefits, but there should also be national benefits. If the Exchequer is going to enjoy greater revenues from the exploration of shale gas, similar to those that we have seen from North sea oil and gas, we should have a national strategy. I would like such revenue to be put towards extending the gas grid of Great Britain and Northern Ireland. I stress Northern Ireland because I am fully aware of the problems that people there have with the high price of oil.
I am as disappointed as other Members who have intervened about the fact that the OFT has not strongly concluded that those who live off-grid do not enjoy the benefits of those who are on the grid. It has looked at competition very narrowly. It is difficult to unpick that, and the Competition Commission has been unable to unpick the unfairness that lies behind people’s lack of choice when they are off-grid. For example, they do not enjoy the dual-fuel discounts that the big six and other energy companies boast about because they do not have dual fuels. They cannot get gas and electricity from the same supplier so that they can enjoy a reduction in their bills. That opportunity does not exist for them.
I am pleased that the Labour party has made the commitment that the regulator will look after those who are off-grid in the same way that it looks after those who are on the gas mains grid. I have pressed the Government on that issue on a number of occasions. It is important that the regulator is the champion of people who live in rural areas. The electricity and gas markets were privatised rather hastily and the regulations were put in place to look after privatised areas. The off-grid issue was neglected in many ways, but it is time for that to end.
With the rise of energy prices, we have seen a fuel poverty crisis in many places. DECC’s own figures show that people who live off-grid and those in rural areas have been hurt more than those who are on the grid, so we must take an important step. The Minister and the Government are looking at extending the gas mains, but will he comment today on the possibility of the revenues from shale gas being used as an incentive for the distribution companies that often have no competition?
The electricity and gas market is not fully competitive. Monopolies set the prices in the transmission and distribution of gas—huge prices that contribute between 19% and 24% of gas and electricity bills. We are not talking about a small fraction like the green levy, which was X%. A quarter of the actual price is the result of distribution and transmission. That must be looked into, because bills are increasing. I was very keen on what the hon. Member for Brecon and Radnorshire said about the comparison with European prices. He said that that included tax, but if he looks at the matter closely, the fact that we have a 5% VAT threshold on energy gives us an advantage, because the rate is higher in many other European countries. I know that he was present at this morning’s debate on the effect of VAT on tourism. The off-grid is disadvantaged. We need a regulator and champion to bring benefits to off-grid consumers.
I want also to talk about transportation in rural areas, because it also has an effect. There is a double whammy: people are paying more for oil and off-grid gas and more for transportation and fuel. I very much welcome the Government’s freeze on fuel duty. I have campaigned for it for a long time, under previous Governments, and previous Chancellors have frozen the duty for many years. Members will recall that the fuel duty escalator was introduced in the ’90s. It escalated quite a lot, and there was a crisis point in 2000, when there were fuel protests in this country. There were price freezes thereafter for a number of years. People in my constituency and many rural areas in the UK are affected by the fact that they are paying VAT on their fuel. That 2.5p in every pound that people spend on diesel or petrol has an impact and creates a cost of living crisis in such areas. We are not talking about cars as luxury items; we are talking about essential means of transport.
Does the hon. Gentleman share my disappointment that the whole of Wales is excluded from the Government’s laudable attempt to achieve a derogation of fuel duty? That is despite Wales being a sparsely populated area by anyone’s standards—his constituency and mine certainly are.
I agree with the hon. Gentleman. I compliment the Government for introducing the fuel duty rebate and for making representations on the issue. I am sure that the Minister and my hon. Friend the shadow Minister will know that I am not shy of criticising my own party, and I was not shy of criticising it when we were in government, because it should have taken that step. Nevertheless, it is wrong now to exclude a whole area—a whole country—because it is within 100 miles of a refinery. No one in my area, the most north-western point of Wales, can plug into a refinery. The independent suppliers are paying extra for fuel because of the cost of transport from those very refineries. The 100 mile radius principle is really a fly in the ointment. People in Wales, unlike those in remote areas of Scotland and in some parts of England, have been seriously disadvantaged. They are paying extra.
I want to pick up on a point made in the previous intervention. The hon. Gentleman will no doubt join me in expressing concern and anger that the rural fuel rebate scheme does not apply to any part of Northern Ireland either, even though we have the highest diesel and petrol prices anywhere in the UK and, indeed, sometimes in Europe. This is a major issue for us as well, and it must be revised and looked at.
Absolutely. The criteria should take rural areas into account, as well as peripheral areas of the UK, because they are the ones that are disadvantaged. Someone in a rural area of central Yorkshire, for example, could probably travel in all directions to get a better deal on their fuel. However, for someone in a peripheral area, such as the hon. Member for Ceredigion (Mr Williams), there is only one way to get their fuel.
The hon. Gentleman and I are at one on this issue. I emphasise the importance of independent petrol retailers, without whom many rural areas would not be served. They also serve to keep the bigger suppliers and supermarkets honest: without the independents, we do not know what the supermarkets would charge.
Absolutely. I ask the Minister to put pressure on the Treasury to reconsider the criteria for the fuel rebate, so that areas such as the periphery areas in west and north Wales and Northern Ireland can be given a fair chance. There is absolutely no doubt that people in those areas pay more for their fuel, as any cost comparison shows. That fly in the ointment—being 100 miles from a refinery—should be excluded from the criteria and the formula. I reiterate that I congratulate the Government on taking the initiative forward, because some areas of the UK will benefit.
I finish on the green deal, which I think everybody in the House welcomes. We welcome the focus of attention on alleviating fuel poverty and introducing energy efficiency measures. However, the green deal that has gone through the House and is now in place is a little cumbersome and expensive. It is well-intentioned, but the rates at which people would borrow money are too high. Again, there is a simpler solution.
I will try to answer the question asked by the hon. Member for Brecon and Radnorshire about boiler replacement. The evidence that I am hearing—I am talking to many of the energy companies as well—is that most energy is lost through inefficient boilers, many of which are in older properties. They are placed in the living room, and most of the heat goes up the chimney. The boilers themselves are inefficient, so the heat goes out through the flues. A package is needed to help with boiler replacements, because modern boilers—condensing boilers, for example—are hugely energy-efficient.
We must remember that most households replace their boilers only after they break down. We are probably all guilty of that: “Oh, this inefficient boiler’s got another year left in it.” That is why the scrappage scheme under the last Government was so successful. People realised, “I might have a year or two to go on this one, but it’s well worth replacing it now.” We are finding—anecdotally, but I have read it on numerous occasions—that there is a pattern. Many people who want to use the green deal get the assessment, go through all the paperwork and find out that just replacing the boiler or the thermostat on the radiator does the job. That is why I think that we should have a reduced version of the green deal, so that people can get quick fixes, perhaps while raising revenues for exterior insulation, for example, for hard-to-heat homes.
There are some good examples in Wales of energy companies—yes, I pay tribute to the big six for this—giving free insulation for lofts, or giving pensioners additional insulation in their lofts and walls. That has been a huge success, but the green deal is missing a trick due to its cumbersome nature. Fuel poverty is hugely important, and I am pleased that it has come to the House. This is an important debate on an important issue. The hon. Member for Brecon and Radnorshire has outlined the issues in a measured way, and I know that the Minister will respond in an equally measured way.
It is in everybody’s interest that we reduce fuel poverty and the amount of carbon emissions. It is in everybody’s interest that we have energy-efficient homes and businesses. When we have this debate, we tend to exclude businesses. We need energy-efficient businesses. Members from all parts of the United Kingdom have businesses in their constituency that are concerned about their energy prices, and they do not get the deals that many individuals get that are easy to switch. It is difficult for small businesses as well. I am pleased to have taken part in this debate, and I hope that the Minister will consider some of the points made by the hon. Member for Brecon and Radnorshire and me. The issue unites the House, and the House of Commons is at its best when united.
It is a pleasure to serve under your chairmanship, Mr Sheridan, and a privilege to follow the hon. Member for Ynys Môn (Albert Owen) and my hon. Friend the Member for Brecon and Radnorshire (Roger Williams), who has done so much in this area. He has done the House a good service in securing this debate. He set the parameters for the debate clearly and effectively, stating what we can do to improve energy performance and reduce bills in our homes. We heard some interventions from the Opposition about the immediacy of the issue—a point that I do not think is lost on anybody—and my hon. Friend gave a longer-term vision of the action that must start soon. The truth is that both approaches must be undertaken.
This debate is particularly timely, given that last week was cold homes week, a campaign to raise awareness of the Energy Bill Revolution that we have heard about in gatherings here over the last week. I will use this opportunity to discuss some smaller measures that could be taken to make our homes more fuel-efficient and keep them warm, an issue on which my local authority has been active.
Research undertaken by the Energy Bill Revolution campaign has shown that overall, the UK ranks bottom of 16 western European countries with comparable properties on a range of factors, including the affordability of space heating units, the share of household energy spent on heating, the percentage of households in energy poverty, the number of homes in a poor state of repair and the thermal performance of walls. That is particularly pertinent to rural Wales, as I said in an intervention, as much of our housing stock is dated and of a poor standard, with poor heating systems, insulation and so on. It is of great concern to hear that we are performing so badly compared with our European counterparts, but it goes to show that if the issue is dealt with in the right way, it can be addressed effectively, as it has been elsewhere.
Does the hon. Gentleman agree that although the Prime Minister spoke well, before he was elected, about having the greenest Government ever, the Government are missing a trick by not investing in the kinds of initiative that can genuinely create a green economy and jobs, and deal with some of the issues that he and other colleagues have raised, including retrofitting and improving energy efficiency? Will he join us in encouraging his Government to take more active steps to consider how to promote the green economy while addressing fuel poverty?
I am grateful for that provocative intervention. I will not join the hon. Lady. I actually aspire, like the hon. Member for Ynys Môn, to a cross-party approach to the issue. The Prime Minister and my party leader made various comments before the general election, many of which have been or are being delivered on, through the green deal. However, I do agree with the hon. Lady that we must be even more ambitious and take the agenda forward, so there is partial agreement.
The Energy Bill Revolution campaign, in whose measures I am particularly interested in this debate, calls for revenues from two carbon taxes—the EU emissions trading scheme and the carbon floor price—to be invested in a widespread energy efficiency programme in the hope of eliminating poverty. The campaign believes that investment in improving the energy efficiency of the UK’s leaky homes would save the average family money, provide the jobs mentioned by the hon. Member for Bethnal Green and Bow (Rushanara Ali) by developing the green economy, and boost growth. Incidentally, it has also undertaken polling that suggests that it would be a popular form of investment. Most people feel that it would bring them more benefit than some of the more controversial road or rail projects.
What makes the debate even more timely, especially for Wales, is the fact that figures released last week indicate that in Wales, fuel poverty has increased by 13% over the past year and that, more worryingly, more than one in four families with dependent children are fuel-poor. Families are struggling to keep their homes warm at a reasonable price due to our poor housing stock, as has been outlined. The hon. Member for Bethnal Green and Bow alluded to work done by Barnardo’s; I concur with that work. Barnardo’s and the Children’s Society support the Energy Bill Revolution. The Children’s Society found, in a survey of 2,000 children across the UK, that about 28% of them thought that their homes were too cold, and this winter more than 3 million families are likely to have to cut back on essentials such as food to pay their energy bills.
Some good moves have been made, as was pointed out by the hon. Member for Gosport (Caroline Dinenage). One of those was the warm home discount introduced in 2011—inadequate in its coverage, of course, and not enough, but important to many. It required the big six to provide £135 towards energy bills to low-income, more vulnerable households. Low-income pensioners are in the core eligibility group. However, energy companies can use criteria to decide whether struggling families qualify. It is scandalous that although it may be known that a family are struggling, they may still not get that support. I endorse the Children’s Society’s call on the Government to ensure that no household is without a warm home discount if it is known that there is a child living in poverty there.
Will the Minister consider encouraging companies to extend the eligibility criteria for a warm home discount so that poorer families are automatically included? Perhaps that would be families who receive extra child tax credits, or households earning less than £10,000. The Government have done wonderful things on tax thresholds for those earning less than £10,000, and have taken many people out of tax altogether. The additional action that I suggest is something immediate and pertinent that could be done. Does the Minister have any dialogue with energy companies, or does he plan to have any, about extending the criteria for the warm home discount to working families in which there are children living in poverty? That would help many of my constituents.
I want to mention some local initiatives. The hon. Member for Hexham (Guy Opperman) spoke about the need to develop bulk-buying oil syndicates; 70% of my constituency, including my house, does not have access to mains gas, and I wonder what the Department of Energy and Climate Change is doing to support the development of such syndicates, for domestic oil in particular. There have been schemes in the past. I think that a predecessor of the Minister’s alluded, in a letter, to a competition; I think it is less a question of a competition than of a drive to encourage the development of oil syndicates. I declare an interest, because my family is the beneficiary of one, organised by an inspiring lady, Jane Wakeham, in the village of Llanddewi Brefi. She has built an oil syndicate for her community; we have talked about the big society, but I think that that initiative was always there. What should the Department do to encourage the development of such syndicates? We need them on a much bigger scale, not least in my area, which is off-grid for gas.
I was delighted, for cold homes week, to visit two projects in my constituency that do fantastic work to help my constituents make the most of the energy on which they spend their hard-earned money. One is Ymlaen Ceredigion, a charity that runs the Keep Cosy initiative in conjunction with Ceredigion county council and Aberystwyth university. It gives residents free advice in a home visit, pointing out ways to minimise energy consumption, including through draught-proofing, energy monitors and radiator backing, and signposting them towards energy schemes. Funding to enable 400 households to benefit has been secured, and built into the project is the expectation that the information on energy conservation will cascade down to other families. I also visited Cymdogion Cynnes—the Ceredigion Warm Neighbour scheme—which aims to help residents by collating all information on available energy grants and schemes in one place. That is a valuable resource; we hear time and again that lack of access to information about schemes is a barrier. That county council project is most welcome.
I was sitting at home on Sunday evening and the telephone rang; it was an automated message offering me a free home insulation service. I was supposed to press 2 on the telephone and an agent would enlighten me and my wife about the benefits on offer. I am not sure where that came from, or whether it was from green deal operatives; perhaps the Minister or his shadow would know. I await enlightenment. It is a good, proactive way to deal with things, but it makes the point that people need to know where to get information, or, in my case, where it is coming from.
I agree with my hon. Friend that small community initiatives are incredibly important. The point has come my way that some older people, who could have free loft insulation, cannot face dealing with the loft to make it possible; we need voluntary bodies on hand to help and make things easier—and to explain that perhaps it will not be the upheaval they imagine.
I agree. Elderly people are one of the target groups that we want to approach, and briefings from Age Cymru or Age UK make that point strongly. What my hon. Friend says is important; somewhere along the line, more of a one-to-one dialogue will be needed to get those people engaged in schemes.
I want to reiterate the point that the hon. Member for Ynys Môn made when he talked about his passion for getting people on to mains gas. As I have mentioned, 70% of my constituents do not have mains gas in their homes. People talk about swapping suppliers, but we are limited in our choices and there is a need to renew work on that. I am sure—or I hope—that DECC is undertaking such work. I was in the main Chamber earlier, and in a discussion of energy policy in the nations of the UK, the Minister’s predecessor, the hon. Member for Wealden (Charles Hendry), pointed out that there is a need for that renewed emphasis, particularly for rural areas and people who do not have the range of choices that many others have.
The Government have undertaken some good initiatives, and the hon. Member for Ynys Môn was big enough to acknowledge that. We must build consensus on some of those; that is what the campaign that I am associated with is about, and the number of organisations that have joined the Energy Bill Revolution campaign is relevant to that. I want a renewed vision for rural areas. If the Minister will answer me on one matter, perhaps it could be the development of community oil syndicates. I feel strongly about that, because it is a good and proven way for consumers, in the absence of choice, to get something approaching justice in relation to the bills that they pay.
It is, as ever, a pleasure to serve under your chairmanship, Mr Sheridan. I thank and pay tribute to the hon. Member for Brecon and Radnorshire (Roger Williams) for securing this vital debate. We could almost say that we have had a Welsh debate, because the three speeches have come from Welsh Members of Parliament, but that is not what it was; it has been much broader, although the speeches highlighted issues that affect rural communities, and much of Wales is rural.
There is wide agreement throughout the House that whatever measurement is used, the number of people in the country classed as fuel-poor is too high. It should be a source of shame that in Europe only Estonia has a higher proportion of its population in fuel poverty. Things appear to be getting worse, and among the reasons for that is the fact that the issues raised in the debate are so complex and wide-ranging that there is not one solution. There are knock-on effects for many Departments. Housing issues have been mentioned a number of times in this debate, but they are not the responsibility of the Department of Energy and Climate Change. There are also issues about the supply of energy to off-grid homes. The solutions to these difficulties will be many and multifaceted, and we must recognise that.
The scale of the problem of fuel poverty is severe. As a result of the age profile of the UK’s housing stock, we have some of the least energy-efficient dwellings in Europe. Earlier, an hon. Member mentioned the U-rating of public housing as opposed to private housing. In my experience, public housing—social housing—is often of a far better standard, particularly in the rented sector, than private rented housing, which has some of the worst energy insulation standards in our housing stock. There are some difficulties. The fact that our country has a long-standing population going back many thousands of years means that we have some beautiful old buildings, but we do not have buildings that are particularly energy-efficient, and some of the issues around modernising them are complex.
Recent figures show that 2.4 million households in the UK are classified as being fuel-poor. Furthermore, the distressing statistic that there were 31,000 excess winter deaths last year shows just how vital it is that we combat fuel poverty. I recognise the important work being carried out by organisations such as the Energy Bill Revolution, which the hon. Member for Brecon and Radnorshire talked about in some detail; the Association for the Conservation of Energy; and Age UK. Last Friday, I went along to support Age UK’s bobble day in my constituency, which highlighted some of the issues that we are debating. Such organisations are bringing the issue of fuel poverty to a wider audience, and I hope that the coalition of groups committed to fighting fuel poverty continues to grow.
I am proud of the good work that the last Labour Government did on fuel poverty, and I am concerned that the current Government are undoing much of it. Projects such as the carbon emissions reduction target, the community energy saving programme and Warm Front were not perfect, but they all helped to lift people out of fuel poverty.
The energy market reforms that my right hon. Friends the Members for Doncaster North (Edward Miliband), and for Don Valley (Caroline Flint), have set out in detail will help to address the issue of rising energy bills. Our reforms will improve competition and transparency in both the wholesale market and the retail market, establish a new energy security board to plan and deliver the capacity that Britain needs, and replace Ofgem with a new regulator with real teeth to prevent overcharging. Moreover, while these reforms are being implemented, we will freeze energy bills for 20 months.
It should go without saying that energy efficiency must also be a key consideration when combating fuel poverty. However, the Government’s record on fuel poverty and energy efficiency has been hugely disappointing. The energy company obligation in its original form, which I should remind Members was the only energy efficiency programme available to the public under this Government, was expensive, bureaucratic and poorly targeted at the fuel-poor. Of course, any scheme that attempts to address fuel poverty must be welcomed, particularly after the Government scrapped Warm Front. However, ECO was a scheme of only modest ambition, aiming to lift only 125,000 to 250,000 households out of fuel poverty, and it has been condemned by the Select Committee on Energy and Climate Change as
“insufficient considering the scale of fuel poverty”.
ECO could certainly be much improved. It could be made more efficient by focusing its delivery on specific geographic areas, and by devoting a far higher proportion of the money that it raises to lifting people out of fuel poverty. Alongside a properly functioning green deal, an improved ECO would also allow us to hit our carbon reduction targets and generate many thousands of jobs.
The Government’s announcement on ECO in the autumn statement was all the more frustrating and disappointing because just as ECO was beginning to achieve limited success, the Government caved in to pressure from the energy companies and let them off the hook, so that they did not have to extend ECO. The effect of that has been disastrous.
Many of the consequences of the changes to ECO are still unknown. In his response, can the Minister tell us when the impact assessment and consultation on the changes to ECO will happen? There are numerous examples of the devastating repercussions that followed the changes to ECO, such as the effect on the scheme in Clifton, which is in the constituency of my hon. Friend the Member for Nottingham South (Lilian Greenwood); there, the Government’s changes allowed British Gas simply to walk away from a project that was due to deal with problems affecting somewhere in the region of 4,000 homes. Does the Minister agree that where deals have been signed but the work has not been done, the energy company should honour its commitment?
The greater worry about some of the changes to ECO is that the more difficult solid-wall insulations will simply not happen and, as is often said, only the low-hanging fruit will be picked. However, until we start to tackle the very complex properties, particularly the solid-wall properties, we will not really tackle the problems.
I will briefly mention the green deal, the Government’s flagship project on energy efficiency. It was meant to dovetail with ECO, but it has been an abject failure. Just over 600 homes have taken advantage of the green deal financial packages. In its current form, the green deal is an unattractive offer, with a sky-high interest rate and an incredible amount of bureaucracy for both home owners and installers. To all intents and purposes, it has become a boiler replacement scheme. There is nothing wrong with boiler replacement schemes, but it was not the ambition and objective of the green deal that it should be a boiler replacement scheme. Boilers need replacing and get replaced, but the issues are so much more complex than that. We need a scheme that really works to address the wide-ranging problems, and that makes finance accessible to everybody to solve those problems.
I must comment on the reference the hon. Member for Brecon and Radnorshire made to Liberal Democrat party policy on energy. Much of it is honourable, and much of it I would not disagree with. However, it is a shame that the Secretary of State for Energy and Climate Change, who is a member of the Liberal Democrat party, does not vote in the House for Liberal Democrat policy. A particular example is the 2030 decarbonisation target. He is on public record as saying that he agrees with it, but he does not vote for it. Everyone I meet in the sector who invests in energy, whether they are in insulation or renewables, says that one of the things they want is that 2030 target, in order to secure investment. I had to draw attention to that.
At every stage of life, living in fuel poverty is a terrible way to live. Young people in cold homes are twice as likely to suffer from respiratory diseases and five times more likely to suffer from mental health problems. For adults, cold homes impact on existing health conditions, and for older people, cold homes can be a killer. We need to improve energy efficiency in all homes in the UK, but particularly in the homes where people need it most. That is why Labour would ensure that the help that is available would first go to people in fuel poverty and others who need it most. Better insulated homes mean warmer homes, lower bills and more comfortable lives, so it is shocking that the Government are scaling back their energy efficiency programmes.
It is our intention in the spring to publish our Green Paper on energy efficiency, which my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) will lead on.
Is my hon. Friend aware of the poll carried out for the Energy Bill Revolution group, which showed that 85% of people—a massive proportion—want the Government to prioritise energy efficiency and make it one of the key things that they use their investment in infrastructure for? Clearly, that would be a popular policy, as well as one that would help to address the implications of climate change and take people out of fuel poverty.
I thank my hon. Friend for that intervention. Fuel poverty and energy efficiency are important issues. Whenever I knock on doors and talk to people, they are among the main issues that they are very concerned about. People are very worried about their heating bills, and tackling heating bills is not only about tackling energy costs at source but about ensuring that homes are insulated as well as they possibly can be, so that the amount of energy used is as low as possible; that is important because of the impact that it would have on not only climate change, but household bills. Of course, it is not just in the domestic market that energy is a key factor; energy bills are one of the biggest factors in industry, and in employing people. The knock-on implications of energy are massive, so getting it right is very important.
Will my hon. Friend share with the House her views on the regulator being the champion for people who are not on the gas grid? This is the crux of the issue. Many people who are off-grid do not have somebody to speak up for them in an impartial way. She mentioned the Secretary of State, who is looking at the Office of Fair Trading and the Competition Commission in respect of gas prices. Many hon. Members have been calling for that for some time. Again, the OFT and the Competition Commission are being brought in, whereas, if we had a strong regulator, it could deal with this matter.
I thank my hon. Friend for making those two important points. Of course, we are proposing, as a party, to abolish the current regulator and bring in a new one with more teeth, which will cover some of the off-grid issues that are not covered at the moment. I represent an urban community, and it has been shocking for me to hear, over the past few years, some of the stories about off-grid people’s problems. The situation is bad for everybody, but they have so many other issues on top of that, and that needs sorting out for the long term.
The Secretary of State made great play yesterday of the moneys involved in the big six, and figures were quoted that we published a month ago, so that is not new news. However, at least he has suddenly found that what is going on is a problem. The problem in all this is that the regulator is simply not working and operating in the interests of the general public. We need to focus not just on paying less for energy, but on using less energy. Hon. Members from all parties care passionately about fuel poverty. I hope that the Minister listened carefully to what was said in the debate. I urge him to place fuel poverty, cold homes and, ultimately, energy efficiency at the top of the Government’s agenda.
I, too, congratulate the hon. Member for Brecon and Radnorshire (Roger Williams) on securing this debate on fuel poverty and cold homes. Like the hon. Member for Sunderland Central (Julie Elliott), I note that all the Back-Bench speakers were from Wales. I make no complaint about that at all; these are important issues. I note that fuel poverty, as a subject, is a devolved matter. I am not trying to escape responsibility—I will try to answer a lot of these points—but perhaps some questions should also be addressed to the Welsh Government and their spending decisions.
Let me begin by saying a little bit about fuel poverty, something on the retail market and prices and something about the off-grid issue, which a number of hon. Members mentioned. I will then try to answer some points made by hon. Members in their speeches. I hope that they will allow me to write to them if I do not cover every point that has been mentioned.
I hope that hon. Members welcome the fall in the last reported fuel poverty figures as much as I do. Of course, that followed a period in which fuel poverty rose between 2004 and 2009, reaching a peak of 5.5 million households. I put that on the record as a criticism not of the previous Government, but of how fuel poverty was measured. To help us meet the challenge better, with the new more accurate measure that we are introducing, which deals with low income and higher cost together, we will be better able to design and deliver effective policies that can cut bills and increase comfort for those on low incomes who live in the very coldest homes. I am pleased that the House agreed to the Energy Act 2013, which allows us to bring in the new definition.
Does the Minister understand the scepticism out there about the Government’s changing how fuel poverty is calculated? People want to see significant investment in energy efficiency, to ensure that the shocking increase in excess winter deaths last winter is not repeated in future. Fiddling around with the measurement of fuel poverty will do little to address that. People see winter deaths rising and fuel poverty increasing, but they see spending on tackling it falling. The Government need to deal with that, rather than simply changing the definition of what constitutes fuel poverty.
I am a little disappointed about that. We all deplore any excess deaths arising in the winter months, but in terms of fiddling with the figures, the new definition of fuel poverty that we are securing was reached by agreement with fuel poverty action groups that have welcomed the new focus, which, as I say, is on low-income households as well as high-cost households. The problem with the previous definition was that it essentially picked out large houses and wealthy people can be living in large houses. That was not the right way to tackle fuel poverty. It was also a measure that kept moving; people kept moving in and out of the definition.
We are now moving to a better definition, with the agreement with those who work in the area. That will form the foundation for a new fuel poverty strategy that we will publish later this year, which will be deliverable and on which the public can hold us to account.
The Minister makes an important point. There will be issues about whatever calculation we use. However, now that we have moved to a different definition of fuel poverty, will DECC, the Government and other Departments ensure that there is a comparison with the old figures, so that people are not as sceptical about the change for change’s sake? I agree with the Minister that drawing wealthy people into this is not the way forward, but for people to have confidence in the new calculation, there needs to be a comparison over the transition period.
That seems to me a reasonable point. I will see whether we can set the tables side by side. Of course, I have to tell the House that the figure was not dreamt up by the Government; it was the work of Professor Hills, who consulted widely on it. It has been supported by those who work in this area.
We had already moved, under the 2013 Act, to ensure that the energy market, with its confusingly large number and range of tariffs, which had not been serving the consumer as well as they might, could make it much simpler for consumers to understand prices and ensure that everybody is put on the cheapest tariff that meets their preference. I am glad, too, that that seemed to secure all-party support, as the energy legislation went through the House.
We were confronted in the autumn with some quite unacceptably large price increases, by some major suppliers, of 8%, 9% and 10%. We moved immediately, as would be expected of a listening Government, to consider what could be done to reduce the bit on the bill—the green levies—that the Government have control over. We have secured an average reduction of some £50 per household. That is important. People do not have to wait for an unworkable price freeze. This Government take action immediately to ensure that people see a reduction in their bills as quickly as possible.
No, I do not think that is the right figure. In any case, the hon. Lady would be advised to go a little bit further back and see the scale of the increase under the final years of her Government. This debate, so far, has been reasonably good natured. I am not sure how useful it is to tempt her back on to previous ground, but I will come to some remarks that she made.
I want finally to say something about off-grid and then deal with hon. Members’ individual points. Four million households are off the gas grid and face higher than average energy bills. Of course, winter is a particularly expensive time for them. One of my first duties as Energy Minister was to chair the off-grid gas round table, not least at the instigation of the all-party group on off-gas grid, which has been working on this issue. I launched, at the all-party group’s request, the Buy Oil Early campaign in September and promulgated a better code of practice for oil suppliers, so that people pay the price advertised, and so on.
The group meets every six months, and we will reconvene in May to learn the lessons of this winter. We will have the regulators, the advisory bodies, the charitable bodies, people who have worked in oil-buying clubs and representatives from Northern Ireland, where there have been real difficulties. We will learn the lessons of this winter again to see what more can be done to improve the security and affordability of the off-grid fuel supply and to share best practice. One of the things on which we are working is how we can better pool data between Government agencies to ensure that we better understand which off-grid households need the most help.
I welcome the Minister’s insistence that people are sold, for instance, heating fuel at the price quoted by the supplier, but will he also try to insist that the supplier includes VAT in his quote? When the supplier trades with other wholesalers, he might do so at a price that is minus VAT, but VAT is included in the price that the consumer has to pay.
I will take up that point. It is important for those who are off-grid that there is as much transparency as possible, so that they understand what the costs are likely to be.
I will now address some of the individual points that have been raised. The hon. Gentleman drew our attention to harder-to-treat homes, which probably lie at the core of the long-term challenge. Getting energy efficiency measures into harder-to-treat homes lies at the heart of solving the problem and catching up with the progress that has been made elsewhere in Europe. I accept that those comparisons are not encouraging for us as one of the wealthier member states.
The hon. Gentleman asked about hypothecating some of the carbon taxes towards this objective. If that were to involve additional spending, the revenue from those taxes would have to be produced from elsewhere, or else we would become involved in additional borrowing. None of that is easy at a time when we still face a deficit of more than £100 billion. He asked specifically about extending the gas grid, and the grid is being extended in the current seven-year period that runs from 2013 to 2020. The aim is to connect some 75,000 off-grid homes each year. Those homes will be reasonably close to the existing grid, but that is expensive and a contribution has to be made by the householder, by some other agency or by the local authority. I do not want him to be under the impression that nothing is happening. I will take his points back to the transmission operators and the companies, including his view that more should be done. The aim is to connect more homes to the grid in each successive year.
I am grateful to the Minister for giving way again. Extending the grid is welcome, but is not the key actually to reduce energy demand? Surely, a huge uplift in investment is needed to address fuel poverty—in other words, properly insulating people’s homes—using the money that is already in the system. Unless we can do that, extending the grid will not address the problem of fuel poverty for millions of people.
I understand that this problem must be addressed across a number of fronts. The hon. Gentleman is right that energy efficiency has a huge part to play, which allows me now to address the energy company obligation. The ECO has been criticised, so I will first address the suggestion that some of those who work in the ECO scheme have run out of budget. I am advised that, by the end of November 2013, published figures from Ofgem showed that approved ECO measures accounted for some 60% of the affordable warmth obligation that was to be delivered by March 2014, so there is still work to do. There are still affordable warmth targets out there for 2015, and we are now extending the scheme to run through to the end of March 2017. We are also ensuring that, having considered the working of the scheme, it is better targeted at lower-income households.
I welcome the support of the hon. Member for Ynys Môn (Albert Owen) for shale gas, and I am sorry that he will not be able to demonstrate that support for any application in his constituency at the moment. No application has yet been made that would allow him to campaign more openly on the scene of an application, but I note what he says. We simply do not know the full potential for shale, so we are not able to estimate the likely revenues, which is what he was homing in on. I am sure that if shale takes off here, as it has taken off in the United States, there will be many claims on the additional revenues that it brings in. The revenues will, of course, not only simply be brought into the Treasury and reallocated outwards to public services; they will also be brought into local communities through the local community benefits package that the industry has already agreed.
The hon. Gentleman asked about the green deal. Some 130,000 assessments have now been made through the green deal, and it is perfectly true, as I think he said, that not all have taken up green deal finance, but the green deal is being taken up. More and more assessments are being made, and the scheme is proving successful.
The hon. Member for Ceredigion (Mr Williams) welcomes the warm home discount, and he asked about eligibility. He will be pleased to know that 2 million households get the warm home discount each year, but we have committed to extending the scheme not simply for 2015-16, but with an additional spend of some £320 million. More than 1 million additional low-income households will therefore receive the payment, without having to take any action at all.
The hon. Gentleman also asked about oil syndication, which we are pursuing through the twice-yearly round table that I chair. We will pick up experience from his constituency and from other constituencies to see what the Government can do to encourage syndicates. There are some good examples of syndication and oil buying in the north-east of England, in Ceredigion and in Northern Ireland, and I want to see what role the Government can play in incentivising that form of syndication.
The hon. Member for Sunderland Central said that she is proud of the previous Labour Government’s record, but she then outlined the reforms that she wants to make. I am not sure why she should be both proud of Ofgem and determined to abolish it. Her Government set up Ofgem, and now they are going to abolish it. I am not sure that she should be proud of that or of having started with 14 energy suppliers and ending up with the big six. She must develop her policy for a future Labour Government, if there is ever to be such a thing, in her own way.
I preferred the hon. Lady’s earlier remarks, in which she said that the Labour Government did not get everything absolutely right. That is probably a good motto for any Government. I am not pretending that the current Government have all the answers on fuel poverty, which is a deep-rooted problem. A lot depends on the state of our housing stock, which needs to be addressed. The hon. Member for Derby North (Chris Williamson) is right that we need to do more on energy efficiency, but we also need to measure the problem better to ensure that the data that we have are properly matched so that, with all the different schemes, we get help to those who need it most.
I am sure, Mr Sheridan, that you would like me, on behalf of all the hon. Members who have spoken, to thank the hon. Member for Brecon and Radnorshire for bringing this important subject to the House today. I assure him that the Government will respond to him and the other Members who have spoken on all the points that have been raised. This is a serious subject, and we are grateful to him for raising it.
It is a pleasure, Mr Sheridan, to have this debate under your chairmanship. I want to explore where we are with welfare reform and the options for the future. The coalition Government inherited a broken welfare system that was in desperate need of reform. We have started and are seeing through the most far-reaching reforms in more than half a century. The reforms are not about saving money; they are about saving lives. They are about replacing dependence with independence.
Let us look at what has been done to date. Labour left the biggest ever peacetime deficit, with £120 million a day in interest bills. Under Labour, welfare spending increased by 60%, taking inflation into account. That is £3,000 a year for every household in Britain. More than £170 billion was spent on tax credits, four and a half times the cost of the benefits they replaced. By the end, out-of-work benefits were increasing nearly twice as quickly as earnings. That was the toxic legacy left by the Labour party, and that is the out-of-control spending that the Government have fought to keep in check while protecting pensioners with the triple lock.
Welfare spending is now falling as a share of GDP. Savings of £25 billion will have been made by the end of this financial year, with £50 billion having been saved by the end of the Parliament. At every turn Labour has been unapologetic. Labour has opposed every single reform, including universal credit, and has provided no ideas. Labour has nothing to say. Indeed, the few policies developed so far are spending pledges, rather than savings. For example, the jobs guarantee will cost a staggering £1 billion. On my count, it is the 10th time that Labour’s bank bonus tax has been spent. To every problem, its answer is the same: more spending, more borrowing, more debt and more welfare. It is small wonder that the Labour party is increasingly known as the welfare party.
The Institute for Fiscal Studies says that we need to reduce the benefits bill by a third, but Labour has failed to name even one working age benefit it would cut. Government Members have given thought to the reforms that could be made to promote a greater sense of fairness: fairness to people on welfare, so that they might have independence in place of dependence; and fairness to hard-working people and their families, who expect their taxes to be used to help people escape poverty and welfare, rather than further to enchain them within it.
I have been giving thought to how work-based benefits could be reformed, particularly to improve the position of women in the workplace. In our system, industrial injuries benefits cost £907 million a year, while maternity pay costs £2.3 billion. The maternity pay system, however, too often hampers rather than safeguards the position of women in the workplace. There are still too many barriers to hiring women. Too often employers are scared of employing women who may go on maternity leave. Even the Labour peer, Lord Sugar, was moved to say:
“We have maternity laws where people are entitled to too much.”
He also said that the prospect of women becoming pregnant and taking maternity leave puts businesses off hiring women.
That attitude needs to change, as does the shocking complexity of the system, which involves complex reclaims though the tax system and leaves people at risk of their employer going bust or otherwise failing to pay. Women are increasingly self-employed, yet the self-employed are worse off with maternity allowance, and injury benefits are sparse indeed. Meanwhile, pay is not even at minimum wage levels. Pay is set at £137 a week, which is a far cry from the £220 received by a minimum wage earner for a 35-hour week. To my mind, the system is ripe for reform, to safeguard and improve the position of women in the workplace, to increase simplicity and security, to treat the employed and self-employed alike, and to pay parental leave more fairly.
How can that be done? We should think about a new system of workplace benefits, paid for by the workplaces of the nation. We should set up an at-work scheme—a compulsory pooled risk system along the lines of the Financial Services Compensation Scheme, backed up by the state but funded by business with reference to the total pay-as-you-earn income tax paid by each business. In return, businesses would see a corresponding cut in their net employers’ national insurance contributions. That way, the cost would not be affected by the number of injuries or the amount of maternity leave that might at any one time affect any one workplace. The at-work scheme would pay out regardless, whether there were no parental leave absences or many. In that way, the fear of the burden of maternity would be reduced, and so too would the barriers to women in the workplace. The self-employed would contribute on the same basis and be treated in the same way as employed people. Pay for leave could more easily be increased from the current £137 a week to the minimum wage level of £220, and that would ensure that the minimum basic standard would be the minimum wage.
We have seen the toxic legacy left by the Labour party and we have passed welfare reforms to save lives and promote independence in place of dependence.
The hon. Gentleman raises an important issue about the future of welfare reform. Will he join me in deploring the fact that the current welfare reform measures have still not been implemented in Northern Ireland, at a possible cost of more than £1 billion over the next five years? The Finance Minister there indicated that the Northern Ireland Executive have already lost £15 million. We have negotiated good tweaks to the system to suit the Northern Ireland situation, yet Sinn Fein holds up that reform, at a massive cost to the Northern Ireland block grant. Does the hon. Gentleman agree that it is time for Northern Ireland to move into line with what is happening elsewhere?
Yes, I would. It is about fairness to hard-working people and their families. They pay their taxes and want to see those taxes used to help people escape poverty, rather than to enchain them within it. They want their taxes to fund doctors, teachers and nurses, rather than those on welfare. It is also about fairness to people on welfare and their having a greater sense of independence, rather than being locked into a cycle of dependence. I hope that the Northern Ireland Executive will think more carefully about the future, and fairness for working people and those not in work.
In the absence of any positive ideas from the Labour party, I hope the Government will consider new reforms like the one I am suggesting. It would promote the role of women in the workplace, increase simplicity and security, treat employed and self-employed alike, and ensure that maternity and parental leave is paid fairly and that the system is funded by the workplaces of the nation on a long-term sustainable basis.
I am very grateful for being allowed to speak in the debate. I am also pleased to speak after my hon. Friend the Member for Dover (Charlie Elphicke), who is an innovative and creative thinker on these subjects. I want to say a few words on welfare reform, which is probably the single most important thing that the coalition Government are embarking upon, because the principal reason why the coalition came into being was to reduce the deficit. Everyone here knows that welfare spending, including pensions, is 28% of the entire budget. Surely it makes sense, if we are to reduce the deficit, to look at the biggest part of expenditure.
My hon. Friend is right when he says that there was a huge problem under the previous Government with welfare spending. Between 1997 and 2010, it rose by more than 60% in real terms. Even if pensions are excluded, the welfare bill went up by 55% in real terms. It is right for everyone in the House to realise that that is a real problem. I am grateful to my hon. Friend for bringing the matter up in such a timely fashion and for allowing others to contribute to this important debate. I do not have much time to speak, but I want to say that it is disappointing that so few Labour Members are present, given that they have said nothing constructive about welfare reform over the past four years. They have opposed all the coalition Government’s messages. [Interruption.] The hon. Member for Rhondda (Chris Bryant) looks at me quizzically, but it is true.
I am grateful for the hon. Gentleman’s contribution, but it is extraordinary to say that Members cannot contribute to debates simply because of convention. This is an important matter and I wanted to put something on the record. That is all I have to say.
I am grateful, Mr Sheridan. I also thank the hon. Member for Dover (Charlie Elphicke) for securing this debate. If it had been an hour-and-a-half debate, it would have been more conventional to have several people speaking. I say to the hon. Member for Spelthorne (Kwasi Kwarteng) that it is not only a convention, but a rule of the House that only two people are allowed to speak in these half-hour debates. We are therefore engaging in a rather unusual practice this afternoon, which is why things are slightly confusing. The hon. Member for Dover gave a rather short speech—the debate’s promoter normally takes 15 minutes—and he devoted quite a lot of it to saying nasty things about the Labour party. I understand why he wants to do that, but I want to correct some impressions.
The Labour party has been engaged in a process of welfare reform and was when in government. One of the key things that we wanted to achieve was ensuring that work pays. In my constituency, which has historically high levels of people on one form or other of sickness benefit, people have been trapped in a style of poverty that ends up being inherited from one generation to the next. Opposition Members are desperately keen to ensure that we have a system under which work always pays. That is why we supported the introduction of the national minimum wage, which we see as part of welfare reform, and why we introduced tax credits as another means of making it possible for people to get into work.
I do not accept the argument of the hon. Member for Spelthorne that Labour has never been in favour of welfare reform. Indeed, key elements of what the Government are doing now are right. The move towards universal credit is right. The Government have been too ambitious in the time scale that they have set themselves, and it would help the Government’s cause were they a bit more honest about the fact that the scheme is neither on time nor on budget and that a great amount of money has been wasted. Ministers have not yet made key decisions, such as when somebody goes on to universal credit, whether their children will be entitled to free school meals. At the moment, there is a difference between those on in-work benefits and those on out-of-work benefits. The latter’s children get free school meals, but the former’s do not. Universal credit does not recognise the difference between the two, which is a key policy issue that will have to be determined.
We are keen to try to help the Government make universal credit work, but it is difficult so to do if the Secretary of State is mouthing inanities and presenting such an optimistic version of events that some might construe it not to be entirely true, which is what the Labour party believe has happened. It is a convention that people receive absolution only after confessing, and the Government need to own up to a few more of the problems that they are experiencing with universal credit. We would then be more than happy to help them.
Another classic example is the bedroom tax. People have different views about whether it is right and proper, but my argument is that while it might be a legitimate thing if we knew that everyone had smaller properties to move to, in truth, when those smaller properties are not available, it is a fairly cruel and vindictive assault on some of the most vulnerable people in society, including hundreds of thousands of disabled people. Even more bizarrely, the Government managed to mess that up by not spotting the loophole in their legislation. On the same day, three different Ministers said different things: one said that only 3,000 to 5,000 would be affected; another said in the House of Lords that the number would be insignificant; and a third Minister said that she had no idea how many people would be affected. Through freedom of information requests, which the Government should have submitted, we already know that, from the third of local authorities who have replied, 16,000 households are affected. In other words, it is likely that some 48,000 to 50,000 people are affected.
The Labour party is engaged in a process of welfare reform. We always have been. We want to make welfare work, so that it both supports those who desperately need it at key times in their lives and gives people an opportunity to stand on their own two feet. In your constituency, Mr Sheridan, and in mine, the vast majority of people are not looking for handouts; they are looking to stand on their own feet, to put food on the table for their family and to provide a better future for their children.
I congratulate my hon. Friend the Member for Dover (Charlie Elphicke) on securing this wide-ranging debate, which has actually been quite refreshing, because we so often get caught up in the minutiae of a clause, amendment or fine detail and it is good to get back to first principles and the context of what the Government have done over the past four years. I also enjoyed his blue-skies thinking about workplace and maternity benefits and so on. I will try to address both those issues, while providing some reflections on his idea for workplace benefits.
The context that my hon. Friend described was one where, for every £3 that the Government received, they were spending £4. There is nothing progressive or fair about saying that we will pay for a higher standard of living for ourselves now and expect our children to meet the bill. The biggest task that we faced—as my hon. Friend the Member for Spelthorne (Kwasi Kwarteng) said, this was one of the reasons for forming the coalition— was to provide the country with a stable Government at a time of economic crisis and to try to get the nation’s finances on an even keel, which has required a series of difficult decisions, particularly because social security spending is the biggest area of Government spending, every one of which was opposed by Labour, but only one of which it now says that it will reverse. There is a distinct lack of consistency.
I am pretty sure that the record will show—the hon. Member for Rhondda (Chris Bryant) will correct me if I am wrong—that Labour voted against the Welfare Reform Act 2013 on Second Reading. He may not recall, but I am pretty sure that Labour did—it may have voted against it on Third Reading, which is even worse. The 2013 Act introduced universal credit, so it is a bit rich to say that Labour supports universal credit when it voted against the legislation that introduced it. That shows no credibility.
The hon. Gentleman may say that Labour has been engaged in welfare reform for the past four years, but it has only said what it is against. It is against our getting the books balanced by the measures that we have taken, but the positive agenda has largely been avoided. On the odd occasion that we get a positive suggestion, it often involves spending more money, not less. A humane welfare system during a time of austerity is a challenging task. One would have hoped that the party that paints itself as progressive would have engaged constructively over the past four years in how to design such a system, but we have essentially heard nothing on that front.
My hon. Friend the Member for Dover is right that the driver of the reforms that my right hon. Friend the Secretary of State for Work and Pensions and the ministerial team have brought forward has absolutely been fiscal rectitude, but it has also been about more than that. My right hon. Friend has said—I do not think that I am revealing any secrets here—that he did not come into his present role simply to cut, but rather to reform. During difficult times, we are reforming and bringing together a fractured system. Why should people have to go to Her Majesty’s Revenue and Customs for tax credits, to the local council for housing benefit and to the Department for Work and Pensions for income support? Why should there not be a single system? One of the fatal flaws of tax credits, which the hon. Member for Rhondda praised, is that, because the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown)—the previous Chancellor and then Prime Minister—wanted to pretend that it was not welfare, it was claimed that they were negative tax. They were nothing of the sort. They were social security benefits, but paid over the course of a year. People’s needs, however, arise on a weekly or monthly basis. They cannot wait for end-year reconciliation and a following-year clawback.
The beauty of universal credit is that it is real time. It meets people’s needs when they happen, rather than saying at the end of the year, “Oh, guess what? We underpaid you,” or, more often, “Guess what? We overpaid you three years ago by several thousand quid. Please may we have it back?” That shambles will be over as we introduce universal credit.
I will not, because it is the debate of my hon. Friend the Member for Dover. I want to respond to some of his specific ideas on workplace benefits. I agree with his goals. I absolutely agree that we need a system that is fair for women; that we need to think hard about anything in the system that makes an employer less likely to employ a woman of childbearing age; and that we clearly want the system to work for self-employed women. He has made some important points.
As the system currently works, however, 93% of the cost of statutory maternity pay is refunded to employers. In fact, more than 100% is refunded to small firms. Small firms that take on a woman who becomes pregnant and goes on maternity leave will get back all the maternity pay that they pay out, plus what is essentially a handling charge—another 3% on top. Even a large employer gets 92% or thereabouts of reimbursement.
If an employer is reluctant to take on a woman who might have a child, therefore, the pure finances should not make a huge difference. Clearly, there is a bureaucracy issue with the reclaiming and so on, and we are happy to look at whether that can be streamlined, but the basic principle is that the employers get the lion’s share of the money back. The thing that might put them off, as my hon. Friend said in his speech, is the thought, “Well, I employ this person. They might not be there in some months’ time. I might have to provide maternity cover, retraining and so on,” but however we reimburse maternity pay, that will still be a feature of the system.
I am not therefore sure that having a collectivised—I hesitate to use the word, but my hon. Friend knows what I mean—system of insurance is any different substantively for the employer. Either way, employers are getting reimbursed—the costs are being met and are not in essence falling on the employer.
My hon. Friend’s proposal is interesting and I am grateful to him for suggesting it, but one of my worries arises from something that I have learnt as a Minister. Whenever we set up a new scheme, we have new infrastructure, bureaucracy and sets of rules. If we had the levy—the at-work scheme that he described—we would have to define the new tax base, have a new levy collection mechanism, work out who was in and who was out, have appeals and all that kind of stuff. There is always a dead weight to such things. Simply setting up new infrastructure costs money. I would have to be convinced that we were getting something back for it.
In essence, my hon. Friend is proposing that, instead of the general taxpayer paying into the pot and employers handing out statutory maternity pay, which is reimbursed by the Government from the general taxpayer—the current system—we have a new levy on employers, although he recognises that he does not want a new jobs tax, so that it is offset by a reduction in something else that employers pay and the tax in that world is neutral overall. However, he then says that he wants the rate not to be some £130 a week, but to be £200 and something a week.
My hon. Friend was commendably brief, so I apologise if I misunderstood, but I was not clear where that extra money would come from. If we pay women on maternity leave double, someone must pay for it. If he does not want that to be an extra burden on firms, paying for it will simply be a tax increase. That might be the right thing to do—increasing taxes to pay for it—but it is an increase.
Part of the reason for raising the rate is to bring it into line with the self-employed position. Also, however, most work places have the extra maternity leave as well, yet a small number of less good employers do not top up the statutory amount. The idea is to raise the threshold, so that women on maternity leave are overall in a better position.
I appreciate that my hon. Friend would like to make the scheme more generous, but my sense is that that is potentially quite a substantial cost. If we spend £2 billion already and he wants to double the rate, is that another £2 billion? I do not know. Without more detail, I could not say, but it might be a substantial cost that we have to think through.
On the important issue of self-employed women, the dilemma is that if they have chosen to be self-employed, they are paying class 2 national insurance of about £2.70 a week, while their employed sisters are paying national insurance of 12%, or whatever the rate is, as an employee, while their employer is paying another 13.8%. The best part of 25% of wages is raised in national insurance from the employed earner, while £2.70 something a week comes from the self-employed—or at class 4, depending on how much she is earning. The amount going into the system from the self-employed is vastly lower; the maternity provision for the self-employed, however, is only a bit lower for some women.
In that first six weeks, when we are on 90% of earnings, the employed earner could get more, but some self-employed women get more than their employed counterparts, because of the detail of the rules. There is an issue about some women who pay voluntary class 2 at two or three quid a week for a period of time, but then become entitled to maternity allowance running into thousands, having only put in £50 or £100 into the system. There is a worry that the system is possibly too lax in that area and we might need to think about it.
It is absolutely right that self-employed women get proper maternity provision, which is what the maternity allowance is for. Relative to what they put into the system, however, what they get out of it is a fantastic rate of return compared with an employed earner. An employed earner is putting far more in, while the employer is also putting in.
On the tax base for my hon. Friend’s idea, he proposes that all firms should contribute. Unless the self-employed are also going to contribute, they will either benefit without contributing, or we are talking about another levy on the self-employed as well. Having chosen to be self-employed, people often change, because of the lack of burdens, costs and levies of being an employed earner. We would have to think about whether we are distorting the choice between becoming an employed earner or a self-employed person if we made those changes.
I do not want to end on a discouraging note, because my hon. Friend has raised an important challenge. We do not want to be in a situation in which employers, through prejudice or for other reasons, are disinclined to employ women of childbearing age. That is clearly an important issue. We must ensure, however, that the social security system reflects the labour market as it is now and not as it was after the second world war. We need to reflect on the fact that there are growing numbers of, first, women working and, secondly, self-employed women. The Department is not currently doing work in this area, because we have our hands full with reform, but it is always good to look at such things.
Part of my thinking is that we are about to have a revolution with the whole concept of shared parental leave, so that issue of men versus women in the workplace will tend to blur. That might be a good time to look at reworking the system in this way, to encourage and help parents in the workplace.
My hon. Friend is right, and the coalition can be proud of the shared parental leave approach and for rethinking the nature of what happens after a child is born and whether it is mum, dad or a combination of the two who take time off. My hon. Friend is also right to encourage us to think outside departmental silos: the Department for Business, Innovation and Skills does parental leave, but the Department for Work and Pensions does maternity pay, and so on. He makes a welcome link. I am not convinced that his scheme is necessarily affordable, because of the additional cost involved, but he makes an important link.
I have a final word of encouragement to employers, who may be listening to our proceedings. About 10 years ago, less than half of mothers who went on maternity leave came back and worked in the same job; that figure was about 40%, but it is now 80%. The norm now for an employer who takes on a woman who goes on maternity leave is that—four times out of five—she will come back to the job for which she was trained, in which she is experienced and to which she can contribute.
Likewise, we now find that three quarters of women return to work within 12 to 18 months of having their baby. There is a norm: if someone takes on a woman of childbearing age, the odds are that she will come back to the same job within 12 to 18 months. We need to educate employers about the fact that, if they do not employ women of childbearing age, they are depriving themselves of talented people who contribute to the work force. Not employing such women is clearly a bad thing, not only from a social point of view, but from an economic point of view.
I congratulate my hon. Friend on raising the issue and my hon. Friend the Member for Spelthorne, who serves on the Select Committee now and is thinking hard about such issues, on his contribution. We have done a huge amount of reform in this Parliament, and we want to see our reforms through and deliver them, because we want our legacy to be a system that, as my hon. Friend the Member for Dover said, encourages independence, not dependence, that is fiscally responsible, but that works with the grain of people, so that those who want to work hard and get on are encouraged and enabled to do so, rather than being trapped on benefit, which was the risk of the system that we inherited.
I am grateful for the opportunity to air this issue in the House this afternoon. Although the power to deprive British nationals of citizenship, amplified in clause 60 of the Immigration Bill, might seem to some a mere legal technicality, important issues lie behind it. Clause 60 is wrong-headed, and I hope that airing the issues this afternoon will lead people in another place to throw the clause out of the Bill.
The clause provides for the Secretary of State to render a person stateless by depriving him or her of their nationality where citizenship has been gained through naturalisation and where
“the Secretary of State is satisfied that the deprivation is conducive to the public good because the person, while having that citizenship status, has conducted him or herself in a manner which is seriously prejudicial to the vital interests of the United Kingdom”.
First, I would remind the House that we are talking about terror suspects. Nowadays in Parliament, saying that someone is suspected of terrorist activity is enough for the political class to assume that that person does not deserve due process. It is worth reminding the House that those people have not actually been convicted of any crime. Sadly, I have to say, the currency of political debate about terrorism has been so debased, first under Tony Blair and now under the coalition, that alleged terrorists are now routinely deemed to be the only category of alleged criminal who are not allowed due process—even alleged paedophiles have to have due process, but not alleged terrorists.
My view is that if someone is suspected of terrorism, the obvious step is to put them on trial. I am supported in that view by no less a person than the late Lord Kingsland, the former Conservative shadow Lord Chancellor, who said in 2002:
“If we identify someone as a person proposing to commit a serious terrorist offence…surely the obligation is on us to deal with that person. If we simply deport him, we shall be handing on…this terrorist problem to another state which may not have the same capability of dealing with it…It cannot be a proper response to the terrorist threat to refuse to deal with it ourselves”.—[Official Report, House of Lords, 9 October 2002; Vol. 639, c. 277-278.]
That was the view of the Conservative party in 2002, but clearly things have changed in the intervening time.
Being realistic, we know that the security services have always resisted trial for many suspected terrorists because—this is my understanding—they do not want to make public their wire-tapping and other surveillance methods. I have always found that argument dubious, and it is even less credible post the Snowden revelations, which have revealed to us all more about state surveillance than we ever wanted to know. Instead of due process, the security services and their political adherents in both parties prefer secret courts, detention without trial and now this attempt to strip away citizenship.
That leads me to one of the big problems with clause 60 of the Immigration Bill: it creates two different classes of British citizenship. There are those, such as myself, who are British citizens because we were born here, and there are those, including some of the people who work for me, who are British citizens by naturalisation. We will have two classes of British citizens. That is a dangerous road to go down. In support of that view I quote no less a person than the hon. Member for North East Somerset (Jacob Rees-Mogg), who, as I think most people know, is a Conservative MP and not someone who could be described as a bleeding-heart liberal. On Report, when clause 60 was added to the Immigration Bill, he said:
“I am perhaps rather romantic in my view of what it means to be a British subject. I always thought that Palmerston got it right on the Don Pacifico affair—the ‘civis Romanus sum’ principle. Once any one of us has a passport that says we are British, we are as British as anybody else, whether they were born here or got their passport five minutes ago. It is incredibly important that there is equality before the law for all Her Majesty’s subjects who are living in this country and have right of residence here. I worry that if we give the Government the ability to take passports away from a certain category of British subject but not from others, it will create a potential unfairness and a second category of citizen.”—[Official Report, 30 January 2014; Vol. 574, c. 1086.]
That goes to the heart of one of the problems with the legislation.
We should not have, as it were, class A and class B British citizens. In communities such as mine, the fear will be that although this has started with suspected terrorists, where will it end, once the state decides that British citizenship is not indivisible? The Home Secretary has said, rather unfortunately, that citizenship is a privilege, not a right, but citizenship is not a privilege or a right; it is a fact. Deciding that it is not a fact and that the state can chop and change when it comes to the light in which it regards someone’s citizenship, is, I believe—as does the hon. Member for North East Somerset—a dangerous road to go down.
Another problem with the proposal is that in stripping a terrorism suspect of their nationality, there is a danger that we could render them stateless. That problem was raised on Report. The Secretary of State argued that
“we are talking about a situation in which they”—
that is, the person deprived of citizenship—
“would be able to acquire statehood from somewhere else.”—[Official Report, 30 January 2014; Vol. 574, c. 1040.]
However, even the most cursory glance at clause 60 reveals that the provision is not limited in that way, but allows individuals to be rendered stateless without reference to the possibility of securing citizenship elsewhere. The Home Secretary said:
“The whole point of the measure is to be able to remove certain people”.—[Official Report, 30 January 2014; Vol. 574, c. 1043.]
That assertion raises a number of important questions. I am interested to hear from the Minister how the Government will remove people who have no nationality and no travel documents.
The hon. Lady is making an important point. If another state were to remove citizenship from a naturalised citizen who was originally from the UK, does she envisage that it would be at all likely that our country would be enthusiastic about offering citizenship to that person? If we would not, why should we imagine that other countries would offer citizenship to someone who has had their citizenship revoked by this Government?
It is even worse, is it not? Potentially, the only countries that would offer nationality to a person reckoned to be a suspected terrorist would be countries where we probably would not want that person to end up, because they would by definition be countries that sponsor terrorism. We would end up with people in this country who we would simply be keeping completely stateless, without any role or standing. We cannot simply banish them to France as we would have done in the middle ages.
My hon. Friend makes an excellent point. In saying that, I am accepting an argument that I do not really support, namely that somehow, because someone is alleged to be a terrorist, that makes them a terrorist. Even if we accept that logic, we will not be making the country any safer, because we cannot move such people on anywhere.
Statelessness is a notion that the British Government were trying to move away from for a long time. In 1930, Britain was among the first to ratify the convention on certain questions relating to the conflict of nationality, which included a protocol relating to certain cases of statelessness. The universal declaration of human rights, which was adopted by the UN General Assembly with UK support as far back as 1948, says:
“Everyone has the right to a nationality…No one shall be arbitrarily deprived of his nationality”,
yet that is what clause 60 of the Immigration Bill seeks to do.
Deprivation of citizenship is a severe sanction and statelessness is a separate and even more brutal punishment with unique practical and legal consequences. Although it is an aspiration of human rights activists that fundamental rights such as the right to life and the prohibition on torture should attach to all human beings, the reality is that we live in a world deeply divided along national borders, in which it is notoriously difficult to access redress for, or protection on, human rights matters without nationality.
Going further forward, the UN convention on the reduction of statelessness, which is where we are supposed to be going, was adopted in 1961 and ratified by the UK in 1966. It stipulates that, absent circumstances of fraudulent application or disloyalty toward the contracting state, deprivations and renunciations of citizenship will take effect only where a person has or subsequently obtains another nationality in replacement. The clause moves away from that. This country has spent a generation trying to move away from statelessness, but we are now going in reverse.
We may not have seen the end of this matter; that is why the other place should look at the provision. We had the Home Secretary saying that citizenship was a privilege, not a right, but citizenship is a fact. During the same debate, Alok Sharma MP—
The hon. Member for Reading West (Alok Sharma) raised with the Home Secretary the question of whether we could extend the stripping away of citizenship from naturalised citizenship. He said:
“I am a naturalised British citizen and the clause therefore applies to me. I support it wholeheartedly…Perhaps my right hon. Friend should go even further…and introduce similar sanctions against anyone who is British, irrespective of how they got British citizenship”.
The Home Secretary responded:
“My hon. Friend makes an important point about…the desire that we have in the House to ensure that we can take appropriate action against people who are acting in a manner that is not conducive to the public good”.—[Official Report, 30 January 2014; Vol. 574, c. 1042.]
One of the problems with the new clause is that it opens the door to further arbitrary deprivation of citizenship. It must be wrong in principle to create two classes of citizenship. It is wrong in practice because it will create a class of stateless people who, in practice, cannot be moved out of the UK. It seems that the coalition Government introduced the clause as a short-term strategy to see off a related but separate clause covering the ability of foreign criminals to resist deportation on the grounds that they have a right to family life. I suggest that the civil liberties of British citizens are too important to be tampered with for short-term political advantage.
Coming as I do from a family in which many members of my parents’ generation obtained British citizenship through naturalisation, and representing as I do a part of London where many of my constituents obtained British citizenship through naturalisation, I am naturally wary of any move to create two classes of British citizenship, as that could affect so many of my constituents and even members of my family. The clause was thought up in a hurry, and as with so much legislation that is thought up in a hurry, it is deeply flawed. I sincerely hope that when Members of the other place consider it, they will take it out of the Bill.
I welcome you, Mr Sheridan, to the Chair. I congratulate the hon. Member for Hackney North and Stoke Newington (Ms Abbott) on securing this debate, and I respect the passion with which she made her points this afternoon. I hope that my comments will reassure her and clarify some of the misapprehensions she has raised in the context of the measures that have been introduced into the Immigration Bill, which is starting its consideration in another place.
I welcome the opportunity to correct some of the issues surrounding the powers to deprive a person of citizenship and the Government’s proposed legislative changes in the Bill. As the Home Secretary outlined in her speech to the House last month, depriving people of their citizenship is a very serious matter, and the hon. Member for Hackney North and Stoke Newington rightly emphasised that in her contribution this afternoon. It is one of the most serious sanctions a state can take against a person. The decision requires considerable research, evidence gathering and consultation by officials throughout the Government, and the Home Secretary herself reviews and signs it off to ensure that it is proportionate and necessary. The issue also concerns national security and our attempts to remove dangerous individuals from the UK.
It may be helpful if I start by outlining the Government’s existing provisions and powers, and the safeguards that already exist, before going on to explain the purpose of the proposals in the Immigration Bill and addressing some of the hon. Lady’s specific questions.
The Minister will be aware that in response to a freedom of information request, we now know that between 2010 and 2013, the Home Secretary revoked the passports of 16 British nationals under the current section 40 of the British Nationality Act 1981 on public good grounds. At least five of those people were born in the UK and one had been resident for almost 50 years. When the Home Secretary was asked during Report stage of the Immigration Bill what happened to those 16 people, she did not provide specific information. Can the Minister provide information now, or at least write to me with an explanation?
I will certainly address some of the hon. Lady’s points, but I am unable to provide further details about specific cases. She is right about existing powers being utilised. Since 2006, there have been 27 examples of that. The powers have their origin in legislation dating back to the first world war—the hon. Lady looked at some of the history—when provision was made for the revocation of citizenship if a naturalised person was suspected of treasonable activities.
The current position under section 40 of the British Nationality Act 1981, as amended by the previous Labour Government in 2002 and 2006, is that the Home Secretary can deprive a British citizen of their citizenship in two scenarios. The first is when the person acquired it using fraud, false representation or concealment of a material fact. That essentially means that they used deception to obtain citizenship for which they were not eligible or, had we known the full and true facts, we would not have granted the application. In such cases, the person involved may be left stateless. The second scenario is when the Home Secretary is satisfied that deprivation is
“conducive to the public good”
and the person would not be left stateless as a result. We want to amend the second of those two conditions to ensure that individuals who are a serious threat to this country cannot retain citizenship simply because deprivation would leave them stateless.
As I said, a Labour Government amended the British Nationality Act 1981 in 2002 and 2006. That provided for deprivation when it was
“conducive to the public good”.
That is a broad power which gives the Home Secretary discretion to respond to changing threats, and covers cases involving national security, including espionage, war crimes, serious and organised crime and unacceptable behaviours such as the glorification of terrorism. Conducive deprivation can be pursued against any British citizen, including British-born citizens, as a result of the changes introduced in 2002. In practice, because a person cannot be left stateless, it applies only to those who would have another nationality when they are deprived. That provision would remain and is unchanged by our proposals.
A number of safeguards are in place for deprivation cases and those will remain, which is important to understand. First, any decision to deprive will arise only after extensive research and understanding of an individual’s previous behaviour, any potential human rights issues and the threats that they pose to the UK. Officials from the Home Office and other Departments are consulted before the information is reviewed and a final decision made by the Home Secretary.
Secondly, any person deprived of their citizenship has a full right of appeal. Grounds for appeal can include both the legality of the action and the merits of the Secretary of State’s decision. Such appeals are heard at either the first-tier tribunal—the immigration and asylum chamber—or, where issues of national security are relevant, at the Special Immigration Appeals Commission, or SIAC. In both cases, any onward challenge can be to the Court of Appeal or other higher courts. That is not being changed by the wider, necessary changes to the appeals system contained in the Immigration Bill.
Thirdly, deprivation action is taken only against those individuals who meet the thresholds that I have outlined. We do not and cannot take deprivation action against family members—husbands, wives or children—on the basis of their relationship to the person being deprived.
Finally, let me be clear: this Government do not take deprivation action lightly. There is a high threshold and only a small number of individuals are deprived of their citizenship. As I said, since 2006, 27 people have been deprived under these conducive powers.
The hon. Lady highlighted the new provisions in the Immigration Bill. Clause 60 is the relevant clause that she touched on: it seeks to address the most serious deprivation cases where we have previously been prevented from taking action because it may leave the individual stateless. At present, we cannot deprive someone of citizenship even in circumstances where an individual could acquire another nationality or reacquire their previous one.
We recognise the need to avoid statelessness and are committed to maintaining our international obligations. However, we do not believe that that should be at a cost to the national security of the UK. It is a fact that article 8(3) of 1961 UN convention on the reduction of statelessness specifies that a state may retain the right to deprive any person of their nationality, regardless of whether it would leave them stateless, if the person has
“conducted himself in a manner seriously prejudicial to the vital interests of the State”,
if, at the time of ratification, those grounds exist in domestic law.
Therefore, when the UK ratified that UN convention, it made such a declaration that allowed for the prospect of leaving a person stateless in certain circumstances. Those circumstances, as they existed in the domestic law of the time, include the ability to deprive a naturalised person of their citizenship—regardless of whether it would leave them stateless—when an individual has conducted themselves in a manner seriously prejudicial to the vital interests of Her Britannic Majesty. That is a high threshold for cases involving national security and those who take up arms against British or allied forces. Clause 60 of the Immigration Bill seeks to recreate that very set of circumstances.
Many of us are puzzled about why the Minister calls in aid national security in making people stateless, if making people stateless would in effect make it almost impossible to move them to another country. Some people cite the case of Bilal al-Berjawi, who was a British-Lebanese citizen whom we did make stateless when he was overseas. His solicitor has argued that
“the process of deprivation of citizenship made it easier for the US to then designate Sakr”—
who accompanied Bilal al-Berjawi—
“as an enemy combatant, to whom the UK owes no responsibility whatsoever.”
This man was killed in a drone attack. Are we really talking about making people stateless when they are overseas in order to make them vulnerable targets of drone attacks by the United States?
May I directly address the suggestion that any action on deprivation of citizenship is linked, in any way, to the sort of activity that the hon. Lady highlighted? I strenuously deny that. They are two clearly separate issues and there is nothing to indicate, in any respect, that they are linked.
It is true that people have been deprived while outside the UK, but I do not accept that it is a particular tactic. It is simply an operational reality that in some cases the information comes to light when the person is outside the UK or that it is the final piece of the picture, confirming what has been suspected. In other cases, we may determine that the most appropriate response to the actions of an individual is to deprive that person while they are outside the UK. Equally, there are cases where it can be determined that it is appropriate to take action to deprive individuals while they are inside the UK.
It is not true that all those deprived under the clause will be stateless. Some may be able to acquire or reacquire another nationality. In those cases, where the individual has been deprived while in the UK, we would seek to remove that individual from the UK once they had acquired another nationality. However, the clause is not limited to those cases and can be applicable to those who cannot acquire another nationality. In that event, it is open to them to make an application to stay in the UK as a stateless person.
The UK would continue to comply with the provisions of the 1961 UN convention on the reduction of statelessness, regarding the rights of stateless persons. Where appropriate, we could regularise a person’s position in the UK by granting limited leave—possibly with conditions relating to access to public funds and their right to work and study.
I come back to the hon. Lady’s point about the concept, as she described it, of two-tier citizenship. We do not accept that there is, or will be, a two-tier citizenship system. The proposal merely reflects the fact that there are differing routes to citizenship, and therefore, different actions permissible depending on the actions of the person concerned. The power to deprive a person of citizenship, as I have explained, already exists and certain aspects can only be applied depending on a person’s route to citizenship. Naturalised or registered citizens can be deprived if they obtained it by means of fraud, false representation or concealment of a material fact. Any citizen can be deprived if the Secretary of State considers it conducive to the public good and the person would not be left stateless as a result, so I do not accept the hon. Lady’s suggestion.
I understand that Members are concerned about instances where deprivation action takes places when a person is outside the UK, and I hear the hon. Lady’s point. I restate that the Home Secretary takes deprivation action only when she considers it is appropriate and that may mean doing so when an individual is abroad, which prevents their return and reduces the risk to the UK. That individual would still have a full right of appeal and the ability to resolve their nationality issues accordingly. It is often the travel abroad to terrorist training camps or to countries with internal fighting that is the tipping point—the crucial piece of the jigsaw—that instigates the need to act.
As I indicated, a route is open to SIAC to consider that, and closed material proceedings could be applicable in certain circumstances—not automatically; it would depend on the nature of the individual case. It is appropriate, however, that there is that right of appeal and right of challenge, and SIAC effectively provides that ability to do so.
I reassure Members that the new power would apply only to those who are naturalised citizens—crucially, not children, who are not able to naturalise as British citizens, nor anyone who is British by birth or registration. That is because our original declaration reasonably limits action only to those who have sought the privilege of British citizenship but then betray the values and laws that they swore to maintain.
Ultimately, the new power will be used sparingly. It will be relevant only in a small subset of the most serious deprivation cases, where we are currently precluded from taking action because those people would be left stateless. Our proposed clause is a targeted and proportionate measure that protects the security of the UK without jeopardising our international obligations. It provides for effective rights of appeal and for upholding the 1961 UN convention on the reduction of statelessness.
I am grateful to the hon. Member for Hackney North and Stoke Newington for bringing the matter to the Chamber this afternoon and for enabling me to set out more details on the proposals. As she has rightly identified, this matter is before the other place, and I am sure that it will give the issues careful scrutiny and consideration.
Sitting adjourned without Question put (Standing Order No.10(13)).