It is a pleasure to be here this morning with you in the Chair, Mr. Amess.

I am acutely conscious that time is short and that a considerable number of my colleagues want to contribute. However, before I begin, I pay tribute to a number of organisations for their work in my constituency: the Guildford Society, residents associations such as the one for east Guildford, and the Campaign to Protect Rural England. There has been considerable cross-party support locally to work on the plan.

The debate comes at the end of a consultation, which closes on Friday, on the Government’s proposed alterations to the south-east plan. They need to be clear about the opposition from local people in my constituency. I have commented on the south-east plan in this place on a number of occasions including 18 December 2007 and 22 July this year. It is extremely disappointing that the Government have not paid any attention to or reacted to the points that I raised. I suggest that their record on listening and responding is rather poor.

I draw attention to the report commissioned by the Government from experts at Roger Tym and Partners, who warned of the effects of imposing unsustainable building targets on the south-east. The report stated that the building plans will

“have a negative effect in all sub-regions on the objective to reduce the risk of flooding…A number of trunk roads are likely to be unable to cope with the predicted traffic demand…There is some over-loading on most routes into London and all sub-regions adjoining London would therefore likely be under stress under the higher growth forecasts…Increasing the provision of housing under all our scenarios will result in a regional deficit in water supply, with many areas in severe deficit of water resources”.

The Government appear not to have paid any attention to that.

The publication of the plan was shrouded in secrecy. It was impossible to get an answer from the Minister about when it would be published even 12 hours beforehand. It was not widely available and is not accessible to people without the internet. If it had not been for the co-operation of my local newspaper, the Surrey Advertiser, and local radio station, 96.4 Eagle, I doubt whether anybody in Guildford without the support of the residents association would be aware of the plan’s existence, let alone its importance. Yet it will have a significant and irreversible impact not only on Guildford, but across the south-east.

I will mention the gross figures. The original plan proposed building 578,000 new homes. Despite the serious challenges of achieving that, the Government have returned with an increase of some 85,000, making the total 662,500 new homes. As the regional assembly has already made clear—and I am no fan of regional assemblies—Government proposals threaten to destroy an already delicate balance between housing growth on the one hand and providing decent infrastructure and protecting the environment on the other.

I would like to make it clear that the people of Guildford are not against housing growth. It is very easy to portray us all as nimbys. We have a sophisticated understanding of the need for more housing and the challenges that that brings. However, this plan is not the right way to meet housing need and is fundamentally flawed. It suggests that Guildford can meet London’s housing need without causing very serious and detrimental harm. The south-east plan proposes a smaller increase—but still an increase—in housing numbers for the Waverley part of my constituency. The proposed changes for Guildford will be felt well beyond the town itself.

I hope that the Minister will take close note as I discuss the geography and topography of Guildford. It is very geographically constrained. It is dissected by a floodplain and is surrounded by green belt, protected downland, rural villages, the Surrey hills and the Thames basin heaths. It has constricted roads, forming a pinch-point in the network.

Flood risk is a significant concern because there is an undefended zone 3 floodplain running through the town centre. There is also an extensive natural floodplain to the north-east of Guildford, which takes the flood waters, thus saving the town. That is already densely developed. The proposed changes to the plan will increase the flooding risks by increasing the pressure for development along the river channel on land with a risk level that planning policy statement 25 advises is a flood corridor. The plan also proposes new houses in the natural floodplain between Guildford and Woking, which is a crucial strategic gap.

Does my hon. Friend agree that a most concerning aspect of the proposals for the south-east plan is the removal of the policy of strategic gaps full stop, whether between Guildford and Woking or between Farnham and Aldershot? Does she agree that such strategic gaps are a vital amenity for the people of those towns? They feel that there is a green lung around the edge of the town and that their community is distinct and does not form part of an urban sprawl that goes indiscriminately from one town to the next.

My hon. Friend makes a valid point. One cannot understand the impact of those strategic gaps without going to the area and seeing them on the ground. They have been a crucial part of planning policy since the last world war and have served us very well. In line with Government policy in “Making Space for Water”, the Thames catchment flood management plan relies on the natural floodplain to do its job and manage flood risks in Guildford. The south-east plan cuts right across that point.

I congratulate the hon. Lady on securing an important debate on a matter that will affect the quality of life of all constituents in the south-east. She has made some excellent points.

Is the hon. Lady not heartened by the assurances the Government have given to me, including on the Floor of the House, that the Environment Agency will prevent any further building on the floodplain—certainly in my constituency—and that the Government are against building on the green belt? They have set their mind on to building on brownfield land. There is plenty of that to achieve the housing targets that they have set.

I disagree. I do not think that the Government will get anywhere near those targets by building on brownfield land in Guildford. The Government have contradicted themselves on green belt policy many times. I urge the Minister to listen very closely to this point. The plan says:

“However, in order to meet regional development needs in the most sustainable locations, selective reviews of Green Belt boundaries are required in the following locations: in the Metropolitan Green Belt to the north east of Guildford, and possibly to the south of Woking”.

It does not say “maybe” or “possibly”; it says that reviews of the green belt boundaries are required.

That is in stark contrast to the comments made in the House by the Minister for Housing:

“The Government are not putting green belt at risk. Indeed, when it comes to housing development, we set our face against any such development.”—[Official Report, 14 October 2008; Vol. 480, c. 670.]

I raise again the Prime Minister’s comments of 11 July 2007 when he said that

“we will continue robustly to protect the land designated as green belt.”—[Official Report, 11 July 2007; Vol. 462, c. 1450.]

The Government cannot have it both ways. The plan says that reviews will be necessary and that green belt land will be built on. Either the plan is wrong or the Prime Minister and the Minister for Housing are not being entirely straightforward.

My constituency is entirely in the metropolitan green belt. It is where the green belt is at its narrowest around London and it has already been driven through, in a sense, with a ribbon of development along the A23. Under this plan, the constituency of Reigate and the borough of Reigate and Banstead are threatened with the largest number of houses, as a direct change imposed by the Secretary of State for Communities and Local Government. I urge the Minister to look at what he proposes to do to the quality of life of the people that my hon. Friend the Member for East Surrey (Mr. Ainsworth) and I represent. I am also extremely grateful to my hon. Friend the Member for Guildford (Anne Milton) for the splendid case that she is making on behalf of all of us.

I thank my hon. Friend for those points. The Minister must come back and specifically address the contradiction between what is said in this place and what is said in the plan.

The metropolitan green belt has served us well for 50 years. It has been successful in maintaining the strategic gaps. It has protected the historic and special character of towns such as Guildford, checked urban sprawl, and of course safeguarded our very valuable countryside. It has been a very successful planning policy. However, despite the protestations from the Prime Minister downwards, the Government have put their name to a plan that will rip up our green belt.

Crucially, the Government’s proposed changes weaken the link between development and infrastructure. Infrastructure in Guildford is at breaking point. Business is a considerable contributor to the Treasury’s coffers. However, the great success of the research park in Guildford, for instance, is limited by the paucity of infrastructure development, and taxis will not go to it after 4 pm because it takes so long. Another example is north Guildford, where incremental planning applications have had a huge toll on local road networks.

The patronising comments in the plan are unbelievable. For example, there are aims such as:

“Delivering efficiency through better use of existing infrastructure…Reducing demand by promoting behavioural change…To deliver best value this will firstly require a full understanding of how the use of existing infrastructure can best be optimised.”

Does the Minister honestly believe that the people of Guildford have not already thought about that? It is absolutely absurd to have this development without first having the infrastructure improvements that we desperately need now.

I am very grateful to my hon. Friend for making such important points on behalf of so many of us who are in exactly the same situation as she is. As she knows, an enormous demand for new houses has also been made in my constituency. An extra number of houses has been added on in an area where the infrastructure is simply not capable of bearing them. It is unsustainable and completely unreasonable. It is impossible to imagine how any area could cope with the impact of new housing and retain the quality of life that people have come to expect. She is right to say that this is nothing to do with nimbyism; it is simply that the infrastructure and environment cannot sustain the proposed level of housing.

I support all my hon. Friend’s comments. He knows that I was brought up in Mid-Sussex and there has been immense housing growth in that part of the country. I am sure that each one of us here today would be happy to take the Minister on a short tour of our areas. Give us a day, Minister, and we will show you what the situation is like. The Government’s proposals to slap an increase of 2,000 more homes—and more—in Guildford simply demonstrate how little they know and understand the constraints under which we already operate.

I would like the Minister to take note of a few other issues. Guildford should not be on the list for regional hubs, for major high-density housing and economic growth. Neither its geography nor its infrastructure can cope. The review of the green belt to the south of Woking, which is not in my constituency, puts the distinctive character of both Guildford and Woking under serious threat, as I have already mentioned.

Guildford may be a transport hub, but we certainly are not a regional hub. The town cannot and should not be a centre for significant change. We are an historic town that is struggling already.

Is not one of the problems that my hon. Friend is identifying that the new planning regime has virtually disfranchised the elected county councils and replaced them with unelected regional development agencies? Therefore, should we not be moving towards a planning regime that is much more responsive and sensitive to the needs of local people through elected councillors?

Of course. My right hon. Friend makes an excellent point in saying that local decision making is probably at the heart of the issue. The plan is being imposed on us all and if we had local decisions by local people, we would get better decisions. I believe that the Government are nervous of local people; they think that local people will say “no” to everything. Actually, people are very sensible. They have sons, daughters, grandsons and granddaughters who need housing, so they understand the need for more housing. However, they want to be in control of where that housing goes, how it goes there and when it goes there, and they need support from the Government. The Government are so reliant on the south-east for their taxes. They must understand the need for the improvements in infrastructure that I have mentioned.

I would also like the Minister to rethink the idea of Guildford meeting housing need from London, given that we are already struggling to meet our existing housing need. Development must be preceded by infrastructure improvements. We want a sustainable, deliverable approach from the Government, and the decisions that are needed about our local area must be made by local people who are locally accountable and not by people in distant regional assemblies who are accountable to no one.

Finally, the plan makes it clear that annual figures will be a minimum, so the 31 per cent. increase for housing in Guildford is a minimum. Also under the plan, windfall sites, which historically have provided much of the land for housing, are to be disregarded when housing supply is being planned, and the rate of building should be assumed to continue to five years after the end of the plan. There will not be 8,000 extra houses in Guildford, but a considerable number more, including on those windfall sites.

That extra housing will wreck Guildford and ruin our countryside. It is completely unsustainable. It will put at severe risk the future of our green belt, our town centre, with its special character, our already very congested roads in the north of the town, and Guildford itself as an historic, distinctive, evolving and dynamic community.

I urge the Minister to think again. If he will come to Guildford, I will show him. He should take note of what his own experts and organisations such as the Campaign to Protect Rural England are already telling him and halt these proposals now.

rose—

Order. The winding-up speeches will begin at 10.30 am. I would like to call everyone who wants to speak, so I appeal to hon. Members to bear that deadline in mind when making their contributions. An excellent example has already been set by the hon. Member for Guildford (Anne Milton).

I congratulate the hon. Member for Guildford (Anne Milton) on securing this important debate. With so many Opposition Members taking an interest in this important issue, I am glad to be here on the Government Benches.

I welcome the hon. Lady’s recognition that more housing is needed, because often the mood music of debates such as this one can be that, somehow, we do not need new housing or that, wherever it is going to go, it has to go somewhere else, anywhere other than near ourselves or our constituents. So I welcome her recognition that more housing is needed, and I also welcome what she said about the common sense of local people who have children and grandchildren who need homes, and those houses have to be provided.

In that context, we should also recognise that the Secretary of State has quite modestly increased the number of new houses in the south-east plan. However, it is worth noting that serious draft plan numbers were far lower than the evidence suggested that they should be and the examination in public noted that the draft plan’s suggested numbers were at the lower end of the range.

The National Housing and Planning Advisory Unit urges far higher numbers. I am very much in favour of housing to meet need, but I do not think that it is fair to say that the Government are not listening or taking account of concerns that have been voiced.

Can the right hon. Gentleman define for us what “modest” means in percentage terms?

I define it in terms of the needs of the people I see in my advice surgeries, who are desperately in need of housing. The hon. Lady referred to the vitality of our economy and I rarely have a meeting, whether it is with the CBI or the chambers of commerce or other business organisations, in my area—

rose—

The hon. Lady spoke about her area; I will largely confine my remarks to my area. As I was saying, in my area I rarely have a meeting with business organisations where they do not say that more housing is needed to tackle problems of retention and mobility of labour.

The hon. Lady rightly spoke about the importance of infrastructure, which, clearly, is crucial. But past problems are a reason for getting the infrastructure right, not an argument for not building houses, which, as I have said, are desperately needed.

Perhaps the right hon. Gentleman therefore agrees that infrastructure improvements should come before house building.

The two have to go together. The necessary infrastructure must be in place so that people can travel and access local facilities. We must construct not just housing estates but genuine communities, and I will have more to say about that in a moment.

That point is particularly timely at present. If there were ever a time when it was in the national economic interest to accelerate infrastructure investment, build more roads, improve transport communications, get more facilities for communities and, yes, build more houses to meet social and economic needs and also, in a contra-cyclical fashion, to support the economy through difficult times, it is now. I will be looking to the Chancellor in the pre-Budget report to accelerate capital projects that could meet the kind of infrastructure needs that the hon. Lady has described.

I greatly welcome the proposals for an urban extension to Oxford. I supported it and argued in favour of it at the public examination. We desperately need housing in Oxford, and, whatever people may say about the green belt in other parts of the south-east, in Oxford it is so tightly drawn into the existing built-up area of the city that it is creating a pressure cooker effect. Residential communities are being destroyed as houses are converted to multiple occupation and the building of flats becomes more intensive. We debated those issues in this Chamber on a different occasion. We also have the erosion of the precious green lungs that come right into the centre of Oxford. They are the most distinctive, defining feature of its beauty and unique ecology. Therefore, if we are to provide the extra housing that is needed, we must go into the green belt somewhere, and I believe that the site south of Grenoble road is an appropriate site for building houses without causing the kind of unacceptable damage that is of concern to all of us who care about green spaces and the aesthetic setting of our communities. I welcome what the plan says about that site.

However, I am concerned about the arrangements for bringing the development forward. There must be collaboration between Oxford city council and South Oxfordshire district council, within whose area the development site presently rests. We need specific mechanisms for approaching the development in a collaborative way because, without putting too fine a point on it, the city council is broadly in favour of the development—to a certain extent, that is a cross-party position—and the district council is broadly against it. We need an institutional arrangement that locks the two into working together constructively to build a good community.

Time is short, and I know that many Members want to speak, so I shall draw my remarks to a close. I emphasise the importance of local consultation, which the hon. Lady mentioned. Residents in Blackbird Leys and Greater Leys, which are the communities that will be most affected by the urban extension, must be consulted. So far, only one person has consulted them about it on an individual household basis, and that was me. There is significant support for the development, and much concern as well, but the acid test for local people will be whether the community will have, yes, the infrastructure, but also the facilities.

I would like to make an important point about what I call the social infrastructure. When people talk about new development and new estates, they are often rightly concerned about roads, bricks and mortar, leisure facilities, schools, health centres, shops and so on. But what is every bit as important as that, especially when communities are settling down, is local community leadership, particularly leadership of youth activity. As the Government consider expanded housing provision across the south-east and, in particular, in central Oxfordshire, I hope that some imaginative thinking will be done about how we can build up social capacity on new developments from the outset.

I urge my hon. Friend the Minister to think about those points. My overall position is that the social and economic vitality of Oxford and its remarkable contribution to the regional and national economy and, most importantly, the often dire circumstances of those in housing need, mean that more housing is required. I urge an acceleration in the building of social housing particularly, but we also need many more shared housing schemes. Even with the dip in the property market—this must be true in the constituencies of many Opposition Members as well—property prices are such that it is difficult for people on anything near average salaries or wages to be able to afford housing in the communities in which they grew up. That must be of concern to all of us.

I urge the Minister and the Government to get on with it. I am aware of just how long the process of planning housing numbers for the future takes. I do not think that there is any contradiction between wanting to do such things faster and wanting to do them better. Delay does not always mean better consultation or schemes. People need housing now, and we should get on with it. With will and imagination, we should be able to construct good communities that enhance rather than spoil the environment.

I congratulate my hon. Friend the Member for Guildford (Anne Milton) on securing this debate and thank her for it. She has taken and fired many of the shots for all of us on this side and so has reduced the time that I shall speak.

I am interested in the points made by the right hon. Member for Oxford, East (Mr. Smith). We all accept that there is a need for more housing, but I hope that he and the Minister will think about the contrary argument. One of the problems with fuelling demand and not using the planning system to try to persuade and move demand to other areas, particularly areas of unemployment, is that, ultimately, greater demand will be generated, and we will be looking at the issue again with the prospect of even more concrete over the south-east.

When the South East England regional assembly figures came out, there was deep concern in my local area. It changed to horror when the Government inspector produced his figures. My constituency and, of course, Surrey, are on the border with London, so we get the effect of everything coming from London—it feels like it—and not always the greatest things. We have crime problems, and a large proportion of them come from London. It is worth adding that the police do not have enough funding.

My constituency shares part of Guildford with my hon. Friend and extends through to the Mole Valley district council area. It has the restrictions mentioned by the right hon. Gentleman and even more: it has green belt, areas of outstanding natural beauty, special protection areas, special areas of conservation, and farms that produce food for our area and for London, which are particularly important now, with all the concern over food and food prices.

My hon. Friend said that the problem is that the figures are not a target but a floor. The refusal to accept the windfalls makes that floor damaging. In my area, recent growth has come from developers purchasing large single properties or achieving an amalgam of purchases—a few houses—then demolishing them and building additional homes. The developments do not come in sizes that are large enough to count on plans, so they cannot be predicted—they are a windfall—but they are where the growth is happening.

I know the Minister’s constituency a little from the past, and I know how admirable the local authority is. I am sure that he supports its every move and benefits from its excellent services and low council tax. It provides development, but not large development. Developers there do the same kind of thing that most of the developers in my area do. The fact that in the present economic climate they are developing houses that are then taken by the bank is a temporary blip.

As my hon. Friend mentioned, the point is also that, since there are no large sites, and since such sites have to be predicted for the plan, that will mean that precious green belt has to be taken into account and will be lost. I hope that the Minister will think of his constituency. My memory of it is such that I can barely imagine the outcry if Tooting parks and commons, and so forth, were eaten into and covered with houses. The outcry would be phenomenal. If the Minister supported that in his ministerial position, he would definitely be without a job come the next election—as he may be anyway.

The Minister needs to take notice of the concerns, which are tempered with the recognition that we need housing. However, with regard to the argument that I have just touched on, can he see that to supply endlessly fuels the demand? He can, in his position as Minister, use the planning system to try to encourage the movement away from the south-east to areas where there is deprivation, land, empty properties and shortages of jobs.

The then Office of the Deputy Prime Minister Committee had a rare visit from the Deputy Prime Minister. He was invited on many occasions but did not come. Finally, he came and the business of infrastructure, building and house numbers, particularly in the south-east, was raised. The Deputy Prime Minister agreed that housing development should work hand in hand with improved infrastructure, but that has not happened.

Secondary schools in my constituency are overflowing; they have temporary accommodation attached to them, but they are still overflowing. Children are being bussed miles to other areas’ schools from my constituency, through my hon. Friend’s constituency. The county has no capital to build schools. It has had no capital for road improvements and has been given no such capital for years. My hon. Friends the Members for Guildford and for Reigate (Mr. Blunt) and I—and others—have been fighting to save hospitals. We are trying to save them, whereas what we really need is more, bigger hospitals and better facilities. There are concerns about water throughout the whole area. Our private water company is struggling to find water supplies.

All right hon. and hon. Members in the Chamber could talk to the Minister for a good hour each about the problems. However, we are putting the case succinctly and asking him to look at the figures, including the SEERA figures, and move to those, at least; to allow windfalls to be taken into consideration; and to recognise that despite the pouring of houses, and the people in them, into its area, Surrey county council has been deprived of funds to provide the infrastructure and turn the situation round at the same time as, if not before, the houses go in. It is quicker to build a house than to build a hospital or a school, and so on. If we are to have the growth—we need some—we need that infrastructure.

Finally, I ask the Minister to recognise that the success of the south-east could be mimicked elsewhere if planning were used. That would ease the demand and would not, as he is doing with his figures, put petrol on the fire that is already there.

It is a pleasure to follow my hon. Friend the Member for Mole Valley (Sir Paul Beresford), and I congratulate my hon. Friend the Member for Guildford (Anne Milton) on securing this important and timely debate. The consultation closes on Friday. I hope that the Minister will treat this speech as my submission to it.

The people of Milton Keynes are not opposed to building more houses; they are not nimbys. Indeed, with a constituency that is growing by nearly 2,000 every year, it is fair to say that we are building our fair share of houses in Milton Keynes. However, people there feel strongly that there should be some local control over that building. They also feel incredibly strongly that there must be “i before e”—infrastructure before expansion—which is not being delivered at the moment. They also feel strongly that they have not been listened to by the Government.

In a debate in this Chamber shortly before the summer recess, the Under-Secretary of State for Communities and Local Government, the hon. Member for Hartlepool (Mr. Wright), agreed with me that, for any community to be truly sustainable, it must have the support of local people. That is where I fear we are going wrong.

I will focus my brief comments on just one area: the late imposition of 5,600 houses to the east of the M1 motorway, which has always been the natural border of Milton Keynes and which has been put in the latest draft of the local plan by the Secretary of State. This area is rural green belt—prime rolling fields that are not connected to Milton Keynes. Importantly, this cuts across the wishes of everybody, including local people; the local government quango, Milton Keynes Partnership; and the regional development agency. It appears that everybody is opposed to these 5,600 new houses, apart from the Secretary of State.

In 2005-06, over the Christmas period, the people of Milton Keynes were given just six weeks to take part in a consultation entitled “Options for Growth”, which was put forward by Milton Keynes Partnership. It contained six options, five of which effectively involved the expansion of Milton Keynes within the designated expansion areas to the south-west and south-east. Just one option dealt with building in the rural green belt east of the M1 motorway.

Option six was the least popular; nobody wanted it. Everybody said that they wanted to continue to expand in Milton Keynes, but within the city itself. Yet after the consultation had taken place, Ubiqus, which put the report together, said several things. Three of its findings particularly interested me. First, it said:

“Many respondents felt that the Growth Strategy represented government policy and doubted that the needs and opinions of local people would be taken into account. They felt that housing targets were dictated by central government rather than local needs and questioned whether the targets were achievable.”

I am quoting from annex C to item 9, dealing with the regional spatial strategy.

Secondly, the majority of respondents strongly supported calls for a directly elected body to oversee the growth of the city. Thirdly, as I just said, option six—the option that the Secretary of State has now ruled on and decided will be imposed—was the least popular with anybody in the local community.

Interestingly, once local bureaucrats from Milton Keynes Partnership had had their say—let us be clear that Milton Keynes Partnership does not support this move—the matter moved to the RDA. Once again, the independent body that the Government charge to look at these things did not support the plans. Indeed, the RDA said:

“Weighing all these criteria our view is that the development to the South East”—

that is, the south-east of Milton Keynes—

“is likely to be the most sustainable. Given the difficulties of accessibility by rail, the problems of integration and the likely infrastructure costs we consider that development to the East of the motorway during the plan period would be less sustainable or deliverable than development to the South West.”

Why, Minister—despite all the advice, despite local concerns and despite Milton Keynes Partnership and the RDA saying no, and now that we are finally moving away from local people who have some charge over those matters—has the Secretary of State decided that she knows best?

The answer to my question is given away in the Secretary of State’s comments. She starts by saying:

“The Secretary of State notes the Panel’s view that development to the East of the M1 Motorway during the plan period would be less sustainable than the development proposed to the South West of Milton Keynes.”

She continues:

“The Secretary of State notes that the Panel were not satisfied from the evidence before them that there was an overriding need for a strategic reserve site East of the M1 motorway.”

But we get down to the truth when we discover a footnote:

“However, since the Panel’s report was published revised population and household projections show that the figure of 32,000 dwellings per annum proposed for the South East Region by the Panel is too low to meet requirements”.

Whose requirements? Government’s requirements.

Despite a public consultation overwhelmingly saying no and despite a regional quango saying that the site east of the M1 was unsustainable and lacked infrastructure, which would be extremely expensive to put in, the Secretary of State has ignored all those constant warnings. Despite all the evidence, it is clear that the only goal of the Department for Communities and Local Government is to impose centrally driven housing targets that are simply not needed and are not the wish of the local people.

I finish by pointing out briefly a couple of practical problems that the Minister will, I hope, be able to deal with in his winding-up speech. The M1 motorway is, as I have said, the natural boundary of Milton Keynes. The Government have already made Milton Keynes Partnership, not the local authority, the planning authority for the eastern expansion area up to the M1. Already, outline planning permissions have been granted and detailed planning permission has been granted in places. Now the Government want to build houses on the other side of the M1, in the rural green belt.

The Government accept “i before e”—infrastructure before expansion. We must build new bridges across the motorway and new roads to link the new community that the Government so desperately want to the existing community. Given that planning permission has been granted on one side of the motorway, a bridge may be launched, but where will the Government land it? How short-sighted it is to have two planning authorities doing entirely different things that cannot be joined up? It is ridiculous, and I ask the Minister, even at this late stage, to listen to the independent advice that he has been given at every level—from the wishes of local people and the local planning quango to those of the regional planning quango—and think again about this ridiculous plan to impose 5,600 houses east of the M1 motorway at the last minute, simply to fulfil artificial Government targets.

I congratulate the hon. Member for Guildford (Anne Milton) on securing the debate, and I am pleased to follow the hon. Member for North-East Milton Keynes (Mr. Lancaster), because some of the experiences that he graphically described are familiar to my constituents.

I have been asked by a number of local organisations in my constituency to raise the issue directly with the Minister. Botley parish action group, Botley parish council and Eastleigh borough council oppose the proposals for a substantial strategic development area to the north and north-east of Hedge End on the basis of inadequate transport infrastructure, and water and sewerage facilities. Because of how the process has been handled, many of my constituents in Botley and Boorley Green have had less consultation on the proposals than if a neighbour had proposed an extension to their home. They were not notified individually, but Boorley Green, for example, will be swamped by the strategic development area.

The whole process—not just this consultation, which closes on Friday and is supposed to be narrow in that it is considering the changes that the Government have made, but the previous one—is deeply inadequate, given the dramatic changes that the proposals will make to some people’s lives. My first point, therefore, is about process.

The second point is about substance. We are still dealing with an extraordinary, top-down decision by the Government, which is essentially predict and provide, on housing levels. Given the Government’s decisions on changing their previous projections on households, how much of the growth that we are seeing results from the population growth projected for the south-east, and how much from household formation? We know that people are getting married later and, unfortunately, getting divorced earlier, and they are living longer, but that does not increase the number of people in the region. It may increase household formation and, therefore, demand for housing, but in itself it does not have the same effect on environmental sustainability as an increase in population. It is crucial to make that distinction.

That brings me to the substance of my concern about the whole top-down approach—environmental sustainability in south-east England. One example is water, which a number of hon. Members, including the hon. Member for Mole Valley (Sir Paul Beresford), mentioned. In the south-east, Thames Water has proposed a desalination plant on the Thames to obtain fresh water. Such proposals are normally heard about in Saudi Arabia. Non-governmental organisations such as Waterwise point out that the availability of water per head in the south-east is now lower than in Sudan or Syria. We are at the absolute limit of water sustainability.

As the Environment Agency repeatedly tells Ministers, we are also at the limit of building on flood plains, and the projection to build 100,000 homes on flood plains cannot be sensible when climate change will inevitably make them more vulnerable. The south-east is the most densely populated region not only of England, but of all European regions. The population density of England as a whole is the same as that for the Netherlands, which traditionally has been the most densely populated part of Europe. The south-east is substantially more densely populated than the average. I second all those environmental sustainability reasons, including submissions to the Minister from Hampshire and Isle of Wight wildlife trust on some of the consequences for the sustainability of wildlife as a result of the proposed development.

I shall not continue with the infrastructure points, but I entirely agree with what other hon. Members have said about the importance of “i before e”—infrastructure before expansion. That is an additional and very serious problem in the proposals. There are concerns about sustainable transport links, and our experience in Hampshire is that the infrastructure has not been put in place adequately to sustain communities that have been built up.

Finally, a matter of enormous concern to us locally in Eastleigh and more widely in south Hampshire is the Department’s extremely mistaken judgment to allow the plan to get rid of strategic gaps to proceed . We feel strongly in Eastleigh that we do not want to be part of a sprawling urban area called Solent city, which will merge every settlement from Totton in the west to Waterlooville and Portsmouth in the east.

A key part of our planning policy has been successfully to build the extra housing that we need for household formation. The borough council has done that responsibly, but has always borne in mind the key requirements of residents that local settlements should be distinctive and have their traditional character; that one village should not merge into another; that Hamble wants to be separate from Netley and Bursledon; that Bishopstoke wants to be separate from Fair Oak; and that there should not be fill-in between West End, Eastleigh, Bishopstoke and Fair Oak.

For all those reasons, I hope very much that the Minister will reconsider this exceptionally misguided policy of getting rid of strategic gaps.

I congratulate my hon. Friend the Member for Guildford (Anne Milton) on securing the debate, which is both timely—the consultation period finishes at the end of this week—and extremely important.

When I was elected in 1997 to have the honour of representing a constituency that is entirely within the green belt and, indeed, provides the green belt between London and the rest of the south-east, I knew that developmental pressure would be the most important issue and a constant in my life of representing my constituents. I am utterly horrified by the Government’s proposals. Let us be clear. There is a basic, philosophical difference between the Government on one side and us on the other. That comes out loud and clear in the changes that the Secretary of State has proposed to the plan. I shall make the case briefly.

The original plan said:

“The strategy is based on meeting development requirements within urban areas and the protection of the green belt across the sub-region.”

The Secretary of State has struck that out. The original wording referred to

“sustaining growth in the local economy to a level that can be supported by labour markets and infrastructure, supported by comprehensive monitoring of the local economy, labour supply and demand, and movement patterns across the sub-region and in adjoining areas including London”.

After the Secretary of State had her way, it referred to

“sustaining growth in the economy, supported by comprehensive monitoring of labour supply and demand, and movement patterns across the sub-region and in adjoining areas including London”.

The Secretary of State has struck out all the references to “local”. The original plan referred to

“giving priority to meeting locally defined housing needs, including affordable housing to underpin the economy, within the overall requirement for the sub-region”.

The Secretary of State struck that out. It also referred to

“promoting high quality design in new buildings and civic spaces, which respects and develops local character and distinctiveness, to improve the quality of the built environment”.

What on earth is wrong with that? Something is wrong with it, because the Secretary of State struck it out. It then referred to

“requiring developers to contribute to the provision of infrastructure and service improvements to meet needs arising from the additional development in the area and to ensure delivery of these through the implementation plan”.

What on earth is wrong with that? Something is wrong with it, because the Secretary of State put a line through it.

I say this as the representative of the constituency of Reigate. In the last development plan that came out in 1994, the borough of Reigate took a substantial increase in housing. Those in my constituency have co-operated with the Government and the Department on trying to enable that development to happen and their reward is to have housing numbers increased where the green belt is under the greatest pressure.

The Secretary of State has put a line through the figure of 4,740 houses in the plan and has said that we must have 8,240 in the north of my constituency—in the London fringe. That is in addition to the 3,000 houses that are being imposed around Gatwick and the town of Horley in the south of the borough of Reigate and Banstead. That part of the borough is represented by my hon. Friend the Member for East Surrey (Mr. Ainsworth). Some 2,800 houses are already being constructed there on the only non-green belt area of open space, which is up to the boundary of the green belt around the town of Horley and the boundary of my constituency.

I declare an interest because that is where I happen to live. I live next to a river and, interestingly, the houses are being built on a place called Great Lake Farm. I wonder why it is called that? Local people have the pictures to explain why it is called Great Lake Farm, but that has not stopped the development plan going through, and all the flood prevention measures have, of course, been incorporated within the development. However, considering the weather conditions we are experiencing, what will be the consequences for everybody else who lives around there? Some 36,000 houses are going into the Gatwick sub-region and one can only speculate on what that will mean for the River Mole, which runs past my house—particularly given that, under the south-east plan, 2,800 houses will go immediately downstream in that part of the borough, and they will be followed by another 3,000.

I simply hope that the Minister will reflect on the cry of outrage from hon. Members who represent the constituencies affected and who can see that this is a deliberate effort to undermine local democracy. The purpose of having councils and the contribution of local representation is so that local people can make their voices heard. As has been said, it is not that local people are incapable of making judgments about what is required to house their children and grandchildren; it is that they are also sensitive to the protection of their environment. The Government appear to have chosen to say, “We know best and we are going to ensure that south-east England remains the motor of the economy. Never mind the infrastructure. We see that housing is a requirement and you are going to deliver it.” During the enormous consultation exercise, which has ended up in a revision of the plan, the Government have overridden local people’s judgments. In the case of my constituency, that has resulted in nearly doubling, by fiat of the Secretary of State, the number of houses that will be required to be built.

The Government have a dreadful philosophical approach that completely disfranchises local people. I sincerely hope that the Government will listen at this late stage to the responses to the consultation, to which thousands of local people in my constituency have contributed. How are local, ordinary people supposed to understand all of this and get involved in the consultation? Yet hundreds—if not thousands—of people in my constituency alone will have had to have found some way of trying to understand what is happening in order to respond to a consultation that is likely to be a complete waste of time. I sincerely hope that the Minister and the Secretary of State will surprise me when they respond to the consultation.

I am grateful to my hon. Friend the Member for Guildford (Anne Milton) for choosing this subject for a debate and for introducing it in such a responsible way. We have had some good speeches in response.

In a way, this is an unreal debate because it is driven by the Government’s target to build 3 million homes by 2020. Hardly anybody in the housing world thinks that that target is achievable, yet that is what is driving the debate. The energy of Ministers in the relevant Department should be focused on building houses on the sites that already have planning consent. They should concentrate on making progress on meeting the housing needs of all those we represent, as opposed to driving these targets based on the 3 million figure.

A long time ago, I was the Minister for housing and planning and took an interest in these matters. The forecasting of households is not an exact science; it is underpinned by some heroic assumptions. I remember having a dialogue with the man who produced the figures. One has to make assumptions about whether a child—someone who is age 20—who has had a row with their parents is entitled to a home of their own. That is a difficult judgment to make, but the forecasts of households depend on such judgments.

Heroic assumptions about inward and outward migration have to be made, and when focusing on the south-east, heroic assumptions have to be made about outward migration from London. Is it right that we should continue to plan for the outward migration from London when many people planning for the future of London want to retain that population there—particularly in relation to those who are likely to migrate outwards? Likewise, there is a debate about whether, given the structure of London, one should focus on the east side of London, where unemployment is highest, or the west side, which is overheated. Some real political and sociological issues underpin this debate.

I start from the premise that everyone is entitled to a decent home. Certainly, in my constituency, a major development area on the eastern side of Andover is going ahead without a lot of aggravation, and we accept that we have a role to play. My view is that one is more likely to get a sensible answer if local people feel that they have ownership of the problem. In a county, district or village, there is resistance if people are told what they have to do. If people are asked about how best to provide for their children, elderly parents, teachers and postmen, they will say, “We have a real responsibility and interest in this.” They will then be much more creative in looking for sites than if they have to find sites because they have been told to do so to accommodate people who are not in the area but who plan to move there.

Let us consider the policy of building on land that would not normally get planning consent—the so-called exceptions policy. People who live in a village will be creative about identifying suitable sites, having a dialogue with the housing association and ensuring that homes are built for local people. However, there will be resistance if people are told by someone from outside, “You have to find sites for another 100 houses and we cannot tell you who will live there.”

Does my right hon. Friend not agree that the one thing most liked by local people is the feeling that they can give a home to another local person?

I agree. In one parish council in my constituency, the village has provided all the homes that they have been told to. They are actually trying to provide more homes by moving the allotments that they own from the middle of the village to the outside because they feel that they have a responsibility to make better housing provision.

I shall leave the Minister with this thought. A top-down approach provokes a reaction, whereas a bottom-up approach does not. One of the Government’s mistakes has been to move to a much more dirigiste, centrally driven planning policy, which perversely makes it more difficult to get the houses that we all want built in the areas in which we need them. I know that the Minister is relatively new in his appointment, but I ask him to begin to put a few question marks against that aspect of the policy. If that happens as a result of this debate, we might have made some real progress.

It is a pleasure to serve under your chairmanship, Mr. Amess, to discuss this important subject. I must confess to a feeling of déjà vu in that a couple of weeks ago, the hon. Member for Beckenham (Mrs. Lait) and I debated the south-west regional spatial strategy in this very Chamber. As we now have a different Minister facing us, perhaps he will forgive me for repeating some of the remarks I made to his colleague because the issues are same.

First, I should congratulate the hon. Member for Guildford (Anne Milton) on securing this important debate. She quite rightly raised the issue of local opposition and voiced her concerns about how those points of view have not had the opportunity to be heard. She is concerned that this process dictates against local opinion—and we have heard that point repeated time and again. Importantly, she also spoke about flood risk, transport capacity and water resources, a subject mentioned by my hon. Friend the Member for Eastleigh (Chris Huhne). The hon. Lady was also keen to point out that her constituents are not nimbys and that they understand the pressure caused by housing need. They wish to be part of the process, helping to meet that need and not being left out of decisions being made on their behalf.

The right hon. Member for Oxford, East (Mr. Smith) rightly pointed out that many areas of the country have a housing crisis, a subject that we all face at our regular advice surgeries, with local people struggling to find somewhere to live that they can afford. All local authorities are trying to deal with such issues, in partnership with some responsible developers, registered social landlords and the business community. However, they all face one problem: no matter how much consultation they undertake and how much excellent work they do locally, it is undervalued and set aside by the process of regional planning, which has been imposed over the top.

I pick up on the hon. Lady’s point that development should allow the green lungs of urban areas to be maintained. We should not go for a policy of continued urban density, as it will change the character of our existing communities. My hon. Friend the Member for Truro and St. Austell (Matthew Taylor) made a similar point in a report that he wrote for the Government. He said that planners ought to consider the broader scale, particularly on development in rural areas, something that I very much support.

The hon. Member for Mole Valley (Sir Paul Beresford) spoke of trends coming out of the capital into his part of the south-east. I recall that that included his own political career, given what he said about a certain London borough. We return to the question time and again of how overheated economic development is becoming in the south-east. He made some good points about the need to promote economic development in other parts of the country in order to spread the load and, indeed, to allow the benefits of development—there are some—to occur in other parts of the country, where they are crying out for it.

The hon. Member for North-East Milton Keynes (Mr. Lancaster) has over the years consistently spoken about development in Milton Keynes. I once served on Bedford borough council, so I am familiar with some of the problems that he mentioned about the area beside the M1.

My hon. Friend the Member for Eastleigh highlighted the overall problem when he listed the communities in his constituency that have raised concerns about how their areas will be affected. That takes us back to the level at which we should deal with planning matters.

The right hon. Member for North-West Hampshire (Sir George Young) spoke about planning at town or parish level. In my constituency, the parish plan process has been incredibly positive, drawing communities together to meet the needs that they have identified. That overcomes whatever nimby tendency there may be, which sometimes comes from those who have recently moved into an area and like it as it is—unlike local residents, who have been there for longer and have seen the community changing over the years. I have seen some very positive outcomes from parish plans. Communities have come together to make proposals, sometimes even proposing specific sites where they would like to see development.

One of the key elements in our debate on the south-west regional spatial strategy is the question of sequential sites, a scheme under which local communities and local authorities can identify those sites where they would like development to happen first. The problem with inflated housing targets is that it gives developers a blank cheque, allowing them to go to appeal in order to avoid focusing on those sites first, and instead developing sites on which the local community would far rather resist development. That is yet another problem with the process.

The hon. Member for Reigate (Mr. Blunt) pointed out that the Secretary of State has undertaken some vicious pruning of the strategy. She seems to have pruned some of the key provisions that local authorities and their representatives on the regional assemblies sought as guarantees. As I say, we have ended up with a blank cheque for development.

I return to a point made by the right hon. Member for North-West Hampshire about the shifting economic sands on which our debate is centred. We have to be honest about where housing development is to happen and how quickly it is to take place, given the economic situation that we face. It is even more important to take advantage of the extra time that we now have in order to get things right on some of those sites. As building may not occur for a considerable time, we should ensure that we do not set down planning and zoning proposals that put the wishes of local communities at risk, as they will hang over their heads and could prevent development in areas that may be more preferable.

My party is increasingly concerned that the planning system is being driven entirely from the centre. Excellent work is being done by local authorities and local communities. They are coming up with sustainable plans that meet the needs of the community, that acknowledge the fact that there may be inward migration in some of these areas as well as a need to look after local people, and that consider the benefits to the local economy and the importance of securing employment land as well as residential land. All that good work is being set aside by centrally imposed targets based on models that must now be re-evaluated.

The Liberal Democrats would far rather see a planning system that is flexible enough to deal with the economic circumstances, and one that is far more accountable to local people. We want a planning system that creates communities, meets local need, and is sustainable for new and existing residents alike.

I, too, congratulate my hon. Friend the Member for Guildford (Anne Milton) on securing the debate. As we heard from the hon. Member for North Cornwall (Dan Rogerson), this is not the first such debate, and I suspect that it will not be the last. However, this debate is different from the first. The right hon. Member for Oxford, East (Mr. Smith) has broadly supported the Government, although with some serious questions being raised. I seem to remember that during the last debate three Government supporters savagely attacked the south-west plan. That indicates the sheer depth of concern about this top-down planning target.

I welcome the Minister to what must, for him, be quite an uncomfortable experience. I hope that he has enjoyed hearing of the difficulties that those who represent the residents of south-east England have experienced with the top-down approach.

I have to record the fact that my husband is leader of East Sussex county council and deputy chairman of the South East England Development Agency, and I am therefore deemed to have an interest in the subject. However, I have an interest in the subject in more ways than one, and I am familiar with a number of the broad issues that affect the south-east.

This is a timely debate—I congratulate my hon. Friend the Member for Guildford on that—as the consultation closes on Friday. I have a deep scepticism that despite all the hard work that my hon. Friends, colleagues and constituents have put into the consultation, it will be ignored in much the same way as the original proposals were ignored.

My hon. Friend also referred to a serious concern in the south-east—the difficulty with water resources. That is a minor part of the infrastructure, but it has been referred to by practically every Member in the Chamber. I do not think I am wrong, but doubtless I will be corrected if I am—I clearly have not been properly briefed—but I believe that the South East England Development Agency estimates that the value of infrastructure requirements is to the tune of some £25 billion. Given economic circumstances, one is slightly concerned about where that money is likely to be found. The only developers that one can see on the horizon are the housing associations.

My hon. Friend may be aware that the Government have introduced the Milton Keynes tariff, under which some £18,500 per dwelling built went towards the local infrastructure. The tariff makes only a small contribution, but given the economic downturn and the lack of houses being built, has it not proved to be rather short-sighted?

I am grateful to my hon. Friend for that intervention. I was going to speak about the impact of the Milton Keynes tax, which has emerged through the Planning Bill as the community infrastructure levy. Can the Minister confirm the rumour that the Government are thinking of imposing the community infrastructure levy at the rate of 25 per cent? If 25 per cent. is added to the cost of every house, it will consume the profitability of any developer.

Obvious consequences will flow from having a levy at that level. Perhaps then we will be able to work out whether the Government’s imposed target of extra housing in the south-east can even come close to being reached. My hon. Friend the Member for North-East Milton Keynes (Mr. Lancaster) will recognise that £18,500 is not 25 per cent. of the cost of most houses—it is considerably less.

My hon. Friends the Members for Mole Valley (Sir Paul Beresford) and for Guildford raised the issue of windfall housing. I am familiar with it from London suburbs such as Beckenham, because that is precisely how development has been carried out there. In my constituency, as well as in others in the south-east, concerns have been expressed that the nature and character of our communities are being changed, without the local community having a say. Although windfall development is useful and acceptable in many cases, for it not to be included in the housing numbers is disgraceful and typical of the Government’s top-down approach.

My hon. Friend the Member for North-East Milton Keynes, with whom I completely agree about the Milton Keynes roof tax, indicated the number of houses that Milton Keynes might have to deal with. I wonder whether that is part of the argument for imposing the community infrastructure levy on infrastructure developments that have nothing to do with the local community. The famous junction on the M1 that is required to make Milton Keynes more viable is not directly related to the community infrastructure levy as it is perceived by local people.

The hon. Member for Eastleigh (Chris Huhne) rightly talked about environmental sustainability and the strategic gaps. None of us would argue with that—maintaining sustainability in the south-east is already difficult, given the pressures. My hon. Friend the Member for Reigate (Mr. Blunt) noted how the top-down approach to planning undermines local democracy. Councillors feel that they have no power and wonder why they were elected. Local people often wonder why they go out to vote for local councillors who can make no difference whatever and are being instructed from the top.

My right hon. Friend the Member for North-West Hampshire (Sir George Young) brought us to the nub of the problem—the issue of heroic assumptions. I suspect that the Government approach has been made on super-heroic, superman-type assumptions. Those of us who lived through the time in office of the then Deputy Prime Minister, the right hon. Member for Kingston upon Hull, East (Mr. Prescott), remember that we sought to abandon predict and provide. Quite rightly, my right hon. Friend returned us to the reality of predict and provide, and the difficulty that flows from it.

This debate and the previous one highlight the centralising nature of current planning and the fact that we are told what we must do. Local communities are not involved, and do not believe that they are involved, in planning for their future and community. The challenge to the regional spatial strategies could, in our view, lead to civic discontent that is dangerous for the body politic. Not only Conservative and Liberal Members and our constituents object. Significant comments have been made by members of the Labour party. The Under-Secretary of State for Defence, the hon. Member for North Durham (Mr. Jones), said:

“The regional spatial strategy has more to do with the era of Soviet-style planning than a modern dynamic economy such as the north-east’s.”—[Official Report, 14 June 2007; Vol. 461, c. 959.]

The south-east, south-west and, I am sure, other regions will echo those views.

Does the hon. Lady agree that those who think that it is easy to shift economic development from the south to other regions also have a touch of Soviet-style planning about them?

The right hon. Gentleman cannot—in any way, shape or form—accuse me of thinking that that is easy. I lived through the first experiment in regional policy—the building of a car factory at Linwood, just outside Glasgow. Indeed, the Labour council in Glasgow built delightful housing schemes, as they are called in Scotland, such as Easterhouse and similar places, which are now mostly leaving us, 50 or 60 years on, with social problems that are still unsolved. The right hon. Gentleman’s approach is not very sensible.

The right hon. Member for Oxford, East (Mr. Smith) fails to understand that persuasion and co-operation with the local planning authority are what works, rather than what I think is fascist dictation. That point is recognised by my hon. Friend, who was a planning Minister before me.

That is the point exactly and I am grateful to my hon. Friend for picking me up on it. Unless local people feel in control, they will resist. This system of top-down centralised planning ensures automatic resistance. It undermines the role of the local authorities and leaves local communities feeling helpless. We plan to deal with the matter in a completely different way and I reassure my hon. Friends that we will abolish regional spatial strategies. We will give back to local people and local authorities the power over their own future.

The point has been made repeatedly: local people know what they can provide and what they need. Indeed, they agreed with the total of 27,000 houses in the south-east plan. They are willing to do that, but the Government, who think that they know better, say, “I am from the Government and I am here to help.” We all know the implications, including our constituents.

We must get rid of the regional spatial strategy. We must work with local people and give authority back to local authorities. That is the only way that we can meet what is an acknowledged need for more housing.

I am in danger of having the least amount of time in which to respond to the various excellent points that have been raised. I am grateful to the hon. Member for Guildford (Anne Milton) and all colleagues for the restraint, vis-à-vis time, with which they have spoken.

The hon. Lady and I joked before the start of the debate that she could have spoken for an hour on this important issue, and I do not doubt that other hon. Members could also have done so. The fact that they curtailed their remarks demonstrates huge discipline. I recognise the passion with which many colleagues and hon. Friends have spoken, particularly when raising the concerns of their constituents, and I am grateful for the brevity of their comments.

A number of issues were raised, and I shall try in the next 11 minutes to gallop through them and deal with as many as I can. In summary, the issues were the number of houses proposed; the implications for the green belt; whether there will be sufficient social, physical and other infrastructure to support the required growth; and the consultation process. Before responding, right hon. and hon. Members will be aware, as people in the Public Gallery will need to be, that I am unable to comment on, for example, individual proposals for housing, given that the consultation process is under way and the roles that the Department for Communities and Local Government and the Secretary of State play in the planning process. However, I will try to address as many of the general points as I can.

In response to the hon. Member for North-East Milton Keynes (Mr. Lancaster), comments made today will be taken as responses to the consultation—I have sought assurances on that—and the Government will consider all responses. On housing numbers, the hon. Member for Guildford and others were concerned about the proposed house build in their constituencies but said less about how best to ensure—I paraphrase—that our children will have homes to live in with their families in future. I know that those comments were made not because those Members and their constituents are nimbys, but out of recognition of the necessity to balance the need for housing and respect for local areas.

That said, we need to put things in context by saying what has happened in recent times. The hon. Member for Mole Valley (Sir Paul Beresford) referred to his association with my constituency. As a former leader of the local council, he will be aware that thousands and thousands of houses were sold over the past 30 years and that there was a lack of house building in the period. Those things led to some of the crises in the area and elsewhere in the country. I am grateful to him for providing me with the opportunity to put that on record.

During the past 30 years, under both Conservative and Labour Governments, there has been a nationwide 30 per cent. increase in the number of households and a 50 per cent. drop in new house building. In the south-east, the average age of a first-time buyer is now 33, more than 200,000 households are on council waiting lists and more than 7,500 homeless households live in temporary accommodation. The latest regional household projections—the hon. Member for Beckenham (Mrs. Lait) referred to these as super-heroic presumptions—forecast that 35,850 new households will be required in the next 20 years. The proposed number of dwellings in the panel’s recommendations was 32,000, but the increase to 33,125 is 4 per cent. higher.

We face a gap between growing demand and constrained supply, which we all recognise. I am sure that we have all met people in our surgeries—whether in Tooting, Beckenham, Hampshire or Milton Keynes—who are unable to have a house near to where mums, dads, brothers or sisters live. The pressures in Surrey are no different from those in other places. The Government acknowledge the pressures in south-east and from 2006 to 2008 have spent £700 million on increased affordable housing in the region. More importantly, in the next period, between 2008 and 2011, that will increase to £1.24 billion.

To suggest that we do not recognise the problems in the south-east is, I believe, slightly unfair, but the challenge for the future is to balance the interests of the current generation with those of future generations who will need homes. The Government are worried that the concerns of future generations could be drowned out by those of present generations, whether at local, regional or national level. That is the balance that needs to be struck.

The green belt remains an important part of national policy and the Government continue to place great importance on the correct application of the long-standing policy of planning policy guidance note 2. Opposition Members criticised the travesty of the Government building on the green belt, but it is worth allowing the facts to cover some of that rhetoric. The amount of green belt has increased by 33,000 hectares since 1997 and now accounts for around 13 per cent. of England’s land mass. It is not true that green belts are being built on around the country, as we can see from those national figures. There is nothing stopping me today confirming that the Secretary of State has proposed to accept all the panel’s key green belt recommendations. I am sure that colleagues who are interested in green belt will be pleased to hear that.

The Secretary of State has considered the proposed changes. The problem is protecting the general extent of the green belt in the south-east. The hon. Member for North-East Milton Keynes made a huge issue of the green belt, but he may have meant green fields, which are slightly different. I cannot comment on those points for obvious reasons, but, generally, it is a matter of striking the right balance between the continued application of the green belt policy, the ability of planning authorities to address local issues and the need to create and maintain a network of sustainable communities. The Secretary of State and the Department will welcome comments from all quarters on whether specific place references in the final south-east plan would help to provide more certainty.

I would like to be clear on one more thing on the green belt. Local authorities, as part of their responsibility to current and future generations, must make the difficult decisions about the most sustainable locations for the growth and development that we need, and then plan for their delivery. Once again, it is not fair to suggest that the Secretary of State is ignoring local authority proposals.

Colleagues talked about infrastructure and my right hon. Friend the Member for Oxford, East (Mr. Smith) spent a great deal of his short contribution dealing with social infrastructure. We hear many stories about Government spending in the south-east and the fear of what happens if infrastructure is not in place—the “i before e” problem, meaning infrastructure before expansion. The Government recognise that infrastructure is not only about transport; it is also about health, education, energy supply, waste disposal, cultural and leisure facilities, and green spaces.

Once again, I want to put facts before the rhetoric. As I said, £1.24 billion has been devoted to securing affordable housing in the south-east. Public expenditure on transport in the region in the five years to 2007-08 increased from £1.9 billion to £2.3 billion—[Interruption.] I hear someone ask from a sedentary position what this has to do with infrastructure or transport. That point has been made.

Will the Minister give way?

The hon. Lady had 13 minutes to speak, and I have nine, but of course I will give way.

I am not going to argue about the fact that the Minister has 12 minutes in which to make his speech. Future infrastructure costs are estimated to be £25 billion, not the paucity represented by the £1 billion-plus on public transport, which has already been spent.

I am disappointed that the hon. Lady calls £1.24 billion “paucity”. Someone said that infrastructure should come before expansion, and my point is that we have invested in infrastructure, and now we have expansion. I am disappointed that she belittles £1.24 billion.

The Minister continues to say that he recognises this and that, and keeps telling us what the Government have done, but he is not listening to the people of the south-east, particularly Guildford. He stands there saying that it is unfair of us not to recognise what the Government are doing, but he should pay attention and listen to the people in my area.

I am disappointed with that comment. The hon. Lady will be aware that I cannot comment on the individual plans. Had she listened to what I said six minutes ago, she would have known that I can speak today only in generalities. She will be aware of the legal reasons for which I cannot go into specifics. The Government are listening and she should note that we have received 500 e-mails, 3,000 letters and 1,300 comments online so far. We take on board what is said in the debate.

I wish to give a final plug for the consultation, which ends at 5 pm this Friday. We are listening. I encourage all those watching the debate, and those who will read about it in their local papers or hear it on local radio, to continue to respond. People have until 5 pm on Friday to make their views known to the consultation, and we will listen.

It is a pleasure to sit under your chairmanship, Mr. Amess. I am grateful to have the opportunity to debate this important subject.

State-sponsored terrorism has been and remains one of the most alarming trends in international terrorism. It is not a new phenomenon. On 11 September 2001, the western world experienced the nightmare of international terrorism on a scale that had never been seen before. Unfortunately, such action was not a new phenomenon. For many decades, Ulster has suffered from the appalling consequences of IRA terrorism, which has been heavily funded and sponsored by rogue states, such as Libya. Fuelled by a hatred of all things British, Colonel Gaddafi supplied the Provisional IRA with weapons and cash for many years.

One of the most lethal weapons in the IRA arsenal was the deadly Semtex explosive, which made one of its first appearances in Enniskillen in that deadly and tragic bombing in November 1987. For decades, it has been used to bomb towns and cities throughout Northern Ireland. It was used to tear out the heart of the City of London and it left a trail of death and destruction in Omagh in 1998.

As a result of Libya’s prolonged and persistent support for the IRA, many innocent men, women and children are dead, and their relatives physically and psychologically scarred. While we are living in more peaceful times in Northern Ireland today—and we are all grateful for that—the scars of the victims will never heal, and the victims must never be forgotten. We are faced with the threat from Islamic terrorism. The western powers have worked towards the restoration of diplomatic relations with Libya and towards bringing Colonel Gaddafi and his regime in from the cold.

I congratulate my hon. Friend on securing this debate. Does he agree with me that this is a matter of concern to many people and not just those in Northern Ireland? Libyan-donated Semtex explosives were used in bombs at Bishopsgate, Canary Wharf and Manchester, and in other cities in Great Britain. The Government have an obligation not just to Northern Ireland but to citizens throughout the United Kingdom who were the victims of IRA violence as a result of Libyan state-sponsored terrorism.

I am grateful to my right hon. Friend. He makes an extremely valid and important point. Last week, he helped to organise a visit to this place for victims and the relatives of those who were injured and killed in incidents across the United Kingdom. I know that other hon. Members here have had constituents killed in incidents in which Libyan-supplied Semtex was used. The matter affects not just Northern Ireland, but many people right across the United Kingdom. It is a United Kingdom issue.

While progress towards the abandonment of terror and support for terrorism by Libya is welcome and to be encouraged and supported, we must not allow that to prevent Libya from being forced to face up to its responsibility to make reparation for its past involvement in terrorism. Michelle Williamson, whose parents Gillian and George were murdered by the IRA in 1993 in a fish shop in Belfast’s Shankill road, two years ago said:

“Libya can’t wash its hands of responsibility. It’s like the pub owner who knowingly supplies drink to a customer knowing he or she is going to drive home drunk. If that driver kills someone, the person who plied him or her with drink bears some responsibility.”

She was quite right.

In 2006, almost 200 British survivors of IRA terrorism—most of whom were from Northern Ireland including Michelle Williamson and Jim Dixon, who was seriously injured in the 1987 Remembrance day bomb in Enniskillen—joined a very small number of American victims in taking a class action against Libya, which was filed and pursued through the courts in the United States. The aim was to ensure compensation along the lines of the Lockerbie air disaster in Scotland. Those who took the action were representing not only themselves, but thousands of others murdered and maimed by Libyan-sponsored IRA terrorism. That was a crucially important and highly symbolic legal action, and those who have suffered so much at the hands of the IRA were surely deserving of the support and encouragement of our Government.

The Government, however, have seemed reluctant—to put it mildly—to become involved, and we were told that that was because of the legal proceedings. None the less, the Government have seen fit to become involved in a number of other matters relating to Libya and Libyan actions towards individuals and foreign citizens. For example, the former Prime Minister, Tony Blair, intervened in relation to the legal actions in Libya against Bulgarian nurses. The Government have rightly intervened on behalf of British and foreign victims of the Lockerbie air disaster, including criminal proceedings in the Netherlands and civil proceedings in Scotland and the United States.

Other European Governments, such as France and Italy, have taken a proactive approach and have secured adequate compensation for their citizens who have suffered as a result of Libyan-supported terrorism. For example, the French Government intervened in litigation brought by their own and foreign citizens against Libya regarding the French flight UTA 772, which exploded in mid-air over the Sahara desert in September 1989.

The inactivity of our Government in seeking to support the victims in their just quest for compensation and justice as a result of Libyan-sponsored IRA terrorism contrasts sharply with the various precedents that they themselves have set. It also contrasts sharply with the activities of other Governments, particularly with the proactive approach of the US Government. I commend the American Administration for their determination to see right done by their own citizens. Sadly, in the case of the legal action that has been brought by UK citizens, such determination has turned out to be something of a two-edged sword, for the US Administration have taken the view—and espoused some of the reasons for it—that they can only look after their own citizens. That approach means that, two years on, the case mounted and initiated in the US has hit a massive brick wall.

The US Administration concluded that it was in their best interests, in both security and economic terms, to engage in a process of rapprochement with Colonel Gaddafi. However, as the US Government engaged in negotiations with Gaddafi’s regime, they were also acutely aware of the demands of Congress and victims that any rapprochement could take place only in the context of ensuring compensation for US victims in their courts. In order to secure a successful outcome to the negotiations, the American Government unashamedly interfered in domestic litigation and recommended a stay of civil actions on the basis of agreeing a compensation settlement for US citizens only.

The American deal with Libya was enshrined in the Libya claims settlement agreement of 14 August 2008, and was settled last month when the US Secretary of State Condoleezza Rice visited Libya. The deal means that three Americans—the only US claimants—will be well compensated, and rightly so, but the remaining 139 UK claimants and the class action of some 3,500 British claimants are now back to square one. That cannot be right or just. It is a travesty of justice that has caused considerable dismay and anger among those who now find themselves no better off than they were when they embarked on their just case.

One of the other people who came to the House last week was Willie Frazer of the Northern Ireland-based pressure group, Families Acting for Innocent Relatives. He said:

“We tracked down the American victims to allow us to take the case in the first place. They will now be entitled to get compensation. I don’t begrudge it to them. We have been working on this for six years, to hold Colonel Gaddafi responsible. We thought there was some justice in the world.”

That view is common. It is felt not just by him but by many victims in Northern Ireland and throughout the United Kingdom in relation to how matters have proceeded. The Government’s stance on pursuing compensation appears to be to do nothing. That approach can only infuriate victims further. If it was important for the Government to intervene proactively before, it is imperative that they do so now that the case has come to such an abrupt and unsatisfactory stalemate.

The Prime Minister, the Foreign Secretary and the Government must rise to the challenge. I ask them on behalf of the victims what they will do to ensure that Libya and Colonel Gaddafi are made to face up to their responsibility to compensate the victims of Provisional IRA terrorism. Her Majesty’s Government cannot afford simply to sweep the matter under the carpet. However Gaddafi and his regime in Libya are regarded today, we cannot allow them literally to get away with murder.

Unfortunately, the legal correspondence between the victims’ representatives and the Government does not fill one with great confidence that the Government are inclined to change their position. In a recent letter of 7 October, the Prime Minister said to the victims’ representatives that

“the UK Government does not consider it appropriate to enter into a bilateral discussion with Libya on this matter. Thus remains the Government’s position”.

He went on to say:

“I assure you that the UK in no way condones Libya’s past sponsorship of terrorism…It is, however, important that we recognise the fundamental changes Libya has made in recent years. It has dismantled its weapons of mass destruction programme and renounced its support for international terrorism, including the IRA. With the support of the UK, Libya has returned to the heart of the international community”.

That is all very well, but it will bring little comfort to the British citizens who suffer daily as a result of IRA atrocities sponsored and aided to a considerable extent by the same Libyan regime. It appears that the Government’s attitude is “Let’s not rock the boat. Let’s not do anything that will unsettle things diplomatically.” That approach is of course not adopted by other Governments, most notably those of the US, France and Italy; it appears to be the unique attitude of the UK Government. To their shame, they sit alone in that attitude, betraying and letting down the victims of terrorism.

This country has suffered more from terrorism over the past 30 years than any other nation in Europe, and perhaps the world, in terms of the length and intensity of violence inflicted. Recently, there has been unprecedented intervention in the banking and financial sectors. It has been all hands to the pump. I do not disagree with many of the actions taken in the current emergency, such as the setting aside of billions, but many victims have said to me recently that it is simply not tenable for the Government to say that they can and will do nothing to achieve justice through compensation for the victims of Libyan state-sponsored terrorism. In my view and that of many victims, the Government must fulfil that moral obligation. Such action will help bring closure to the deep and long-standing tensions between the United Kingdom and Libya and smooth the way to improved trade and business relations, but the issue must be dealt with. It will not go away.

As right hon. and hon. Members will know, a process is under way in Northern Ireland to consider how to deal with issues from the past. An awful lot of time and effort has been put into recognising that such issues will not simply disappear; they must be addressed. Just as that must be acknowledged, the issue of compensation and justice for the victims injured by the Libyans’ actions in supporting the IRA cannot be swept under the carpet. It must be addressed. We will have no closure or settlement of the issues until that boil is lanced. If it is not dealt with properly, the spectre of the victims and their suffering will continue to haunt us. It will not simply go away.

There are precedents for Government intervention, as I said. The new special relationship with Gaddafi and Libya has not prevented the US, French and Italian Governments from addressing victims’ needs in their recent agreements with Libya. The run-up to a proposed visit to this country by Colonel Gaddafi is an opportunity. I would be grateful if the Minister could confirm what the arrangements are for any such visit. Who will Gaddafi meet? Will the issue of facing up to his responsibility for IRA terrorism be addressed with Ministers? Will there be an opportunity for victims and their representatives to meet him and put the case directly? It is essential that that should be taken on board.

It is vital to ensure that justice is done and is seen to be done for the victims. We welcome the Libyan regime’s progress in normalisation and the fact that it has taken its place in the international community, but this country cannot say, uniquely and alone, that we will do nothing as far as the victims are concerned. Others have done it; it can be done. It is imperative that this Government act on behalf of the victims.

It is a pleasure to follow the hon. Member for Belfast, North (Mr. Dodds). I congratulate him on securing this debate on an issue that I know he and his colleagues feel strongly about on their constituents’ behalf. I know that the matter is of considerable concern to his constituents and groups representing the victims of IRA terrorism, and of course to the victims and their relatives and friends. The Government are acutely aware that many thousands of people have suffered terribly as a result of IRA terrorism. They continue to have the Government’s deepest sympathies and my own.

The hon. Gentleman’s central question, as I understand it, is whether the British Government will pursue a bilateral settlement with Libya to obtain compensation for the victims of IRA terrorism who have brought claims before the US courts. Before addressing that important and complex question in detail, I assure him and the victims of IRA atrocities that the Government recognise that it is essential to acknowledge and address victims’ suffering as a necessary element in the reconciliation process in Northern Ireland. The Government, along with the Northern Ireland Executive and others, including many non-governmental, community-based organisations, have already taken many steps to provide support and services for victims of the troubles.

Since 1998, as the hon. Gentleman knows, the Government have invested more than £20 million in victims’ initiatives. Over the past few years, in line with the reshape, rebuild, achieve strategy, responsibility for most initiatives relating to victims has passed to the Northern Ireland Executive, as is right and proper. Central to that responsibility are the four commissioners for victims and survivors, recently appointed by the First and Deputy First Ministers, whose statutory remit will include representing the interests of victims and survivors and reviewing the services provided for them. That is a welcome development.

As well as associating myself 100 per cent. with the remarks made by the hon. Member for Belfast, North (Mr. Dodds), I remind the Minister that the atrocities were not confined to Northern Ireland, although they were particularly intense there. They were United Kingdom atrocities. I lost a constituent in 1992 in the City of London; I think it was at the Baltic Exchange. The Minister refers to what is happening in Northern Ireland, but the remedy sought is for United Kingdom citizens from Essex to Warrington as well as in Northern Ireland.

I take that point firmly on board. The IRA attacks were upon all UK citizens.

The hon. Gentleman referred to the fact that the United States and Libya signed a comprehensive claims settlement agreement on 14 August. The important point is that that followed an explicit approach by Libya to the US to resolve outstanding compensation claims in order to improve their relations. Under the agreement, compensation will be paid from a humanitarian fund to several categories of victims. Libya’s sovereign immunity before the US courts will be restored, and terrorism-related legal action, prior to June 2006, before the US courts will be barred.

It is true, however, that those who will receive compensation will be of either US or Libyan nationality, with the exception of those involved in the Lockerbie case. Although the provision of the outstanding compensation to the families of the 52 British victims of Lockerbie is welcome—I am sure that the hon. Gentleman would acknowledge that—I am of course disappointed that the agreement between the US and Libya could not provide compensation for all British claimants in the US proceedings regarding Libyan-sponsored terrorism.

I assure the hon. Gentleman, and all others with an interest in this issue, that the UK Government recognised the importance to the UK victims of their US legal claims, which is why we made real efforts to raise their interests with the US Government. When it became clear that the negotiations were taking place between the US and Libya, the UK Government made a number of diplomatic representations urging the US Government to include, on the list of recipients of any compensation package, UK claimants who had brought cases in the US against Libya. We attempted to do that, but regrettably it did not prove possible for the UK claimants to be included in the US-Libya agreement. A key reason for that, as the Prime Minister explained in writing to H20—the law firm representing the claimants—was the US view that international and US law did not permit the US Administration to espouse as its own the claims of non-US nationals. The US Administration was precluded by law from espousing the claims of UK nationals as part of the compensation agreement. Also relevant to the US decision was its assessment—I must underline that it was its assessment—of how likely the cases were to succeed in the US courts.

Why Lockerbie and not the IRA victims? Although I am sure that the hon. Gentleman would welcome the inclusion of British Lockerbie victims among the recipients of compensation, it is worth emphasising that they have been able to benefit from this agreement because of the unique circumstances of the case. Unlike Libya’s support to the IRA, the Lockerbie bombing was subject to a UN Security Council resolution that required Libya to accept responsibility and pay victims’ families appropriate compensation. Libya agreed to do so in 2003 following negotiations between the victims’ families and Libya. The sums paid to the Lockerbie families under the US-Libya agreement represent the last unpaid tranche of previously agreed settlement payments. Regrettably, no such mechanism, settlement or court judgment is in place in relation to the legal actions regarding the supply of arms by Libya to the IRA. I wish that things were different, but those are the facts of the case.

The hon. Gentleman has urged the Government to open bilateral negotiations with Libya to seek compensation for the British victims of Libyan-sponsored IRA terrorism. The Government considered that very carefully at length and on a number of occasions, and we understand that it is a difficult and sensitive matter for those involved. Although the Government made diplomatic representations to the US Government about their agreement with Libya, the Government’s position remains—I respect his view, of course—that we will not seek to enter into a bilateral discussion with Libya on this matter.

Will the Minister stop relying on others to do something that the British Government should do? What action will our Government take on behalf of our citizens to defend their rights and bring them justice?

We have taken action on behalf of UK citizens. A claim was made about the Italian Government, but actually the Italian Government compensated Libya—not the other way round—for past colonial actions.

I wish to make it absolutely clear, however, that in reaching this position the Government in no way, shape or form condone Libya’s past sponsorship of IRA terrorism, nor—this is crucial—underestimate the suffering caused by IRA atrocities during the troubles. However—this touches on the key point that the hon. Member for Belfast, North raised—it is correct that in addition to the US, France secured a compensation agreement for victims of the bombing of the Union des Transports Aériens flight in 1989, although the circumstances were much more analogous to the Lockerbie bombing than to IRA-supported terrorism.

They are French.

That was an aside. We have delivered for the victims of Lockerbie on exactly the same basis as the French Government delivered for the citizens.

We do not believe that we can negotiate a bilateral settlement with Libya, for reasons that I shall explain. Although there can be no doubt that Libya’s financial and material support to the IRA added significantly to its paramilitary capabilities, both the situation in Northern Ireland and our relations with Libya have been fundamentally transformed in recent years to the benefit of everyone concerned. Libya has dismantled its weapons of mass destruction programme and—crucially—renounced its support for international terrorism, including for the IRA.

Is the Minister aware that the Semtex explosives supplied by Libya were used in a device fired at police officers in Lisnaskea, County Fermanagh, just a few weeks ago, and that Gaddafi’s arming of the republican movement is still having consequences for police officers on the streets of Northern Ireland?

I do not absolve Libya from its responsibilities for its past actions, but it is incontestable that there has been a transformation in our relations with the Libyan Government to the benefit of people throughout the UK. Libya has renounced its support for international terrorism.

In 1995, Libya explained to the UK Government the extent of its support to the IRA. It has also complied with UN Security Council resolutions and handed over the Lockerbie suspects for trial, in return for which all UN and EU sanctions against Libya have now been lifted. With the support of the British Government, Libya has now returned to the international community—that is in everyone’s interest—and has built normal co-operative relations with those countries to which it was formerly hostile, and we believe that it is right to seek to build on this improvement in relations. Libya is now an essential partner for the UK on wide-ranging issues, in particular in the fight against today’s terrorist threats. It is vital for the UK’s present and future security that that co-operation continues.

For its part, Libya considers this matter closed. [Interruption.] Let me continue. In 1995, Libya explained to the UK Government the extent of its support to the IRA. We should not underestimate the significance of that explanation, because it helped the Government accurately to assess the true material capacities of the IRA. Without that agreement and information, it would have taken us longer to make progress in Northern Ireland. The Libyan Government have subsequently made it clear to us that they now consider this matter closed and that they would be strongly opposed to reopening it. It is therefore this Government’s considered assessment that Libya would not support a bilateral settlement of these cases with the UK Government. That is an important point given that in the US, Libya actually initiated the agreement.

I understand the concerns expressed forcefully by the hon. Member for Belfast, North on behalf of his constituents. We have taken action and I think that the situation has improved. Relations have been transformed to the benefit of citizens throughout the UK, including in his constituency. Nevertheless, I understand the force and conviction with which he put forward his arguments and congratulate him on securing this debate.

I was grateful to have secured this debate, but when I heard that the Government were making a statement on support for small businesses, I hoped that I would be able to tear up the speech. Sadly that was not the case, but we are all grateful for any small measures that they come up with to support small businesses. We have all watched financial events unfold over the past few months with huge concern. Every person in the country is affected, but today I ask the Government to help the small business sector to survive over the coming months.

Ten days ago, a small business owner in Solihull e-mailed me to say that his bank, HSBC in Solihull, had withdrawn his business overdraft without warning. He described his business profile as very profitable overall, but spiky. He needed an overdraft to help him get over the spikes. His so-called relationship manager had already agreed verbally to the facility and was mysteriously unavailable when he tried to contact her for an explanation. Naturally, I have written to the manager of the bank and to the chief executive of HSBC about the matter.

I have also written to the chief executive about the case of another small business involving the Harborne branch of HSBC. An art studio and retail outlet opened with the full support of that bank. The three directors provided the start-up funding. The business applied for an overdraft to ease its early cash-flow problems caused by having to pay the business rent three months in advance. Despite being able to demonstrate steady growth over the first six months, the application was flatly refused.

The Federation of Small Businesses has been good enough to provide me with further examples from all over the country. Barclays has raised overdraft rates from 2.2 to 5.5 per cent above the base rate. On one company account in east England, it was raised to 7 per cent. above the base rate. NatWest doubled its interest rates on an overdraft and loan for a south Wales-based company and introduced a facility fee of 2.5 per cent. The company had never defaulted on or delayed a payment, but its banking overheads were increased by £100,000 a year. There are more examples, but you get the flavour, Mr. Amess. I find it sickening that some banks are pulling the carpet from underneath small businesses when those same banks have been treated most generously by the taxpayer.

Some businesses are being squeezed at both ends of the credit chain. Some large companies, including supermarkets and retail outlets, are arbitrarily changing their terms of business by extending payment schedules in their own favour to improve their cash flow. Boots, which I name and shame, has extended its terms from paying suppliers about 45 days after the delivery of goods or services to potentially more than 100 days.

I welcome today’s statement that Departments will make prompt payments to their supply chains within 10 days. I also welcome the commitment given in last night’s debate to look at lowering barriers to enable small businesses to become approved suppliers for Government contracts. Frankly, it is currently hard for small businesses to get a look in. Local authorities such as my own in Solihull can be seduced into awarding huge swathes of service contracts to large companies, thereby cutting out small suppliers. Will the Minister undertake to ensure that the prompt payments to first-tier suppliers feed down the supply chain?

On that point, let us take as an example a big company that has 400 small businesses in its supply chain. The Government will deal with the big company and pay it, but the trickle-down effect is immensely slow and I fear that it will get slower. Does the hon. Lady see that as a problem? Perhaps she will ask the Minister whether there is any opportunity for the Government to help in that respect with their major suppliers.

That is an excellent point, which covers exactly what I am about to ask the Minister. Will she undertake to ensure that the prompt payments that the Government and its agencies make to first-tier suppliers feed down the supply chain? If that does not happen, it will be predominantly large companies that benefit and not the little guys at the bottom.

Worryingly, a Federation of Small Businesses survey found that 51 per cent. of businesses were seeing an increase in their payment times from invoicing to full payment. The FSB maintains that that reflects its concern that large companies are improving their cash-flow performance on the backs of smaller companies. If a small supplier does not like it, they can lump it. The large companies hold all the cards, but should they? Should not the companies that can pay in a timely manner exercise some corporate social responsibility and pay?

When such cases are brought to the attention of the Government, is it possible for a Minister to put pressure on large companies to see whether their influence can persuade those companies to take a more responsible approach to their payment terms? It is in the interests of large companies to do that, as the hon. Gentleman pointed out last night. Otherwise they may find that they have no supply chain left.

At the other end of the credit chain, banks often increase charges for credit or cut off credit facilities arbitrarily. Banks have suddenly and unilaterally altered loan deals and then charged firms higher administrative costs for making those charges. I read that in the Daily Mail, Mr. Amess, so it must be true. Some banks have argued that changes in interest rates and other charges will push only companies that are in trouble over the top. Let me tell them that in the vast majority of cases, the problem is not solvency but liquidity. The FSB survey also found that more than three quarters of companies that borrow have seen an increase in the cost of their finance over the last year. A survey by the London chambers of commerce conducted last week and this week found that more than a third of businesses have experienced difficulty in accessing credit as a result of the financial turmoil.

The hon. Lady raises an important point that I want to highlight. In many cases, this is about contingency. We will see more bad debt and an elongation of the payment of invoices. Small businesses can run into a one-off problem or have cash-flow problems even if they are very profitable. It is that understanding that we need from the banks—that firms can be very profitable but still get a major hit on cash flow, which they need real help with there and then. They want the bank’s decision made there and then, too.

I am grateful for that intervention, because again the hon. Gentleman raises an important point. If he will have a little patience, I will go on to talk about some of the things that we could ask the Government and the banks to do to help to resolve the short-term cash-flow problems that many of these small businesses have.

The Government have made £50 billion available to the UK’s top eight banks and say that they will require those banks that they bail out to give competitively priced debt facilities to small businesses. The Government have said that the arrangement that they have made with the banks is for the banks to maintain the same level of lending for the next three years as they maintained in 2007.

I apologise for arriving late; I did not race back for this debate from the vote in the House as fast as some other hon. Members managed to.

One of the fears that some businesses in my community have is that they have never needed credit in the past, but because of late payment they suddenly need credit and they have no credit history. They are very afraid that the definition of credit to be made available excludes them, because they were not part of the customer pool in 2007. Will my hon. Friend ask the Minister to address that?

Indeed. That is another crucial problem for those companies, which have been so successful in the past that they have not been hit by this tsunami of financial difficulties. Now, at the very moment that they need to ask their banks for help, they face difficulties. I am sure that the Minister has taken note and will ensure that, where banks have customers who have had good cash-flow records in the past, the banks should look very sensitively at this new group of—let us face it—potential good customers.

On the £50 billion that the Government have made available and the 2007 lending levels to which the banks must adhere, only yesterday Lord Mandelson was rowing back on that commitment, saying that the banks would “offer” money at those levels.

Of course, I would be the last one to criticise the Government for not helping small businesses. The Prime Minister negotiated £12 billion-worth of aid through the European Investment Bank. That money is to be made available in the form of “soft” loans from British banks. However, the reason, apparently, that the release of these loans has been delayed is because the Government interfered in how the high street banks should co-ordinate in order to promote the scheme.

I received assurances in the small business debate last night that the Government are not holding up those moneys. I am sure that they do not intend to. However, I do not have a single example to quote yet of that money trickling through to where it is urgently needed. I urge the Minister to get on with it and release that badly needed funding. I hope to goodness that it will not get snagged up in the miles of red tape that we have seen created by other Government grant initiatives. Forget the red tape, because as we speak, companies are failing for want of this life-giving cash injection.

The hon. Member for Twickenham (Dr. Cable) has talked about excessive levels of debt, which leads to the argument that there should be less debt around. Who does the hon. Lady think will suffer as a result of reducing debt levels?

I am not entirely sure that I understand the point. When the hon. Gentleman talks about reducing the levels of debt, does that mean debt for the companies or debt for the banks?

The hon. Member for Twickenham frequently talks about reducing the level of debt in the economy. That means that banks will have to lend less if they are to reduce the level of debt. Who will suffer when that level of debt comes down?

I am not aware of my hon. Friend having made any such statement. Only today and in the debate yesterday, my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso), who is sitting here and is big enough to speak for himself, agreed with the Government about the amount of borrowing that is necessary to try to refloat the economy. I am not sure where the hon. Gentleman has taken that idea from, but I suspect that it may be slightly incorrect.

Is it not the case that the debt to which my hon. Friend is referring is the vast tide of toxic debt that has been wracked up by a greedy City, which sloshes around in the balance sheets of banks, bringing them to their knees? That is the debt that we want to see removed from the economy.

I am extremely grateful to my hon. Friend for that intervention; he has helped me out very graciously there.

Perhaps I can help the Minister with some further suggestions. I was wondering whether it would be possible for her colleagues to negotiate an agreed protocol with all the banks that have received taxpayers’ money. My hon. Friend the Member for Caithness, Sutherland and Easter Ross, in his response to the Government statement, asked for the Government to agree a memorandum of understanding on vital issues, such as limits to the fees and rates to be charged, availability of finance and so on.

Could that list not also include, say, a requirement that banks always give at least one month’s notice of any changes in banking terms of business? Furthermore, could the other banks not adopt the same sort of procedure as Lloyds TSB, which has about 5 per cent. of its business customers on a special “watch list”, to give them extra support? How much better is that than pulling the rug out from under them?

In the small business debate yesterday, the attitude of some banks that make arbitrary decisions at a level removed from the immediate branch and the customer’s situation was raised. The best person to decide how help is to be given is surely the person who is closest to the problem. It is meaningless to designate someone as a “relationship manager” when there is no real relationship. They might just as well sit there and say to the company that approaches them for help, “Computer says no.” I will be making these points when I meet the chief executive of the British Bankers Association next week. However, what we really need is for the Government to row in and ensure that these changes, or something like them, happen before it is too late.

I know that this is a crazy idea, but could we not even get the magnificent Business Link advisers to row in and help struggling companies? Indeed, the Economic Secretary suggested that in his statement. Those advisers could work with the banks to help businesses, perhaps requiring banks at least to consider schemes such as the small business loan guarantee scheme. Would that not be a really good use of Business Link advisers’ time?

I do not know whether the Minister has noticed, but take-up of the small firms loans guarantee scheme has been steadily declining. I think that that is because many companies need more than the existing £250,000 limit and the process to obtain the money has been criticised by many businesses as being the biggest barrier to obtaining it. Why not increase the limit that a firm can apply for and get rid of the red tape that is holding firms back? After all, we would not stop at a roadside accident where a victim was bleeding to death and fill in a questionnaire before applying a tourniquet, would we?

Having said all that, the picture is not all bad. Some small businesses can prosper in economic downturns such as this one because they are more flexible in adapting to a changed market circumstance.

One particular problem that many businesses face in my constituency and that of my hon. Friend is the continuing failure of rate relief on empty properties. That is a standard fee which is very costly to the type of businesses that she is representing. As some of our small businesses contract, that situation is getting markedly worse. Would she welcome an extension, at the very least, of the three-month holiday period for payment on empty properties?

I completely understand what my hon. Friend is saying. Indeed, I do not know whether he has seen my early-day motion on that subject, which calls for the Government to re-examine the policy on rate relief for empty businesses. Companies are making money from needlessly demolishing commercial property because the property owner cannot afford to pay the empty property rate relief. I have a constituent who is letting his commercial premises in Birmingham at only 50p a square foot, because he cannot afford to pay the empty property rate relief. My hon. Friend makes an important point. Why, at a time when it is clear that there will be much less demand for commercial property, can we not help this sector of the market and make some adjustments to Government policy? Otherwise, when the upturn comes there will be nobody to do all the jobs that will be created.

On a positive note, however, businesses—particularly small businesses—are extremely flexible. They can survive and prosper, but only if they get a little help from their friends, the banks.

I congratulate the hon. Member for Solihull (Lorely Burt) on securing this debate in such a timely manner. I know that she has a strong interest in consumer affairs. When I was the Minister with responsibility for trading and consumer affairs, she represented the Liberal Democrats with distinction, although she caused me uncomfortable moments at times, particularly during the passage of the Consumers, Estate Agents and Redress Act 2007. During the passage of that Act, she spent a great deal of time talking about vulnerable consumers and the impact of indebtedness on them, individually and as families. The points that she made in today’s debate are among a family of measures that she is prepared to set before the House.

I declare an interest: since leaving the Government, I have become president of the Money Advice Trust, which was founded in 1991, following the Conservative Government’s report on indebtedness and the lack of free face-to-face advice—or free advice of any kind—to help people to get out of debt and to manage their resources effectively so as to prevent them from going further into debt, or back into debt once they had come out of it.

Since 1991, the president of the trust has been Lord Borrie, so I have large shoes to fill. I am enjoying the role, and I hope to give a flavour of the trust’s work to all hon. Members, because it is not a partisan political organisation. Indeed, during the Conservative party conference in Birmingham, the Leader of the Opposition visited the service and was made extremely welcome. He had a private discussion and debate not just with those who run the national debt advice centre in Birmingham, but with the staff who have daily contact with people to work on their indebtedness and to help them through it to reach the other side and keep them and their families together.

The Money Advice Trust is there to increase the quality, availability and efficiency of money advice. It receives resources from Departments and from the banking and other sectors, with two thirds of its funding coming from outside Government and one third from Government. The trust’s job is to co-ordinate money advice, provide direct service provision free to all who contact it, provide information, and influence the training and research of the money advice sector.

The trust is chaired by Martin Hall, former director general of the Finance and Leasing Association, who has a great reputation in the City and in the voluntary sector, where he is involved in work in this area. The chief executive is Joanna Elson, a former executive director at the British Bankers Association, who is one of the most effective chief executives working in this area, in this country and in Europe.

The Money Advice Trust opened up Business Debtline and has now received pledges from the Department for Business, Enterprise and Regulatory Reform, for which I wish to thank the Minister, for an ongoing budget through to 2010. Since September this year, demand for the Business Debtline service has risen by a staggering 60 per cent., putting stress and strain on its resources and ability to give good-quality advice to those who need it, and need it quickly.

The co-ordination of the free-to-client money advice sector, which includes Citizens Advice, is done by the trust. As a consequence, through Government funding, we now have the largest number of debt advisers of any country in Europe. That is down solely to the funding provided by the Government and the significant role played by the former Treasury Minister, my right hon. Friend the Member for Normanton (Ed Balls).

The National Debtline and Business Debtline have helped 135,000 people so far this year. They have trained more than 90 per cent. of the country’s free-to-client debt advisers, including those funded by the Treasury’s financial inclusion fund. The trust is training a further round of debt advisers, who will work not just for the trust, but for other parts of the sector. It will be training the advisers to deliver the Government’s mortgage rescue system, and it looks forward to taking up that task as soon as possible.

Since becoming president of the trust, I have held meetings with the Treasury, the Ministry of Justice, the Department for Work and Pensions, the Department for Communities and Local Government and the Department for Business, Enterprise and Regulatory Reform to keep them abreast of developments, and they are all investing in one form or another in the trust and its services.

Business Debtline is becoming a much valued asset and resource, and the trust hopes to be able to keep the House and the Government abreast of what the debt line finds. It is a unique national service, offering free, confidential and independent advice by telephone on how to deal to with debt or the cash-flow problems that trading businesses encounter, and which lead to financial difficulty.

Business Debtline was the first crisis intervention hotline for small businesses created in western Europe. The positive impact that it is having is such that the European Commission and other partners have asked it to assist in the launch of three similar pilots in France, Spain and the Netherlands. The problem of small business indebtedness is not peculiar to this country; it affects small businesses across the globe.

This current credit crunch takes vulnerable businesses to the brink. It adds to our burden and problems with the market, cash flow and relationships with suppliers, in getting back from them the income that they owe. That all adds up to a difficult situation for small businesses, as has been reflected time and again in calls to Business Debtline.

About 15,000 small businesses based in the UK will have contacted Business Debtline by the end of the quarter. The Business Debtline website was launched a year ago and is receiving 100,000 hits per month. It is designed to give practical help and advice to small businesses.

From my point of view, there is no point in my representing the Money Advice Trust and not letting hon. Members know just how much effective intervention is needed at an early stage, and how many businesses require such help. The Government are already using that type of information, which has been reflected in ministerial financial statements, in the Secretary of State’s statement yesterday and by the Economic Secretary to the Treasury in the House this afternoon.

During September, Business Debtline received more than 5,500 calls from businesses seeking help and advice. As I said, that is an increase of 60 per cent., compared with an increase of 30 per cent. in calls to the debt line for consumer customers, who are not business owners. The pressures on the business community, particularly the small and micro-business community, are intense at this time. It is important that the free advice that is provided allows businesses to survive and to utilise the other services being made available to them, whether through the Government or other agencies.

I met with Which? on 14 October on behalf of the Money Advice Trust, and during that meeting explained the newly established National Economic Council, which is a welcome initiative by the Government. I wrote to the Chancellor on behalf of the trust to indicate the importance of working with the trust.

However, one aspect of the council needs strengthening at some stage, and that is that it does not have any direct consumer representation. Which? has now put that in the public domain, and I welcome its support, but it was the trust that wrote to the Chancellor first, on 14 October, and asked him to consider establishing at least one place on the council for an independent consumer representative. For that, I do not mean a politician such as me. There are many skilled, knowledgeable people whose job it is to represent consumer interests, and they could play an effective part.

The whole point of the council is to deal with the practical nuts and bolts of how this country takes on the challenges, one of which must be to ensure that the problems faced by individual consumers and small businesses are reflected through the council. I ask my hon. Friend the Minister to ask the Chancellor to look at that request sympathetically.

I also wrote to the Chancellor to tell him that on Monday I will be bringing together all the partners that provide money advice across the United Kingdom: citizens advice bureaux, AdviceUK, the Consumer Credit Counselling Service, the Institute of Money Advisers, Citizens Advice Scotland, Citizens Advice Northern Ireland, Money Advice Scotland and Advice Northern Ireland. We will discuss how we can respond more effectively to the current crisis, the demand for advice services, our current capacity and what capacity we forecast will be required next year. We need to co-ordinate across the whole sector and work not just as individual groups but collectively to maximise the service to the benefit of consumers who are in debt or may get into debt if they do not get proper free advice. We are looking for better ways to work together and to improve access to the capacity that we already have.

We are looking at how the recent steps that the Government have taken in the banking system will affect funding for the free advice sector. Much of our work is done with the banking sector, and of course changes to the structure of the banking system have already taken place. We are looking at how the changes will impact on the job that we do for the Government in terms of the resources that they provide and what more we can do to assist. We are looking at how we can help the Government to help consumers with actual or potential debt problems. I shall write to the Minister following the meeting on Monday, and I hope that we can discuss as soon as possible the outcomes of the meeting, because the whole purpose of the groups, in helping the consumer, is to help the Minister to understand the issues that consumers face and what we can do as a sector to assist consumers and secure support for them.

One thing that is always forgotten when people get into debt is the fact that the vast majority of them did not get into that situation because of wilful failure on their part. An overwhelming majority of people who get in debt want support and help to get out of debt. More than 80 per cent. of the people who are helped by our service repay their debt and go on to repair the damage done to their life and their family.

The damage done by debt can be severe. Debt can cause severe problems to people’s health, and to relationships in the family and in the workplace. Ultimately, for small businesses, it can lead to their demise and, with that, a demise of the financial structure that underpins the stability of the family, including the potential loss of other assets such as the home.

Debt is not something that someone willingly takes on. It has a serious impact on individuals and families. The debt advice sector is important in helping the Government when people are in debt and in securing resources to do that. It also feeds back to the Government and to the House what is happening on the ground in a fast-moving situation. Even where there is total sympathy, as well as the structures in Government to assist and support people and the community, the fact is that it is only through the debt services that such problems are quickly discovered.

It was through debt counselling, for example, that we became aware of and advised the Government about problems in the court system. Too many people were being automatically put up for repossession when other measures could have been followed first. That information came through the phone lines of the Money Advice Trust and others who give advice. Therefore, the debt advice sector is critical to helping to find solutions to problems that are arising.

I offer the Minister and her colleagues in the Treasury an opportunity after next Monday to get feedback, and I hope that out of that feedback we will be able to provide an even more effective advice service on behalf of her and her colleagues, and co-ordinate effort across the whole sector—not just the Money Advice Trust, but all the other organisations that I named. All of them, in one part or another, receive resources from the public and the private sector, and it is our job to ensure that we provide support services not just to those who are in debt, but to the Government, who want to provide the best possible services to prevent people from getting into debt, or, if they are in debt, to help them to get out of it.

I again thank the hon. Member for Solihull for this opportunity. I hope that the information that I have provided to Members has been of interest. I would be happy to make arrangements for any Member who wished to do so over the coming months to visit our services in Birmingham. On the ground, meeting the staff, Members would get a better understanding of the services that we provide, the quality of the advice that the staff give and the knowledge, sympathy and empathy that they bring to the discussion. We are the first point of contact for many people. Their whole life is crumbling before them, and what they need is someone who has not just knowledge but sympathy and empathy to take them through reconstructing their life and to help them through the business of getting rid of their debt.

I have a final point to make about the banking system and our discussions on reforming it. When I was a Minister, we established services in places such as Birmingham—they have now been rolled out across the country—to prevent people from getting into the hands of illegal money lenders. In the evidence about how illegal money lenders operate, it came out that, in the first instance, banks had removed themselves from giving quality, legitimate, transparent assistance to communities, small businesses and citizens, particularly in poor, inner-city and urban areas. When the banking system withdrew its services, it opened up opportunities for illegal banking services and all the social and criminal problems that come in their wake.

Therefore, when we consider the future of the banking system, we must ensure that the institutions that come out of the rescue package go back into and invest in those communities and, alongside the voluntary sector, offer banking services to ensure that people are not forced into the hands of illegal money lenders.

It is nonsensical that in large parts of the United Kingdom in the past 20 years or so banks have consistently withdrawn their services to communities and that, as a consequence, millions of pounds of legitimate business has been forced through the hands of illegal money lenders rather than through the legitimate facilities of banks and building societies. There is an obligation on the industry to work with the Government, who are putting in huge resources to rid the country of the scourge of illegal money lenders. We can put them in jail, but others will come in if legitimate banking services are not available.

The lesson that we should all learn is that the only way to keep illegal money lending out of the system and stop people getting into debt to money lenders is to reintroduce legitimate lending services through the banks, building societies and other institutions. The Government have done a great deal of work on that, and I hope that my hon. Friend the Minister will take it forward.

I congratulate my hon. Friend the Member for Solihull (Lorely Burt) on having secured this debate at this time. She has clearly caught the mood of the moment.

Before I respond to her remarks, may I briefly congratulate the right hon. Member for Makerfield (Mr. McCartney) on his contribution? It was not so much about small business—more about individual people—but it was important. I recall that when the Minister and I sat on the Treasury Committee together, we looked in some detail at the matter that he discussed. There was a great deal in what he said, and I am sure that the Minister will be sympathetic to it.

One point that I would make briefly is about the importance of credit unions. I happened to have the opportunity late last week to be in a pleasant part of Scotland called Glenrothes. I visited the credit union there and was impressed by the work that that small credit union in the kingdom of Fife was doing.

My hon. Friend has clearly caught the moment. We are at the point where what was, a year ago, a credit crunch that appeared to be almost entirely confined to the City has now well and truly spread out into the high street. Small businesses are vital for commerce. They are major employers and, when taken together, they form the majority of the local economy, particularly in many rural areas such as the one that I represent. Those employers are exactly who hon. Members would expect: hoteliers, restaurateurs, shopkeepers and small farmers, who run important businesses. Interestingly, they are also often small start-up companies in the knowledge economy, which are being nursed through and are growing. All these companies find themselves suddenly vulnerable. For all of them the problem is the same: cash flow. We are back to that moment when cash is king.

I was running a business in the last recession and was responsible for one in the recession before that. I know precisely what owners and managers are thinking at the moment; they are worrying about where the money is coming from to meet the payroll. That is everybody’s worry. Next after that they are worrying about how on earth they will deal with Her Majesty’s Revenue and Customs on tax and VAT. They are trying to squeeze their debtors to pay quickly and stretching their creditors as much as they can, they are cancelling orders where they can and are not going ahead with capital expenditure. On top of all that, the real worry is whether they can hold on to their banking facility and whether their bank will stand by them through this situation.

We heard evidence earlier—we heard evidence in the debate in the main Chamber yesterday and during the statement this afternoon—of banks removing facilities. One problem is that overdraft facilities may be agreed for a year, but the fine print says that those are repayable on demand. Another problem is that, suddenly, as my hon. Friend mentioned, interest rates are going from around 2 to 2.5 per cent. up to 5 and 7 per cent.—and I have heard that they are going higher—and facility fees, which used to be £100, are suddenly £500 or £1,000 or whatever it may be. It is vital that we get to grips with that problem with the banking sector.

Since the Conservative spokesman, the hon. Member for Fareham (Mr. Hoban), raised the point, I should say there is nothing either particularly good or bad about debt. What is bad is badly constructed debt—the toxic debt that I mentioned in my intervention—and irresponsible lending to people who, frankly, should never have had the money in the first place. I am thinking particularly about young people who have been encouraged to take credit cards at exorbitant rates.

I was told a story six or eight months ago about a young lady who had amassed twice as much debt on credit cards as her annual salary. That is unacceptable. I would like to see such levels of debt reduced. I would not want to get back to such a level of irresponsible lending. Banks lending to companies that are solvent but need liquidity and the Government borrowing to advance projects to stimulate the economy are both examples of acceptable debt. We should encourage that, provided that we do so appropriately.

My hon. Friend set out the problems: one’s facility being taken away quickly and the cost involved. My hon. Friend the Member for Richmond Park (Susan Kramer) raised the problem of companies that have never had to acquire debt but find themselves with a working capital deficit and need to ask for some credit. At the moment, if people do not have a credit history they are unlikely to get a facility. The Government statement made this afternoon contained a fine sentiment, which was the promise that debt would be available at 2007 levels. In the statement that I received, “availability” was underlined. So it is the availability that is there.

I am delighted that a Treasury Minister is responding to this debate, because there is a real opportunity tomorrow, when members of the Government and Treasury officials meet with the banks as part of their negotiations, to ask for a formal memorandum of understanding or protocol to deal with these issues in principle before we get into the terrible situation of Government officials having to arbitrate on individual loans, which would be unacceptable. I suggest, as my hon. Friend the Member for Solihull said, that under such a protocol banks would agree not to exercise their right to cancel facilities overnight, but would give a minimum of 28 days’ notice. They would also agree to honour previously agreed facility fees and interest rates. The Government might like to consider asking the banks to allow businesses with term loans over five, seven or 10 years, for example, which are mostly made up of capital repayment with an interest slug on top, a holiday without penalty from the capital repayment, which would save them a lot of money, because it would be an interest-only loan and the capital sum could be added to the end of the term loan with interest on it.

Is there not a challenge here? Every time a loan is extended to a customer, that means less capital is available to lend to other customers. We are talking about banks with a finite amount of capital at the moment, where lending levels are lower, and there is an issue about trade-off, which needs to be recognised.

I understand the difficulties. In a 10-minute speech it is difficult to encapsulate all the detail.

Returning to what is good debt and what is not, if we are to allow borrowing in certain areas, it should be allowed for solvent companies with temporary cash flow difficulties in respect of their working capital, to help them by making minor adjustments, which the banks have done commercially on their own in the past. Agreeing that through a memorandum would be highly desirable.

The idea of making Government bodies at all levels pay at 10 days is laudable. However, I worry about how that will be policed or even quantified, because the vast bulk of large organisations pay by computer, usually through a monthly computer run to the bank. Will these organisations be in a position to make the payments that they are promising? However, more important than that is the point raised by my hon. Friend regarding large plcs conserving their cash by putting pressure on creditors who do not have the clout to argue with them. It is undesirable to attempt to legislate in any way on this. I suggest that the Minister talks to the CBI about the possibility of its making the point to all its members. Such a measure will ultimately have to be voluntary, but peer pressure from a respected organisation, such as the CBI, would make a considerable difference.

Finally, in the statement there was much talk of HMRC becoming more flexible, which I am looking forward to. However, I would like to know how that would work, because, as I recall, HMRC has a directive to be as efficient as it can about recouping its money. During the statement, my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) requested that the Minister at the Dispatch Box place in the Library of the House of Commons the new instructions being given to HMRC. However, the Minister was unable to answer that point, largely because he was from the Department for Business, Enterprise and Regulatory Reform. Perhaps the Minister will tell us when those instructions will be put in the Library.

My hon. Friend the Member for Solihull made a powerful case, and I hope that I have added a few constructive suggestions for the Minister to think about. It is clear that small businesses are vital to our economy. They will go through a short period that will be very rough and cash flow will be at the root of it, so anything that we can do to help them will be a wise investment for the future.

I congratulate the hon. Member for Solihull (Lorely Burt) on securing this debate. When she did so last week, she may have thought that this would be the only opportunity this week to discuss the issue, but events moved on, and we had an Opposition day debate in the House yesterday, and a statement this afternoon. Everything to be said may have been said, but certainly not everyone has said it, as I shall prove in a few moments.

The hon. Lady made some important points, but part of the challenge is that although the debate is about small businesses, large businesses are also facing cash flow problems, and there is a beggar-my-neighbour problem. A larger business facing similar challenges with cash flow and bank facilities may believe that the only way in which it can manage its cash flow is to sweat its debtors harder and make them pay faster, and to delay payment to creditors, as the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) mentioned from his business experience.

I am grateful to the hon. Gentleman for giving way so early in his speech. I completely understand where he is coming from, particularly in the light of the collapse of some huge organisations. When a bank collapses, one realises the precariousness of businesses at both ends of the spectrum.

My point, on behalf of small businesses, is that a larger business generally has a little more fat, but small businesses often live hand to mouth. Larger businesses can often absorb problems and cash flow difficulties, but they may be the end for small businesses if they are living hand to mouth. I am concerned for all businesses, but particularly small businesses.

The hon. Lady makes a fair point, but such problems are not limited to small businesses, and businesses across a wide spectrum will suffer. In my constituency, a private business with more than 50 employees is classified as big. Fareham has a huge number of small businesses, and I know that they are going through some of those problems.

The right hon. Member for Makerfield (Mr. McCartney) mentioned Joanna Elson, and I am seeing her next week to discuss the Money Advice Trust’s work. I welcome the fact that it has moved into providing advice to businesses. He and I, and other hon. Members have come across constituents who receive tremendous advice from the Money Advice Trust, citizens advice bureaux, and consumer credit counselling services. Their advice is often not to take on more debt, and how to manage finance better. That constructive advice is needed by small and medium-sized businesses and is a practical way in which to help them through the crisis.

I am aware that small businesses are facing high arrangement fees, that overdraft rates are rising from 10 to 15 per cent., and that facilities are being reduced and withdrawn, often at short notice. That is happening because of the credit crunch, because banks are hoarding their capital and rationing lending. Consumers have faced that problem during the past year, and more and more businesses are now facing it. Different banks act in different ways, depending on their strength. Some will be able to continue to lend, and I have heard examples of small businesses being refused facilities at one bank, and being granted them at better rates by another. There is an onus on businesses to shop around, but we see the impact of the credit crunch on the wider economy. In his speech in Leeds last night, the Governor of the Bank of England was very clear about that when he said that we are heading towards recession.

It is important that the Government consider ways to help small businesses and to ease their cash flow problems. We welcome the Government’s measure to speed up payment to suppliers, and the NHS and other Government bodies are also being asked to do so. We have argued that companies should be allowed to defer their VAT bills. They would pay interest on that, but interest at 7.5 per cent. is a lot better than interest on an overdraft of 15 per cent. That would help.

The hon. Gentleman is being extremely patient, and I am grateful. I wanted to ask a question about VAT during the debate in the House last night, because I could not find the cost of that measure on the Conservative party’s website. Although the Conservatives purport to have costed such measures, I could not see a costing or where they intend to find the money. I should be most grateful if he will enlighten me.

This is a first. I have never heard a Liberal Democrat ask for the cost of a policy. Had I known that the hon. Lady would be so prudent about spending commitments, I might have asked her to cost her party’s spending commitments. I do not have the figures to hand for every policy, but it is a reasonable way to help and encourage businesses. There is a cost attached, as there is to prompt payment.

Will the hon. Gentleman give way?

I am not sure whether I shall get injury time. I am supposed to take no longer than 10 minutes, but I shall be gracious and give way to the Minister.

It is kind of the hon. Gentleman to be so gracious, and I thank him. Is he saying that he does not know off hand the cost of the announcements that the leader of his party made? It is important to know how the Opposition propose to pay for the policies that they announce.

Order. The debate runs until 4 o’clock, so hon. Members have plenty of time.

Thank you, Mr. Amess, I promise that I shall not go on until 10 minutes to 4, unless the Minister or the hon. Member for Solihull provokes me to do so.

Our policy has been costed. We are a responsible Opposition, and we ensure that our policy proposals are properly costed because we know that the Government will scrutinise them, and we will not fall into the trap that they fall into of pretending that new money has been announced simply by rebadging it or bringing it forward.

Will the hon. Gentleman give way?

No. I have given way to the Minister, and I have said that our policy has been costed, but that I do not happen to have the figures to hand.

Perhaps the hon. Gentleman will circulate a letter with the costings, and perhaps he will give the figures in both sterling and roubles.

I knew in my bones that it was a bad idea to take an intervention from the right hon. Gentleman, whose remarks had been non-partisan, but he is now interested in roubles. I am sure that Lord Mandelson will be equally familiar with the cost of policies in roubles.

Another way in which to help small businesses is to reduce employers’ national insurance contributions by 1 per cent. for six months, which could be financed by the abolition of allowances elsewhere. Such measures would help to ease cash flow problems for small businesses, and that is what we want to do.

We have made other proposals to help small businesses. We know that some will need time to find refinancing. Their bank may have withdrawn a facility, but they may want to shop around, which is why we proposed some reforms to insolvency law to give a short breathing space to businesses, before they are put into administration, to help them to find that facility, and to provide greater protection for creditors who provide them with finance during that interim period. We do not want businesses to disappear or jobs to be lost unnecessarily, and it is important to provide a reasonable breathing space for businesses to find alternative facilities.

We must also consider the macro-picture. One challenge in the development of the crisis is that some of the rules governing the amounts that banks lend have encouraged excessive lending in the good times, and a contraction of facilities in the bad times. The Basel 2 arrangements reinforce either end of the business cycle, and we want those arrangements to be reformed to make the availability of finance much more stable. We are pleased that the hon. Member for Twickenham (Dr. Cable) agrees with us in that policy. It is important.

At home, we must give the Bank of England greater power to monitor the debt level in the economy, and to ensure that the Financial Services Authority takes action to tackle excessive lending. Although debt makes an important contribution to business growth, too much debt in the economy creates a bubble that hurts families and businesses when it bursts. We need to get it right. The Governor of the Bank of England has previously talked about a goldilocks economy—not too hot and not too cold. I suspect that in recent years, we have had an economy that is too hot and we are now paying the price for that.

I shall turn to the package that the Government announced to refinance three of Britain’s leading banks: Royal Bank of Scotland, Halifax Bank of Scotland and Lloyds TSB. On 13 October, the Chancellor said that the

“availability of lending to home owners and small business will be maintained at at least 2007 levels”.—[Official Report, 13 October 2008; Vol. 480, c. 540.]

However yesterday, Eric Daniels, who is the chief executive of Lloyds TSB, said to his staff:

“What we have given government is an assurance that we will make our products available in the SME markets…and mortgages, so we will have good availability and we will market just as hard as we did in 2007”.

There is a gap between the banks and the Government. The Government seem to be suggesting that lending will be at 2007 levels and the banks are saying that they will market at 2007 levels and make sure that there is good availability. Businesses will want some clarity about what commitment banks have given to the Government in return for the public finance they have received.

I would also like the Minister to comment on the effect that the Government’s package will have on the cost of capital to banks, because that will have an impact on the rates at which banks will lend to homeowners and businesses. The preference shares that the Government have proposed are priced at 12 per cent., compared with 5 per cent. in the US. An extra 7 per cent. will therefore be paid by way of dividends, which will force up the cost of capital. The guarantees are about 50 basis points above the average for a bank’s credit default swaps. That, again, could increase the cost of capital and will flow through to small businesses. Has the Minister looked at the impact that might have on the cost of borrowing for small businesses?

The hon. Gentleman raises an important point regarding the cost of capital. It surely must be right that the preference shares are reasonably costly because of the reason they are going. Does he agree that in that circumstance, if the banks get their act together and behave properly, they ought to be able to repay those preference shares? They should not be made to hold on to them for five years, as I believe they are meant to do.

The hon. Gentleman makes a good point. I can see why it is a good idea to pay the preference shares back quicker, but we ought to think about the cost of paying them back quicker, because doing so would imply that there will be less money available for lending to small businesses and families. The Chancellor is proud that Northern Rock has repaid £11 billion back to the taxpayer, but, of course, that means there is £11 billion less by way of mortgage capital out there in the market. We need to be careful about what we are going to commit the banks to and what the impact of accelerating repayment of the preference shares will be on lending. However, he makes a good point about reducing the cost of capital by repaying them earlier.

In conclusion, it is worth remembering what the Governor said yesterday:

“it will take time before the recapitalisation leads to a resumption of normal levels of lending by the banking system to the real economy”.

That is the position we are in at the moment. It will take some time for those levels to return and it will therefore be harder for small businesses to access finance. That is why it is important to ensure that the right measures are in place to help small businesses with their cash flow. The Governor’s words are also a reminder that we need to look for a stable level of borrowing in the economy, so that we have economic stability and avoid some of the overheating we have seen recently.

It is a great pleasure to respond to this extremely timely debate. I congratulate the hon. Member for Solihull (Lorely Burt) on her timing and on her success in the ballot. Her observations have given us some things to think about, and she gave prescient examples of what has been going on in her constituency. My right hon. Friend the Member for Makerfield (Mr. McCartney) also did that in his contribution. Those consequences have been brought home to many right hon. and hon. Members from all parties, which is why this subject has taken centre stage this week. We are all being made aware of how behaviour has changed and the effect that that is having on our small business sector.

Obviously, support for small business is a crucial subject at the best of times, but it is even more important during what we recognise to be much more challenging times. Like the hon. Lady, I recognise the vital role that small and medium-sized enterprises play in our economy. There are 4.7 million small businesses, which provide 13.5 million jobs. That is, I think, an increase of nearly 1 million in number since 1997 and 1.5 million more jobs since 1997. Those businesses contribute as much as large businesses to UK output and turnover.

Obviously, this tough economic climate creates challenges for us all. The effects of the global economic crisis have filtered down from major financial institutions to families across the country and to the country’s 4.7 million small and medium-sized enterprises, as we have heard. I recognise that some of the commercial sectors worst affected by the financial crisis are those dominated by small and medium-sized enterprises—for example, the construction industry. Some 60 per cent. of employment in that sector is in micro-businesses, which is double the national average.

I am proud of the Government’s track record in supporting small and medium-sized enterprises and we are determined to help businesses affected by the global economic difficulties by doing what we can to support those who need it most. Although the origins of the crisis are global, the response has included firm action in the UK that has, obviously, been taken by my right hon. Friend the Prime Minister and the Chancellor. Action has also involved working to restore stability, which has included working with our counterparts around the world to achieve the same end. As hon. Members will know, one part of the Government’s recent initiatives to support the UK financial system will use public money to buy shares in UK banks to improve their capital positions—the recapitalisation programme. So far, HBOS, Lloyds TSB and the Royal Bank of Scotland have signed up to a combined Government investment of £37 billion.

As has been said, banks participating in that scheme have made an explicit commitment as part of their agreement with the Government that, during the next three years, they will maintain the availability and active marketing of competitively priced lending to small businesses at 2007 levels.

Is the Minister saying that there is no commitment on behalf of banks to lend at 2007 levels?

I was about to go on to that. The commitment means that lenders will offer a wide range of products at competitive rates, which are made available to credit-worthy customers. The decision to lend to individual customers and businesses must by definition remain a decision for individual banks. That is dependent on the specific circumstances and a level of detail that it is impossible for the Government to get into in terms of deciding whether individual A or business B should get a loan, as I am sure all hon. Members will understand only too readily. In addition, participating banks have committed to publishing an annual report on their lending to small business. That will ensure that there is transparency about how banks are supporting small and medium-sized enterprises.

The banks have also committed themselves to reporting on application and usage of the European Investment Bank’s small and medium-sized enterprise loan facility, which the hon. Lady mentioned. Those are credit lines offered to banks specifically for their small and medium-sized enterprise lending at competitive rates. The European Investment Bank has made €30 billion available under that facility over the period 2008-11.

The Government are taking steps to raise awareness of that facility and strongly encourage all UK banks to make the best use of the funding. We expect that participating banks will need to review comprehensively their business strategies, to take account of the recapitalisations and commitments that they have made. We look forward to the outcomes of that work.

rose—

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I will give way to the hon. Lady, because it is her debate, so she gets first dibs.

Can the Minister give an indication of how long all the consideration that she describes will take? If I were a small business, how soon could I apply for some of the funding and how would I go about that? We have heard a lot about the funding, and many companies need it now, so will she elaborate on the time scale and methodology?

The scheme is applied for through banks. It is important that banks realise that the liquidity—the money from the European Investment Bank—is available and that they consider how they can ensure that they have access to it, use it and pass it on.

The credit guarantee and the special liquidity schemes, which were announced at the same time as the recapitalisation scheme, will help to unfreeze inter-bank lending, which will in turn free up liquidity at the other major banks, too. We are looking to see that that is passed on to businesses and home owners. It is in everyone’s interest that the financial system unfreezes—that lending unfreezes—and we get that vital part of the economy working. It is like oil in an engine. We have to get that in to facilitate the smooth working of the engine again. That is what the recapitalisation, special liquidity and credit guarantee schemes are designed to do.

My question is regarding the small firms loan guarantee scheme, which the Minister has mentioned. I welcome the fact that the Government have put more money in, but the extra money will not be used because last year, according to the annual report, only £270 million was lent. The number of firms availing themselves of that assistance has gone down year on year, and the default rate, which is costing the Government £68 million or £69 million, is running at 13 per cent. The critical difficulty is the way in which the scheme is administered and who is eligible. What will the Government do to make it available to more firms?

The hon. Member for Solihull raised that matter. My intention was to go on to deal with some of those issues, but I am more than happy to do so now. The Government are seeking to increase demand for the scheme. We increased the amount available for the scheme by £60 million to a total of £360 million for this financial year, which is a 20 per cent. increase. Ministers are engaged with banks to find ways of ensuring that the banks are promoting the scheme appropriately and that the liquidity that is in it is put where it is needed in the most efficient way and in a timely fashion. It is in everyone’s interest to ensure that that works.

As the hon. Lady said, a £250,000 limit has been set for the scheme. That was in response to the independent Graham review. The vast majority of loans at the moment are not at the maximum level, but we are considering options for improving the scheme. We want to see whether increases might be an appropriate way of dealing with the issue, but we are also considering outreach to ensure that the money gets where it needs to go. It is not applied for directly, as the hon. Gentleman hinted at in his speech. It is administered by the bank or as part of its portfolio of support available. We are considering means of improving the scheme and increasing uptake of it. Obviously, that will be in collaboration with the banks, but we may be able to do other things to ensure that knowledge of the scheme’s availability is more widespread.

My right hon. Friend the Member for Makerfield might know one such outlet in the form of the business advice that he talked about. We need to ensure that advice organisations such as Citizens Advice and debt advisers are aware of these programmes. Often, they sound boring and people do not understand or know about them. In the past, perhaps we have relied too much on those who are experts to use them. We need to ensure that knowledge of the programmes is much more widely held than perhaps it has been, and we will ensure that we bring that about.

The hon. Lady, in a series of interesting and important comments, suggested that Business Link should provide advice. It already provides advice to all firms, including on how best to access finance. In these times, we need to ensure that all advice organisations up their game as much as possible, respond quickly to a rapidly changing situation and give good, well-focused advice at just the time when it is needed. I trust that in the current circumstances that will come about.

My right hon. Friend made an extremely good speech, in which he mentioned a range of issues. I think that we were all extremely pleased to hear that the organisation with which he has become involved since he stepped back from manic ministerial life has launched debt advice for business. He is right to point out that the information from the front line about the 60 per cent. increase since September in calls to the helpline from small businesses is an early indicator of what is going on. It gives the Government information and advice about what is happening on the front line far more quickly than official statistics can. An important part of our having feedback mechanisms is so that we can respond quickly to the situation as it is changing. Naturally, I thank him for pointing out that it is Government investment in those advice services that has enabled 135,000 people to be helped this year. The quite sophisticated organisation that is emerging is doing important and pioneering work, offering debt advice not only to individuals but to small businesses. That is part of the financial inclusion fund.

I will pass on to the Chancellor my right hon. Friend’s request as to whether it is possible to have direct consumer representation on the National Economic Council. I promise that we will get back to him on that in due course. He should take pride in the fact that the announcements today on repossessions have been developed as a policy response partly because of the information that the Money Advice Trust and others feed back to Government to tell us what is going on regionally at the front line.

I thank my hon. Friend for that comment; I will pass it back to colleagues on the ground. The Government have assisted in putting in place a pilot project whereby we give advice in the courts for those who are at risk of losing their property. The Government may want to examine whether we can roll that out further to assist them with the announcement made today at Prime Minister’s Question Time, because that type of intervention will give security to the Prime Minister’s statement and help to ensure that people do not end up, wrongly, in front of a court having their house repossessed.

I could not agree more. I promise that we will continue to see what we can do, using the feedback mechanisms that have developed for debt advisers to respond rapidly to newly emerging problems.

My right hon. Friend mentioned loan sharks, which are an issue in many communities, including mine. I recently attended a conference on that in my constituency. I was happy to see that money from the Department for Business, Enterprise and Regulatory Reform, which has been developing a national response to the problem of loan sharking, has led in the past year to the closing of £6 million-worth of loan shark books. In my own area of the north-west, £100,000-worth of loan shark books were closed. There have also been prosecutions.

What is just as important is that debt advice is being given to those who have fallen into that trap. They are often guided to credit unions and given other advice. In one case, someone was rehoused. Extremely important and very focused work is going on in that area. However, I agree that once the loan shark books have been closed down, they will have to be replaced with other more sensible ways of borrowing, otherwise the same conditions will continue and the next loan shark will deal with the demand.

My right hon. Friend might like to know that, as part of the recapitalisation scheme, the banks have agreed to conditions to support plans that help people struggling with mortgage payments to stay in their homes. The banks also support the expansion of financial capability initiatives, and that is in addition to conditions ensuring the availability of lending.

The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) made his usual interventions, and, as always, because of his experience, his speech was extremely well targeted. He and I have spent many an interesting hour on the Treasury Select Committee questioning bankers and others, and I look back on that time with great fondness. He was right to emphasise the importance of credit unions, especially for those with small cash needs, but he was also right to talk about the serious issues that face many small businesses. I shall leave information about HMRC instructions in the Library because, although I heard his question, I have not had time to fashion a response.

The hon. Gentleman spoke also of developing memorandums of understanding or protocols. Our relationship with the banks that have recapitalised is obviously slightly different to the one that we have with those that have not yet gone for recapitalisation funds. However, major banks and policy makers recognise that we need to ensure that the economic fallout of the credit crunch and the dramatic events that we have seen over the past few months should impact as little as possible on the real economy. One way to achieve that is to see what we can do to ensure the flow of funding to the SME community. As I said, it is responsible for generating nearly 50 per cent. of our business activity, tax revenues and so on.

The hon. Gentleman also asked how the 10-day aim would be fulfilled, a subject raised also by the hon. Lady. The Government have led by example and agreed to ensure that payment is made within 10 days. That will amount to about £70 billion of procurement. On-time payment will increase cash flow for those who contract with the public sector, and regional development agencies have announced that they will do the same. That represents about £750 million of expenditure. The Secretary of State for Communities and Local Government has written to the Local Government Association to ask if it will follow suit. The chief executive of the NHS has done the same. If everyone gets on board, that will represent £175 billion of procurement.

The hon. Lady was concerned about how that money could be passed down the supply chain so that not only large companies benefited. The Government look to the private sector to follow where the public sector leads. Many private sector firms are already committed to making prompt payment; they are identified as members of the Institute of Credit Management. We expect big businesses to regard the passing on of such payments as a matter of corporate and social responsibility. Short of legislating, which no one has suggested, it is up to everyone to ensure that laggards and others that put small business in real danger by not passing on payments promptly will get the oxygen of publicity. I would like to see businesses coming forward voluntarily to say that they will follow the Government’s lead.

May I invite my hon. Friend to do one more thing for small businesses? They are under a great deal of pressure from energy costs. Looking across Europe, one can see that the UK business community has proportionately greater costs for energy than some businesses on the continent. It is not an anti-European point, but perhaps my hon. Friend, with the help of the Secretary of State for Energy and Climate Change, will consider Ofgem’s lack of effectiveness as regulator in properly looking after the interests of the small business community, as well as general consumers, given that the cost of energy is fundamentally undermining the stability of business.

I thank my right hon. Friend for those observations. He is right, but energy costs for businesses can be improved the more energy efficient they are. There is a great deal of leeway for businesses to improve their energy efficiency and there are quite short payback times—but that clearly needs investment, which brings us back to the beginning. Many things can be done, and the Government are considering them. I promise to pass my right hon. Friend’s observations to my right hon. Friend the Secretary of State of the new Ministry.

The hon. Member for Fareham (Mr. Hoban) observed that there have been no debates on small business, and then, just like the buses, three come at once. I suspect that we have many debates on small business, but it is right that hon. Members had the chance, today and yesterday, to reflect on the real worries that people have. I welcome the opportunity to respond to the debate.

I was astonished to discover that the hon. Gentleman could not enlighten us on the cost of the eye-catching Opposition suggestion that VAT payments should be deferred for six months for small and medium-sized enterprises. It is hard to work out what the cost would be. Last year, £80 billion was paid in VAT, and 50 per cent. of business activity can be attributed to SMEs. A six-month holiday could cause the Government cash-flow problems worth billions of pounds, and it could cause some practical problems too. Likewise, I was puzzled that the Conservative party website did not have those costings proudly displayed for all to see. The figures have obviously slipped out of the hon. Gentleman’s brief.

It is by no means clear that VAT holidays would apply only to small businesses, and if we had to give them to all businesses, it would put everyone six months in arrears in their VAT payments. Once that period came to an end, how would companies deal with the cash-flow problems that suddenly hit them? There seemed to be some hint about interest payments, but that too could represent a large cost. The Government may have to borrow more—we have been criticised for borrowing by the Conservative party—to make up the cash flow for the six months while no VAT was coming in.

The Opposition have not properly explored a range of issues, which makes me think that that was a PR suggestion rather than a properly worked out policy. I wait with interest to see what the costings are. My right hon. Friend the Member for Makerfield suggested that the Opposition could circulate a letter outlining the cost. I would certainly be interested to see the contents of such a letter, but I shall not hold my breath.

Again, I congratulate the hon. Member for Solihull on securing this timely debate. I hope that she agrees that it has been interesting, focused and worth while. We have focused on the practicalities of how to assist small businesses to get through in the best possible way.

I am most grateful for the opportunity to raise this important matter in Westminster Hall. I shall begin gently to allow the Minister to take his place.

This has become an extremely important issue in my constituency, which is small, rather overcrowded and close to London. We are protective of our green belt and of the ancient woodlands in Epping Forest, which are important socially and environmentally. I am glad that the Minister has now found his seat.

Let me explain. There have always been Gypsies and Travellers temporarily accommodated in and around Epping Forest—that is part of life and no one objects to it. Sometimes, they have stopped for a while before passing on peacefully to their next place of residence, and sometimes, especially in recent years, some have unfortunately caused trouble by leaving an enormous mess behind. Many hon. Members will be familiar with such a situation in their own parts of the country. Once the Gypsies and Travellers have moved on, they sometimes cause health and safety problems and leave taxpayers an enormous financial cost for clearing up the mess that they have left behind. However, that is an occasional problem that every local authority and every community has to deal with at times. It is not the problem that I wish to address today.

The problem that I want to discuss is entirely of the Government’s making—that is the main point of my debate. With regard to this problem, which is entirely avoidable, I have received countless letters, e-mails and phone calls, and I have held numerous meetings and been visited today at the House of Commons by some of my constituents. The Government are riding roughshod over local democracy and opinion. They are not only insisting, but directing in law, that Epping Forest district council provide 96 additional pitches for Gypsies and Travellers over the next few years.

I appreciate that there must be somewhere for Gypsies and Travellers to go to, but I completely disagree and take issue with the Minister who said in Westminster Hall on 22 May 2008 that this is

“a relatively solvable problem of providing 4,000 additional pitches, spread throughout the length and breadth of this country, covering about 1 square mile”.—[Official Report, Westminster Hall, 22 May 2008; Vol. 476, c. 171WH.]

He continued, “We can sort this.”

Let me tell the Minister that 1 square mile in one part of the country is not the same as in another. Our little corner of Essex in Epping Forest sits on the London border and is dependent on the green belt, the surrounding countryside and the ancient forest. A little bit of land is very precious. I mean that it is precious not in terms of its monetary value, but rather in how it is used for our environment and communities.

In terms of the whole country, 1 square mile might not seem much. The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso), who was sitting in front of me a moment ago, represents part of Caithness where there are hundreds of square miles with nothing in them. That is not the case in Epping Forest, where 96 pitches would take up a large amount of space.

The issue is not only about the amount of space taken up; it is about precisely where that space might be. I do not understand how the Minister can justify the Government’s plans to create 388 new pitches throughout Essex over the next two years. Perhaps he can defend those pitches for Gypsies and Travellers throughout Essex, but I do not see why the Government are saying that we need so many.

To make matters worse, the strict criteria that the Government have laid down for finding what are described as “suitable pitches” make it difficult in an area such as Epping Forest to find such a pitch. My constituents are rightly concerned about the effect that the development of those 96 pitches would have on our local communities, landscape and the green belt. The effect on individual people who live next to the pitches would be almost indescribable.

Can any of us imagine part of our own garden, or a small field adjacent to our house, being compulsorily purchased and used for Gypsies and Travellers, when for centuries it had been used only by horses or sheep? That would cause indescribable anguish among my constituents and I have every sympathy with them. More than anything, they are rightly indignant about how local democracy is being utterly ignored and disregarded. Local people are not properly consulted, and decisions are forced on our communities by regional and national bodies.

Epping Forest district council is a well-run local authority, regardless of political control. It is under Conservative control, but that has not been the case for most of the last 15 or 20 years. During that time, it has been a responsible, well-run district council that takes its duties seriously. This is not about party politics; it is about protecting our local community and planning for the best use of our scarce land resources.

Because of the way that the Government behave, Epping Forest district council, which is taking the blame for producing a development document on where the 96 pitches might go, simply had no choice in the matter. I find that difficult to explain. There is no democracy and no choice. Epping Forest district council has been directed by the Government office for the east of England to amend the local development scheme. I quote from a letter from that Government office dated 17 September 2007:

“In exercise of the powers conferred on her by section 15(4) of the Planning and Compulsory Purchase Act, the Secretary of State for Communities and local government directs that your council make the following amendments to the local development scheme…and to specify that (a) it includes a Gypsy and Traveller site Development Plan Document”.

Of course, Epping Forest district council behaves responsibly, and once directed by the Government office for the east of England to produce such a document and local development scheme, it went ahead and did so. However, that was not done urgently enough for the Government’s liking, and the workings of responsible local democracy have been cast aside and utterly ignored by this over-powerful, dictatorial Government.

Epping Forest district council, having done as it was told by the Government office for the east of England, found that the Minister—I am delighted that he is here—had written to the council on 23 April 2008:

“I consider it crucial for the Council to make demonstrable progress with this important document in a clear and urgent manner in accordance with the terms of the Direction in order we can get to a position, sooner rather than later, where Gypsies and Travellers will have appropriate authorised provision of sites”.

The responsible, properly acting and democratically elected Epping Forest district council has gone ahead to try to solve the problem of finding places for the Gypsies and Travellers, but it is not allowed to do so in a reasonable and considered way, because the Minister says, “You can’t take time or look at the criteria and try to find places. You must do it now.”

The council has entered into a consultation to produce a development plan document. Consultation is the right way to take the local community along when an exercise of this kind has to be undertaken, but it is meaningless if it is directed by the Government. We now find that edicts are dictated by that unelected, totally undemocratic and unaccountable body, the East of England regional assembly.

All that, because of how it has been undertaken at the Government’s command, is leading to the compulsory purchase of privately owned land. I am not exaggerating when I say that the proposed compulsory purchase of those pieces of land for this purpose smacks of the worst excesses of communist dictatorship. My constituents and I, as well as Epping Forest district council, which I totally support, see it that way.

My constituents have written to me about an enormous variety of problems that result for them both personally and as members of our local community from the Government’s overbearing and dictatorial attitude. Compulsory purchase simply is not fair. I have received some heartbreaking letters from people who have spent a lifetime building up the resources to buy a house. That house and the little bit of land beside it are all they have for their retirement. If the land beside the house is compulsorily purchased, and if Gypsies and Travellers are put on it by the Government, those people will lose everything that they have worked all their lives for. I have every sympathy with them, and the Minister is wrong to ignore them. I am talking not about one family or one person, but an enormous problem, if 96 pitches are to be found in my small constituency and throughout the Epping Forest area.

The impact on our precious green belt, conservation areas and sites of special scientific interest would be enormous, and ancient woodland and indigenous wildlife would be badly affected. When we then consider the increase in traffic flows on unsuitable roads, road safety, listed buildings and their surroundings, the impact on local facilities—particularly the lack of provision in primary schools, GP surgeries, utilities and other transport matters—we realise that local infrastructure is unable to sustain the enforced increase in our local population in those areas.

Added to that, there is the problem of building on flood plains. We have a lot of flooding problems in Epping Forest, which was not taken into consideration in the Government’s criteria and how they issued their orders.

Most of all, I am concerned about how the planning laws will be distorted. Local people feel that there is one planning law for them and another for Gypsies and Travellers. People who want to build a small extension to their houses in the Epping Forest area have to go through an enormous number of hoops in the planning procedure—quite rightly.

indicated dissent.

The Minister is indicating that he disagrees, but the planning process is difficult because we have in our area protected ancient woodland, a lot of green belt and overcrowding. The planning laws are rightly strict for local people, yet the planning laws for Gypsies and Travellers, who are merely passing through and are not part of our local community, are quite different and much more lenient.

The point is that we want Gypsies and Travellers to integrate in the local community and to be part of the general community throughout the country. We also want to ensure that the children of Gypsies and Travellers are properly educated in our local schools, and that elderly Gypsies and Travellers are properly looked after in the NHS. Therefore, we should be encouraging a degree of integration, but the law does not do so. Instead, by forcing the Government’s plans on a local community, the law sets people apart. Far from integrating, the Government, by dictating rules and laws, go entirely against community cohesion.

We have to live together on this small island of ours, and it takes patience and careful planning to ensure that different groups and people with different interests can do so in harmony. In Epping Forest right now, the Government are putting the local council and local people in an impossible position, and, for the sake of their own political programme, causing upset to community cohesion and to individuals. They have created a problem. The Minister may say, “We can sort it,” but I have to tell him that he is wrong.

I am grateful to the hon. Member for Epping Forest (Mrs. Laing) and the Minister for generously allowing me a couple of minutes to speak. I will take no more than that.

The hon. Lady concentrated on land acquisition for site provision. The Minister will know, having visited Bedford earlier this year, that I am concerned about what happens when provision is entirely inadequate. Several of Bedford’s parks and open spaces have this year played host to a series of unauthorised Traveller encampments—almost weekly from April until October.

Order. I am very reluctant to interrupt the hon. Gentleman, but it is clear that if he is to be in order, he has to talk about Epping Forest, not his own circumstances in Bedford. I am afraid that this is a very narrow debate.

It might help you, Mr. Amess, and the hon. Member for Bedford (Patrick Hall), if I say that lack of provision is relevant to Epping Forest because if the exercise that I spoke about is not properly carried out, Epping Forest will have the same problems that the hon. Gentleman has encountered in Bedford. Epping Forest has a lot to learn from Bedford in that regard.

I am grateful to the hon. Lady for her helpful remarks. The issues that I am raising, although they come from my direct experience, are relevant to Epping Forest and perhaps to a few other places.

I wish to put three things to my hon. Friend the Minister on alternative provision. Alternative provision is part of the answer to unauthorised encampments. I support the restoration of the statutory requirement on councils to make such provision. However, that is only part of the answer, so I want to put three points to the Minister. First, will he consider the point made by the mayor of Bedford borough that the law be changed to allow all local councils—

Order. I am very sorry, but I am being strongly advised that we cannot have specific points about Bedford. They can be about only Epping Forest.

My points are entirely relevant to every local authority, including Epping Forest. We should allow local councils—all of them—to issue a blanket eviction order with regard to their land so that they do not have to go through the time-consuming, frustrating process that is part of the current law. The Minister has had that point of view put to him before. I believe that such a measure relates to all local councils.

My second point is to ask the Minister to revisit the Briscoe review and consider adopting similar measures regarding trespass that the Republic of Ireland adopted in 2002.

My third point relates to interim or emergency sites that I raised with regard to Bedford, but which would apply anywhere. Is the Minister ready to issue guidance on councils providing emergency sites, pending the proper provision that he seeks?

It is a pleasure to serve under your chairmanship, Mr. Amess-perhaps I should say your over-powerful and forceful chairmanship, as the hon. Member for Epping Forest (Mrs. Laing) might say.

I also congratulate the hon. Lady on securing the debate and the manner in which she advanced the case on behalf of some of her constituents. Again, I thought that her arguments were extremely forceful and somewhat over-powerful.

I congratulate my hon. Friend the Member for Bedford (Patrick Hall), whom I visited earlier this year to talk about the provision of Gypsy and Traveller accommodation in his borough. I also acknowledge the presence of the hon. Member for North Wiltshire (Mr. Gray), who has raised Gypsy and Traveller issues on a great many occasions, and I know that it is a subject that really interests him.

If I may, Mr. Amess, I would like to be incredibly unprofessional and wish my son, William, a very happy fourth birthday. I am grateful to the Chamber for allowing me to make such comments.

In many respects, the debate is extremely timely. The hon. Member for Epping Forest will be aware of the examination in public of planning for Gypsy and Traveller accommodation in the east of England. She may be aware that the EiP started yesterday in Letchworth and will run until Friday. Using the results of that public consultation, the panel will provide recommendations on any changes to the proposals. The Government will consult on further changes before publishing the final policy in 2009.

I do not want to say a lot about the details of that examination because I am limited in what I can say on the ground of matters being quasi judicial. All I will say is that all interested parties will have the opportunity this week to debate the number of pitches that have to be provided. The process does not mean that provision should necessarily await the outcome of the EiP. Until the regional spatial strategy review is adopted, local authorities should continue to base provision on the latest available information on need within the region and local area in the context of the urgent need for improved provision across the region.

The hon. Lady specifically mentioned green belt and I want to address that directly in the time that I have. I want to be as clear as I possibly can be on this extremely important matter. It is right and proper that we support, maintain and enhance the green belt as much as possible. She will agree that it is very much valued and an extremely efficient planning tool to prevent urban sprawl.

Circular 01/06 makes it clear that Gypsy and Traveller sites are inappropriate in the green belt. Therefore, it is the responsibility of local authorities to manage land provision to meet housing needs, and in an area such as Epping Forest, that principally means managing the supply of land within the urban areas available for redevelopment or with potential for alternative uses.

We may quibble about the figures. The hon. Lady mentioned 96 additional pitches. My understanding was that the district’s proposed Gypsy and Traveller pitch target was 49 to 2011, and potentially 92 to 2021. I must forcefully argue that that is a tiny proportion—just 4 per cent. of the RSS target of at least 2,290 additional dwellings needed in the region between 2006 and 2021.

The hon. Lady spoke very powerfully about the communist nature of this Government. She said that we are over-powerful and dictatorial. I disagree vehemently. The whole point of the process is that local authorities step up to the plate to ensure that they have the evidence in place in relation to accommodation—I mean not just Gypsy and Traveller accommodation, but additional housing for the wider need, as and when it is necessary.

In preparing for the debate, I was struck by some of the comments made by Councillor Anne Grigg, who is planning and economic development portfolio holder. In what I consider the quote of the debate, she said:

“Mistrust and misunderstanding between the travelling and settled communities can lead to friction. This process, which includes comprehensive public consultation, should help to identify a balanced solution. Hopefully if our District plans for good sites, we will run less risk of unauthorised encampments and problems these create.”

Councillor Grigg is a Conservative. I do not want to make a narrow political point here; on the contrary, I am pleased to see those comments and an example of mature local leadership on an issue that can raise huge tensions. However, it appears that there is strong leadership on the matter within the local authority, which is a welcome and positive step change in attitude from what there has been in recent months.

Anne Grigg is a very responsible councillor and she is writing what she says. My point is that Councillor Grigg and the rest of Epping Forest district council are not being allowed to handle the matter in a way that they, as a democratically locally elected district council, wish to do because they are being told by the Government in a dictatorial way how it must be handled.

Let me address the additional and new site provision framework that we have put in place. As the hon. Lady is aware, local authorities are required by the Housing Act 2004 to undertake accommodation needs assessments for Gypsies and Travellers as they do for the rest of the community with regard to conventional bricks and mortar housing. They also have to prepare a development framework to facilitate identification of appropriate sites. We recommend that that is done in a timely manner.

The presumption continues to be that local planning authorities should identify and assess the need for sites for Gypsies and Travellers, and where that need is identified allocate sufficient land within a development plan document. Any local authority not intending to do so must demonstrate that there is no need and that other means are certain to deliver sites to meet future needs—for example, through clear criteria.

I strongly suggest to the hon. Lady that we need increased authorised site provision coupled with effective use of enforcement powers—my hon. Friend the Member for Bedford and I have already discussed this—and a joined-up approach between various organisations, whether it is the local authority, police or others. If we are to address the problems that the hon. Lady has highlighted, we need to have that identification, assessment of authorised sites and good management of those sites because the whole community will benefit and we will see more examples of community cohesion and communities coming together as she suggested, as well as, ultimately, a reduction in enforcement costs, which is incredibly important.

I simply do not see how compulsory purchase will create good community cohesion. It is tantamount to stealing people’s possessions.

The whole process is bottom up. The comments that have been made by Councillor Anne Grigg demonstrate a real step change in attitude in the local authority. There is a recognition that well-managed authorised sites that work in partnership with local agencies can reduce community tension and enforcement costs, which benefits everybody concerned.

Let me finish on an important point. The hon. Lady suggested that there is one rule for the settled community and another for the Gypsy and Traveller communities. I dispute that. There is one rule in this land and that is for everybody.

I am grateful for the opportunity to launch this debate on tax credits, and in particular on repayments by those who fail to fill in their forms on time. The introduction of tax credits has made a huge difference to thousands of families in my constituency. Tax credits have made it possible for people with disabilities or young children to take on work and improve their circumstances. I am very pleased with the concept.

Across the country, nearly 700,000 children have been lifted from poverty thanks in no small part to the introduction of tax credits, but our ambition to remove 1 million children from poverty by 2010 and eradicate the scourge of poverty by 2020 is a tall order, and every impediment must be removed. The keep the promise campaign rightly recognises that the Labour Government’s achievements have been enormous, but it points out, also rightly, that we must still work towards achieving what we promised.

If tax credits can be criticised, it must surely be on the grounds that they are just too complex. The average recipient relies entirely on official calculations, and it is nigh on impossible to know whether payments are right or wrong. For my part—and I am a pretty intelligent chap—I have not a clue how the formula works. I will not embarrass my right hon. Friend the Minister by asking whether he can make the calculations; his staff certainly cannot. The calculations are made by feeding the computer with myriad facts and figures, and one simply hopes that the outcome is correct.

Unfortunately, the introduction of tax credits was marred initially by computer faults and system failures. That has got much better, but there remains none the less a legacy of victims who, for the most part, simply did not know whether what they were paid was right or wrong, or whether they were overpaid or underpaid. Sometimes rough justice is better than no justice, and I hope that the Minister will still consider how the system can be simplified. A benefit should always have two qualities: knowledge of eligibility and knowledge whether what one receives is right or wrong. It is a simple test that tax credits, sadly, do not meet.

However, the concern that I wish to raise today relates to a specific failure in the tax credit system. It is a regulatory issue, but one that casts families into poverty rather than lifting them out. Through my constituency casework, I have been made aware of several cases—I know that many colleagues have had similar experiences—in which an award has been terminated after failure to finalise within the permitted deadline. When that happens, the whole amount paid during the tax year becomes recoverable, even if the family’s circumstances meant that they were fully entitled to all that they received.

We are not talking about a few hundred pounds. In many cases, sums of £5,000 or £7,000—for some families, that is almost half a year’s income—are being demanded. It is a sign of how widespread the problem is that over 100 of my parliamentary colleagues have signed an early-day motion that I sponsored on the subject. I am grateful for their support.

It is not my practice to raise such issues in Adjournment debates, particularly with a kind and generous person such as my right hon. Friend the Minister. I would rather deal with them by bringing them to the attention of the appropriate Department. However, that is what I have been doing. Over and over again, my colleagues and I have raised the issue with the Department. Indeed, the Department now has the benefit of an ombudsman’s report saying that what is happening is wrong, but nothing has been done and no remedy has been found.

I have asked how many households are affected by the issue. I know that my right hon. Friend will not yet have had the chance to answer, as my question was perfected only earlier this week, but so far that information has not been forthcoming. We may be able to find out more about how many families are subject to this draconian measure requiring repayment when they fail to fill in the forms. In the absence of statistical data, all I can say is that the empirical evidence suggests that the issue is not insignificant. It affects certainly hundreds and perhaps thousands of families, and the support for my early-day motion suggests that it is widespread.

I shall explain a little about how the problem arises. A family receiving child tax credit continues to receive the benefit after the end of the year for which it is awarded. There is a case for paying retrospectively—that would be a better system, if it could be devised—but that is not how it works. In order to finalise an award, the applicant is required to complete a record of income for the past year not later than 31 July of the following year. That may seem straightforward and perfectly reasonable; indeed, the Department requires the perfected information in order to finalise the award for the current year as well as the previous year. However, sometimes, for exceptional reasons—or, I dare say, sometimes out of ignorance or gross failure—the forms are not returned in time. Sometimes it is alleged that the forms have been returned, but the Revenue denies receipt. Who knows? I do know, however, that the draconian policy in such situations causes harm.

In such situations, not only does the current payment cease but all payments made during the current year before that cessation are recoverable in full, even if it is deemed subsequently that the award was fully valid. In short, families are being asked to pay, out of no income or a reduced income, an award to which they were entitled, and are thus being plunged into poverty. That cannot be right.

To give an example, one of my constituents has five children, two of whom are severely disabled. Although her husband works, they live on a very low income. They failed to finalise their award within the time scale allowed for by HM Revenue and Customs and were notified by letter that they would need to do so. My constituent says that she then sent off the relevant details. There is proof that the tax credit office received the letter, but it did not contain all the information needed to finalise the claim. My constituent says that they wrote again, but heard nothing further.

Some time later, her tax credits stopped altogether, at which point she contacted the tax credit office and was told to reapply, which she did. That was fine—she filed a new claim and started receiving money from November of that year—but all the money that she had received from April to November, even though her income had not changed, was repayable. It came to more than £5,000. The family could ill afford it; in fact, they simply cannot afford it. They have been plunged into poverty as a result of that failure on her part. Whether or not it is her fault, that is simply wrong.

That family, with all its problems, was plunged into poverty. Perhaps my constituent should have been more careful to ensure that the information that she sent was complete, or sent the documentation by recorded delivery to be sure, but the fact is that the average recipient family are not solicitors of the Supreme Court or Ministers of the Crown. They act in normal ways. They get things wrong. Life is hard. To punish them for what is either no fault of their own or simple ignorance is just not right.

In another case, a man with three children suffered serious mental health problems that prevented him from dealing with his affairs during the months when his annual return should have been made. As a consequence, the deadline passed and he and his family were required to repay more than £4,000, the moneys received during the first nine months of the year. The Minister may well tell me that HMRC has discretion to accept exceptional reasons for failing to submit an annual declaration on time. How often is such discretion exercised? The case worker in my office, Andrea Samuelson, who deals with such matters has made it clear to me that discretion has never been exercised in any case that we have dealt with. It is as bad as that, and the experience of the colleagues to whom I have spoken is much the same.

The ombudsman’s 2007 report criticises that failure to exercise discretion, saying that continuing to deny reinstatement would

“be far too harsh a penalty for the delay, work entirely against the policy objectives of the scheme and unnecessarily cause customers avoidable distress and hardship.”

In the particular case that I mentioned, HMRC says that it is unprepared to exercise discretion, as the man’s wife was capable of dealing with the paperwork. That may be true, but at the time she was supporting the family and, as her husband had always dealt with household money issues, she did not act on the letters received.

I fully appreciate why awards need to be finalised and that, for reasons of efficiency, a cut-off date is necessary. If accurate information regarding income is not received in good time, there is clearly a risk that the wrong payments will be made and an overpayment will occur. Of course, I acknowledge that if someone is not entitled to a payment received, they should be asked to repay it, but that is not the issue. I am talking about people who are entitled to the payments that they receive, but who through administrative failure, on their part or the part of others, are penalised in the way that I have described. To plunge deliberately such families into poverty is not just an administrative failing, but something of which we should be ashamed.

I am listening with great interest to my hon. Friend’s compelling case. Is he arguing that if someone forgets to complete their renewal form, there should be no penalty or a smaller penalty? Where should that be set?

I am not suggesting that there should be no penalty for a failure to complete a return on time. The Tax Credit Act 2002 provides for the ability to fine or impose penalties for late returns. Indeed, under income tax legislation, late returns result in a penalty—£100 or £200, I think—which is absolutely right. However, late income tax returns, for example, do not result in the draconian measures such as those arising from late tax credits forms. Late income tax returns do not deny the opportunity for a tax rebate, which still follows when the application is submitted, however late—up to six years, I believe, which is very generous. Those applications are dealt with according to the facts and on merit.

I can think of no other part of the tax system that imposes penalties as draconian as the loss of one’s entire benefit, as does the tax credit system. Given its purpose, the ombudsman is quite right when she said that to deny reinstatement causes

“far too harsh a penalty for the delay, works entirely against the policy objectives of the scheme and unnecessarily causes customers avoidable distress and hardship”.

I would like the whole system to be simplified and, indeed—this perhaps is not quite possible—credits to be paid retrospectively. The number of families who do not make a claim through fear of overpayments is becoming more and more significant and certainly does not aid our common cause of reducing child poverty.

My proposal is simple: where a tax credit claim is terminated following a failure to finalise an award, there should be an independent appeals system whereby, if the claimant can prove their entitlement for that year at a later date, that which constitutes a genuine overpayment should be recovered, although perhaps with some penalty akin to the income tax arrangements. I am not suggesting that there should not be a penalty, but that the current one is disproportionate. We expect more of sometimes vulnerable families than of any other group in the tax system. We do not exercise that sort of draconian power against income or company tax payers or against those who fail to make their VAT returns on time. It is wholly disproportionate, and I want the Government to deal with it now. They have had long enough. There is no excuse or moral or legal reason it should not happen immediately.

I congratulate my hon. Friend the Member for Hastings and Rye (Michael Jabez Foster) on securing this debate and on the customarily clear and cogent way in which he put his case. He was generous in his praise for tax credits, and I think that he is right to point out how many people benefit from them: more than 11,000 families and nearly 19,000 children in his constituency, as of April. They have done a very effective job in helping people into work and to move up the employment ladder. I heard his case for a more backward-looking system, which would indeed simplify the computation of allowable tax credits. The problem with that is that the system would become much less flexible. At the moment, one of the strengths of the system is that if, for example, someone suffers a fall in income during a financial year, the system can respond quite quickly. If it just looked at the previous year’s income, that would not be possible. However, I understand his case.

The most popular payment introduced by this Government is the winter fuel payment, because poor people benefit from large lumps of money. They do not spend their money weekly. Obviously they need the basic income and income support, or whatever, to get them through the week, but it is things such as the cost of shoes, fuel bills and other big payments that they need help with. Lumps of money from time to time aid poor people enormously—they seem to manage day to day on anything, but big retrospective payments would be a benefit, not a disadvantage.

I agree with my hon. Friend on the popularity of winter fuel payments, although tax credits are pretty popular too: take-up is very high. I understand the concern that some may have about not applying for tax credits because of the worry about overpayments, but actually, in 2005-06, take-up of the child tax credit was 82 per cent., with more than 90 per cent. of the money available being claimed. Take-up among those with incomes of less than £10,000 a year is now 96 per cent., up from 93 per cent. in the first year of tax credits. Those figures are encouraging and partly reflect the fact that the service has become considerably better since the initial problems, which undoubtedly there were—I readily acknowledge that there were serious problems in the early days, but there have been considerable improvements since. In many respects, Her Majesty’s Revenue and Customs is now providing a good service, although I entirely accept that there is room for further improvement. I am determined to ensure that we do improve it further, as I have made clear during my couple of weeks in my current role so far. We are certainly seeing fewer overpayments caused by IT or administrative error, and accuracy in processing and calculating awards has risen substantially. I very much hope that through the tax credits transformation programme, which started in 2006, we will see substantial further improvements still.

My hon. Friend made a number of very important points about overpayments. End-year adjustments leading to an overpayment fell significantly in 2006-07 to £1 billion, as a result of the successful implementation of a package of measures to improve tax credits administration announced at the 2005 pre-Budget report. They are now less than half the level of the first year of the system and constitute just 5 per cent. of gross spending on tax credits, which is better than we projected in the 2005 pre-Budget report when we anticipated that overpayments would fall by about a third—in fact the fall has been about 40 per cent.

The number of families affected by overpayments is down significantly from 1.9 million to 1.3 million, and the average overpayment is down. But I agree that that is no grounds for complacency, so in May we published “Tax Credits: improving delivery and choice”, which was a discussion paper showing the Government’s commitment to ensuring that the system is working for families. It explored proposals to improve choice and certainty for tax credits customers, as part of a strategy of encouraging customers to take more control of their tax credits awards. My hon. Friend argued for simplicity. One of the themes of the document, particularly on support for child care, was about how the system could be simplified while still meeting its objectives. We received very good input to that exercise from advice organisations, and this debate gives me the chance to put on the record my thanks to those organisations for the effort that they put into responding to that consultation.

HMRC’s policy on recovering overpayments is set out in its code of practice 26—“What happens if we have paid you too much tax credit?”—which was significantly amended at the start of this year. Previously the policy was that an overpayment was written off if there was an official error and it was reasonable for the customer to believe that their award was correct. The reasonable belief test caused a good deal of concern particularly because people’s perception of what is “reasonable” can vary widely. My hon. Friend has raised a number of issues about that since the introduction of the system.

At the end of January, we replaced the belief test in code of practice 26 with a clearer test setting out the responsibilities of HMRC and customers to check factual information. In effect, that is a contract of responsibility. It builds on the existing practice of giving people responsibility for checking the factual information. HMRC plays back to them in the award notice information such as how many children they have and what their income is. People are expected to check that that information is correct and that the amount that goes into their bank account matches the award notice. There is no expectation that people will know the formula and I sympathise with the points that my hon. Friend made about that. As before, they will not be expected to check the calculation. However, if there is an official error and customers meet their responsibilities, the overpayment should be written off.

The new code of practice goes further. HMRC now has a time limit of 30 days to process reported changes of circumstances. In addition, where HMRC makes an error any overpayment will be remitted if the customer reports the error within 30 days of receiving the award notice. HMRC will also remit all overpayments arising following a report from a customer of an error by HMRC. The changes will create a fairer balance of responsibilities between individuals and HMRC. I hope that that will allow us to make significant progress in bearing down on the scale of the problems caused by overpayments.

The early-day motion put down by my hon. Friend aimed to question the way in which HMRC recovers overpayments when a customer has not renewed their application. I will give some background on this issue. Tax credits are claimed annually. The renewals process serves two purposes. First, it finalises the award for the previous year. Secondly, as he said, it acts as a claim for the current year. While the claim is being renewed, HMRC will pay provisional payments based on the previous year. In the absence of a claim, the award is ended and provisional payments become repayable.

My hon. Friend believes that overpayments should not be recovered when the person has failed to make a claim in time but would have been eligible had they done so. There is a problem with that, which was the reason for my intervention. There are deadlines for good reasons and I do not think that anyone, including my hon. Friend, can say that those do not matter. The longer that families are on provisional payments the more likely they are to have their current award based on out-of-date information. We have shortened the deadline by two months. As a result, just after the end of July this year around 2 million fewer people were on provisional payments than three years ago. That has helped.

HMRC must put out a strong message that deadlines are important and that people must get the information in on time. HMRC makes every effort to get people to renew on time, including an extensive campaign of radio and television advertising. As part of the tax credits transformation programme that I mentioned, HMRC has proactively contacted 85,000 of the most vulnerable customers either early on in the renewal process or if they had not renewed by the deadline. HMRC offered help by renewing awards immediately over the phone where possible or, if they had already been renewed, checking that the renewal had been processed to encourage timely renewal in the following year. As a result of that exercise, more than 10,000 claims were renewed immediately over the phone and more than 20,000 claimants agreed to call back on a special number. More than 20,000 claims had already been renewed by the time HMRC had spoken to the claimants. Those figures indicate that that was a worthwhile exercise in ensuring that people got the information in.

If someone misses the end of July deadline, their payments will be stopped shortly afterwards. After that, HMRC allows customers 30 days to restore their award without any quibble. They can be allowed longer if they can demonstrate a good cause for their not renewing by the deadline. My hon. Friend asked how often that discretion has been exercised. Unfortunately I am not able to give that figure, although I understand the point that he has made. I can tell him that for this year’s renewals round overall, HMRC has restored nearly 200,000 awards to date. I am not able to say how many of those were on the good cause basis, but nevertheless, a lot of rewards have been restored.

It was interesting to hear the two examples that my hon. Friend referred to in his speech. I have not seen the details of those cases before. If he passes the details to me, it would be interesting to look at whether the good cause basis should have applied in either case. I would be happy to check that.

If someone has not restored their award and they make a new claim, that can be backdated by up to three months. HMRC has no interest in forcing people into hardship. We want to strike the right balance between a payment plan that can be met without undue hardship and the recovery of overpayments. There are well established processes in place to do that, including for those whose awards have been terminated, using 12-month instalment plans with longer repayment periods where necessary. The code of practice on recovering overpayments makes it clear that exceptional circumstances will be taken into account.

My right hon. Friend talks about the good cause basis. The section on the definition of good cause on the website states that more internal guidance on what constitutes a good cause exists. However, the Library tells me that it is protected by the Freedom of Information Act 2000 so it is not actually available. I am not talking about overpayments, but about people who would have been entitled to tax credits had they filled in the form. In his last moments, will he say why income tax payers are not dealt with in the same draconian way? Is it because there are more of them?

My hon. Friend is right to continue to press me on that point. I am well aware of the strength of feeling shown by those who have signed the early-day motion and in other representations that have been made. The issue that he raises on the impact of the policy is similar to a separate issue that has been raised with me about notional entitlement. I do not know if he has come across that. It is similar in that there is a change of circumstances and people’s tax credits change, but they do not notify anybody of that change of circumstances. That has been raised by the advisory group that works with us on this matter. I am looking at that and I will look at the matter that my hon. Friend has raised as I do so.

It is important that we underline the need for people to complete the forms and respond promptly. If they do not, great difficulty is caused to HMRC and in due course to the individuals themselves.

In my last couple minutes, I will pick up on a couple of other points that my hon. Friend made. There is already an appeals process. If people think that their entitlement is wrong, they can appeal to the tribunals service, which is independent. There is no statutory right of appeal against a decision to recover an overpayment where there is no argument about the level of entitlement. However, HMRC suspends recovery of an overpayment when a customer disputes an overpayment or appeals against the decision that identified an overpayment. When a customer is unhappy with the decision of HMRC to seek recovery of an overpayment, they can ask the adjudicator or the ombudsman, who are both independent, to review it.

I will look at the point that my hon. Friend has just made about the Freedom of Information Act. That is a new one on me. If he sends me the details of the two cases, I will ensure that they are checked to see whether the good cause discretion should have been exercised.

The sitting having continued for two and a half hours after half-past Two o’clock, it was adjourned without Question put.

Adjourned at Five o’clock.